Financial Sector (Collection of Data) (reporting standard) determination No. 5 of 2018 (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 5 of 2018
Reporting Standard ARS 113.2 Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting
Financial Sector (Collection of Data) Act 2001
I, Alison Bliss, 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:
(a)REVOKE Financial Sector (Collection of Data) (reporting standard) determination No. 6 of 2008, including Reporting Standard ARS 113.2 Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting made under that Determination; and
(b)DETERMINE Reporting Standard ARS 113.2 Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting, in the form set out in the Schedule, which applies to the financial sector entities to the extent provided in paragraph 3 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, and the revoked reporting standard shall cease to apply, on 1 April 2018.
This instrument commences on 1 April 2018.
Dated: 21 March 2018
[Signed]
Alison Bliss
General Manager
Data Analytics Division
Interpretation
In this Determination:
APRA means the Australian Prudential Regulation Authority.
financial sector entity has the meaning given by section 5 of the Act.
Schedule
Reporting Standard ARS 113.2 Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting comprises the document commencing on the following page.
Reporting Standard ARS 113.2
Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting
Objective of this Reporting Standard
This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.
This Reporting Standard outlines the overall requirements for the provision of information to APRA in relation to an authorised deposit-taking institution’s specialised lending exposures for which the ADI is using the supervisory slotting approach under the internal ratings-based approach to credit risk. It should be read in conjunction with:
the versions of Reporting Form ARF 113.2 IRB – Specialised Lending Supervisory Slotting designated for an authorised deposit-taking institution reporting at Level 1 and Level 2, and the associated instructions (all of which are attached and form part of this Reporting Standard); and
Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk.
Authority
This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001
Purpose
Data collected in Reporting Form ARF 113.2 IRB – Specialised Lending Supervisory Slotting (ARF 113.2) is used by APRA for the purpose of prudential supervision, including assessing compliance with Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113). It may also be used by the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).
Application and commencement
This Reporting Standard applies to an authorised deposit-taking institution (ADI) that has APRA’s approval or is seeking APRA’s approval to use the internal ratings-based approach to credit risk, and uses or intends to use the supervisory slotting approach for one or more of its specialised lending sub-asset classes (refer to APS 113).
This Reporting Standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 6).
This Reporting Standard commences on 1 April 2018.
Information required
An ADI to which this Reporting Standard applies must provide APRA with the information required by the version of ARF 113.2 designated for an ADI at Level 1 for each reporting period.
If an ADI to which this Reporting Standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by the version of ARF 113.2 designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC. If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period. In doing so, the immediate parent NOHC must comply with this Reporting Standard (other than paragraphs 5 and 12) as if it were the relevant ADI.
Forms and method of submission
The information required by this Reporting Standard must be given to APRA in electronic format, using the ‘Direct to APRA’ application or by a method notified by APRA, in writing, prior to submission.
Note: the Direct to APRA application software (also known as D2A) may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 9, an ADI to which this Reporting Standard applies must provide the information required by this Reporting Standard for 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 within 30 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
All information provided by an ADI under this Reporting Standard (except for the information required under paragraph 6) must be the product of systems, processes and controls that have been reviewed and tested by the external auditor of the ADI as set out in Prudential Standards APS 310 Audit and Related Matters. Relevant standards and guidance statements issued by the Auditing and Assurance Standards Board provide information 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 information provided by an ADI under this Reporting Standard.
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. These systems, processes and controls are to assure the completeness and reliability of the information provided.
Authorisation
When an officer of an ADI submits information under this Reporting Standard using the D2A application, or other method notified by APRA, it will be necessary for the officer to digitally sign the relevant information using a digital certificate acceptable to APRA..
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.
Interpretation
In this Reporting Standard:
AASB has the meaning in section 9 of the Corporations Act 2001.
ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.
APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.
authorised NOHC has the meaning given in the Banking Act 1959.
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.
immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of paragraph 21(b) of Prudential Standard APS 110 Capital Adequacy (APS 110).
Level 1 has the meaning in APS 001.
Level 2 has the meaning in APS 001.
reporting period means a period mentioned in paragraph 8 or, if applicable, paragraph 9.
subsidiary has the meaning in section 9 of the Corporations Act 2001.
Unless the contrary intention appears, a reference to an Act, Prudential Standard, Reporting Standard, Australian Accounting or Auditing Standard is a reference to the instrument as in force from time to time.
Reporting Form ARF 113.2
IRB – Specialised Lending Supervisory Slotting
Instruction Guide
This instruction guide is designed to assist in the completion of Reporting Form ARF 113.2 IRB – Specialised Lending Supervisory Slotting – (ARF 113.2). This form captures the credit risk-weighted assets (RWA) relating to an authorised deposit-taking institution’s (ADI’s) specialised lending (SL) exposures for which the ADI is using the supervisory slotting approach under the internal ratings-based (IRB) approach to credit risk. In completing this form, ADIs should refer to Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113).
General directions and notes
Reporting entity
This form is to be completed at Level 1 and Level 2[1] by each ADI (subject to the following paragraph) that has APRA’s approval or is seeking APRA’s approval to use the IRB approach to credit risk, and uses or intends to use the supervisory slotting approach for one or more of its SL sub-asset classes, in accordance with APS 113.
[1] Level 1 and Level 2 are defined in accordance with Prudential Standard APS 001 Definitions.
If an ADI is a subsidiary of an authorised non-operating holding company (NOHC), the report at Level 2 is to be provided by the ADI’s immediate parent NOHC.[2]
[2] Refer to paragraph 6 of Reporting Standard ARS 113.2 Internal Ratings-based (IRB) Approach to Credit Risk – Specialised Lending Supervisory Slotting.
Securitisation deconsolidation principle
Except as otherwise specified in these instructions, the following applies:
Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120):
(a)special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes;
(b)the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns; and
(c)the underlying exposures (i.e. the pool) under such a securitisation may be excluded from the calculation of the ADI’s regulatory capital (refer to APS 120). However, the ADI must still hold regulatory capital for the securitisation exposures[3] that it retains or acquires, and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital. The RWA relating to such securitisation exposures must also be reported in Reporting Form ARF 110.0.1 Capital Adequacy (Level 1) and Reporting Form ARF 110.0.2 Capital Adequacy (Level 2).
[3] Securitisation exposures are defined in accordance with APS 120.
Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI undertakes a funding-only securitisation or synthetic securitisation, such exposures are to be reported as on-balance sheet assets in APRA’s regulatory reporting returns. In addition, these exposures must also be reported as a part of the ADI’s total securitised assets within Reporting Form ARF 120.2 Securitisation – Supplementary Items.
Reporting period and timeframe for lodgement
The form is to be completed as at the last day of the stated reporting period (i.e. the relevant quarter) and submitted to APRA within 30 business days after the end of the relevant reporting period.
Requirements applying to certain ADIs reporting under the form
The following particular requirements apply to certain ADIs:
| Description of ADI | Reporting requirement | Timeframe for lodgement |
| ADI is operating under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) standardised approach, but has applied to adopt (or APRA has indicated that it proposes to approve it for) the IRB approach for most or all of its operations | Report under ARF 113.2 (the form) in respect of any operations to be covered by the supervisory slotting approach (for purposes of assessing prospective credit risk component of regulatory capital calculation after IRB approval (i.e. “parallel run” of data) | Within 30 business days of end of reporting period |
| ADI has IRB approval, but some operations remain under the standardised approach set out in APS 112 | Report under the form in respect of any operations that are under the supervisory slotting approach (for purposes of calculating credit risk component of regulatory capital) | Within 30 business days of end of reporting period |
These ADIs will also have certain reporting obligations under Reporting Form ARF 112.1A Standardised Credit Risk – On-balance Sheet Assets and Reporting Form ARF 112.2A Standardised Credit Risk – Off-balance Sheet Exposures.
Unit of measurement
This form is to be completed in millions of Australian dollars (AUD) rounded to one 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.
Scope
An ADI is to report in this form (ARF 113.2):
all on-balance sheet and off-balance sheet SL exposures in its banking book that are subject to the supervisory slotting approach, including those that expose the ADI to counterparty credit risk, except the following specifically excluded items (refer to APS 113):
(a)assets or investments that are required to be deducted from Tier 1 or Tier 2 capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital; and
(b)securitisation exposures, which are subject to the requirements of APS 120; and
all trading book SL exposures (subject to the supervisory slotting approach) that expose the ADI to counterparty credit risk (refer to APS 113).
Definitions
In this instruction guide and its corresponding reporting form (ARF 113.2), the following expressions have the defined meanings as set out below:
Specialised lending exposures
Refer to APS 113 and Prudential Practice Guide APG 113 Internal Ratings-based Approach to Credit Risk – January 2013 (APG 113) for details on the characteristics of the four sub-asset classes of SL - project finance, object finance, commodities finance and income-producing real estate (IPRE).
Specific instructions
The following instructions are applicable at Level 1 and (where relevant) Level 2.
For both on-balance sheet and off-balance sheet exposures, where an ADI’s IRB approval provides for the supervisory slotting approach to apply to one or more of the SL sub-asset classes, the ADI must map its internal obligor grades for those exposures to the five supervisory slotting categories (refer to Attachments B and F to APS 113).
Section A: On-balance sheet exposures
The on-balance sheet component is the book value of the exposure gross of any specific provisions.
Columns 3.1 to 3.4. Exposures after CRM
All exposures are to be reported after eligible credit risk mitigation (CRM) (refer to Attachment B to APS 113 for details on recognition of CRM). Allocate SL exposures after CRM to the relevant sub-asset classes in columns 3.1 – 3.4 (refer to APG 113):
(a)Column 3.1 Project finance;
(b)Column 3.2 Object finance;
(c)Column 3.3 Commodity finance; and
(d)Column 3.4 Income producing real estate.
Column 4. Total exposures
Derived field that totals exposures after CRM in columns 3.1 to 3.4 for each supervisory category.
Column 5. RWA
Derived field that multiplies the total exposures (column 4) for each supervisory category by the unexpected loss (UL) risk-weights (column 1) corresponding to the relevant supervisory category.
Column 6. EL amount
Derived field that calculates eight per cent of the total exposures (column 4) in each supervisory category and multiplies it by the expected loss (EL) risk-weights (column 2) corresponding to the relevant supervisory category.
Section B: Off-balance sheet exposures
Off-balance sheet exposures include both non-market-related (including undrawn commitments) and market related off-balance sheet transactions.
Columns 3.1 to 3.4. Exposures after CRM
Off-balance sheet exposures are to be converted to on-balance sheet equivalents using the FIRB credit conversion factors (CCFs) detailed in Attachment B to APS 113.
Allocate on-balance sheet equivalent amounts of SL exposures after CRM to the relevant sub-asset classes in columns 3.1 – 3.4 (refer to APG 113).
(a)Column 3.1 Project finance;
(b)Column 3.2 Object finance;
(c)Column 3.3 Commodity finance; and
(d)Column 3.4 Income producing real estate.
Columns 4 to 6. Total exposures, RWA and EL amount
Refer to the instructions in section A of this instruction guide for the following items:
(a)Column 4. Total exposures;
(b)Column 5. RWA; and
(c)Column 6. EL amount.
0
0
0