Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013 - ARS 112.2 - Standardised Credit Risk - Off-balance Sheet Exposures

Administered by Department of the Treasury

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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.

  1.    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.

 

 

Overview

The Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013 was enacted to address an identified error in the reporting instructions for the calculation of credit value adjustment (CVA) risk capital charge within authorised deposit-taking institutions (ADIs). This determination was made by the Australian Prudential Regulation Authority (APRA) under the authority conferred by sections 13 and 15 of the Financial Sector (Collection of Data) Act 2001. The primary objective of this instrument was to rectify an error in the reporting instructions that led to an overstatement of an ADI's CVA risk-weighted assets. This determination revokes the previous reporting standard, ARS 112.2, and introduces an amended version that corrects the calculation error while maintaining the integrity of the underlying requirements. The instrument aims to ensure that the capital requirements for ADIs in relation to their CVA risk capital charge are calculated as originally intended.

Scope and Application

The Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013, issued by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001, applies to authorised deposit-taking institutions (ADIs) within Australia. This instrument, which revokes the previous determination No. 8 of 2012 and introduces a new reporting standard, mandates that ADIs comply with the revised reporting standard ARS 112.2, specifically addressing the calculation of credit value adjustment (CVA) risk capital charges. The changes are confined to correcting an identified error in the reporting instructions for section 2.8 of the standardised credit risk – Off-balance Sheet Exposures, without altering the underlying requirements of ARS 112.2. The instrument operates nationally across Australia and is subject to the conditions outlined in the Acts Interpretation Act 1901, which allows for revocation of similar instruments. The determination does not introduce any exclusions or exemptions but is limited to the correction of the specified reporting error, ensuring that the capital requirements for CVA risk capital charges are calculated as originally intended.

Key Provisions

The Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2013 (the Instrument) primarily concerns the amendment of a reporting standard for authorised deposit-taking institutions (ADIs) (sections 1-2). Under section 13(1)(a) of the Financial Sector (Collection of Data) Act 2001, the Australian Prudential Regulation Authority (APRA) is authorised to set reporting standards in writing, which financial sector entities must comply with. This includes standards relating to financial or accounting data and information regarding the business or activities of the entities. The instrument revokes the previous reporting standard (Financial Sector (Collection of Data) (reporting standard) determination No. 8 of 2012) and introduces a new reporting standard, ARS 112.2 Standardised Credit Risk – Off-balance Sheet Exposures (ARS 112.2). The instrument is effective from its registration on the Federal Register of Legislative Instruments. The Instrument imposes specific obligations on ADIs to accurately report data about their off-balance sheet exposures, including data used to calculate credit value adjustment (CVA) risk capital charges. This data must be submitted in accordance with the specified reporting standard, ARS 112.2. The Instrument aims to ensure that ADIs provide accurate and reliable information to APRA, which is crucial for the assessment of their financial stability and regulatory compliance. ADIs must adhere to the amended reporting instructions to ensure that their CVA risk capital charge is calculated correctly, avoiding any overstatements of their CVA risk-weighted assets. The Act imposes significant penalties for non-compliance with the reporting standards set out in the Instrument. Under section 14 of the Financial Sector (Collection of Data) Act 2001, any person who contravenes a provision of the Act, including the reporting standards, is liable to a civil penalty of up to $210,000 for a corporation and $42,000 for an individual. Additionally, under section 16, any person who knowingly or recklessly makes a false or misleading statement in a document required to be lodged with APRA is liable to a penalty of up to $210,000 for a corporation and $42,000 for an individual. These penalties underscore the importance of accurate and truthful reporting to APRA. Failure to comply with the reporting requirements can result in significant financial and legal consequences for the ADIs concerned.

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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.