Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013
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, subsection 33(3)
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 3 June 2013, APRA made Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013 (the instrument), which revokes Financial Sector (Collection of Data) (reporting standard) determination No. 8 of 2012 (which includes Reporting Standard ARS 112.2 Standardised Credit Risk – Off-balance Sheet Exposures) and determines a new Reporting Standard ARS 112.2 Standardised Credit Risk – Off-balance Sheet Exposures (ARS 112.2).
The instrument is to take effect on its date of registration on the Federal Register of Legislative Instruments.
- Background
ARS 112.2 was made as part of APRA’s implementation of reforms to the capital adequacy framework applying to authorised deposit-taking institutions (ADIs) announced by the Basel Committee on Banking Supervision, of which APRA is a member.
The purpose of ARS 112.2 is to obtain data about an ADI’s off-balance sheet exposures, including data used to calculate an ADI’s credit value adjustment (CVA) risk capital charge. This data is collected in section 2.8 of Reporting Form 112.2A Standardised credit risk – Off-balance Sheet Exposures (ARF 112.2A), which forms a part of ARS 112.2. An error has been identified in the reporting instructions applying to section 2.8, which results in an incorrect calculation (resulting in an overstatement) in certain cases of the amount of an ADI’s CVA risk-weighted assets used to calculate the CVA risk capital charge. To correct this error, an amendment is required to the Instruction Guide to ARF 112.2A.
2. Purpose and operation of the instrument
The purpose of the instrument is to revoke the existing reporting standard and replace it with a reporting standard that is identical in all respects to the revoked reporting standard except for the amendment to section 2.8 in the Instruction Guide to ARF 112.2A. The proposed change does not alter the underlying requirements of ARS 112.2. Amending the instructions will clarify that an ADI’s capital requirement in relation to its CVA risk capital charge will be calculated as originally consulted on with industry.
3. Consultation
APRA alerted industry to the need to change the reporting instructions. APRA is of the view that the changes introduced by the instrument are machinery in nature and, as such, has not sought formal submissions.
4. Regulation Impact Statement
The Office of Best Practice Regulation confirmed that no Regulation Impact Statement is required, owing to the machinery nature of the revised instructions.
5. Statement of Compatibility with Human Rights Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of Compatibility with Human Rights is Appendix A to this Explanatory Statement.
Appendix 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. 63 of 2013
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 changes the instructions applying to one element of the data submitted to APRA about an authorised deposit-taking institution’s off-balance sheet exposures relating to the calculation of the CVA risk capital charge. This is the only change to the data required to be provided pursuant to Reporting Standard ARS 112.2 Standardised Credit Risk – Off-balance Sheet Exposures.
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.