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, which empowers the Australian Prudential Regulation Authority (APRA) to establish reporting standards for financial sector entities. The determinations were introduced to simplify prudential reporting requirements and to align the reporting of financial and accounting data more closely with Australian equivalents to International Financial Reporting Standards (AIFRS). The objective was to enhance APRA’s analysis of the financial performance of general insurers. The determinations include eleven new reporting standards and associated reporting forms, and they came into effect on the date of registration on the Federal Register of Legal Instruments. APRA undertook extensive consultation with the industry from December 2009 to February 2010, releasing a discussion paper, draft standards, and a quantitative impact study, and receiving generally supportive feedback from industry stakeholders.
Scope and Application
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 applies to entities within Australia's financial sector, specifically general insurers, as outlined under the Financial Sector (Collection of Data) Act 2001 (FSCOD Act). The Act empowers the Australian Prudential Regulation Authority (APRA) to determine reporting standards concerning financial or accounting data and other relevant business information. These standards, which have been introduced to align with the Australian equivalents to International Financial Reporting Standards (AIFRS), are intended to streamline prudential reporting and improve APRA's analysis of insurers' financial performance. The new standards, which became effective from the date of their registration on the Federal Register of Legal Instruments, replace previous standards and introduce new ones such as GRS 110.0 Minimum Capital Requirement, GRS 120.0 Determination of Capital Base, and GRS 300.0 Statement of Financial Position, among others. Additionally, the determination revokes the previous Reporting Standard GRS 320.0 (2008) Reconciliation of Annual Disclosure, which was effective from 3 November 2008. The new standards necessitate the submission of quarterly and annual data, beginning with the first reporting period after their registration, and include transitional arrangements to facilitate the comparison and reconciliation of key reporting items between the old and new frameworks.
Key Provisions
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 introduce new and amended reporting standards for financial sector entities, specifically general insurers, under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act) (section 13(1)(a)). These standards pertain to the reporting of financial and accounting data, aligning the balance sheet and income statement with Australian equivalents to International Financial Reporting Standards (AIFRS) to enhance the analysis of the financial performance of general insurers. These new standards, including GRS 110.0, GRS 120.0, GRS 140, GRS 160.0, GRS 170.1, GRS 210, GRS 300.0, GRS 301.0, GRS 310, and GRS 400, replace existing reporting standards and become effective from the date of their registration on the Federal Register of Legal Instruments (section 15). Additionally, the GRS 320.0 (2008) Reconciliation of Annual Disclosure has been revoked and will no longer be required.
The primary obligation imposed by these determinations is for general insurers to comply with the specified reporting standards when submitting their financial data to the Australian Prudential Regulation Authority (APRA). This includes the submission of additional reconciling data items for the first quarterly and annual returns under the new standards, as outlined in GRS 900.0 Transitional Arrangements 2010. These requirements are designed to ensure a smooth transition and to enable APRA to compare and reconcile key reporting items under the prior and new reporting basis.
Breach of the reporting standards outlined in these determinations may result in various civil and criminal consequences. Although the specific penalties are not detailed within the explanatory statement, under the FCSOD Act, failure to comply with the reporting standards can lead to civil penalties, including fines. In more severe cases, non-compliance could potentially result in criminal penalties, particularly if the breach is deemed to be deliberate or negligent. The exact penalties would be determined in accordance with the provisions of the FCSOD Act and other relevant legislation.