Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2006 Reporting Standard ARS 230.0 Commercial Property (Cth)

Case

Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2006

Reporting standard ARS 230.0 Commercial Property

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 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:

  • REVOKE the Reporting Standard ARS 230.0 (2005) Commercial Property; and

  • DETERMINE the Reporting standard ARS 230.0 Commercial Property in the form 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 to those financial sector entities on the later of 1 July 2006 and the date of registration on the Federal Register of Legislative Instruments.

Dated  26 June 2006

[signed]

Charles Littrell

Executive General Manager

Policy, Research and Statistics

APRA

Interpretation

In this Determination

APRA means the Australian Prudential Regulation Authority.

Schedule    

Reporting standard ARS 230.0 Commercial Property comprises 27 pages commencing on the next page.

Reporting Standard ARS 230.0

Commercial Property

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires all authorised deposit-taking institutions, including foreign authorised deposit-taking institutions operating in Australia through branch operations, but excluding specialist credit card institutions, to report to APRA, generally on a bi-annual basis, in relation to their commercial property.

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 230.0 Commercial Property designated ‘Consolidated Group or Licensed ADI for Banks’ and ‘Consolidated Group and Licensed ADI for other ADIs’, and the associated instructions (all of which are attached and form part of this reporting standard).

Purpose

  1. Data collected in Form ARF 230.0 Commercial Property (Form ARF 230.0) is used by APRA for the purpose of prudential supervision. It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.

Application

  1. This reporting standard applies to all authorised deposit-taking institutions (ADIs) except specialist credit card institutions.

Information required

  1. A bank must provide APRA with the following information for each reporting period:

(a)if the bank is the highest parent entity in relation to a consolidated ADI group – the information required by the version of Form ARF 230.0 designated ‘Consolidated Group or Licensed ADI for Banks’, completed on a consolidated group basis; or

(b)if the bank is not a highest parent entity in relation to a consolidated ADI group – the information required by the version of Form ARF 230.0 designated ‘Consolidated Group or Licensed ADI for Banks’, completed on a licensed ADI basis.

Note: Paragraph (b) will apply to a foreign ADI that is a bank (as well as to a certain locally-incorporated banks).

  1. An ADI that is a building society, credit union, special service provider or Cairns Penny Savings & Loans Ltd, must provide APRA with the following information for each reporting period:

(a)the information required by the version of Form ARF 230.0 designated for a ‘Consolidated Group and Licensed ADI for other ADIs’, completed on a licensed ADI basis; and

(b)if the ADI is the highest parent entity in relation to a consolidated ADI group – the information required by the version of Form ARF 230.0 designated for a ‘Consolidated Group and Licensed ADI for other ADIs’, completed on a consolidated group basis.

Forms and method of submission

  1. 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

  1. Subject to paragraph 7, an ADI must provide the information required by this reporting standard for reporting periods comprising each 6-month period ending 30 September and 31 March.

  1. 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.

  1. The information required by this reporting standard must be provided to APRA by 20 business days after the end of the reporting period to which the information relates.

  1. 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

  1. The information provided by an ADI under this reporting standard (except for the information required under subparagraphs 3(a) and 4(b)) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. AGS 1008 ‘Audit Implications of Prudential Reporting Requirements for Authorised Deposit-taking Institutions’, issued by the Auditing and Assurance Standards Board provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the data.

  1. All information provided by an ADI under this reporting standard must 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

  1. 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.

  1. 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

  1. 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.

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

Transitional

  1. An ADI must report under the old reporting standard in respect of a transitional reporting period. For these purposes:

old reporting standard means the reporting standard revoked in the determination making this reporting standard (being the reporting standard which this reporting standard replaces).

transitional reporting period means a reporting period under the old reporting standard:

(a)which ended before the date of revocation of the old reporting standard; and

(b)in relation to which the ADI was required, under the old reporting standard, to report by a date on or after the date of revocation of the old reporting standard.

Interpretation - classifications of ADIs

  1. In this reporting standard:

Accounting Standard AASB 127 means the accounting standard so made by the Australian Accounting Standards Board.

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

ADI list means the attached ADI list.

bank means an ADI whose name appears under the heading ‘Australian-owned Banks’ or ‘Foreign Subsidiary Banks’ or ‘Branches of Foreign Banks’ in the 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 127 ) 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.

foreign ADI means, subject to paragraph 18, an ADI that is incorporated outside Australia.

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 127); and

(c)it is not itself a subsidiary (within the meaning of Accounting Standard AASB 127) of an ADI that is locally-incorporated.

locally-incorporated means, subject to paragraph 18, incorporated in Australia.

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.

  1. For the purposes of this reporting standard, Bank of China is taken to be a locally-incorporated ADI and a locally-incorporated bank.

  1. 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, it is taken to be a 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, it is taken to be a 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, it is taken to be a 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, then it is taken to be a specialist credit card institution for the purposes of this reporting standard.

  1. APRA may in writing determine that an ADI is taken to be a bank, building society, credit union, special service provider or 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

  1. 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 China (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)

  • Citigroup Pty Limited

  • 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 UFJ, Ltd

  • Barclays Capital (the trading name of Barclays Bank plc)

  • BNP Paribas

  • Citibank N.A.

  • Credit Suisse

  • Deutsche Bank AG

  • HBOS Treasury Services plc

  • 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

  • Alliance One Credit Union Ltd

  • AMP Employees' & Agents Credit Union Limited

  • Austral Credit Union Limited

  • Australian Central Credit Union Limited

  • Australian Country Credit Union Ltd (trading as Reliance Credit Union)

  • Australian Defence Credit Union Ltd

  • AWA Credit Union Limited

  • Bananacoast Community Credit Union Ltd

  • Bankstown City Credit Union Ltd

  • Berrima District Credit Union Ltd

  • Big Sky Credit Union Ltd

  • Blue Mountains and Riverlands Community Credit Union Ltd

  • Broadway Credit Union Ltd

  • Calare Credit Union Ltd

  • CAPE Credit Union Limited

  • 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

  • Community Alliance Credit Union Limited

  • Community CPS Australia 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 Co-operative (ACT) Limited

  • Credit Union Australia Ltd

  • Credit Union Incitec Pivot Limited

  • Croatian Community Credit Union Limited

  • CSR and Rinker Employees Credit Union Limited

  • Dairy Farmers Credit Union Ltd

  • 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 Option Credit Union Limited

  • First Pacific Credit Union Limited

  • Fitzroy & Carlton Community Credit 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

  • 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

  • Melbourne University Credit Union Limited

  • Memberfirst Credit Union Limited

  • New England Credit Union Ltd

  • Newcom Colliery Employees' Credit Union Ltd

  • 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

  • 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

  • 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

  • Railways Credit Union Limited

  • RegionalOne Credit Union Limited

  • 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 Limited

  • Shell Employees' Credit Union Limited

  • 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

  • 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 (eg payments clearing) to member building societies and credit unions.

  • Australian Settlements Limited

  • Credit Union Services Corporation (Australia) Limited

  • Indue Ltd

One ADI that provides general banking services which does not fall into the other categories.

  • Cairns Penny Savings & Loans Limited

Authorised Non-Operating Holding Companies

  • HBOS Australia Pty Ltd

Reporting Form ARF 230.0

Commercial Property

Instruction Guide

This instruction guide is designed to assist in the completion of the Commercial Property form. The authorised deposit-taking institution’s (ADI’s) exposure to commercial property in “Australia” and “Overseas” is required to be reported separately in the form (both Parts A and B).

General directions and notes

Reporting entity

This form is to be completed by all locally incorporated banks on either a licensed ADI or consolidated ADI group basis (where applicable).

Foreign ADIs[1] operating through branches in Australia are required to complete this form on a licensed ADI basis only.

[1]           These instructions and any relevant form are to apply to the Bank of China as if its branch operations in Australia constituted a locally-incorporated bank.  Accordingly: (a) the Bank of China is to undertake stand-alone or ‘Licensed ADI’ reporting in respect of the bank’s Australian branch operations, as if those operations constituted a locally-incorporated bank; and (b) ‘Consolidated Group’ reporting for Bank of China is to encompass (i) those branch operations (as if they constituted a locally-incorporated bank) and (ii) any locally-incorporated subsidiary of the Bank of China.

Credit Unions, Cairns Penny Savings & Loans Limited, Building Societies and Special Service Providers (SSPs) are to complete this form on both a licensed ADI and consolidated ADI group basis (where applicable).

Note: Specialist Credit Card Institutions (SCCIs) are not required to complete this form.

Licensed ADI

This refers to the operations of the reporting ADI on a stand-alone basis.

Securitisation deconsolidation principle

Except where stated otherwise on this form, reporting entities must treat any securitisation program special purpose vehicles (SPVs) in which the ADI (or a member of its consolidated group) participates in accordance with APRA’s clean sale and separation requirements as non-consolidated independent third parties. As a result, for reporting purposes all assets, liabilities, revenues and expenses of these SPVs must be excluded from the ADI’s reported amounts. Where relevant, report on this form any exposure to or other transaction between the ADI and any such SPV as if such transaction was conducted with an independent third party, regardless of whether the SPV or its assets is consolidated for accounting purposes.

APRA's clean sale and separation requirements are set out in APS 120 Funds Management and Securitisation and related Guidance Notes AGN 120.3 Purchase and Supply of Assets (including Securities Issued by SPVs) (AGN 120.3) and AGN 120.1 Disclosure and Separation. Whenever the clean sale and separation requirements are not met, all the assets, liabilities, revenues and expenses of the SPV are to be consolidated with the ADI’s reported amounts.

Note: ADIs should consult APRA in case of doubt as to whether a subsidiary or controlled entity that engaged in non-financial operations should be consolidated at Level 2 for capital adequacy purposes.

Consolidated ADI group

This refers to the global operations of the ADI and all its controlled entities (where relevant), consolidated in accordance with Australian accounting standards (AASB 127 Consolidated and Separate Financial Statements (AASB 127) and AASB 3 Business Combinations (AASB 3)).

‘Controlled entity’, ‘parent entity’

These terms are defined in accordance with AASB 127 and AASB 3.

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 127 and AASB 3 with the following modifications:

  1. Include the following:

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

  1. 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;

  • non-financial (commercial) operations; and

  • special purpose vehicles whose assets have satisfied the clean sale requirements set down in AGN 120.3 (refer Securitisation deconsolidation principle).

Reporting period

The form is to be completed as at the last day of September and March. Locally incorporated banks, foreign ADIs, Credit Unions, Cairns Penny Savings & Loans Limited, Building Societies and SSPs should submit the completed form to APRA within 20 business days after the end of the relevant reporting period.

Unit of measurement

Banks are asked to complete the form in millions of Australian dollars rounded to one decimal place.  SSPs, Building Societies, Credit Unions 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 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).

The general requirements of AASB 121 for translation are:

  1. foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;2

    2           Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency. Spot rate means the exchange rate for immediate delivery.

  1. foreign currency non-monetary items that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction;3

    3           Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.

  1. foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 Financial Instruments: Recognition and Measurement (AASB 139).  However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition.  Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

  1. translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

·Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.

·Translation of financial reports should otherwise follow the requirements in AASB 121.

Netting

Amounts should be reported without any adjustment for netting arrangements.

Reporting threshold

Bank ADIs:

For the purposes of this report, only include commercial property exposures which exceed AUD $250,000.

Non-bank ADIs:

For the purposes of this report, include total commercial property exposures irrespective of the dollar amount.

Definition

Commercial property exposure is defined according to the nature of the risk. An exposure should be classified as commercial property risk, if the exposure is subject to the performance of the property market.

For reporting purposes, a commercial property exposure exists when a facility has been provided for the development, acquisition or improvement of landed property (real estate), and the servicing and repayment of the facility is dependent on the cash flows generated by the property itself through sale or rental income, and/or from cash flows generated from other properties owned by the borrower.

The following points may assist to further clarify this general definition:

  • The definition excludes residential property loans for owner occupation and loans to individuals or families for investment in residential property.

  • Exclude loans to private family companies and/or family trusts where the residence is occupied by the directors or principal beneficiaries of the family trust.

  • Exclude loans to builders, construction companies or sub-contractors who are paid for the execution of their contracts by a third party and not out of the sale or rental of the property upon completion.  If, however, they assume development risk, whether recognised as a developer or not, the exposure is classified as property exposure.

  • Rural exposures will generally not meet the definition of commercial property, unless the property has been acquired specifically for lease or resale, and where the servicing of the debt is dependent on such lease or resale (and/or the lease or resale of other properties).

  • Facilities to investment companies, property management companies and unit trusts whose success in business (and therefore the servicing and repayment of the debt) is predominantly dependent upon the performance of the property market are included in commercial property exposure.

  • Facilities provided for the acquisition of property to be used for generating income other than through rental or sale are classified under the industry from which the cash flow servicing the debt is derived. In such owner-occupied properties where part of the debt servicing is derived from rental income, the classification depends on the predominant source of debt servicing. If most of the servicing is by way of income derived from the owner’s business, the exposure is classified under that business. However, if most of the servicing derives from the property itself, it is a property exposure.

The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes may be used as a guide. Although ANZSIC was not developed for this purpose, property exposures will generally be to enterprises classified under ANZSIC 771 (Property Operators and Developers), and exclude those under subdivision 57 (Accommodation, Cafes and Restaurants).  Also excluded are loans to enterprises classified under subdivision 41 (General Construction) unless they assume the development risk, as described above.

Specific instructions

Part A – Commercial property

Total exposure limits

When calculating total exposure limits, do not include internal limits, which have not been formally advised to a client and may be cancelled at your ADI’s discretion.

Total actual exposures

When calculating total actual exposures, the exposure should include:

  • claims and commitments recorded on-balance sheet; and

  • the credit equivalent amounts of off-balance sheet claims and commitments.

Impaired exposures

The definition of impaired exposures should be consistent with the methodology used to compile the information for ARF 220.0 Impaired Facilities – ADIs. Specific provisions and security held against these exposures are also requested.

Commercial property classifications

The information required for total exposure limits, total actual exposures, impaired exposures (balance outstanding, specific provisions & security held) are to be classified according to the type of commercial property market/categories to which the ADI is exposed. The categories that the exposures are to be classified in this form are listed below:

  1. office;

  1. retail – includes retail shops, restaurants, shopping centres, petrol stations, etc;

  1. industrial - includes warehouses and factories;

  1. land development and subdivisions;

  1. other residential - includes residential exposures not excluded by point 1 in the general instructions;

  1. tourism and leisure - includes hotels, motels and lodgings, recreational and sporting facilities, hotel developments, time-share developments and other hospitality industries; and

  1. other - includes other property exposures not elsewhere covered (e.g. health, education related, churches, infrastructure, etc).

An ADI’s own investment in commercial property (such as equity investments or purchases of units in trusts) should not be included in the main section of the form, but should be noted in Part B.  Property held for the ADI’s own use should not be included.

Bank ADIs need only include commercial property exposures which exceed AUD $250 000, whilst non-bank ADIs should include total exposures irrespective of the dollar amount.

Part B – ADIs own investment in commercial property

An ADI’s own investment in commercial property (such as equity investments or purchases of units in trusts) should be included in this section of the form.  Property held for the ADI’s own use should not be included.

Report the total current carrying value of investments in commercial property (such as equity investments and purchases of units in trusts), that exceed AUD $250 000 for bank ADIs, or the total for non-bank ADIs.  Do not include property held for the ADI’s own use. Investments in Australia and overseas should be reported separately.

Report the value of all commercial property exposures written off against provisions, asset revaluation reserves or profits during the reporting period. Write-offs in Australia and overseas are required to be reported separately.


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