Financial Sector (Collection of Data) determination No. 66 of 2005 Reporting Standard ARS 112.1 (2005) Capital Adequacy On-Balance Sheet Business Risk Weighting Schedule (Cth)

Financial Sector (Collection of Data) determination No. 66 of 2005

Reporting Standard ARS 112.1 (2005)

Financial Sector (Collection of Data) Act 2001

I, Wayne Stephen Byres, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (‘the Act’) MAKE the reporting standard set out in the Schedule, which applies to the financial sector entities referred to in paragraph 2 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply those financial sector entities on the date of registration on the Federal Register of Legislative Instruments.
Dated 27 July 2005
[Signed]
Wayne Byres
Executive General Manager
Diversified Institutions Division
APRA
Interpretation

In this Notice

APRA means the Australian Prudential Regulation Authority.

Schedule

Reporting Standard ARS 112.1 (2005)

Capital Adequacy – On-Balance Sheet Business Risk Weighting Schedule
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires all authorised deposit-taking institutions (ADIs) that are locally-incorporated to report to APRA, generally on a quarterly basis, in relation to their capital adequacy.
This reporting standard outlines the overall requirements for the provision of relevant information to APRA. It should be read in conjunction with:

the versions of Form ARF 112.1 Capital Adequacy – On-Balance Sheet Business Risk Weighting Schedule (Form ARF 112.1) designated for a ‘Licensed ADI’ and ‘Consolidated Group’ and the associated instructions (all of which are attached and form part of this reporting standard); and
·Prudential Standard APS 112 Capital Adequacy: Credit Risk and associated guidance notes.
Purpose

Data collected in Form ARF 112.1 is used by APRA for the purpose of prudential supervision including assessing compliance with Prudential Standard APS 112 Capital Adequacy: Credit Risk. It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.
Application and commencement
This reporting standard will apply, from the date of registration on the Federal Register of Legislative Instruments, to all locally-incorporated ADIs.
Information required
A locally-incorporated ADI must provide APRA with the information required by the version of Form ARF 112.1 designated for a ‘Licensed ADI’ for each reporting period.
A locally-incorporated ADI that is a highest parent entity in relation to a consolidated ADI group must also provide APRA with the information required by the version of Form ARF 112.1 designated for a ‘Consolidated Group’ for each reporting period.
Forms and method of submission
The information required by this reporting standard must be given to APRA either:
(a)in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or
(b)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, a locally-incorporated ADI must provide the information required by this reporting standard in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:
(a)the particular circumstances of the ADI;
(b)the extent to which the information is required for the purposes of the prudential supervision of the ADI; and
(c)the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics.
The information required by this reporting standard must be provided to APRA by the following times:

(a) in the case of information required by paragraphs 3 and 4 from a locally-incorporated bank or locally-incorporated special service provider – 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of information required by paragraphs 3 and 4 from a locally-incorporated credit union, locally-incorporated building society, locally-incorporated specialist credit card institution or Cairns Penny Savings & Loans Limited – 15 business days after the end of the reporting period to which the information relates.

APRA may grant an ADI an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
The information provided by an ADI under this reporting standard (except for the information required under paragraph 4) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurances Standards Board of the Australian Accounting Research Foundation, provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data.
All information provided by an ADI under this reporting standard must also be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
If an ADI submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the data to APRA.
If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:

(a) the Principal Executive Officer of the ADI; or
(b) the Chief Financial Officer of the ADI (whatever his or her official title may be).
Minor alterations to forms and instructions

APRA may make minor variations to:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b) the instructions to a form, to clarify their application to the form
without changing any substantive requirement in the form or instructions.

If APRA makes such a variation it must notify in writing each ADI that is required to report under this reporting standard.
Transitional
If the due date for lodgement in respect of a reporting period is a day after the date of registration of this reporting standard on the Federal Register of Legislative Instruments, an ADI must report under this reporting standard in respect of that reporting period (including where the reporting period ended before the date of registration).
Interpretation - classifications of ADIs
In this reporting standard:
Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of the accounting standard) commencing immediately before 1 January 2005.
ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.
ADI list means the attached ADI list.
building society means an ADI whose name appears under the heading ‘Building Societies’ in the ADI list.
consolidated ADI group means a group comprising:

(a)      an ADI that is a highest parent entity; and
(b)      each subsidiary (within the meaning of Accounting Standard AASB 1024) of that ADI, whether the subsidiary is locally-incorporated or not, other than a subsidiary that is excluded by the instructions attached to this standard.
credit union means an ADI whose name appears under the heading ‘Credit Unions’ in the ADI list.
highest parent entity means an ADI that satisfies all of the following conditions:
(a)      it is locally-incorporated;
(b)      it has at least one subsidiary (within the meaning of Accounting Standard AASB 1024); and
(c)      it is not itself a subsidiary (within the meaning of Accounting Standard AASB 1024) of an ADI that is locally-incorporated.
locally-incorporated means, subject to paragraph 18, incorporated in Australia.
locally-incorporated bank means, subject to paragraph 18, an ADI whose name appears under the heading ‘Australian-owned Banks’ or ‘Foreign Subsidiary Banks’ in the ADI list.
special service provider means an ADI whose name appears under the heading ‘Other ADIs’ in the ADI list (other than Cairns Penny Savings & Loans Limited).
specialist credit card institution means an ADI whose name appears under the heading ‘Specialist Credit Card Institutions (SCCIs)’ in the ADI list.

For the purposes of this reporting standard, Bank of China is taken to be a locally-incorporated ADI and a locally-incorporated bank.
If an ADI is not in the ADI list, then:

(a)      if the ADI assumes or uses the word ‘bank’ in relation to its financial business, and is locally-incorporated, it is taken to be a locally-incorporated bank for the purposes of this reporting standard;
(b)     if the ADI assumes or uses the expression ‘building society’ in relation to its financial business, and is locally-incorporated, it is taken to be a locally-incorporated building society for the purposes of this reporting standard;
(c)      if the ADI assumes or uses the expression ‘credit union’, ‘credit society’ or ‘credit co-operative’ in relation to its financial business, and is locally-incorporated, it is taken to be a locally-incorporated credit union for the purposes of this reporting standard; and
(d) if the ADI engages in credit card issuing or credit card acquiring, or both, and does not otherwise carry on banking business within the meaning of section 5 of the Banking Act 1959, and is locally-incorporated, it is taken to be a locally-incorporated specialist credit card institution for the purposes of this reporting standard.

APRA may in writing determine that an ADI is taken to be a locally-incorporated bank, locally-incorporated building society, locally-incorporated credit union, locally-incorporated special service provider or locally-incorporated specialist credit card institution for the purposes of this reporting standard (even if, under paragraph 17, 18 or 19, it comes within a different classification).
Interpretation - other definitions
In this reporting standard:
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.
Principal Executive Officer means the principal executive officer of the ADI for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the entity.
reporting period means a reporting period under paragraph 6 or, if applicable, paragraph 7.

The ADI list
Australian-owned Banks

Adelaide Bank Limited
AMP Bank Limited
Australia and New Zealand Banking Group Limited
Bank of Queensland Limited
Bendigo Bank Limited
Commonwealth Bank of Australia
Commonwealth Development Bank of Australia Limited (a subsidiary of Commonwealth Bank of Australia)
Elders Rural Bank Limited
Macquarie Bank Limited
Members Equity Bank Pty Limited
National Australia Bank Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation
Foreign Subsidiary Banks
Arab Bank Australia Limited
Bank of Cyprus Australia Pty Limited
BankWest (the trading name of Bank of Western Australia Limited, a foreign subsidiary bank following its sale to Bank of Scotland in December 1995)
Citibank Pty Limited (a subsidiary of Citibank N.A.)
HSBC Bank Australia Limited
ING Bank (Australia) Limited
Investec Bank (Australia) Limited
Laiki Bank (Australia) Limited
NM Rothschild & Sons (Australia) Limited
Rabobank Australia Limited (a subsidiary of Rabobank Nederland from October 1994)
Branches of Foreign Banks
ABN AMRO Bank N.V.
Bank of America, National Association
Bank of China (subject to depositor protection provisions of the Banking Act 1959)
Bank of Tokyo-Mitsubishi, Ltd
Barclays Capital (the trading name of Barclays Bank plc)
BNP Paribas
Citibank N.A.
Credit Suisse
Deutsche Bank AG
HSBC Bank plc
ING Bank NV
JPMorgan Chase Bank, National Association
Mizuho Corporate Bank, Ltd
Oversea-Chinese Banking Corporation Limited
Rabobank Nederland (the trading name of Co-operative Central Raiffeisen-Boerenleenbank B.A.)
Royal Bank of Canada
Société Générale
Standard Chartered Bank
State Bank of India
State Street Bank and Trust Company
The International Commercial Bank of China
The Royal Bank of Scotland Plc
The Toronto-Dominion Bank
Taiwan Business Bank
UBS AG
United Overseas Bank Limited
WestLB AG
Building Societies
ABS Building Society Ltd
B & E Ltd
Greater Building Society Ltd
Heritage Building Society Limited
Home Building Society Ltd
Hume Building Society Ltd
IMB Ltd
Lifeplan Australia Building Society Limited
Mackay Permanent Building Society Ltd
Maitland Mutual Building Society Limited
Newcastle Permanent Building Society Ltd
Pioneer Permanent Building Society Limited
The Rock Building Society Limited
Wide Bay Australia Ltd
Credit Unions
Amcor Credit Co-operative Limited
AMP Employees' & Agents Credit Union Limited
Austral Credit Union Limited
Australian Central Credit Union Limited
Australian Defence Credit Union Ltd
Australian National Credit Union Limited
AWA Credit Union Limited
Bananacoast Community Credit Union Ltd
Bankstown City Credit Union Ltd
Berrima District Credit Union Ltd
Big River Credit Union Ltd
Big Sky Credit Union Ltd
Blue Mountains and Riverlands Community Credit Union Ltd
Broadway Credit Union Ltd
Calare Credit Union Ltd
Capital Credit Union Ltd
Capricornia Credit Union Ltd
Carboy (SA) Credit Union Limited
Central Murray Credit Union Limited
Central West Credit Union Limited
Circle Credit Co-operative Limited
Coastline Credit Union Limited
Collie Miners Credit Union Ltd
Combined Australian Petroleum Employees' Credit Union Ltd
Community Alliance Credit Union Limited
Community First Credit Union Limited
Companion Credit Union Limited
Comtax Credit Union Limited
Connect Credit Union of Tasmania Limited
Country First Credit Union Ltd
CPS Credit Union (SA) Ltd
CPS Credit Union Co-operative (ACT) Limited
Credit Union Australia Ltd
Credit Union Home Loans Australia Limited
Credit Union Incitec Pivot Limited
Croatian Community Credit Union Limited
CSR and Rinker Employees Credit Union Limited
Dairy Farmers Credit Union Ltd
Dana Employees Credit Union
Defence Force Credit Union Limited
Discovery Credit Union Ltd
Dnister Ukrainian Credit Co-operative Limited
ELCOM Credit Union Ltd
Electricity Credit Union Ltd
Encompass Credit Union Limited
Ericsson Employees Credit Co-operative Limited
Esso Employees' Credit Union Ltd
Eurobodalla Credit Union Ltd
Family First Credit Union Limited
Fire Brigades Employees' Credit Union Limited
Fire Service Credit Union Limited
Firefighters & Affiliates Credit Co-operative Limited
First Pacific Credit Union Limited
Fitzroy & Carlton Community Credit Co-operative Limited
Flying Horse Credit Union Co-operative Limited
Ford Co-operative Credit Society Limited
Gateway Credit Union Ltd
Geelong & District Credit Co-operative Society Limited
GMH (Employees) Q.W.L. Credit Co-operative Limited
Goldfields Credit Union Ltd
Gosford City Credit Union Ltd
Goulburn Murray Credit Union Co-operative Limited
H.M.C. Staff Credit Union Ltd
Heritage Isle Credit Union Limited
Hibernian Credit Union Limited
Holiday Coast Credit Union Ltd
Horizon Credit Union Ltd
Hoverla Ukrainian Credit Co-operative Ltd
Hunter Mutual Limited
Hunter United Employees' Credit Union Limited
Industries Mutual Credit Union Limited
Intech Credit Union Limited
Island State Credit Union Ltd
Karpaty Ukrainian Credit Union Limited
La Trobe Country Credit Co-operative Limited
La Trobe University Credit Union Co-operative Limited
Laboratories Credit Union Ltd
Latvian Australian Credit Co-operative Society Limited
Lithuanian Co-operative Society (Talka) Limited
Lysaght Credit Union Ltd
M.S.B. Credit Union Limited
MacArthur Credit Union Ltd
Macaulay Community Credit Co-operative Limited
Macquarie Credit Union Limited
Maleny and District Community Credit Union Limited
Manly Warringah Credit Union Ltd
Maritime Workers of Australia Credit Union Ltd
Maroondah Credit Union Ltd
MECU Limited
Media Credit Union Queensland Ltd
Melbourne University Credit Union Limited
Memberfirst Credit Union Limited
N.R.M.A. Employees' Credit Union Ltd
NACOS Credit Union Limited
New England Credit Union Ltd
Newcom Colliery Employees' Credit Union Ltd
North East Credit Union Co-operative Limited
Northern Inland Credit Union Ltd
Nova Credit Union Limited
NSW Teachers Credit Union Ltd
Old Gold Credit Union Co-operative Limited
Orana Credit Union Ltd
Orange Credit Union Limited
Phoenix (NSW) Credit Union Ltd
Pinnacle Credit Union Limited
Plenty Credit Co-operative Limited
Police & Nurses Credit Society Limited
Police Association Credit Co-operative Limited
Police Credit Union Limited
Polish Community Credit Union Ltd
Power Credit Union Limited
Powerstate Credit Union Ltd
Prospect Credit Union Limited
Pulse Credit Union Limited
Qantas Staff Credit Union Limited
Queensland Community Credit Union Limited
Queensland Country Credit Union Ltd
Queensland Police Credit Union Limited
Queensland Professional Credit Union Ltd
Queensland Teachers' Credit Union Limited
Queenslanders Credit Union Limited
RACV Credit Union Limited
Railways Credit Union Limited
Randwick Credit Union Limited
RegionalOne Credit Union Limited
Reliance Credit Union Ltd
Resources Credit Union Limited
RTA Staff Credit Union Limited
Satisfac Direct Credit Union Limited
Savings and Loans Credit Union (S.A.) Ltd
Security Credit Union Ltd
Select Credit Union Ltd
Service One Credit Union Ltd
SGE Credit Union Ltd
Shell Employees' Credit Union Limited
Shoalhaven Paper Mill Employee's Credit Union Ltd
South West Slopes Credit Union Ltd
Southern Cross Credit Union Limited
South-West Credit Union Co-operative Limited
St Mary's Swan Hill Co-operative Credit Society Limited
St Patrick's Mentone Co-operative Credit Society Limited
Statewest Credit Society Limited
Sutherland Credit Union Ltd
Sutherland Shire Council Employees' Credit Union Ltd
Sydney Credit Union Ltd
TAB Credit Union Limited
Tartan Credit Union Ltd
The Broken Hill Community Credit Union Ltd
The Gympie Credit Union Ltd
The Police Department Employees' Credit Union Limited
The Summerland Credit Union Limited
The TAFE and Community Credit Union Limited
The University Credit Society Limited
Traditional Credit Union Limited
TransComm Credit Co-operative Limited
Uni Credit Union Ltd
United Credit Union Limited
Victoria Teachers Credit Union Limited
Wagga Mutual Credit Union Ltd
Warwick Credit Union Ltd
WAW Credit Union Co-operative Limited
Westax Credit Society Ltd
Western City Credit Union Ltd
Woolworths/Safeway Employees' Credit Co-operative Limited
Wyong Council Credit Union Ltd
Yennora Credit Union Ltd
Specialist Credit Card Institutions (SCCIs)
Foreign-owned SCCIs
GE Capital Finance Australia
GE Finance Australasia Pty Ltd
Locally Incorporated SCCIs
MoneySwitch Limited
Other ADIs
These companies are run by industry bodies and provide services (e.g. payments clearing) to member building societies and credit unions.

Australian Settlements Limited
Credit Union Services Corporation (Australia) Limited
Creditlink Services Limited
One ADI that provides general banking services which does not fall into the other categories.
Cairns Penny Savings & Loans Limited

Reporting Form ARF 112.1
Capital Adequacy – On-Balance Sheet Business Risk Weighting Schedule
Instruction Guide
This Instruction Guide is designed to assist in the completion of the On-Balance Sheet Business Risk Weighting Schedule form. In completing this form, reference should be made to Prudential Standard APS 112 Capital Adequacy: Credit Risk and the accompanying Guidance Notes.
The On-Balance Sheet Business Risk Weighting Schedule sets out the means of calculating an ADI’s total risk-weighted on balance sheet credit exposures at the stand-alone and consolidated banking group (‘the group’) level for capital adequacy purposes.
General directions and notes
Reporting entity
The On-Balance Sheet Business Risk Weighting Schedule form is to be completed by all locally incorporated ADIs (including Specialist Credit Card Institutions (SCCIs)) on both a Licensed ADI and Consolidated ADI Group basis (where applicable). Foreign ADIs[1] and Specialist Credit Card Institutions (SCCIs) operating through branches in Australia are not required to complete this form.
[1] For the purpose of this reporting form, foreign ADI has the meaning given in Division IB of Part II of the Banking Act 1959 (accordingly, Bank of China is not to be treated as a foreign ADI).
Licensed ADI
This refers to the operations of the reporting ADI at Level 1 (i.e. the stand-alone level) defined in accordance with Prudential Standard APS 110 Capital Adequacy.
Consolidated ADI group
This refers to the consolidated group of the reporting ADI at Level 2 (i.e. the consolidated banking group level) defined in accordance with Prudential Standard APS 110 Capital Adequacy.
The basis of consolidation required in this form is in accordance with the prudential Consolidated ADI Group. The prudential consolidated group should also be determined in accordance with Australian accounting standards, notably AASB 1024 ‘Consolidated Accounts’ with the following modifications:

Include the following:

all controlled banking entities, securities entities and other financial entities (e.g. finance companies, money market corporations, stockbrokers and leasing companies).

Exclude subsidiary entities involved in the following business activities:

insurance businesses (including friendly societies and health funds);
acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management or the securitisation of assets; and
non-financial (commercial) operations.
Reporting period
This form is to be completed as at the last day of the stated reporting quarter. Locally incorporated banks and Special Service Providers should submit the completed form to APRA within 20 business days after the end of the relevant reporting quarter. Credit Unions, Cairns Penny Savings & Loans Limited, Building Societies and Specialist Credit Card Institutions (SCCIs) should submit the completed form to APRA within 15 business days after the end of the relevant reporting quarter.
Unit of measurement
Banks are asked to complete the form in millions of Australian dollars rounded to one decimal place. Special Service Providers, Building Societies, Credit Unions, Specialist Credit Card Institutions (SCCIs) and Cairns Penny Savings & Loans Limited are asked to complete the form in whole Australian dollars (no decimal place).
Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 1012 ‘Foreign Currency Translation’.
The general requirements of AASB 1012 for translation are:

Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date.
Other items outstanding at the reporting date must not be retranslated subsequent to initial recognition of the transaction.
Monetary items are defined to mean money held and assets and liabilities that are to be received or paid in fixed or determinable amounts of money.
Monetary items arising under foreign currency derivative contracts at the reporting date must be translated as follows:

Where the exchange rate is fixed in the contract, at that fixed exchange rate; and
Where the exchange rate varies, at the spot rate at the reporting date.
Scope
The risk-weighting process used for measuring an ADI’s (and the group’s) on balance sheet credit exposures covers all on balance sheet assets held by the ADI (and the group), except the following items which are specifically excluded:

(a)      those assets or investments which are required to be deducted from Tier 1 or total capital as per Prudential Standard APS 111 Capital Adequacy: Measurement of Capital;
(b)     all debt and equity securities held in the trading book (the associated risk-weighted exposures are determined in accordance with Prudential Standard APS 113 Capital Adequacy: Market Risk and the accompanying Guidance Notes);
(c)      all on balance sheet positions in commodities (the associated risk-weighted exposures are determined in accordance with Prudential Standard APS 113 Capital Adequacy: Market Risk and the accompanying Guidance Notes); and
(d)     on balance sheet unrealised gains on market related off balance sheet transactions (which are to be included in the calculation of an ADI’s (and the group’s) total risk-weighted off balance sheet credit exposures – refer Guidance Note AGN 112.2 Risk-Weighted Off-Balance Sheet Credit Exposures).
Risk-weighted on-balance sheet credit exposures
An ADI’s (and the group’s) total risk-weighted on balance sheet credit exposures equal the sum of the risk-weighted amount of each on balance sheet asset the ADI (and the group) holds.
The risk-weighted amount of an on balance sheet item is determined by multiplying its current book value (i.e. current outstanding amount including accrued interest or revaluations, and net of any specific provision or associated depreciation) by the relevant risk weight specified in the form.
Where an on balance sheet claim on a counterparty is secured against eligible collateral and/or guarantee recognised by APRA, the secured portion of the claim should be weighted according to the risk weight appropriate to the collateral and/or the guarantor. The unsecured portion of the claim must be weighted according to the risk weight applicable to the original counterparty.
Coverage of collateral or guarantees is generally determined by the market value of the collateral or the amount of the guarantee in relation to the amount of the actual exposure supported by the collateral or guarantee. Only collateral and/or guarantees actually posted may be used for determining risk weights. A commitment to provide collateral is not recognised as eligible collateral for risk weighting purposes.
An ADI should consult APRA if in doubt about how to determine the risk-weighted amount of a particular on balance sheet transaction.
Definitions
Eligible collateral and guarantees
Collateral
The only forms of collateral that APRA recognises for capital adequacy purposes are:
(a)      cash deposits (including any rights of set-off on credit balances) subject to the conditions set out in Attachment B to Guidance Note AGN 112.1 Risk-Weighted On Balance Sheet Credit Exposures;
(b)     securities issued by the Commonwealth, State and Territory Governments (including State and Territory central borrowing authorities) in Australia; central and state governments in OECD countries; OECD central banks; international banking agencies and multilateral regional development banks; and
(c)      residential mortgages subject to the criteria detailed in Attachment C to Guidance Note AGN 112.1 Risk-Weighted On Balance Sheet Credit Exposures.
The underlying collateral arrangements must provide for direct, explicit, irrevocable and unequivocal recourse to the collateral.
Claims secured or collateralised in other ways, for example, by insurance contracts, put options, forward sales contracts or agreements, bank paper, securities issued by public sector entities etc, are not considered to be covered by eligible collateral. Such claims must be weighted according to the risk weight applicable to the original counterparty.
Guarantees
The only guarantees that APRA recognises for capital adequacy purposes are:
(a)      guarantees provided by the Commonwealth, state, territory and local governments (including state and territory central borrowing authorities) in Australia; central, state and local governments in OECD countries; public sector entities in Australia and OECD countries; OECD central banks and other OECD banks; ADIs in Australia; international banking agencies and multilateral regional development banks. Guarantees provided by non-OECD central governments and central banks, as well as non-OECD banks are recognised, to a limited extent, subject to the relevant conditions set out in this instruction guide (or refer Attachment A to Guidance Note AGN 112.1 Risk-Weighted On-Balance Sheet Credit Exposures); and
(b)     credit derivatives used for buying credit protection subject to the criteria set out in Guidance Note AGN 112.4 Treatment of Credit Derivatives in the Banking Book.
The guarantee must be issued formally and the underlying guarantee arrangements must provide for direct, explicit, irrevocable and unequivocal recourse to the guarantor.
Claims secured against indirect guarantees (e.g. guarantee of guarantee such as the Commonwealth’s guarantee of the entity which provides the guarantee) and letters of comfort do not qualify as eligible guarantees. Such claims must be weighted according to the risk weight applicable to the original counterparty.
State and territory central borrowing authorities in Australia
These are corporations established by state and territory governments to provide finance for government authorities and to manage their surplus funds, which include:

New South Wales Treasury Corporation (NSW TCorp);
Treasury Corporation of Victoria (TCV);
Queensland Treasury Corporation (QTC);
South Australian Government Financing Authority (SAFA);
Western Australian Treasury Corporation (WATC);
Tasmanian Public Finance Corporation (Tas Corp);
Northern Territory Treasury Corporation (NT TCorp); and
ACT Treasury.
OECD countries
These include countries that have concluded special lending arrangements under the IMF’s General Arrangements to Borrow (Saudi Arabia at this stage), provided that they have not rescheduled their external debt, whether to official or private sector creditors, within the previous five years.
International banking agencies and multilateral regional development banks
These include, for example, the IMF, the International Bank for Reconstruction and Development, the Bank for International Settlements and the Asian Development Bank.
Overseas banks
These include financial institutions in a country which (i) have the power to accept deposits in the regular course of business; (ii) are supervised by the supervisor of banks or by state-based regulatory agencies; and (iii) are subject to the same prudential requirements as banks (including capital adequacy).
ADIs
ADIs are authorised deposit-taking institutions which have an authority under subsection 9(3) of the Banking Act 1959 to carry on banking business in Australia (refer APRA’s website for a complete list of ADIs). ADIs include:
Australian-owned Banks;
Foreign Subsidiary Banks;
Branches of Foreign Banks;
Credit Unions, Credit Societies and Credit Co-operatives;
Building Societies;
Specialist Credit Card Institutions (SCCIs); and
Other ADIs (e.g. Cairns Penny Savings & Loans Limited, former special service providers under the FI Scheme).
Note: ADIs DO NOT include merchant banks in Australia.

Specific instructions
Category I – cash items
Item 1.
Report all notes and coins held irrespective of country of issue.
Item 2.
Report balances held in the Exchange Settlement Account with the Reserve Bank of Australia (RBA). Report all other claims on the RBA under item 17 of Category IV.
Item 3.
Report claims to the extent that they are secured against eligible cash collateral (refer Attachment B to Guidance Note AGN 112.1 Risk-Weighted On Balance Sheet Credit Exposures for qualifying criteria).
Item 4.
Gold bullion liabilities include gold borrowings, gold futures and forward sales of gold. Gold held in safe custody for other institutions or customers should not be reported. Gold held on an unallocated basis by another party, though backed by gold liabilities, is weighted as a claim on the counterparty unless a lower risk weight is approved by APRA.
Item 5.
Report claims collateralised by gold to the extent that the underlying claim being collateralised is denominated in gold.
Item 6.
Report the amount of cheques, drafts and other items drawn on other ADIs or overseas banks that are payable immediately upon presentation and that are in the process of collection. Include overnight settlement balances relating to Clearing House and Austraclear transactions.
Category II – Claims on Australian & foreign governments
For the purposes of this category, report all claims held in the banking book on, or claims to the extent that they are guaranteed by or secured against securities issued by, specified entities under this category. All claims held in the trading book (e.g. securities issued by these entities) are treated in accordance with Prudential Standard APS 113 Capital Adequacy: Market Risk and the accompanying Guidance Notes.
Category III – Claims on public sector entities & public trading enterprises
Item 13.
Report all claims on, or claims to the extent that they are guaranteed by, public sector entities (except those which have corporate status and operate on a commercial basis) in Australia. Reporting ADIs may refer to APRA in case of doubt.
Item 14.
Report all claims on public trading enterprises in Australia that have corporate status and operate on a commercial basis (notably in significant competition with private sector enterprises). Reporting ADIs may refer to APRA in case of doubt.
Category IV – Claims on central banks, international banking agencies, regional development banks, ADIs in Australia and overseas banks
For the purposes of this category, report all claims held in the banking book on, or claims to the extent that they are guaranteed by or secured against securities issued by, specified entities under this category. All claims held in the trading book (e.g. securities issued by these entities) are treated in accordance with Prudential Standard APS 113 Capital Adequacy: Market Risk and the accompanying Guidance Notes.
For items 22 to 26, claims held in the banking book exclude investments in equity and debt capital instruments of other ADIs or overseas banks (including their subsidiaries) which are not consolidated for capital adequacy purposes. Such investments are deducted from total capital (instead of applying a risk weight) as per Prudential Standard APS 111 Capital Adequacy: Measurement of Capital.
Item 22.
These include claims on, or claims guaranteed by, overseas branches of locally incorporated ADIs.
Item 23.
These include claims on, or claims guaranteed by, their branches in all countries.
Item 24.
These include claims on, or claims guaranteed by, their branches in all countries. A bank incorporated in the Asia-Pacific region wishing to be afforded this treatment must apply to APRA. APRA is willing to consider, on a case-by-case basis, assigning claims on, or claims guaranteed by, non-OECD banks from the Asia-Pacific area the same risk weight as claims on, or claims guaranteed by, OECD banks provided the bank is of high international standing and the parent country has a supervisory framework and standards equivalent to that applied in Australia.

Item 25.
These include claims on, or claims guaranteed by, their branches in all countries.
Item 26.
These include claims on their branches in all countries. Claims guaranteed by these non-OECD banks (and their branches in all countries) with a residual maturity exceeding one year are weighted according to the risk weight applicable to the original counterparty.
Category V – Claims secured against residential mortgages
Item 27.
Refer Attachment C to Guidance Note AGN 112.1 Risk-Weighted On-Balance Sheet Credit Exposures for definition of eligible residential mortgages.
Category VI – Other assets & claims
Item 29.
These include, for examples, personal and corporate loans, commercial and industrial loans, leasing finance and bill acceptances drawn by private sector counterparties, all other property loans (including loans secured against commercial property), holdings of corporate debt securities and shares in the banking book (claims held in the trading book are treated in accordance with Prudential Standard APS 113 Capital Adequacy: Market Risk and the accompanying Guidance Notes) and claims on other financial institutions.
Note on References to Accounting Standards
This Note is about references in these instructions to an accounting standard or accounting standards, e.g. where the instructions say that something must be done in accordance with a particular AASB or international accounting standard, or must be done in accordance with the accounting standards (however described) generally.
Where you see such a reference, you must read it as meaning the version of the accounting standard, or versions of the accounting standards, applying to reporting periods (within the meaning of the accounting standards) beginning immediately before 1 January 2005.
Accordingly, the new AASB standards for 2005 are not to be applied.
Similarly, a reference to principles or conventions (however described) governing an accounting procedure or treatment shall be taken to refer to principles or conventions applicable in relation to reporting periods (within the meaning of the accounting standards) that began immediately before 1 January 2005.