Reporting Form ARF 320.3

Debt Securities on Issue

Instruction Guide

General directions and notes

Reporting entity

This form is to be completed by all locally incorporated banks, foreign authorised deposit-taking institutions (ADIs) and Special Service Providers (SSPs) on a Domestic books basis.

The Domestic books of the locally incorporated banks, foreign ADIs and SSPs relates to the Australian books of the Australian ADI and has the following scope:

• is an unconsolidated report of the Australian licensed ADI's operations/transactions that are booked inside Australia;
• exclude offshore branches of the Australian licensed ADI from this reporting unit;
• exclude offshore banking units based overseas from this reporting unit;
• do not consolidate Australian and offshore controlled entities or associated entities that are not ADIs;
• include Australian based offshore banking units of the licensed ADI; and
• include transactions with non-residents recorded on Australian books.

Securitisation deconsolidation principle

Except where stated otherwise on this form, reporting entities must treat any securitisation program special purpose vehicles (SPVs) in which the ADI (or a member of its consolidated group) participates in accordance with APRA’s clean sale and separation requirements as non-consolidated independent third parties. As a result, for reporting purposes all assets, liabilities, revenues and expenses of these SPVs must be excluded from the ADI’s reported amounts. Where relevant, report on this form any exposure to or other transaction between the ADI and any such SPV as if such transaction was conducted with an independent third party, regardless of whether the SPV or its assets is consolidated for accounting purposes.

APRA's clean sale and separation requirements are set out in APS 120 Funds Management and Securitisation and related Guidance Notes AGN 120.3 Purchase and Supply of Assets (including Securities Issued by SPVs) and AGN 120.1 Disclosure and Separation. Whenever the clean sale and separation requirements are not met, all the assets, liabilities, revenues and expenses of the SPV are to be consolidated with the ADI’s reported amounts.

Reporting period

The form is to be completed as at the last day of the stated reporting quarter. Locally incorporated banks, foreign ADIs and SSPs should submit the completed form to APRA within 20 business days after the end of the relevant reporting quarter.

Unit of measurement

Banks are asked to complete the form in millions of Australian dollars rounded to one decimal place. SSPs are asked to complete the form in whole Australian dollars (no decimal place).

Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).

The general requirements of AASB 121 for translation are:

1. foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;[1]
2. foreign currency non-monetary items that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction;[2]
3. foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 Financial Instruments: Recognition and Measurement (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss; and

4. translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

• Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
• Translation of financial reports should otherwise follow the requirements in AASB 121.

Timing

Report assets and liabilities as at the date of change of ownership.

Netting

Unless otherwise specifically stated, institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 139, AASB 132 Financial Instruments: Disclosure and Presentation and AASB 7 Financial Instruments: Disclosures and any relevant prudential standards.

Term to maturity

References to term to maturity in this form are references to original term to maturity. Note that this approach differs from the treatment of debt securities (liabilities) on ARF 320.0 Statement of Financial Position (Domestic books) (ARF 320.0), which requires data on a residual maturity basis. This difference arises because the standards underlying this form are based on international statistical standards rather than accounting standards.

Valuation and currency conversion

Closing balances should be reported at market price effective at the reference date. Where denominated in foreign currency, market values in foreign currency should be converted to AUD at the spot rate effective as at the reference date.

For debt securities, the market price is the traded price quoted on the reference date. If the traded price does not take account of interest accrued up to the ex-coupon date but not yet payable, this interest accrued should be included. If the traded price is not available, other methods of approximation include (in order of preference):

• using a market rate of interest (yield to maturity), the net present value of the expected stream of future payments associated with the securities;
• for unlisted securities, the price used to value securities for accounting or regulatory purposes;
• for discount, deep discount or zero coupon securities, the issue price plus amortisation of the discount; or
• other mark to market method.

Basis of preparation

Unless otherwise specifically stated, institutions are to comply with Australian accounting standards regarding the measurement of asset, liability and equity items

Domicility

References to "issued in Australia" are references to the domicility of the debt instruments used to raise funds in the domestic market. These instruments can be denominated in either AUD or some foreign currency such as USD.

References to "issued overseas" or "offshore" are references to the domicility of the debt instruments used to raise funds in countries other than Australia. These instruments can be denominated in either AUD or some foreign currency such as USD. Euro issues should be included in "overseas".

Specific instructions

Short term debt securities

Report all debt securities issued with an original term to maturity less than or equal to 1 year at market value. Report separately the amount of debt securities denominated in AUD and other currencies, and amounts issued in Australia and overseas.

Include:

• bills of exchange issued by the bank;
• certificates of deposits issued by this bank with an original term to maturity of 1 year or less;
• commercial paper issued by this bank with an original term to maturity of 1 year or less; and
• other one-name paper with an original term to maturity less than or equal to 1 year.

Long term debt securities

Report all debt securities issued with an original term to maturity of more than 1 year at market value. Report separately the amount of debt securities denominated in AUD and other currencies, and amounts issued in Australia and overseas.

Include:

• certificates of deposit with an original term to maturity of more than 1 year;
• medium term notes, bonds, debentures and unsecured notes;
• inflation-indexed bonds;
• floating rate notes and other floating-rate debt securities;
• subordinated bonds and notes;
• Euro medium term notes, Euro notes and Euro bonds;
• convertible notes prior to conversion; and
• other long-term debt securities issued with an original term to maturity of more than 1 year.

Exclude:

• options, swaps, rights, warrants and other financial derivatives in a net liability position (report on ARF 320.6 Financial Derivatives).

Reconciliation with ARF 320.0

Total debt securities issued (market value)

The sum of:

• short-term debt securities issued in Australia (ARF 320.3 Debt Securities Issued) (ARF 320.3); and
• long-term debt securities issued in Australia (ARF 320.3)

equals

the sum of:

• certificates of deposit (ARF 320.0);

• other borrowings - promissory notes/commercial paper (ARF 320.0);

• other borrowings - other short-term debt securities (ARF 320.0);

• bonds, notes and long-term borrowings - debt securities (ARF 320.0); and

• loan capital and hybrid securities (excluding subordinated loans) (ARF 320.0).