Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2024
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Financial Sector (Collection of Data) Act 2001, sections 13 and 15
Acts Interpretation Act 1901, section 33
Under subsection 13(1) of the Financial Sector (Collection of Data) Act 2001 (the Act), APRA has the power to determine reporting standards, in writing, 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. 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.
Subsection 15(1) of the Act provides that APRA may declare a day on and after which the reporting standards are to apply.
On 5 September 2024, APRA made:
- Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2024 which:
- revokes Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (ARS 113.0) made under Financial Sector (Collection of Data) (reporting standard) determination No. 50 of 2023; and
- determines a new version of ARS 113.0.
The instrument commences on the day after it is registered on the Federal Register of Legislation.
1. Background
APRA is the prudential regulator for banking, insurance and superannuation entities, and collects financial sector data for its own uses and on behalf of the Reserve Bank of Australia and the Australian Bureau of Statistics.
ARS 113.0 sets out the requirements for authorised deposit-taking institutions (ADIs) to report information to APRA relating to their exposures that are subject to calculations using the internal ratings-based approach to credit risk. It states the specific data items ADIs need to submit, provides definitions and instructions on how to measure and report these items, and states timelines and quality requirements for providing the data to APRA.
APRA implemented an updated capital framework for ADIs effective 1 January 2023. In December 2023, APRA released for consultation proposed minor updates to the ADI capital framework. The aim of these minor updates was to address specific implementation issues raised by industry in applying the new capital framework in practice. Following a three-month consultation period, APRA released a response to submissions on 26 June 2024.
2. Purpose and operation of the instrument
The purpose of the instrument is to revoke the existing ARS 113.0 and replace it with a new version.
The new version of ARS 113.0 will ensure that APRA’s reporting framework aligns with its updated prudential framework and provides ADIs with clarity for reporting. This will allow APRA to supervise ADIs’ compliance against the updated capital requirements.
The new reporting standard applies to reporting periods ending on or after 30 September 2024.
Explanation of each provision in the instrument
Authority – paragraph 1
This paragraph outlines APRA’s power to determine reporting standards that are required to be complied with by financial sector entities under paragraph 13(1)(a) of the Act.
Purpose – paragraph 2
This paragraph explains the purpose of APRA’s collection of information under the reporting standard. Information collected under this reporting standard will be used by APRA for the purpose of prudential supervision including assessing compliance with capital standards. It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.
Application and commencement – paragraphs 3 - 5
This provision states which financial sector entities must comply with the reporting standard under section 13 of the Act, and when the reporting standard begins to apply to these financial sector entities as provided for in section 15 of the Act.
Information required – paragraphs 6 and 7
These provisions state what information financial sector entities must provide to APRA for each reporting period as permitted by paragraph 13(2)(b) of the Act.
Method of submission – paragraph 8
This provision specifies how information required by the reporting standard must be given to APRA as permitted by paragraph 13(2)(e) of the Act.
Reporting periods and due dates – paragraphs 9-12
Paragraphs 13(2)(d)-(f) of the Act permits reporting standards determined by APRA to include matters related to the times as at which, or the periods to which, the information in reporting documents is to relate, the giving of reporting documents to APRA, and when they should be provided, and the discretion of APRA, in particular cases, to vary reporting standards, including, but not limited to, the discretion to vary when entities are to provide documents. Paragraph 13(2)(bb) of the Act permits reporting standards determined by APRA to include matters related to the auditing of reporting documents.
Paragraphs 9-12 rely on these provisions. Paragraph 9 states that ADIs are to provide the information required by this reporting standard in respect of each quarter based on the ADI’s financial year (within the meaning of the Corporations Act 2001). Paragraph 10 provides for APRA to vary the reporting periods mentioned in paragraph 9 in writing, if, having regard to the particular circumstances of an ADI and other matters, APRA considers it necessary or desirable to obtain information at a different frequency than stated in paragraph 9. Paragraph 11 specifies the due dates for provision of information to APRA – within 35 calendar days after the end of the relevant reporting period. Paragraph 12 states that APRA may grant an extension of a due date in paragraph 11 in writing.
Quality control – paragraphs 13-14
Paragraphs 13-14 state that information provided under this reporting standard (except for the information required under paragraph 7) must be the product of and subject to systems, processes and controls developed by the entity for the internal review and authorisation of that information and subject to review and testing by the ADI’s external auditor.
Authorisation – paragraph 15
Paragraph 15 states how information provided to APRA should be authenticated.
Variation – paragraph 16
Paragraph 13(2)(f) of the Act permits reporting standards determined by APRA to include discretions for APRA, in particular cases, to vary the reporting standards.
Paragraph 16 relies on this provision and states that APRA may, by written notice to the ADI, vary the reporting requirements of this reporting standard in relation to that ADI.
Transition – paragraph 17
Paragraphs 13(2)(d)-(e) of the Act provide for APRA to include matters relating to times and periods to which information in reporting documents is to relate, the provision of documents to APRA, and the time periods for provision of these documents to APRA. Paragraph 17 clarifies that financial sector entities must continue to report data under the reporting standard revoked in the determination making this reporting standard for reporting periods that ended before the new reporting standard begins to apply to reporting periods ending on or after 30 September 2024.
Interpretation – paragraphs 18-19
Paragraph 18 provides definitions of common terms used throughout this reporting standard. Paragraph 19 states that 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.
General instructions
The general instructions contain details on the data to be reported to APRA under this reporting standard. Information in the general instructions applies to all data items in this reporting standard.
Specific instructions
The specific instructions list the specific data items that must be reported to APRA and how financial sector entities should determine these items.
Documents incorporated by reference
Under paragraph 14(1)(a) of the Legislation Act 2003, the standard incorporates by reference as in force from time to time:
- Acts of Parliament;
- Prudential Standards determined by APRA under section 11AF of the Banking Act 1959;
- Reporting Standards determined by APRA under subsection 13(1) of the Act; and
- Australian Accounting Standards determined by the Australian Accounting Standards Board under section 334 of the Corporations Act 2001 (Cth).
These documents may be freely obtained at www.legislation.gov.au (all documents listed above except for Australian Accounting Standards), and https://www.aasb.gov.au/pronouncements/accounting-standards/ (Australian Accounting Standards).
Under section 14(1)(b) of the Legislation Act, the reporting standard incorporates the following documents as existing at the commencement of the reporting standard:
- Prudential Practice Guide APG 112 Standardised Approach to Credit Risk, which may be freely obtained at https://www.apra.gov.au/industries/1/standards.
- Prudential Practice Guide APG 113 Internal Ratings-based Approach to Credit Risk, which may be freely obtained at https://www.apra.gov.au/industries/1/standards.
Exercise of discretion by APRA
There are a number of powers that may be exercised by APRA in reporting standards that involve an element of discretion, and which may impact the interests of the ADIs to which the reporting standards apply. These powers include changing a reporting period or due date for an ADI to provide information required by each of the instruments, and varying the reporting requirements of the reporting standard in relation to an ADI by written notice to that ADI.
The need to apply discretion is driven by entity specific issues and circumstances which are not adequately addressed by the generally applicable provisions of the reporting standards.
APRA will exercise the power to vary the reporting requirements in relation to an ADI if it is satisfied that this will achieve a better reporting or prudential outcome than if it remained in its original form. A change to a reporting period or due date might be determined on APRA’s initiative taking into account APRA’s assessment of whether existing data will be sufficient for APRA’s prudential supervision purposes, or whether the APRA will have the required data to assess an entity’s capital adequacy by a particular date. Alternatively, a change to a reporting period or due date might be considered by APRA at the request of an ADI, where the ADI is able to demonstrate that it would not be appropriate or feasible to provide data for a particular reporting period or by a particular date.
APRA considers a wide range of factors when exercising its discretion under reporting standards, including the considerations set out in the Act and the Australian Prudential Regulation Authority Act 1998. Other considerations include limiting regulatory burden, or correcting errors or inconsistencies in the reporting standards.
The exercise of APRA’s powers is governed by a robust decision-making framework which is documented in APRA’s internal policies. This framework supports APRA in fulfilling its mandate by limiting decision-making to those senior APRA officers with the appropriate experience and skill to exercise prudential judgement. The framework also requires decision makers to seek advice from internal technical experts.
The power is also exercised following discussion with the relevant ADI about its appropriateness and the impact it may have on the entity and users of the data collected.
Review of decisions
Decisions made by APRA exercising the powers in reporting standards are not subject to merits review. APRA considers decisions made by APRA exercising discretions under its reporting standards should not be subject to merits review as they are financial decisions with a significant public interest element.
APRA’s reporting standards collect financial data from regulated entities. This data contains critical indicators of a regulated entity’s financial wellbeing. APRA relies heavily on this financial data to inform its supervisory actions towards its regulated entities. Without timely and complete data, APRA may miss indicators that an entity is taking on imprudent risk or is in distress. APRA’s supervisory decisions may be jeopardised if its receipt of data is unreliable due to entities seeking merits review under its reporting standards.
3. Consultation
APRA undertook public consultation on minor updates to the capital framework for ADIs, including a draft of this Reporting Standard from December 2023 to March 2024. The final round of consultation was completed on 26 June 2024, when APRA released finalised changes to the prudential and reporting framework for ADIs, including finalised reporting standards[1].
Submissions were received from reporting ADIs and industry bodies. APRA incorporated feedback received into the final versions of the reporting standards, including aligning with updates to the capital framework in response to industry feedback.
APRA is satisfied the consultation was appropriate and reasonably practicable.
4. Regulation Impact Statement
The Office of Impact Analysis confirmed that a Regulation Impact Statement was not required.
5. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.
ATTACHMENT A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2024
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instrument listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).
Overview of the Legislative Instrument
The purpose of the Legislative Instrument is to revoke Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (ARS 113.0) made under Financial Sector (Collection of Data) (reporting standard) determination No. 50 of 2023 and replace it with a new version of ARS 113.0.
ARS 113.0 sets out requirements for authorised deposit-taking institutions (ADIs) to report their exposures that are subject to calculations using the internal ratings-based approach to credit risk. ADIs are bodies corporate that have been granted the authority, under the Banking Act 1959, to carry on banking business in Australia.
Human rights implications
APRA has assessed the Legislative Instrument and is of the view that it does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the HRPS Act. Accordingly, in APRA's assessment, the Legislative Instrument is compatible with human rights.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
[1] Please see: https://www.apra.gov.au/adi-capital-reforms-minor-updates.