Reporting Form ARF 326.0

Offshore Banking Units

Instruction Guide

This form collects the assets and liabilities recorded on the books of your offshore banking unit declared under Sub-section 128 AE (2) of the Income Tax Assessment Act (1936) to be an offshore banking unit (OBU). Do not include assets and liabilities on the books of related corporations and overseas offices.

In compiling this form:

• include any transactions not posted as at the reporting date;
• translate all foreign currency amounts to Australian dollar equivalents using the mid of market spot rates applying as at the close of business; and
• report amounts in millions of Australian dollars, rounded to the first decimal place.

"Other OBU's" refers to Australian financial institutions declared by the Federal Treasurer to be offshore banking units.

A "related corporation" is defined as a company in which your institution has a 20 per cent or more beneficial interest; or a company which has a 20 per cent or more beneficial interest in your institution.

"Overseas offices" includes your branches, agencies and other offices.

A "resident" is a person ordinarily resident in Australia, or an enterprise or body operating in Australia. Australian subsidiaries and branches of foreign enterprises are regarded as residents, while foreign branches and subsidiaries of Australian enterprises are regarded as non-residents.

General directions and notes

Reporting entity

The Offshore Banking Units form is to be completed by all locally incorporated banks and foreign authorised deposit-taking institutions (ADIs) on a Domestic books basis.

The Domestic books of the locally incorporated banks and foreign ADIs 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.

Unit of measurement

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.

Reporting period

The form is to be completed as at the last day of the reporting month. Locally incorporated banks, foreign ADIs should submit the completed form to APRA within 10 business days after the end of the relevant reporting month.

Specific instructions

Liabilities

1. Deposits from

Include current, term and certificates of deposit, placements and overdrawn nostro accounts.

Deposits from offshore banking units (refer General Instructions) should be included in Item 1 (a).

“(c) Other" should include deposits from Commonwealth and State governments, other government bodies and financial institutions, which are not offshore banking units.

Deposits from related corporations and overseas offices should be included in Item 2.

2. Balances due to related corporations and overseas offices

Include all balances due to related corporations and overseas offices. Refer to General Instructions.

3. All other liabilities (excluding shareholders’ funds)

"All other liabilities" includes items in transit, accounts payable, prepayments received, accrued interest, etc.

4. Total liabilities

This item is the sum of Items 1 to 3.

Assets

6. Deposits and loans

Include in this item: overdrafts, placements, import and export finance and nostro accounts.

Deposits with related corporations and overseas offices should be included in Item 7.

7. Balances due from related corporations and overseas offices

Include all balances due from related corporations and overseas offices. Refer to general instructions.

8. All other assets

"All other assets" includes items in transit, accounts receivable, prepayments made, futures deposits and margins, accrued interest, etc.

Provisions for doubtful debts relating to exposures on the books of your offshore banking unit should be deducted from this item.

9. Total assets

This item is the sum of Items 5 to 8.