Interest Rate Risk in the Banking Book Reporting (IRRBB) – Response to Submissions
To: All authorised deposit-taking Institutions
The Australian Prudential Regulation Authority (APRA) has released a response to submissions on proposed updates to the following reporting standards and guidance:
- Reporting Standard ARS 117.0 Repricing Analysis (ARS 117.0);
- Reporting Standard ARS 117.1 Interest Rate Risk in the Banking Book (ARS 117.1);
- Reporting Practice Guide RPG 117 Reporting Concepts for the Interest Rate Risk in the Banking Book data collection, including Repricing Analysis (RPG 117); and
- ARS 117.0 Table 3 Calculation Example Spreadsheet (Example Spreadsheet).
These changes are designed to:
- support policy changes made to the Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (APS 117), incorporating lessons learned from the large interest rate movements and last year’s international banking crisis;
- cater for the migration of the data collection from D2A to APRA Connect; and
- ensure a proportionate approach across ADIs, with non-SFIs having less reporting requirements relative to SFIs, commensurate to an ADI’s nature, scale and complexity.
With the strategic solution migrating from D2A to APRA Connect, APRA intends to reduce regulatory burden by removing some existing ad hoc IRRBB data collections as well as reducing the need for future ad hoc collections. This aims to reduce industry cost and long-run reporting burden whilst enabling APRA to better identify and respond to IRRBB risks.
Consultation process
On 12 December 2023, APRA released drafts for the revised ARS 117.0, ARS 117.1, and RPG 117 for consultation.
APRA held multiple pre-consultation workshops (and additional workshops held during consultation) with industry participants to discuss the changes and share feedback on the collection. The workshops provided an opportunity for industry to voice their concerns early to APRA and for APRA to address material concerns before commencing formal consultation.
Response to submissions
APRA received five submissions in response to the reporting standard consultation; three from industry associations, one from an ADI and one from a RegTech provider, of which one was confidential. Submissions provided feedback on timing, alignment of the collection with other reporting requirements, and on the proposed level of granularity of the collection. Submissions also sought more guidance for net interest income (NII) calculations, clarity on APRA’s expectations for the reporting parallel runs, and application to foreign ADIs. While receiving feedback on revisions to be made to ARS 117.0, submissions were largely supportive of the draft ARS 117.1 collection.
APRA has updated ARS 117.0, ARS 117.1, and RPG 117 to provide ADIs with additional information in response to the feedback raised in submissions.
APRA’s response to feedback on the proposals in the consultation is set out in the table below.
| Issue | Comments received | APRA’s response |
|---|---|---|
| Reporting timelines | Multiple submissions noted the importance of providing ADIs with finalised reporting standards, guidance and taxonomy artefacts with enough lead time to implement the changes. Some submissions suggested a minimum period of 12 months prior to the commencement of the first parallel run. | APRA notes the importance of providing industry participants with sufficient time to update the collections. APRA will provide ADIs at least 12 months from the finalisation of the reporting standards until the first parallel run. APRA will work to release the APRA Connect taxonomy artefacts as soon as possible after the finalisation of the reporting standards to facilitate development and implementation of the changes. |
| Data hierarchy and granularity | Some submissions provided recommendations for further simplification and less granularity in ARS 117.0, by removing items that can be derived from other data items and combining items that have similar repricing characteristics. | APRA has reviewed the granularity of the proposed collection and has simplified ARS 117.0 by reducing the number of reporting items. These changes are aimed at balancing industry burden with ensuring sufficient information for supervision needs and without removing key IRRBB and repricing risk information. |
| Alignment of definitions to RBA/ABS Economic and Financial Statistics (EFS) data collection | Most submissions opposed alignment to the EFS data collection, which would be overly burdensome and a concern for overseas subsidiaries, while some responses preferred EFS alignment. | In conjunction with revising reporting granularity, APRA has ensured that the data hierarchy and reporting is reflective of the nature of interest rate risk characteristics rather than merely aligning to the EFS data collection. |
| Alignment with other reporting and disclosure requirements | Some submissions noted a lag between the commencement of the new Prudential Standard APS 330 Public Disclosure (APS 330), effective 1 January 2025 and the new APS 117, which commences 1 October 2025. | Please refer to APRA’s response in the Policy Response letter Finalisation of Interest Rate Risk in the Banking Book requirements.
|
| Application of ARS 117.0 to Foreign ADIs | Some submissions requested information on whether ARS 117.0 reporting requirements apply to Foreign ADIs given they are not subject to APS 117 requirements. | Paragraph 3 of ARS 117.0 states that this reporting standard applies to all classes of ADIs, including Foreign ADIs, except providers of purchased payment facilities. Foreign ADIs have requirements under Prudential Standard CPS 220 Risk Management which identifies IRRBB as a ‘material risk’. The revised ARS 117.0 continues to apply to Foreign ADIs, consistent with the current ARS 117.0. |
| Guidance on NII calculation for ARS 117.1 reporting | Some submissions requested clarification on the calculation of NII, questioning if ADIs can use the assumptions and follow the guidelines specified in the BCBS (2016) IRRBB standard. | APRA has updated ARS 117.1 Table 1 and provided guidance for reporting NII in RPG 117, which is largely aligned to the BCBS (2016) IRRBB standard. |
| Guidance on calculating ARS 117.0 Table 3 | Some submissions sought clarification on how to calculate the interest rate sensitivities across each of the six specific interest rate shock scenarios for a change in economic value of equity (EVE). | ARS 117.0 specifies the reporting instruction to calculate the change in EVE across each of the six prescribed interest rate shock scenarios. ADIs are to multiply out the net-gap across all currencies and each tenor by the relevant weighted factor prescribed by APRA as specified in ARS 117.0. APRA has released a spreadsheet as part of this response package which provides an example of how to calculate the items in Table 3. It is provided only as guidance and entities are expected to comply with the instructions outlined in ARS 117.0. |
Parallel run expectations
On 12 December 2023, APRA released its expectations on parallel run reporting for the ARS 117.0 and ARS 117.1 data collections: Revision to the ADI capital framework: Reporting standards for consultation and parallel run expectations. Some submissions sought further information on APRA’s expectations for data quality and whether the parallel run will apply to non-SFIs and foreign ADIs.
In response to submissions, APRA is updating its position on the parallel run and outlining our expectations below:
- APRA intends to collect data through both D2A and APRA Connect for two quarters before the commencement of the revised APS 117 on 1 October 2025.
- The first and second parallel runs apply to all ADIs, including non-SFIs and foreign ADIs, and are planned for the reporting periods ending 30 June 2025 and 30 September 2025.
- Leading up to the parallel run, entities will be able to interact with the updated collections in APRA Connect’s External Test environment. This will facilitate familiarisation with them ahead of the parallel run commencement.
- Submission for the first parallel should be on a best endeavours basis. It will primarily serve to ensure ADIs are able to input and successfully submit data using APRA Connect, and as a basis for the start of exploratory data quality. APRA expects all ADIs to have complete and high-quality data for the second parallel run. As such, APRA highly encourages ADIs to ensure appropriate data in time for the second parallel run.
- APRA intends to use data in the second parallel run to analyse ADI results and compare to the existing IRRBB data collection in D2A. APRA may ask ADIs to explain differences between D2A and APRA Connect submissions. Data validation rules are expected to be fully enabled in APRA Connect at this stage and will prevent ADIs submitting incorrect data.
- For ADIs who have or are seeking IRRBB model approval, APRA expects that ADIs use models they are seeking re-accreditation from APRA in the first parallel run, even if APRA approval has not yet been granted. By the second parallel run, ADIs with IRRBB model approval are to only use approved models.
- The first ‘go-live’ collection in APRA Connect will be for the reporting period ending 31 December 2025. APRA expects to decommission D2A collections for ARS 117.0 and ARS 117.1 at that time, subject to data quality assurance and successful implementation of the APRA Connect IRRBB data collections.
1st parallel run 30 June 2025 reporting period | 2nd parallel run 30 September 2025 reporting period | First go-live return 31 December 2025 reporting period | |
|---|---|---|---|
| Due date | 40 Business Days after the end of the reporting period | 40 Business Days after the end of the reporting period | 35 Calendar Days after the end of the reporting period |
| Completion | Best endeavours | Expected | Mandatory |
| May use test systems | Yes | Yes | No |
| Completeness of data sets and data quality | Low expectations | High expectations | Complete |
| Use of IRRBB model | Draft models | Approved only | Approved only |
| Subject to APS 310 requirements | No | No | Yes |
| Signed off by accountable executive | No | No | Yes |
Finalised reporting standards and next steps
The finalised reporting standards, guidance, and the calculation spreadsheet for interest rate shock scenarios in ARS 117.0 can be viewed at – Interest rate risk in the banking book | APRA. ADIs are encouraged to contact APRA with any questions regarding the updated collection at DataConsultations@apra.gov.au.
Yours sincerely
Andy Robertson
Chief Data Officer
Technology and Data Division