Economic and financial statistics - frequently asked questions

The agencies have established a process to provide responses to questions raised that are likely to be of common interest via FAQs on APRA's website. Industry webinars and workshops may also be convened when appropriate for the nature and volume of questions received.

A number of the forms listed are not part of the data currently collected on a domestic books basis for the primary use of the ABS and RBA and therefore they do not form part of the new EFS collection. In particular, ARF 322.0, ARF 325.0, ARF 330.0, ARF 330.1 and ARF 330.2 are collected on a consolidated entity, licensed ADI or overseas operations basis; these forms are not part of the EFS collection and will continue to be reported.

The two other returns listed are informal collections that are provided on a domestic books basis and these will be rolled into the new EFS collection. Chapter 5 of the EFS consultation response paper notes that the ad hoc or informal collections of data similar to that on the ARF 720.1 (including the monthly housing loans by state informally referred to as 320.7) will be discontinued following one period of parallel reporting. Likewise, Appendix 3 of the EFS consultation response paper lists the final reporting period for the quarterly informal collection on lending and funding statistics submitted by the largest ADIs - also known as the 324.0 information - as September quarter 2019.

The EFS reporting standards and guidance set out the agencies' expectations. It is the responsibility of reporting institutions to implement reporting methodologies that are consistent with these standards; reporting institutions are also strongly encouraged to have regard for reporting guidance and seek clarification where they are unsure of the application of these standards and guidance to a particular reporting concept. Where a reporting institution is unable to meet the reporting standard, the agencies will work directly with the affected institution to identify a suitable interim solution and a transition path towards meeting the standard.

APRA expects to be able to release the reporting taxonomies for the ARF 720 series of reporting forms during March 2018, the remainder of the EFS reporting taxonomies will be released during the second quarter of 2018.

Reporting on a business day basis requires both APRA and the reporting entities to assess the impact of both national public holidays and state-based public holidays on the actual due date for submission for each period. Different state-based public holidays result in multiple due dates for the same reporting period for reporting entities within the same industry located in various jurisdictions.

A calendar day reporting basis simplifies the reporting deadline as all reporting entities with the same reporting obligation will be required to submit reports to APRA on the same day. The due date will also be the same for each quarter (e.g. the 28th of each month following the reference period).

If the due date for a particular reporting period falls on a day other than a usual business day, the reporting entity is nonetheless required to submit the information required no later than the due date.

Monthly data collections will continue to be reported on a business day basis and, depending on the form, will have a due date of either the 10th or 15th business day of each month after the end of the reporting period.

A list of investment funds with an ARSN is available on request from APRA and will be updated annually. This list currently includes both the ARSN and the name of the fund. A separate register of investment funds for which both an ARSN and an ABN could be sourced is also available on request – please see FAQ 88 for further information.

The ASX Concordance List provides sector mapping for ASX listed corporations. This mapping includes investment funds which are listed on the ASX. While it is not possible to provide a comprehensive list mapping unlisted funds to SESCA, it is recommended that entities use an appropriate mix of custodial and investment manager data to determine appropriate SESCA classifications.

The general principle is that sectoral or counterparty classification should be made based on the counterparty with whom the reporting institution has a position on a flow of funds basis, not on an ultimate risk basis.

Where a reporting entity has placed funds on deposit with a clearing house or central counterparty on its own behalf (i.e. for its own trades where no client-clearing relationship is in place), this position should be recognised as a deposit made by the reporting entity with the clearing house or central counterparty.

Where the reporting entity is a client that clears its trades through a broker (i.e. the reporting entity is an indirect participant of a clearing house or central counterparty), this position should be reported as a deposit made by the reporting entity with the broker.

Where the reporting entity is a broker that has client-clearing arrangements in place with clients (who are indirect participants of a clearing house or central counterparty), the position should be reported as a deposit made by the client with the reporting entity. The reporting entity should also recognise the value of funds that the reporting entity then deposits with the clearing house or central counterparty as a deposit of the reporting entity with the clearing house or central counterparty.

The following non-financial investment funds should be segregated as:

• Infrastructure funds (that invest in public assets such as toll roads, airports and rail facilities) – other private non-financial investment funds;
• Listed and unlisted property trusts – REITs;
• Property common funds – REITs.

The following non-money market financial investment funds should be segregated as:

• Funds with predominantly overseas property or infrastructure holdings – Other non-money market financial investment funds;
• Listed equity trusts (domestic and international) – ETFs;
• Unlisted equity trusts (domestic and international) – Other non-money market financial investment funds;
• Listed mortgage trusts – ETFs;
• Unlisted mortgage trusts – Other non-money market financial investment funds;
• Listed investment companies – ETFs;
• Non-cash common funds – Other non-money market financial investment funds.

APRA does not require the use of SESCA 2008 counterparty classification in ADI and RFC reporting standards outside the EFS data collection.

In October 2017, the RBA indicated it would update the RMBS reporting guidance to bring the definition of loan-level fields into line with those in the EFS collection to ensure consistency in the data reported and streamline reporting requirements for financial institutions (https://www.rba.gov.au/securitisations/archive/news-archive.html#oct-2017).

These changes were released in April 2018 and, as indicated in the announcement, the fields affected by the update relate to property purpose and the first-home buyer flag.

The residency concepts from the EFS and existing RMBS reporting guidance are intended to operate in a consistent manner. In general, the definition and application of the residency concept is outlined in more detail for the EFS collection. For example, the definitions of residency in ARS 701.0 relate to an institutional unit’s principal place of residence or principal place of production. This notion is not currently referenced in the RMBS guidance; rather, reporting is based on the internal processes at the reporting entity for determining residency (which in practice may or may not be the same as the EFS definitions). To the extent possible, the agencies encourage reporting entities to apply the EFS residency concept in their reporting requirements for repo-eligible securities.

The interest rate concept is also outlined in more detail for the EFS collection than it is in the RMBS reporting guidance. The interest rates reported for EFS should be contractual rates, excluding any fees charged (see ARS 701.0 for a complete definition). Interest rates for RMBS reporting should be consistent with the determination of interest collections allocated to the trust, which will be specified in the accompanying legal documentation for the deal. Therefore, there could be instances where reporting of interest rates for EFS and RMBS reporting may not be entirely consistent.

The consolidation for each of these forms is required to be maintained so that in each case the data collected is suitable for the intended data user. International Exposures and ARF 223.0 are consolidated based on APRA requirements to align them with prudential principles whilst the accounting consolidation used in the EFS data collection is for the purposes of the RBA and ABS.

The EFS collection is specific to the statistical needs of the ABS and RBA, which are distinct from the capital and prudential requirements of APRA. The EFS concepts and definitions should not be applied to the prudential Capital or Risk returns.

As a first step, ECL provisions over any particular financial asset need to be determined as per AASB 9 and separated in the following way between individual and collective provisions as per the EFS Reporting of Provisions document (see below)  'Provisions for doubtful financial assets: AASB 9 Financial Instruments mapped to EFS’.

Once the ECL provisions have been allocated between individual and collective provision as above:

• For loans and finance leases, report the provisions in the relevant ‘individual’ or ‘collective’ item codes.
• For other financial assets, net off the value of individual provisions and report the net amount of the asset as one item. For clarity, do not net off collective provisions. Apply this to all EFS forms.
• For off-balance sheet credit related commitments, report individual provisions in Item 17.5. Other provisions in ARF 720.0.

A multi-option facility is a line of credit from which various types of finance can be drawn, the features of which are unknown when a reporting entity makes a firm offer to provide finance. If the exact features of the finance are known that the time the reporting entity has made a firm offer to provide finance, report in accordance with the existing EFS standards and guidance. 

Consider the example of a $10 million multi-option facility. 

a) When reporting a new borrower-accepted commitment

When reporting borrower-accepted commitments on ARF 741.0, report the value of funds made available to the business entity without additional authorisation or approval. Report this amount of the multi-option facility as a revolving credit facility. Using the example, if the entire $10 million facility is committed and accepted without any additional authorisation or approval, report the $10 million facility under Column 2 ‘Revolving credit’ of Item 3: New borrower-accepted commitments for business finance – by industry for the month in which this is accepted by the borrower(s). 

b) When reporting total credit limits

When reporting total credit limits on ARF 741.0, report the value of funds made available to the business entity without additional authorisation or approval. Report this amount in Column 3 of Item 1 as ‘Other revolving credit facilities’. Using the example above, if the entire $10 million credit limit is made available to the borrower without any additional authorisation or approval, the entire $10 million multi-option facility would be reported under Column 3 of Item 1 on ARF 741.0. The credit limit should be subsequently reclassified according to the characteristics of the finance drawn from the facility.

c) When reporting a loan as funded

On ARF 742.0, report the amount funded according to the characteristics and timing of the individual loans made available for draw down within the period (regardless of whether the funds are drawn within that period). 

Consider the example above, where a $1 million fixed-term loan from the multi-option facility is made available to the borrower(s) to draw down in a given reporting period. Report the $1 million loan under Column 2 of Item 3: Business finance – by finance type as a fixed-term loan. Report the $1 million loan as one facility in Column 6, and report the loan according to its individual characteristics in Columns 7 and 8. 

d) When reporting credit outstanding

On ARF 720.1A/B and ARF 742.0, report the balance owed by the borrower(s) at the end of the reporting period according to the characteristics of the individual loans drawn from the multi-option facility. Continuing with the example above, on ARF 742.0 report the $1 million loan under Column 2 of Item 3: Business finance – by finance type as a fixed-term loan. Report the $1 million loan as one facility in Column 3, and report the loan according to its individual characteristics in Columns 4 and 5.

Holding companies should be classified in line with SESCA 2008 as follows: 

•    Holding companies that have mainly financial corporations as subsidiaries should be classified as ‘Financial auxiliaries’. 

•    Holding companies that have mainly non-financial corporations as subsidiaries should be classified as ‘Other private non-financial corporations’. 

The purpose of the small/medium/large business size categorisation in the EFS collection is to provide the agencies with greater insight into lending conditions across borrower types, particularly for small businesses. 

The EFS business size definitions are similar to those used by the Basel Committee for Banking Supervision (BCBS) and APRA in their standards for institutions following the internal-ratings based approach to credit risk. Entities that already categorise counterparties according to this methodology can report in line with their internal categorisations (see RPG 701.0, section 1.7). 

Entities that do not categorise according to the BCBS/APRA methodology should use the turnover and exposure size metrics specified in ARS 701.0 to allocate counterparties to the relevant business size category. Where a customer forms part of a larger corporate group, it is expected that the turnover and exposure metrics will be calculated at the consolidated group level, rather than the individual entity or branch level. This should be more representative of the effective size of the business that the funds are being provided to. However, the reporting entity may choose to classify a customer according to the turnover and exposure of the individual legal entity if it determines that this is a more appropriate representation of the customer.

Please see the file below (EFS guidance on securitisation reporting) for additional guidance on how to report on-balance sheet securitisation, including self-securitisation and covered bonds, across the relevant EFS forms. 

The EFS collection requires the reporting of counterparty sector information based on SESCA 2008, which in turn is based on the sectoral classification prescribed by the 2008 System of National Accounts (SNA). SNA guidance states that if a commercial agent makes transactions or takes a position under the order and at the expense of another party (the principal), the transactions or positions should be attributed to the latter.

The agencies acknowledge the potential difficulties for reporting institutions to identify the principal in a transaction or position taken by a commercial agent. As a result, the general principle applied for EFS reporting is that the sectoral or counterparty classification should be made based on the counterparty with whom the reporting institution has a position on a flow of funds basis, not on an ultimate risk basis (see section 1.18 of RPG 701.0 and EFS FAQ 34). For example, in the situation where a funds manager makes a deposit on behalf of a client, this should be reported as a deposit by the funds manager.

However, a special case arises where the direct legal entity facing the reporting institution is a trustee, a responsible entity or a custodian acting on behalf of a trust. In these situations, reporting entities should classify the counterparty according to the sectoral classification of the trust. For example, where a corporate trustee acting on behalf of a trust that is a non-financial investment fund makes a deposit, this should be reported as a deposit by a non-financial investment fund (the trust), not a deposit by a financial auxiliary (the corporate trustee). For the purposes of EFS reporting trustees, responsible entities and custodians acting on behalf of a trust are not considered to be transacting or have a position with the ADI or RFC on a flow of funds basis; rather, they are facilitating the flow of funds between the ADI or RFC and the trust. This distinction is important as it allows for the meaningful reporting of sectoral counterparty information in accordance with SESCA and SNA requirements. In line with the general principle above, no further look-through to the trust beneficiary is required.

The agencies expect that all reporting entities record sufficient information about their customers to allow them to be appropriately classified on the EFS forms using the above principles. For further guidance on classifying counterparties for the EFS collection, please refer to RPG 701.0. In particular, section 1.5 outlines a number of methods and types of information that can be used to classify counterparties to their economic sectors. This includes a mapping from ANZSIC to the SESCA 2008 categories. There are also several FAQs that may help identify certain types of counterparties (for example, FAQ 88 may help in the identification of investment funds), as well as a range of publicly available information about registered businesses (such as the ATO’s ABN lookup tools). The Reserve Bank's list of eligible securities may also assist in identifying counterparties that are securitisers.

For loans that have been funded in the month but not yet drawn down, report the contractual interest rate that would have been charged to the borrower if they had fully drawn down the loan, as at the end of the month. This could be determined by, for example, applying the interest rate on the drawn portion of the loan to the undrawn portion, or calculating the rate that would have been applied to the loan using the contractual spread and market reference rate. Where the contractual interest rate cannot be determined for an undrawn loan, exclude this loan from the calculation of the weighted average interest rate.  

In the case of credit cards funded during the month, the reported interest rate should be zero unless a balance transfer has taken place (in which case, report the interest rate applying to this balance).

The FAQs were designed to provide timely guidance to reporting entities on commonly asked questions and key issues related to the EFS collection. Many of the FAQs seek to clarify the EFS standards, forms and instructions to help entities meet their reporting obligations. Some FAQs also identify errors in the reporting standards and advise entities how the relevant data will need to be reported once the standards are corrected. 

Entities are encouraged to report in accordance with the FAQ guidance to the extent practicable. However, the agencies understand that reporting entities face an additional burden during the parallel run period, and that even small changes to reporting systems could require considerable time and resources to implement. The agencies therefore do not expect that entities would be able to implement all additional FAQ guidance published during the Phase 1 and 2 parallel run periods immediately. Where an entity would find it difficult to implement any additional FAQ guidance promptly, they should advise the agencies and provide an estimated implementation date if possible.

Note that the FAQs refer to the provisions of APRA’s reporting standards but, until they are incorporated into the legislative reporting instruments, they do not form part of the law or create enforceable requirements. Where appropriate, the FAQs will later be incorporated into the EFS reporting standards and form instructions, as well as Reporting Practice Guide RPG 701.0. The next update to the EFS standards is expected to take place by the end of 2019, and any relevant changes to reporting systems should be implemented by that time. In the meantime, entities can nevertheless expect to receive data quality queries if the agencies identify that data are not being reported in line with all available instructions and guidance (including the FAQs). Where it is deemed appropriate, the agencies may request that entities expedite changes to their reporting systems for specific data items. 

Central Borrowing Authorities primarily provide finance for public corporations and notional institutional units and other units owned or controlled by the government. For EFS reporting, only the following entities should be classified as central borrowing authorities for the purposes of EFS reporting:

• NSW Treasury Corporation (TCorp);
• Treasury Corporation of Victoria (TCV)
• Queensland Treasury Corporation (QTV);
• Western Australian Treasury Corporation (WATC);
• South Australian Government Financing Authority (SAGFA);
• The Tasmanian Public Finance Corporation (TasCorp);
• Northern Territory Treasury Corporation (NTTC).

The ACT Treasury, should be reported as ‘state, territory and local government’ and not as a Central Borrowing Authority.

RPG 701.0 specifies acceptable ongoing or transitional proxy data items or methodologies for updating back-book reporting. Where a proxy has not been specified the agencies expect that reporting institutions will review and update their back-book treatment.The agencies note that reporting institutions have a number of options for achieving this, including leveraging existing run-off and turnover in the back-book, and natural contact points with customers to update or collect relevant data points. Where a reporting institution believes it will be unable to source information for a data point (other than those specified in RPG 701.0) in time for the commencement of EFS reporting they should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.

The reporting standards outline the agencies' expectations for the data to be reported. For a limited number of reporting concepts, RPG 701.0 specifies acceptable proxy data items or methodologies, including transitional measures. Where a reporting institution believes it will be unable to source information for a data point (other than those specified in RPG 701.0) in time for the commencement of EFS reporting they should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.

Entity submissions of EFS reporting standards will commence on D2A from the first reporting period ending 31 March 2019. APRA is aiming to transition to a new Data Collection Solution (DCS) replacing D2A in late-2020, with entities beginning to use it thereafter. The implementation of DCS will be limited to the system through which entities submit data to APRA. While the transition to a new system may necessitate some process changes, it will not result in changes to the content of current data collections, or collections under consultation. Entities are encouraged to register to receive ongoing updates on the DCS implementation to stay abreast of developments. More information can be found at APRA is replacing D2A.

The agencies' strong preference would be for the existing domestic books returns to be quarantined from system changes made to report the new EFS returns. This is to allow for statistics to continue to be compiled on a consistent basis across industry until publications are switched over to the new EFS data after the parallel run period. Reporting institutions should alert agencies as soon as possible to instances where current reporting is affected by changes made in preparation for EFS reporting.

The agencies do not intend to extend the length of the parallel run beyond the period determined during consultation. As part of the industry consultation process, the agencies received feedback on the length of the forward-looking parallel run. The agencies balanced the varying opinions of reporting institutions and decided to shorten the forward-looking parallel run to four months for monthly balance sheet forms and ARF 721.0 and three months for the monthly finance forms. Although the agencies initially proposed a longer parallel run period, the agencies are of the view that the shorter period appropriately balances the various considerations outlined by reporting institutions, including the burden associated with a longer parallel run period. The agencies note that quarterly forms will still need to be submitted for two quarters in the planned parallel run period. The agencies will analyse the data reported in a timely manner and will manage any reporting anomalies with the reporting institution involved as they arise.

Submission dates:  In recognition of the additional burden that the parallel run will place on reporting entities, APRA has extended the due dates of the new EFS reporting forms during their respective parallel run periods.

For details of the submission dates, see the letter below:  

Entities are nevertheless encouraged to submit the EFS returns as early as possible, partly to mitigate the risk of discovering any reporting errors through the D2A validation rules on the due date.

Timing of query process: The agencies will require additional time to analyse the EFS returns to ensure that they can form meaningful queries. We would expect to send out queries within 4 business days. Reporting entities will then have 4 business days to respond to the queries. Given the nature of the parallel process entities should expect additional follow up questions.

The agencies’ approach to assessing the Phase 2 EFS submissions during the parallel run will be similar to that adopted for Phase 1. In particular, queries sent out during the parallel run will largely be focused on ensuring that the data have been reported in line with the EFS reporting standards and guidance, as well as understanding the impact of conceptual and definitional changes on entities’ reporting. One key purpose of these queries is to inform how the agencies intend to implement changes to their publications.

The agencies intend to use a range of existing data sources to help inform the query process. These may include data currently being submitted on the Domestic Books forms, responses to out-of-cycle queries, entities’ advertised lending and deposit rates, and bond pricing and other market data. The RBA may also use estimates derived from the RBA Securitisation Dataset. Cross-institution comparisons and checks for internal consistency may also be used to help detect any anomalies in the reported data. Where relevant and appropriate, the agencies intend to identify the data that is used to inform their queries.

The agencies have also prepared the following documents (attached to this FAQ below) to assist entities in preparing for the Phase 2 parallel run query process:

• A list of data items that the agencies intend to prioritise when assessing the quality of the submissions during the parallel run. This list is largely focused on items that are intended to be used by the ABS and RBA for analysis, publication and policy-making purposes, or where the new EFS guidance is expected to result in significant changes to the reported data. Low-priority data items may nevertheless be queried, particularly in latter months of the parallel run. Note that this document differs from, and does not replace, RPG 702.0 or the EFS Priority Listing for Data Items. RPG 702.0 and the EFS Priority Listing for Data Items is the framework reporting entities should consult to understand the agencies’ priorities on an ongoing basis.
• A (non-exhaustive) high-level mapping of items reported on ARF 741.0, ARF 743.0 and ARF 745.0 to conceptually related items currently being reported on the Domestic Books forms. When considering the mapping, it is important to remember that entities are expected to report EFS data in line with the new reporting standards and guidance. This may or may not result in equivalent values being reported for conceptually related data items on the new and existing forms, and outcomes may not be consistent across institutions. For many conceptually related data items, the agencies expect to see a change in the reported values due to differences between the definitions used in the EFS and Domestic Books forms. For such items, queries may be used to understand the extent to which any differences in the reported data were driven by the changes in definitions as opposed to other factors; if no differences in the reported data are observed, queries may be used to confirm whether the reporting entity has reported in line with the EFS standards.

Ahead of the parallel run, APRA intends to send out a set of ‘conceptual queries’ to selected institutions that seek to understand how they report certain key data concepts on the Phase 2 reporting forms. These include data concepts that span several reporting forms and those that will be calculated in line with institutions’ internal business practices. The general intent of the conceptual queries is to help the agencies interpret each reporting entity’s data on an ongoing basis, rather than with a view to force consistency in the methodologies applied across the industry.The agencies expect to receive detailed responses to these queries that explain the entity’s methodology for calculating or sourcing the relevant data, and how the reporting may have changed from the Domestic Books collection if appropriate. The conceptual queries are intended to be sent out in early August. Responses will only be due at the same time as the responses to the regular parallel run queries for the July 2019 reporting period (in mid-September). The long time frame for these queries recognises the additional resource burden that institutions are facing during the EFS parallel run periods, and is intended to provide institutions with sufficient time to prepare appropriate responses.

Details of the timing of the parallel run query process are outlined in FAQ 93.

Reporting entities are expected to report data in accordance with the EFS Collection reporting standards requirements from the beginning of each parallel run.
 
Reporting entities may utilise Reporting Practice Guide 702.0 ABS/RBA Data Quality for the EFS Collection and notify APRA in the event of any reporting errors identified, regardless of whether a form is still in its parallel run phase. 

EFS Collection forms that are still in the parallel run period at the end of a reporting entity’s financial year are not required to be audited. However, auditors are expected to use the General and Specific Observations index to provide details on how an entity is progressing with its implementation of all EFS Collection forms – even those that are in still in the parallel run period. 

The following EFS Collection forms, namely ARFs 720.0A/B, 720.1A/B and 720.2A/B, are subject to reasonable and/or limited assurance audit/review opinion if the forms are no longer in the parallel run period at the end of the reporting entity’s financial year. Following the end of the parallel run period, those specific EFS Collections forms will be subject to a reasonable and/or limited assurance audit opinion/review.

Auditors are to provide limited assurance over the controls designed to ensure that a reporting entity has provided reliable data to APRA for the purposes of the EFS Collection, and that these controls have operated effectively throughout a reporting entity’s financial year. For a reporting entity with a financial year ending after the parallel run period for a set of forms has finished, the agencies require these forms to be included in the scope of this limited assurance review. This includes forms submitted during the parallel run period that also falls within the relevant financial year.
 

As noted in the initial discussion paper, APRA will consult on changes to its statistical publications arising from the proposed changes to the EFS collection (e.g. Monthly Banking Statistics).

The RBA and ABS will also be reviewing their publications. Core publications focussed on credit stocks and flows will continue in some form (e.g. the RBA's Financial Aggregates and the ABS' Lending Finance Release). New publications are also being considered, for example the RBA is considering publishing aggregated data on average interest rates facing borrowers and depositors.

Further information on changes to publications will be made available in due course.

All data in the EFS collection are protected under the Australian Prudential Regulation Authority Act 1998 (APRA Act). As noted in the initial discussion paper, APRA will consult on changes to its statistical publications arising from the proposed changes to the EFS collection. Where necessary, APRA will consult industry on confidentiality further to s.57 of the APRA Act. The commercial-in-confidence nature of these data is understood and would be taken into account in any proposals for publication.

In using EFS data the ABS and RBA are bound by the general secrecy obligations of the APRA Act and conditions imposed by APRA under this Act. Additionally, the ABS is bound by the secrecy obligations in the Census and Statistics Act 1905 and the RBA by the 'protected information' provisions in the Reserve Bank Act 1999. Consistent with these obligations, both the ABS and RBA will ensure that the publication and dissemination of compilations and analyses of EFS data does not enable the identification of a particular person or organization, except where these data are already in the public domain (for example, where APRA has determined such data to be 'non-confidential').

The data collected as part of the EFS collection will be published by the ABS, APRA and the RBA. These publications are set out in the table below along with indicative release dates.

Specific details of changes to individual publications arising from the EFS collection will be communicated by the relevant agency prior to publication.

An inconsistency has been identified and amended. Treasury-related short-term borrowings from banks and other financial institutions should be reported as a loan in item 16 of ARS 720.0. The instruction to exclude treasury-related short-term borrowings from banks has been removed from both the loan and deposit definitions in ARS 701.0 (the latter to avoid confusion of reporting of 'deposit' positions on both sides of the balance sheet). The guidance has been updated to indicate that treasury-related short-term borrowings should be reported in item 16 of ARS 720.0.

Gold certificates relating to unallocated gold should be reported under Item 1.2 'Unallocated gold' assets on ARF 720.0A/0B. If a gold certificate relates to allocated gold, it should be reported under Item 10.12.1 'Other assets, of which: Non-financial assets' on ARF 720.0A/0B. If a reporting institution is unable to distinguish whether a gold certificate relates to allocated or unallocated gold, report the gold certificate under allocated gold.

The category 'Available for sale reserve' in the current ARF 320.0 should be reported under 'Other reserves' in the ARS 720.0.

Any expenses incurred in originating a loan or finance lease that have been capitalised by the reporting entity (that is, where the entity has delayed the recognition of these expenses by recording them as a long-term asset) should be included in ‘Item 10.2: Total other assets – Capitalised expenses’ until amortised.

Margin lending should be included in both the ARF 720.0 and the ARF 723.0.

Both short- and long-term treasury-related borrowings should be reported as loans in item 16 of ARS 720.0.

In the reporting of margin monies, a distinction should be made between ‘repayable’ and ‘non-repayable’ margin monies, where possible.  This treatment is in line with the IMF’s Monetary and Financial Statistics Manual and Compilation Guide (2016), from which the following definitions have been drawn (page 62).

Repayable margin – sometimes referred to as initial margin – consists of collateral deposited to protect a counterparty against default risk.  Ownership of the margin remains with the unit that deposited it.  Although its use may be restricted, a margin is classified as repayable if the depositor retains the risks and rewards of ownership, such as the receipt of income or exposure to holding gains and losses.  At settlement, a repayable margin (or the amount of repayable margin in excess of any liability owed on the financial contract) is returned to the depositor.

Repayable margin payments are transactions in deposits, not transactions in the associated financial assets (e.g. financial derivatives).  Repayable margin deposits made in cash should be reported as ‘non-transaction deposits’.  When a repayable margin deposits is made in a non-cash asset, no transaction or a new position in stocks is recorded in the balance sheets because no change in economic ownership has occurred.

Non-repayable margin – sometimes referred to as variation margin – payments are transactions in financial derivatives, not deposits. Non-repayable margin is paid to meet liabilities recorded due to the daily marking of derivatives to market value.  In effect, non-repayable margin represents an effective transfer of ownership between counterparties to the financial contract.  The non-repayable margin payments reduce the liability created through the financial derivative with the contra-entry a reduction in another financial asset.  The receipt of non-repayable margin is recorded as a reduction in the financial derivative asset; the contra-entry is an increase in another financial asset.

There may be instances where a reporting entity is unable to make the distinction between repayable and non-repayable margin monies.  In these circumstances, treat all margin monies as repayable.

RPG 701.0 will be updated to reflect this reporting guidance.

For ARF 720.0, RBA Exchange Settlement Accounts and Nostro/Vostro accounts should be treated as ‘at call deposits’ and reported on the balance sheet accordingly.

Outstanding securities settlements should be reported on ARF 720.0 in line with the Australian Accounting Standards (specifically, AASB 9). Where an entity has elected to use trade date accounting under AASB 9, outstanding settlements should be reported in:

• Item 10.5: Receivables related to securities sold not delivered / outstanding security settlements.
• Item 18.7: Payables related to securities purchased not delivered / outstanding security settlements.

Note, where an entity has elected to use settlement date accounting for securities transactions, it is not required to report the receivables and payables related to outstanding settlements in items 10.5 and 18.7 on ARF 720.0.

Any other settlement account balances not related to outstanding security settlements (e.g. related to the payments system) should be reported in:

• Item 10: Total other assets (and will be captured in the derived Item 10.12 Other assets).
• Item 18: Total creditors and other liabilities (and will be captured in the derived Item 18.11 Other).

The agencies have developed detailed reporting standards that outline the agencies' expectations for the data to be reported on ARF 720.0. The expectation is that reporting institutions will report data in line with the new reporting standards. This may or may not result in equivalent data being reported by an institution on the new ARF 720.0 and the existing ARF 320.0, and outcomes may not be consistent across institutions. Reporting differences may also rise between ARF 720.0 and ARF 320.0 as a result of changes to the balance sheet structure, such as the treatment of non-resident and intragroup positions. As a result of these differences, the agencies are not able to develop mappings for items reported in ARF 320.0 to those in ARF 720.0 that would be accurate for, and could be used consistently by, all reporting entities.

Entities are encouraged to contact APRA if they have specific questions related to where items should be reported on ARF 720.0. The agencies will then work with that entity to provide targeted advice.

The definition of trade credit is intentionally broad to capture all items within accounts payable that are not specified elsewhere in item 18 of ARF 720.0A/B.

Please refer to definitions of types of "related parties" in ARS 701, including "controlled entities" and "associated entities". Assets (including investments) and liabilities with all related parties (including controlled entities and associated parties) should not be consolidated in the domestic books of the reporting entities. Assets and liabilities with related parties should instead be reported as total intragroup positions on ARF 720.0A/B and detailed as appropriate in any other relevant EFS forms. The agencies have added guidance to RPG 701 to clarify that investments in related parties should be reported in item 12 Total Intra-group Assets on 720.0A/B.

Margin loans provided through the reporting institution’s prime brokerage business are in scope of the ‘margin lending’ definition for the purposes of the EFS data collection, as long as they meet the description of being ‘the provision of secured loans to investors for the purpose of purchasing financial assets’. Such margin loans should be reported on all relevant forms, including ARF 720.0A/B, ARF 720.1A/B, ARF 723.0 and ARF 742.0A/B.

The EFS collection is intended to capture margin lending to both households and public and private sector businesses (including community service organisations, non-financial businesses and financial institutions). Margin lending to businesses is captured on several forms, including ARF 720.0, ARF 720.1, ARF 723.0 and ARF 742.0. The definition of margin lending should be consistent across all of these forms.

The definition of margin lending in ARS 701.0 will be amended to clarify that it is not restricted to facilities provided to ‘natural persons.’

Cash collateral exchanged with other entities in respect of uncleared over-the-counter derivatives trades should be reported in the same way as all other margin monies (see section 2.1.7 of RPG 701.0 and FAQ 32 for further information).  

For example, margin monies exchanged with other banks should be reported as follows:

• On ARF 720.0A – Cash collateral posted to other banks to cover repayable margin requirements should be reported under Item 2.1.2. (3) Total funds on deposit at other financial institutions; ADI's; (Not at call). Repayable cash collateral collected from other banks should be reported under Item 14. Total deposits. Exchange of non-repayable margin should be recorded as transactions in financial derivatives, rather than deposits (see section 2.1.7 of RPG 701.0 and FAQ 32).  
• On ARF 720.2A – Cash collateral collected from other banks to cover their repayable margin requirements should be reported under Item 1.1.5.2. (3) Total deposits; resident deposits; financial institutions; ADIs; (Other non-transaction deposits).

When reporting on ARF 720.0A/B, the sum of current tax assets and deferred tax assets should be reported in item 10.6: Deferred tax assets. The sum of current tax liabilities and deferred tax liabilities should be reported in item 18.1: Tax liabilities.

Please note that this differs from guidance provided previously. The instructions and form labels in ARF 720.0A/B will be amended to clarify that tax assets and liabilities should not be netted, but should instead be reported in line with this FAQ response. 

The EFS standards and guidance previously required the consolidation of SPVs established for the purpose of holding assets in a cover pool for covered bonds. However, following further consultation with reporting entities, the requirement to consolidate covered bond SPVs will now be removed.

Covered bonds and any cover pool assets transferred to an SPV should now be reported in the same way as other on-balance sheet securitisations. Specifically, both the assets underlying the cover pool and the covered bonds issued by the reporting entity should be reported on the domestic books balance sheet of the ADI (cover pool assets should not be derecognised). Since covered bond SPVs should no longer be consolidated, intra-group balances between the ADI and any related covered bond SPVs will also need to be reported. This treatment aligns with statutory accounting reporting and the general concept of ‘domestic books’ under the EFS.

The updated RPG 701.0 will include guidance on how covered bonds should be reported across the relevant EFS forms.

For a given derivative instrument, please only report the net (market) value as one item on ARF 720.0. That is, do not separately record the clean price as an asset and accrued interest as a liability (or vice versa).

In the reporting of margin payments, a distinction should be made between ‘repayable’ and ‘non-repayable’ margin, where possible.  This treatment is in line with the IMF’s Monetary and Financial Statistics Manual and Compilation Guide (2016).

As in the case of cash collateral (see EFS FAQ 32), variation margin is considered ‘non-repayable’ if there is an effective transfer of ownership of the collateral between the counterparties to the financial contract.  Non-repayable margin payments reduce the liability created through the financial derivative, with the contra-entry a reduction in another financial asset.  The receipt of non-repayable margin is recorded as a reduction in the financial derivative asset; the contra-entry is an increase in another financial asset. In the case of non-cash collateral, it is expected that the contra-entry will be an increase or decrease in ‘Item 3: Total trading securities’ of ARF 720.0.

If the variation margin is ‘repayable’ (i.e. ownership of the margin remains with the counterparty that deposited it), no transaction or a new position in stocks is recorded in the balance sheets because no change in economic ownership has occurred.

Interbank loans and deposits should be reported on ARF 720.0 as follows:

• Loans provided to other banks in Item 6: Total loans and finance leases, and in the relevant items on ARF 720.1 (e.g. item 1.1.1.5.2 for interbank loans to resident ADIs).
• Deposits received from other banks in Item 14: Total deposits, and in the relevant items on ARF 720.2 (e.g. item 1.1.5.2 for interbank deposits received from resident ADIs).
• Borrowings from other banks in Item 16.3: Total borrowings – Loans and finance leases.
• Deposits held at other banks in Item 2: Total funds on deposit at other financial institutions.

Please ensure that such loans and deposits are always reported according to the type of asset/liability, the residency of the counterparty and the counterparty’s related party status.

‘Non-financial assets’ are resources that meet the definition of an 'asset' according to the AASB Framework for the Preparation and Presentation of Financial Statements (para. 49(a)) but do not meet the definition of a 'financial asset' according to AASB 132 Financial Instruments: Presentation (para. 11).

ARF 720.0 does not currently have specific line items to capture a lessee’s right-of-use asset (ROU asset) and related lease liability as defined in AASB 16 Leases.

Any form changes are likely to occur only when APRA has finalised its regulatory capital position on the treatment of the ROU asset in line with Basel’s position (see the Bank for International Settlement's website on Frequently asked questions on changes to lease accounting). Until then, banks in their capacity as lessees should report operating leases as follows:

ARF 720.0

• Lease liabilities at ‘item 18.11: Total creditors and other liabilities – Other’
• ROU assets at item ‘10.12: Other assets and item 10.12.1. of which: Non-financial assets’

ARF 720.3 (if applicable)

• Lease liabilities at ‘item 3.1.4: Creditors and other liabilities’
• ROU assets at item ‘1.1.7: Other assets’

ARF 730.0

• Interest expense at ‘item 4.1.6: Other interest-bearing liabilities’
• Depreciation expense on the ROU asset at ‘item 6.1.2: Depreciation of property, plant and equipment’

As there has been no changes to the accounting treatment for lessors, please report this using the existing guidance (e.g. report operating rental income on ARF 730.0 at item 2.1.1. Rental income on operating leases)

Unamortised costs should not be included in ‘item 6: Total loans and finance leases’ on ARF 720.0A. Any expenses incurred in originating a loan or finance lease that have been capitalised by the reporting entity should be included in ‘item 10.2: Total other assets – Capitalised expenses’, until amortised.

Fees and commissions received by the reporting entity but not yet recognised as earned for accounting purposes should be reported in ‘item 7: Deferred fees and commissions relating to loans and finance leases’.

Fees and commissions that have been earned (accrued) during the period but not yet received should be reported in ‘item 10.11 Total other assets – Fees and commissions receivable’. Once any accrued fees and commissions have been capitalised by the entity (i.e. added to the outstanding value of the loan amount, as per the terms of the loan contract), they should then be reported within ‘item 6: Total loans and finance leases’.

Fees and commissions that have been earned and received should be included in the value of the relevant asset in ARF 720.0 (e.g. in ‘item 1.1 Notes and coins’ or ‘item 2: Funds on deposit’, as appropriate) and recognised as income in ARF 730.0.

Item 1.1 of ARF 720.3 may not reconcile with Item 12 of ARF 720.0A, since the treatment of provisions on the two forms differs

• In ARF 720.3, the value of credit outstanding for loans and finance leases should be reported net of individual provisions but gross of collecting provisions (that is, individual provisions should be excluded from the value of loans and finance leases, but collective provisions should be included).
• In ARF 720.0, the total value of intra-group assets (item 12) should be reported net of both individual and collective provisions (note that the instructions for item 20 state that individual and collective provisions for intra-group loans and finance leases should be reported in item 12).

The requirement for item 1.1 of ARF 720.3 to equal item 12 of ARF 720.0 will be removed from ARS 720.3 when the EFS standards are next updated.

When reporting the value of on-balance sheet securitised loans on ARF 720.0:

• The value of ‘credit outstanding’ (as recorded in item 6) that has been securitised should be reported in item 13.1.1. As explained in ARS 701.0, ‘credit outstanding’ means the total balance owed by the borrower as at the end of the reporting period, including any capitalised interest and fees.
• Any interest and fees accrued on these loans but not yet charged to the customer (i.e. interest receivable and fees and commissions receivable, as recorded in items 10.1 and 10.11) should be reported in item 13.1.2. This means that interest and fees that have accrued but not yet been charged on securitised loans will also not be reported on ARF 720.1.

Please disregard the instructions to exclude unsettled trades unless your entity has elected to use settlement date accounting for securities transactions under AASB 9: Financial Instruments. If you have elected to use trade date accounting under AASB 9, you may include unsettled trades in the reported values of securities (in line with your statutory reporting).

To avoid imposing settlement date accounting on all reporting entities, the requirement to exclude unsettled trades will be removed from the instructions for reporting the value of securities on ARF 720.0, ARF 720.3, ARF 720.4 and ARF 720.5. 

The residual maturity of hybrid securities should be calculated using the length of time from the reporting period until the next call date, rather than the contractual maturity date. So, hybrid securities should be reported in the ‘Matures in 12 months or less’ item codes when their next call date is within 12 months of the reporting period. Because all hybrid securities should be classified as long-term throughout the EFS collection (see EFS FAQ 127), this is irrespective of whether their original maturity is less than or equal to one year.

Provided the changes are implemented prior to the March 2019 reporting period, the agencies will not require that comparative periods for the existing domestic books forms are re-submitted following the implementation of AASB 9 in 2018. However, the agencies request that reporting institutions indicate from what reporting period changes will be effective.

With regards to the reporting of syndicated loans made by the reporting entity on item 3.1.1 of ARF 720.1A, only syndicated loans that are made to resident entities should be reported. A reporting institution should report the value of loans it has made to resident entities through a syndicate. The definition of residency can be found in ARS 701.0 and further guidance can be found in RPG 701.0.

Where a separate funding vehicle is established for the group of borrowers seeking funding, the residency of the funding vehicle would determine whether the syndicated loan is made to a resident or non-resident entity.

Where a separate funding vehicle is not established – for example, where the reporting entity makes a loan to a group of borrowers through an agent – syndicated loans should be reported based on the residency of the end borrowers. That is, only the value loaned to resident entities should be reported in item 3.1.1 of ARF 720.1A.

With regards to the reporting of funds that the reporting entity borrows from a syndicate, the same principles as outlined above apply. Where the reported entity borrows from a separate vehicle established to provide the syndicated loan, the residency of the funding vehicle would determine whether the borrowings should be reported as loans from a resident or non-resident entity.

Where a separate funding vehicle is not established and the reporting entity borrows through an agent who facilitates the syndicated loan, the borrowings should be reported based on the residency of the lenders (not the agent). That is, the value borrowed from resident and non-resident entities should be reported according to the amount borrowed from each resident and non-resident lender, respectively.

Section 1.10 of RPG 701.0 provides specific guidance on determining whether a loan should be reported in the ‘of which: secured by residential property’ items on ARF 720.1, ARF 742.0, ARF 745.0 and 746.0.

As outlined in the guidance, the conditions for a loan to be considered ‘secured by residential property’ are:

(1) the value of the collateral must be at least 50% of the loan balance; and  

(2) at least 50% of the collateral must be residential property.

The ‘of which: secured by residential property’ items are the only ones for which these criteria apply.

When reporting loans in all other circumstances, the general definitions of ‘secured’ and ‘unsecured’ (as per ARS 701.0) should be applied:

• A ‘secured’ loan is any loan that is ‘fully secured’ or ‘partially secured’ (i.e. some amount of collateral exists to support the loan exposure – there is no minimum collateral threshold for a loan to be considered secured).
• An ‘unsecured’ loan is one where there is no collateral to secure the loan.

The distinction between ‘secured’ and ‘secured by residential property’ has been clarified in both ARS 701.0 and RPG 701.0.

There should be no overlap between the values reported in columns 1, 2 and 3 of Item 6 on ARF 720.1A. If a reporting entity determines that a loan has become impaired (as per the definition of ‘impaired’ in Prudential Standard APS 220 Credit Quality), this should be reported in column 3. Exposures that are past due for between 30 and 89 days but are not impaired should be reported in column 1. Exposures that are past due for 90 days or more that are well secured (not impaired) should be reported in column 2. As outlined in RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection, reporting of past due and impaired exposures should be consistent with data reported in the ARF 220.0: Impaired Facilities form. Reporting entities are encouraged to revisit APS 220 and Reporting Standard ARS 220.0: Impaired Facilities for further guidance.

(a) Using the example of a $100 loan secured by $30 of collateral, what should be the value reported as ‘secured’ in ARF 720.1 – the total value of a loan or only the amount that is secured?

(b) ARF 742.0 requires additional classification of loans by ‘fully secured’, ‘partially secured’ and ‘unsecured’. In the example above, the loan would be classified as ‘partially secured’. What would be the value reported in Item 5, Column 4 (Credit outstanding: Value) for collateralisation type (Column 2) ‘partially secured’?

(a) If a loan is considered ‘secured’ (i.e. some amount of collateral exists to support the loan exposure), then the entire loan balance should be reported as ‘secured’ on ARF 720.1, regardless of the value of the collateral. In the given example, report the loan value of $100, not the collateral value of $30.

(b) If a loan is considered ‘partially secured’ (i.e. some amount of collateral exists to support the loan exposure but the LVR is greater than 100%), then the entire loan balance should be reported in column 5 (‘Credit outstanding: Value’) for the ‘partially secured’ collateralisation type in Table 5 of ARF 742.0, regardless of the value of the collateral. In the given example, report the loan value of $100, not the collateral value of $30.

ARS 720.1 and ARS 720.2 form an integral part of the ARS 720.0 balance sheet, but were split into separate forms for ease of review. Entities with no relevant deposits or loans (or finance leases) may submit a nil return as applicable. The agencies are not seeking to implement a different reporting threshold for these forms as the cohort of reporting entities exceeding a reporting threshold will be assessed annually, while the information on deposits, loans and finance leases will be required for any given period in which the relevant amount reported on ARS 720.0 is non-zero.

Offset accounts are used to offset the balance of a linked loan when calculating the interest payable by a customer.

For the purposes of EFS, the interest rate on offset accounts should be reported as the contractual rate payable on the linked loan account, multiplied by the proportion of the offset account balance that is offset against the loan balance. For instance, if the balance in the offset account is fully offset against the loan balance, then the interest rate on the offset account would be the interest rate reported on the loan account. However, if only half of the balance in the offset account is offset against the relevant loan balance, then report the interest rate on the offset account as half of the interest rate on the loan account (see the definition of ‘offset accounts’ in ARS 701.0). As an example, assume a $100 housing loan with an interest rate of 4 per cent and a linked offset deposit account (which has a contractual interest rate of 0 per cent):  

• If the loan balance ($100) exceeds the deposit balance ($50), an interest rate of 4 per cent will be charged on the net balance of the loan ($50). The entire loan balance and the entire deposit balance should each be reported with an interest rate of 4 per cent (since all of the offset account balance is being utilised to offset the loan).  
• If the deposit balance ($200) exceeds the loan balance ($100), no interest will be payable/receivable by the customer on the loan/deposit. The entire loan balance should be reported with an interest rate of 4 per cent, and the entire deposit balance should each be reported with an interest rate of 2 per cent (since only half of the offset account balance is being utilised).

Under ARS 701.0, deposit accounts should only be reported as ‘non-interest-bearing’ if none of the contractual interest rates on the account are greater than zero. Since the interest rate to be reported on offset accounts is dependent on the loan interest rate, offset accounts should be treated as interest-bearing deposits for the purposes of the EFS collection.

Please note the following:  

• ARS 701.0 currently states “report the interest rate as the contractual rate payable on the linked loan account, divided by the proportion of the offset account balance”. The italicised part is incorrect and will be amended to read “multiplied by” in due course, as per the guidance in this FAQ response.
• RPG 701.0 (section 1.15, example 1) currently advises that if the deposit balance exceeds the loan balance, then both balances should be reported with an interest rate of 0 per cent. This guidance is incorrect and will be amended in line with this FAQ response at the nearest opportunity.

ARF 720.0 does not require a breakdown of intra-group assets to be reported, except between the total and denominated in FX. In ARF 720.3, there is no specific investment type that the agencies expect to be reported under item 1.1.6. Investments. The inclusion of this item is for completeness, as a residual, to capture an investment that does not fit into the specific categories between items 1.1.1. and 1.1.5.or in the 'other assets' items (i.e. 1.1.7.1.1. and 1.1.7.1.2.). A nil response is acceptable for this item.

The row items that apply to the reporting of intra-group assets and liabilities for a foreign bank branch in ARF 720.3 are:

• items 2.1.1 and 4.1.1: Assets and liabilities due from/to the parent entity;
• items 2.1.4 and 4.1.4: Assets and liabilities due from/to SPVs; and
• items 2.1.5 and 4.1.5: Assets and liabilities due from/to (all) other related parties.

Items 2.1.2/4.1.2 and items 2.1.3/4.1.3 relate only to Australian-owned entities. Foreign-owned entities should not report intra-group assets of liabilities under these row items.  

For example, assume a reporting entity is an Australian branch of a foreign bank. Assume also that the reporting entity has some assets due from another overseas branch of the same foreign bank (not located in Australia). Because the entity is foreign-owned, these assets should be reported in item 2.1.5 ‘assets due from other related parties’ (as they do not fall under item 2.1.1 or item 2.1.4). These assets should not be reported in item 2.1.3 ‘assets due from the ADI’s overseas-based banking operations’.

Consider the following example:

• The reporting entity provides an intra-group loan of $30bn to its covered bond trust (CBT) (reported in items 1.1.5 and 2.1.4 of ARF 720.3).
• This loan is used to fund the notional transfer of $30bn of mortgages into the CBT cover pool (reported in items 3.1.4 and 4.1.4 of ARF 720.3).
• The reporting entity issues $25bn of covered bonds backed by the loans in the CBT cover pool.

Subordination

A loan is 'subordinated' if the borrower would not repay the reporting entity until it has repaid other specified creditors. Funding extended to the CBT will be subordinated to the extent that it has been used to fund mortgages up to the value of the covered bonds issued. Using the example above: $25bn of the $30bn loan should be reported as subordinated, since this amount must first be repaid to the covered bond holders; and $5bn should be reported as unsubordinated, since no other creditors have a claim on this amount.  

On the other side of balance sheet, the liability to the CBT is the value of loans that have been notionally transferred to it. This should be reported as unsubordinated, since the loans are legally being held in trust by the CBT (even though they remain on-balance sheet for EFS reporting purposes). Using the example, the entire $30bn notional liability would be reported as unsubordinated.

Security

Finance should be reported as ‘secured’ if the lender has recourse to collateral in the event of the borrower’s default. 

All funding extended to an SPV that is used to purchase mortgages to be held in a cover pool should be reported as secured, since the mortgages act as security for that funding. In the given example, the full $30bn loan to the CBT should be reported as secured. 

On the other side of the balance sheet, the notional liability to the CBT ($30bn in the given example) is also effectively secured by the mortgages transferred and should also be reported as secured. 

Yes – please report ordinary share capital in item 4. Total ASX-listed equity securities.

ARF 720.6 is used to report securities issued by the reporting entity. The liability that should be reported in items 1.1.1 and 1.2.1 on ARF 720.6 is therefore the liability of the reporting entity as the drawer of a bill, rather than the drawee (i.e. please report the value of bills drawn on your entity). Note that the value of securities reported on ARF 720.6 largely reconciles with the ‘borrowings: debt securities’ items on ARF 720.0 (excluding differences in valuation methodology) – see section 2.7.7 of RPG 701.0 for details of the reconciliation.

Where the reporting entity is the drawee of a bill (i.e. the bill is drawn on a customer and is held and/or accepted by the reporting entity), this should be reported on ARF 720.0A/B in line with the guidance in section 2.1.6 of RPG 701.0. Bills accepted or endorsed by the reporting entity should also be reported on ARF 720.7 (Bill Acceptances and Endorsements).

Yes. All hybrid securities that are treated as liabilities under accounting standards should be reported in item 3 of ARF 720.6. Regulatory capital instruments, including Tier 2 capital instruments, are defined to be hybrid securities in ARS 701.0.

Items 9 and 5 on ARF 721.0A/B collect information on the reinvestment of cash collateral received from securities lending only. Cash collateral received under repurchase agreements that has been reinvested should not be reported in these items.

All individual repurchase agreements and reverse repurchase agreements transactions should be reported in ARF 721.0A/B. Reporting entities should not apply any netting to the reporting.

Supra‑national and foreign agency-issued debt securities’ means debt obligations of intergovernmental, governmental or quasi-governmental organisations.

Supra-national issuers are defined as institutions owned by more than one sovereign state.

Foreign agency issuers can generally be identified based on meeting three key criteria:

1. They have a public mandate;
2. They have strong links with the public sector; and
3. They have a high importance for the public sector.

Agencies tend to be partly or wholly owned by state and/or local governments and include promotional, development and municipal/local government banks; infrastructure operators; export financiers; public debt or deficit repayment funds; and entities established for resolution and reorganisation of the banking system.

Definitions of ‘lending fee/premium’ and ‘rebate rate’ have been added to ARS 701. Both should be expressed as an annualised percentage of the market value of the securities borrowed. See definitions below.

Lending fee/premium – A securities lending fee is the fee/premium that the borrower of the security pays to the lender when the securities loan is backed by non-cash collateral. The lending fee/premium is predetermined in a securities lending agreement between the borrower and lender and should be expressed as an annualised percentage of the market value of the securities borrowed.

Rebate rate – A securities lending rebate rate is the rate that the borrower of the security pays the lender when the securities loan is backed by cash collateral. The rebate fee is predetermined in a securities lending agreement between the borrower and lender (or the agent on the lender’s behalf) and should be expressed as an annualised percentage of the market value of the securities borrowed.

The unique transaction identification number should be reported as an alphanumeric value throughout ARF 721.0A. The reference to ‘whole number’ will be amended at the earliest opportunity for items 2-8.  

Note the unique transaction identification number is expected to be common to the transaction and the collateral characteristics reported for each repo, reverse repo, securities borrowing transaction or securities lending transaction. E.g. the unique transaction identification number used to report the characteristics of a specific repo transaction in item 1 on ARF 721.0A may also be used to report the characteristics of the repo collateral in item 2. 

All outstanding repurchase agreements and reverse repurchase agreements should be reported in Item 3 of ARF 721.0B. Please report positions with zero haircuts in the >0 to <= 0.5 per cent haircut category. ARF 721.0B and its instructions will be corrected for this error at the earliest opportunity. 

The primary purpose of ARF 722.0 is to collect data on derivative stock balances and quarterly flows (i.e. net transactions, market value changes, exchange rate variations, and other changes). This data is required for statistical compilations.

Due to form design limitations, ARF 722.0 does not currently capture quarterly derivative flows for STM derivatives because under a STM arrangement opening and closing gross positions are zero.

To collect the quarterly derivative flows data for STM derivatives, entities are asked to report on reasonable estimates of what the derivative positions (opening and closing) would have been if the derivatives were collateralised-to-market. Please report the estimates in Item 5 (Derivatives with resident and non-resident clearing houses and central counterparties that are margined). This data will be used to compile the quarterly derivative flows and will not affect the compilation of stock balances. Before adopting this approach, the entity is asked to notify the agencies (email to: DataAnalytics@apra.gov.au).

The agencies also confirm that, in this situation, it is acceptable that the treatment of opening and closing positions of STM derivatives reported on ARF 722.0 will differ from ARF 720.0.

ARF 723.0 will replace the RBA Quarterly Margin Lending Survey. The first reporting period for ARF 723.0 is for the September quarter 2019. The final RBA Quarterly Margin Lending Survey will be for the June quarter 2019. That is, there will not be an overlap in reporting.  

ARF 730.1 will also replace the annual RBA Banking Fees Survey - please see EFS FAQ ID 18 and EFS FAQ 25 on APRA's website for further information on ARF 730.1 and the RBA Banking Fees Survey.

The agencies confirm that "Income tax expense" is not to be reported on ARF 730.0.

APRA requests that affected ADIs report the 'major bank levy' expense in item 8.1.8. 'Other operating expenses' (PL20088) on ARF 730.0. Although ARF 730.0 should generally be aligned with accounting standards, APRA requests a departure in the case of the major bank levy, as income and expense items need to be reported gross of tax effects for the purposes of the ABS National Accounts measures of GDP. The major bank levy will distort the ABS’s calculation if it’s included within interest expense on ARF 730.0. APRA will consider amending ARF 730.0 to insert an item of expense for the major bank levy.

Expenses paid to external market data providers should be reported at item 7.1.7 Other information technology expense. Such expenses may include subscriptions, individual terminals and data feeds.

Report expenses relating to credit card loyalty and rewards programs and marketing costs at 8.1.5 Advertising expense.

Report staff bonuses at 5.1.1 Total wages and salaries. 

The first reporting period for ARF 730.1 will be June 2020 (with a standardised 30 June year-end). The first submission date will be four calendar months after the end of the reporting period. The final RBA Banking Fees Survey will cover the year ended in 2019 and will be submitted in early 2020. This will result in a short overlap period of between two and six months for some institutions that currently complete the annual RBA Banking Fees Survey, depending on the individual institution's year end.

For ARF 730.0, the first quarterly reporting period ends on 30 September 2019.  The ARF 730.0 form should be submitted to APRA within 28 calendar days after the end of the reporting period (i.e. submitted by 28 October 2019).

For ARF 730.1, the first annual reporting period ends on 30 June 2020 (i.e. the reporting period covers from 1 July 2019 to 30 June 2020).  The ARF 730.1 form should be submitted to APRA within four calendar months after the end of the reporting period (i.e. submitted by 31 October 2020).

Interchange payments related to four-party card scheme transactions should be excluded from the ARF 730.1 return. These payments include interchange expenses paid by acquirers, and interchange revenue received by issuers. This is because these interchange payments are made between the issuing and acquiring banks, and are not considered to be a fee charged to a customer directly (see blue ‘Interchange fee’ line for an stylised example: Figure 8B.1 | Submission to the Financial System Inquiry – March 2014 | RBA). To exclude these interchange payments, the merchant’s bank should report merchant service fees without netting off interchange expenses (report merchant service fees gross of expenses) under Item 3 – Merchant fees charged. Similarly, the card-issuing bank should exclude interchange revenue received from the reporting of fees charged in the ARF 730.1 return.

Institutions should report fees charged net of housing loan cashback offers on ARF 730.1. ‘Cashback offer’ in this context refers to monetary incentives that are tied to a customer taking out a housing loan with the reporting institution. These offers are typically associated with refinancing loans and often offset (in part or in full) switching fees faced by the refinancing customer.  

The instructions for ARF 730.1 ABS/RBA Fees Charged clarifies that the reporting form does not follow Australian Accounting Standards for the treatment of fees and fees should be reported net of any waivers, exemptions or rebates afforded to the customer. In addition, as per RPG 701.0 Reporting Practice Guide section 2.13.2 ‘Reporting basis’, the primary focus of ARF 730.1 is on quantifying fees charged to customers from the customer’s perspective rather than the reporting institution’s perspective.

All values on ARF 741.0 should be reported in Australian dollars or the Australian dollar equivalent of the foreign currency amount (see ARS 741.0 for further guidance). The value of commitments reported could therefore be affected by foreign currency fluctuations. However, changes in the value of existing commitments due only to foreign currency fluctuations should not be reported as ‘new’ borrower-accepted commitments (as defined in ARS 701.0).

If so, where should increases to existing loan contracts be reported in Table 1 of ARF 741.0?

‘New borrower-accepted commitments’ refers to borrower-accepted commitments that were made during the reporting period. As outlined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, this includes agreements to increase the credit limit of an existing loan contract (for example, as part of an internal finance).

The value of all new borrower-accepted commitments for business loans (to resident non-related parties) during the reporting period should be reported in item 1.1 of ARF 741.0. The number of lending facilities for these new borrower-accepted commitments during the reporting period should be reported in item 1.2 of ARF 741.0.

In ARF 741.0, the value of credit limits should be reported for item 2 (fixed-term loans) and for columns 1 and 2 in item 3 (fixed-term loans and revolving credit). For a borrower-accepted commitment, the credit limit is the maximum amount of funds that will be made available to the borrower without additional authorisation or approval. This includes outstanding balances (including capitalised interest or fees) and any other funds that can be drawn without additional approval by the lender in this amount (see ‘credit limit’ definition in ARS 701.0).

However, the concept of a ‘credit limit’ (as defined) does not apply to borrower-accepted commitments for finance leases or bill acceptances. Please report the value of new commitments for ‘other finance’ (i.e. finance leases and bill acceptances) in column 3 of item 3 and finance leases in item 4.

Certain items explicitly state the type of security e.g. “secured by residential property” (e.g. item 1.1.1.1. and 2.1.2.1. of ARF 742.0A/B), for such items only the named type of security would qualify for the loan to be considered secured.

In cases where it is not made explicit, both tangible and intangible security would qualify the loan to be considered secured.

The number of facilities should be reported in column 1 of items 1 and 2 in ARF 742.0A/B rather than the number of loans. See the definition of ‘(lending) facility’ in ARS 701.0 for further information.

The value of credit outstanding for fixed-term business loans to resident non-related parties as at the end of the month reported in Item 7.13 is equivalent to:

• the total value of credit outstanding for fixed-term loans to resident non-related parties for all business types in Table 3 (column 4), plus fixed-term margin lending.
• the total value of credit outstanding for fixed-term business loans to resident non-related parties reported by business type in Table 6 (column 4).
• the sum of column 1 and column 3 for item 3.1.3.4 on ARF 720.1A. That is, the sum of credit outstanding for fixed-term business loans to non-financial businesses and community service organisations (column 1) and financial institutions (column 3).

RPG 701.0: ABS/RBA Reporting Concepts for the EFS Collection contains further details on some of the reconciliations relevant to item 7.13 on ARF 742.0A/B noted above.

All amounts funded during the reporting period should be reported in item 2 of ARF 742.0A/B, irrespective of whether or not they were drawn (see instructions in ARS 742.0). As defined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, a loan or finance lease is considered ‘funded’ once any proportion of the funds is made available for the borrower to draw down according to the terms of the contract (this may differ from the definition of ‘funded’ used internally by reporting institutions). This will occur after there is a borrower-accepted commitment to provide finance. See definition of ‘funded’ in ARS 701.0 for further information on when different types of finance are to be considered ‘funded’ for reporting purposes.  Loan amounts drawn down during the reporting period are to be reported in Table 7 of ARF 742.0A/B.

In line with the guidance in ARS 701.0 and RPG 701.0, all interest rates reported on ARF 742.0 should be the contractual rates to be paid or received by the counterparty, not the effective rates. That is, the reported interest rates should exclude any fees charged to borrowers. This guidance applies to all EFS forms on which interest rates are reported. Fees are to be reported separately on ARF 730.1; all fees are to be included on this form, regardless of whether they can be treated as interest income or interest expense under the Australian Accounting Standards.

The treatment of fees only differs in the case of ARF 730.0. On this form, fees that form an integral part of the effective interest rate of a financial instrument (as defined in AASB 9, AASB 13 and AASB 132) should be included within ‘interest income earned’ or ‘interest expense incurred’, in accordance with Australian Accounting Standards. All other fees and commissions are to be reported under Item 8.1.4 (Other operating expense – Fees and commissions).

Under ARS 701.0, variable interest rate products are those which have “an interest rate that fluctuates over the term of the agreement. Fluctuations in interest rates generally occur at the discretion of the lender and/or in response to movements in some other interest rate or other variable specified in the contract.”

The situation described meets the definition of a variable interest rate facility and should be reported as such. Although the interest rate is fixed for some specified time window, there is a provision for the interest rate to fluctuate over the term of the agreement at regular intervals, in line with changes in a market reference rate.

The instructions in ARS 742 and ARS 744 outline how to report the total number, value and weighted average interest rate of facilities where facilities have a mix of interest rate or repayment types.

When reporting the number of facilities, each facility should only be reported once. The particular row item on ARF 742.0 and ARF 744 to report each facility in should be determined by the predominant interest rate type or repayment type by value. For example, if the majority of the value of a facility has a fixed interest rate, the facility should be reported as a fixed interest rate facility only.

When reporting the value of facilities, the values should be apportioned across the relevant interest rate and/or repayment types and reported accordingly.

When reporting the weighted average interest rate, each interest rate should be weighted by the value of its corresponding balance outstanding.

For example, assume the total value of a facility is $500,000, of which $300,000 is at a fixed interest rate of 4% p.a. and $200,000 is at a variable interest rate of 5% p.a.

When reporting the number of facilities, this facility should be counted once only as a fixed interest rate facility because the predominant interest rate by value is a fixed interest rate.

When reporting the value of facilities, $300,000 should be reported under fixed interest rate and $200,000 should be reported under variable interest rate.

The weighted average interest rate of the facility should be calculated as: (4% x $300,000) + (5% x $200,000)/$500,000.

The same instructions and calculation methodologies apply to a mix of repayment types (e.g. interest-only or amortising).

For the purposes of reporting on the EFS forms, ‘credit outstanding’ means the total balance owed by the borrower as at the end of the reporting period, including any capitalised interest and fees (see ARS 701.0). ‘Capitalised’ in this case refers to interest and fees that have been charged to the customer and thereby added to the loan balance. Such ‘capitalisation’ will depend on the terms of the contract – in the case of mortgages, for example, this would often happen on a monthly basis; for some other finance, interest and fees may be charged less frequently.

‘Interest charged’ refers to the interest that has been charged or notified to the customer by adding it to the balance of their loan account(s) on a contractual basis. Interest that has been charged will therefore be included in the value of ‘credit outstanding’ and should be reported in item 7.6 of ARF 742.0. This is distinct from interest accrued on an accounting basis. Interest that has accrued but not yet been charged is recorded as 'interest receivable' (item 10.1 on ARF 720.0) and is not included in item 7 of ARF 742.0.

For example, assume a $100 mortgage outstanding on 1 April, accruing 3% interest per month; interest is ‘charged’ to the customer on the 20th day of the month. Interest accrues daily and is reported as ‘interest receivable’ until it is charged to the customer. On 20 April, the $2 of accrued interest will be charged to the customer and added to the balance of their loan account(s) (the amount that the customer is now due to repay). On the 30 April reporting date, the reporting entity should record $102 of credit outstanding on ARF 720.0 and ARF 720.1, and $1 of interest receivable (accrued between 21-30 April) on ARF 720.0. The entity should also report $2 in item 7.6 of ARF 742.0.

Note, the same principles apply when reporting item 5 of ARF 743.0. 

A commitment should be reported as being serviced by foreign-sourced income if the reporting entity has determined that any of the ‘allowable income’ used to assess the validity of the loan qualifies as foreign-sourced income – regardless of whether the commitment was made inside or outside the reporting entity’s serviceability policy.  The share of allowable income that qualifies as foreign-sourced income is irrelevant.  If foreign-sourced income is not taken into account in the serviceability assessment of the particular loan, then the commitment should not be reported as being serviced by foreign-sourced income (because in such cases, the foreign-sourced income has not been relied upon).

The wording of the guidance on foreign-sourced income in section 2.16.7 of RPG 701.0 has been amended to provide the clarification that loans with foreign-sourced income should be included even when outside the reporting institution’s serviceability criteria.

Yes. As per the guidance on borrower-accepted commitments (section 1.13 of RPG 701.0), reporting entities may use the date of receipt of a signed contract as indicating borrower acceptance of an offer of finance as a proxy for the date the contract is signed by the borrower.

In Column 5 of item 7, report the average facility credit limit for each combination of future scheduled repayments category, property purpose and repayment type. That is, for each combination of future scheduled repayments, property purpose & repayment type, sum the individual credit limits for each facility and divide by the total number of facilities in that combination.

In items 7.1 and 7.2, report the average number of monthly repayments for amortising and interest-only loans (respectively). For example, when calculating item 7.1, sum the number of future scheduled repayments for each individual amortising facility and divide by the number of amortising loans reported in item 7. 

The instructions in ARS 743.0 will be amended at the earliest opportunity.

The scheduled repayment amounts due to be paid by the customer over the life of the loan may be unknown (e.g. in the case of interest-only loans where the scheduled repayment amount may vary each period based on factors such as the outstanding balance of the loan and the excess repayments available). In such cases, the most recent scheduled repayment amount as at the reporting date can be used to calculate the number of future scheduled repayments covered by the customer’s stock of accumulated excess repayments and balances in associated redraw and offset accounts for the purposes of reporting item 7 of ARF 743.0. If the calculated number of future scheduled repayments is greater than the residual loan term, please cap the reported number at the length of the residual loan term.

Also note that item 7 of ARF 743.0 only collects information on resident fixed-term housing loans that are outstanding. Any loans that have been committed or funded but not yet drawn down (i.e. which have no credit outstanding and hence no repayments are required) should be excluded when reporting this item. Once the loan has been draw upon, either fully or partially, the loan should be included in the reporting for this item.  

The contracted value of scheduled repayments due in the reporting period should be reported in item 5.7 of ARF 743.0, regardless of whether the payments were received from the borrower or whether the payments were made via a deduction from a redraw facility. Where a scheduled repayment is met by being deducted from the borrower's redraw facility, report the full value of the scheduled repayment due in the reporting period in item 5.7 and the amount drawdown from the redraw facility in item 5.3.

The reconciliation requirements for items 1.1.1 (column 4) and 1.2.1 (column 4) in ARF 744.0 are incorrect. These items record the value of credit outstanding for revolving credit facilities, while Item 4.3 (columns 1 and 2) of ARF 743.0 records the total credit limits available on revolving credit facilities. The available credit limits of revolving credit facilities may differ from the value of credit outstanding. These reconciliation requirements will be removed from the ARF 744.0 form instructions.

No. Item 4.1 (average loan-to-valuation ratio at commitment) should include only loans with a known LTV ratio. Please exclude unsecured loans and loans with unknown LTV from this calculation.

In item 1 of ARF 744.0A/B, the interest rate charged on loans temporarily not bearing interest should be reported as follows: 

• In column (3) of item 1, the average interest rate (net of offset balances) should include loans temporarily not bearing interest, and
• In column (5) of item 1, exclude loans temporarily not bearing interest from the calculation of the weighted average interest rate. 

The instructions for ARF 744.0A/B will be clarified at the earliest opportunity.

The weighted average residual term of the fixed interest rate period should be reported using only the fixed interest rate portion of split loan facilities. Table 5 of ARF 744.0A/B collects information on the residual term of the fixed interest rate period.

Example 1: Full offset

For a loan with $800,000 of credit outstanding and an interest rate of 7 per cent, with $200,000 in a linked offset account that is fully offset against the outstanding balance of the loan for the purposes of calculating interest, the value of credit outstanding, net of offset accounts reported would be as follows:

$800,000 – $200,000 = $600,000

For the purposes of calculating the weighted average interest rate (net of offset balances), the interest rate that enters the weighted average for this loan is 7 per cent and the weight corresponds to a value of $600,000.

Example 2: Partial offset

For a loan with $800,000 of credit outstanding and an interest rate of 7 per cent, with $200,000 in a linked offset account that is partially offset against the outstanding balance of the loan for the purposes of calculating interest, the value of credit outstanding, net of offset accounts reported will depend upon the proportion of the linked offset account that is offset for the purposes of calculating interest. If 75 per cent of the balance in the offset account is offset against the outstanding loan balance for the purpose of calculating interest, then the value of credit outstanding, net of offset accounts reported would be as follows:

$800,000 – ($200,000 × 75%) = $800,000 – $150,000 = $650,000

For the purposes of calculating the weighted average interest rate (net of offset balances), the interest rate that enters the weighted average for this loan is 7 per cent and the weight corresponds to a value of $650,000.

The interest rate reported should be the weighted average contractual rate for all balances that accrued interest in the month. Because a credit card may charge interest in the month on only a portion of the balances outstanding, the interest rate to be reported should be calculated as interest charged on credit cards during the month divided by the relevant balance × 100 per cent. In the absence of further instructions, the relevant balance is the balance of credit card debt outstanding that is incurring interest at the end of the month.

If a liability has a contractual rate that references a benchmark market rate, this is considered to be an ‘interest rate greater than zero’. This will apply even if the referenced market rate falls to 0% for some period. A deposit should only be reported as ‘non-interest bearing’ if the contractual rate is specified to be zero. In the given example, the deposit should therefore be classified as ‘interest-bearing’.

For Item 1 of ARF 747.0, report deposits outstanding received from non-resident financial institutions that are related parties under the counterparty classification ‘Other related parties’. ARS 747.0 will be updated to clarify that this counterparty classification includes all non-resident related parties (including financial institutions) and any resident related parties other than financial institutions. Deposits outstanding received from all non-residents that are not related parties should be reported under the counterparty classification ‘Other non-residents’.

The weighted average residual term for fixed term deposits (ARF 747.0A/B, item 4, column 6) and for fixed-interest housing loans (ARF 744.0A/B, item 5, column 6) should both be reported as a number to two decimal places. The instructions and taxonomy for these items will be updated in line with this guidance. Note that the unit of measurement for these values is years (number of days remaining to maturity/365 days).

The reporting instructions for ARF 748.0A/B have been amended to remove all references to face value.  The latest version of ARS 748.0 released on APRA’s website in March 2018 reflects these changes.  Values on this form should be reported in line with valuation practices used under Australian Accounting Standards.

Section 2.21.4 of RPG 701.0 contains guidance on how to calculate a weighted average term (or tenor) along with an example.

No – covered bonds that are asset-backed should not be reported in items 1.4 and 2.4 of ARF 748.0A/B. This is because "asset-backed securities" and "covered bonds" are defined distinctly and treated separately under the EFS collection (see ARS 701.0). While they are similar, the covered bonds do not fall under the definition of asset-backed securities for the purposes of the EFS collection.

The intention of both items 1.4 and 2.4 in ARF 748.0A/B is for asset-backed securities issued by related parties to be reported, where the underlying assets are held on-balance sheet in accordance with accounting principles. The agencies note that the words "issued by related parties" are unintentionally absent from the instructions for item 1.4 on ARF 748.0A and both items on ARF 748.0B and will be added. Activities of SPVs that are related parties (i.e. all SPVs other than covered bond SPVs) are not consolidated within domestic books reporting. However, the 'memo items' in 1.4 and 2.4 are of interest to the agencies, and the agencies have therefore requested this information on this report.

In ARF 748.0, the cost/value of funds is only reported for ‘other interest-bearing liabilities’ (i.e. other than deposits or debt securities) (items 4 and 5). As per the general guidance in RPG 701.0 (section 1.15.3), the cost/value of funds rate should be reported on an AUD or AUD-equivalent basis.

The ‘benchmark rate’ on senior unsecured debt (item 3) should also be reported on an AUD or AUD-equivalent basis (this will be reflected in the updated guidance in section 2.21.7 of RPG 701.0).

ARF 748.0 does not collect information on the cost/value of funds for debt securities.  Instead, items 1 and 2 collect information on the interest rate of debt securities on issue. As per the instructions on reporting ‘interest rates’ on ARF 748.0, “for debt securities issued in foreign currency, do not convert the interest rate back to an implied AUD rate.”  That is, report interest rates on foreign currency debt securities as the contractual rate paid to the counterparty in that foreign currency (see RPG 701.0, section 1.15).

Negative interest rates should be included in the calculation of weighted average interest rates on ARF 748.0, including in the case of ‘other interest-bearing liabilities’ (Items 4 and 5, Column 2).

For example, if the reporting entity’s outstanding interest-bearing liabilities include $400m at an interest rate of 2% and $100m at an interest rate of -0.5%, the weighted average interest rate would be calculated as: (2% × 400/500) + (-0.5% × 100/500) = 1.5%.

The definition and guidance on the reporting of benchmark rates on senior unsecured debt in Item 3 of ARF 748.0 will be updated in both ARS 701.0 and RPG 701.0 (section 2.21.7) in line with the response below.

For the purposes of ARF 748.0, the ‘benchmark rate’ is the rate at which the reporting entity can issue senior unsecured debt for a given tenor in the relevant currency. The guiding principle in reporting Item 3 is to report the reporting entity’s indicative wholesale funding cost curve for senior unsecured debt in the relevant currency, as would be used in the calculation of internal funds transfer pricing.

The calculation of the reported benchmark rate curve may vary across institutions. It is expected that it would typically be based on the price of recent primary market issuance by the reporting entity or comparable institutions if available, but it may also be interpolated or based on secondary market spreads or estimated in some other way. The reported rates should incorporate any relevant costs that are included in the internal calculation of the entity’s benchmark rate reference curve (such as hedging costs and issuance fees).

For senior unsecured funding denominated in a foreign currency, the benchmark rate should be reported on an AUD (or AUD-equivalent) basis and incorporate adjustments for relevant hedging costs (such as a cross-currency basis).

The benchmark rate should be expressed as an outright rate, and not as a spread. That is, even if the reporting entity would typically consider the benchmark rate as a spread over a reference market rate for internal purposes, then the applicable market rate, as at the end of the reporting period, should be added to the spread when reporting the benchmark rate on ARF 748.0.

Item 6 of ARF 748.0 should include derivatives positions with related parties, as per the general form instructions. The current reconciliation requirement in the instructions for item 6.1 is incorrect. The ARF 748.0 instructions for item 6.1 will be amended at the earliest opportunity to read as follows:

Report total derivatives used to hedge banking book assets and/or liabilities.

The fair value reported in item 6.1 (column1) must be equal to:

• the sum of banking book derivatives reported in item 10.3.2 (column 1) on ARF 720.0A/B and banking book derivatives reported in item 1.1.7.1.2 on ARF 720.3;

less

• the sum of banking book derivatives reported in item 18.8.2 (column 1) on ARF 720.0A/B and banking book derivatives reported in item 3.1.4.1.2 on ARF 720.3.

for entities that submit these forms.

The D2A validation rules for item 6.1 of ARF 748.0 have been updated in line with this response.

The tenor of hybrid securities should be calculated using the period between issuance and the next call date (at issuance; i.e. the first call date for the security), rather than the contractual maturity date, for the purpose of the ‘Tenor’ item codes on ARF 748.0. However, please classify all hybrid securities as long-term throughout the EFS collection, even if the period between issuance and the next call date is less than or equal to one year. In particular, this means that no hybrid securities should be reported in items 1.1 or 2.1 on ARF 748.0, or in column 1 of item 16 on ARF 720.0.

No. Notwithstanding the guidance to report asset-backed securities issued by related parties in items 1.4 and 2.4 of ARF 748.0 (see EFS FAQ 60), please do not report any asset-backed securities that were issued in relation to self-securitisations (also known as internal securitisations; as defined in ARS 701.0). 

Please calculate the tenor for asset-backed securities using the weighted average life of these securities as estimated at issuance, based on your reporting entity’s internal assumptions, rather than the contractual maturity. The reporting instructions will be corrected at the earliest opportunity. 

Interest rates on floating-rate debt securities should be reported using the value of the floating benchmark rate plus the spread, as at the end of the reporting period, in line with the example in item 2.21.2 in RPG 701.0. The benchmark rate used for reporting on ARF 748.0 may often differ from the benchmark rate as at the time of the most recent rate reset. This fits with the agencies’ intention to be able to meaningfully compare interest rate data across institutions (as the timing of rate resets is not uniform across institutions). 

The instructions for ARF 748.0 will be clarified at the earliest opportunity.

The reconciliation instructions for column 7 of item 1.3 in ARF 748.0B will be corrected at the earliest opportunity. The correct instructions are:

The value of total outstanding debt securities maturing in 12 months or less reported in item 1.3 (column 7) must also equal the sum of:

• short-term debt securities reported in item 16.2 (column 1) on ARF 720.0A;
• long-term debt securities maturing in 12 months or less reported in of item 16.2 (column 3) on ARF 720.0A;
• total debt securities reported in item 3.1.3.1 (column 1) on ARF 720.3; 
• long term debt securities maturing in 12 months or less reported in of item 3.1.3.1.1.1 (column 1) on the ARF 720.3.

less:

• total debt securities with an original maturity of greater than 12 months reported in item 3.1.3.1.1 on ARF 720.3 

for entities that submit these forms.

Such liabilities are only notional (in that they counterbalance a notional transfer of assets to the related party), so they should not be reported as interest-bearing liabilities for the purpose of ARF 748.0 (nor should they be reported as asset-backed securities in items 1.4 and 2.4; please see EFS FAQ 129). For the avoidance of doubt, covered bonds issued by the reporting entity should be reported in items 1.2 and 2.2 of ARF 748.0.

Yes. All new wholesale debt liabilities issued should be reported on ARF 748.0 in the relevant fields, regardless of whether or not the liability matures within the month that it is issued.

Changes to existing liabilities that should be reported as new issuance include: 

•  If the maturity date of the liability is extended beyond the originally contracted unwind date. This excludes any liabilities that have no defined unwind date (e.g. ‘open repos’). 
• If the originally contracted amount is amended to increase the cash value of a liability. 
• If the interest rate for a liability is renegotiated. This does not include trades where the interest rate is a floating rate e.g. cash rate + 0.1%. 

Changes to existing liabilities that should not be reported as a new issuance include: 

• Changes to the collateral pledged for a repurchase agreement (e.g. specific security or security type).
• Changes to the market prices/yields on collateral used for a repurchase agreement. 
• Changes to collateral haircuts for a repurchase agreement.
• Margin calls associated with an existing purchase agreement.  

Except where these changes result in an increase in the cash value of a liability.

Hybrid securities should be reported as either fixed rate or variable rate depending on the rate which applies at the reporting date.  Hybrid securities with a fixed interest rate should be reported as such until such time that the rate transfers to a variable rate.

Yes. Please report zero coupon borrowings as fixed rate.

These terms are used interchangeably for the purposes of the EFS collection and have the same definition. They are all limited to only natural persons.

As outlined in ARS 701.0 ABS/RBA Definitions for the EFS Collection, an internal refinance occurs where:

1. a new loan is obtained to replace an existing loan that was provided by the ADI or RFC and the credit limit has increased from that which was available prior to refinancing; or the credit limit on an existing loan by the ADI or RFC is increased (e.g. a ‘top-up’); and
2. the funds following will be used for substantially the same purpose class as the existing loan contract.

An assessment of whether the purpose class has changed is therefore required to determine whether a new borrower accepted commitment should be reported as an internal finance. 

When additional finance is approved for an existing borrower and combined with existing finance provided by the ADI or RFC, the predominant purpose class should be changed if:

1. the additional finance is for a different purpose class than that of the existing finance; and
2. the additional finance is greater than the outstanding amount of existing finance.

If the predominant purpose class has changed, the loan should not be reported as an internal refinance. The loan should be reported as a new commitment for the new purpose class and the purpose sub-class of the additional finance should be identified.  

If the predominant purpose class has not changed, the loan should be reported as a new commitment for the existing purpose class. Where there is a separate internal refinance sub-class item on the reporting form, the loan should be reported as an internal refinance, regardless of the purpose sub-class of the additional finance. Where there is no separate internal refinance sub-class item (for example, for most revolving credit items), the loan should be reported as a new commitment for the existing purpose sub-class (for example, credit cards). The amount of the new credit limit should be reported (the total value of the loan); that is, the previous credit limit should not be subtracted from the new credit limit. 

Note that loans that have been granted temporary relief as part of a COVID 19 support should not be regarded as restructured and should not be reported as internal refinancing commitments. At the conclusion of the relief period, however, the loan should be reported as an internal refinance if it meets the criteria outlined above. 

See Section 1.8.5 ‘Refinances’ of RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection for additional information on internal and external refinance and examples of how to determine predominant purpose class.

Yes, these loans should be classified to households, which is the primary borrower sector in this case.

Yes, these loans should be classified to households, which is the primary borrower sector in this case. The ownership of the company by the natural person (being the primary borrower) has no effect for the purposes of classifying the loan.

Yes, these loans should be classified to private unincorporated businesses, which is the primary borrower sector in this case.

For loans and finance leases, a borrower-accepted commitment is recognised once the borrower has accepted the contract or letter of offer issued by the reporting entity. For bills, however, a borrower-accepted commitment is only recognised once the bill itself is ‘accepted’. According to the definition in ARS 701.0, a bill of exchange is ‘accepted’ once it has been signed by the drawee, thus triggering formal acceptance of the liability to pay out the funds on the due date. A borrower’s acceptance of an offer for a facility under which bills and only bills may be drawn on the borrower in the future is not considered to be a borrower-accepted commitment.

Several EFS forms (in particular, ARF 720.4-720.7 and ARF 721.0) require securities to be reported at market value, as defined in ARS 701.0. In cases where the market value is not available, RPG 701.0 notes that 'fair value' (measured in accordance with AASB 13 Fair Value Measurement) is an acceptable proxy (see, for example, sections 2.5.2 and 2.7.2).

Please note that the valuation method used for ARF 720.0 differs. In ARF 720.0, trading securities should generally be recorded at fair value, in accordance with AASB 9 Financial Instruments (see RPG 701.0, section 2.1.12 for details).

For the purposes of EFS reporting, ‘parent entity’ has the meaning as in AASB 3, AASB 127 and AASB 128, and thereby AASB 10 (see ARS 701.0). Under AASB 10, a ‘parent’ is an entity that controls the investee; this means that that the entity has:

• power over the investee (see paragraphs 10–14);
• exposure, or rights, to variable returns from its involvement with the investee (see paragraphs 15 and 16); and
• the ability to use its power over the investee to affect the investor’s returns (see paragraphs 17-18).

It is up to the reporting entity to determine which related entity or entities possess these attributes and should therefore be classified as a ‘parent entity’ for the purposes of EFS reporting. Note, this classification should align with statutory reporting.  

Under ARS 701.0, ‘security’ refers to assets pledged by the borrower or a third party against a loan. In line with the Australian Accounting Standards, qualifying ‘assets’ include tangible and intangible assets, but exclude contingent assets (see AASB Framework for the Preparation and Presentation of Financial Statements and AASB 137). Guarantees and other contingent assets should therefore not be considered when determining whether to report a loan as ‘secured’ for the purposes of the EFS collection.

The savings account in the example provided does not meet any of the criteria for ‘non-transaction deposits’ set out in ARS 701.0. In particular:

• the funds can be instantaneously transferred to a linked transaction account;
• there is no restriction on, or penalty based on, the number of withdrawals or transfers;
• there is no restriction on, or penalty for, early withdrawal or transfer; and
• the interest rate offered does not differ based on whether a certain number of withdrawals have been made.

As such, the account should be classified as a transaction deposit.

Note that ‘transaction deposits’ are defined as “deposits that are directly accessible and exchangeable … on demand at par and without penalty or restriction” (see ARS 701.0). The EFS standards and guidance further explain that the ‘penalty or restriction’ aspect of the definition only relates to the transferability of the deposit – that is, the ability to use the funds instantaneously, with no restrictions on the number or value of transfers or withdrawals. It is therefore possible for a deposit account to incur penalties under some circumstances but still be classified as a transaction deposit. This is the case in the given example – even though the interest rate differs according to the final balance of the account, it is not affected by the number or value of withdrawals or transfers that are made.

The instructions for calculating margin on deposits and other interest-bearing liabilities in ARF 747.0 and ARF 748.0 are correct. The definition of ‘margin’ in ARS 701.0 will be amended at the earliest opportunity to read: “For liabilities, the margin is equal to the value of funds less the weighted average interest rate paid to the depositor or holder.” 

The current definitions of 'write-backs' and ‘recoveries’ in ARS 701.0 are incorrect. At the earliest opportunity APRA intends to amend these definitions as follows: 

• Write-backs — Refers to the value of reversals of impairment losses on financial assets (not measured at fair value through profit or loss) through non-cash adjustments, as determined in accordance with Australian Accounting Standards.
• Recoveries — Refers to the value of reversals of impairment losses on financial assets through cash collections as determined in accordance with Australian Accounting Standards.

The five public asset funds under the two sovereign wealth funds owned by the Commonwealth Government should also be classified as Commonwealth general government. Any state-owned future funds should be classified as State, territory and local general government.

The agencies' expectations are for the stock of outstanding loans, including loans that have previously been internally refinanced, to be correctly classified according to their predominant purpose. The requirement to reclassify loans where their predominant purpose changes applies to both Phase 1 balance sheet returns and Phase 2 finance flow returns. The agencies understand that reclassifying the back-book for changes in predominant loan purpose may be challenging for reporting institutions. RPG 701.0 specifies acceptable ongoing or transitional proxy data items or methodologies for updating back-book reporting. The agencies note that reporting institutions have a number of options for updating their back-book treatment, including using existing run-off and turnover data, and natural contact points with customers to update or collect relevant data points. Where a reporting institution believes it will be unable to source information for a data point (and this cannot be remedied by using the proxies specified in RPG 701.0) in time for the commencement of EFS reporting it should contact APRA with details of the expected timetable on which this information will be able to be provided and a proposal for an interim solution.

The wording in the decision tree (figure 6) should have been in line with the text in Section 1.10 to be “50 per cent or more”.

The definitions stipulated in ARS 701.0 ABS/RBA Definitions for private non-financial investment funds, money-market investment funds, and non-money-market financial investment funds each relate to collective investment schemes, which may include trusts or corporations.  Corporations that qualify as part of these sectors are limited to listed investment companies only.  The decision trees to assist with the identification of investment funds in RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection do not reference listed investment companies as they are designed to provide a practical approach in appropriately classifying funds (particularly unlisted funds) where identification is more problematic. APRA will update RPG 701.0 to make the intention of the practical approach clearer.

It is correct that item 2.2 of ARF 744.0A/B requires housing loans to non-resident to be classified as owner-occupied or investment.  The statement in section 1.9.6 of RPG 701 that says “it is not necessary to separately report whether lending to non-resident households for housing is for owner-occupation or investment” is incorrect and has been amended. The guidance provided in RPG 701 for how to classify a non-resident housing loan as either owner-occupied or investment is correct and should be used as guidance for categorising non-resident loans in item 2.2 of ARF 744.0A/B.

The agencies have created a register of investment funds that provide the name, ARSN and ABN of each fund. This will be updated on an annual basis. The list is based on the information in the ATO Australian Business Register and the ASIC MIS register. Investment funds for whom this information was not available have not been included in the fund register. As this is a customised register combining datasets from the ASIC and the ATO and is updated periodically, entities are requested to contact APRA on a needs basis.

A reporting entity may use the location of the collateral securing a housing loan to proxy the address of the property (see RPG 701.0, Section 1.11 – Location of Property). Where the loan is collateralised against multiple properties, the ADI or RFC can use the location of the property with the highest collateral value to determine the property location.