Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2019
 

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Financial Sector (Collection of Data) Act 2001(the Act)

Under paragraph 13(1)(a) of the 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.  Subsection 15(1) of the Act provides that APRA may declare a day on and after which the reporting standards are to apply.

On 4 June 2019, APRA made Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2019 which determines a new Reporting Standard RRS 710.0 ABS/RBA Audit Requirements for Registered Financial Corporations – EFS collection (RRS 710.0).

The instrument commences on 1 July 2019.

1. Background

The economic and financial statistics (EFS) collection – previously the Domestic Books collection – is a series of reporting requirements administered on behalf of the Australian Bureau of Statistics (ABS) and the Reserve Bank of Australia (RBA) (collectively, the agencies) by APRA in its role as national statistical agency for the financial sector. The collection focuses on the Australian (domestic) operations and activities of authorised deposit-taking institutions (ADIs) and Registered Financial Corporations (RFCs).

The data collected from ADIs and RFCs in the EFS data collection are used by the ABS and the RBA to compile and publish key macroeconomic indicators for Australia and are also used for analysis and policy purposes by the RBA. Data collected on the EFS forms are also used by APRA for prudential supervision and other purposes. Aggregated data are used by other economic policy makers and to meet Australia’s international reporting obligations.

The EFS data are therefore a vital input for measuring and assessing both activity and risks in the financial sector and for the Australian economy more broadly. The data are also an input to global assessments of economic and financial activity and risks. The provision of relevant, timely and high quality EFS data will ensure that policy decisions are made using the best available information.

The EFS forms on which APRA collects data on behalf of the ABS and the RBA had not been comprehensively reviewed or materially updated since the forms were introduced in the early 2000s. Over time, the number and volume of informal requests and surveys grew as new priority areas emerged. At the same time, some data items ceased to a priority for the ABS and RBA. The need to modernise was given further impetus by frequent data resubmissions, some of which were of sufficient magnitude and importance to complicate the analysis of significant policy issues.

Modernising the EFS collection ensures that the data collected meet the needs of the ABS and RBA while not imposing unnecessary burden on reporting institutions. It has also allowed the ABS and RBA to improve the quality of the instructions to assist reporting institutions submit data that are fit for purpose.

2.      Purpose of the instruments

The purpose of the instruments is to determine RRS 710.0, which establishes requirements for a RFC to ensure that APRA, the RBA and the ABS have access to the provision of independent advice on the information and internal controls of RFCs’ EFS data.

The reporting standard incorporates by reference certain provisions of Acts and Reporting Standards. All of these references are references to the instruments as they exist from time to time. These instruments are available on the Federal Register of Legislation at www.legislation.gov.au.

There are a number of powers that may be exercised by APRA in RRS 710.0 which involve an element of discretion and which may impact the interests of the financial sector entity to which the reporting standard applies. All of these powers are examples of APRA varying the reporting standard for a particular financial sector entity. Such decisions fall within the definition of “reviewable decision” in section 31 of the Act.  As a consequence, a person affected by the decision can seek independent review by the Administrative Appeals Tribunal under section 25D of the Act.

3.      Consultation

Before commencing formal consultation APRA and the agencies undertook extensive informal consultation with the larger reporting institutions to ensure that unnecessary reporting burden was removed while ensuring that the agencies’ data requirements were met. As a result of the informal consultation the agencies produced a data quality standard and a reporting concepts guidance document to accompany the EFS reporting forms.

In January 2017, APRA, the ABS and the RBA commenced formal consultation on the modernised EFS collection. APRA and the agencies released a discussion paper EFS Modernisation January 2017, along with draft versions of 23 reporting standards, a data quality guidance document and reporting guidance for the EFS collection. APRA received 29 submissions in response to its consultation.

A number of submissions raised concerns on the lack of clarity of internded roles, responsibilities and activities related to data quality for the EFS collection, and the cost of audit.

In August 2017 APRA and the agencies released their response to submissions comprising a Response paper: EFS modernisation August 2017 clarifying and outlining changes to the EFS collection in a number of areas following consideration of the issues raised in submissions, 20 reporting standards, a definitions standard and a concepts guide.

The August 2017 response to submissions also included a revised data quality framework for further consultation. 11 submissions from reporting entities, auditors and an industry association were received. Most feedback related to the data quality benchmarks to be applied to the EFS collection and the relationship between the proposed framework and existing assurance requirements under APS 310 Audit and Related Matters. Submissions also sought clarification about the purpose of the benchmarks and how they should be applied.

In March 2018 APRA and the agencies released a response to submissions on the EFS collection data quality framework. The package included a response paper as well as an audit standard for RFCs and a reporting practice guide outlining data quality expectations.

Changes in response to feedback included reducing the number of data items to which benchmarks are applied by approximately 80 per cent, and providing clarity on the application of the benchmarks by auditors when determining materiality.

4.      Regulation Impact Statement

The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required for this legislative instrument.

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) determinations No. 22 of 2019

This legislative instruments 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 instrument is to determine Reporting Standard RRS 710.0 ABS/RBA Audit Requirements for Registered Financial Corporations – EFS collection (RRS 710.0).

RRS 710.0 sets out requirements for a Registered Financial Corporations (RFCs) to ensure that APRA, the RBA and the ABS have access to the provision of independent advice on the information and internal controls of RFCs’ EFS data.

Human rights implications

APRA has assessed the 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 instrument is compatible with human rights.

Conclusion

This legislative instrument is compatible with human rights as it does not raise any human rights issues.