Reporting standard ARS 114.0 Standardised Approach – Operational Risk

Financial Sector (Collection of Data) Act 2001

I, Wayne Stephen Byres, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901 DETERMINE Reporting Standard ARS 114.0 Standardised Approach – Operational Risk in the form set out in the Schedule, which applies to financial sector entities to the extent provided in paragraph 2 of the reporting standard.

Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities on the later of 1 April 2008 and the date of registration of this instrument on the Federal Register of Legislative Instruments.

Dated 4th February 2008

[Signed]

Wayne Byres

Executive General Manager

Diversified Institutions Division

Interpretation

In this Determination

APRA means the Australian Prudential Regulation Authority.

Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.

Schedule

Reporting Standard ARS 114.0 Standardised Approach – Operational Risk comprises the 16 pages commencing on the following page.

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Reporting Standard ARS 114.0

Standardised Approach – Operational Risk

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.

This reporting standard outlines the overall requirements for the provision of information to APRA relating to an authorised deposit-taking institution’s operational risk regulatory capital. It should be read in conjunction with:

• the versions of Form ARF 114.0 Standardised – Operational Risk designated for an authorised deposit-taking institution reporting at Level 1 and Level 2, and the associated instructions (all of which are attached and form part of this reporting standard); and
• Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk.

Purpose

1. Data collected in Form ARF 114.0 Standardised – Operational Risk (ARF 114.0) is used by APRA for the purpose of prudential supervision including assessing compliance with Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk (APS 114). It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.

Application

2. This reporting standard applies to an authorised deposit-taking institution (ADI) that satisfies both of the following requirements:

(a) it is applying the standardised approach to operational risk to all or part of its business activities for capital adequacy purposes (refer to APS 114 or Prudential Standard APS 115 Advanced Measurement Approaches to Operational Risk, as appropriate); and

(b) it is included in one of the classes of ADI to which this reporting standard applies, as set out in the table below.

This reporting standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 4).

Information required

3. An ADI to which this reporting standard applies must provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 1 for each reporting period.

4. If an ADI to which this reporting standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC. If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period. In doing so, the immediate parent NOHC must comply with this reporting standard (other than paragraphs 3 and 10) as if it were the relevant ADI.

Forms and method of submission

5. The information required by this reporting standard must be given to APRA in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application.

Note: the Direct to APRA application software may be obtained from APRA.

Reporting periods and due dates

6. Subject to paragraph 7, an ADI to which this reporting standard applies must provide the information required by this reporting standard in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.

7. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:

(a) the particular circumstances of the ADI;

(b) the extent to which the information is required for the purposes of the prudential supervision of the ADI; and

(c) the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics.

8. The information required by this reporting standard must be provided to APRA in accordance with the table below. The right hand column of the table sets out the number of business days after the end of the reporting period to which the information relates, within which information must be submitted to APRA by an ADI in each of the classes set out in the same row in the left hand column.

In certain cases an ADI will be both a "bank – advanced or applicant advanced" and a "bank – standardised". The instructions associated with ARF 114.0 set out the relevant reporting requirements and timeframes in those circumstances.

9. APRA may grant an ADI an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

10. The information provided by an ADI under this reporting standard (except for the information required under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurance Standards Board provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data.

11. All information provided by an ADI under this reporting standard must also be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

12. When an ADI submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the data to APRA.

Minor alterations to forms and instructions

13. APRA may make minor variations to:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b) the instructions to a form, to clarify their application to the form

without changing any substantive requirement in the form or instructions.

14. If APRA makes such a variation it must notify in writing each ADI that is required to report under this reporting standard.

Interpretation

15. In this reporting standard:

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.

Australian-owned bank means a locally incorporated ADI that assumes or uses the word ‘bank’ in relation to its banking business and is not a foreign subsidiary bank.

authorised NOHC has the meaning given in the Banking Act 1959.

bank – advanced or applicant advanced means an Australian-owned bank or a foreign subsidiary bank that has APRA’s approval or is seeking APRA’s approval to use an internal ratings-based approach to credit risk and/or an advanced measurement approach to operational risk for capital adequacy purposes.

bank – standardised means an Australian-owned bank or a foreign subsidiary bank that uses the standardised approaches to credit risk and operational risk for capital adequacy purposes in respect of the whole of its operations.

branch of a foreign bank means a ‘foreign ADI’ as defined in section 5 of the Banking Act 1959, but does not include an SCCI that is a foreign ADI.

building society means a locally incorporated ADI that assumes or uses the expression ‘building society’ in relation to its banking business.

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.

class of ADI means each of the following:

(i) bank – advanced or applicant advanced;

(ii) bank – standardised;

(iii) branch of a foreign bank;

(iv) building society;

(v) credit union;

(vi) other ADI;

(vii) provider of purchased payment facilities; and

(viii) a specialist credit card institution.

credit union means a locally incorporated ADI that assumes or uses the expression ‘credit union’ in relation to its banking business. and, for the purposes of this reporting standard, includes Cairns Penny Savings and Loans Limited.

foreign subsidiary bank means a locally incorporated ADI in which a bank that is not locally incorporated has a stake of more than 15%.

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of paragraph 10(b) of Prudential Standard APS 110 Capital Adequacy (APS 110).

Level 1 has the meaning in APS 110.

Level 2 has the meaning in APS 110.

locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or Territory law.

other ADI means an ADI that is not an Australian-owned bank, a branch of a foreign bank, a building society, a credit union, a foreign subsidiary bank, a provider of purchased payment facilities or a specialist credit card institution, but for the purposes of this reporting standard does not include Cairns Penny Savings and Loans Limited.

provider of purchased payment facilities means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to providing purchased payment facilities.

reporting period means a period mentioned in paragraph 6 or, if applicable, paragraph 7.

specialist credit card institution means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to the activities of credit card acquiring and credit card issuing in any credit card scheme that was designated as a payment system under section 11 of the Payment Systems (Regulation) Act 1998 on 11 April 2001.

stake means a stake determined under the Financial Sector Shareholdings Act 1998, as if the only associates that were taken into account under paragraph (b) of subclause 10(1) of the Schedule to that Act were those set out in paragraphs (h), (j) and (l) of subclause 4(1).

subsidiary has the meaning in the Corporations Act 2001.

16. APRA may make a determination in writing that an individual ADI of one class of ADI is to be treated, for the purposes of this reporting standard, as though it was an ADI of another class of ADI.

Standardised Approach – Operational Risk

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.

This reporting standard outlines the overall requirements for the provision of information to APRA relating to an authorised deposit-taking institution’s operational risk regulatory capital. It should be read in conjunction with:

• the versions of Form ARF 114.0 Standardised – Operational Risk designated for an authorised deposit-taking institution reporting at Level 1 and Level 2, and the associated instructions (all of which are attached and form part of this reporting standard); and
• Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk.

Purpose

1. Data collected in Form ARF 114.0 Standardised – Operational Risk (ARF 114.0) is used by APRA for the purpose of prudential supervision including assessing compliance with Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk (APS 114). It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.

Application

2. This reporting standard applies to an authorised deposit-taking institution (ADI) that satisfies both of the following requirements:

(a) it is applying the standardised approach to operational risk to all or part of its business activities for capital adequacy purposes (refer to APS 114 or Prudential Standard APS 115 Advanced Measurement Approaches to Operational Risk, as appropriate); and

(b) it is included in one of the classes of ADI to which this reporting standard applies, as set out in the table below.

This reporting standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 4).

Information required

3. An ADI to which this reporting standard applies must provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 1 for each reporting period.

4. If an ADI to which this reporting standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC. If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period. In doing so, the immediate parent NOHC must comply with this reporting standard (other than paragraphs 3 and 10) as if it were the relevant ADI.

Forms and method of submission

5. The information required by this reporting standard must be given to APRA in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application.

Note: the Direct to APRA application software may be obtained from APRA.

Reporting periods and due dates

6. Subject to paragraph 7, an ADI to which this reporting standard applies must provide the information required by this reporting standard in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.

7. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:

(a) the particular circumstances of the ADI;

(b) the extent to which the information is required for the purposes of the prudential supervision of the ADI; and

(c) the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics.

8. The information required by this reporting standard must be provided to APRA in accordance with the table below. The right hand column of the table sets out the number of business days after the end of the reporting period to which the information relates, within which information must be submitted to APRA by an ADI in each of the classes set out in the same row in the left hand column.

In certain cases an ADI will be both a "bank – advanced or applicant advanced" and a "bank – standardised". The instructions associated with ARF 114.0 set out the relevant reporting requirements and timeframes in those circumstances.

9. APRA may grant an ADI an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

10. The information provided by an ADI under this reporting standard (except for the information required under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurance Standards Board provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data.

11. All information provided by an ADI under this reporting standard must also be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

12. When an ADI submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the data to APRA.

Minor alterations to forms and instructions

13. APRA may make minor variations to:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b) the instructions to a form, to clarify their application to the form

without changing any substantive requirement in the form or instructions.

14. If APRA makes such a variation it must notify in writing each ADI that is required to report under this reporting standard.

Interpretation

15. In this reporting standard:

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.

Australian-owned bank means a locally incorporated ADI that assumes or uses the word ‘bank’ in relation to its banking business and is not a foreign subsidiary bank.

authorised NOHC has the meaning given in the Banking Act 1959.

bank – advanced or applicant advanced means an Australian-owned bank or a foreign subsidiary bank that has APRA’s approval or is seeking APRA’s approval to use an internal ratings-based approach to credit risk and/or an advanced measurement approach to operational risk for capital adequacy purposes.

bank – standardised means an Australian-owned bank or a foreign subsidiary bank that uses the standardised approaches to credit risk and operational risk for capital adequacy purposes in respect of the whole of its operations.

branch of a foreign bank means a ‘foreign ADI’ as defined in section 5 of the Banking Act 1959, but does not include an SCCI that is a foreign ADI.

building society means a locally incorporated ADI that assumes or uses the expression ‘building society’ in relation to its banking business.

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.

class of ADI means each of the following:

(i) bank – advanced or applicant advanced;

(ii) bank – standardised;

(iii) branch of a foreign bank;

(iv) building society;

(v) credit union;

(vi) other ADI;

(vii) provider of purchased payment facilities; and

(viii) a specialist credit card institution.

credit union means a locally incorporated ADI that assumes or uses the expression ‘credit union’ in relation to its banking business. and, for the purposes of this reporting standard, includes Cairns Penny Savings and Loans Limited.

foreign subsidiary bank means a locally incorporated ADI in which a bank that is not locally incorporated has a stake of more than 15%.

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of paragraph 10(b) of Prudential Standard APS 110 Capital Adequacy (APS 110).

Level 1 has the meaning in APS 110.

Level 2 has the meaning in APS 110.

locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or Territory law.

other ADI means an ADI that is not an Australian-owned bank, a branch of a foreign bank, a building society, a credit union, a foreign subsidiary bank, a provider of purchased payment facilities or a specialist credit card institution, but for the purposes of this reporting standard does not include Cairns Penny Savings and Loans Limited.

provider of purchased payment facilities means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to providing purchased payment facilities.

reporting period means a period mentioned in paragraph 6 or, if applicable, paragraph 7.

specialist credit card institution means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to the activities of credit card acquiring and credit card issuing in any credit card scheme that was designated as a payment system under section 11 of the Payment Systems (Regulation) Act 1998 on 11 April 2001.

stake means a stake determined under the Financial Sector Shareholdings Act 1998, as if the only associates that were taken into account under paragraph (b) of subclause 10(1) of the Schedule to that Act were those set out in paragraphs (h), (j) and (l) of subclause 4(1).

subsidiary has the meaning in the Corporations Act 2001.

16. APRA may make a determination in writing that an individual ADI of one class of ADI is to be treated, for the purposes of this reporting standard, as though it was an ADI of another class of ADI.

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.

This reporting standard outlines the overall requirements for the provision of information to APRA relating to an authorised deposit-taking institution’s operational risk regulatory capital. It should be read in conjunction with:

• the versions of Form ARF 114.0 Standardised – Operational Risk designated for an authorised deposit-taking institution reporting at Level 1 and Level 2, and the associated instructions (all of which are attached and form part of this reporting standard); and
• Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk.

Purpose

1. Data collected in Form ARF 114.0 Standardised – Operational Risk (ARF 114.0) is used by APRA for the purpose of prudential supervision including assessing compliance with Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk (APS 114). It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.

Application

2. This reporting standard applies to an authorised deposit-taking institution (ADI) that satisfies both of the following requirements:

(a) it is applying the standardised approach to operational risk to all or part of its business activities for capital adequacy purposes (refer to APS 114 or Prudential Standard APS 115 Advanced Measurement Approaches to Operational Risk, as appropriate); and

(b) it is included in one of the classes of ADI to which this reporting standard applies, as set out in the table below.

This reporting standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 4).

Information required

3. An ADI to which this reporting standard applies must provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 1 for each reporting period.

4. If an ADI to which this reporting standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by the version of ARF 114.0 designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC. If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period. In doing so, the immediate parent NOHC must comply with this reporting standard (other than paragraphs 3 and 10) as if it were the relevant ADI.

Forms and method of submission

5. The information required by this reporting standard must be given to APRA in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application.

Note: the Direct to APRA application software may be obtained from APRA.

Reporting periods and due dates

6. Subject to paragraph 7, an ADI to which this reporting standard applies must provide the information required by this reporting standard in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.

7. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:

(a) the particular circumstances of the ADI;

(b) the extent to which the information is required for the purposes of the prudential supervision of the ADI; and

(c) the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics.

8. The information required by this reporting standard must be provided to APRA in accordance with the table below. The right hand column of the table sets out the number of business days after the end of the reporting period to which the information relates, within which information must be submitted to APRA by an ADI in each of the classes set out in the same row in the left hand column.

In certain cases an ADI will be both a "bank – advanced or applicant advanced" and a "bank – standardised". The instructions associated with ARF 114.0 set out the relevant reporting requirements and timeframes in those circumstances.

9. APRA may grant an ADI an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

10. The information provided by an ADI under this reporting standard (except for the information required under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurance Standards Board provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data.

11. All information provided by an ADI under this reporting standard must also be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

12. When an ADI submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the data to APRA.

Minor alterations to forms and instructions

13. APRA may make minor variations to:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b) the instructions to a form, to clarify their application to the form

without changing any substantive requirement in the form or instructions.

14. If APRA makes such a variation it must notify in writing each ADI that is required to report under this reporting standard.

Interpretation

15. In this reporting standard:

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.

Australian-owned bank means a locally incorporated ADI that assumes or uses the word ‘bank’ in relation to its banking business and is not a foreign subsidiary bank.

authorised NOHC has the meaning given in the Banking Act 1959.

bank – advanced or applicant advanced means an Australian-owned bank or a foreign subsidiary bank that has APRA’s approval or is seeking APRA’s approval to use an internal ratings-based approach to credit risk and/or an advanced measurement approach to operational risk for capital adequacy purposes.

bank – standardised means an Australian-owned bank or a foreign subsidiary bank that uses the standardised approaches to credit risk and operational risk for capital adequacy purposes in respect of the whole of its operations.

branch of a foreign bank means a ‘foreign ADI’ as defined in section 5 of the Banking Act 1959, but does not include an SCCI that is a foreign ADI.

building society means a locally incorporated ADI that assumes or uses the expression ‘building society’ in relation to its banking business.

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.

class of ADI means each of the following:

(i) bank – advanced or applicant advanced;

(ii) bank – standardised;

(iii) branch of a foreign bank;

(iv) building society;

(v) credit union;

(vi) other ADI;

(vii) provider of purchased payment facilities; and

(viii) a specialist credit card institution.

credit union means a locally incorporated ADI that assumes or uses the expression ‘credit union’ in relation to its banking business. and, for the purposes of this reporting standard, includes Cairns Penny Savings and Loans Limited.

foreign subsidiary bank means a locally incorporated ADI in which a bank that is not locally incorporated has a stake of more than 15%.

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of paragraph 10(b) of Prudential Standard APS 110 Capital Adequacy (APS 110).

Level 1 has the meaning in APS 110.

Level 2 has the meaning in APS 110.

locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or Territory law.

other ADI means an ADI that is not an Australian-owned bank, a branch of a foreign bank, a building society, a credit union, a foreign subsidiary bank, a provider of purchased payment facilities or a specialist credit card institution, but for the purposes of this reporting standard does not include Cairns Penny Savings and Loans Limited.

provider of purchased payment facilities means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to providing purchased payment facilities.

reporting period means a period mentioned in paragraph 6 or, if applicable, paragraph 7.

specialist credit card institution means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to the activities of credit card acquiring and credit card issuing in any credit card scheme that was designated as a payment system under section 11 of the Payment Systems (Regulation) Act 1998 on 11 April 2001.

stake means a stake determined under the Financial Sector Shareholdings Act 1998, as if the only associates that were taken into account under paragraph (b) of subclause 10(1) of the Schedule to that Act were those set out in paragraphs (h), (j) and (l) of subclause 4(1).

subsidiary has the meaning in the Corporations Act 2001.

16. APRA may make a determination in writing that an individual ADI of one class of ADI is to be treated, for the purposes of this reporting standard, as though it was an ADI of another class of ADI.

Instruction Guide

This instruction guide is designed to assist in the completion of the Standardised – Operational Risk form. This form captures the calculation of the capital requirement for operational risk using the standardised approach. In completing this form, authorised deposit-taking institutions (ADIs) should refer to Prudential Standard APS 114 Capital Adequacy: Standardised Approach to Operational Risk (APS 114).

General directions and notes

Reporting entity

This form is to be completed at Level 1 and Level 2[3] by each ADI that satisfies both of the following paragraphs:

(a) it is applying the standardised approach to operational risk to all or part of its business activities for capital adequacy purposes (refer to APS 114 or Prudential Standard APS 115 Advanced Measurement Approaches to Operational Risk, as appropriate); and

(b) it is included in one of the classes of ADI to which this form applies, as set out in the table below.

If an ADI is a subsidiary of an authorised non-operating holding company (NOHC), the report at Level 2 is to be provided by the ADI’s immediate parent NOHC.[6]

Securitisation deconsolidation principle

Except as otherwise specified in these instructions, the following applies:

1. Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120):

(a) special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes;

(b) the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns; and

(c) the underlying exposures (i.e. the pool) under such a securitisation may be excluded from the calculation of the regulatory capital (refer to APS 120). However, the ADI must still hold regulatory capital for the securitisation exposures[7] that it retains or acquires and such exposures are to be reported in Form ARF 120.0 Standardised - Securitisation or Forms ARF 120.1A to ARF 120.1C IRB - Securitisation (as appropriate). The risk-weighted assets (RWA) relating to such securitisation exposures must also be reported in Form ARF 110.0 Capital Adequacy.

2. Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI elects to treat the securitised assets as on-balance sheet assets under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, such exposures are to be reported as on-balance sheet assets in APRA’s regulatory reporting returns. In addition, these exposures must also be reported as a part of the ADI’s total securitised assets within Form ARF 120.2 Securitisation – Supplementary Items.

Reporting period and timeframes for lodgement

The form is to be completed as at the last day of the stated reporting period (i.e. the relevant quarter). The table below specifies the number of business days after the end of the relevant reporting period, within which each class of ADI must submit data to APRA.

An immediate parent NOHC must submit data to APRA within the same timeframe as its subsidiary ADI.

Where both "Bank – Standardised" and "Bank – Advanced or Applicant Advanced" reporting requirements and timeframes apply to an ADI

In the following cases an Australian-owned bank or a foreign subsidiary bank must meet reporting requirements and timeframes applicable to both a “Bank – Advanced or Applicant Advanced” and a “Bank – Standardised”:

(a) where the ADI is operating under the standardised approach to operational risk under APS 114, but has applied for AMA approval under APS 115, in which case the ADI will be both a “Bank – Advanced or Applicant Advanced” and a “Bank – Standardised”; and

(b) where the ADI has received AMA approval under APS 115 in respect of most (but not all) of its operations, and has approval for partial use of the standardised approach under APS 114 for the remainder of its operations.

Such an ADI must report under ARF 114.0 (the form) as follows:

<table cellspacing="0" cellpadding="0" style="border:0.75pt solid #000000; border-collapse:collapse"><tbody><tr><td style="width:142.2pt; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid; page-break-after:avoid; font-size:12pt"><span style="font-weight:bold">Description of bank</span></p></td><td style="width:147.45pt; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid; page-break-after:avoid; font-size:12pt"><span style="font-weight:bold">Reporting requirement</span></p></td><td style="width:98.65pt; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid; page-break-after:avoid; font-size:12pt"><span style="font-weight:bold">Timeframe</span><span style="font-weight:bold">s for lodgement</span></p></td></tr><tr><td style="width:142.2pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid; page-break-after:avoid"><span></span></p><p style="page-break-inside:avoid; page-break-after:avoid"><span>ADI</span><span> is operating under Basel II</span><a id="_ftnref9"></a><a href="#_ftn9" style="text-decoration:none"><span class="FootnoteReference" style="font-size:6.67pt; color:#000000">[9]</span></a><span> APS 114 standardised approach, but has applied for AMA approval for </span><span style="text-decoration:underline">all</span><span> its operations</span></p><p style="page-break-inside:avoid"><span></span></p></td><td style="width:147.45pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid"><span></span></p><p style="page-break-inside:avoid"><span>Report under the </span><span>f</span><span>orm (for purposes of calculating operational risk component of regulatory capital</span><span> for all of its operations</span><span>)</span></p><p style="page-break-inside:avoid"><span></span></p></td><td style="width:98.65pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid"><span></span></p><p style="page-break-inside:avoid"><span>“Bank – Standardised” timeframe (within 20 business days)</span></p></td></tr><tr><td rowspan="2" style="width:142.2pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid"><span></span></p><p style="page-break-inside:avoid"><span>ADI</span><span> is operating under Basel II APS 114 standardised approach, but has applied to adopt AMA approach for most (but not all) of its operations (or APRA has indicated that it does not propose to grant AMA approval in respect of all of the </span><span>ADI</span><span>’s operations)</span></p></td><td style="width:147.45pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid"><span></span></p><p style="page-break-inside:avoid"><span>Report under the </span><span>f</span><span>orm (for purposes of calculating operational risk component of regulatory capital</span><span> for all of its operations</span><span>)</span></p><p style="page-break-inside:avoid"><span></span></p></td><td style="width:98.65pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p style="page-break-inside:avoid"><span></span></p><p style="page-break-inside:avoid"><span>“Bank – Standardised” timeframe (within 20 business days)</span></p><p style="page-break-inside:avoid"><span></span></p></td></tr><tr><td style="width:147.45pt; border:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p><span></span></p><p><span>Separately report under the </span><span>f</span><span>orm in respect of operations that will remain under the standardised approach (i.e. partial use) after AMA approval given (for purposes of assessing prospective operational risk component of regulatory capital calculation after AMA approval</span><span> (i.e. “parallel run” of data)</span><span>)</span></p><p><span></span></p></td><td style="width:98.65pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p><span></span></p><p><span>“Bank – Advanced or Applicant Advanced” timeframe (within 30 business days)</span></p></td></tr><tr><td style="width:142.2pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p><span></span></p><p><span>ADI</span><span> </span><span>has AMA approval, but some operations remain under Basel II standardised approach</span></p><p><span></span></p></td><td style="width:147.45pt; border-top:0.75pt solid #000000; border-right:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p><span></span></p><p><span>Report under the </span><span>f</span><span>orm in respect of operations that remain under standardised approach </span><span>(for purposes of calculating partial use operational risk component of regulatory capital)</span></p><p><span></span></p></td><td style="width:98.65pt; border-top:0.75pt solid #000000; border-left:0.75pt solid #000000; padding-right:5.03pt; padding-left:5.03pt; vertical-align:top"><p><span></span></p><p><span>“Bank – Advanced or Applicant Advanced” timeframe (within 30 business days)</span></p></td></tr></tbody></table>

These ADIs will also have certain reporting obligations under Forms ARF 115.0A to ARF 115.0C Advanced Measurement Approaches to Operational Risk.

Unit of measurement

This form should be completed in Australian dollars (AUD) and in accordance with the units set out for each class of ADI in the table below.

An immediate parent NOHC must complete this form in AUD and in accordance with the same units as its subsidiary ADI.

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

Specific instructions

The following instructions are applicable at Level 1 and (where relevant) Level 2.

Section A: Operational risk regulatory capital for retail banking

The operational risk regulatory capital for the retail banking area of business is determined using a proportion of an ADI’s total gross outstanding loans and advances for retail banking as an indicator of the area’s operational risk exposure.

1.1 Total gross outstanding loans and advances for retail banking

Report the last six consecutive half-yearly balances[10] of total gross outstanding loans and advances for the retail banking area of business.

Total gross outstanding loans and advances for this area of business is calculated as the total of on-balance sheet exposures to the following items:

(a) cash holdings of notes and coins; and

(b) loans to households comprising:

(i) housing loans;

(ii) revolving credit;

(iii) credit cards;

(iv) leasing; and

(v) other personal term loans (including margin lending facilities).

For reporting at Level 2, an ADI may map these data items to the relevant on-balance sheet items reported in the version of Form ARF 112.1A Standardised Credit Risk – On-balance Sheet Assets (ARF 112.1A) designated for an ADI reporting at Level 2.

Exclude the balances of loans and advances that meet the operational requirements for regulatory capital relief outlined in APS 120, and are therefore excluded from the calculation of RWA under APS 120.

1.2 Total operational risk regulatory capital for retail banking

Derived field that calculates the total operational risk regulatory capital for the retail banking area of business, in accordance with APS 114.

Section B: Operational risk regulatory capital for commercial banking

The operational risk regulatory capital for the commercial banking area of business is determined using a proportion of an ADI’s total gross outstanding loans and advances for commercial banking as an indicator of the area’s operational risk exposure.

2.1 Total gross outstanding loans and advances for commercial banking

Report the last six consecutive half-yearly balances[11] of total gross outstanding loans and advances for the commercial banking area of business.

Total gross outstanding loans and advances for this area of business is calculated as the total of on-balance sheet exposures to the following items:

(a) amounts, including all deposits, due from financial institutions including:

(i) Reserve Bank of Australia, central banks, banks, other ADIs, Registered Financial Corporations.

(b) gross book value of securities (including all debt securities) held in the banking book (refer to APS 114); and

(c) commercial lending, comprising loans and advances to:

(i) private and public trading corporations;

(ii) private unincorporated businesses and community service organisations;

(iii) ADIs and other financial institutions; and

(iv) government.

For reporting at Level 2, an ADI may map these data items to the relevant on-balance sheet items reported in the version of ARF 112.1 designated for an ADI reporting at Level 2.

Exclude:

(a) funded positions with respect to corporate finance activities (refer to APS 114);

(b) the balances of loans and advances that are excluded from risk-weighted assets under APS 120; and

(c) the gross book value of securities arising from the ADI’s involvement in corporate finance related activities and those that are deducted from capital pursuant to Prudential Standard APS 111 Capital Adequacy: Measurement of Capital.

2.2 Total operational risk regulatory capital for commercial banking

Derived field that calculates the total operational risk regulatory capital for the commercial banking area of business, in accordance with APS 114.

Section C: Operational risk regulatory capital for all other activity

The operational risk regulatory capital for the all other activity area of business is determined using a proportion of an ADI’s gross income, adjusted to exclude income primarily relating to retail banking and commercial banking (adjusted gross income)[12] as an indicator of the area’s operational risk exposure.

An ADI must include, in the all other activity area of business, income (including net interest income and servicing activities) from its involvement in securitisation, trading and corporate finance activities. For trading activities, net income includes profits and losses on instruments held for trading purposes, net of funding costs, plus fees from wholesale broking.

Report the last six consecutive half-yearly amounts[13] for the following items:

3.1 Total operating income from continuing operations

Report the amount for total operating income from continuing operations, as reported on Form ARF 330.0 Statement of Financial Performance (Licensed or Consolidated).

LESS

In this section, items 3.1.1 and 3.1.2 are deducted from item 3.1 to arrive at an adjusted gross income figure in item 3.2.

3.1.1 Adjustments relating to the retail banking and commercial banking areas of business

Include adjustments primarily relating to the retail banking and commercial banking areas of business. Refer to Prudential Practice Guide APG 114 Standardised Approach to Operational Risk for examples of the types of adjustments that may be made in relation to the retail banking and commercial banking areas of business.

3.1.2 Other adjustments

Include any other adjustments not already included in item 3.1.1.

3.2 Adjusted gross income

Derived field calculated as item 3.1 less items 3.1.1 and 3.1.2.

3.3 Total operational risk regulatory capital for all other activity

Derived field that calculates the total operational risk regulatory capital for the all other activity area of business, in accordance with APS 114.

Section D: Operational risk regulatory capital summary

4. Total operational risk regulatory capital

Derived field that totals the operational risk regulatory capital for the retail banking, commercial banking and all other activity areas of business, in accordance with APS 114.

5. RWA equivalent amount for operational risk regulatory capital

Derived field that converts the total operational risk regulatory capital to a RWA equivalent amount by multiplying the Total operational risk regulatory capital by 12.5.