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Determinations/Financial (Other) as made
This instrument determines Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk.
Administered by: Treasury
Registered 26 Mar 2018
Tabling HistoryDate
Tabled HR27-Mar-2018
Tabled Senate28-Mar-2018

Financial Sector (Collection of Data) (reporting standard) determination No. 3 of 2018

Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk

Financial Sector (Collection of Data) Act 2001

 

I, Alison Bliss, 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. 4 of 2008, including Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk made under that Determination; and

 

(b)          DETERMINE Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk, in the form set out in the Schedule, which applies to the 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 April 2018.

 

This instrument commences on 1 April 2018.

 

Dated: 21 March 2018

 

[Signed]

 

Alison Bliss

General Manager

Data Analytics Division

 

Interpretation

In this Determination:

APRA means the Australian Prudential Regulation Authority.

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

 

 

Schedule

 

Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk comprises the document commencing on the following page.


 

 

 

Reporting Standard ARS 113.0

Foundation Internal Ratings-based (FIRB) Approach to Credit Risk

Objective of this Reporting Standard

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

This Reporting Standard outlines the overall requirements for the provision of information to APRA in relation to an authorised deposit-taking institution’s corporate (including specialised lending and SME corporate), sovereign and bank exposures under the foundation internal ratings-based approach to credit risk.  It should be read in conjunction with:

·                the versions of Reporting Form ARF 113.0A FIRB - Corporate, Reporting Form ARF 113.0B FIRB – Sovereign, Reporting Form ARF 113.0C FIRB – Bank, Reporting Form ARF 113.0D FIRB – SME Corporate and Reporting Form ARF 113.0E FIRB – Specialised Lending designated for an authorised deposit-taking institution reporting at Level 1 and Level 2, and the associated instructions (all of which are attached and form part of this Reporting Standard); and

·                Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk.

 

 

Authority

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

Purpose

2.             Data collected in Reporting Form ARF 113.0A FIRB - Corporate (ARF 113.0A), Form ARF 113.0B FIRB – Sovereign (ARF 113.0B), Reporting Form ARF 113.0C FIRB - Bank (ARF 113.0C), Reporting Form ARF 113.0D FIRB – SME Corporate (ARF 113.0D) and Reporting Form ARF 113.0E FIRB – Specialised Lending (ARF 113.0E) is used by APRA for the purpose of prudential supervision, including assessing compliance with Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113).  It may also be used by the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).

Application and commencement

3.             This Reporting Standard applies to an authorised deposit-taking institution (ADI) that has APRA’s approval or is seeking APRA’s approval to use the foundation internal ratings-based approach to credit risk for capital adequacy purposes.  The Reporting Standard may also apply to the non-operating holding company (NOHC) of an ADI (refer to paragraph 6).

4.             This Reporting Standard commences on 1 April 2018.

Information required

5.             An ADI to which this Reporting Standard applies must provide APRA with the information required by the versions of ARF 113.0A, ARF 113.0B, ARF 113.0C, ARF 113.0D and ARF 113.0E 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 113.0A, ARF 113.0B, ARF 113.0C, ARF 113.0D and ARF 113.0E 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 format, using the ‘Direct to APRA’ application or by a method notified by APRA, in writing, prior to submission.

Note: the Direct to APRA application software (also known as D2A) 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 for 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 RBA or the ABS.

10.         The information required by this Reporting Standard must be provided to APRA within 30 business days after the end of the reporting period to which the information relates.

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.         All information provided by an ADI under this Reporting Standard (except for the information required under paragraph 6) must be the product of systems, processes and controls that have been reviewed and tested by the external auditor of the ADI as set out in Prudential Standard APS 310 Audit and Related Matters. Relevant standards and guidance statements issued by the Auditing and Assurance Standards Board provide information 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 required by the external auditor to enable the external auditor to form an opinion on the accuracy and reliability of the information provided by an ADI under this Reporting Standard.

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. These systems, processes and controls are to assure the completeness and reliability of the information provided.

Authorisation

14.         When an officer of an ADI submits information under this Reporting Standard using the D2A application, or other method notified by APRA, it will be necessary for the officer to digitally sign the relevant information using a digital certificate acceptable to APRA.

Minor alterations to forms and instructions

15.         APRA may make minor variations to:

(a)           a form that is part of this Reporting Standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b)          the instructions to a form, to clarify their application to the form

without changing any substantive requirement in the form or instructions.

16.         If APRA makes such a variation it must notify in writing each ADI that is required to report under this Reporting Standard.

Interpretation

17.         In this Reporting Standard:

AASB has the meaning in section 9 of the Corporations Act 2001.

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.

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

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

immediate parent NOHC means an authorised NOHC, or a subsidiary of an authorised NOHC, that is an immediate parent NOHC within the meaning of paragraph 21(b) of Prudential Standard APS 110 Capital Adequacy (APS 110).

Level 1 has the meaning in APS 001.

Level 2 has the meaning in APS 001.

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

subsidiary has the meaning in section 9 of the Corporations Act 2001.

18.         Unless the contrary intention appears, a reference to an Act, Prudential Standard, Reporting Standard, Australian Accounting or Auditing Standard is a reference to the instrument as in force from time to time.

 

 















 


Reporting Forms ARF 113.0A, ARF 113.0B, ARF 113.0C and ARF 113.0D

FIRB – Corporate (including SME Corporate), Sovereign and Bank

Instruction Guide

This instruction guide is designed to assist in the completion of the FIRB – Corporate, Sovereign, Bank and SME Corporate suite of forms. This suite of forms consists of the following:

(a)           Reporting Form ARF 113.0A FIRB – Corporate (ARF 113.0A);

(b)          Reporting Form ARF 113.0B FIRB – Sovereign (ARF 113.0B);

(c)           Reporting Form ARF 113.0C FIRB – Bank (ARF 113.0C); and

(d)          Reporting Form ARF 113.0D FIRB – SME Corporate (ARF 113.0D).

These forms capture the credit risk-weighted assets (RWA) and risk components of corporate (excluding specialised lending), sovereign, bank, and small- and medium-sized enterprise (SME) corporate exposures under the foundation internal ratings-based (FIRB) approach to credit risk. In completing these forms, authorised deposit-taking institutions (ADIs) should refer to Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113). There is a separate instruction guide for Reporting Form ARF 113.0E FIRB - Specialised Lending.

General directions and notes

Reporting entity

These forms are to be completed at Level 1 and Level 2[1] by each ADI (subject to the following paragraph) that has APRA’s approval or is seeking APRA’s approval to use the FIRB approach to credit risk for its corporate (including SME corporate), sovereign and/or bank IRB asset classes, or to certain exposures within such an asset class, for capital adequacy purposes, in accordance with APS 113.

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.[2]


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[3] that it retains or acquires, and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital.  The risk-weighted assets (RWA) relating to such securitisation exposures must also be reported in Reporting Form ARF 110.0.01 Capital Adequacy (Level 1) and Reporting Form ARF 110.0.2 Capital Adequacy (Level 2).

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 undertakes a funding-only securitisation or synthetic securitisation, 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 timeframe for lodgement

These forms are to be completed as at the last day of the stated reporting period (i.e. the relevant quarter) and submitted to APRA within 30 business days after the end of the relevant reporting period.

Requirements applying to certain ADIs reporting under the forms

 

The following particular requirements apply to certain ADIs:

 

Description of ADI

Reporting requirement

Timeframe for lodgement

 

ADI is operating under  Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) standardised approach, but has applied to adopt (or APRA has indicated that it proposes to approve it for) the FIRB approach for most or all of its operations

 

 

Report under ARF 113.0A, ARF 113.0B, ARF 113.0C and ARF 113.0D (the forms) in respect of any relevant operations to be covered by the FIRB approach (for purposes of assessing prospective credit risk component of regulatory capital calculation after FIRB approval (i.e. “parallel run” of data))

 

 

Within 30 business days of end of reporting period

 

ADI has FIRB approval, but some operations remain under the standardised approach set out in APS 112

 

 

Report under the forms in respect of any relevant operations that are under the FIRB approach  (for purposes of calculating credit risk component of regulatory capital)

 

 

Within 30 business days of end of reporting period

 

 

These ADIs will also have certain reporting obligations under Reporting Form ARF 112.1A Standardised Credit Risk ­– On-balance Sheet Assets and Reporting Form ARF 112.2A Standardised Credit Risk – Off-balance Sheet Exposures.

 

Unit of measurement

These forms are to be completed in millions of Australian dollars (AUD) rounded to one decimal place, unless otherwise specified in this instruction guide.

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

Scope

An ADI is to report in ARF 113.0A, ARF 113.0B, ARF 113.0C, ARF 113.0D:

1.             all on-balance sheet and off-balance sheet corporate (excluding specialised lending), sovereign, bank and SME corporate exposures in its banking book that are subject to the FIRB approach, including those that expose the ADI to counterparty credit risk, except the following specifically excluded items (refer to APS 113):

(a)           assets or investments that are required to be deducted from Tier 1 or Tier 2 capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital; and

(b)          securitisation exposures, which are subject to the requirements of APS 120; and

2.             all trading book exposures (for the relevant asset/sub-asset classes) that expose the ADI to counterparty credit risk (refer to APS 113).

Definitions

In this instruction guide and its corresponding reporting forms (ARF 113.0A, ARF 113.0B, ARF 113.0C and ARF 113.0D), the following expressions have the defined meanings as set out below:

Corporate, sovereign and bank exposures

Refer to APS 113 for the definitions of corporate, sovereign and bank exposures.

SME corporate exposures

An SME corporate exposure is defined as a credit obligation of a corporation, partnership or proprietorship that forms a part of a corporate group that has reported consolidated annual sales of less than AUD 50 million (refer to Attachment B to APS 113 for the treatment of SME corporate exposures).

Specific instructions

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

These forms do not calculate the RWA and expected loss (EL) amounts. An ADI completing these forms is required to disclose these data items based on its own regulatory capital calculations.

Section A: On-balance sheet risk-weighted assets and expected loss amount

Table 1.

Column 1. PD

Report the assigned probability of default (PD) as a percentage rounded to two decimal places, of each obligor grade. Where PDs are bucketed and there are multiple assigned PDs within a bucket, ADIs are to report the exposure weighted average PD of the bucket.

A PD of 100 per cent is to be assigned to all defaulted exposures.

Column 2. Exposures before CRM

Exposure at default (EAD) estimates are to be calculated in accordance with the FIRB approach detailed in Attachment B to APS 113.

Report exposures before credit risk mitigation (CRM) for each assigned PD in the relevant rows.

Column 3. Exposures after CRM

Derived field that sums up the Exposures after CRM by LGD categories (columns 4.1 to 4.5) for an assigned PD.

Columns 4.1 to 4.5. Exposures after CRM by LGD categories

Refer to Attachment B to APS 113 for details of the FIRB approach to the recognition of CRM.

Allocate exposures after CRM according to the following loss given default (LGD) categories for each assigned PD:

1.             Column 4.1: Subordinated claims;

2.             Column 4.2: CRE and/or RRE;

3.             Column 4.3: Eligible financial receivables;

4.             Column 4.4: Eligible financial collateral; and

5.             Column 4.5: Senior unsecured claims.

For reporting under these five categories, the following applies:

(a)           if a claim is a subordinated claim, report the full amount of EAD after CRM in column 4.1;

(b)          if a senior claim is secured by commercial and/or residential real estate (CRE and/or RRE), the exposure should be allocated to the LGD categories as follows (refer to Attachment B to APS 113):

(i)            where the level of collateralisation exceeds 140 per cent, report the full amount of EAD after CRM in column 4.2;

(ii)          where the level of collateralisation is between 140 per cent and 30 per cent, the exposure is divided into fully collateralised and uncollateralised portions as detailed in Attachment B to APS 113. Report the fully collateralised portion in column 4.2 and the uncollateralised portion in column 4.5; and

(iii)        where the level of collateralisation is below 30 per cent, the collateral is not recognised. Report the full amount of EAD after CRM in column 4.5;

(c)           if a senior claim is secured by eligible financial receivables, the exposure should be allocated to the relevant LGD categories as follows:

(i)            where the level of collateralisation exceeds 125 per cent, report the full amount of EAD after CRM in column 4.3;

(ii)          where the level of collateralisation is between 125 per cent and 0 per cent, the exposure is divided into fully collateralised and uncollateralised portions as detailed in Attachment B to APS 113. Report the fully collateralised portion in column 4.3 and the uncollateralised portion in column 4.5;

(d)          if a senior claim is secured by eligible financial collateral, report the exposure value after CRM as detailed in Attachment B to APS 113 in column 4.4. Report the uncollateralised portion in column 4.5;

(e)           for claims secured by pools of eligible collateral, the portions fully covered by eligible financial collateral and eligible financial receivables are to be reported in the respective LGD categories. In the case of a residual portion covered by CRE and/or RRE, report the exposure in column 4.5 if the ratio of the sum of the value of CRE and RRE to the residual exposure is below 30 per cent;

(f)           if a senior claim is not secured by eligible collateral, report the full amount of EAD after CRM in column 4.5.

Table 2.

Column 1. PD

Refer to the instructions for Table 1 in section A of this instruction guide.

Column 2. Weighted average LGD

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for exposures allocated to each assigned PD in the relevant rows.

Weighted average LGD = LGDi x EAD i / EAD i

Where:

LGDi = the LGD associated with the ith exposure allocated to the assigned PD.

EADi = the EAD associated with the ith exposure allocated to the assigned PD.

Column 3: Weighted average maturity

Report the exposure weighted average effective maturity (M), in years rounded to one decimal place, for exposures allocated to each assigned PD in the relevant rows.

Weighted average maturity = Mi x EAD i / EAD i

Where:

Mi = the maturity associated with the ith exposure allocated to the assigned PD.

EADi = the EAD associated with the ith exposure allocated to the assigned PD.

Column 4: Weighted average firm size (ARF 113.0D only)

This section is relevant only to ARF 113.0D.

Report the exposure weighted average firm size for exposures allocated to each assigned PD in the relevant rows.

Weighted average firm size = Salesi x EAD i / EAD i

Where:

Salesi = the level of annual sales associated with the ith exposure allocated to the assigned PD.

EADi = the EAD associated with the ith exposure allocated to the assigned PD.

Column 4. (Column 5 in ARF 113.0D) RWA

RWA are to be calculated in accordance with Attachment B to APS 113. Report the sum of RWA for exposures allocated to each assigned PD in the relevant rows.

Column 5. (Column 6 in ARF 113.0D) EL amount

EL amounts are to be calculated in accordance with APS 113. Report the sum of the EL amounts for exposures allocated to each assigned PD in the relevant rows.

Section B: Off-balance sheet risk-weighted assets and expected loss amount

Off-balance sheet exposures include both non-market-related (including undrawn commitments) and market-related off-balance sheet transactions.

Table 1.

Refer to the instructions for Table 1 in section A of this instruction guide for the following columns:

(a)           Column 1. PD;

(b)          Column 2. Exposures before CRM;

(c)           Column 3. Exposures after CRM; and

(d)          Columns 4.1 to 4.5 Exposures after CRM by LGD categories.

Refer to Attachment B to APS 113 for further details on the calculation of EAD for off-balance sheet exposures.

Table 2.

Refer to the instructions for Table 2 in section A of this instruction guide for the following columns:

(a)           Column 1. PD;

(b)          Column 2. Weighted average LGD;

(c)           Column 3. Weighted average maturity;

(d)          Column 4. Weighted average firm size (ARF 113.0D only);

(e)           Column 4. (Column 5. in ARF 113.0D) RWA; and

(f)           Column 5. (Column 6. in ARF 113.0D) EL amount.

Table 3. Memorandum items: breakdown of non-market-related off-balance sheet exposures

Report the breakdown of non-market-related off-balance sheet exposures, for which a credit conversion factor (CCF) other than 100 per cent is applicable under the FIRB approach (refer to Attachment B to APS 113).

Column 1. Nature of transaction

Report the nature of the non-market-related off-balance sheet transactions (e.g. commitments, direct credit substitutes, performance-related contingencies (refer to Attachment B to APS 113 for further details)). This field is limited to 80 characters.

Column 2. Notional amount

Report the notional amount (or the undrawn amount in the case of undrawn commitments) of off-balance sheet exposures after CRM in the relevant row for each transaction type listed in column 1.

Column 3. Credit equivalent amount

The credit equivalent amount is calculated by multiplying the notional amount/ undrawn amount of off-balance sheet exposures for a transaction type by the appropriate CCF (refer to Attachment B to APS 113). Report the credit equivalent amounts in the relevant row for each transaction type.

Section C: Summary

Column 1. Weighted average PD

Report the exposure weighted average PD, as a percentage rounded to two decimal places, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average PD, as a percentage rounded to two decimal places, for the total non-defaulted exposures within the asset/sub-asset class to which the form relates.

Column 2. Weighted average LGD

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for the total non-defaulted exposures within the asset/sub-asset class to which the form relates.

Column 3. Weighted average maturity

Report the exposure weighted average maturity, in years rounded to one decimal place, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average maturity, in years rounded to one decimal place, for the total non-defaulted exposures within the asset/sub-asset class to which the form relates.

Column 4. Weighted average firm size (ARF 113.0D only)

Report the exposure weighted average firm size, in millions of dollars rounded to one decimal place, for the non-defaulted on-balance sheet and off-balance sheet SME corporate exposures in the relevant rows.

Total

Report the exposure weighted average firm size, in millions of dollars rounded to one decimal place, for the total non-defaulted SME corporate exposures.

Column 4. RWA (Column 5 in ARF 113.0D)

Derived fields that sum up the RWA for the on-balance sheet and off-balance sheet exposures reported in Tables 2 of sections A and B respectively.

Total

Derived field that sums up the RWA for the total on-balance sheet and off-balance sheet exposures within the asset/sub-asset class to which the form relates.

Column 5. EL amount (Column 6 in ARF 113.0D)

Derived fields that sum up the EL amounts for the on-balance sheet and off-balance sheet exposures reported in Tables 2 of sections A and B respectively.

Total

Derived field that sums up the EL amounts for the total on-balance sheet and off-balance sheet exposures within the asset/sub-asset class to which the form relates.

Section D: Memorandum items: purchased receivables (ARF 113.0A and ARF 113.0D only)

Report the breakdown of RWA and EL amount for default risk and dilution risk for all pools of purchased receivables, which are included in the calculation of RWA and EL amounts for corporate and SME corporate exposures in sections A and B of ARF 113.0A and ARF 113.0D respectively.




 


Reporting Form ARF 113.0E

FIRB – Specialised Lending

Instruction Guide

This instruction guide is designed to assist in the completion of the FIRB – Specialised Lending form. This form captures the credit risk-weighted assets (RWA) and the risk components of specialised lending (SL) exposures under the foundation internal ratings-based (FIRB) approach to credit risk. In completing this form, authorised deposit-taking institutions (ADIs) should refer to Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113).

General directions and notes

Reporting entity

This form is to be completed at Level 1 and Level 2[4] by each ADI (subject to the following paragraph) that has APRA’s approval or is seeking APRA’s approval to use the FIRB approach for one or more of its SL sub-asset classes, in accordance with APS 113.

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.[5] 

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[6] that it retains or acquires, and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital.  The RWA relating to such securitisation exposures must also be reported in Reporting Form ARF 110.0.01 Capital Adequacy (Level 1) and Reporting Form ARF 110.0.2 Capital Adequacy (Level 2).

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 undertakes a funding-only securitisation or synthetic securitisation, such exposures are to be reported as on-balance sheet assets in APRA’s regulatory reporting returns. In addition, these exposures are also to be reported as a part of the ADI’s total securitised assets within Reporting Form ARF 120.2 Securitisation – Supplementary Items.

Reporting period and timeframe for lodgement

This form is to be completed as at the last day of the stated reporting period (i.e. the relevant quarter) and submitted to APRA within 30 business days after the end of the relevant reporting period.

Requirements applying to certain ADIs reporting under the form

 

The following particular requirements apply to certain ADIs:

                                       

Description of ADI

Reporting requirement

Timeframe for lodgement

 

ADI is operating under Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112) standardised approach, but has applied to adopt (or APRA has indicated that it proposes to approve it for) the FIRB approach for most or all of its operations

 

 

Report under ARF 113.0E (the form) in respect of any relevant operations to be covered by the FIRB approach (for purposes of assessing prospective credit risk component of regulatory capital calculation after FIRB approval (i.e. “parallel run” of data))

 

 

Within 30 business days of end of reporting period

 

ADI has FIRB approval, but some operations remain under the standardised approach set out in APS 112

 

 

Report under the form in respect of any relevant operations that are under the FIRB approach  (for purposes of calculating credit risk component of regulatory capital)

 

 

Within 30 business days of end of reporting period

 

These ADIs will also have certain reporting obligations under Reporting Form ARF 112.1A Standardised Credit Risk ­– On-balance Sheet Assets and Reporting Form ARF 112.2A Standardised Credit Risk – Off-balance Sheet Exposures.

 

Unit of measurement

This form is to be completed in millions of Australian dollars (AUD) rounded to one decimal place, unless otherwise specified in this instruction guide.

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

Scope

An ADI is to report in this form (ARF 113.0E):

1.             all on-balance sheet and off-balance sheet SL exposures in its banking book that are subject to the FIRB approach, including those that expose the ADI to counterparty credit risk, except the following specifically excluded items (refer to APS 113):

(a)           assets or investments that are required to be deducted from Tier 1 or Tier 2 capital under Prudential Standard APS 111 Capital Adequacy: Measurement of Capital; and

(b)           securitisation exposures, which are subject to the requirements of APS 120; and

2.         all SL exposures in its trading book that expose the ADI to counterparty credit risk (refer to APS 113).

Definitions

In this instruction guide and its corresponding reporting form (ARF 113.0E), the following expressions have the defined meanings as set out below:

Specialised lending exposures

Refer to APS 113 and Prudential Practice Guide APG 113 Internal Ratings-based Approach to Credit Risk – January 2013 (APG 113) for details on the characteristics of the four sub-asset classes of SL - project finance, object finance, commodities finance and income-producing real estate (IPRE).

Specific instructions

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

This form does not calculate the RWA and expected loss (EL) amounts. An ADI completing this form is required to disclose these data items based on the outputs of its own regulatory capital calculations.

Section A: On-balance sheet risk-weighted assets and expected loss amount

Table 1.

Column 1. PD

Report the assigned probability of default (PD) as a percentage rounded to two decimal places, of each obligor grade. Where PDs are bucketed and there are multiple assigned PDs within a bucket, ADIs are to report the exposure weighted average PD of the bucket.

A PD of 100 per cent is to be assigned to all defaulted exposures.

Column 2. Exposures before CRM

Exposure at default (EAD) estimates are to be calculated in accordance with the FIRB approach detailed in Attachment B to APS 113.

Report exposures before credit risk mitigation (CRM) for each assigned PD in the relevant rows.

Column 3. Exposures after CRM

Derived field that sums up the exposures after CRM by LGD categories (columns 4.1 to 4.5) for an assigned PD.

Columns 4.1 to 4.5. Exposures after CRM by LGD categories

Refer to Attachment B to APS 113 for details of the FIRB approach to the recognition of CRM.

Allocate exposures after CRM according to the following loss given default (LGD) categories for each assigned PD (refer to Attachment B to APS 113):

1.             Column 4.1: Subordinated claims;

2.             Column 4.2: CRE and/or RRE;

3.             Column 4.3: Eligible financial receivables;

4.             Column 4.4: Eligible financial collateral; and

5.             Column 4.5: Senior unsecured claims.

For reporting under these five LGD categories, the following applies:

(a)           if a claim is a subordinated claim, report the full amount of EAD after CRM in column 4.1;

(b)          if a senior claim is secured by commercial and/or residential real estate (CRE and/or RRE), the exposure should be allocated to the LGD categories as follows (refer to Attachment B to APS 113):

(i)            where the level of collateralisation exceeds 140 per cent, report the full amount of EAD after CRM in column 4.2;

(ii)          where the level of collateralisation is between 140 per cent and 30 per cent, the exposure is divided into fully collateralised and uncollateralised portions as detailed in Attachment B to APS 113. Report the fully collateralised portion in column 4.2 and the uncollateralised portion in column 4.5; and

(iii)        where the level of collateralisation is below 30 per cent, the collateral is not recognised. Report the full amount of EAD after CRM in column 4.5;

(c)           if a senior claim is secured by eligible financial receivables, the exposure should be allocated to the LGD categories as follows:

(i)            where the level of collateralisation exceeds 125 per cent, report the full amount of EAD after CRM in column 4.3; and

(ii)          where the level of collateralisation is between 125 per cent and 0 per cent, the exposure is divided into fully collateralised and uncollateralised portions as detailed in Attachment B to APS 113. Report the fully collateralised portion in column 4.3 and the uncollateralised portion in column 4.5;

(d)          if a senior claim is secured by eligible financial collateral, report the exposure value after CRM as detailed in Attachment B to APS 113 in column 4.4. Report the uncollateralised portion in column 4.5;

(e)           for claims secured by pools of eligible collateral, the portions fully covered by eligible financial collateral and eligible financial receivables are to be reported in the respective LGD categories. In the case of a residual portion covered by CRE and/or RRE, report the exposure after CRM in column 4.5 if the ratio of the sum of the value of CRE and RRE to the residual exposure is below 30 per cent;

(f)           if a senior claim is not secured by eligible collateral, report the full amount of EAD after CRM in column 4.5.

Table 2.

Column 1. PD

Refer to the instructions for Table 1 in section A of this instruction guide.

Columns 2 to 6. Exposures after CRM

Column 2. Total exposures after CRM

Derived fields that sum up the exposures after CRM for the four sub-asset classes of SL for each assigned PD.

Columns 3 to 6. Project finance, Object finance, Commodities finance, and IPRE

Allocate exposures after CRM to the four sub-asset classes of SL in accordance with the characteristics of the sub-asset classes detailed in APG 113. Report exposures after CRM as follows:

1.             Column 3. Project finance;

2.             Column 4. Object finance;

3.             Column 5. Commodities finance; and

4.             Column 6. IPRE

Column 7. Weighted average LGD

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for exposures allocated to each assigned PD in the relevant rows.

Weighted average LGD = LGDi x EAD i / EAD i

Where:

LGDi = the LGD associated with the ith exposure allocated to the assigned PD.

EADi = the EAD associated with the ith exposure allocated to the assigned PD.

Column 8. Weighted average maturity

Report the exposure weighted average effective maturity (M), in years rounded to one decimal place, for exposures allocated to each assigned PD in the relevant rows.

Weighted average maturity = Mi x EAD i / EAD i

Where:

Mi = the maturity associated with the ith exposure allocated to the assigned PD.

EADi = the EAD associated with the ith exposure allocated to the assigned PD.

Column 9. RWA

RWA are to be calculated in accordance with Attachment B to APS 113. Report the sum of RWA for exposures allocated to each assigned PD in the relevant rows.

Column 10. EL amount

EL amounts are to be calculated in accordance with APS 113. Report the sum of the EL amounts for exposures allocated to each assigned PD in the relevant rows.

Section B: Off-balance sheet risk-weighted assets and expected loss amount

Off-balance sheet exposures include both non-market-related (including undrawn commitments) and market-related off-balance sheet transactions.

Table 1.

Refer to the instructions for Table 1 in section A of this instruction guide for the following items:

(a)           Column 1. PD;

(b)          Column 2. Exposures before CRM;

(c)           Column 3. Exposures after CRM; and

(d)          Columns 4.1 to 4.5. Exposures after CRM by LGD categories.

Refer to Attachment B to APS 113 for further details on the calculation of EAD for off-balance sheet exposures.

Table 2.

Refer to the instructions for Table 2 in section A of this instruction guide for the following items:

(a)           Column 1. PD;

(b)          Columns 2 to 6. Exposures after CRM;

(c)           Column 7. Weighted average LGD;

(d)          Column 8. Weighted average maturity;

(e)           Column 9. RWA; and

(f)           Column 10. EL amount.

Table 3. Memorandum items: breakdown of non-market-related off-balance sheet exposures

Report the breakdown of non-market-related off-balance sheet exposures, for which a credit conversion factor (CCF) other than 100 per cent is applicable under the FIRB approach (refer to Attachment B to APS 113).

Column 1. Nature of transaction

Report the nature of the non-market related off-balance sheet transactions (e.g. commitments, direct credit substitutes, performance-related contingencies (refer to Attachment B to APS 113 for further details)). This field is limited to 80 characters.

Column 2. Notional amount

Report the notional amount (or the undrawn amount in the case of undrawn commitments) of off-balance sheet exposures after CRM in the relevant row for each transaction type listed in column 1.

Column 3. Credit equivalent amount

The credit equivalent amount is calculated by multiplying the notional amount/undrawn amount of off-balance sheet exposures for a transaction type by the appropriate CCF (refer to Attachment B to APS 113). Report the credit equivalent amounts in the relevant row for each transaction type.

Section C: Summary

Column 1. Weighted average PD

Report the exposure weighted average PD, as a percentage rounded to two decimal places, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average PD, as a percentage rounded to two decimal places, for the total non-defaulted exposures within the sub-asset classes of SL.

Column 2. Weighted average LGD

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average LGD, as a percentage rounded to two decimal places, for the total non-defaulted exposures within the sub-asset classes of SL.

Column 3. Weighted average maturity

Report the exposure weighted average maturity, in years rounded to one decimal place, for the non-defaulted on-balance sheet and off-balance sheet exposures in the relevant rows.

Total

Report the exposure weighted average maturity, in years rounded to one decimal place, for the total non-defaulted exposures within the sub-asset classes of SL.

Column 4. RWA

Derived fields that sum up the RWA for the on-balance sheet and off-balance sheet exposures reported in Tables 2 of section A and section B respectively.

Total

Derived field that sums up the RWA for the total on-balance sheet and off-balance sheet exposures within the sub-asset classes of SL.

Column 5. EL amount

Derived fields that sum up the EL amounts for the on-balance sheet and off-balance sheet exposures reported in Tables 2 of section A and section B respectively.

Total

Derived field that sums up the EL amounts for the total on-balance sheet and off-balance sheet exposures within the sub-asset classes of SL.

 



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

[2]           Refer to paragraph 6 of Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk.

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

[4]           Level 1 and Level 2 are defined in accordance with Prudential Standard APS 001 Definitions.

[5]           Refer to paragraph 6 of Reporting Standard ARS 113.0 Foundation Internal Ratings-based (FIRB) Approach to Credit Risk.

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