Financial Sector (Collection of Data) (reporting standard) determination No. 32 of 2014
Reporting Standard ARS 210 Liquidity
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Financial Sector (Collection of Data) Act 2001 section 13
Acts Interpretation Act 1901, subsection 33
Under paragraph 13(1)(a) 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.
On 20 November 2014, APRA made Financial Sector (Collection of Data) (reporting standard) determination No. 32 of 2014 (the instrument), which revokes Reporting Standard ARS 210.0 Liquidity made under Financial Sector (Collection of Data) (reporting standard) determination No. 2 of 2014 and determines a new Reporting Standard ARS 210.0 Liquidity (ARS 210.0).
The instrument commences on 1 January 2015.
- Background
APRA’s mandate is to ensure the safety and soundness of prudentially regulated financial institutions so that they can meet their financial promises to depositors, policyholders and fund members within a stable, efficient and competitive financial system. In response to the global financial crisis, the Basel Committee on Banking Supervision (Basel Committee) developed and released global liquidity measures for internationally active banks, known as Basel III liquidity. APRA incorporated these measures in Prudential Standard APS 210 Liquidity (APS 210). APS 210 includes one of the two Basel Committee global liquidity standards, the Liquidity Coverage Ratio (LCR).
2. Purpose and operation of the instrument
The purpose of the instrument is to revoke the existing ARS 210.0 and replace it with a new version of ARS 210.0 that introduces a new reporting form, Reporting Form ARF 210.5 Daily Liquidity Report (ARF 210.5). In addition, the new version of ARS 210.0 includes amendments to the instruction guides to four other reporting forms: Reporting Form ARF 210.1 Liquidity Coverage Ratio (ARF 210.1); Reporting Form ARF 210.2 Minimum Liquidity Holdings Ratio (ARF 210.2); Reporting Form ARF 210.3 Balance Sheet Maturity (ARF 210.3); and Reporting Form ARF 210.4 Balance Sheet Forecast (ARF 210.4).
ARF 210.5 is intended to play an important role in APRA’s ability to manage a liquidity crisis, by ensuring all authorised deposit-taking institutions (ADIs) are able to produce, on demand, key liquidity information in a consistent format. This is to ensure that APRA has immediate access to updated and comparable liquidity data, which will provide a view on liquidity for individual ADIs and, in aggregated form, across groups of ADIs. The daily liquidity report requirement forms part of APRA’s Basel III liquidity reporting framework.
The amendments to the instruction guides to the other reporting forms mostly arise from changes to a derivatives definition in APS 210 and other minor clarifications.
ARS 210.0 collects information from ADIs and the non-operating holding company (NOHC) of an ADI in certain circumstances. This information is used by APRA for the purpose of prudential supervision, including assessing compliance with APS 210.
3. Consultation
APRA undertook consultation on the proposed amendments to the liquidity reporting requirements. APRA issued a letter to all ADIs ‘Changes to liquidity reporting arrangements’ in April 2014 which invited written submissions on the daily liquidity report proposals. Further, APRA released for consultation proposed amended reporting instructions in its letter to industry ‘Proposed amendments to liquidity standard and reporting instructions’ issued in September 2014. This letter also invited written submissions. In November 2014, APRA released a response ‘Liquidity risk – recent consultations’ to submissions regarding the proposed amendments to the reporting instructions and the daily liquidity report proposals.
4. Regulation Impact Statement
The reporting requirements for APRA’s revised liquidity framework, including the daily liquidity report, were addressed in the LCR Regulatory Impact Statement (LCR RIS) (Office of Best Practice Regulation (OBPR) ID: 2012/14531)). APRA noted in the RIS that ADIs will be subject to additional liquidity disclosure requirements and a requirement to provide crisis liquidity reporting to APRA, upon request.
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.
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. 32 of 2014
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).
Overview of the Legislative Instrument
The instrument revokes Reporting Standard ARS 210.0 Liquidity made under Financial Sector (Collection of Data) (reporting standard) determination No. 2 of 2014 and determines a new Reporting Standard ARS 210.0 Liquidity (ARS 210.0). ARS 210.0 aims to ensure that ADIs provide information to APRA to allow APRA to assess compliance with Prudential Standard APS 210 Liquidity.
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
The Legislative Instrument is compatible with human rights as it does not raise any human rights issues.