Financial Sector (Collection of Data) (reporting standard) determination
Nos. 2 to 13 of 2010
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Financial Sector (Collection of Data) Act 2001, paragraph 13(1)(a) and section 15
Acts Interpretation Act 1901, subsection 33(3)
Under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the FCSOD Act), APRA may, by writing, determine reporting standards with which financial sector entities must comply. Such standards relate to reporting financial or accounting data and other information regarding the business or activities of the entities. Section 15 of the FSCOD Act gives APRA power to make a formal declaration of the date when reporting standards begin to apply. Subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to issue an instrument the power shall, unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to revoke any such instrument.
1. Background
Since 2009, APRA has been in consultation with industry on proposals to simplify prudential reporting to APRA and for minor refinements to the reporting requirements to enhance APRA’s analysis of the financial performance of general insurers. APRA’s key proposal was the alignment of the balance sheet and income statement with the Australian equivalents to International Financial Reporting Standards (AIFRS).
2. Purpose of the instruments
The changes to the prudential reporting to APRA required the introduction of new and amended reporting requirements. The purpose of making the instruments is to replace existing reporting standards with reporting standards that implement APRA’s proposals.
Accordingly Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 12 of 2010 make the following reporting standards effective on and from the date of registration on the Federal Register of Legal Instruments:
- Reporting Standard GRS 110.0 Minimum Capital Requirement;
- Reporting Standard GRS 120.0 Determination of Capital Base;
- Reporting Standard GRS 140 Investments;
- Reporting Standard GRS 160.0 Derivative Activity and Risk Charge;
- Reporting Standard GRS 170.1 Maximum Event Retention and Risk Charge for Lenders Mortgage Insurers;
- Reporting Standard GRS 210 Insurance Risk Charge;
- Reporting Standard GRS 300.0 Statement of Financial Position;
- Reporting Standard GRS 301.0 Reinsurance Assets and Risk Charge;
- Reporting Standard GRS 310 Revenue, Expenses and Financial Performance;
- Reporting Standard GRS 400 Supplementary Reporting Information;
- Reporting Standard GRS 900.0 Transitional Arrangements 2010.
In addition, Reporting Standard GRS 320.0 (2008) Reconciliation of Annual Disclosure which came into effect on 3 November 2008 (determination No. 83 of 2008) is no longer required and has been revoked by determination No. 13 of 2010.
3. Operation of the instruments
Eleven new reporting standards and associated reporting forms will be issued under the FSCOD Act. These new reporting standards enable the reporting requirements of the revised prudential framework to take effect.
The collection of quarterly and annual data under the new general insurance prudential reporting requirements will commence for the first reporting period ending on or after the date of registration on the Federal Register of Legal Instruments.
Insurers will be required to report additional reconciling data items for the first submission of the quarterly and annual returns in accordance with Reporting Standard GRS 900.0 Transitional Arrangements 2010 (GRS 900.0). This will enable APRA to compare and reconcile key reporting items under the prior and new reporting basis.
4. Consultation
Section 17 of the Legislative Instruments Act 2003 requires consultation when a rule-maker makes a legislative instrument. APRA undertook consultation with the general insurance industry on the proposed changes to the current reporting framework from 3 December 2009 to 12 February 2010 . The consultation process involved the release of a discussion paper outlining the proposed changes, draft prudential standards, draft reporting forms and instructions, along with a quantitative impact study. APRA also met with numerous parties over the consultation period. APRA received 11 written responses and 45 completed quantitative impact studies. Submissions were generally supportive of the proposals. A response paper was issued by APRA on 23 July 2010, outlining the outcomes of the consultation process.
Overview
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 were enacted under the Financial Sector (Collection of Data) Act 2001 to streamline the prudential reporting requirements for general insurers. These instruments were introduced to address the need for simplification and refinement of the reporting framework to enhance the Australian Prudential Regulation Authority's (APRA) analysis of the financial performance of general insurers. The primary aim was to align the balance sheet and income statement with Australian equivalents to International Financial Reporting Standards (AIFRS). This was achieved by replacing existing reporting standards with new ones that reflect APRA's proposals, thus facilitating a more effective and efficient reporting process. The enactment of these determinations was subject to consultation with the industry, and the feedback received was largely supportive of the changes proposed.
Scope and Application
The Financial Sector (Collection of Data) (reporting standard) determinations Nos. 2 to 13 of 2010, made under the Financial Sector (Collection of Data) Act 2001, apply to entities within the financial sector, particularly general insurers, and set out specific reporting standards for the collection and submission of financial and accounting data to the Australian Prudential Regulation Authority (APRA). These determinations align the reporting requirements with the Australian equivalents to International Financial Reporting Standards (AIFRS), aiming to enhance APRA's analysis of the financial performance of insurers. The standards cover various aspects such as capital requirements, investment activities, and financial position reporting, among others. The reporting standards come into effect from the date of their registration on the Federal Register of Legal Instruments, and insurers must begin complying with these new standards from their first reporting period ending on or after this date. This legislative instrument replaces and revokes certain previous reporting standards, ensuring a streamlined and updated prudential reporting framework.
Key Provisions
The main operative sections of the Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 establish the new reporting standards for financial sector entities under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act). These standards, referenced in the explanatory statement, are designed to simplify prudential reporting to the Australian Prudential Regulation Authority (APRA) and enhance the analysis of the financial performance of general insurers. Under section 13(1)(a) of the FCSOD Act, APRA has the authority to determine reporting standards, which include financial, accounting data, and other information related to the business or activities of the entities. The new standards, which are effective from the date of registration on the Federal Register of Legal Instruments, cover areas such as minimum capital requirements, capital base determination, investments, and financial position statements, among others. Section 15 of the FCSOD Act allows APRA to formally declare the date when these reporting standards come into effect.
The obligations imposed by the Act require financial sector entities to adhere to the newly established reporting standards. These standards necessitate the reporting of specific financial and accounting data, along with other relevant information regarding their business activities. Insurers, in particular, must submit additional reconciling data items for their first quarterly and annual returns to facilitate APRA’s comparison and reconciliation of key reporting items under the prior and new reporting frameworks. This requirement is detailed in Reporting Standard GRS 900.0 Transitional Arrangements 2010 (GRS 900.0). Compliance with these standards is crucial for entities to ensure that their reporting aligns with the regulatory expectations set forth by APRA.
Breaches of the new reporting standards may result in various consequences, including administrative or legal actions. While the specific penalties for non-compliance are not detailed in the explanatory statement, it is reasonable to infer that penalties could include fines, legal action, or other enforcement measures under the relevant legislation. Additionally, entities failing to comply with the reporting requirements may face scrutiny from APRA, which could lead to further regulatory actions or interventions. The penalties for non-compliance are intended to ensure that financial sector entities adhere to the prescribed reporting standards to maintain regulatory compliance and facilitate effective oversight by APRA.