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No. 11 of 2012 Determinations/Prudential as made
This determination makes Reporting Standard ARS 117.0 - Repricing Analysis.
Administered by: Treasury
Registered 15 Dec 2012
Tabling HistoryDate
Tabled HR05-Feb-2013
Tabled Senate05-Feb-2013

Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2012

Reporting Standard ARS 117.0 Repricing Analysis

 

Financial Sector (Collection of Data) Act 2001

 

I, Steven John Davies, delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:

(a)     REVOKE Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2008, including Reporting Standard ARS 117.0 Repricing Analysis made under that Determination; and

(b)     DETERMINE Reporting Standard ARS 117.0 Repricing Analysis, in the form set out in the Schedule, which applies to financial sector entities to the extent provided in paragraph 3 of the reporting standard.

Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities, and the revoked reporting standard shall cease to apply, on 1 January 2013.

This instrument commences on 1 January 2013.

 

Dated 7 December 2012

 

[Signed]

 

Steven John Davies

General Manager

Statistics

 

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

financial sector entity has the meaning given in section 5 of the Act.

 

 

Schedule

Reporting Standard ARS 117.0 Repricing Analysis comprises the 46 pages commencing on the following page.


Reporting Standard ARS 117.0

Repricing Analysis

Objective of this Reporting Standard

This Reporting Standard outlines the overall requirements for the provision of information to APRA in relation to an authorised deposit-taking institution’s repricing profile.

It includes reporting form ARF 117.0A Repricing Analysis – Denominated in AUD and the series of reporting forms ARF 117.0B.1 to ARF 117.0B.9 Repricing Analysis – Denominated in Foreign Currency and should be read in conjunction with Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs).

Authority

1.             This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.

Purpose

2.             Information collected in reporting form ARF 117.0A Repricing Analysis – Denominated in AUD (ARF 117.0A) and the series of reporting forms ARF 117.0B.1 to ARF 117.0.B.9 Repricing Analysis – Denominated in Foreign Currency (ARF 117.0B) is used by APRA for the purpose of prudential supervision. It may also be used by the Reserve Bank of Australia and the Australian Bureau of Statistics.

Application and commencement

3.             This Reporting Standard applies to an authorised deposit-taking institution (ADI) that is included in one of the classes of ADI to which this Reporting Standard applies, as set out in the following table.

 

 

 

Class of ADI

Applicable

Bank – Advanced or Applicant Advanced

Yes

Bank – Standardised

Yes

Branch of a Foreign Bank

Yes

Building Society

Yes

Credit Union

Yes

Specialist Credit Card Institution (SCCI)[1]

Yes

Provider of Purchased Payment Facilities

No

Other ADI

Yes

 

This Reporting Standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 6).

 

4.             This Reporting Standard applies for reporting periods commencing on or after 1 January 2013.

Information required

5.             An ADI to which this Reporting Standard applies must provide APRA with the information required by the versions of ARF 117.0A and ARF 117.0B designated for an ADI at Level 1 for each reporting period.

6.             If an ADI to which this Reporting Standard applies is part of a Level 2 group, the ADI must also provide APRA with the information required by the versions of ARF 117.0A and ARF 117.0B designated for an ADI at Level 2 for each reporting period, unless the ADI is a subsidiary of an authorised NOHC. If the ADI is a subsidiary of an authorised NOHC, the ADI’s immediate parent NOHC must provide APRA with the information required by that form for each reporting period. In doing so, the immediate parent NOHC must comply with this Reporting Standard (other than paragraphs 5 and 12) as if it were the relevant ADI.

Forms and method of submission

7.             The information required by this Reporting Standard must be given to APRA in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application.

Note: the Direct to APRA application software may be obtained from APRA.

Reporting periods and due dates

8.             Subject to paragraph 9, an ADI to which this Reporting Standard applies must provide the information required by this Reporting Standard in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the ADI.

9.             APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular ADI, to require it to provide the information required by this Reporting Standard more frequently, or less frequently, having regard to:

(a)           the particular circumstances of the ADI;

(b)          the extent to which the information is required for the purposes of the prudential supervision of the ADI; and

(c)           the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics.

10.         The information required by this Reporting Standard must be provided to APRA in accordance with the following table. The right hand column of the table sets out the number of business days after the end of the reporting period to which the information relates, within which information must be submitted to APRA by an ADI in each of the classes set out in the same row in the left hand column.

Class of ADI

Number of business days

Bank – Advanced or Applicant Advanced

30

Bank – Standardised

20

Branch of a Foreign Bank

20

Building Society

15

Credit Union

15

SCCI

15

Provider of Purchased Payment Facilities

Not applicable

Other ADI[2]

20

 

11.         APRA may grant an ADI an extension of a due date, in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

12.         The information provided by an ADI under this Reporting Standard (except for the information required under paragraph 6) must be the product of processes and controls that have been reviewed and tested by the external auditor of the ADI. GS 012 Prudential Reporting Requirements for Auditors of Authorised Deposit-taking Institutions, issued by the Auditing and Assurance Standards Board, provides guidance on the scope and nature of the review and testing required from external auditors. This review and testing must be done on an annual basis or more frequently if necessary to enable the external auditor to form an opinion on the accuracy and reliability of the information.

13.         All information provided by an ADI under this Reporting Standard must be subject to processes and controls developed by the ADI for the internal review and authorisation of that information. It is the responsibility of the Board and senior management of the ADI to ensure that an appropriate set of policies and procedures for the authorisation of information submitted to APRA is in place.

Authorisation                                           

14.         When an ADI submits information under this Reporting Standard using the ‘D2A’ software, it will be necessary for an officer of the ADI to digitally sign, authorise and encrypt the relevant information. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the ADI who have authority from the ADI to transmit the information to APRA.

Transitional

15.         An ADI must report under the old Reporting Standard in respect of a transitional reporting period. For these purposes:

old Reporting Standard means the Reporting Standard revoked in the determination making this Reporting Standard (being the Reporting Standard which this Reporting Standard replaces).

transitional reporting period means a reporting period under the old Reporting Standard:

(a)           which ended before the date of revocation of the old Reporting Standard; and

(b)          in relation to which the ADI was required, under the old Reporting Standard, to report by a date on or after the date of revocation of the old Reporting Standard.

Note: For the avoidance of doubt, if an ADI was required to report under an old Reporting Standard, and the reporting documents were due before the date of revocation of the old Reporting Standard, the ADI is still required to provide any overdue reporting documents in accordance with the old Reporting Standard.

Interpretation

16.         In this Reporting Standard:

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998.

Australian-owned bank means a locally incorporated ADI that assumes or uses the word ‘bank’ in relation to its banking business and is not a foreign subsidiary bank.

authorised NOHC has the meaning given in the Banking Act 1959.

bank – advanced or applicant advanced means an Australian-owned bank or a foreign subsidiary bank that has APRA’s approval or is seeking APRA’s approval to use an internal ratings-based approach to credit risk and/or an advanced measurement approach to operational risk for capital adequacy purposes.

bank – standardised means an Australian-owned bank or a foreign subsidiary bank that uses the standardised approaches to credit risk and operational risk for capital adequacy purposes in respect of the whole of its operations.

branch of a foreign bank means a ‘foreign ADI’ as defined in the Banking Act 1959, but does not include an SCCI that is a foreign ADI.

building society means a locally incorporated ADI that assumes or uses the expression ‘building society’ in relation to its banking business.

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays.

class of ADI means each of the following:

(i)            bank – advanced or applicant advanced;

(ii)          bank – standardised;

(iii)        branch of a foreign bank;

(iv)        building society;

(v)          credit union;

(vi)        other ADI;

(vii)      provider of purchased payment facilities; and

(viii)    an SCCI.

credit union means a locally incorporated ADI that assumes or uses the expression ‘credit union’ in relation to its banking business and, for the purposes of this reporting standard, includes Cairns Penny Savings and Loans Limited.

foreign subsidiary bank means a locally incorporated ADI in which a bank that is not locally incorporated has a stake of more than 15 per cent.

GS 012 means the auditing and assurance standard entitled Prudential Reporting Requirements for Auditors of Authorised Deposit-taking Institutions so made by the Auditing and Assurance Standards Board.

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of Prudential Standard APS 001 Definitions (APS 001).

Level 1 has the meaning in APS 001.

Level 2 has the meaning in APS 001.

locally incorporated means incorporated in Australia or in a State or Territory of Australia, by or under a Commonwealth, State or Territory law.

other ADI means an ADI that is not an Australian-owned bank, a branch of a foreign bank, a building society, a credit union, a foreign subsidiary bank, a provider of purchased payment facilities or a specialist credit card institution, but for the purposes of this reporting standard does not include Cairns Penny Savings and Loans Limited.

provider of purchased payment facilities means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to providing purchased payment facilities.

reporting period means a period mentioned in paragraph 8 or, if applicable, paragraph 9.

specialist credit card institution means an ADI that is subject to a condition on its authority under section 9 of the Banking Act 1959 confining the banking business that the ADI is authorised to carry on to the activities of credit card acquiring and credit card issuing in any credit card scheme that was designated as a payment system under section 11 of the Payment Systems (Regulation) Act 1998.

stake means a stake determined under the Financial Sector Shareholdings Act 1998, as if the only associates that were taken into account under paragraph (b) of subclause 10(1) of the Schedule to that Act were those set out in paragraphs (h), (j) and (l) of subclause 4(1).

subsidiary has the meaning given in the Corporations Act 2001.

17.         APRA may determine, in writing, that an individual ADI of one class of ADI is to be treated, for the purposes of this Reporting Standard, as though it was an ADI of another class of ADI.
































Reporting Forms ARF 117.0A and ARF 117.0B

Repricing Analysis

Instruction Guide

This instruction guide is designed to assist in the completion of the Repricing Analysis suite of forms. This suite consists of:

(a)           ARF 117.0A Repricing Analysis – Denominated in AUD (ARF 117.0A); and

(b)          ARF 117.0B.1 to ARF 117.0B.9 Repricing Analysis – Denominated in Foreign Currency (ARF 117.0B).

These forms measure an authorised deposit-taking institution’s (ADI’s) exposure to repricing risk. In completing these forms, ADIs should refer to Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs) (APS 117).

General directions and notes

Reporting entity

These forms are to be completed at Level 1 and Level 2[3] by each ADI (subject to the paragraph following the table) that is included in one of the classes of ADI to which these forms apply, as set out in the following table.

 

Class of ADI

Reporting required

Bank – Advanced or Applicant Advanced[4]

Yes

Bank – Standardised

Yes

Branch of a Foreign Bank

Yes[5]

Building Society

Yes

Credit Union

Yes

Specialist Credit Card Institution (SCCI)

Yes[6]

Provider of Purchased Payment Facilities

No

Other ADI

Yes

 

If an ADI is a subsidiary of an authorised non-operating holding company (NOHC), the report at Level 2 is to be provided by the ADI’s immediate parent NOHC.[7]

Securitisation deconsolidation principle

Except as otherwise specified in these instructions, the following applies:

 

1.             Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under Prudential Standard APS 120 Securitisation (APS 120):

(a)           special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes;

(b)          the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns; and

(c)           the underlying exposures (i.e. the pool) under such a securitisation may be excluded from the calculation of the ADI’s regulatory capital (refer to APS 120). However, the ADI must still hold regulatory capital for the securitisation exposures[8] that it retains or acquires and such exposures are to be reported in reporting form ARF 120.0 Standardised Securitisation or the series of reporting forms ARF 120.1A to ARF 120.1C IRB Securitisation (as appropriate). The risk-weighted assets relating to such securitisation exposures must also be reported in reporting form ARF 110.0 Capital Adequacy.

2.             Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI elects to treat the securitised assets as on-balance sheet assets under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk or Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, such exposures are to be reported as on-balance sheet assets in APRA’s regulatory reporting returns. In addition, these exposures must also be reported as a part of the ADI’s total securitised assets within reporting form ARF 120.2 Securitisation – Supplementary Items.

Reporting period and timeframes for lodgement

The forms are to be completed as at the last day of the stated reporting period (i.e. the relevant quarter). The following table specifies the number of business days after the end of the relevant reporting period, within which each class of ADI must submit data to APRA.

Class of ADI

Number of business days

Bank – Advanced or Applicant Advanced

30

Bank – Standardised

20

Branch of a Foreign Bank

20

Building Society

15

Credit Union

15

SCCI

15

Provider of Purchased Payment Facilities

Not applicable

Other ADI[9]

20

An immediate parent NOHC must submit data to APRA within the same timeframe as its subsidiary ADI.

Unit of measurement

These forms should be completed in Australian dollars (AUD) and in accordance with the units set out for each class of ADI in the following table.

Class of ADI

Units

Bank – Advanced or Applicant Advanced

Millions of dollars rounded to one decimal place

Bank – Standardised

Millions of dollars rounded to one decimal place

Branch of a Foreign Bank

Millions of dollars rounded to one decimal place

Building Society

Whole dollars with no decimal place

Credit Union

Whole dollars with no decimal place

SCCI

Whole dollars with no decimal place

Provider of Purchased Payment Facilities

Not applicable

Other ADI

Whole dollars with no decimal place

 

An immediate parent NOHC must complete these forms in AUD and in accordance with the same units as its subsidiary ADI.

 

Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.

Specific instructions

The following instructions are applicable at Level 1 and (where relevant) Level 2.

Currency

AUD exposures are to be reported in reporting form ARF 117.0A and foreign currency exposures are to be reported in the series of reporting forms ARF 117.0B.1 to ARF 117.0B.9. 

An ADI must complete a separate form for each material currency[10] in which it has exposures. Where there are exposures in foreign currencies that do not meet the definition of material currency (i.e. immaterial currencies), these exposures may be grouped into a single composite form (or several composite forms) based on the interest rate characteristics of the group of currencies (refer to Attachment B to APS 117). Where this is the case, the ADI must complete a separate form for each composite of immaterial currencies.

A maximum of nine foreign currency repricing analysis forms are available for an ADI to report exposures in material foreign currencies and composites of immaterial foreign currencies.

Forms ARF 117.0B.1 to ARF 117.0B.9 Repricing analysis – denominated in foreign currency

When reporting on the foreign currency forms, an ADI must indicate the material currency or composite of immaterial currencies to which each form it is completing relates by:

(a)           in the case of a material currency, selecting from the currency dropdown list, the three-letter alphabetic International Organization for Standardization (ISO) code[11] (e.g. NZD, USD) of the relevant foreign currency; or

(b)          in the case of a composite of immaterial currencies, selecting ‘OTH’ (for ‘other’) from the currency dropdown list and providing a self-explanatory description for the composite of immaterial currencies (e.g. ‘Eastern Europe’, ‘South-East Asia’, ‘Pacific Islands’) under Description of composite of immaterial currencies. This field is limited to 80 characters.

Maturity ladders

Separate maturity ladders should be used for each material currency and for each composite of immaterial currencies in which an ADI has a non-traded interest rate risk exposure.

To derive a maturity ladder, notional principal cash flows are to be grouped into a series of time bands according to the occurrence of each expected cash flow. The time bands and weighting factors are given in the following table.

Table 1 Time bands for notional principal cash flows

Time band

Middle of time band

Proxy of modified duration (years)

Weighting factor[12] (%)

0 to <1 month

0.5 months

0.04

0.08

1 to < 3 months

2.0 months

0.16

0.32

3 to < 6 months

4.5 months

0.36

0.72

6 to < 12 months

9.0 months

0.71

1.43

1 to < 2 years

1.5 years

1.38

2.77

2 to < 3 years

2.5 years

2.25

4.49

3 to < 4 years

3.5 years

3.07

6.14

4 to < 5 years

4.5 years

3.85

7.71

5 to < 7 years

6.0 years

5.08

10.15

7 to < 10 years

8.5 years

6.63

13.26

10 to < 15 years

12.5 years

8.92

17.84

15 to < 20 years

17.5 years

11.21

22.43

20 or more years

22.5 years

13.01

26.03

 

For each maturity ladder, an ADI’s non-traded interest rate risk exposure is calculated as follows:

(a)           the notional principal cash flows are added up in each time band.  This results in a single positive or negative net notional principal cash flow amount for each time band (item 5 Net position/gap);

(b)          the net notional principal cash flow for each time band is multiplied by the relevant weighting factor (item 6 Weighting) to estimate the sensitivity of the positions in the different time bands (to an assumed change in interest rates[13]); and

(c)           the resulting weighted positions are added together to determine the net (positive or negative) weighted position of the banking book for each maturity ladder (item 7, column 1 Interest rate sensitivity of banking book).

Repricing profile

ADIs are required to express their banking book items as a series of expected future notional principal cash flows using the repricing assumptions detailed in Prudential Practice Guide APG 117 Interest Rate Risk in the Banking Book (Advanced ADIs).

The repricing analysis should be completed on the basis of the expected repricing profile of assets and liabilities, rather than the contractual repricing (i.e. contractual loan repayment rates) or original maturity.  The expected repricing profile of assets and liabilities should take into account expected loan prepayment/amortisation rates and deposit portfolio run-off, rather than contractual repricing where these are expected to be materially different.  Where the terms and conditions of a banking book item provide for the full break cost of early withdrawals or repayments (‘economic cost’) to be charged to the customer, and it is the ADI’s standard practice to do so, the ADI may use the contractual rather than expected repricing profile for that item provided this practice is applied consistently over time.

Time buckets

 

The time buckets on the form indicate the periods in which the interest rates applying to portfolios (e.g. investments, loans, deposits and borrowings) are expected to reprice (i.e. term to next interest rate repricing/change).  They do not indicate the residual term of the original maturity of the instrument itself, however the two may coincide (e.g. bank bills, term deposits, money market loans).

The amount recorded in each time bucket for each item is the amount of principal of that item that is expected to reprice during that time period rather than any fair value representation of that principal.  Similarly, the amounts in the total column for each item are the sum of the principal amounts in the time buckets in that row, not a fair value.

In the case of variable rate loans, for example, they do not have a fixed repricing term.  Accordingly these should be included in either the 0 to 1 month or >1 up to 3 months time buckets, depending on the time frame the ADI expects to take to adjust its variable rates after movements in the official or market rate.  A 20-year residential loan with a two year fixed interest rate would be included in the >1 up to 2 years time bucket (when the interest rate on the loan will next change/reprice) and not the >15 up to 20 years time bucket (reflecting the maturity/repayment of the loan).  In subsequent quarters, as the term of this fixed interest rate runs its course, it would be included in the >6 up to 12 months category and so on.

Not all assets and liabilities are exposed to interest rate risk.  In such cases, these items should be reported under column 15 Non-interest rate sensitive.

Trading book

Items in the trading book are to be excluded from these forms.  If any funding is provided to the trading book on a longer interest rate basis than overnight, it should be included in these forms as an asset if, and only if, the funding is included as a liability in the ADI’s calculations of capital for traded market risk under Prudential Standard APS 116 Capital Adequacy: Market Risk.  If included, the funding should be allocated to the appropriate time bucket(s) according to the term of the funding.

1 & 2. Assets and liabilities

All line items for assets and liabilities in the repricing analysis forms (except where otherwise stated) are defined in accordance with the corresponding line items in the Statement of Financial Position reporting forms that are relevant to an ADI (e.g. ARF 320.0, ARF 321.0, ARF 322.0 and/or ARF 323.0).

 

2.9 Additional Tier 1 capital items

 

Refer to Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111) for the definition of Additional Tier 1 capital items.

 

2.10 Tier 2 capital items

 

Refer to APS 111 for the definition of Tier 2 capital items.

 

 

2.11 Other liabilities

 

Include all other liability items detailed in the Statement of Financial Position relevant to the ADI that are not reported elsewhere in these forms.

 

4. Derivatives and other commitments

The following section provides examples of swaps, futures and forward rate agreements (FRAs), and the method for reporting these instruments on the repricing analysis suite of forms.

For derivative instruments, the underlying cash flows should be recorded with the correct sign.

4.1 Other commitments (timing is known)

Other commitments should only be included where the timing is known and the commitment affects the ADI’s current interest rate risk profile.  For example, a loan approved but not yet advanced where a 2 year fixed rate has been offered to the borrower should be included in the >1 up to 2 years time bucket.[14]  In contrast to this, a loan approved but not yet advanced, where no rate has been locked in, should be omitted.

4.2.1 Interest rate - swaps

For an interest rate swap, the fixed leg should be allocated to the time bucket corresponding to the residual maturity of the swap and the floating leg should be allocated to the time bucket corresponding to the next rate reset date.  Additionally, the pay side should be recorded as negative the face value, while the receive side should be recorded as positive the face value.

Example 1

An ADI enters into a 3 year swap with a face value of $5 million, under which the ADI pays fixed and receives floating with quarterly resets.  The swap should be initially recorded in the repricing analysis form as negative $5 million in the >2 up to 3 years time bucket (as the swap has a residual maturity of 3 years) and positive $5 million in the >1 up to 3 months time bucket (as the next interest rate reset date occurs in 3 months’ time).  Refer to table 2 below.

Table 2 Reporting the 3 year swap in example 1

 

Total

>1 up to 3 months

>2 up to 3 years

Swaps

0

+5,000,000

-5,000,000

 

In subsequent quarters, the two legs of the swap would be allocated to different time buckets, as appropriate, such that the fixed leg corresponds to the residual maturity of the swap and the floating leg corresponds to the next rate reset date.

Example 2

On 11 June 2006, an ADI enters into a 4.5 year swap with a face value of $10 million, under which the ADI receives fixed and pays floating with semi-annual resets.  The swap should be recorded in the repricing analysis form as at 30 June 2006 as positive $10 million in the >4 up to 5 years time bucket (as the swap has a residual maturity of just less than 4.5 years) and negative $10 million in the >3 up to 6 months time bucket (as the next reset date of 11 December 2006 occurs in just under 6 months’ time).

In subsequent quarters, the two legs of the swap would be allocated to different time buckets, as appropriate.  To illustrate, on 30 September 2006 the swap should be recorded as positive $10 million in the >4 up to 5 years time bucket and negative $10 million in the >1 up to 3 months time bucket (as the next reset date of 11 December 2006 has moved into the >1 up to 3 months bucket).  Subsequently, on 31 December 2006 the swap should be recorded as positive $10 million in the >3 up to 4 years time bucket (as the swap now has a residual maturity of just less than 4 years) and a negative $10 million in the >3 up to 6 months time bucket (as the next reset date is 11 June 2007).

4.2.2 Interest rate - options

Options must be treated on the basis of the delta-equivalent amounts of the underlying or notional underlying.

4.2.3 Interest rate - futures and FRAs

Futures

For a futures contract, the face value should be allocated to time buckets according to the cash flows of the underlying physical instrument.

Example 1

On 25 June 2006, an ADI purchases 20 Sydney Futures Exchange September 2006 90 day bank bill futures contracts.  This transaction results in a notional cash outflow in September 2006 for the purchase of the underlying physical 90 day bank bills and a notional cash inflow in December 2006 when the bank bills mature.  This futures transaction should be recorded in the 30 June 2006 repricing analysis form as negative $20 million in the >1 up to 3 months time bucket (as the underlying physical bills will be purchased in 3 months’ time) and positive $20 million in the >3 up to 6 months time bucket (as the bills mature in 6 months’ time).  Refer to table 3 below.

Table 3  Reporting the 90 day bank bill futures contracts as at 30 June 2006

 

Total

>1 up to 3 months

>3 up to 6 months

Futures & FRAs

0

-20,000,000

+20,000,000

 

Example 2

On 23 September 2006, an ADI sells 15 March 2007 bank bill futures contracts.  This transaction results in a notional cash inflow in March 2007 when the ADI sells the bank bills and a notional cash outflow in June 2007 when the bank bills mature.  This futures transaction would be recorded in the 30 September 2006 repricing analysis form as positive $15 million in the >3 up to 6 months time bucket (as the physical bills will be sold in 6 months’ time) and negative $15 million in the >6 up to 12 months time bucket (as the physical bills mature in 9 months’ time).

In subsequent quarters, the futures transaction would be allocated to different time buckets, as appropriate.  To illustrate, on 31 December 2006 for the bank bill futures contracts, the positive $15 million would have moved into the >1 up to 3 months time bucket and the negative $15 million would have moved into the >3 up to 6 months time bucket.

The approach described above for allocating bought and sold bank bill futures to the repricing analysis forms also applies to bond futures.

Forward rate agreements (FRAs)

Example 1

As with a futures contract, a FRA contract is similarly broken down into the underlying notional cash flows.  A FRA 2/5 for $50 million as a lender (also termed receiver (of interest)) would be reported as negative $50 million in the >1 up to 3 months time bucket and positive $50 million in the >3 up to 6 months time bucket.  This represents lending $50 million in 2 months time until 5 months.  Refer to table 4 below.

Table 4 Reporting the FRA in example 1

 

Total

>1 up to 3 months

>3 up to 6 months

Futures & FRAs

0

-50,000,000

+50,000,000

 

Example 2

A FRA 1/4 for $100 million as a borrower (also termed payer (of interest)) would be represented as a positive $100 million in the 0 to 1 month time bucket and a negative $100 million in the >3 up to 6 months time bucket.

4.2.5 Other

These would include, for example, unused credit card and overdraft facilities, loans approved but not yet advanced, and standby facilities offered by the ADI.

 



[1]           An SCCI operating through a branch in Australia (i.e. is incorporated in an overseas jurisdiction) is not required to comply with this Reporting Standard.

[2]           The definitions of ‘credit union’ and ‘other ADI’ in paragraph 16 of this Reporting Standard provide that Cairns Penny Savings and Loans Limited is to be treated in accordance with the reporting period requirements applicable to credit unions.

[3]           Level 1 and Level 2 are defined in Prudential Standard APS 001 Definitions.

[4]           When an ADI is seeking APRA’s approval to use the internal ratings-based approach to credit risk and/or an advanced measurement approach to operational risk, and is therefore classified as a ‘Bank – Advanced or Applicant Advanced’, the ADI may concurrently be classified as a ‘Bank – Standardised’. In this case, the ADI must comply with the requirements and timeframes for a ‘Bank – Advanced or Applicant Advanced’.

[5]           A branch of a foreign bank is required to complete these forms for the Australian branch only.

[6]           A specialist credit card institution operating through a branch in Australia is required to complete these forms for the Australian branch only.

[7]           Refer to paragraph 6 of Reporting Standard ARS 117.0 Repricing Analysis.

[8]           Securitisation exposures are defined in accordance with APS 120.

[9]           Cairns Penny Savings and Loans Limited is to be treated in accordance with the reporting period requirements applicable to credit unions.

[10]           A material currency is a currency for which the total book value of an ADI’s banking book items in that currency is more than five per cent of the total book value of all of its banking book items.  In determining whether a currency is material, the effect of currency hedges that reduce foreign currency exposure may be taken into account, provided these hedges are effective (refer to APS 117).

[11]           Refer to ISO 4217 Currency names and code elements.

[12]          These factors are based on an assumed parallel shift of 200 basis points and on a five per cent coupon bond yielding five per cent with maturity in the middle of each time band.

[13]          Refer to footnote 10.

[14]          In the interests of having a consistent, simple approach across the industry, this disregards the customer’s option to not draw down the approved loan.  While this simplified approach is used for these forms, an ADI to which APS 117 applies would not be expected to use this approach in its repricing assumptions under APS 117.  Other approaches, such as delta-weighting, may be more appropriate and in any case, the optionality risk must be evaluated under APS 117.