Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2007 MRS 150.0 Asset Exposures (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2007
Reporting standard MRS 150.0 Asset Exposures
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 and subsection 33(3) of the Acts Interpretation Act 1901:
REVOKE the Reporting Standard MRS 150.0: Asset Exposures; and
DETERMINE the Reporting Standard MRS 150.0 Asset Exposures in the form set out in the Schedule, which applies to the financial sector entities referred to in paragraph 1 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities on the later of 30 June 2007 and the date of registration on the Federal Register of Legislative Instruments.
Dated 29 June 2007
[Signed]
Charles Littrell
Executive General Manager
Policy, Research and Statistics
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard MRS 150.0 Asset Exposures comprises 13 pages commencing on the following page.
Reporting Standard MRS 150.0
Asset Exposures
| Objective of this reporting standard This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires medical defence organisations (‘MDOs’, as defined in paragraph 17) to report to APRA on a half-yearly basis in relation to their Asset Exposures. This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with reporting form MRF 150.0 Asset Exposures and the instructions to that form (each of which is attached and forms part of this reporting standard). |
Application
1. This reporting standard applies to all MDOs.
Information required
2. An MDO must, after the end of each reporting period, and in accordance with the instructions, duly complete the form in respect of the reporting period, and provide the completed form (the ‘report’) to APRA by the due date.
Method of submission
3. Reports 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;
(b)in Microsoft Excel format on a 3.5 inch diskette, which must be posted to APRA’s head office at Level 26, 400 George Street, Sydney, NSW 2000; or
(c)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and forms may be obtained from APRA but will not be available immediately upon commencement of this standard. Therefore, initially, only methods of submission (b) and (c) will be available.
Reporting periods
4. Subject to paragraphs 5 and 6, the reporting periods are the half-yearly period ending on 30 June 2007 and each successive half-yearly period (ending on 31 December or 30 June) after that.
5. APRA may, by notice in writing, change the reporting periods for a particular MDO so that it is required to report in respect of half-yearly reporting periods based upon the MDO’s own year of income.
Note: this will be relevant where the MDO’s year of income does not end on 30 June or 31 December.
6. APRA may, by notice in writing change the reporting periods for a particular MDO to require it to provide the information:
(a)more frequently (APRA may require this when, having regard to the particular circumstances of the MDO, APRA considers it necessary or desirable for the MDO to report more frequently for the purposes of monitoring the financial position of the MDO); or
(b)less frequently (APRA may do so when, having regard to the particular circumstances of the MDO and the extent to which its financial position requires monitoring, it is unnecessary to require it to report on a half-yearly basis).
Due dates
7. Reports under this standard must be provided to APRA no later than:
(a)in the case of a report in respect of a half-yearly period ending on the last day of the MDO’s year of income – 4 months after that day; and
(b)in the case of all other reports – 20 business days after the end of the reporting period.
8. APRA may, in writing, grant an MDO an extension of the due date for submission of a report, in which case the new due date will be the date on the notice of extension.
Audit and auditor’s certificate
9. Reports under this standard must be the product of processes and controls that have been reviewed and tested by a registered company auditor. This will require the auditor to review and test the systems, processes, and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the approved auditor to form an opinion as to the accuracy and reliability of the data.
10. In relation to each year of income of an MDO (including a year of income ending on 30 June 2007), the MDO must provide APRA with an annual certificate, signed by a registered company auditor, which must either:
(a)state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is accurate and reliable; or
(b)state that in the auditor’s opinion the information provided to APRA under this standard in respect of the year of income is not accurate or reliable and specify the ways in which the information is not accurate or reliable and the grounds upon which the auditor has come to this conclusion.
A certificate under this paragraph must be provided to APRA no later than four months after the last day of the year of income to which it relates. It may be combined with certificates under corresponding paragraphs of other reporting standards (made under section 13 of the Financial Sector (Collection of Data) Act 2001) applying to the MDO.
Authorisation
11. Reports under this standard must also be subject to processes and controls developed by the MDO for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the MDO to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
12. If an MDO submits a report under this standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the MDO 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 insurer who have authority from the insurer to transmit the data to APRA.
13. If a report under this standard is completed in Microsoft Excel format and provided on diskette, the diskette must be sent to APRA with a letter signed by either the Principal Executive Officer or Chief Financial Officer of the MDO.
14. If a report under this standard is completed and provided in paper form, it must be signed by either the Principal Executive Officer or Chief Financial Officer of the MDO.
Minor alterations to forms and instructions
15. APRA may make minor variations to:
(a)the form, and the instructions to the form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b)the instructions, to clarify their application to the form
without changing any substantive requirement in the form or instructions.
16. If APRA makes such a variation it must notify affected MDOs in writing.
Interpretation
17. In this standard:
APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.
business day means an ordinary business day, excluding weekends and public holidays.
Chief Financial Officer means the person having the function of chief financial officer of the MDO, by whatever name called, and whether or not he or she is a member of the governing board of the MDO, and if there is no such person means a person who performs similar functions to those commonly performed by a chief financial officer.
due date means the relevant date under paragraph 7 or 8.
form means the attached form.
instructions means the attached instructions.
MDO means a corporation to which section 5A of the Financial Sector (Collection of Data) Act 2001 applies (but, for the avoidance of doubt, does not include a general insurer within the meaning of the Insurance Act 1973).
Principal Executive Officer means the principal executive officer of the MDO for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the MDO.
registered company auditor has the meaning in section 9 of the Corporations Act 2001.
Note: That section provides that registered company auditor:
(a) means a person registered as an auditor under Part 9.2 of the Corporations Act; and
(b) in relation to a body corporate that is not a company—includes a person qualified to act as the body's auditor under the law of the body's incorporation.
report has the meaning given in paragraph 2.
reporting period means the relevant period under paragraph 4, 5 or 6
year of income in relation to an MDO means the accounting period adopted by the MDO for the purposes of the Income Tax Assessment Act 1936 or for taxation purposes generally (whether or not that period is the same as the standard financial year beginning on 1 July and ending on 30 June).
Reporting Form MRF 150.0
Asset Exposures
Instruction Guide
Introduction
This form requires Medical Defence Organisations (MDOs) to report information about their large asset exposures and concentrations.
Reporting Obligations
MDOs are required to report on a half-yearly basis (that is, six monthly intervals), based on their financial year.
For annual reporting, MDOs must lodge a form within four months of the end of their financial year. The information required on an annual basis must be reported as at the last day of the reporting period on a financial year-to-date basis of the MDO.
For half-yearly reporting (that is, the half-year that does not correspond with the MDO’s financial year end), MDOs must lodge a form within 20 business days of the end of that six month period.
Audit Requirements
This form must be subject to audit review and testing on an annual basis or more frequently if necessary to enable the auditor to form an opinion on the accuracy and reliability of the data. The auditor must provide a certificate to the MDO specifying whether, in their opinion, the data provided by the MDO are reliable. The MDO must submit this certificate to APRA on an annual basis.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Basis of Preparation
Unit of Measurement
This form is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).
Netting
For the purposes of this form, netting arrangements that are in the form of a legally recognised right to net or set off must be in accordance with AASB 7 Financial Instruments: Disclosures (AASB 7), AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) and AASB 132 Financial Instruments: Presentation (AASB 132).
Related party/entity
Related parties/entities are to be interpreted in accordance with AASB 124 Related Party Disclosures (AASB 124).
Parent
Parent entity is to be interpreted in accordance with AASB 127 Consolidated and Separate Financial Statements (AASB 127).
Subsidiaries
Subsidiaries are to be interpreted in accordance with AASB 127.
Associates
Associates are to be interpreted in accordance with AASB 128 Investments in Associates (AASB 128).
Joint ventures
Joint ventures are to be interpreted in accordance with AASB 131 Interests in Joint Ventures (AASB 131).
Specific Instructions
This form is to be completed for each exposure that is greater than 10% of Capital (as reported on MRF 120.0 Capital Base (MRF 120.0)).
Issues that must be noted for the purposes of completing this form are:
Report all exposures in the appropriate counterparty/asset rating band columns. Report the fair value of the asset, net of provision for doubtful debts, as per MRF 300.0 Statement of Financial Position (MRF 300.0), except where the MDO has in place netting agreements that are in the form of a legally recognised right to net or set off in accordance with AASB 132.
Where the counterparty rating is revised due to credit support received (e.g. guarantee or eligible collateral), the exposure must be reported taking into account the credit support received (i.e. the appropriate counterparty/asset rating should be reported).
Exposures include claims and commitments of the MDO recorded both on and off the balance sheet, that are of the following nature:
· Credit exposures (i.e. exposure to a counterparty or group of related counterparties); and/or
· Asset exposures that are not in the nature of a credit exposure (e.g. equity investments).
On-Balance Sheet Exposures
Report the fair value of exposures, net of provision for doubtful debts, recognised on-balance sheet (i.e. exposure recorded in MRF 300.0), except where point 1 above is satisfied in regards to netting. Fair value has the same meaning as defined in the Australian accounting standards, that is, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.
Off-Balance Sheet Exposures
Note: Refer to the MRF 130 series
For off-balance sheet transactions (i.e. exposures not recorded in MRF 300.0) and exposures, include direct credit substitutes, trade and performance related contingent items, guarantees, collateral and other commitments, that are of a credit nature, whether revocable or not.
Group of related counterparties (counterparties related to each other whether or not they are related to the MDO): Two or more counterparties will form a group of related counterparties, if they are linked by:
- Cross guarantees;
- common ownership or management;
- the ability of a counterparty to exercise control (defined in accordance with Australian Accounting Standards issued by AASB) over the other(s) whether direct or indirect;
- financial interdependency such that the financial soundness of any of them may affect the financial soundness of the other(s); or
- other connections or relationships which, according to a MDO’s assessment, identify the counterparties as constituting a single risk.
Counterparties related to the MDO: Exposures of the reporting MDO to related parties (i.e. parent entity, subsidiaries, associates and joint ventures) must be included in the analysis. 'Related parties' is to be interpreted consistently with its definition and meaning as contained in AASB 124.
Exposures to the foreign parent and the related entities of the parent (where applicable) are to also be considered in the analysis.
Investments in equity or subordinated debt must be regarded as having the same rating as unsecured debt of the issuer.
Obligator/exposure
Report the name of the obligator/exposure.
Counterparty/asset rating grade
Report the grade of the counterparty/asset. The grades are detailed in Attachment 1.
Type of exposure (i.e. type of investment/asset)
Report the type of asset or exposure (e.g. holdings of listed equity instruments, debt instruments, loan, units in listed or unlisted trusts, direct property holding, guarantee).
Performance of asset impaired
Mark “Y” or “N” in this column for each exposure listed. For the purposes of this form, impairment means that there exists reasonable doubt that amounts of principal (or fair value) and any associated amounts of accrued income (e.g. interest, dividends, distributions associated with the investment/asset) will be able to be collected by the MDO.
Related entity
If the asset/exposure of the entity is to another related entity, report the relationship with the entity by reporting: parent entity “P”; subsidiary “S”; associate/joint venture "A"; or other related party “O”).
Disclose type of entity/business
Report the type of business conducted by the entity.
On-balance sheet exposures
Refers to exposures that are recorded in MRF 300.0. Report the fair value of exposures, net of provision for doubtful debts (as per MRF 300.0), except where a legal right of set off exists in accordance with AASB 132.
Off-balance sheet exposure
Relates to assets that are not recorded in MRF 300.0. These are reported in the MRF 130 series.
For off-balance sheet transactions and exposures, include the gross value/limit of re-insurance contracts, direct credit substitutes, trade and performance related contingent items, guarantees and other commitments, that are of a credit nature, whether revocable or not.
Total exposure
This is the total of the “On Balance Sheet” and “Off Balance Sheet” amounts listed for each individual obligator/exposure.
10. Component of investment representing goodwill and other intangible assets
Report the component of the value of an investment in a related entity that constitutes goodwill and/or other intangible assets.
This value is also included in column 5, but should be separately identified here.
ATTACHMENT 1: Counterparty Grades
| Grade | Standard & Poor’s | Moody’s | AM Best | Fitch |
| 1 | AAA | Aaa | A++ | AAA |
| 2 | AA+ | Aa1 | A+ | AA+ |
| 3 | A+ | A1 |
| A+ |
| 4 | BBB+ | Baa1 | B++ | BBB+ |
| 5 | BB+ or below | Ba1 or below | B or below | BB+ or below |
Unrated assets or exposures should be classified as Grade 4.
An MDO must, in general, use the same rating agency for determining counterparty grades. An MDO may depart from this general rule where there are good reasons for doing so, such as under the following circumstances:
Where the rating agencies usually monitored by the MSO do not issue a solicited credit rating for a particular debt obligation and only one other rating agency issues a solicited credit rating for that debt obligation, the MDO may use that solicited credit rating.
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