Economic and financial statistics - frequently asked questions
These frequently asked questions provide timely guidance on commonly asked questions about reporting.
The questions are designed to clarify reporting issues raised by authorised deposit-taking institutions and registered financial corporations and to help them meet their reporting obligations. APRA encourages entities to report to APRA in accordance with the guidance provided here, to the extent practicable. The questions refer to the provisions of APRA’s reporting standards but, until they are incorporated into the legislative reporting instruments, they do not form part of the law or create enforceable requirements. It is APRA’s practice, where appropriate, to incorporate this guidance into the final reporting standards, forms and instructions from time-to-time. When this occurs, APRA provides formal notice to entities and removes the questions from this page. For reference purposes only, APRA will archive questions that contain guidance on matters that have been incorporated in the final reporting standards, forms and instructions.
Note: The numbering of these questions is fixed and will not change as new questions are added.
Updated: 2 August 2019
Reporting Framework - General
1. What framework do the agencies envisage to ensure timely advice is provided to industry if and as questions arise?
The agencies have established a process to provide responses to questions raised that are likely to be of common interest via FAQs on APRA's website. Industry webinars and workshops may also be convened when appropriate for the nature and volume of questions received.
2. Are the following returns affected by the new EFS requirements and will they be required to be produced on an ongoing basis: 320.7, 322.0, 324.0, 325.0, 330.0, 330.1 and 330.2?
A number of the forms listed are not part of the data currently collected on a domestic books basis for the primary use of the ABS and RBA and therefore they do not form part of the new EFS collection. In particular, ARF 322.0, ARF 325.0, ARF 330.0, ARF 330.1 and ARF 330.2 are collected on a consolidated entity, licensed ADI or overseas operations basis; these forms are not part of the EFS collection and will continue to be reported.
The two other returns listed are informal collections that are provided on a domestic books basis and these will be rolled into the new EFS collection. Chapter 5 of the EFS consultation response paper notes that the ad hoc or informal collections of data similar to that on the ARF 720.1 (including the monthly housing loans by state informally referred to as 320.7) will be discontinued following one period of parallel reporting. Likewise, Appendix 3 of the EFS consultation response paper lists the final reporting period for the quarterly informal collection on lending and funding statistics submitted by the largest ADIs - also known as the 324.0 information - as September quarter 2019.
11. How will the agencies ensure consistency and comparability of EFS reporting concepts and reporting methodology across the industry?
The EFS reporting standards and guidance set out the agencies' expectations. It is the responsibility of reporting institutions to implement reporting methodologies that are consistent with these standards; reporting institutions are also strongly encouraged to have regard for reporting guidance and seek clarification where they are unsure of the application of these standards and guidance to a particular reporting concept. Where a reporting institution is unable to meet the reporting standard, the agencies will work directly with the affected institution to identify a suitable interim solution and a transition path towards meeting the standard.
12. When does APRA expect to release reporting taxonomies?
APRA expects to be able to release the reporting taxonomies for the ARF 720 series of reporting forms during March 2018, the remainder of the EFS reporting taxonomies will be released during the second quarter of 2018.
14. Why are the due dates changing from business days to calendar days for non-monthly collections?
Reporting on a business day basis requires both APRA and the reporting entities to assess the impact of both national public holidays and state-based public holidays on the actual due date for submission for each period. Different state-based public holidays result in multiple due dates for the same reporting period for reporting entities within the same industry located in various jurisdictions.
A calendar day reporting basis simplifies the reporting deadline as all reporting entities with the same reporting obligation will be required to submit reports to APRA on the same day. The due date will also be the same for each quarter (e.g. the 28th of each month following the reference period).
If the due date for a particular reporting period falls on a day other than a usual business day, the reporting entity is nonetheless required to submit the information required no later than the due date.
Monthly data collections will continue to be reported on a business day basis and, depending on the form, will have a due date of either the 10th or 15th business day of each month after the end of the reporting period.
19. Can APRA provide a list of investment funds with an Australian Registered Scheme Number (ARSN) and will this list include the ABN?
A list of investment funds with an ARSN is available on request from APRA and will be updated annually. This list currently includes both the ARSN and the name of the fund. A separate register of investment funds for which both an ARSN and an ABN could be sourced is also available on request – please see FAQ 88 for further information.
20. Can APRA provide a comprehensive list of investment funds with mapping to the appropriate Standard Economic Sector Classification of Australia (SESCA)/EFS category?
The ASX Concordance List provides sector mapping for ASX listed corporations. This mapping includes investment funds which are listed on the ASX. While it is not possible to provide a comprehensive list mapping unlisted funds to SESCA, it is recommended that entities use an appropriate mix of custodial and investment manager data to determine appropriate SESCA classifications.
34. Could APRA clarify how an entity should treat client-clearing relationships for EFS reporting in situations where the reporting entity is either:
- a client of another clearing member (i.e. a broker); or
- a broker who has clearing arrangements with clients.
In particular, where a client-clearing relationship exists, should positions relating to clearing house or central counterparty activity such as margin deposits be reported based on the entity making the deposit or on an ultimate-risk basis?
The general principle is that sectoral or counterparty classification should be made based on the counterparty with whom the reporting institution has a position on a flow of funds basis, not on an ultimate risk basis.
Where a reporting entity has placed funds on deposit with a clearing house or central counterparty on its own behalf (i.e. for its own trades where no client-clearing relationship is in place), this position should be recognised as a deposit made by the reporting entity with the clearing house or central counterparty.
Where the reporting entity is a client that clears its trades through a broker (i.e. the reporting entity is an indirect participant of a clearing house or central counterparty), this position should be reported as a deposit made by the reporting entity with the broker.
Where the reporting entity is a broker that has client-clearing arrangements in place with clients (who are indirect participants of a clearing house or central counterparty), the position should be reported as a deposit made by the client with the reporting entity. The reporting entity should also recognise the value of funds that the reporting entity then deposits with the clearing house or central counterparty as a deposit of the reporting entity with the clearing house or central counterparty.
37: For the following types of non-financial investment funds, can the agencies confirm whether they would be segregated as either Real Estate Investment Trusts (REITs) or other private non-financial investment funds:
- Infrastructure funds (that invest in public assets such as toll roads, airports, rail facilities;
- Listed and un-listed property trusts;
- Property common funds.
The following non-financial investment funds should be segregated as:
- Infrastructure funds (that invest in public assets such as toll roads, airports and rail facilities) – other private non-financial investment funds;
- Listed and unlisted property trusts – REITs;
- Property common funds – REITs.
38: For the following types of non-money market financial investment funds, should they be segregated as either Exchange Traded Funds (ETFs) or other non-money mark financial investment funds:
- Funds with predominantly overseas property or infrastructure holdings;
- Listed equity trusts (domestic and international);
- Unlisted equity trusts (domestic and international);
- Listed mortgage trusts;
- Unlisted mortgage trusts;
- Listed investment companies;
- Non-cash common funds.
The following non-money market financial investment funds should be segregated as:
- Funds with predominantly overseas property or infrastructure holdings – Other non-money market financial investment funds;
- Listed equity trusts (domestic and international) – ETFs;
- Unlisted equity trusts (domestic and international) – Other non-money market financial investment funds;
- Listed mortgage trusts – ETFs;
- Unlisted mortgage trusts – Other non-money market financial investment funds;
- Listed investment companies – ETFs;
- Non-cash common funds – Other non-money market financial investment funds.
41. Are there existing APRA returns outside the EFS collection that require reporting of counterparty sector information based on SESCA 2008?
APRA does not require the use of SESCA 2008 counterparty classification in ADI and RFC reporting standards outside the EFS data collection.
42. Should interest rate and residency concepts from the EFS be applied to reporting to the RBA under the reporting requirements for repo-eligible securitisations?
In October 2017, the RBA indicated it would update the RMBS reporting guidance to bring the definition of loan-level fields into line with those in the EFS collection to ensure consistency in the data reported and streamline reporting requirements for financial institutions (https://www.rba.gov.au/securitisations/archive/news-archive.html#oct-2017).
These changes were released in April 2018 and, as indicated in the announcement, the fields affected by the update relate to property purpose and the first-home buyer flag.
The residency concepts from the EFS and existing RMBS reporting guidance are intended to operate in a consistent manner. In general, the definition and application of the residency concept is outlined in more detail for the EFS collection. For example, the definitions of residency in ARS 701.0 relate to an institutional unit’s principal place of residence or principal place of production. This notion is not currently referenced in the RMBS guidance; rather, reporting is based on the internal processes at the reporting entity for determining residency (which in practice may or may not be the same as the EFS definitions). To the extent possible, the agencies encourage reporting entities to apply the EFS residency concept in their reporting requirements for repo-eligible securities.
The interest rate concept is also outlined in more detail for the EFS collection than it is in the RMBS reporting guidance. The interest rates reported for EFS should be contractual rates, excluding any fees charged (see ARS 701.0 for a complete definition). Interest rates for RMBS reporting should be consistent with the determination of interest collections allocated to the trust, which will be specified in the accompanying legal documentation for the deal. Therefore, there could be instances where reporting of interest rates for EFS and RMBS reporting may not be entirely consistent.
46: The International Exposures (IE) and ARF 223 Residential Mortgage Lending reporting instructions follow the securitisation deconsolidation principle while the EFS standards follow accounting consolidation. What are APRA’s views on aligning the two reporting regimes so that the IE returns and ARF 223 also following the accounting consolidation rules?
The consolidation for each of these forms is required to be maintained so that in each case the data collected is suitable for the intended data user. International Exposures and ARF 223.0 are consolidated based on APRA requirements to align them with prudential principles whilst the accounting consolidation used in the EFS data collection is for the purposes of the RBA and ABS.
77. Should the EFS loan classifications also be applied to the Capital and Risk returns submitted to APRA for prudential reporting purposes?
The EFS collection is specific to the statistical needs of the ABS and RBA, which are distinct from the capital and prudential requirements of APRA. The EFS concepts and definitions should not be applied to the prudential Capital or Risk returns.
97. APRA published a letter on its website on 4 July 2017 addressed to all ADIs on reporting provisions for regulatory purposes in the context of AASB 9 Financial Instruments. AASB 9 establishes three grades of Expected Credit Loss (ECLs) provisions. How should ECL provisions for the following items be reported on the EFS forms?
- Loans and finance leases;
- Other financial assets; and
- Off-balance sheet commitments.
As a first step, ECL provisions over any particular financial asset need to be determined as per AASB 9 and separated in the following way between individual and collective provisions as per the EFS Reporting of Provisions document (see below) 'Provisions for doubtful financial assets: AASB 9 Financial Instruments mapped to EFS’.
Once the ECL provisions have been allocated between individual and collective provision as above:
- For loans and finance leases, report the provisions in the relevant ‘individual’ or ‘collective’ item codes.
- For other financial assets, net off the value of individual provisions and report the net amount of the asset as one item. For clarity, do not net off collective provisions. Apply this to all EFS forms.
- For off-balance sheet credit related commitments, report individual provisions in Item 17.5. Other provisions in ARF 720.0.
101. How should a multi-option facility be reported?
A multi-option facility is a line of credit from which various types of finance can be drawn, the features of which are unknown when a reporting entity makes a firm offer to provide finance. If the exact features of the finance are known that the time the reporting entity has made a firm offer to provide finance, report in accordance with the existing EFS standards and guidance.
Consider the example of a $10 million multi-option facility.
a) When reporting a new borrower-accepted commitment
When reporting borrower-accepted commitments on ARF 741.0, report the value of funds made available to the business entity without additional authorisation or approval. Report this amount of the multi-option facility as a revolving credit facility. Using the example, if the entire $10 million facility is committed and accepted without any additional authorisation or approval, report the $10 million facility under Column 2 ‘Revolving credit’ of Item 3: New borrower-accepted commitments for business finance – by industry for the month in which this is accepted by the borrower(s).
b) When reporting total credit limits
When reporting total credit limits on ARF 741.0, report the value of funds made available to the business entity without additional authorisation or approval. Report this amount in Column 3 of Item 1 as ‘Other revolving credit facilities’. Using the example above, if the entire $10 million credit limit is made available to the borrower without any additional authorisation or approval, the entire $10 million multi-option facility would be reported under Column 3 of Item 1 on ARF 741.0. The credit limit should be subsequently reclassified according to the characteristics of the finance drawn from the facility.
c) When reporting a loan as funded
On ARF 742.0, report the amount funded according to the characteristics and timing of the individual loans made available for draw down within the period (regardless of whether the funds are drawn within that period).
Consider the example above, where a $1 million fixed-term loan from the multi-option facility is made available to the borrower(s) to draw down in a given reporting period. Report the $1 million loan under Column 2 of Item 3: Business finance – by finance type as a fixed-term loan. Report the $1 million loan as one facility in Column 6, and report the loan according to its individual characteristics in Columns 7 and 8.
d) When reporting credit outstanding
On ARF 720.1A/B and ARF 742.0, report the balance owed by the borrower(s) at the end of the reporting period according to the characteristics of the individual loans drawn from the multi-option facility. Continuing with the example above, on ARF 742.0 report the $1 million loan under Column 2 of Item 3: Business finance – by finance type as a fixed-term loan. Report the $1 million loan as one facility in Column 3, and report the loan according to its individual characteristics in Columns 4 and 5.
107. What sector should holding companies be assigned to?
Holding companies should be classified in line with SESCA 2008 as follows:
• Holding companies that have mainly financial corporations as subsidiaries should be classified as ‘Financial auxiliaries’.
• Holding companies that have mainly non-financial corporations as subsidiaries should be classified as ‘Other private non-financial corporations’.
108. When determining business size, should the turnover and exposure metrics be calculated at the individual entity or the parent entity level?
The purpose of the small/medium/large business size categorisation in the EFS collection is to provide the agencies with greater insight into lending conditions across borrower types, particularly for small businesses.
The EFS business size definitions are similar to those used by the Basel Committee for Banking Supervision (BCBS) and APRA in their standards for institutions following the internal-ratings based approach to credit risk. Entities that already categorise counterparties according to this methodology can report in line with their internal categorisations (see RPG 701.0, section 1.7).
Entities that do not categorise according to the BCBS/APRA methodology should use the turnover and exposure size metrics specified in ARS 701.0 to allocate counterparties to the relevant business size category. Where a customer forms part of a larger corporate group, it is expected that the turnover and exposure metrics will be calculated at the consolidated group level, rather than the individual entity or branch level. This should be more representative of the effective size of the business that the funds are being provided to. However, the reporting entity may choose to classify a customer according to the turnover and exposure of the individual legal entity if it determines that this is a more appropriate representation of the customer.
109. Can APRA provide additional guidance on how on-balance sheet securitisation should be reported across the EFS collection?
Please see the file below (EFS guidance on securitisation reporting) for additional guidance on how to report on-balance sheet securitisation, including self-securitisation and covered bonds, across the relevant EFS forms.
111. How should trustees, responsible entities and custodians acting on behalf of a trust be classified when reporting by counterparty?
The EFS collection requires the reporting of counterparty sector information based on SESCA 2008, which in turn is based on the sectoral classification prescribed by the 2008 System of National Accounts (SNA). SNA guidance states that if a commercial agent makes transactions or takes a position under the order and at the expense of another party (the principal), the transactions or positions should be attributed to the latter.
The agencies acknowledge the potential difficulties for reporting institutions to identify the principal in a transaction or position taken by a commercial agent. As a result, the general principle applied for EFS reporting is that the sectoral or counterparty classification should be made based on the counterparty with whom the reporting institution has a position on a flow of funds basis, not on an ultimate risk basis (see section 1.18 of RPG 701.0 and EFS FAQ 34). For example, in the situation where a funds manager makes a deposit on behalf of a client, this should be reported as a deposit by the funds manager.
However, a special case arises where the direct legal entity facing the reporting institution is a trustee, a responsible entity or a custodian acting on behalf of a trust. In these situations, reporting entities should classify the counterparty according to the sectoral classification of the trust. For example, where a corporate trustee acting on behalf of a trust that is a non-financial investment fund makes a deposit, this should be reported as a deposit by a non-financial investment fund (the trust), not a deposit by a financial auxiliary (the corporate trustee). For the purposes of EFS reporting trustees, responsible entities and custodians acting on behalf of a trust are not considered to be transacting or have a position with the ADI or RFC on a flow of funds basis; rather, they are facilitating the flow of funds between the ADI or RFC and the trust. This distinction is important as it allows for the meaningful reporting of sectoral counterparty information in accordance with SESCA and SNA requirements. In line with the general principle above, no further look-through to the trust beneficiary is required.
The agencies expect that all reporting entities record sufficient information about their customers to allow them to be appropriately classified on the EFS forms using the above principles. For further guidance on classifying counterparties for the EFS collection, please refer to RPG 701.0. In particular, section 1.5 outlines a number of methods and types of information that can be used to classify counterparties to their economic sectors. This includes a mapping from ANZSIC to the SESCA 2008 categories. There are also several FAQs that may help identify certain types of counterparties (for example, FAQ 88 may help in the identification of investment funds), as well as a range of publicly available information about registered businesses (such as the ATO’s ABN lookup tools). The Reserve Bank's list of eligible securities may also assist in identifying counterparties that are securitisers.
112. How should the interest rate be reported for the undrawn portion of a loan funded in the month, if the interest rate charged is not fixed until the funds have been drawn down?
For loans that have been funded in the month but not yet drawn down, report the contractual interest rate that would have been charged to the borrower if they had fully drawn down the loan, as at the end of the month. This could be determined by, for example, applying the interest rate on the drawn portion of the loan to the undrawn portion, or calculating the rate that would have been applied to the loan using the contractual spread and market reference rate. Where the contractual interest rate cannot be determined for an undrawn loan, exclude this loan from the calculation of the weighted average interest rate.
In the case of credit cards funded during the month, the reported interest rate should be zero unless a balance transfer has taken place (in which case, report the interest rate applying to this balance).
113. The agencies have continued to publish FAQs since the beginning of the EFS parallel run, which provide new guidance on the reporting requirements and indicate further upcoming changes to the EFS standards. Do the agencies expect the new guidance to be implemented immediately after an FAQ is published?
The FAQs were designed to provide timely guidance to reporting entities on commonly asked questions and key issues related to the EFS collection. Many of the FAQs seek to clarify the EFS standards, forms and instructions to help entities meet their reporting obligations. Some FAQs also identify errors in the reporting standards and advise entities how the relevant data will need to be reported once the standards are corrected.
Entities are encouraged to report in accordance with the FAQ guidance to the extent practicable. However, the agencies understand that reporting entities face an additional burden during the parallel run period, and that even small changes to reporting systems could require considerable time and resources to implement. The agencies therefore do not expect that entities would be able to implement all additional FAQ guidance published during the Phase 1 and 2 parallel run periods immediately. Where an entity would find it difficult to implement any additional FAQ guidance promptly, they should advise the agencies and provide an estimated implementation date if possible.
Note that the FAQs refer to the provisions of APRA’s reporting standards but, until they are incorporated into the legislative reporting instruments, they do not form part of the law or create enforceable requirements. Where appropriate, the FAQs will later be incorporated into the EFS reporting standards and form instructions, as well as Reporting Practice Guide RPG 701.0. The next update to the EFS standards is expected to take place by the end of 2019, and any relevant changes to reporting systems should be implemented by that time. In the meantime, entities can nevertheless expect to receive data quality queries if the agencies identify that data are not being reported in line with all available instructions and guidance (including the FAQs). Where it is deemed appropriate, the agencies may request that entities expedite changes to their reporting systems for specific data items.
Reporting framework - Implementation
3. What are the agencies' expectations for back-book treatment for information that has not previously been reported or where definitions have changed significantly?This is particularly relevant to the reporting of loan purpose on the back book.
RPG 701.0 specifies acceptable ongoing or transitional proxy data items or methodologies for updating back-book reporting. Where a proxy has not been specified the agencies expect that reporting institutions will review and update their back-book treatment.The agencies note that reporting institutions have a number of options for achieving this, including leveraging existing run-off and turnover in the back-book, and natural contact points with customers to update or collect relevant data points. Where a reporting institution believes it will be unable to source information for a data point (other than those specified in RPG 701.0) in time for the commencement of EFS reporting they should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.
9: What workarounds are acceptable for data that are not captured in reporting institutions' source systems?
The reporting standards outline the agencies' expectations for the data to be reported. For a limited number of reporting concepts, RPG 701.0 specifies acceptable proxy data items or methodologies, including transitional measures. Where a reporting institution believes it will be unable to source information for a data point (other than those specified in RPG 701.0) in time for the commencement of EFS reporting they should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.
15: How does the planned upgrade to D2A affect the implementation of the EFS collection? Will any alternative software be available for testing prior to go-live for each EFS phase?
Entity submissions of EFS reporting standards will commence on D2A from the first reporting period ending 31 March 2019. APRA is aiming to transition to a new Data Collection Solution (DCS) replacing D2A in late-2019, with entities beginning to use it thereafter. The implementation of DCS will be limited to the system through which entities submit data to APRA. It will not result in changes to the content of current data collections, or collections under consultation.Entities are encouraged to register to receive ongoing updates on the DCS implementation to stay abreast of developments. More information can be found at APRA is replacing D2A.
Reporting Framework - Parallel Run
4. Should existing returns be quarantined from systems and reporting changes for the EFS data (e.g. where there are reporting concepts common to both)?
The agencies' strong preference would be for the existing domestic books returns to be quarantined from system changes made to report the new EFS returns. This is to allow for statistics to continue to be compiled on a consistent basis across industry until publications are switched over to the new EFS data after the parallel run period. Reporting institutions should alert agencies as soon as possible to instances where current reporting is affected by changes made in preparation for EFS reporting.
16. Can APRA share information on how the EFS parallel run will be managed when reporting anomalies are detected, and whether there will be a longer parallel run period?
The agencies do not intend to extend the length of the parallel run beyond the period determined during consultation. As part of the industry consultation process, the agencies received feedback on the length of the forward-looking parallel run. The agencies balanced the varying opinions of reporting institutions and decided to shorten the forward-looking parallel run to four months for monthly balance sheet forms and ARF 721.0 and three months for the monthly finance forms. Although the agencies initially proposed a longer parallel run period, the agencies are of the view that the shorter period appropriately balances the various considerations outlined by reporting institutions, including the burden associated with a longer parallel run period. The agencies note that quarterly forms will still need to be submitted for two quarters in the planned parallel run period. The agencies will analyse the data reported in a timely manner and will manage any reporting anomalies with the reporting institution involved as they arise.
93. Can the agencies provide any additional information about the parallel run query process?
Submission dates: In recognition of the additional burden that the parallel run will place on reporting entities, APRA has extended the due dates of the new EFS reporting forms during their respective parallel run periods.
For details of the submission dates, see the letter below:
Entities are nevertheless encouraged to submit the EFS returns as early as possible, partly to mitigate the risk of discovering any reporting errors through the D2A validation rules on the due date.
Timing of query process: The agencies will require additional time to analyse the EFS returns to ensure that they can form meaningful queries. We would expect to send out queries within 4 business days. Reporting entities will then have 4 business days to respond to the queries. Given the nature of the parallel process entities should expect additional follow up questions.
116. Can the agencies provide any additional information to help reporting institutions prepare for the Phase 2 parallel run?
The agencies’ approach to assessing the Phase 2 EFS submissions during the parallel run will be similar to that adopted for Phase 1. In particular, queries sent out during the parallel run will largely be focused on ensuring that the data have been reported in line with the EFS reporting standards and guidance, as well as understanding the impact of conceptual and definitional changes on entities’ reporting. One key purpose of these queries is to inform how the agencies intend to implement changes to their publications.
The agencies intend to use a range of existing data sources to help inform the query process. These may include data currently being submitted on the Domestic Books forms, responses to out-of-cycle queries, entities’ advertised lending and deposit rates, and bond pricing and other market data. The RBA may also use estimates derived from the RBA Securitisation Dataset. Cross-institution comparisons and checks for internal consistency may also be used to help detect any anomalies in the reported data. Where relevant and appropriate, the agencies intend to identify the data that is used to inform their queries.
The agencies have also prepared the following documents (attached to this FAQ below) to assist entities in preparing for the Phase 2 parallel run query process:
- A list of data items that the agencies intend to prioritise when assessing the quality of the submissions during the parallel run. This list is largely focused on items that are intended to be used by the ABS and RBA for analysis, publication and policy-making purposes, or where the new EFS guidance is expected to result in significant changes to the reported data. Low-priority data items may nevertheless be queried, particularly in latter months of the parallel run. Note that this document differs from, and does not replace, RPG 702.0 or the EFS Priority Listing for Data Items. RPG 702.0 and the EFS Priority Listing for Data Items is the framework reporting entities should consult to understand the agencies’ priorities on an ongoing basis.
- A (non-exhaustive) high-level mapping of items reported on ARF 741.0, ARF 743.0 and ARF 745.0 to conceptually related items currently being reported on the Domestic Books forms. When considering the mapping, it is important to remember that entities are expected to report EFS data in line with the new reporting standards and guidance. This may or may not result in equivalent values being reported for conceptually related data items on the new and existing forms, and outcomes may not be consistent across institutions. For many conceptually related data items, the agencies expect to see a change in the reported values due to differences between the definitions used in the EFS and Domestic Books forms. For such items, queries may be used to understand the extent to which any differences in the reported data were driven by the changes in definitions as opposed to other factors; if no differences in the reported data are observed, queries may be used to confirm whether the reporting entity has reported in line with the EFS standards.
Ahead of the parallel run, APRA intends to send out a set of ‘conceptual queries’ to selected institutions that seek to understand how they report certain key data concepts on the Phase 2 reporting forms. These include data concepts that span several reporting forms and those that will be calculated in line with institutions’ internal business practices. The general intent of the conceptual queries is to help the agencies interpret each reporting entity’s data on an ongoing basis, rather than with a view to force consistency in the methodologies applied across the industry.The agencies expect to receive detailed responses to these queries that explain the entity’s methodology for calculating or sourcing the relevant data, and how the reporting may have changed from the Domestic Books collection if appropriate. The conceptual queries are intended to be sent out in early August. Responses will only be due at the same time as the responses to the regular parallel run queries for the July 2019 reporting period (in mid-September). The long time frame for these queries recognises the additional resource burden that institutions are facing during the EFS parallel run periods, and is intended to provide institutions with sufficient time to prepare appropriate responses.
Details of the timing of the parallel run query process are outlined in FAQ 93.
117. What audit requirements apply to the data submitted during the parallel run periods?
Reporting entities are expected to report data in accordance with the EFS Collection reporting standards requirements from the beginning of each parallel run.
Reporting entities may utilise Reporting Practice Guide 702.0 ABS/RBA Data Quality for the EFS Collection and notify APRA in the event of any reporting errors identified, regardless of whether a form is still in its parallel run phase.
EFS Collection forms that are still in the parallel run period at the end of a reporting entity’s financial year are not required to be audited. However, auditors are expected to use the General and Specific Observations index to provide details on how an entity is progressing with its implementation of all EFS Collection forms – even those that are in still in the parallel run period.
The following EFS Collection forms, namely ARFs 720.0A/B, 720.1A/B and 720.2A/B, are subject to reasonable and/or limited assurance audit/review opinion if the forms are no longer in the parallel run period at the end of the reporting entity’s financial year. Following the end of the parallel run period, those specific EFS Collections forms will be subject to a reasonable and/or limited assurance audit opinion/review.
Auditors are to provide limited assurance over the controls designed to ensure that a reporting entity has provided reliable data to APRA for the purposes of the EFS Collection, and that these controls have operated effectively throughout a reporting entity’s financial year. For a reporting entity with a financial year ending after the parallel run period for a set of forms has finished, the agencies require these forms to be included in the scope of this limited assurance review. This includes forms submitted during the parallel run period that also falls within the relevant financial year.
|Financial year ending||Relevant EFS forms||30 June 2019||30 September 2019||30 June
|Is a limited and/or reasonable assurance audit/review required for ARFs 720.0A/B, 720.1A/B and 720.2 A/B?||No||ARFs 720.0A/B, 720.1A/B and 720.2 A/B||Yes – for the September 2019 reporting period||Yes – for the June 2020 reporting period|
|Is a limited assurance review over controls required for the Phase 1 EFS Collection forms?||No||ARF 720.0A/B, ARF 720.1A/B, ARF 720.2A/B, ARF 720.3, ARF 720.4, ARF 720.5, ARF 720.6, ARF 720.7||Yes – from the March 2019 reporting period onwards||Yes – for the full financial year|
|Is a limited assurance review over controls required for the Phase 2 EFS Collection forms?||No||ARF 743.0, ARF 745.0, ARF 744.0, ARF 746.0, ARF 741.0, ARF 742.0, ARF 747.0, ARF 748.0||No||Yes – for the full financial year|
|Is a limited assurance review over controls required for the Phase 3 EFS Collection forms?||All||No||No||Yes – for the full financial year|
|Is a General and Specific Observations index on EFS implementation progress required?||Yes||Yes||Yes||Yes|
5. Could the agencies please advise which data items in the EFS collection are expected to be publicly disclosed?
As noted in the initial discussion paper, APRA will consult on changes to its statistical publications arising from the proposed changes to the EFS collection (e.g. Monthly Banking Statistics).
The RBA and ABS will also be reviewing their publications. Core publications focussed on credit stocks and flows will continue in some form (e.g. the RBA's Financial Aggregates and the ABS' Lending Finance Release). New publications are also being considered, for example the RBA is considering publishing aggregated data on average interest rates facing borrowers and depositors.
Further information on changes to publications will be made available in due course.
10. Can APRA confirm that the cost/value of funds and margin data will not be disclosed in any APRA, ABS or RBA publications? How will this information be protected from misuse or unintended disclosure?
All data in the EFS collection are protected under the Australian Prudential Regulation Authority Act 1998 (APRA Act). As noted in the initial discussion paper, APRA will consult on changes to its statistical publications arising from the proposed changes to the EFS collection. Where necessary, APRA will consult industry on confidentiality further to s.57 of the APRA Act. The commercial-in-confidence nature of these data is understood and would be taken into account in any proposals for publication.
In using EFS data the ABS and RBA are bound by the general secrecy obligations of the APRA Act and conditions imposed by APRA under this Act. Additionally, the ABS is bound by the secrecy obligations in the Census and Statistics Act 1905 and the RBA by the 'protected information' provisions in the Reserve Bank Act 1999. Consistent with these obligations, both the ABS and RBA will ensure that the publication and dissemination of compilations and analyses of EFS data does not enable the identification of a particular person or organization, except where these data are already in the public domain (for example, where APRA has determined such data to be 'non-confidential').
123. Can the agencies provide more information on the publications that will change as a result of the EFS collection?
The data collected as part of the EFS collection will be published by the ABS, APRA and the RBA. These publications are set out in the table below along with indicative release dates.
Specific details of changes to individual publications arising from the EFS collection will be communicated by the relevant agency prior to publication.
|Frequency||Publication||First EFS data release|
|RBA Monthly||Financial Aggregates||July 2019 data released 30 August 2019|
|APRA Monthly||Banking Statistics||July 2019 data released 30 August 2019|
|ABS Monthly||Lending to Households and Businesses (5601.0)||October 2019 data released 13 December 2018|
|ABS Quarterly||Australian National Accounts: Finance and Wealth (5232.0)||September 2019 data released 18 December 2018|
|ABS Quarterly||Australian National Accounts: National Income, Expenditure and Product (5206.0)||TBA|
|ABS Annual||Australian System of National Accounts (5204.0)||TBA|
ARF 720.0 ABS/RBA Statement of Financial Position
6. ARS 701.0 indicates that treasury-related short-term borrowings from banks should be excluded from deposits and loans. Where should such borrowings (and treasury-related short-term borrowings from financial institutions) be reported on ARS 720?
An inconsistency has been identified and amended. Treasury-related short-term borrowings from banks and other financial institutions should be reported as a loan in item 16 of ARS 720.0. The instruction to exclude treasury-related short-term borrowings from banks has been removed from both the loan and deposit definitions in ARS 701.0 (the latter to avoid confusion of reporting of 'deposit' positions on both sides of the balance sheet). The guidance has been updated to indicate that treasury-related short-term borrowings should be reported in item 16 of ARS 720.0.
21. Where on ARF 720.0A/0B should gold certificates be reported, as gold certificates may relate to 'unallocated gold' or 'allocated gold'?
Gold certificates relating to unallocated gold should be reported under Item 1.2 'Unallocated gold' assets on ARF 720.0A/0B. If a gold certificate relates to allocated gold, it should be reported under Item 10.12.1 'Other assets, of which: Non-financial assets' on ARF 720.0A/0B. If a reporting institution is unable to distinguish whether a gold certificate relates to allocated or unallocated gold, report the gold certificate under allocated gold.
22. Under Shareholder Equity, reserve categories are the same as ARF 320.0 with the exception of ‘Available for sale reserve’ which is missing. Is the assumption to report this under ‘Other reserves’?
The category 'Available for sale reserve' in the current ARF 320.0 should be reported under 'Other reserves' in the ARS 720.0.
24. Where on the ARF 720.0A/B should loan origination costs (such as external legal costs, valuation fees and other incremental costs incurred in acquiring a loan) be reported?
Any expenses incurred in originating a loan or finance lease that have been capitalised by the reporting entity (that is, where the entity has delayed the recognition of these expenses by recording them as a long-term asset) should be included in ‘Item 10.2: Total other assets – Capitalised expenses’ until amortised.
29. Should margin lending be included in ARF 720.0, or only in ARF 723.0?
Margin lending should be included in both the ARF 720.0 and the ARF 723.0.
30. FAQ 6 notes that treasury-related short-term borrowings should be reported as a loan in item 16 of ARS 720.0. Where should treasury-related long-term borrowings be reported?
Both short- and long-term treasury-related borrowings should be reported as loans in item 16 of ARS 720.0.
32. Can APRA clarify the treatment of margin monies on ARF 720.0 and define the references to ‘repayable’ and ‘non repayable’ margin in RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection?
In the reporting of margin monies, a distinction should be made between ‘repayable’ and ‘non-repayable’ margin monies, where possible. This treatment is in line with the IMF’s Monetary and Financial Statistics Manual and Compilation Guide (2016), from which the following definitions have been drawn (page 62).
Repayable margin – sometimes referred to as initial margin – consists of collateral deposited to protect a counterparty against default risk. Ownership of the margin remains with the unit that deposited it. Although its use may be restricted, a margin is classified as repayable if the depositor retains the risks and rewards of ownership, such as the receipt of income or exposure to holding gains and losses. At settlement, a repayable margin (or the amount of repayable margin in excess of any liability owed on the financial contract) is returned to the depositor.
Repayable margin payments are transactions in deposits, not transactions in the associated financial assets (e.g. financial derivatives). Repayable margin deposits made in cash should be reported as ‘non-transaction deposits’. When a repayable margin deposits is made in a non-cash asset, no transaction or a new position in stocks is recorded in the balance sheets because no change in economic ownership has occurred.
Non-repayable margin – sometimes referred to as variation margin – payments are transactions in financial derivatives, not deposits. Non-repayable margin is paid to meet liabilities recorded due to the daily marking of derivatives to market value. In effect, non-repayable margin represents an effective transfer of ownership between counterparties to the financial contract. The non-repayable margin payments reduce the liability created through the financial derivative with the contra-entry a reduction in another financial asset. The receipt of non-repayable margin is recorded as a reduction in the financial derivative asset; the contra-entry is an increase in another financial asset.
There may be instances where a reporting entity is unable to make the distinction between repayable and non-repayable margin monies. In these circumstances, treat all margin monies as repayable.
RPG 701.0 will be updated to reflect this reporting guidance.
33. Can APRA clarify the expected reporting treatment for the following balance sheet items:
- RBA Exchange Settlement Accounts
- Nostro/Vostro accounts
- Other settlement accounts
For ARF 720.0, RBA Exchange Settlement Accounts and Nostro/Vostro accounts should be treated as ‘at call deposits’ and reported on the balance sheet accordingly.
Outstanding securities settlements should be reported on ARF 720.0 in line with the Australian Accounting Standards (specifically, AASB 9). Where an entity has elected to use trade date accounting under AASB 9, outstanding settlements should be reported in:
- Item 10.5: Receivables related to securities sold not delivered / outstanding security settlements.
- Item 18.7: Payables related to securities purchased not delivered / outstanding security settlements.
Note, where an entity has elected to use settlement date accounting for securities transactions, it is not required to report the receivables and payables related to outstanding settlements in items 10.5 and 18.7 on ARF 720.0.
Any other settlement account balances not related to outstanding security settlements (e.g. related to the payments system) should be reported in:
- Item 10: Total other assets (and will be captured in the derived Item 10.12 Other assets).
- Item 18: Total creditors and other liabilities (and will be captured in the derived Item 18.11 Other).
39. Can guidance on the relationship/mapping between existing and new line items on the balance sheet returns (i.e. ARF 320.0 and ARF 720.0) be provided?
The agencies have developed detailed reporting standards that outline the agencies' expectations for the data to be reported on ARF 720.0. The expectation is that reporting institutions will report data in line with the new reporting standards. This may or may not result in equivalent data being reported by an institution on the new ARF 720.0 and the existing ARF 320.0, and outcomes may not be consistent across institutions. Reporting differences may also rise between ARF 720.0 and ARF 320.0 as a result of changes to the balance sheet structure, such as the treatment of non-resident and intragroup positions. As a result of these differences, the agencies are not able to develop mappings for items reported in ARF 320.0 to those in ARF 720.0 that would be accurate for, and could be used consistently by, all reporting entities.
Entities are encouraged to contact APRA if they have specific questions related to where items should be reported on ARF 720.0. The agencies will then work with that entity to provide targeted advice.
47. Trade credit (as appears in item 18 of ARF 720.0A/B) is defined as goods or services purchased for which the corresponding payment is deferred past the date on which the good or service is received. This definition is broad, and suggests any accounts payable should be reported here. Should reporting institutions follow their judgement of what type of payables should be reported?
The definition of trade credit is intentionally broad to capture all items within accounts payable that are not specified elsewhere in item 18 of ARF 720.0A/B.
54. Where should industry report investments in controlled entities and associates on ARF 720.0A/B?
Please refer to definitions of types of "related parties" in ARS 701, including "controlled entities" and "associated entities". Assets (including investments) and liabilities with all related parties (including controlled entities and associated parties) should not be consolidated in the domestic books of the reporting entities. Assets and liabilities with related parties should instead be reported as total intragroup positions on ARF 720.0A/B and detailed as appropriate in any other relevant EFS forms. The agencies have added guidance to RPG 701 to clarify that investments in related parties should be reported in item 12 Total Intra-group Assets on 720.0A/B.
62. Are prime brokerage financing facilities included within the scope of the ‘margin lending’ definition?
Margin loans provided through the reporting institution’s prime brokerage business are in scope of the ‘margin lending’ definition for the purposes of the EFS data collection, as long as they meet the description of being ‘the provision of secured loans to investors for the purpose of purchasing financial assets’. Such margin loans should be reported on all relevant forms, including ARF 720.0A/B, ARF 720.1A/B, ARF 723.0 and ARF 742.0A/B.
64. Margin lending is defined in ARS 701.0 with reference to the Corporations Act, which limits the definition to margin loans provided to natural persons. However, ARF 723.0 requires the disclosure of margin loans to private and public sector businesses. Should ARF 720.0 and ARF 723.0 be consistent in their definition of margin lending, or are the two forms intended to capture different information?
The EFS collection is intended to capture margin lending to both households and public and private sector businesses (including community service organisations, non-financial businesses and financial institutions). Margin lending to businesses is captured on several forms, including ARF 720.0, ARF 720.1, ARF 723.0 and ARF 742.0. The definition of margin lending should be consistent across all of these forms.
The definition of margin lending in ARS 701.0 will be amended to clarify that it is not restricted to facilities provided to ‘natural persons.’
67. Can APRA clarify the treatment of cash collateral exchanged with other banks in respect of uncleared derivatives trades?
Cash collateral exchanged with other entities in respect of uncleared over-the-counter derivatives trades should be reported in the same way as all other margin monies (see section 2.1.7 of RPG 701.0 and FAQ 32 for further information).
For example, margin monies exchanged with other banks should be reported as follows:
- On ARF 720.0A – Cash collateral posted to other banks to cover repayable margin requirements should be reported under Item 2.1.2. (3) Total funds on deposit at other financial institutions; ADI's; (Not at call). Repayable cash collateral collected from other banks should be reported under Item 14. Total deposits. Exchange of non-repayable margin should be recorded as transactions in financial derivatives, rather than deposits (see section 2.1.7 of RPG 701.0 and FAQ 32).
- On ARF 720.2A – Cash collateral collected from other banks to cover their repayable margin requirements should be reported under Item 220.127.116.11. (3) Total deposits; resident deposits; financial institutions; ADIs; (Other non-transaction deposits).
72. Could APRA please confirm where current and deferred tax assets and liabilities should be reported on ARF 720.0?
Current tax assets and any current tax liabilities should be netted and reported in item 18.1: Tax liabilities (BSL21991), even if this results in a negative balance. Likewise, deferred tax assets and deferred tax liabilities should be netted and reported in item 10.6: Deferred tax assets (BSAO27526).
81. Can APRA confirm whether an SPV entity that is set up to hold assets as part of a cover pool should be consolidated within the domestic books of an ADI for the purposes of EFS reporting?
The EFS standards and guidance previously required the consolidation of SPVs established for the purpose of holding assets in a cover pool for covered bonds. However, following further consultation with reporting entities, the requirement to consolidate covered bond SPVs will now be removed.
Covered bonds and any cover pool assets transferred to an SPV should now be reported in the same way as other on-balance sheet securitisations. Specifically, both the assets underlying the cover pool and the covered bonds issued by the reporting entity should be reported on the domestic books balance sheet of the ADI (cover pool assets should not be derecognised). Since covered bond SPVs should no longer be consolidated, intra-group balances between the ADI and any related covered bond SPVs will also need to be reported. This treatment aligns with statutory accounting reporting and the general concept of ‘domestic books’ under the EFS.
The updated RPG 701.0 will include guidance on how covered bonds should be reported across the relevant EFS forms.
82. For derivative financial instruments, should the clean price and accrued interest be reported separately on ARF 720.0, or should a single net figure be reported?
For a given derivative instrument, please only report the net (market) value as one item on ARF 720.0. That is, do not separately record the clean price as an asset and accrued interest as a liability (or vice versa).
86. Can APRA clarify the treatment of securities pledged as variation margin on ARF 720.0?
In the reporting of margin payments, a distinction should be made between ‘repayable’ and ‘non-repayable’ margin, where possible. This treatment is in line with the IMF’s Monetary and Financial Statistics Manual and Compilation Guide (2016).
As in the case of cash collateral (see EFS FAQ 32), variation margin is considered ‘non-repayable’ if there is an effective transfer of ownership of the collateral between the counterparties to the financial contract. Non-repayable margin payments reduce the liability created through the financial derivative, with the contra-entry a reduction in another financial asset. The receipt of non-repayable margin is recorded as a reduction in the financial derivative asset; the contra-entry is an increase in another financial asset. In the case of non-cash collateral, it is expected that the contra-entry will be an increase or decrease in ‘Item 3: Total trading securities’ of ARF 720.0.
If the variation margin is ‘repayable’ (i.e. ownership of the margin remains with the counterparty that deposited it), no transaction or a new position in stocks is recorded in the balance sheets because no change in economic ownership has occurred.
91. Can APRA clarify the expected reporting treatment of interbank loans and deposits on the balance sheet
Interbank loans and deposits should be reported on ARF 720.0 as follows:
- Loans provided to other banks in Item 6: Total loans and finance leases, and in the relevant items on ARF 720.1 (e.g. item 18.104.22.168.2 for interbank loans to resident ADIs).
- Deposits received from other banks in Item 14: Total deposits, and in the relevant items on ARF 720.2 (e.g. item 22.214.171.124 for interbank deposits received from resident ADIs).
- Borrowings from other banks in Item 16.3: Total borrowings – Loans and finance leases.
- Deposits held at other banks in Item 2: Total funds on deposit at other financial institutions.
Please ensure that such loans and deposits are always reported according to the type of asset/liability, the residency of the counterparty and the counterparty’s related party status.
92. Can APRA provide a definition of non-financial assets, or should reporting institutions apply the definition in the Australian Accounting Standards?
‘Non-financial assets’ are resources that meet the definition of an 'asset' according to the AASB Framework for the Preparation and Presentation of Financial Statements (para. 49(a)) but do not meet the definition of a 'financial asset' according to AASB 132 Financial Instruments: Presentation (para. 11).
96. What are the implications of AASB 16 for the EFS data collections, and specifically the reporting of right-of-use assets and lease liabilities?
ARF 720.0 does not currently have specific line items to capture a lessee’s right-of-use asset (ROU asset) and related lease liability as defined in AASB 16 Leases.
Any form changes are likely to occur only when APRA has finalised its regulatory capital position on the treatment of the ROU asset in line with Basel’s position (see the Bank for International Settlement's website on Frequently asked questions on changes to lease accounting). Until then, banks in their capacity as lessees should report operating leases as follows:
- Lease liabilities at ‘item 18.11: Total creditors and other liabilities – Other’
- ROU assets at item ‘10.12: Other assets and item 10.12.1. of which: Non-financial assets’
ARF 720.3 (if applicable)
- Lease liabilities at ‘item 3.1.4: Creditors and other liabilities’
- ROU assets at item ‘1.1.7: Other assets’
- Interest expense at ‘item 4.1.6: Other interest-bearing liabilities’
- Depreciation expense on the ROU asset at ‘item 6.1.2: Depreciation of property, plant and equipment’
As there has been no changes to the accounting treatment for lessors, please report this using the existing guidance (e.g. report operating rental income on ARF 730.0 at item 2.1.1. Rental income on operating leases)
98. Should unamortised fees (income) and unamortised costs (expenses) related to loans and finance leases be reported in Item 6 of ARF 720.0?
Unamortised costs should not be included in ‘item 6: Total loans and finance leases’ on ARF 720.0A. Any expenses incurred in originating a loan or finance lease that have been capitalised by the reporting entity should be included in ‘item 10.2: Total other assets – Capitalised expenses’, until amortised.
Fees and commissions received by the reporting entity but not yet recognised as earned for accounting purposes should be reported in ‘item 7: Deferred fees and commissions relating to loans and finance leases’.
Fees and commissions that have been earned (accrued) during the period but not yet received should be reported in ‘item 10.11 Total other assets – Fees and commissions receivable’. Once any accrued fees and commissions have been capitalised by the entity (i.e. added to the outstanding value of the loan amount, as per the terms of the loan contract), they should then be reported within ‘item 6: Total loans and finance leases’.
Fees and commissions that have been earned and received should be included in the value of the relevant asset in ARF 720.0 (e.g. in ‘item 1.1 Notes and coins’ or ‘item 2: Funds on deposit’, as appropriate) and recognised as income in ARF 730.0.
100. Can APRA please confirm if Item 1.1 of ARF 720.3 should equal the value reported in Item 12 of ARF 720.0, as per the instructions in ARS 720.3?
Item 1.1 of ARF 720.3 may not reconcile with Item 12 of ARF 720.0A, since the treatment of provisions on the two forms differs
- In ARF 720.3, the value of credit outstanding for loans and finance leases should be reported net of individual provisions but gross of collecting provisions (that is, individual provisions should be excluded from the value of loans and finance leases, but collective provisions should be included).
- In ARF 720.0, the total value of intra-group assets (item 12) should be reported net of both individual and collective provisions (note that the instructions for item 20 state that individual and collective provisions for intra-group loans and finance leases should be reported in item 12).
The requirement for item 1.1 of ARF 720.3 to equal item 12 of ARF 720.0 will be removed from ARS 720.3 when the EFS standards are next updated.
105. Where should interest accrued on securitised loans be reported on ARF 720.0?
When reporting the value of on-balance sheet securitised loans on ARF 720.0:
- The value of ‘credit outstanding’ (as recorded in item 6) that has been securitised should be reported in item 13.1.1. As explained in ARS 701.0, ‘credit outstanding’ means the total balance owed by the borrower as at the end of the reporting period, including any capitalised interest and fees.
- Any interest and fees accrued on these loans but not yet charged to the customer (i.e. interest receivable and fees and commissions receivable, as recorded in items 10.1 and 10.11) should be reported in item 13.1.2. This means that interest and fees that have accrued but not yet been charged on securitised loans will also not be reported on ARF 720.1.
110. When reporting the value of securities, the EFS standards instruct to “report the value of securities held less the value of securities short-sold. Do not include unsettled trades.” Should all unsettled trades be excluded when reporting the value of securities, or only unsettled short-sale trades?
Please disregard the instructions to exclude unsettled trades unless your entity has elected to use settlement date accounting for securities transactions under AASB 9: Financial Instruments. If you have elected to use trade date accounting under AASB 9, you may include unsettled trades in the reported values of securities (in line with your statutory reporting).
To avoid imposing settlement date accounting on all reporting entities, the requirement to exclude unsettled trades will be removed from the instructions for reporting the value of securities on ARF 720.0, ARF 720.3, ARF 720.4 and ARF 720.5.
7. With the implementation of AASB 9 in 2018, the reporting of collective provisions in the ARF 720.1 (from March 2019) may not be comparable to balances reported in prior years. Will comparative periods need to be re-submitted?
Provided the changes are implemented prior to the March 2019 reporting period, the agencies will not require that comparative periods for the existing domestic books forms are re-submitted following the implementation of AASB 9 in 2018. However, the agencies request that reporting institutions indicate from what reporting period changes will be effective.
48. Could the agencies provide further guidance on how to determine residency for syndicated loans, including in circumstances where there is an agency relationship involved?
With regards to the reporting of syndicated loans made by the reporting entity on item 3.1.1 of ARF 720.1A, only syndicated loans that are made to resident entities should be reported. A reporting institution should report the value of loans it has made to resident entities through a syndicate. The definition of residency can be found in ARS 701.0 and further guidance can be found in RPG 701.0.
Where a separate funding vehicle is established for the group of borrowers seeking funding, the residency of the funding vehicle would determine whether the syndicated loan is made to a resident or non-resident entity.
Where a separate funding vehicle is not established – for example, where the reporting entity makes a loan to a group of borrowers through an agent – syndicated loans should be reported based on the residency of the end borrowers. That is, only the value loaned to resident entities should be reported in item 3.1.1 of ARF 720.1A.
With regards to the reporting of funds that the reporting entity borrows from a syndicate, the same principles as outlined above apply. Where the reported entity borrows from a separate vehicle established to provide the syndicated loan, the residency of the funding vehicle would determine whether the borrowings should be reported as loans from a resident or non-resident entity.
Where a separate funding vehicle is not established and the reporting entity borrows through an agent who facilitates the syndicated loan, the borrowings should be reported based on the residency of the lenders (not the agent). That is, the value borrowed from resident and non-resident entities should be reported according to the amount borrowed from each resident and non-resident lender, respectively.
65. RPG 701.0 Section 1.10 sets out the criteria for identifying loans secured by residential property. Should the criteria also be used to determine if a loan is secured by other assets?
Section 1.10 of RPG 701.0 provides specific guidance on determining whether a loan should be reported in the ‘of which: secured by residential property’ items on ARF 720.1, ARF 742.0, ARF 745.0 and 746.0.
As outlined in the guidance, the conditions for a loan to be considered ‘secured by residential property’ are:
(1) the value of the collateral must be at least 50% of the loan balance; and
(2) at least 50% of the collateral must be residential property.
The ‘of which: secured by residential property’ items are the only ones for which these criteria apply.
When reporting loans in all other circumstances, the general definitions of ‘secured’ and ‘unsecured’ (as per ARS 701.0) should be applied:
- A ‘secured’ loan is any loan that is ‘fully secured’ or ‘partially secured’ (i.e. some amount of collateral exists to support the loan exposure – there is no minimum collateral threshold for a loan to be considered secured).
- An ‘unsecured’ loan is one where there is no collateral to secure the loan.
The distinction between ‘secured’ and ‘secured by residential property’ has been clarified in both ARS 701.0 and RPG 701.0.
74. In section 6 of ARF 720.1A, are the values reported in columns 2 and 3 mutually exclusive or could they overlap?
There should be no overlap between the values reported in columns 1, 2 and 3 of Item 6 on ARF 720.1A. If a reporting entity determines that a loan has become impaired (as per the definition of ‘impaired’ in Prudential Standard APS 220 Credit Quality), this should be reported in column 3. Exposures that are past due for between 30 and 89 days but are not impaired should be reported in column 1. Exposures that are past due for 90 days or more that are well secured (not impaired) should be reported in column 2. As outlined in RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection, reporting of past due and impaired exposures should be consistent with data reported in the ARF 220.0: Impaired Facilities form. Reporting entities are encouraged to revisit APS 220 and Reporting Standard ARS 220.0: Impaired Facilities for further guidance.
87. How should ‘partially secured’ loans be reported?
(a) Using the example of a $100 loan secured by $30 of collateral, what should be the value reported as ‘secured’ in ARF 720.1 – the total value of a loan or only the amount that is secured?
(b) ARF 742.0 requires additional classification of loans by ‘fully secured’, ‘partially secured’ and ‘unsecured’. In the example above, the loan would be classified as ‘partially secured’. What would be the value reported in Item 5, Column 4 (Credit outstanding: Value) for collateralisation type (Column 2) ‘partially secured’?
(a) If a loan is considered ‘secured’ (i.e. some amount of collateral exists to support the loan exposure), then the entire loan balance should be reported as ‘secured’ on ARF 720.1, regardless of the value of the collateral. In the given example, report the loan value of $100, not the collateral value of $30.
(b) If a loan is considered ‘partially secured’ (i.e. some amount of collateral exists to support the loan exposure but the LVR is greater than 100%), then the entire loan balance should be reported in column 5 (‘Credit outstanding: Value’) for the ‘partially secured’ collateralisation type in Table 5 of ARF 742.0, regardless of the value of the collateral. In the given example, report the loan value of $100, not the collateral value of $30.
8. Can entities that are required to report ARS 720.0 but have either no deposits or no loans (or finance leases) be exempt from reporting ARS 720.1 or ARS 720.2 as applicable?
ARS 720.1 and ARS 720.2 form an integral part of the ARS 720.0 balance sheet, but were split into separate forms for ease of review. Entities with no relevant deposits or loans (or finance leases) may submit a nil return as applicable. The agencies are not seeking to implement a different reporting threshold for these forms as the cohort of reporting entities exceeding a reporting threshold will be assessed annually, while the information on deposits, loans and finance leases will be required for any given period in which the relevant amount reported on ARS 720.0 is non-zero.
99. If the balance of an offset account exceeds the loan balance and the customer does not receive any interest, should the deposit be reported as ‘non-interest-bearing’ in ARF 720.2?
Offset accounts are used to offset the balance of a linked loan when calculating the interest payable by a customer.
For the purposes of EFS, the interest rate on offset accounts should be reported as the contractual rate payable on the linked loan account, multiplied by the proportion of the offset account balance that is offset against the loan balance. For instance, if the balance in the offset account is fully offset against the loan balance, then the interest rate on the offset account would be the interest rate reported on the loan account. However, if only half of the balance in the offset account is offset against the relevant loan balance, then report the interest rate on the offset account as half of the interest rate on the loan account (see the definition of ‘offset accounts’ in ARS 701.0). As an example, assume a $100 housing loan with an interest rate of 4 per cent and a linked offset deposit account (which has a contractual interest rate of 0 per cent):
- If the loan balance ($100) exceeds the deposit balance ($50), an interest rate of 4 per cent will be charged on the net balance of the loan ($50). The entire loan balance and the entire deposit balance should each be reported with an interest rate of 4 per cent (since all of the offset account balance is being utilised to offset the loan).
- If the deposit balance ($200) exceeds the loan balance ($100), no interest will be payable/receivable by the customer on the loan/deposit. The entire loan balance should be reported with an interest rate of 4 per cent, and the entire deposit balance should each be reported with an interest rate of 2 per cent (since only half of the offset account balance is being utilised).
Under ARS 701.0, deposit accounts should only be reported as ‘non-interest-bearing’ if none of the contractual interest rates on the account are greater than zero. Since the interest rate to be reported on offset accounts is dependent on the loan interest rate, offset accounts should be treated as interest-bearing deposits for the purposes of the EFS collection.
Please note the following:
- ARS 701.0 currently states “report the interest rate as the contractual rate payable on the linked loan account, divided by the proportion of the offset account balance”. The italicised part is incorrect and will be amended to read “multiplied by” in due course, as per the guidance in this FAQ response.
- RPG 701.0 (section 1.15, example 1) currently advises that if the deposit balance exceeds the loan balance, then both balances should be reported with an interest rate of 0 per cent. This guidance is incorrect and will be amended in line with this FAQ response at the nearest opportunity.
52. ARF 720.3 contains a separately reported line item for Investments (Item 1.1.6). ARS 720.3 instructs that this line item should report "investments in financial assets other than investment securities." Can APRA clarify what items would be reported in this line? It is noted that this same classification is not reported in the ARF 720.0. Can APRA clarify why there would be a difference between ARF 720.0 and ARF 720.3?
ARF 720.0 does not require a breakdown of intra-group assets to be reported, except between the total and denominated in FX. In ARF 720.3, there is no specific investment type that the agencies expect to be reported under item 1.1.6. Investments. The inclusion of this item is for completeness, as a residual, to capture an investment that does not fit into the specific categories between items 1.1.1. and 1.1.5.or in the 'other assets' items (i.e. 126.96.36.199.1. and 188.8.131.52.2.). A nil response is acceptable for this item.
63. On ARS 720.3, how does a foreign bank branch report intra-group overseas assets and liabilities by related party type in items 2 and 4, respectively?
The row items that apply to the reporting of intra-group assets and liabilities for a foreign bank branch in ARF 720.3 are:
- items 2.1.1 and 4.1.1: Assets and liabilities due from/to the parent entity;
- items 2.1.4 and 4.1.4: Assets and liabilities due from/to SPVs; and
- items 2.1.5 and 4.1.5: Assets and liabilities due from/to (all) other related parties.
Items 2.1.2/4.1.2 and items 2.1.3/4.1.3 relate only to Australian-owned entities. Foreign-owned entities should not report intra-group assets of liabilities under these row items.
For example, assume a reporting entity is an Australian branch of a foreign bank. Assume also that the reporting entity has some assets due from another overseas branch of the same foreign bank (not located in Australia). Because the entity is foreign-owned, these assets should be reported in item 2.1.5 ‘assets due from other related parties’ (as they do not fall under item 2.1.1 or item 2.1.4). These assets should not be reported in item 2.1.3 ‘assets due from the ADI’s overseas-based banking operations’.
56. In ARF 720.6, should Ordinary Share Capital be reported in item 4: Total ASX-listed securities?
Yes – please report ordinary share capital in item 4. Total ASX-listed equity securities.
78. Should bills of exchange that are held, accepted and/or endorsed by the reporting entity be reported in items 1.1.1 and 1.2.1 of ARF 720.6?
ARF 720.6 is used to report securities issued by the reporting entity. The liability that should be reported in items 1.1.1 and 1.2.1 on ARF 720.6 is therefore the liability of the reporting entity as the drawer of a bill, rather than the drawee (i.e. please report the value of bills drawn on your entity). Note that the value of securities reported on ARF 720.6 largely reconciles with the ‘borrowings: debt securities’ items on ARF 720.0 (excluding differences in valuation methodology) – see section 2.7.7 of RPG 701.0 for details of the reconciliation.
Where the reporting entity is the drawee of a bill (i.e. the bill is drawn on a customer and is held and/or accepted by the reporting entity), this should be reported on ARF 720.0A/B in line with the guidance in section 2.1.6 of RPG 701.0. Bills accepted or endorsed by the reporting entity should also be reported on ARF 720.7 (Bill Acceptances and Endorsements).
35. Can APRA confirm that ‘Item 9 on ARF 721.0A and Item 5 on ARF 721.0B: Reinvestment of cash collateral from securities lending’ is intended to only include cash collateral received from securities lending and not cash collateral received from cash collateral received under repurchase agreements?
Items 9 and 5 on ARF 721.0A/B collect information on the reinvestment of cash collateral received from securities lending only. Cash collateral received under repurchase agreements that has been reinvested should not be reported in these items.
36. On ARF 721.0A/B, can netting be applied to the reporting of repurchase agreements and reverse repurchase agreements trades or do entities have to report on a gross basis? For example, can netting be applied to the reporting of trades where:
Master Netting Agreements are signed between counterparties to net settle repurchase agreement or reverse repurchase agreement trades?
Pairing of repurchase agreements and reverse repurchase agreements is used (i.e. the same security is used)?
All individual repurchase agreements and reverse repurchase agreements transactions should be reported in ARF 721.0A/B. Reporting entities should not apply any netting to the reporting.
49. Can the agencies provide a definition of a “supra-national and foreign agency” for reporting of collateral types in ARF 721.0A/B?
Supra‑national and foreign agency-issued debt securities’ means debt obligations of intergovernmental, governmental or quasi-governmental organisations.
Supra-national issuers are defined as institutions owned by more than one sovereign state.
Foreign agency issuers can generally be identified based on meeting three key criteria:
- They have a public mandate;
- They have strong links with the public sector; and
- They have a high importance for the public sector.
Agencies tend to be partly or wholly owned by state and/or local governments and include promotional, development and municipal/local government banks; infrastructure operators; export financiers; public debt or deficit repayment funds; and entities established for resolution and reorganisation of the banking system.
57. Within Tables 5 and 7 of ARF 721.0A and Table 4 of ARF 721.0B, the lending/borrowing fee premium or rebate rate has been requested. What method should be used where a fee and rebate exist? If a monthly fee is charged, how that should be represented as a percentage?
Definitions of ‘lending fee/premium’ and ‘rebate rate’ have been added to ARS 701. Both should be expressed as an annualised percentage of the market value of the securities borrowed. See definitions below.
Lending fee/premium – A securities lending fee is the fee/premium that the borrower of the security pays to the lender when the securities loan is backed by non-cash collateral. The lending fee/premium is predetermined in a securities lending agreement between the borrower and lender and should be expressed as an annualised percentage of the market value of the securities borrowed.
Rebate rate – A securities lending rebate rate is the rate that the borrower of the security pays the lender when the securities loan is backed by cash collateral. The rebate fee is predetermined in a securities lending agreement between the borrower and lender (or the agent on the lender’s behalf) and should be expressed as an annualised percentage of the market value of the securities borrowed.
59. Will ARF 723.0 replace the RBA Quarterly Margin Lending Survey? Are there any other EFS returns that will replace existing surveys?
ARF 723.0 will replace the RBA Quarterly Margin Lending Survey. The first reporting period for ARF 723.0 is for the September quarter 2019. The final RBA Quarterly Margin Lending Survey will be for the June quarter 2019. That is, there will not be an overlap in reporting.
ARF 730.1 will also replace the annual RBA Banking Fees Survey - please see EFS FAQ ID 18 and EFS FAQ 25 on APRA's website for further information on ARF 730.1 and the RBA Banking Fees Survey.
55. Is “income tax expense” required to be reported on ARF 730.0?
The agencies confirm that "Income tax expense" is not to be reported on ARF 730.0.
18. ARF 730.1 ABS/RBA Fees Charged will replace the annual RBA Banking Fees Survey. When will this Survey be replaced with ARF 730.1?
The first reporting period for ARF 730.1 will be June 2020 (with a standardised 30 June year-end). The first submission date will be four calendar months after the end of the reporting period. The final RBA Banking Fees Survey will cover the year ended in 2019 and will be submitted in early 2020. This will result in a short overlap period of between two and six months for some institutions that currently complete the annual RBA Banking Fees Survey, depending on the individual institution's year end.
25. Can APRA clarify the first reporting periods and return submission dates for ARS 730.0 and ARS 730.1?
For ARF 730.0, the first quarterly reporting period ends on 30 September 2019. The ARF 730.0 form should be submitted to APRA within 28 calendar days after the end of the reporting period (i.e. submitted by 28 October 2019).
For ARF 730.1, the first annual reporting period ends on 30 June 2020 (i.e. the reporting period covers from 1 July 2019 to 30 June 2020). The ARF 730.1 form should be submitted to APRA within four calendar months after the end of the reporting period (i.e. submitted by 31 October 2020).
50. Regarding the reporting of ‘new borrower-accepted commitments’ in ARF 741.0, should the value of new borrower-accepted commitments be affected by foreign currency fluctuations (for foreign currency denominated commitments)?
All values on ARF 741.0 should be reported in Australian dollars or the Australian dollar equivalent of the foreign currency amount (see ARS 741.0 for further guidance). The value of commitments reported could therefore be affected by foreign currency fluctuations. However, changes in the value of existing commitments due only to foreign currency fluctuations should not be reported as ‘new’ borrower-accepted commitments (as defined in ARS 701.0).
51. Regarding the reporting of ‘new borrower-accepted commitments’ in ARF 741.0, should ‘new borrower-accepted commitments’ (as used in ARF 741.0, for example) include increases to existing loan contracts?
If so, where should increases to existing loan contracts be reported in Table 1 of ARF 741.0?
‘New borrower-accepted commitments’ refers to borrower-accepted commitments that were made during the reporting period. As outlined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, this includes agreements to increase the credit limit of an existing loan contract (for example, as part of an internal finance).
The value of all new borrower-accepted commitments for business loans (to resident non-related parties) during the reporting period should be reported in item 1.1 of ARF 741.0. The number of lending facilities for these new borrower-accepted commitments during the reporting period should be reported in item 1.2 of ARF 741.0.
61. For items 2, 3 and 4 in ARF 741.0, should the value of ‘credit limits’ be reported? The reporting instructions for ARF 741 do not use the words ‘credit limit’ for these items.
In ARF 741.0, the value of credit limits should be reported for item 2 (fixed-term loans) and for columns 1 and 2 in item 3 (fixed-term loans and revolving credit). For a borrower-accepted commitment, the credit limit is the maximum amount of funds that will be made available to the borrower without additional authorisation or approval. This includes outstanding balances (including capitalised interest or fees) and any other funds that can be drawn without additional approval by the lender in this amount (see ‘credit limit’ definition in ARS 701.0).
However, the concept of a ‘credit limit’ (as defined) does not apply to borrower-accepted commitments for finance leases or bill acceptances. Please report the value of new commitments for ‘other finance’ (i.e. finance leases and bill acceptances) in column 3 of item 3 and finance leases in item 4.
43. When assessing a loan or finance lease as being secured or unsecured, should tangible or intangible assets both be considered?
Certain items explicitly state the type of security e.g. “secured by residential property” (e.g. item 184.108.40.206. and 220.127.116.11. of ARF 742.0A/B), for such items only the named type of security would qualify for the loan to be considered secured.
In cases where it is not made explicit, both tangible and intangible security would qualify the loan to be considered secured.
44. For ARF 742.0A/B, could APRA confirm that column 1 of items 1 and 2 requires the number of facilities to be reported rather than the number of loans?
The number of facilities should be reported in column 1 of items 1 and 2 in ARF 742.0A/B rather than the number of loans. See the definition of ‘(lending) facility’ in ARS 701.0 for further information.
66. In ARF 742 0A/B, should the value in the ‘item 7.13: Fixed-term business loan credit outstanding to resident non-related parties at end of month’ reconcile to any other items within ARF 742.0A/B or to any other EFS reporting form?
The value of credit outstanding for fixed-term business loans to resident non-related parties as at the end of the month reported in Item 7.13 is equivalent to:
- the total value of credit outstanding for fixed-term loans to resident non-related parties for all business types in Table 3 (column 4), plus fixed-term margin lending.
- the total value of credit outstanding for fixed-term business loans to resident non-related parties reported by business type in Table 6 (column 4).
- the sum of column 1 and column 3 for item 18.104.22.168 on ARF 720.1A. That is, the sum of credit outstanding for fixed-term business loans to non-financial businesses and community service organisations (column 1) and financial institutions (column 3).
RPG 701.0: ABS/RBA Reporting Concepts for the EFS Collection contains further details on some of the reconciliations relevant to item 7.13 on ARF 742.0A/B noted above.
70. Should the reporting of ‘business finance funded in the month’ in item 2 of ARF 742.0A/B include both drawn and undrawn amounts?
All amounts funded during the reporting period should be reported in item 2 of ARF 742.0A/B, irrespective of whether or not they were drawn (see instructions in ARS 742.0). As defined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, a loan or finance lease is considered ‘funded’ once any proportion of the funds is made available for the borrower to draw down according to the terms of the contract (this may differ from the definition of ‘funded’ used internally by reporting institutions). This will occur after there is a borrower-accepted commitment to provide finance. See definition of ‘funded’ in ARS 701.0 for further information on when different types of finance are to be considered ‘funded’ for reporting purposes. Loan amounts drawn down during the reporting period are to be reported in Table 7 of ARF 742.0A/B.
75. Should the interest rates reported on ARF 742.0 include fees, in accordance with accounting standards? In light of this, how should interest income for bills outstanding be reported on ARF 730.0?
In line with the guidance in ARS 701.0 and RPG 701.0, all interest rates reported on ARF 742.0 should be the contractual rates to be paid or received by the counterparty, not the effective rates. That is, the reported interest rates should exclude any fees charged to borrowers. This guidance applies to all EFS forms on which interest rates are reported. Fees are to be reported separately on ARF 730.1; all fees are to be included on this form, regardless of whether they can be treated as interest income or interest expense under the Australian Accounting Standards.
The treatment of fees only differs in the case of ARF 730.0. On this form, fees that form an integral part of the effective interest rate of a financial instrument (as defined in AASB 9, AASB 13 and AASB 132) should be included within ‘interest income earned’ or ‘interest expense incurred’, in accordance with Australian Accounting Standards. All other fees and commissions are to be reported under Item 8.1.4 (Other operating expense – Fees and commissions).
76. Consider the situation where the interest rate on a fixed-term loan is reset on a periodic basis throughout the life of the facility. For example, a portfolio of 3-year loans where the interest rates are tied to the BBSW and reset every 30, 60 or 90 days; or a 5-year loan where the interest rate is reset on a semi-annual basis in line with the 6-month Bank Bill rate. Should the loan be classified as a fixed or variable interest rate loan?
Under ARS 701.0, variable interest rate products are those which have “an interest rate that fluctuates over the term of the agreement. Fluctuations in interest rates generally occur at the discretion of the lender and/or in response to movements in some other interest rate or other variable specified in the contract.”
The situation described meets the definition of a variable interest rate facility and should be reported as such. Although the interest rate is fixed for some specified time window, there is a provision for the interest rate to fluctuate over the term of the agreement at regular intervals, in line with changes in a market reference rate.
83. In ARS 742, instructions are provided on how to report the number, value and weighted average interest rate of facilities where a facility has a mix of interest rate or repayment types. The instructions on how to report the number of facilities is based on determining the ‘predominant’ interest rate type or repayment type by value. Could APRA clarify how the determination of ‘predominant’ interest rate or repayment type should be made, and provide an illustrative example?
The instructions in ARS 742 outline how to report the total number, value and weighted average interest rate of facilities where facilities have a mix of interest rate or repayment types.
When reporting the number of facilities, each facility should only be reported once. The particular row item on ARF 742.0 to report each facility in should be determined by the predominant interest rate type or repayment type by value. For example, if the majority of the value of a facility has a fixed interest rate, the facility should be reported as a fixed interest rate facility only.
When reporting the value of facilities, the values should be apportioned across the relevant interest rate and/or repayment types and reported accordingly.
When reporting the weighted average interest rate, each interest rate should be weighted by the value of its corresponding balance outstanding.
For example, assume the total value of a facility is $500,000, of which $300,000 is at a fixed interest rate of 4% p.a. and $200,000 is at a variable interest rate of 5% p.a..
For the number of facilities reported in column 1 of items 2 and 3, this facility should be counted only as a fixed interest rate facility because the predominant interest rate by value is a fixed interest rate.
For the value of facilities reported in column 2 and 3 of items 2 and 3, $300,000 should be reported under fixed interest rate and $200,000 should be reported under variable interest rate.
The weighted average interest rate of the facility should be calculated as: (4% x $300,000) + (5% x $200,000).
The same instructions and calculation methodologies apply to a mix of repayment types (e.g. interest-only or amortising).
104. Item 7 of ARF 742.0 collects information on the components that contributed to the change in the outstanding balance of fixed-term business loans over the reporting period. Does the inclusion of item 7.6 (‘interest charged’) in the reconciliation table imply that ‘credit outstanding’ – as reported on ARF 720.0 and 720.1 – should include accrued interest?
For the purposes of reporting on the EFS forms, ‘credit outstanding’ means the total balance owed by the borrower as at the end of the reporting period, including any capitalised interest and fees (see ARS 701.0). ‘Capitalised’ in this case refers to interest and fees that have been charged to the customer and thereby added to the loan balance. Such ‘capitalisation’ will depend on the terms of the contract – in the case of mortgages, for example, this would often happen on a monthly basis; for some other finance, interest and fees may be charged less frequently.
‘Interest charged’ refers to the interest that has been charged or notified to the customer by adding it to the balance of their loan account(s) on a contractual basis. Interest that has been charged will therefore be included in the value of ‘credit outstanding’ and should be reported in item 7.6 of ARF 742.0. This is distinct from interest accrued on an accounting basis. Interest that has accrued but not yet been charged is recorded as 'interest receivable' (item 10.1 on ARF 720.0) and is not included in item 7 of ARF 742.0.
For example, assume a $100 mortgage outstanding on 1 April, accruing 3% interest per month; interest is ‘charged’ to the customer on the 20th day of the month. Interest accrues daily and is reported as ‘interest receivable’ until it is charged to the customer. On 20 April, the $2 of accrued interest will be charged to the customer and added to the balance of their loan account(s) (the amount that the customer is now due to repay). On the 30 April reporting date, the reporting entity should record $102 of credit outstanding on ARF 720.0 and ARF 720.1, and $1 of interest receivable (accrued between 21-30 April) on ARF 720.0. The entity should also report $2 in item 7.6 of ARF 742.0.
Note, the same principles apply when reporting item 5 of ARF 743.0.
71. ARF 743.0 (item 2) collects information on new borrower-accepted commitments where foreign-sourced income was used in the reporting entity’s serviceability assessment of the application. Should any approvals made outside of reporting entity’s serviceability policy (such as policy waivers) be reported?
A commitment should be reported as being serviced by foreign-sourced income if the reporting entity has determined that any of the ‘allowable income’ used to assess the validity of the loan qualifies as foreign-sourced income – regardless of whether the commitment was made inside or outside the reporting entity’s serviceability policy. The share of allowable income that qualifies as foreign-sourced income is irrelevant. If foreign-sourced income is not taken into account in the serviceability assessment of the particular loan, then the commitment should not be reported as being serviced by foreign-sourced income (because in such cases, the foreign-sourced income has not been relied upon).
The wording of the guidance on foreign-sourced income in section 2.16.7 of RPG 701.0 has been amended to provide the clarification that loans with foreign-sourced income should be included even when outside the reporting institution’s serviceability criteria.
73. When reporting borrower accepted commitments, is it acceptable to use the date that signed documents (indicating acceptance) have been returned as the date of acceptance? This may be a few days later than when the documents were signed and dated by the customer.
Yes. As per the guidance on borrower-accepted commitments (section 1.13 of RPG 701.0), reporting entities may use the date of receipt of a signed contract as indicating borrower acceptance of an offer of finance as a proxy for the date the contract is signed by the borrower.
103. ARF 743.0 requires the ‘weighted average’ facility credit limit and number of monthly repayments to be reported in items 7 (column 5), 7.1 and 7.2. How should these weighted averages be calculated?
The references to ‘weighted average’ in the instructions for these items in ARS 743.0 are incorrect. In Column 5 of item 7, please report the average facility credit limit for each combination of period banding, property purpose and repayment type. In items 7.1 and 7.2, please report the average number of monthly repayments for amortising and interest-only loans (respectively).
The instructions in ARS 743.0 will be corrected at the earliest opportunity.
115. Should items 1.1.1 (column 4) and 1.2.1 (column 4) of ARF 744.0 reconcile to item 4.3 (columns 1 and 2, respectively) of ARF 743.0?
The reconciliation requirements for items 1.1.1 (column 4) and 1.2.1 (column 4) in ARF 744.0 are incorrect. These items record the value of credit outstanding for revolving credit facilities, while Item 4.3 (columns 1 and 2) of ARF 743.0 records the total credit limits available on revolving credit facilities. The available credit limits of revolving credit facilities may differ from the value of credit outstanding. These reconciliation requirements will be removed from the ARF 744.0 form instructions.
85. If the interest rate on a deposit is based on a market rate which falls to zero, should this still be reported as an ‘interest-bearing’ deposit on ARF 747.0? For example, how should a deposit be classified if the interest rate is set to equal TIBOR, which is currently 0%?
If a liability has a contractual rate that references a benchmark market rate, this is considered to be an ‘interest rate greater than zero’. This will apply even if the referenced market rate falls to 0% for some period. A deposit should only be reported as ‘non-interest bearing’ if the contractual rate is specified to be zero. In the given example, the deposit should therefore be classified as ‘interest-bearing’.
94. Where should deposits outstanding received from non-resident financial institutions that are related parties be reported in Item 1 of ARF 747.0?
For Item 1 of ARF 747.0, report deposits outstanding received from non-resident financial institutions that are related parties under the counterparty classification ‘Other related parties’. ARS 747.0 will be updated to clarify that this counterparty classification includes all non-resident related parties (including financial institutions) and any resident related parties other than financial institutions. Deposits outstanding received from all non-residents that are not related parties should be reported under the counterparty classification ‘Other non-residents’.
114. Can APRA confirm whether the weighted average residual term for fixed-term deposits (ARF 747.0) and fixed-interest housing loans (ARF 744.0) should be reported as whole numbers?
The weighted average residual term for fixed term deposits (ARF 747.0A/B, item 4, column 6) and for fixed-interest housing loans (ARF 744.0A/B, item 5, column 6) should both be reported as a number to two decimal places. The instructions and taxonomy for these items will be updated in line with this guidance. Note that the unit of measurement for these values is years (number of days remaining to maturity/365 days).
23. Formal consultation response recommended that face value should be removed from the ARF 748.0A/B forms and the value reported in line with Australian Accounting Standards. APRA has amended the wording in the reporting instructions under the Values heading on page 1 of ARF 748.0A/B, however the instructions on the individual reporting lines (column 4 of item 1 and item 2) still refer to report the face value. Could APRA please confirm the instructions require amendments to remove face value?
The reporting instructions for ARF 748.0A/B have been amended to remove all references to face value. The latest version of ARS 748.0 released on APRA’s website in March 2018 reflects these changes. Values on this form should be reported in line with valuation practices used under Australian Accounting Standards.
31. The instructions for items 1 and 2 of ARF 748.0A/B include information on calculating and reporting the tenor. How should the weighted average tenor be calculated?
Section 2.21.4 of RPG 701.0 contains guidance on how to calculate a weighted average term (or tenor) along with an example.
58. In ARF 748.0A/B, should items 1.4 and 2.4 ‘Memo item: Asset-backed securities’ include Covered Bonds that are asset-backed?
No – covered bonds that are asset-backed should not be reported in items 1.4 and 2.4 of ARF 748.0A/B. This is because "asset-backed securities" and "covered bonds" are defined distinctly and treated separately under the EFS collection (see ARS 701.0). While they are similar, the covered bonds do not fall under the definition of asset-backed securities for the purposes of the EFS collection.
60. Should asset-backed securities issued by related parties be reported in both items 1.4 and 2.4 of ARF 748.0A/B? The reporting instruction for item 2.4 on ARF 748.0A specifically ask for asset-backed securities “issued by related parties”. However, item 1.4 on ARF 748.0A and both items on ARF 748.0B are silent on related parties.
The intention of both items 1.4 and 2.4 in ARF 748.0A/B is for asset-backed securities issued by related parties to be reported, where the underlying assets are held on-balance sheet in accordance with accounting principles. The agencies note that the words "issued by related parties" are unintentionally absent from the instructions for item 1.4 on ARF 748.0A and both items on ARF 748.0B and will be added. Activities of SPVs that are related parties (i.e. all SPVs other than covered bond SPVs) are not consolidated within domestic books reporting. However, the 'memo items' in 1.4 and 2.4 are of interest to the agencies, and the agencies have therefore requested this information on this report.
69. In ARF 748.0 (items 4 and 5), should the cost/value of funds be reported as an implied AUD rate? Does this apply to both ‘other interest-bearing liabilities’ and debt securities?
In ARF 748.0, the cost/value of funds is only reported for ‘other interest-bearing liabilities’ (i.e. other than deposits or debt securities) (items 4 and 5). As per the general guidance in RPG 701.0 (section 1.15.3), the cost/value of funds rate should be reported on an AUD or AUD-equivalent basis.
The ‘benchmark rate’ on senior unsecured debt (item 3) should also be reported on an AUD or AUD-equivalent basis (this will be reflected in the updated guidance in section 2.21.7 of RPG 701.0).
ARF 748.0 does not collect information on the cost/value of funds for debt securities. Instead, items 1 and 2 collect information on the interest rate of debt securities on issue. As per the instructions on reporting ‘interest rates’ on ARF 748.0, “for debt securities issued in foreign currency, do not convert the interest rate back to an implied AUD rate.” That is, report interest rates on foreign currency debt securities as the contractual rate paid to the counterparty in that foreign currency (see RPG 701.0, section 1.15).
79. How should negative interest rates on ‘other interest-bearing liabilities’ be reported on ARF 748.0? For example, if the reporting entity has borrowings of $100m at an interest rate of -0.5%, should the interest rate be reported as 0% or -0.5%?
Negative interest rates should be included in the calculation of weighted average interest rates on ARF 748.0, including in the case of ‘other interest-bearing liabilities’ (Items 4 and 5, Column 2).
For example, if the reporting entity’s outstanding interest-bearing liabilities include $400m at an interest rate of 2% and $100m at an interest rate of -0.5%, the weighted average interest rate would be calculated as: (2% × 400/500) + (-0.5% × 100/500) = 1.5%.
80. Could APRA provide further clarity on which benchmark rate on senior unsecured debt an entity is expected to report in Item 3 of ARF 748.0A/B?
The definition and guidance on the reporting of benchmark rates on senior unsecured debt in Item 3 of ARF 748.0 will be updated in both ARS 701.0 and RPG 701.0 (section 2.21.7) in line with the response below.
For the purposes of ARF 748.0, the ‘benchmark rate’ is the rate at which the reporting entity can issue senior unsecured debt for a given tenor in the relevant currency. The guiding principle in reporting Item 3 is to report the reporting entity’s indicative wholesale funding cost curve for senior unsecured debt in the relevant currency, as would be used in the calculation of internal funds transfer pricing.
The calculation of the reported benchmark rate curve may vary across institutions. It is expected that it would typically be based on the price of recent primary market issuance by the reporting entity or comparable institutions if available, but it may also be interpolated or based on secondary market spreads or estimated in some other way. The reported rates should incorporate any relevant costs that are included in the internal calculation of the entity’s benchmark rate reference curve (such as hedging costs and issuance fees).
For senior unsecured funding denominated in a foreign currency, the benchmark rate should be reported on an AUD (or AUD-equivalent) basis and incorporate adjustments for relevant hedging costs (such as a cross-currency basis).
The benchmark rate should be expressed as an outright rate, and not as a spread. That is, even if the reporting entity would typically consider the benchmark rate as a spread over a reference market rate for internal purposes, then the applicable market rate, as at the end of the reporting period, should be added to the spread when reporting the benchmark rate on ARF 748.0.
27. For hybrid securities where the interest rate is fixed until the next call date/rollover date, should this be reported as fixed until the next call date/rollover date after which the rate should transfer to a variable rate?
Hybrid securities should be reported as either fixed rate or variable rate depending on the rate which applies at the reporting date. Hybrid securities with a fixed interest rate should be reported as such until such time that the rate transfers to a variable rate.
28. Should zero coupon borrowings be reported as a fixed rate?
Yes. Please report zero coupon borrowings as fixed rate.
45. Can you please clarify if the definitions of person, persons and individual have the same meaning? Are they limited to only natural persons or do they also include legal persons?
These terms are used interchangeably for the purposes of the EFS collection and have the same definition. They are all limited to only natural persons.
68: Where a new borrower accepted commitment is a credit limit increase for an existing borrower (a ‘top-up’), should this be reported as an internal refinance and how should the purpose of the funds be assessed and reported?
As outlined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, an internal refinance occurs where:
- a new loan is obtained to replace an existing loan that was provided by the ADI or RFC and the credit limit has increased from that which was available prior to refinancing; or the credit limit on an existing loan by the ADI or RFC is increased (e.g. a ‘top-up’); and
- the majority of the aggregate funds following the internal refinance will be used for substantially the same purpose class as the existing loan contract.
An important part of determining whether a new borrower accepted commitment should be reported as an internal finance is therefore an assessment of whether the predominant purpose class has changed and should be updated. When additional finance is approved for an existing borrower and combined with existing finance provided by the ADI or RFC, the predominant purpose class should be updated if:
- the additional finance is for a different purpose class than that of the existing finance; and
- the additional finance is greater than the outstanding amount of existing finance.
If the predominant purpose class has changed, the loan should not be reported as an internal refinance. The loan should be reported as a new commitment for the new purpose class and the purpose sub-class of the additional finance should be identified.
If the predominant purpose has not changed, the loan should be reported as a new commitment for the existing purpose class and as an internal refinance, regardless of the purpose sub-class of the additional finance. The amount of the new credit limit should be reported (the total value of the loan); that is, the previous credit limit should not be subtracted from the new credit limit.
See Section 1.8.5 ‘Refinances’ of RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection for additional information on internal and external refinance and examples of how to determine predominant purpose class.
84. Please clarify how the following cases of borrowing should be classified:
a) Where the primary borrower is a natural person, but a non-primary borrower may be a Family Trust, would these loans still be classified as households on the basis of the primary borrower?
Yes, these loans should be classified to households, which is the primary borrower sector in this case.
b) Where the primary borrower may be a natural person, but the secondary borrower is a Family Trust and the third borrower is a company owned by the primary borrower, would these loans still be classified as households on the basis of the primary borrower?
Yes, these loans should be classified to households, which is the primary borrower sector in this case. The ownership of the company by the natural person (being the primary borrower) has no effect for the purposes of classifying the loan.
c) Where the primary borrower is a Family Trust (a private unincorporated businesses) and the secondary borrower is a company, would these loans still be classified as a private unincorporated businesses on the basis of the primary borrower?
Yes, these loans should be classified to private unincorporated businesses, which is the primary borrower sector in this case.
89. ARS 701.0 states that a borrower-accepted commitment means a firm offer to provide finance that has been accepted by the borrower and that for bills, this occurs when the bill is accepted. Can a commitment exist when the borrower has accepted the reporting entity’s offer to provide a bill facility, rather than when the bill is accepted?
For loans and finance leases, a borrower-accepted commitment is recognised once the borrower has accepted the contract or letter of offer issued by the reporting entity. For bills, however, a borrower-accepted commitment is only recognised once the bill itself is ‘accepted’. According to the definition in ARS 701.0, a bill of exchange is ‘accepted’ once it has been signed by the drawee, thus triggering formal acceptance of the liability to pay out the funds on the due date. A borrower’s acceptance of an offer for a facility under which bills and only bills may be drawn on the borrower in the future is not considered to be a borrower-accepted commitment.
90. Can 'fair value' valuation be used instead of 'market value' for EFS reporting, especially in the case of ARF 720.4 and ARF 720.6 which require ‘balances at market prices’?
Several EFS forms (in particular, ARF 720.4-720.7 and ARF 721.0) require securities to be reported at market value, as defined in ARS 701.0. In cases where the market value is not available, RPG 701.0 notes that 'fair value' (measured in accordance with AASB 13 Fair Value Measurement) is an acceptable proxy (see, for example, sections 2.5.2 and 2.7.2).
Please note that the valuation method used for ARF 720.0 differs. In ARF 720.0, trading securities should generally be recorded at fair value, in accordance with AASB 9 Financial Instruments (see RPG 701.0, section 2.1.12 for details).
95. Could APRA please clarify which controlling entities should be considered ‘parent entities’ for the purposes of EFS reporting – only the immediate parent or all the controlling entities above the reporting entity up to the ultimate parent?
For the purposes of EFS reporting, ‘parent entity’ has the meaning as in AASB 3, AASB 127 and AASB 128, and thereby AASB 10 (see ARS 701.0). Under AASB 10, a ‘parent’ is an entity that controls the investee; this means that that the entity has:
- power over the investee (see paragraphs 10–14);
- exposure, or rights, to variable returns from its involvement with the investee (see paragraphs 15 and 16); and
- the ability to use its power over the investee to affect the investor’s returns (see paragraphs 17-18).
It is up to the reporting entity to determine which related entity or entities possess these attributes and should therefore be classified as a ‘parent entity’ for the purposes of EFS reporting. Note, this classification should align with statutory reporting.
102. Do contingent assets, such as guarantees, qualify as ‘security’ for loans?
Under ARS 701.0, ‘security’ refers to assets pledged by the borrower or a third party against a loan. In line with the Australian Accounting Standards, qualifying ‘assets’ include tangible and intangible assets, but exclude contingent assets (see AASB Framework for the Preparation and Presentation of Financial Statements and AASB 137). Guarantees and other contingent assets should therefore not be considered when determining whether to report a loan as ‘secured’ for the purposes of the EFS collection.
106. If a customer has a savings account that offers unlimited and instantaneous access to funds via a linked transaction account, but where bonus interest is lost if the account balance has not increased over the month, should this be classified as a ‘non-transaction deposit’?
The savings account in the example provided does not meet any of the criteria for ‘non-transaction deposits’ set out in ARS 701.0. In particular:
- the funds can be instantaneously transferred to a linked transaction account;
- there is no restriction on, or penalty based on, the number of withdrawals or transfers;
- there is no restriction on, or penalty for, early withdrawal or transfer; and
- the interest rate offered does not differ based on whether a certain number of withdrawals have been made.
As such, the account should be classified as a transaction deposit.
Note that ‘transaction deposits’ are defined as “deposits that are directly accessible and exchangeable … on demand at par and without penalty or restriction” (see ARS 701.0). The EFS standards and guidance further explain that the ‘penalty or restriction’ aspect of the definition only relates to the transferability of the deposit – that is, the ability to use the funds instantaneously, with no restrictions on the number or value of transfers or withdrawals. It is therefore possible for a deposit account to incur penalties under some circumstances but still be classified as a transaction deposit. This is the case in the given example – even though the interest rate differs according to the final balance of the account, it is not affected by the number or value of withdrawals or transfers that are made.
13. RPG 701.0 indicates that the two sovereign wealth funds owned by the Commonwealth Government should be classified as Commonwealth General Government. What category should the five public asset funds under the sovereign fund be classified as? Where should state-owned future funds be included?
The five public asset funds under the two sovereign wealth funds owned by the Commonwealth Government should also be classified as Commonwealth general government. Any state-owned future funds should be classified as State, territory and local general government.
17. Regarding the requirement to report internal refinances as new commitments where predominant purpose changes, do the agencies expect reporting institutions to: (a) review all outstanding loans and the impacts of any historical refinances on the loan classification and reclassify the back-book accordingly, or (b) from the effective date of the first EFS reporting period, review internal refinances for any change in predominant purpose, with no requirement to reclassify the back-book.
The agencies' expectations are for the stock of outstanding loans, including loans that have previously been internally refinanced, to be correctly classified according to their predominant purpose. The requirement to reclassify loans where their predominant purpose changes applies to both Phase 1 balance sheet returns and Phase 2 finance flow returns. The agencies understand that reclassifying the back-book for changes in predominant loan purpose may be challenging for reporting institutions. RPG 701.0 specifies acceptable ongoing or transitional proxy data items or methodologies for updating back-book reporting. The agencies note that reporting institutions have a number of options for updating their back-book treatment, including using existing run-off and turnover data, and natural contact points with customers to update or collect relevant data points. Where a reporting institution believes it will be unable to source information for a data point (and this cannot be remedied by using the proxies specified in RPG 701.0) in time for the commencement of EFS reporting it should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.
26. There is a discrepancy in the wording between the 1.10 Secured by Residential Property decision tree (figure 6) in RPG 701.0 and the accompanying text. The tests outlined in the decision tree refer to “more than 50%”, while the accompanying text refers to “50 per cent or more”. Can the agencies please clarify whether the test contained in the decision tree is correct?
The wording in the decision tree (figure 6) should have been in line with the text in Section 1.10 to be “50 per cent or more”.
40. RPG 701.0 includes a decision tree to assist in the identification of investment funds. This tree implies that a corporation would not qualify, but this is contrary to the definition, which states that a private non-financial investment fund can be either a trust or a corporation. Can APRA clarify this discrepancy?
The definitions stipulated in ARS 701.0 ABS/RBA Definitions for private non-financial investment funds, money-market investment funds, and non-money-market financial investment funds each relate to collective investment schemes, which may include trusts or corporations. Corporations that qualify as part of these sectors are limited to listed investment companies only. The decision trees to assist with the identification of investment funds in RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection do not reference listed investment companies as they are designed to provide a practical approach in appropriately classifying funds (particularly unlisted funds) where identification is more problematic. APRA will update RPG 701.0 to make the intention of the practical approach clearer.
53. There appears to be a discrepancy between section 1.9.6 in RPG 701 and ARS 744.0 regarding whether housing loans to non-residents need to be classified as either owner-occupied or investment. Can APRA please clarify the reporting requirements for non-resident loans?
It is correct that item 2.2 of ARF 744.0A/B requires housing loans to non-resident to be classified as owner-occupied or investment. The statement in section 1.9.6 of RPG 701 that says “it is not necessary to separately report whether lending to non-resident households for housing is for owner-occupation or investment” is incorrect and has been amended. The guidance provided in RPG 701 for how to classify a non-resident housing loan as either owner-occupied or investment is correct and should be used as guidance for categorising non-resident loans in item 2.2 of ARF 744.0A/B.
88. RPG 701.0 states that reporting entities may identify investment funds using the Australian Registered Scheme Number (ARSN) and the name of the investment fund. While APRA can provide a list of investment fund names and ARSNs on request, this list does not include the funds’ ABNs. Can APRA please provide this additional information?
The agencies have created a register of investment funds that provide the name, ARSN and ABN of each fund. This will be updated on an annual basis. The list is based on the information in the ATO Australian Business Register and the ASIC MIS register. Investment funds for whom this information was not available have not been included in the fund register. As this is a customised register combining datasets from the ASIC and the ATO and is updated periodically, entities are requested to contact APRA on a needs basis.