Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023

Administered by Department of the Treasury

Legislation au F2023L00404 Not in force Legislative Instrument

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Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023

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 31 March 2023, APRA made Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023 which:

(1)   revokes Reporting Standard ARS 112.1 Standardised Credit Risk – On-balance Sheet Assets made under Financial Sector (Collection of Data) (reporting standard) determination No. 1 of 2022;

(2)   revokes Reporting Standard ARS 112.2 Standardised Credit Risk – Off-balance Sheet Exposures made under Financial Sector (Collection of Data) (reporting standard) determination No. 23 of 2019; and

(3)   determines a new Reporting Standard ARS 112.0 Capital Adequacy: Standardised Approach to Credit Risk (ARS 112.0).

The instrument commences upon registration on the Federal Register of Legislation.

1. 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. APRA carries out this mandate through a prudential framework and is empowered under the Banking Act 1959 to issue prudential standards that set out specific prudential requirements with which authorised deposit taking institutions (ADIs) must comply.

A key component of APRA’s prudential framework is the suite of prudential standards that impose regulatory capital requirements on ADIs for the purpose of ensuring ADIs hold sufficient capital to address the risks associated with their operations.

In July 2017, APRA announced its intention to review the long-standing requirements in the ADI capital framework. After multiple rounds of consultations, APRA released final capital adequacy and credit risk capital requirements for ADIs in November 2021, contained in Prudential Standard APS 110 Capital Adequacy (APS 110), Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) and Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113).

The ADI capital reforms will embed the industry’s ‘unquestionably strong’ capital position and improve the flexibility of the framework to respond during periods of stress. To support the capital reforms, APRA has created three updated ADI capital reporting standards:

  • Reporting Standard ARS 110.0 Capital Adequacy (ARS 110.0);
  • Reporting Standard ARS 112.0 Capital Adequacy: Standardised Approach to Credit Risk (ARS 112.0); and
  • Reporting Standard ARS 113.0 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (ARS 113.0).

These new reporting standards ensure that APRA’s reporting framework aligns with APRA’s updated ADI capital framework.

In addition to the three ADI capital reporting standards, APRA has also consulted on and created updated ADI reporting standards that incorporate necessary consequential changes as a result of the new ADI capital framework.

These reporting standards are:

  • Reporting Standard ARS 120.1 Securitisation — Regulatory Capital (ARS 120.1);
  • Reporting Standard ARS 120.2 Securitisation — Supplementary Items (ARS 120.2);
  • Reporting Standard ARS 180.0 Counterparty Credit Risk (ARS 180.0);
  • Reporting Standard ARS 210.0 Liquidity (ARS 210.0);
  • Reporting Standard ARS 221.0 Large Exposures (ARS 221.0); and
  • Reporting Standard ARS 223.0 Residential Mortgage Lending (ARS 223.0).

APRA consulted on changes to these reporting standards that were designed to ensure consistency with the new ADI capital reforms. Amendments to the reporting standards were also proposed to update cross referencing and to provide clarification requested by industry.

2. Purpose and operation of the instrument

The purpose of the instrument is to revoke the existing ADI capital reporting standard and replace it with a new version.

The new reporting standard will ensure that APRA’s reporting framework aligns with its prudential framework. It will also ensure that APRA will continue to receive data that is necessary to supervise ADIs’ compliance against the new capital adequacy and credit risk capital requirements.

The reporting standard requires reporting for reporting periods that occurred prior to the commencement of the reporting standard. The reporting standard is not retrospective in operation as the obligation to report on these reporting periods commences from, and not prior to, the commencement of the reporting standard.

Where this standard refers to an Act, Regulation or Prudential Standard, this is a reference to the document as it exists from time to time, and which is 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 reporting standards that involve an element of discretion and which may impact the interests of the ADIs to which the reporting standards apply. These decisions include APRA changing a reporting period or due date for an ADI to provide information required by each of the instruments or determining, in writing, that an individual ADI of one class of ADI is to be treated, for the purposes of a Reporting Standard, as though it were an ADI of another class of ADI. Decisions made by APRA exercising those powers are not subject to merits review. These discretions have not been amended and are consistent with discretions included in the reporting standards being revoked by the instruments.

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, including capital adequacy. 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 ADI 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 proposed updates to ADI capital reporting standards from April 2022 to October 2022 as part of the consultation on updates to the ADI capital reporting and prudential framework.[1] Further details on the consultation from April to October 2022 is provided below.

On 7 April 2022, APRA commenced consultation on draft interim versions of ARS 110.0, ARS 112.0, and ARS 113.0 that would incorporate updates to APRA’s ADI capital framework. APRA also commenced consultation on consequential amendments to ARS 180.0, ARS 221.0 and ARS 223.0 due to the new capital framework as part of the same consultation[2].

On 26 July 2022, APRA initiated consultation on minor consequential amendments to ARS 110.0, ARS 113.0, ARS 120.1, ARS 120.2, ARS 180.0, and ARS 210.0. These amendments were to support proposed updates to APRA’s prudential framework that would ensure consistency with the new ADI capital reforms. Amendments to the reporting standards were also proposed to update cross referencing and to provide clarification requested by industry.

Submissions on both stages of consultation were received from reporting ADIs, industry bodies, and regulatory technology providers. APRA incorporated feedback received into the final versions of the reporting standards, including adding clarification to reporting instructions and forms as requested by industry.

APRA released a response to submissions to its April 2022 consultation on 10 August 2022. The response included a letter to ADIs and updated versions of ARS 110.0, ARS 112.0, ARS 113.0, ARS 180.0, ARS 221.0, and ARS 223.0[3]. In response to feedback on ARS 110.0, ARS 112.0, and ARS 113.0, APRA clarified the reporting treatment for exposures in New Zealand subsidiaries in these reporting standards.

On 31 October 2022 APRA released a response to submissions on the July 2022 consultation [4].  ARS 110.0 and ARS 113.0 contained minor updates to provide clarifications and correct typographical errors. ARS 120.1, ARS 120.2, and ARS 180.0 were updated to reflect the treatment of exposures to New Zealand. ARS 210.0 contained minor changes for consequential amendments to the Net Stable Funding Ratio requirements. 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. 49 of 2023

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 determine a new Reporting Standard ARS 112.0 Capital Adequacy: Standardised Approach to Credit Risk that incorporates updates to APRA’s capital adequacy and credit risk capital requirements and minor consequential updates required as a result of the new capital requirements.

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 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] Refer to: Revisions to the capital framework for authorised deposit-taking institutions | APRA

[2] Refer to: Revisions to the ADI capital framework: Interim reporting standards for consultation and parallel run expectations | APRA

[3] Refer to: Credit risk reporting – Response to submissons | APRA

[4] Refer to: ADI capital reforms: Consequential amendments | APRA

Overview

The Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023 was enacted by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001. The Act empowers APRA to establish reporting standards for financial sector entities, ensuring the collection of critical financial and accounting data. This determination addresses the need for updated reporting standards that align with APRA's revised capital adequacy and credit risk requirements for authorised deposit-taking institutions (ADIs). By revoking outdated reporting standards and introducing new ones, the instrument ensures that APRA receives accurate and relevant data to monitor and supervise ADIs effectively. The policy objective of this determination is to enhance the stability and resilience of Australia's financial sector by ensuring that ADIs maintain adequate capital to manage risks. This is achieved by updating the reporting standards to reflect the latest prudential requirements, thereby improving the quality of data available to APRA. The new Reporting Standard ARS 112.0 Capital Adequacy: Standardised Approach to Credit Risk is designed to support APRA's supervisory activities and ensure that ADIs comply with the updated capital adequacy and credit risk frameworks.

Scope and Application

The Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023, issued by the Australian Prudential Regulation Authority (APRA), applies specifically to authorised deposit-taking institutions (ADIs) within the Australian financial sector. These entities are mandated to comply with the new reporting standards concerning the collection and submission of financial and accounting data to APRA. This data pertains to capital adequacy and credit risk, ensuring that ADIs meet the updated prudential requirements established by APRA. The instrument revokes the previous reporting standards ARS 112.1 and ARS 112.2, replacing them with the new reporting standard ARS 112.0, which aligns with the updated capital adequacy and credit risk capital requirements outlined in the Prudential Standards APS 110, APS 112, and APS 113. The new standard will ensure APRA continues to receive the necessary data to supervise ADIs effectively, thereby maintaining financial stability and safeguarding the interests of depositors, policyholders, and fund members. The instrument's jurisdiction extends across the Commonwealth of Australia, and its application is consistent with the powers conferred by the Financial Sector (Collection of Data) Act 2001 and the Acts Interpretation Act 1901, with no specific exclusions or thresholds outlined in the explanatory statement.

Key Provisions

The main operative sections of the Financial Sector (Collection of Data) (reporting standard) determination No. 49 of 2023 (the Determination) include the revocation of existing reporting standards and the establishment of a new reporting standard. Specifically, the Determination revokes Reporting Standard ARS 112.1 and Reporting Standard ARS 112.2, both of which were made under previous determinations, and introduces a new Reporting Standard ARS 112.0, titled Capital Adequacy: Standardised Approach to Credit Risk (ARS 112.0). This new standard is designed to align with the updated prudential standards for authorised deposit-taking institutions (ADIs) and ensures that APRA continues to receive necessary data to supervise compliance with the new capital adequacy and credit risk capital requirements. The Determination imposes obligations on ADIs to comply with the new reporting standard, ensuring they provide timely and accurate financial data to APRA. This includes submitting data for reporting periods that occurred prior to the commencement of the new standard, although the obligation to report on these periods commences from the date of the Determination's commencement rather than retroactively. ADIs must adhere to the new reporting instructions and formats provided under the new standard to maintain the integrity and usefulness of the data collected by APRA. The data collected under ARS 112.0 is critical for APRA to assess the capital adequacy and risk management practices of ADIs, thereby ensuring the stability of the financial system. Failure to comply with the new reporting standard may result in civil or criminal consequences, although the Determination does not explicitly outline specific penalties. However, under the Financial Sector (Collection of Data) Act 2001 (the Act), non-compliance with reporting standards can lead to enforcement actions by APRA, which may include financial penalties, public reprimands, or other corrective measures. The severity of these actions would depend on the nature and extent of the non-compliance, as well as any resulting impact on the financial stability and integrity of the ADIs and the broader financial system. APRA retains the discretion to change reporting periods or due dates and to classify ADIs differently for reporting purposes, and these decisions are not subject to merits review. The Determination ensures that APRA’s reporting framework aligns with the updated prudential framework, facilitating more effective supervision of ADIs. By collecting necessary financial data through the new reporting standard, APRA can better monitor and address potential risks, thereby contributing to the stability and efficiency of the financial system. The new standard also incorporates feedback from public consultations, ensuring that it meets the needs of industry stakeholders while fulfilling APRA’s regulatory objectives.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.