Financial Sector (Collection of Data) (reporting standard) determination No. 52 of 2008 ARS 394.0 Personal Finance (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 52 of 2008
Reporting standard ARS 394.0 Personal Finance
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) and subsection 33(3) of the Acts Interpretation Act 1901:
REVOKE Reporting Standard ARS 394.0 Personal Finance made by Financial Sector (Collection of Data) (reporting standard) determination No. 40 of 2006; and
DETERMINE Reporting Standard ARS 394.0 Personal Finance in the form set out in the Schedule, which applies to financial sector entities to the extent provided 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, and the revoked reporting standard shall cease to apply, on the later of 1 April 2008 and the date of registration of this instrument on the Federal Register of Legislative Instruments.
Dated 4th February 2008
[Signed]
Wayne Byres
Executive General Manager
Diversified Institutions Division
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
Schedule
Reporting Standard ARS 394.0 Personal Finance comprises the 39 pages commencing on the following page.
Reporting Standard ARS 394.0
Personal Finance
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 and outlines the overall requirements for the provision of information to APRA relating to an authorised deposit-taking institution’s personal finance. It should be read in conjunction with:
Form ARF 394.0.1 Personal Finance in NSW;
Form ARF 394.0.2 Personal Finance in VIC;
Form ARF 394.0.3 Personal Finance in QLD;
Form ARF 394.0.4 Personal Finance in SA;
Form ARF 394.0.5 Personal Finance in WA;
Form ARF 394.0.6 Personal Finance in TAS;
Form ARF 394.0.7 Personal Finance in the NT; and
Form ARF 394.0.8 Personal Finance in the ACT,
and the associated instructions (all of which are attached and form part of this reporting standard).
Purpose
Data collected in Forms ARF 394.0.1 to 394.0.8 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
This reporting standard applies to all authorised deposit-taking institutions (ADIs).
Information required
An ADI that is an Australian-owned bank, a foreign subsidiary bank or a branch of a foreign bank must complete each of Forms ARF 394.0.1 to 394.0.8 on a domestic books basis for each reporting period.
An ADI that is a building society, a credit union, a specialist credit card institution that engages in credit card issuing or Cairns Penny Savings & Loans Limited must complete each of Forms ARF 394.0.1 to 394.0.8 on a licensed ADI basis for each reporting period.
Form and method of submission
The information required by this reporting standard must be given to APRA in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application.
Note: the Direct to APRA application software may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, an ADI to which this reporting standard applies must provide the information required by this reporting standard for each calendar month.
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 10 business days after the end of the reporting period to which it 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.
Authorisation
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.
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.
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
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.
Note: for the avoidance of doubt, if an ADI was required to report under an old reporting standard, and the reporting documents were due before the date of revocation of the old reporting standard, the ADI is still required to provide the overdue reporting documents in accordance with the old reporting standard.
Interpretation - classifications of ADIs
In this reporting standard:
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.
Australian-owned bank means a locally incorporated ADI that assumes or uses the word ‘bank’ in relation to its banking business and is not a foreign subsidiary bank.
branch of a foreign bank means a ‘foreign ADI’ as defined in section 5 of the Banking Act 1959, but does not include a SCCI that is a foreign ADI.
building society means a locally incorporated ADI that assumes or uses the expression ‘building society’ in relation to its banking business.
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.
class of ADI means each of the following:
(i)Australian-owned bank;
(ii)foreign subsidiary bank;
(iii)branch of a foreign bank;
(iv)building society;
(v)credit union;
(vi)other ADI; and
(vii)specialist credit card institution.
credit union means a locally incorporated ADI that assumes or uses the expression ‘credit union’ in relation to its banking business and includes Cairns Penny Savings & Loans Limited.
due date means the relevant due date under paragraph 8 or, if applicable, paragraph 9.
foreign subsidiary bank means a locally incorporated ADI in which a bank that is not locally incorporated has a stake of more than 15 per cent.
locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or territory law.
other ADI means an ADI that is not an Australian-owned bank, a branch of a foreign bank, a building society, a credit union, a foreign subsidiary bank or a specialist credit card institution but does not include Cairns Penny Savings & Loans Limited.
reporting period means a period mentioned in paragraph 6 or, if applicable, paragraph 7.
specialist credit card institution means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to the activities of credit card acquiring and credit card issuing in any credit card scheme that was designated as a payment system under section 11 of the Payment Systems (Regulation) Act 1998 on 11 April 2001.
stake means a stake determined under the Financial Sector (Shareholdings) Act 1998, as if the only associates that were taken into account under paragraph (b) of subclause 10(1) of the Schedule to that Act were those set out in paragraphs (h), (j) and (l) of subclause 4(1).
Reporting Form ARF 394.0
Personal Finance
Instruction Guide
The purpose of this survey is to provide monthly statistics on the provision of finance to individuals for personal (non-business) use. The statistics are used by APRA for regulatory purposes, and may be provided to the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS) for policy and statistical purposes. Published aggregate statistics from this collection are used for research and policy formulation by economists, State and Federal Governments and the housing industry.
A separate form for personal finance in all eight states should be completed.
ARF 394.0.1 Personal Finance in NSW;
ARF 394.0.2 Personal Finance in VIC;
ARF 394.0.3 Personal Finance in QLD;
ARF 394.0.4 Personal Finance in SA;
ARF 394.0.5 Personal Finance in WA;
ARF 394.0.6 Personal Finance in TAS;
ARF 394.0.7 Personal Finance in NT; and
ARF 394.0.8 Personal Finance in ACT.
General directions and notes
Reporting entity
This form is to be completed by Australian-owned banks, foreign subsidiary banks and branches of foreign banks on a Domestic books basis.
The Domestic books of the Australian-owned banks, foreign subsidiary banks and branches of foreign banks relates to the Australian books of the Australian authorised deposit taking institution (ADI) and has the following scope:
is an unconsolidated report of the Australian licensed ADI's operations/ transactions that are booked inside Australia;
exclude offshore branches of the Australian licensed ADI from this reporting unit;
exclude offshore banking units based overseas from this reporting unit;
do not consolidate Australian and offshore controlled entities or associated entities that are not ADIs;
include Australian based offshore banking units of the licensed ADI; and
include transactions with non-residents recorded on Australian books.
This form should be completed by all Credit Unions, Cairns Penny Savings & Loans Limited, Building Societies and Specialist Credit Card Institutions (SCCIs) on a licensed ADI basis. SCCIs that operate as branches in Australia are required to complete this form for the Australian branch only.
Note: SCCIs that engage only in credit card acquiring activities 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 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[1] that it retains or acquires and such exposures are to be reported in Form ARF 120.0 Standardised – Securitisation or Forms ARF 120.1A to ARF 120.1C IRB – Securitisation (as appropriate). The RWA relating to such securitisation exposures must also be reported in Form ARF 110.0 Capital Adequacy (ARF 110.0).
[1] 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 elects to treat the securitised assets as on-balance sheet assets under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, 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 Form ARF 120.2 Securitisation – Supplementary Items.
Reporting period
The information provided in this form should be for the calendar month up to and including the last day of the reporting month. All ADIs should submit the completed form to APRA within 10 business days after the end of the relevant reporting month.
measurementUnit of
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:
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.
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.
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; and
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.
Basis of preparation
Unless otherwise specifically stated, information reported on this form should comply with Australian accounting standards.
Definitions
A separate form for personal finance in all eight states should be completed. Where the entity has no activity in any state, check the “nil form” box. The form requests details of new commitments to provide personal finance to individuals for personal (non-business) use. Only the Australian activities of the business should be included on the form. If exact figures are not available please provide careful estimates. Please note that the items listed under ‘Including’ and ‘Excluding’ are examples and should not be taken as a complete list of items to be included or excluded.
What is a “commitment”?
A commitment is a firm offer to provide finance which has been accepted by the client. A commitment generally exists once a loan application has been approved, and a loan contract or letter of offer has been issued to the borrower.
With the exception of unsecured loans for alterations and additions (Question 6) and unsecured loans for owner-occupied housing (Question 7), commitments are to be reported regardless of whether they are secured or unsecured and, if secured, regardless of the type of security.
Include:
new lending commitments which have also been cancelled during the month;
commitments to provide finance to your employees; and
commitments for revolving credit loans secured by mortgage (mortgage backed overdrafts) on residential properties where the stated purpose at application is as a personal line of credit (refer to III. Home Equity Loans - Guidelines).
Exclude:
commitments to non-residents;
commitments to secured loans for the construction or purchase of dwellings intended for owner occupation or for alterations and additions to owner-occupied dwellings, which should be reported on ARF 392.0 Housing Finance;
commitments to individuals for use in connection with a business carried on by them, which should be reported on ARF 391.0 Commercial Finance; and
commitments for revolving credit loans secured by mortgage where the primary purpose at application is for the purchase of owner-occupied residential property (refer to III. Home Equity Loans).
What is a ‘dwelling’?
A dwelling is a place of residence which is:
contained in a building which is an immobile structure;
private (i.e. not generally accessible to the public); and
self contained (i.e. includes bathing and cooking facilities).
Specific instructions
Part A: Commitments for fixed loans - by purpose
The purpose of the loan is that specified by the borrower. Multi-purpose loans should be split and each component reported in the appropriate purpose classification. Where this is not possible, the whole loan should be classified to the major purpose.
Fixed loans generally involve:
a commitment for a fixed period for a specific purpose; and
repayments over that fixed period which reduce the loan, but do not make further finance available.
Purchase of motor cars
Include:
cars, station wagons, 4WD and forward control passenger vehicles/vans.
Exclude:
trucks, buses, special vehicles, utilities, panel vans (include in Question 3); and
motor cycles/scooters (include in Question 2).
Purchase of other motor vehicles
Include:
trucks, buses, special vehicles, utilities and panel vans.
Exclude:
motor cycles/scooters (include in Question 2).
Unsecured loans for alterations and/or additions to dwellings
Include:
all structural and non-structural changes to dwellings (e.g. garages, carports, pergolas, re-roofing, re-cladding etc.).
Exclude:
repairs and maintenance, swimming pools, and other home improvements that do not involve building work (include in Question 13).
Debt consolidation
Include:
commitments where the principal purpose is to consolidate and pay out amounts owing by borrowers to third parties.
Exclude:
commitments for the principal purpose of refinancing existing personal loans (include in Question 11).
Refinancing
Include:
commitments for the principal purpose of refinancing existing personal loans.
Exclude:
commitments where the principal purpose is to consolidate and pay out amounts owing by borrowers to third parties (include in Question 9); and
refinancing of personal investment loans (include in Question 12).
Loans for personal investment purposes
a) Dwellings for rent/sale
Include:
only commitments for dwellings to be occupied by persons other than the owner.
b) Other personal investments
Include:
commitments for the purchase of shares and other investment assets.
c) Refinancing
Include:
refinancing of loans for personal investments, e.g. purchase of shares and other investment assets, purchase of dwellings for rent/resale.
Exclude:
refinancing of personal loans for the purposes listed in Question 1-10 and Question 13, these should be reported in Question 11.
Other
Include:
commitments for swimming pools and home improvements (other than alterations and additions), motor accessories and any other purpose not covered above.
Part B: New commitments for revolving credit loans
Revolving credit facilities involve a commitment for a credit or borrowing limit and where the extent of the borrowings used at any one time may be for any amount up to the authorised limit. Repayments (other than of charges and/or interest) reduce the borrowings thereby increasing the amount of unused credit available e.g. overdraft limits, secured revolving credit facilities (mortgage backed overdrafts), credit card facilities and other personal lines of credit.
New credit limits and increases to existing credit limits approved during the month
a) Secured
Include:
mortgage backed overdrafts where the primary purpose of the commitment at application is NOT owner-occupied residential property. (Refer to III. Home Equity Loans – Guidelines).
Exclude:
mortgage backed overdrafts where the primary purpose of the commitment at application is owner-occupied residential property. (Report on ARF 392.0). (Refer to III. Home Equity Loans – Guidelines).
Cancellations of and reductions in previously approved credit limits
Include:
the actual value of credit limits cancelled and the value by which existing credit limits were reduced during the month.
Exclude:
amounts used as balancing or adjustment items (such as adjustments between states). These should be reported in Question 19; and
repayments which reduce the used portion of the credit facility, but not the total credit available. These should be excluded from the form altogether.
Balancing item (+/-)
If the previous month’s ‘total credit limits available’ (Q16 last month) plus (+) ‘total new limits approved’ (Q15c) minus (-) ‘cancellations’ (Q18) does not equal the current month’s ‘total credit limits available’ (Q16), please provide the amount and reason for this discrepancy.
Part C: Comments
Please provide comments
on any of the information you have supplied on this form;
on any questions which caused problems; and
if you would like to suggest improvements to this form.
Home equity loans - guidelines
Introduction
The increasing use of home equity loan products by individual (household sector) borrowers as a source of funding has necessitated some additional clarity in how these products should be treated in reporting to ARF 392.0 and ARF 394.0 Personal Finance (ARF 394.0). Please contact APRA for further advice on these guidelines.
Home equity loans
A home equity loan is a secured revolving credit facility which is secured by the borrower's equity in the home. In effect, the assets of the borrower (in equity in the home) are freed up so as other activities may be funded.
A home equity loan may be taken to fund a range of activities, including the purchase of a property (for owner occupation), the refinancing of the borrower's existing home (as for all home loan refinancing, this would only be reported if the refinancing involved changing the lender), or any other activity - investment purchases (shares or property), household consumption spending (cars, boats, holidays) or working capital for a small business. A feature of home equity loans which causes reporting difficulties for lenders is that often the borrower intends to use the home equity loan for a combination of the purposes mentioned.
Reporting of home equity loans on ARF 392.0 and ARF 394.0
Attach one of two major (or primary) purposes to each home equity loan commitment- either "Housing" (for Owner Occupation) or "Other" (than housing for owner occupation).
Primary purpose "Housing" commitments to be reported under Question 10 (Part C) - Secured Revolving Home Loans - on ARF 392.0.
Primary purpose "Other" commitments to be reported as secured personal revolving credit (Question 15) on ARF 394.0, with all drawdowns, re-payments and re-borrowing of principal in subsequent months to be reflected in the value of Credit Used (Question 17).
Where it is not possible to isolate the Credit Used (Question 17) for ARF 394.0 on a sub-group of all home equity loan commitments, then some manipulation must be undertaken to ensure the reported value of Credit Used is conceptually consistent with the total value of Used and Unused Credit (Question 16), and previously reported values of new revolving credit commitments on ARF 394.0.
The intention of the table which forms Question 1a-1e on ARF 392.0 is to monitor the total "stock" of all commitments not advanced. New commitments to lend are added to the stock while advances of commitments and cancellations are removed from the stock. With a fixed term amortising loan, the commitment is either advanced when the finance is settled, or the commitment lapses and is cancelled. Where only part of the initial commitment is advanced, then it may be necessary to report a value advanced and a value cancelled, so that the (previously reported) commitment is wholly removed from the stock of all commitments not advanced. Some lenders may not cancel lapsed commitments until many months after the commitment is made. We prefer that lapsed commitments are reported as cancellations as regularly as possible. Once a commitment is cancelled or advanced, it plays no further role in the table in Questions 1a-1e of ARF 392.0.
The treatment of home equity loan commitments in Questions 1a-1e is problematic. Given that a home equity loan commitment will be reported for ARF 392.0 only if its primary purpose is the purchase of owner-occupied housing, it is reasonable to assume that the majority of the commitment will be advanced in a comparable timeframe as for a regular standard variable loan commitment. As for all new commitments, the new home equity loan commitment should be added to the stock of undrawn commitments (Question 1b). Any amount advanced (for the purchase of owner-occupied housing) in the same or subsequent months should be reported as an Advance (Question 1c); at the same time the balance of the commitment (if any) reported as a Cancellation (Question 1d). The home equity loan commitment (like all housing finance commitments) will take no further part in reporting to ARF 392.0.
Where it is impossible to identify the timing of the drawdown of a home equity loan for the purchase of owner-occupied housing, it is acceptable to assume that the entire value of the commitment is drawn down in the month of the commitment, so that the internal consistency of the Question 1 is preserved.
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