RPG 701.0 ABS/RBA Reporting Concepts for the EFS Collection

RPG 701.0 ABS/RBA Reporting Concepts for the
EFS Collection
June 2024
REPORTING PRACTICE
GUIDE

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Disclaimer and Copyright
While APRA endeavours to ensure the quality of this publication, it does not accept any responsibility for the accuracy, completeness or currency of the material included in this publication and will not be liable for any loss or damage arising out of any use of, or reliance on, this publication. © Australian Prudential Regulation Authority (APRA) This work is licensed under the Creative Commons Attribution 3.0 Australia Licence (CCBY 3.0). This licence allows you to copy, distribute and adapt this work, provided you attribute the work and do not suggest that APRA endorses you or your work. To view a full copy of the terms of this licence, visit https://creativecommons.org/licenses/by/3.0/au/

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Contents
Contents 3
About this guide 5

General guidance 6
1.1 General guide to reporting by counterparty 6
1.2 Residency 6
1.3 Related parties 12
1.4 Domestic books consolidation 12
1.5 Standard Economic Sector Classifications of Australia 14
1.6 Australian and New Zealand Standard Industry Classification 23
1.7 Business size 26
1.8 Identifying (predominant) purpose class and sub-class 28
1.9 Residential property purpose - owner-occupied and investment housing 34
1.10 Secured finance 38
1.11 Location of property 39
1.12 Types of financial assets and liabilities 40
1.13 Borrower-accepted commitments 44
1.14 Identifying facilities 45
1.15 Interest rates 46
1.16 Treatment of fixed interest rate products once the fixed period ends 50
1.17 Residual maturity 50
1.18 Funds held on behalf of/in trust for clients 51
1.19 Treatment of short-sold positions 51
Form-specific Guidance 52
2.1 ARF 720.0A/B: ABS/RBA Statement of Financial Position (Standard) / (Reduced) 52
2.2 ARF 720.1A/B: ABS/RBA Loans and Finance Leases (Standard) / (Reduced) 68

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2.3 ARF 720.2A/B: ABS/RBA Deposits (Standard) / (Reduced) 71
2.4 ARF 720.3: ABS/RBA Intra-group Assets and Liabilities 73
2.5 ARF 720.4: ABS/RBA Debt Securities Held 75
2.6 ARF 720.5: ABS/RBA Equity Securities Held 77
2.7 ARF 720.6: ABS/RBA Securities Issued 79
2.8 ARF 720.7: ABS/RBA Bill Acceptances and Endorsements 81
2.9 ARF 721.0A/B: ABS/RBA Repurchase Agreements and Securities Lending (Option A) /
(Option B) 82
2.10 ARF 722.0: ABS/RBA Derivatives 83
2.11 ARF 723.0: ABS/RBA Margin Lending 109
2.12 ARF 730.0: ABS/RBA Statement of Financial Performance 114
2.13 ARF 730.1: ABS/RBA Fees Charged 125
2.14 ARF 741.0: ABS/RBA Business Finance 127
2.15 ARF 742.0A/B: ABS/RBA Business Credit Stocks, Flows and Interest Rates (Standard)
/ (Reduced) 131
2.16 ARF 743.0: ABS/RBA Housing Finance 139
2.17 ARF 744.0A/B: ABS/RBA Housing Credit Stocks, Flows and Interest Rates (Standard)
/ (Reduced) 146
2.18 ARF 745.0: ABS/RBA Personal Finance 150
2.19 ARF 746.0A/B: ABS/RBA Personal Credit Stocks, Flows and Interest Rates (Standard)
/ (Reduced) 151
2.20 ARF 747.0A/B: ABS/RBA Deposit Stocks, Flows and Interest Rates (Standard) /
(Reduced) 152
2.21 ARF 748.0A/B: ABS/RBA Wholesale Funding Stocks, Flows and Interest Rates
(Standard) / (Reduced) 153
Glossary 158

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About this guide
Reporting practice guides (RPGs) provide guidance on APRA’s view of sound practice in particular areas. RPGs frequently discuss legal requirements from legislation, regulations or APRA’s prudential and reporting standards, but do not themselves create enforceable requirements. This RPG provides guidance to support the Economic and Financial Statistics (EFS) collection applicable to authorised deposit-taking institutions (ADIs) and registered financial corporations (RFCs) and contains:

general guidance relating to reporting concepts applicable to more than one reporting
form; and
form-specific guidance relating to reporting concepts or variations in requirements
specific to individual forms.
This guide should be read in conjunction with:
the EFS collection, including Reporting Standard ARS 701.0 ABS/RBA Definitions (ARS 701.0),
which contains definitions of the reporting concepts underlying the data to be reported; and
Reporting Practice Guide RPG 702.0 ABS RBA Data Quality for the EFS Collection (RPG 702.0).
Through this guide, APRA, the ABS and the RBA (the agencies) seek to provide:
a centralised source of information on the concepts contained in the reporting instructions
and ARS 701.0;
information on how key concepts may be accurately reported, including practical
implementation guidance and examples; and
guidance on verifying and keeping reporting categorisations accurate over time.
For selected reporting concepts this guide also specifies acceptable proxy data items or methodologies. These are denoted throughout as follows:
PROXY: this indicates a proxy data item or methodology that is acceptable on an on-going
basis; and
TRANSITIONAL PROXY: this indicates a proxy data item or methodology that is acceptable
on a transitional basis and includes a description of when the use of the transitional proxy is no longer appropriate. This guide does not seek to provide an all-encompassing framework, or to replace or endorse existing industry standards and guidelines. Subject to reporting requirements set out in the EFS reporting standards, an EFS reporting entity has the flexibility to manage its reporting for the EFS collection in a manner that is best suited to its business. Not all of the practices outlined in this RPG will be relevant for every EFS reporting entity and some aspects may vary depending upon the size, complexity and systems configuration of the EFS reporting entity.

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General guidance
1.1 General guide to reporting by counterparty
When reporting by counterparty, reporting institutions should first consider three main elements: residency; related party status; and consolidation (Figure 1).
Figure 1: Reporting by counterparty
Elements to consider
Where relevant, reporting institutions may also be required to classify the counterparty in accordance with the Standard Economic Sector Classifications of Australia (SESCA) and/or the Australian and New Zealand Standard Industrial Classification (ANZSIC) frameworks. The following sections provide further guidance on how to determine counterparty status.
1.2 Residency
This Reporting Guidance assists in classifying counterparties by residency by explaining key concepts and definitions, as well as how residency should be updated over time. It includes practical examples to assist in classifying resident and non-resident businesses, households and financial instruments. See Residency for more detail See Domestic books consolidation for more detail See Related parties for more detail Is the counterparty a resident? If yes:
Are they a related party?
If yes:
Should they be consolidated?
If yes:
Consolidate within form
If no:
Resident related party
If no:
Resident non-related party
If no:
Are they a related party?
If yes:
Non-resident related party
If no:
Non-resident non-related party

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1.2.1 General principle of residency
The definition of residency used in the EFS collection is that defined in the Australian System of National Accounts.1

Institutional units form the basis of the residency concept. An institutional unit is resident in one and only one economic territory; however, a business may have more than one institutional unit. For example foreign branches or foreign subsidiaries of Australian institutions are classified as non-residents (making them residents of the country in which they operate), while branches or subsidiaries of foreign institutions operating in Australia are classified as residents. The concept of an institutional unit differs from the legal entity. For example, overseas branches or parent entities may be considered part of the legal entity, but should be considered as a separate institutional unit for the purposes of reporting on EFS reporting standards. In general, the residence of each institutional unit is the economic territory with which it has the strongest connection, expressed as its centre of predominant economic interest. In most cases, it is reasonable to assume that an institutional unit has a centre of economic interest in a country if the unit has already engaged in economic activity and transactions on a significant scale in that country for 12 months or more, or if they intend to do so. Where an institutional unit has a centre of economic activity in only one country, ownership of land and structures located within an economic territory is sufficient qualification for the owner to have a centre of economic interest in the country. However, where an institutional unit has a centre of economic interest in more than one country further information will be required to ascertain the predominant centre of economic activity of the institutional unit. Instances where an institutional unit has a central of economic interest in more than one country include:

owning property in multiple countries; and
households living in one country but owning property in another.
The specific treatment of residency for household and business counterparties and for financial instruments is covered in more detail below.
1.2.2 Residency of businesses
Residency Principle
As a general principle, a business is resident in an economic territory when it engages in a significant amount of production of goods and /or services from a location in the territory. A single legal entity with substantial operations in two or more economic territories (for example, for branches, land ownership and multi-territory businesses) is considered to have a separate institutional unit in each economic territory in which it has substantial operations. In practice, taxation and other legal requirements tend to result in the use of a separate legal entity for operations in each economic territory and, as a result, the residence of each of the subsequently identified businesses is usually clear. The ADI/RFC should record the transaction 1 See: http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/5216.0Glossary12014?OpenDocument

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 8 as resident or non-resident based on the country of residence of the legal entity they are transacting with. Businesses may be resident in economies different from their shareholders, and branches and subsidiaries may be resident in different economies from their parent corporations. Practical implementation In determining residency of a business, the legal entity that you are transacting with is generally the relevant consideration. The exception to this is the case of bank branches that are located in a different jurisdiction from their head office – these should be treated as separate institutional units from their head office entities. PROXY (note exception below): A business may be classified as a resident for the purposes of reporting on EFS reporting standards if it satisfies these criteria:

it has a current registered business address in Australia; and
it has a current Australian Business Number (ABN) or Australian Company Number (ACN).
If only one of these indicators is available, then the business may be classified according to that indicator only. PROXY (note exception below): A business may be classified as a non-resident for the purposes of reporting on EFS reporting standards if it satisfies either of these criteria:
its current registered business address is overseas; or
it is currently registered as a business overseas.
The exception to this is that bank branches located in a different jurisdiction to their head office are to be classified according to their location.
Figure 2: Business residency
Elements to consider
Registered business address in Australia?
If yes:
Current ABN or ACN?
If yes:
Resident
If no:
Non-resident
If unknown:
Resident
If no:
Non-resident
If unknown:
Current ABN or ACN?
If yes:
Resident
If no:
Non-resident
If unknown:
Seek additional information

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1.2.3 Residency of households
Residency Principle
A household has a centre of economic interest when household members maintain, within the country, a dwelling or succession of dwellings treated and used by members of the household as their principal residence (for further information see Section 1.9.2 Principal place of residence). If there is uncertainty about which dwelling is the principal residence, it can be identified from the length of time spent there. Being present for 12 months or more or intending to do so is usually sufficient to qualify as having a principal residence and therefore the predominant centre of economic interest. Individual members of households who leave the economic territory of a country and return or intend to return after a limited period (less than 12 months) continue to be regarded as residents of the original country. For example, a member of a resident Australian household who travels abroad for recreation, business, health or other purposes and returns within 12 months is treated while abroad as a resident of Australia. Practical implementation PROXY: In practice, a household may be classified as a resident for the purposes of reporting on EFS reporting standards if it satisfies these criteria:

has a current residential address in Australia; and
is considered an Australian resident for tax purposes.
If only one of these indicators is available, then the household may be classified according to that indicator only. PROXY: In practice, a household may be classified as a non-resident for the purposes of reporting on EFS reporting standards if it satisfies either of these criteria:
has a current residential address overseas; and
is not considered an Australian resident for tax purposes.
Note, however, that reporting institutions are expected to maintain information on the household customer’s residential address over time. See Section 1.2.5 Updating of residency status over time for more information.

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Figure 3: Household Residency
Elements to consider
Joint applications
Where multiple individuals are party to a single transaction, the residency of each individual should be classified based on the criteria above. The entire transaction should be classified as:

resident for the purposes of reporting on EFS reporting standards if at least one of the
individuals is a resident; or
non-resident for the purposes of reporting on EFS reporting standards if all of the
individuals are non-resident.
Where the residency of each individual to a single transaction is not known, the residency of the primary customer may be used to classify the entire transaction.
1.2.4 Residency of financial instruments
Principle
The residency of a financial instrument is determined by the residence of the issuer rather than the country of issuance of the financial instrument itself. Non-resident assets/liabilities are the ADI or RFC’s asset/liability positions with non-resident counterparties. Similarly, resident assets/liabilities are the ADI or RFC’s asset/liability positions with resident counterparties. Practical implementation All financial instruments should be classified according to the residency of the issuer as indicated in the table below. Neither the place nor the currency of issuance should be used to determine residency of a financial instrument, except as allowed for below (for debt securities issued). For equity securities held, the residency of the business issuing the equity should be recorded and not the residency of the exchange. For debt securities held, the residency of the issuer may be determined by:
Residential address in
Australia?
If yes:
Australian resident for tax purposes?
If yes:
Resident
If no:
Non-resident
If unknown:
Resident
If no:
Non-resident
If unknown:
Australian resident for tax purposes?
If yes:
Resident
If no:
Non-resident
If unknown:
Seek additional information

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counterparty identification and address of the issuer; and/or
sourcing information from a third-party data provider, potentially using the International
Securities Identification Number (ISIN) code as an identifier.
For derivatives the residency of the counterparty should be recorded.
Determining Residency of Financial Instruments Issued into the Australian market Issued into an overseas market Issued by a resident unit Resident Resident Issued by a non-resident unit Non-resident Non-resident Residency of the holder of a debt security PROXY: For debt securities issued, ADIs and RFCs are able to use the place of issuance as proxy for the residency of the counterparty holding the debt securities if information on the location of the holder is unavailable.
1.2.5 Updating of residency status over time
To ensure the data remain accurate over time, institutions are expected to make reasonable efforts to verify that classifications of the residency of customers, counterparties and/or financial instruments remain appropriate. Instances of businesses and/or financial instruments changing residency are not expected to occur frequently; however, a non-negligible proportion of households are expected to change residency over time. A key piece of information for verifying household residency over time is the residential address of the customer. Reasonable efforts to verify the customer’s residential address and, accordingly, residency, include (in order of preference):

communicating with customers from time to time to verify their addresses and crosschecking against residency categorisations;
sourcing third-party data to verify customers’ addresses and cross-checking against
residency categorisations; or
cross-checking any customer-updated postal or residential addresses (or similar) against
residency categorisations.
The agencies note that, for deposits, there is an expectation that an effort will be made to ensure residential address details are correct over time, and this expectation aligns with requirements set out in Prudential Standard APS 910 Financial Claims Scheme (APS 910).

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1.3 Related parties
In general, a related party is any institutional unit that is owned or partly owned by the parent entity of the reporting institution, or by the reporting institution itself. As a guide, any entities that are consolidated in the statutory financial statements produced by your institution – or the parent entity of your institution – should be considered related parties. In addition, any controlled entities, associated entities, or joint venture entities of the reporting institution or its parent entity should also be considered related parties. Related parties may be financial institutions, non-financial businesses and/or community service organisations. They may not be members of the household or general government sectors. See ARS 701.0 for the requirements on economic sector classifications.
1.4 Domestic books consolidation
1.4.1 Identification
Domestic books consolidation refers to the positions and transactions recorded on the Australian books of reporting entities. For businesses that are headquartered in Australia, the set of domestic books may not include all positions and transactions recorded on Australian books; some of these activities may be excluded for reporting purposes to the extent that they take place in different legal entities or notional institutional units, as detailed in Section 1.4.2 Reporting consolidation. For businesses that are headquartered overseas, a set of domestic books for Australia are generally considered to exist if a separate (notional) institutional unit can be identified. This may involve identification of:

A separate legal entity formed in Australia; and/or
A complete set of accounts (including a balance sheet) maintained for Australia, or that it
would be possible and meaningful from an economic and legal viewpoint to compile these reports if required. It is likely a set of domestic books exist if the entity is recognised for income tax purposes in Australia, even if they have a tax exempt status. If a set of domestic books exists, then only the applicable entities listed below should be consolidated for reporting purposes.
1.4.2 Reporting consolidation
Reporting on a domestic books basis requires a different level of consolidation from statutory reporting. Any entities not consolidated for statutory reporting purposes should also not be consolidated for domestic books reporting. In addition, a number of entities that are consolidated for statutory reporting purposes should not be consolidated for domestic books reporting. Refer to the domestic books definition and the table below for details.

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Guide to Domestic Books Consolidation
Notional unit Consolidate within domestic books reporting?
Australian-based branches of the ADI or RFC Yes Overseas-based branches of the ADI or RFC No Australian-based Offshore Banking Units of the ADI or RFC Yes Overseas-based Offshore Banking Units of the ADI or RFC No Extended Licensed Entities of the ADI No Subsidiaries of the ADI or RFC No Related RFCs Reporting by ADIs: No RFCs reporting individually: No RFCs reporting as a group: Yes See Section 1.4.3 RFCs reporting on behalf of other RFCs for more detail on RFCs reporting individually or as a group Parent entities of the ADI or RFC No Bare trusts If the beneficiary of the bare trust is the reporting institution: Yes If the beneficiary of the bare trust is not the reporting institution: No Special Purpose Vehicles (SPV) Reporting by ADIs and RFCs that are a related party of an ADI: No Reporting by RFCs that are not a related party of an ADI: Yes (see Section 1.4.4 Consolidation of SPVs by RFCs for more detail) Overseas based representative offices of the ADI or RFC No Any other related parties not specifically mentioned above (such as stock brokers, insurance companies, funds management, nonfinancial operations) No

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1.4.3 RFCs reporting on behalf of other RFCs
Where there are multiple RFCs that are owned and/or controlled by the same parent entity, these RFCs may choose to either report individually or report as a group (submit a single return). The reporting method should be consistent across all forms for a given period. RFCs reporting individually If these RFCs choose to report individually, all RFCs that meet the required thresholds should submit returns to APRA. The reporting thresholds applied to forms will apply to the assets or liabilities of the individual RFC at the domestic books level. When reporting individually, positions and transactions with other RFCs owned/controlled by the same parent entity should be treated as positions or transactions with related parties. RFCs reporting as a group If these RFCs choose to report as a group, only one of these RFCs should submit returns to APRA. The reporting thresholds applied to forms will apply to the (consolidated) domestic books assets or liabilities of all the RFCs, not the individual RFC that is submitting the return. Each of the RFCs should inform APRA via email either the name of the institutions that they are reporting on behalf of, or the name of the institution that is reporting on behalf of them. APRA should be informed at the time that the form is submitted if any of these reporting arrangements have changed. If no reporting arrangements have changed, APRA does not need to be informed. When reporting as a group, the positions and transactions of each of the RFCs should be consolidated within the return. Any intra-group positions and transactions between these RFCs should not be reported. Report (but do not consolidate) positions and transactions with RFCs (and any other entities) that are not part of the RFC reporting group.
1.4.4 Consolidation of SPVs by RFCs
RFCs that are a related party of an ADI should not consolidate SPVs for domestic books reporting, even if the SPVs are owned and/or controlled by the RFC or the same parent entity. All positions and transactions with SPVs owned and/or controlled by the RFC or the same parent entity should be treated as positions or transactions with related parties. Note, this also applies to all ADIs. All other RFCs (i.e. RFCs that are not a related party of an ADI) should consolidate the positions and transactions of all resident SPVs that are owned and/or controlled by the RFC within domestic books. Any intra-group positions and transactions between the RFC and its controlled SPVs should not be reported. The reporting thresholds applied to forms will apply to the consolidated assets or liabilities of the reporting entity (i.e. the RFC and its SPVs).
1.5 Standard Economic Sector Classifications of Australia
To compile Australia’s National Accounts in accordance with the international standard – the 2008 System of National Accounts (SNA08) – the ABS requires balance sheet information classified by financial instruments broken down into sectoral counterparties. Sectoral

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 15 counterparties are required for the ADI or RFC’s deposits, loans and derivative assets or liabilities; and for the issuers of debt securities and equity securities held by the ADI or RFC. The sectoral classification used in the National Accounts is SESCA 2008, 2 which in turn is based on the sectoral classification prescribed by SNA08. As such, the EFS collection requires counterparty sector information based on SESCA 2008. Counterparty sectors have been updated since the previous domestic books collection, which was based on SESCA 2000. The most significant change between SESCA 2000 and 2008 is the separate sectoral classification for investment funds and securitisers; the addition of these new sectors reflects the importance of these institutions in the Australian financial system. Data on residents are disaggregated across a number of sectors. Data for non-residents are reported in aggregate in the non-resident sector, unless otherwise stated in the specific instructions. For example, a resident ADI will be reported in the ADI sector, while a non-resident bank will be reported in the non-resident sector. Similarly, a resident household will be reported in the household sector, while a non-resident household will be reported in the nonresident sector.
1.5.1 General sectoral classification schema
An entity is assigned to one and only one SESCA category.

Groups of people are assigned to the household sector unless otherwise directed.
Family trusts should be assigned to the private unincorporated businesses sector.
SPVs do not have a unique reporting category, and should be reported in either nonfinancial businesses or financial institutions sectors as appropriate.
The general classification schema represented hierarchically is:
2
See:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/E1759367BE2FD4AACA2570AF003E058F?ope ndocument

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Counterparty classification schema
Non-residents
Residents
Households
Private and public sector businesses
Community service organisations
Non-financial businesses
Private non-financial businesses
Private non-financial corporations
Private non-financial investment funds
REITs
Other private non-financial investment funds Other private non-financial corporations Private unicorporated businsses Public non-financial corporations Commonwealth Government nonfinancial corporations State, territory and local government non-financial corporations Financial Institutions Reserve Bank of Australia Authorised deposit-taking institutions Registered financial corporations Central borrowing authorities Insurance corporations Life insurance corporations Other insurance corporations Superannuation funds Self-managed superannuation funds Other superannuation funds Financial auxiliaries Clearing houses and central counterparties Other financial auxiliaries Securitisers Money-market investment funds Non-moneymarket financial investment funds Exchange-traded funds Other non-moneymarket financial investment funds Financial institutions n.e.c. General government Commonwealth general government State, territory and local government

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1.5.2 Determining the economic sector of a counterparty
ADIs and RFCs can use a variety of ways to allocate counterparties to an economic sector, for example:

obtain information directly from the business;
use publicly available information about the business – for example, from the business
website; or
use other information held by the reporting institution along with ANZSIC codes to map to
a SESCA category – note that industry codes will not always provide a one-to-one match to economic sectors and so other information and/or alternative methods will be required for these cases (see Section 1.5.8 Mapping from ANZSIC to SESCA 2008). Further details on the types of information that can be used to classify counterparties to specific sectors follows. Once a business entity is classified to its one and only ANZSIC category, this will map to one SESCA category in the majority of cases. However, in a handful of cases, the ANZSIC category assigned may map into multiple SESCA classifications. In such cases, further criteria, such as the business’s legal structure and/or balance sheet composition may be used to assign a unique sectoral classification as described below.
1.5.3 Identifying investment fund sectors
There are three investment fund categories within the EFS collection. These have been adopted from SESCA 2008:
private non-financial investment funds;
money-market investment funds; and
non-money-market financial investment funds.
Investment funds are collective investment schemes, such as corporations or trusts. The investment funds may be further categorised into listed and unlisted investment funds, where listed investments funds are those listed on the Australian Securities Exchange (ASX). Investment funds in Australia which raise funds from the public operate legally as “Managed Investment Schemes” under the Corporations Act 2001 which is administered by the Australian Securities and Investment Commission (ASIC). ASIC requires that any investment fund seeking funds from retail investors be registered with ASIC and obtain an Australian Financial Services License. Registration confers an Australian Registered Scheme Number (ARSN) number. In addition to the ASIC requirements, listed investment funds are required also to adhere to the regulations and bi-annual reporting requirements set out by the ASX, similarly to listed corporations. Investment funds that are not registered with ASIC tend to be large wholesale funds, with units not listed on the ASX – examples include large master trusts. These investments funds are used by large institutional investors such as superannuation funds and life insurance corporations as investment vehicles. In general, ADIs and RFCs do not acquire equity in investment funds; their predominant interaction with investment funds is in providing deposit accounts and loans.

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ADIs and RFCs may identify investment funds using the following methods:

for funds that are listed on the ASX, entities may use an ASX concordance map, which will
be made available on the ABS website3
. This concordance map categorises all listed entities (name and GICS code) on the ASX by sectoral classification;
entities may use the ASIC ARSN number and the name and ABN of the investment fund. At
the request of an ADI or RFC, APRA can provide reporting entities with a register of investment funds that provides the name, ARSN and ABN of each fund. 4 It is expected that this list will be updated annually;
at application and review, some simple questions may be asked once the business has
been identified as one of the handful of 4-digit ANZSIC classes that may fall into an investment fund SESCA category;
PROXY: it may be possible to identify types of investment funds by title word searches – for
example an investment fund that has ‘cash’ in the title it likely to be a money-market investment fund; or
PROXY: alternatively, if none of these methodologies are able to be used then SESCA
categories that are difficult to determine can be estimated using an apportionment methodology based on other available information – for example, a useful indicator may be derived from client profiles or product information from front-end systems. Some names commonly used to refer to private non-financial investment funds and non-moneymarket financial investment funds are presented below:
Private non-financial investment funds Non-money mark financial investment funds
Real estate investment trusts (REITs)
Listed and unlisted property trusts
Property common funds
Infrastructure funds (e.g. investing in
public assets such as toll roads, airports, and rail facilities)
Exchange Traded Funds (ETFs)
Listed equity trusts (domestic and
international)
Listed mortgage trusts
Listed investment companies
Unlisted equity trusts (domestic and
international)
Unlisted mortgage trusts
Non-cash common funds
Funds with predominantly overseas property
or infrastructure holdings
Below are some questions that might assist in identifying investment funds if there is an opportunity to do so at application or review. 3 See: http://www.abs.gov.au/websitedbs/D3310114.nsf/home/Provider+Information+- +Survey+of+Financial+Information+(SFI) 4 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 register.

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Example 1: Identifying money-market investment funds or non-money-market financial investment funds A business customer has been categorised into financial asset investors, ANZSIC 2006 class 6420 (ANZSIC 1993 class 7340). During the application process, the following questions could be asked:
a) is your entity set up as a trust or company to raise equity funding from the public for the purposes of investing in non-financial assets? b) If yes to (a), what are the predominant assets on your balance sheets (e.g., shares, bonds or short-term money-market instruments)? (i) If answered short-term money-market instruments to (b), categorise as a moneymarket investment fund; or (ii) If answered shares/bonds to (b), categorise as a non-money-market financial investment fund. Example 2: Identifying property/infrastructure funds A business customer has been categorised into the construction industry. During the application process, the following questions could be asked:
a) is your entity set up as a trust?
(i) If answered yes to (a), the entity would be classified as a private non-financial investment fund; or (ii) If answered no to (a), the entity would be classified as an other private non-financial corporation.
1.5.4 Identifying self-managed superannuation funds and other
superannuation funds
To determine the classification between self-managed superannuation funds and other superannuation funds, the following methods may be used:

the ‘Super Fund Look Up’ site on the Australian Taxation Office (ATO) website provides
information on the type of fund and can be searched by ABN (or the name of the superannuation fund) 5 . The site includes publicly available information on superannuation funds regulated by APRA and the ATO. Classification types include self-managed superannuation funds.
a list of Registerable Superannuation Entities (RSEs) regulated by APRA is available on
APRA’s website 6
. Also available from APRA’s website are lists of some of the Exempt Public Sector Superannuation Schemes (EPSSS) that are non-regulated.
1.5.5 Identifying central borrowing authorities (CBAs)
Central borrowing authorities include:
New South Wales Treasury Corporation (NSW TCorp);
Treasury Corporation of Victoria (TCV);
5
See: http://superfundlookup.gov.au
6
See ‘List of RSEs’ at: https://www.apra.gov.au/register-of-superannuation-institutions

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Queensland Treasury Corporation (QTC);
South Australian Government Financing Authority (SAFA);
Western Australian Treasury Corporation (WATC);
Tasmanian Public Finance Corporation (Tas Corp);
Northern Territory Treasury Corporation (NT TCorp); and
ACT Treasury.
1.5.6 Identifying Commonwealth general government and Commonwealth
Government non-financial corporations
A list of Commonwealth Government entities by classification used for reporting in the EFS collection can be found in the ‘List of GGS, PNFC and PFC entities under the PGPA Act’ document on the Department of Finance website7 . These entities can be classified according to the detail in the ‘economic sector’ column:
‘General Govt Sector’ should be classified as Commonwealth general government;
‘Public Non-financial Corporation’ should be classified as Commonwealth Government nonfinancial corporations; and
‘Public Financial Corporation’ should be classified as financial institutions.
1.5.7 Miscellaneous classifications
Sovereign Wealth Funds
Sovereign wealth funds owned by the Commonwealth Government, such as the Future Fund Management Agency and other Australian Government Investment Funds8 , should be classified in the Commonwealth general government sector. Any state-owned funds should be classified as State, territory and local general government. Issuers of covered bonds Resident issuers of covered bonds should be classified as ADIs. Holding companies Holding companies should be classified in line with SESCA 2008 as follows:
Holding companies with mainly financial corporations as their subsidiaries should be
classified as financial auxiliaries.
Holding companies with mainly non-financial corporations as their subsidiaries should be
reported in the other private non-financial corporations sector.
7
See: https://www.finance.gov.au/government/managing-commonwealth-resources/structure-australiangovernment-public-sector/pgpa-act-flipchart-and-list 8 For a full list, see https://www.finance.gov.au/government/australian-government-investment-funds

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Individuals acting on behalf of businesses
Where the ADI or RFC has positions/deposit accounts/lending facilities with a business that have been recorded under the name of an individual (such as a deposit account for a sole trader that is in the individual’s name rather than the business name), the positions/transactions should be reported under the appropriate category according to the nature of the business. These positions/transactions should not be reported in the household sector. This analysis should be applied to each individual position/deposit account/lending facility, and not all positions/deposit accounts/lending facilities need to be allocated to the same sector. For example, an individual has two credit cards in their name. One is for personal use and should be allocated to the household sector, and the other credit card is for business use and should be allocated to the private unincorporated businesses sector. Where there is a position/deposit account/lending facility that combines elements of business and personal purposes, the predominant purpose class should apply. For more information, see Section 1.8 Identifying (predominant) purpose class and sub-class. Where the institution has no information to suggest that the position/deposit account/lending facility is for business purposes, it should be allocated to the household sector. Client-clearing and agent-principal relationships 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. Therefore when the reporting entity is a client of a broker, or a broker itself, or acting on its own behalf report the position as follows:
Where a reporting entity: …report this position as a deposit (etc.) has placed funds on deposit with a clearing house or central counterparty on its own behalf ...made by the reporting entity with the clearing house or central counterparty. 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 ...with the broker. is a broker that has client-clearing arrangements in place with clients ...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. An exception 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, and not e.g. a deposit by a financial auxiliary (i.e. trustee, a responsible entity, or custodian).

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1.5.8 Mapping from ANZSIC to SESCA 2008
ADIs and RFCs should classify counterparties into the SESCA 2008 by using the definitions provided in ARS 701.0. For those institutions that have yet to fully implement SESCA 2008, mapping of counterparties from ANZSIC classification would generally be acceptable, provided further information is sought where required to appropriately allocate counterparties in ANZSIC categories without a one-to-one mapping to SESCA 2008. ADIs and RFCs should make a reasonable effort during the application process and annual reviews with business customers to identify the appropriate sectoral classification. A concordance map from ANZSIC 2006 to SESCA 2008 will be provided on the ABS website9 to assist institutions with classifying counterparties. Guidance on classifying into industry code under ANZSIC 1993 or 2006 is also available on the ABS website 10 . The concordance map shows the derivation of the sectoral classification required in the EFS collection from ANZSIC 2006. It begins with the concordance of 4-digit ANZSIC 2006 to the counterparty sectors listed on the EFS forms. The map illustrates that, for a majority of the 4-digit ANZSIC 2006 classifications, there is a one-to-one relationship into the sector counterparties listed on EFS reporting standards. However, there are instances where this one-to-one relationship does not hold (i.e. one ANZSIC 2006 industry maps to more than one sector in the EFS collection). These situations are listed in the table below. One-to-multiple mapping between ANZSIC 2006 and EFS collection ANZSIC 2006 industry Sector in EFS collection (based on SESCA 2008) Construction 1. private non-financial investment funds;
2. other private non-financial corporations; or
3. private unincorporated businesses.
Rental, hiring and real estate services 1. private non-financial investment funds;
2. other private non-financial corporations; or
3. private unincorporated businesses.
Education and training 1. other private non-financial corporations;
2. private unincorporated businesses;
3. commonwealth general government; or
4. state, territory and local general
government.
9
See: http://www.abs.gov.au/websitedbs/D3310114.nsf/home/Provider+Information+- +Survey+of+Financial+Information+(SFI) 10 See: Australia New Zealand Standard Industry Classification

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Health care and social assistance 1. other private non-financial corporations;
2. private unincorporated businesses;
3. commonwealth general government; or
4. state, territory and local general
government.
Arts and recreation services 1. other private non-financial corporations;
2. private unincorporated businesses;
3. commonwealth general government; or
4. state, territory and local general
government.
Other services 1. other private non-financial corporations;
2. private unincorporated businesses; or
3. community service organisations.
Non-depository financing (part of the Financial and insurance services industry)
1. securitisers;
2. central borrowing authorities; or
3. financial institutions n.e.c.
Financial asset investing (part of the Financial and insurance services industry)
1. money-market investment funds;
2. non-money-market financial investment
funds; or
3. commonwealth general government.
Superannuation funds (part of the Financial and insurance services industry)
1. self-managed superannuation funds; or
2. other superannuation funds.
For these industry categories, further information would be required to appropriately allocate the counterparty to the relevant economic sector.
1.5.9 Updating of SESCA classification over time
It is not expected that institutions will often change SESCA categories. However, if a reporting institution becomes aware that a business has changed industry or incorporation status (for example, at an annual review), then the SESCA category should be updated accordingly. For example, if a business is originally classified as a private unincorporated business but then changes its business structure to a company, it should be re-classified from the point that the change occurred to the other private non-financial corporations category.
1.6 Australian and New Zealand Standard Industry Classification
For private and public sector businesses, a breakdown of counterparties into industry sectors is required for some forms (ARF 741.0 and ARF 742.0). The EFS collection contains 21 industry classifications that are based on ANZSIC 2006, which has been updated since ANZSIC 1993 to

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 24 capture emerging industries such as information technology, to better reflect the current economy and to align with international industry standards. 11 A borrower is assigned to an industry based on its predominant activity, and each borrower can only be assigned to one industry.
1.6.1 Mapping ANZSIC 1993 to ANZISC 2006
For those entities that currently classify businesses to industries based on 4-digit ANZSIC 1993, it will generally be acceptable to map from ANZSIC 1993 to ANZSIC 2006 at the 4-digit level using the mapping available on the ABS’ website,12 in combination with a simple apportionment mechanism where there is a one-to-many split.

A number of the one-to-many mapping instances occur where all options are within the
same ANZSIC industry (at the 2-digit level). In these cases, reporting institutions may determine how to map to ANZSIC 2006. Reporting institutions could choose to either:
o PROXY (note exception below): allocate all to a single 4-digit code; or o PROXY (note exception below): allocate across multiple codes.
The other one-to-many mapping instances involve a series of options that cross ANZSIC
industry (at the 2-digit level). In these cases, there are a few potential options:
o PROXY (note exception below): allocate evenly between the 4-digit codes; o PROXY (note exception below): allocate randomly across the 4-digit codes; or o PROXY (note exception below): where the bulk of the options are within the same division, map to a single 4-digit code in that division. The exception to this is in relation to commercial property. For the ANZSIC 1993 code 7712 – Commercial Property Operators & Developers, ADIs and RFCs will be required to correctly allocate between 3211 – Land Development and Subdivision and 6712 – Non-Residential Property Operators. It is expected that institutions will need to obtain further information from their customers in order to allocate the correct ANZSIC in this instance (see Section 1.6.2 Subindustries below).
1.6.2 Sub-industries
The industry sectors identified on ARF 741.0 and ARF 742.0 only require disaggregation at the Division level (i.e. a 1-digit code under ANZSIC 2006) with the exception of Construction and Financial and insurance services. For Construction three further sub-sectors are identified, which require at most a 3-digit code under ANZSIC 2006. However, if reporting institutions intend to rely on a mapping from ANZSIC 1993 to ANZSIC 2006, information at the level of 4-digit ANZSIC 1993 codes may be required. 11 See: Australia New Zealand Standard Industry Classification 12 For the 4-digit level mapping between ANZSIC 1993 to ANZSIC 2006, see:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1292.0.55.005Main+Features12008?OpenDocument

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Construction Sub-sectors
Form label ANZSIC 2006 ANZSIC 1993
Residential building construction
301 – Residential Building
Construction:
4111 – House Construction; and
4112 – Residential Building
Construction n.e.c.
Non-residential building construction
302 – Non-Residential Building
Construction:
4113 – Non-Residential
Building Construction
Other construction 31 – Heavy and Civil
Engineering Construction; and
32 – Construction Services
Refer to the mapping of ANZSIC
1993 to ANZSIC 2006 available on the ABS’ website for corresponding ANZSIC 1993 sub-divisions. Note that some of these correspondences are partial, requiring further information as described above. For Financial and insurance services, the more specific disaggregation requested aligns with SESCA-based categories, rather than ANZSIC 2006 industries.
1.6.3 Use of International Industry codes
PROXY: In cases where only international based industry codes such as the North American Industry Classification System (NAICS) or the International Standard Industrial Classification (ISIC) are available, then it is acceptable to map these back to the related ANZSIC categories at the two-digit or one-digit level. Mapping to the four-digit ANZSIC codes is not recommended due to many one-to-multiple mappings. There is no direct mapping from NAICS to ANZSIC, but an ADI or RFC can use published mappings from NAICS to ISIC13, ISIC to NAICS14 and ANZSIC to ISIC15. These can be used either in isolation or in combination to map to the ANZSIC requirements for the EFS collection.
1.6.4 ANZSIC captured at the point of origination
To assist in the determination of the correct ANZSIC for a business at the point of origination the following may assist:

at the time of registering their Australian Business Number with the tax office, businesses
are required to self-identify their own ANZSIC and therefore may be able to provide their ANZSIC upon request; or 13 See: https://www.census.gov/naics/ 14 See: https://unstats.un.org/unsd/classifications/Family/Detail/27 15 See: http://abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/1292.0.55.0052008?OpenDocument

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an ANZSIC coder is available on the ABS website.16 The web-based search function uses
key word search functionality to return a list of possible ANZSIC codes with activity descriptions.
1.6.5 Updating of ANZSIC over time
It is not expected that institutions will often change ANZSIC categories. However, if a reporting institution becomes aware that a business has changed industry (for example, at an annual review), then the ANZSIC category should be updated accordingly from that point forward.
1.7 Business size
For private and public sector businesses, a breakdown of counterparties by business size is required for some forms (ARF 741.0, ARF 742.0 and ARF 730.1). These business size categories are based on definitions similar to those used by the Basel Committee for Banking Supervision (BCBS)/APRA in their standards for institutions following the internal-ratings based approach to credit risk; however, they are written such that they can be applied by all reporting institutions, regardless of whether they are required to meet BCBS/APRA standards. Counterparties in the private and public sector businesses category need to be assigned to one of: small, medium, or large business size categories. If the reporting institution already classifies the counterparty as SME retail, SME corporate or Corporate in line with the BCBS/APRA methodology, then a one-to-one mapping can be used with:
SME retail corresponding to small;
SME corporate corresponding to medium; and
Corporate corresponding to large.
This means that, where the reporting institution’s internal decisions lead to it deviating from the turnover and exposure size metrics detailed in ARS 701.0 – perhaps, for example, because a business is viewed as more complex or had previously had turnover in a higher bucket – that institution is able to report in line with its internal categorisations. Where an institution does not categorise counterparties, or certain types of counterparties, according to this methodology, then they would be required to use the turnover and exposure size metrics to allocate the counterparties to the relevant business size category. Where a counterparty forms part of a larger corporate group, it is expected that the turnover and exposure size metrics will be calculated at the consolidated group level, rather than the individual entity or branch level. The reporting institution may nevertheless choose to classify a counterparty according to the turnover and exposure size of the individual legal entity if it determines that this is a more appropriate representation of the borrower. 16 See the ‘Search Facility’ in 1292.0 – ANZSIC, 2006 (Revision 2.0), available at:
http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/1292.0Search12006%20(Revision%202.0)?opendocumen t&tabname=Summary&prodno=1292.0&issue=2006%20(Revision%202.0)&num=&view

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Categorisations based on exposure size and turnover should be allocated at origination. The exposure size should be reviewed periodically (at least annually). There is no requirement to update turnover data during the life of a given facility unless the reporting institution becomes aware that the categorisation is no longer appropriate.
1.7.1 Exposure size
The measure of exposure to be used is total business-related exposure.
1.7.2 Turnover
Reliable measures of turnover include:

tax returns submitted to the ATO;
Business Activity Statements submitted to the ATO;
financial reports of the business; and
reports from the business’s accountants or auditors.
PROXY: Where turnover data are not available because the business was recently formed, then the business should be classified as small or medium based on the exposure of the reporting institution to the business. PROXY: Where a new business has been formed following a merger or demerger, then reporting institutions would be expected to use a sensible method to determine the appropriate category. TRANSITIONAL PROXY: Where turnover information for an existing business customer (not recently formed) is not currently available, the reporting institution should use business-asusual points of contact (e.g. annual reviews) prior to the commencement of reporting for the EFS collection in 2019 to allocate the counterparty to the appropriate category based on turnover information. Where no business-as-usual points of contact occur within this time period, the ADI or RFC may allocate based on an internal allocation methodology – for example, categorising based on the internal business segment that the counterparty interacts with. This would be updated based on turnover information at the next business-as-usual point of contact with the counterparty. Once allocated, there is no requirement to update turnover data during the life of a given facility unless the reporting institution becomes aware that the categorisation is no longer appropriate.
1.7.3 ARF 730.1
PROXY: When reporting fees charged on ARF 730.1, where the counterparty falls with the private and public sector businesses sector but the ADI or RFC does not provide finance to the counterparty, the counterparty may be classified as small, medium or large based on a consistent application of an internal allocation methodology. Such an allocation methodology should be informed by information such as the internal business segment the counterparty interacts with, the size of any deposits they hold with the ADI or RFC, or other known characteristics of the counterparty. This allocation methodology should be made available to APRA on request. Note that this allocation methodology may not be used where the ADI or RFC provides finance to the counterparty.

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1.8 Identifying (predominant) purpose class and sub-class
Figure 4: Purpose Types
Purpose class, sub-class and property purpose
1.8.1 Identifying purpose class
The purpose class (i.e. housing, business or personal) that the funds will be used for determines how finance should be reported. Purpose class is to be allocated based on information provided by the customer. Product type may be used as an input to determine the purpose class, but it is unlikely to be appropriate to rely on this data point exclusively in all situations. This is because alignment between product types and purpose classes may vary according to institution-specific policies and/or may change over time. In general, there are a few rules of thumb when assigning purpose class that may be helpful to note:

All finance extended via business lending products may be classified as being for business
purposes, but not all finance for business purposes need be provided under a business lending product. For example, an individual may seek finance via other types of products for use in their business. If the ADI or RFC is aware that the funds are being used for a business (for example, the customer makes a statement to this effect during the origination process) then this should be classified as business finance. Note, however, that if the customer does not disclose their intent to use the finance for this purpose, and the ADI or RFC has no other information to suggest this alternate use, then the ADI or RFC would correctly classify this Residential property purpose (actively maintain over time) Owner-occupied Investment Purpose class (record at origination & revise as necessary) Housing Personal Business Purpose sub-class (record at origination & revise as necessary) Class-specific use of funds (e.g. travel and holiday) Internal refinance External refinance

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 29 finance to an individual as housing or personal based on the information provided by the customer).
2. Security type (e.g. a residential property) is not directly relevant to the purpose class
definitions, but may be a useful input depending on institution-specific lending policies. Specifically, not all housing finance need be secured by residential property, and finance for personal or business purposes may be secured by residential property (e.g. a home equity loan). Practical implementation PROXY: In practice, finance extended via business lending products may be classified as being for business purposes. Note, however, that not all finance for business purposes need be provided under a business lending product. Example 1: Finance secured by a residential property A household takes out a new loan for personal use, for example paying for a holiday and/or buying shares. The funds are secured against a residential property owned by the household, perhaps via a home equity loan. This loan should be classified as personal not housing. In making this determination, the following points should be recognised:

the product type (e.g. a home equity loan) is not an appropriate indicator of purpose class
in this situation;
the fact that the finance is secured by residential property is not relevant in identifying the
purpose class of the finance; and
because the use of the funds does not relate to the construction or purchase of residential
property, or to finance alterations, additions and repairs to residential property the finance purpose class cannot be housing. Example 2: Purchasing and/or constructing residential property Consider the following cases:
a) A developer borrows funds to purchase residential land and construct an apartment block (i.e. dwellings). The apartments will later be sold to households for their use. b) A self-managed superannuation fund borrows funds to purchase a residential property that will be rented out. In both instances, the finance should be classified as business not housing. In making this determination, the following points should be recognised:
the sector borrowing the funds is a business, not a household; and
whether or not the finance is secured against residential property is irrelevant.

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1.8.2 Assessing the predominant purpose at origination
Where finance is to be used for more than one purpose, the entire amount of the finance should be classified according to the predominant purpose (i.e. the purpose for which the largest share of the funds will be used). Practical implementation In general, where it is known that the funds will be used for more than one purpose but: a) there is insufficient information to make a reasonable judgement about what the largest share of funds will be used for by a household; or b) there is an even split between multiple purpose classes (e.g. 50/50), please classify the finance as follows:

Housing and personal – classify as personal;
Housing and business – classify as business; and
Business and personal – classify as business.
Note that, where finance is classified as predominantly for housing purposes, reasonable effort must be made to identify the property purpose in order for the finance to be further classified as owner-occupier or investor (e.g. ask the borrower for the nature of use of the property) – see Section 1.9 Residential property purpose – owner-occupied and investor housing. The following scenarios typically present some challenges for classification:
revolving credit facilities that are secured by residential property (e.g. home equity loans) or
reverse mortgages;
alterations, additions and repairs; and
refinances of existing fixed-term finance by households.
Accordingly, further guidance on the treatment of these scenarios is provided below.
1.8.3 Revolving credit facilities secured by residential property and reverse
mortgages
A revolving credit facility that is secured by residential property (e.g. a home equity loan) can be taken to fund a range of activities, including the purchase of a residential property, alterations, additions and repairs to residential property, investment purchases (e.g. shares), household consumption spending (e.g. holidays or motor vehicles), or working capital for a small business. Revolving credit extended to a household would generally be expected to be for personal purposes unless there is any indication that the funds are to be used for housing or business purposes. If the borrower indicates that the funds will predominantly be used for housing purposes, then classify accordingly. The agencies expect one of the main uses of a revolving credit facility that is secured by residential property for housing purposes would be for alterations, additions and repairs (although use is of course not limited to this). Please note, where a housing purpose is nominated, reasonable effort must also be made to identify the nature of the property purpose (see Section 1.9 Residential property purpose – owner-occupied and investor housing).

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Example 3: Finance for multiple purposes
Consider the case where a household takes out a revolving credit facility for housing and personal purposes (e.g. alterations, additions and repairs to a residential property and household consumption spending such as paying for a holiday or motor vehicle). The facility should be classified according to what the largest share of the funds will be used for. If a majority of the funds are to be used for the alterations, additions and repairs, then the finance should be classified as housing. If a majority of the funds are to be used for household consumption spending, the finance should be classified as personal. If there is insufficient information to reasonably judge whether the share of funds for alterations, additions and repairs is larger than the share of funds for household consumption spending, then the entire amount should be classified as personal.
1.8.4 Alterations, additions and repairs – housing or personal?
Any changes to a residential property that will remain part of that property in the event of the sale of the property should be classified as for housing (prior to the application of the predominant purpose principle, if relevant), provided the finance is taken out by a household. The following should be included as housing:

permanent swimming pools;
sheds;
permanent furnishings such as floor or window coverings;
stoves, cooktops, range hoods and dishwashers;
cupboards / shelves permanently attached to the property; and
landscaping.
The loan purpose sub-class should be reported as alterations, additions and repairs where this use of funds is the predominant purpose. Please note: the uses described above would not qualify as construction for housing purposes as this concept exclusively relates to the construction of new dwellings. Furnishings not attached to the property, such as furniture and removable electrical goods, should be included as personal.
1.8.5 Refinances
Internal refinance
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 updated if:
a) the additional finance is for a different purpose class than that of the existing finance; and b) the additional finance is greater than the outstanding amount of existing finance. If the reporting institution also submits the relevant finance form (ARF 741.0, ARF 743.0 or ARF 745.0) and:

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the purpose class has changed, the purpose sub-class for reporting the new commitment
should reflect the use of the additional funds (i.e. it should not be reported as an internal refinance);
the purpose class has not changed, finance for fixed-term loans should be classified as an
internal refinance at the purpose sub-class level for reporting the new commitment. Finance for revolving credit should be classified as a new commitment for the existing purpose sub-class. That is, internal refinance includes agreements to increase the credit limit of an existing loan contract (sometimes referred to as a ‘top up’). Should further additional finance subsequently be approved, the same process should apply. However, when reassessing predominant purpose class the most recent classification purpose assigned to the existing finance may be assumed to apply to the entire outstanding amount (i.e. the amount and purpose of additional finance approved does not need be tracked over time). Changes in the value of an existing commitment due only to foreign currency fluctuations should not be reported as an internal refinance. Changes in credit limits of existing margin loans arising as a result of fluctuations in the market value of the collateral should not be reported as an internal refinance, as there has been no variation to the actual agreed loan conditions. External refinance Where a borrower refinances from another lender – an external refinance – reporting institutions should identify the predominant purpose class of the total amount of the new commitment (including any additional finance) and, if the reporting institution submits the relevant finance form (ARF 741.0, ARF 743.0 or ARF 745.0) to classify the finance as an external refinance at the purpose sub-class level for reporting of the new commitment.
Figure 5: Refinances and Predominant Purpose Class
Elements to consider when reporting an internal or external refinance

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Example 4: Additional finance for a different purpose Consider a household approved for additional finance (by their current lender) for personal purposes, for example buying a car, on top of an existing housing loan. The relevant test in applying the predominant purpose principle is whether the balance of the new finance for a personal purpose is greater than the outstanding balance on the original housing loan.

If the outstanding balance on the existing housing loan is larger than the amount of new
finance at the time of approval, the whole loan should continue to be treated as predominantly for housing purposes. The total value of the loan should be reported as an internal refinance on the ARF 743.0 (if applicable) and the new total outstanding balance reported as housing credit.
If the outstanding balance on the existing housing loan is smaller than the amount of new
finance at the time of approval, the whole amount should then be treated as predominantly for personal purposes. The total value of the loan should be reported on the ARF 745.0 (if applicable) as a new commitment and the new total outstanding balance should be reported as personal credit (with the outstanding balance of the original loan removed from housing credit). The purpose sub-class of the new commitment should reflect the use of the additional finance (e.g. buying a car). Because the finance purpose class has changed it should not be reported as an internal refinance. Example 5: Multiple top-ups Let the outstanding balance of an existing housing loan be $200,000 and a top-up for personal purposes be $40,000. Given the outstanding balance of the existing housing loan is greater than the top-up for personal purposes, the whole loan amount ($240,000) should be continue to be treated as predominantly for housing purposes and the new total outstanding balance should be reported as housing credit. Similarly, the total value of the loan ($240,000) should be reported as an internal refinance on the ARF 743.0 (if applicable). Is the pre-existing finance provided by another lender? If yes:
Report as a new commitment for an external refinance.
If no:
Has the predominant purpose class changed?
If yes:
Report as a new commitment for the new purpose class and identify the purpose sub-class of the additional finance. Do not report as an internal refinance. If no:
Report as a new commitment for the existing purpose class and as an internal refinance, regardless of the purpose subclass of the additional finance.

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Let the outstanding balance of the loan then be paid down to $100,000 and the household approved for an additional $60,000 for personal purposes (e.g. a wedding and honeymoon). The current classification (i.e. housing) may be assumed to apply to the total outstanding balance when comparing it to the amount of new personal finance in determining predominant purpose. Thus, the total loan would continue to be classified as housing because the existing outstanding balance ($100,000) is larger than the additional finance for personal purposes ($60,000). There is no expectation that the amount and purpose of subsequent top-ups be recorded in a cumulative manner and used in determining predominant purpose class.
1.8.6 Maintaining the predominant purpose-class classification over time
As noted above, the agencies expect that a reasonable effort should be made during the application process to identify the predominant purpose class (and purpose sub-class) of the finance (e.g. asking the borrower). Unless the lender receives new information that would call into question the purpose class classification (e.g. through a refinance), the initial purpose class may be retained over time. Similarly, the purpose sub-class need only be recorded at origination or when refinanced. However, the residential property purpose (i.e. owner-occupied or investment) should be actively maintained over the course of the life of the loan (see Section 1.9 Residential property purpose – owner-occupied and investor housing).
1.8.7 Identifying purpose sub-class
Once a purpose class has been assigned, the predominant purpose principle should also be used to identify the purpose sub-class. That is, when finance is taken out for multiple purpose sub-classes, the finance should be classified according to the predominant purpose sub-class. Note that, where the use of finance crosses multiple purpose sub-classes, only those purpose sub-classes relevant to the predominant purpose class are options for the predominant purpose sub-class. The exception to this is where additional finance is approved and combined with existing finance (see Section 1.8.5 Refinances).
1.9 Residential property purpose - owner-occupied and investment
housing
As for the determination of the purpose class, product type may be used as an input to determine the property purpose (i.e. owner-occupied or investment), but it is unlikely to be appropriate to rely on this data point exclusively. This is because reporting entities’ lending policies may not align with the definition owner-occupied or investment and because the use of the property by the customer may change over time.
1.9.1 Loan purpose vs collateral
The loan should be classified as owner-occupied or investment based on the use of the property for which the funds have been borrowed (i.e. the property being purchased, constructed,

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 35 improved, or having repairs or maintenance carried out). The use of the property serving as collateral, where this differs, should not be used to determine the residential property purpose. For example, a borrower owns the property they live in (owner-occupied) and has borrowed some funds to purchase an investment property. The loan for the purchase of the investment property was partially secured or fully secured against the owner-occupied property. The loan should be reported as investment, irrespective of the loan being partially secured or fully secured against the owner-occupied property.
1.9.2 Principal place of residence
In general, a borrower will have only one principal place of residence, which will be the property that they live in the majority of the time. In practice, the principal place of residence may be determined by:

asking the borrower; or
PROXY: using the borrower’s residential address.
Example 1: vacation / holiday homes
A borrower owns two houses that are not rented out or used by any other persons. The borrower lives in one for eight months of the year, and the other for four months of the year. The borrower’s principal place of residence will be the house that the borrower lives in for eight months, and the loan used to purchase that property would be classified as an owner-occupied loan. The house that the borrower lives in for four months is not the borrower’s principal place of residence, and the loan used to purchase that property would be classified as an investment loan. Example 2: house for family members A borrower owns two houses – the borrower lives in one house during the week and their children live in the other house (and may or may not pay rent). The borrower stays in the house with the children on weekends. The borrower’s principal place of residence will be the house that the borrower lives in during the week, and the loan used to purchase that property would be classified as an owner-occupied loan. The house that the borrower’s children live in is not the borrower’s principal place of residence, and the loan used to purchase that property would be classified as an investment loan.
1.9.3 Multiple borrowers
If there are multiple borrowers, then classify the loan as owner occupied if at least one of the borrowers meets the relevant definition.
1.9.4 Construction and bridging loans
As defined in ARS 701.0, the criterion on which reporting institutions should seek to classify housing loans as owner-occupied or investment is whether the residential property is serving or will shortly serve as the principal place of residence for the person(s) taking out the loan (i.e. the customer has indicated that they plan to move into the residential property after construction has been completed and before the property is rented out).

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As a result, a customer would, in most cases, be expected to have a maximum of one owneroccupied loan. However, one exception involves the case in which a customer has a loan for a property that is their principal place of residence and has taken out a loan for a new property that will shortly be their principal place of residence. Common examples are construction loans or bridging loans, where the borrower currently has an owner-occupied loan and also intends to transfer their principal place of residence to their new property shortly. During the overlap period these borrowers may have more than one owner-occupied loan.
1.9.5 Rental income and investor loans
The use of rental income from the property to be purchased in the serviceability assessment does not automatically classify the loan as an investment loan. It is possible that the borrower is using or will shortly use the property as their principal place of residence, but that the borrower also is or intends to sublet a room. Example 3: renting out a room in an owner-occupied property A borrower purchases a property that will be their principal place of residence. In their loan application they indicated that they will be renting out one of the bedrooms and will receive rental income. This would be classified as an owner-occupied loan given that it will be the borrower’s principal place of residence. The rental income is irrelevant in this example.

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1.9.6 Non-residents and owner-occupied loans
It is necessary to separately identify and report lending to non-resident households for housing as being either owner-occupied or investment. The following is an assessment of whether such loans are owner-occupied or investment. Loans to non-residents should be classified as owneroccupied in the following circumstances:
a) where the residential property for which the funds are borrowed is located overseas and this residential property will serve as the borrower’s principal place of residence; or b) where the residential property for which the funds are borrowed is located in Australia and this residential property will serve as the borrower’s principal place of residence (i.e. the non-resident borrower will become a resident). Loans to non-residents for the purchase of residential property located in Australia that will not serve as the borrower’s principal place of residence should be classified as investor. Whether the property will act as the principal place of residence for family members of the non-resident borrower is irrelevant.
1.9.7 Updating owner-occupied / investment status over time
Reasonable steps should be taken to ensure the property purpose is correct at origination and that it remains accurate over time in the values reported for credit outstanding. For example, if a borrower has an owner-occupied housing loan, and the property location and the borrower’s residential address are available, then their residential address should match the address of the property for which the finance was sought. If the borrower updates their residential address to be different from the address of the property for which the finance was sought, the loan should be reclassified as an investment loan from the date that the address was changes. An ADI or RFC may use the location of the collateral securing a loan for housing purposes to proxy the address of the property (see Section 1.11 – Location of Property). This information will assist reporting institutions by providing a verifiable data point against which they can crosscheck customers’ residential address to assist in determining whether a housing loan is owneroccupied or investment. Where the loan is collateralised against multiple properties, the ADI or RFC should use an appropriate methodology to determine the property location, such as reporting the location of the property with the highest collateral value.. Reporting institutions should also re-confirm loans status at regular intervals (e.g. every three years). This might be done when borrowers initiate contact with the reporting institution for another reason or when customer-initiated contact has not occurred within an appropriate period (e.g. three years), the reporting institutions may initiate contact with the borrower directly. Please note, this guidance is intended for statistical reporting purposes only and should not be interpreted as relevant to internal business decisions regarding what products or financing arrangements are available to a given customer.

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1.10 Secured finance
Any lending for which some amount of collateral exists to support the loan exposure should be reported as secured finance. That is, there is no minimum collateral threshold for a loan to be classified as secured. Only lending for which there is no collateral to secure the loan should be reported as unsecured. 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 per cent, then the entire loan balance should be reported as partially secured in Table 5 of ARF 742.0, regardless of the value of the collateral. Certain items in the EFS collection explicitly state the type of collateral e.g. ‘secured by residential property’. For such items, only the named type of collateral would qualify for the loan to be considered secured. In cases where it is not made explicit, both tangible and intangible collateral would qualify the loan to be considered secured. Guarantees and other contingent assets should not be considered when determining whether to report a loan as secured for the purposes of the EFS collection. In the case of reporting items as secured by residential property, however, the following criteria must be met:

the value of the collateral for the loan represents 50 per cent or more of the loan balance;
and
50 per cent or more of the collateral is residential property.
If the above criteria are met, the entire loan balance should be reported as secured by residential property.
Figure 6: Secured by Residential Property
Elements to consider

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1.11 Location of property
1.11.1 Housing
Institutions should collect and report housing finance based on the location of the property for which the customer is borrowing the funds (e.g. the address of the property being purchased). This information will assist reporting institutions by providing a verifiable data point against which they can cross-check customers’ residential address to assist in determining whether a housing loan is owner-occupied or investment (see Section 1.9 Residential property purpose – owner-occupied and investor housing). If this information is not available to be reported, the ADI or RFC may report the location of housing finance according to the following proxy. PROXY: An ADI or RFC may use the location of the collateral securing a loan for housing purposes to proxy the location of the property for reporting by state. Where the loan is collateralised against properties located in different states, the ADI or RFC should use an appropriate methodology to determine the property location for reporting by state.
1.11.2 Business
When reporting on ARF 741.0, institutions should report fixed-term business loans for construction or the purchase of property (by small or medium businesses) based on the location of the property for which the customer is borrowing the funds (e.g. the address of the property being purchased or constructed) when reporting by state. Is there security for the loan? If yes:
Is the value of the security at least 50% of the loan balance?
If yes:
Is at least 50% of the security residential property?
If yes:
Secured by residential property
If no:
Secured, but not secured by residential property If no:
Secured
If no:
Unsecured

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1.12 Types of financial assets and liabilities
1.12.1 Loans and finance leases
Generally include:

overdrafts;
secured and unsecured lending;
finance leases;
credit card balances;
fixed-term loans;
mortgage lending;
commercial loans;
redeemable preference share finance not evidenced by a security; and
subordinated loans.
Generally exclude:
reverse repos;
loans and finance leases that have been written off;
associated deferred tax assets in the amounts reported for collective provisions or
individual provisions;
debt securities; and
deposits.
Fixed-term loans vs revolving credit facilities The key distinction between a fixed-term loan and a revolving credit facility is that repayments of revolving credit facilities (other than of charges and interest) increase the amount of unused credit available that may be redrawn up to the original credit limit, while repayments of fixedterm loans (other than into redraw facilities) generally cannot be redrawn. Both fixed-term loans and revolving credit facilities can have a fixed period when the facility is due to end. This is not sufficient to classify a facility as a fixed-term loan. Example of revolving credit facilities with a fixed term:
A lending facility where the borrower can repeatedly draw down and repay the finance up
to a specified limit. This specified limit does not decline over the life of the facility. The facility has a fixed term of one year – at the end of the year, the facility will either be cancelled (and fully repaid), or renewed. Generally, revolving credit facilities include:
credit cards; and
overdrafts.
Valuation of Finance Leases
The value of finance leases should be reported as either:

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the capital cost of new goods;
the written-down value of goods re-leased; or
the purchase price of second-hand goods;
For finance leases where the full value of the goods under lease is not financed by one corporation (e.g. partnership and syndicated leases), report the value as your share of the full value. For revolving lease facilities (such as master leases), report the value of goods acquired at each draw down against such facilities. Exclude the value of commitments to provide a leasing limit or to increase a leasing limit.
1.12.2 Deposits
Generally include:
offset accounts;
account balances with resident and non-resident financial institutions;
purchased payment facilities such as smart cards and electronic cash; and
non-negotiable certificates of deposit.
Generally exclude:
debt securities;
payables due to counterparties arising from the first leg of a repurchase agreement;
treasury-related short-term borrowings from resident ADIs and non-resident banks;
loans (including arranged and unarranged overdrafts); and
finance leases.
1.12.3 Debt securities
Generally include:
bills of exchange;
negotiable certificates of deposit;
commercial paper including promissory notes and asset-backed commercial paper;
treasury notes;
financial paper;
government and semi-government inscribed stock;
medium-term notes, bonds, debentures and unsecured notes;
inflation-indexed bonds;
floating-rate notes and other floating-rate debt securities;
asset-backed securities such as mortgage-backed bonds;
credit-linked notes and other debt securities with embedded financial derivatives; and
hybrid securities treated as liabilities.
Generally exclude:
deposits;
loans;

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finance leases; and
derivatives.
Report debt securities adjusted for the value of short-sold positions (see Section 1.19 Treatment of short-sold positions). Reporting institutions that have elected to use settlement date accounting under AASB 9 should exclude unsettled trades when reporting the value of debt securities. Institutions that have elected to use trade date accounting under AASB 9 should include unsettled trades when reporting the value of debt securities, in line with their statutory reporting.
1.12.4 Equity securities
Generally include:
ordinary shares;
units in trusts; and
preference shares.
Generally exclude convertible notes prior to conversion.
Report equity securities adjusted for the value of short-sold positions (see Section 1.19 Treatment of short-sold positions). Reporting institutions that have elected to use settlement date accounting under AASB 9 should exclude unsettled trades when reporting the value of equity securities. Institutions that have elected to use trade date accounting under AASB 9 should include unsettled trades when reporting the value of equity securities, in line with their statutory reporting.

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1.12.5 Provisions for doubtful financial assets
To determine the amounts to be reported as individual and collective provisions in the EFS collection, 'Expected Credit Loss' (ECL) provisions over any particular financial asset first needs to be determined as per AASB 9 Financial Instruments, and then separated in the following way:
12 month ECL — on performing loans
Lifetime ECL — on underperforming loans
Lifetime ECL — on non-performing loans
Financial assets affected
Assets measured at amortised cost (e.g. loans), at fair value through other comprehensive income (OCI; e.g. securities held for trading), lease assets, assets arising from AASB 15 Revenue from Contracts with Customers, and from financial guarantees (Para 5.5.1). Provision to recognise If there has been no indication of significantly increased credit risk since inception, still recognise a provision for the next 12 months’ worth of expected losses (para. 5.5.5 and B5.5.22- 23). If there has been an indication of significantly increased credit risk (defined in AASB 7) since the inception of the asset, recognise a provision that would take up losses to maturity (para
5.5.3 and B5.5.15-18).
On actually underperforming assets, a provision that would take up losses to maturity (para 5.5.13). Characteristi cs Low risk financial instruments which haven’t had a significant increase in risk since inception (para 5.5.10) from borrowers in good standing (para B.5.22-23) Significant increase in the risk of default (credit risk) since recognition (para 5.5.9). A nonexhaustive list of indicators are given in para. B5.5.17. Purchased or originated credit-impaired assets e.g. in significant financial difficulty, breach of contract, concessions granted etc. (see AASB 9, Appendix A). How assessed?

‘General approach’ —
individually or collectively (para 5.5.5) every period.
Individually — where it
had been determined as such in the Lifetime ECL and it has moved to this bucket (para 5.5.4 and 5.5.7).
‘General approach’ —
individually or collectively (para
5.5.4 and B5.5.1) every period.
Where ‘renegotiated or
modified’ — Individually (para
5.5.12, B5.5.2) every period.
Trade receivables and leases
— collectively (para 5.5.15) every period.
‘Credit-impaired
financial assets’ — individually where assets are individually known to be distressed and assessed as such, otherwise collectively (para 5.5.4), at initial recognition or subsequent measurement. Reporting in EFS forms E.g. ARF 720.0A/B, ARF 720.1A/B etc. Allocate all amounts to the collective column by default, except for individually assessed amounts.
Allocate all renegotiated or
modified loan related provision amounts to the individual column.
Allocate all trade and lease
receivable related provision amounts to the collective Allocate amounts to the individual or collective column, following assessment.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 44 column by default, unless for assets that were individually assessed.

Allocate all remaining
amounts to the collective column by default, except for any that’ve been actually individually assessed. Expected credit losses (ECL):
are determined using forward-looking information (informed by probability-weighted forecasts,
time value of money, future economic conditions, para 5.5.17) related to the financial assets (determined either individually or collectively), and not merely based past-due data unless forwardlooking information is cost ineffective to obtain (B5.5.4), or the data is not available (B5.5.3), unless
assets are >30 days past due, then they are considered have suffered ‘significant increase in
credit risk’ and therefore individually identifiable.
Collective assessment Is to be performed based on ‘shared credit risk characteristics’, such as instrument type, risk ratings, collateral type, industry etc. (para B5.5.5). 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. This treatment is in line with the requirement to report using market values and should be applied to all EFS forms.
For off-balance sheet credit related commitments, report individual provisions in Item 17.5.
Other provisions in ARF 720.0.
1.13 Borrower-accepted commitments
RFCs should report borrower-accepted commitments at the point at which the borrower has indicated acceptance of a firm offer to provide finance consistent with the definition. PROXY: ADIs should also report on this basis, except where capital adequacy guidelines (e.g. APG 112 – Standardised Approach to Credit Risk) require recognition of a commitment at the point at which a firm offer of finance is made (i.e. before customer acceptance). This means that ADIs taking advantage of the long-standing concessional treatment for residential mortgages should report in a manner consistent with the definition of a borroweraccepted commitment for this form of finance. However, other forms of finance may be reported earlier (i.e. when a firm offer to provide finance is made but prior to borrower acceptance). Practical implementation When reporting at the point of borrower acceptance, the reporting institution may determine the month in which a borrower-accepted commitment is accepted by the borrower with reference to either:

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PROXY: the month in which it receives a signed contract indicating the borrower(s)
has/have accepted the reporting institution’s offer of finance; or
the date the contract is signed by the borrower(s).
New borrower-accepted commitments that have been cancelled in the same reporting period they are recognised should not be reported as a new borrower-accepted commitment.
1.13.1 Cancellations and reductions in previously committed credit limits
Include:
borrower-initiated and lender-initiated cancellations and reductions;
cancellations of and reductions in drawn and undrawn commitments.
Exclude:
reductions due to amortisation of a loan or finance lease; and
reductions due to expiration of a contract.
1.14 Identifying facilities
Multiple accounts/lending agreements should only be considered part of a single lending facility where they differ by interest rate type (fixed interest rate or variable interest rate) and/or repayment type (interest only or amortising). If the accounts/lending agreements differ by characteristics that are not the result of different interest rate or repayment types – for example, revolving credit and fixed-term credit – then these should not be considered part of a single lending facility. Practical implementation When grouping accounts/lending agreements into a lending facility apply the following logic:

Disaggregate accounts/lending agreements to the same borrower(s) to the lowest level
possible.
For those accounts/lending agreements approved at the same point in time and/or as a
part of the same application, consider whether they are for the same purpose class and for
housing, the same residential property purpose. In comparing purposes, first apply the predominant purpose principle to each separately identifiable account/lending agreement.
For those accounts/lending agreements that were approved at the same point in time as
part of the same application and for the same (predominant) purpose, , including the same
residential property purpose, treat those that are similarly structured and differ only by characteristics relating to interest rate type (fixed interest rate or variable interest rate) and/or repayment type (interest only or amortising) as belonging to a single lending facility. For example, a housing loan application to be split 25/75 into fixed interest rate and variable interest rate products may be recorded as two new loan accounts but would be regarded as one lending facility.

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Facilities with a mix of interest rate types and/or repayment types may be referred to as ‘split’ facilities. The features of some facilities may be unknown when a reporting entity makes a firm offer to provide finance. In this instance, report the borrower-accepted commitment and credit limit as revolving credit, and according to the expected predominant purpose and sub-purpose. Once a loan has been funded and drawn down from the facility, the loan should be reclassified according to its actual characteristics if required. Do not report such reclassifications as internal refinancing.
1.14.1 Apportioning number
Where the number is required to be reported along an interest rate or repayment type dimension (e.g. fixed interest rate and variable interest rate, or amortising and interest-only), report each facility once according to the predominant type by value for that dimension, unless otherwise directed. For example, if a facility is split by value 25/75 fixed interest rate and variable interest rate then one facility should be recorded (by number) in variable interest rate and none in fixed interest rate. If a facility is split by value 50/50 across interest rate types or repayment types, then report the number of facilities as follows:

interest rate type: default to variable interest rate; and
repayment type: default to amortising.
1.15 Interest rates
The guiding principle in reporting interest rates is to report the contractual rate to be paid to or received by the customer/counterparty/debtholder. No fees should be included and no adjustment should be made for whether the payment/receipt actually occurred. Reporting institutions are requested to report interest rates as annualised rates and not as a spread. That is, even if the reporting institution would typically consider that rate as a spread over a market rate, then the applicable market rate should be added to the spread when reporting the rate. Reporting institutions are requested to report interest rates on foreign currency assets or liabilities as the contractual rate paid to or by the counterparty in that foreign currency. That is, no adjustments for hedging (such as cross-currency basis costs) should be incorporated in the rate reported. Where there is more than one contractual rate, and the rate paid by the customer depends on their behaviour in that period, report the contractual rate that applied given their behaviour. For example, if a customer qualified for a bonus interest rate, then the rate reported for that account for that period should include the bonus interest rate. The treatment of interest rates for credit cards (including charge cards) is specific:

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Because a credit card may charge interest in the month on only a portion of the balances
outstanding, the treatment differs. The interest rate to be reported should be calculated as interest charged on credit cards during the month divided by the relevant balance × 100%. In the absence of further instructions, the relevant balance is the value of credit card debt (outstanding or funded) incurring interest at the end of the month.
When reporting credit cards funded during the month, the interest rate reported against
the credit card limit funded should be zero unless a balance transfer has taken place (in which case, report the interest rate applying to this balance). The treatment of interest rates for offset and set-off accounts is specific:
The linked deposit and loan balances are, in the absence of specific instructions to the
contrary, to be reported on a gross basis.
For offset accounts, the interest rate 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 set-off accounts, the same (contractual) interest rate payable to or receivable by the
customer on the net balance should be reported on both the loan and deposit amounts.
Both offset and set-off accounts should be reported as interest-bearing deposits on ARF
720.2, even if the customer is not due to pay or receive any interest on the net balance of the loan in the given reporting period (unless the contractual interest rates on both the loan and the deposit account are zero).
The average interest rate net of offset balances should include impaired loans temporarily
not bearing interest (e.g. loans with a repayment holiday or loans that are in hardship). However, these loans should be excluded from the calculation of the weighted average interest rate. Example 1: mortgage offset account Assume a $100 housing loan with an interest rate of 4 per cent and a linked offset account (which has a contractual interest rate of 0 per cent):
If the deposit balance is $50, an interest rate of 4 per cent will be charged on the net loan
balance ($50). The entire loan balance and the entire deposit balance should each be reported with an interest rate of 4 per cent (since the full offset account balance is being utilised to offset the loan).
If the deposit balance is $200, no interest will be payable or receivable by the customer on
the loan or deposit. The entire loan balance should be reported with an interest rate of 4 per cent, and the entire deposit balance should be reported with an interest rate of 2 per cent (since only half of the offset account balance is being utilised). Example 2: net balance Assume linked business lending and deposit accounts with an interest rate of 16 per cent charged on the net balance if the total loan balance exceeds the total deposit balance and an interest rate of 3 per cent paid if the total deposit balance exceeds the total loan balance. If the total loan balance exceeds the total deposit balance then report the total loan balance with an interest rate of 16 per cent and the total deposit balance with an interest rate of 16 per cent.

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If the total deposit balance exceeds the total loan balance then report the total loan balance with an interest rate of 3 per cent and the total deposit balance with an interest rate of 3 per cent.
1.15.1 Calculating an annualised rate
Annualised rates may be calculated by simple multiplication or division of the relevant rate on a 365 days per year basis (no calculation of compound rates is required). Where market convention is to use an annualised rate other than 365 days, this annualised rate may be used instead. Example 3 A bank has issued a fixed-rate bond that pays a semi-annual coupon of 3 per cent. To obtain the annualised rate on this funding, multiply the semi-annual rate of 3 per cent by 2 to obtain the annualised rate of 6 per cent.

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1.15.2 Calculating a weighted average rate
The weighted average rate is the weighted sum of the individual rates where the weights used are the corresponding balances expressed as a share of the total balance for that category. Do not excluded interest rates that are less than or equal to zero from the calculation of weighted average interest rates. Weighted average rates may be calculated using the formula below. 𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊ℎ𝑡𝑡 𝑡𝑡 𝑎𝑎𝑎𝑎 𝑎𝑎𝑎𝑎 = � 𝑖𝑖 × 𝑤𝑤 ℎ𝑡𝑡𝑖𝑖 𝑖𝑖 Where weighti = the balance for item i divided by the sum of balances for all items i Example 4 A bank’s portfolio of business loans in a given industry sector consists of loans with the following characteristics:
Loan Characteristics
Loan Outstanding balance Interest rate
1 $50m 3%
2 $10m 5%
3 $40m 4%
The weighted average interest rate would be calculated as:
3% × 50/100 + 5% × 10/100 + 4% × 40/100 = 3.6%
1.15.3 Cost/value of funds
The guiding principle in reporting the cost/value of funds is to report the rate to be charged or credited to the business unit. Unless otherwise explicitly directed, the cost/value of funds is not to be expressed as a spread. That is, even if the reporting institution would typically consider that rate as a spread over a market rate, then the applicable market rate should be added to the spread when reporting the cost/value of funds. The cost/value of funds for a foreign currency asset or liability should be reported on an AUD (or AUD equivalent) basis. This cost/value of funds should include transfer pricing relating to:

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Interest rate risk managed centrally. This transfer price has the effect of reducing the
exposure of the business unit to variability in the interest income it receives that arises from changes in interest rates (and transferring that exposure to the treasury). Accordingly, this transfer price may differ by product – where the characteristics of the product expose it to different types of interest rate risk to other asset or liabilities (for example, because their interest rates may re-price on a different frequency or at the option of the customer).
Liquidity risk managed centrally. This transfer price serves to attribute the costs of
centrally managing liquidity risk. It may incorporate the cost of raising funding that matches the expected life of an asset, and other costs relating to the management of liquidity risk (including contingent liquidity risk) in line with APS 210.
Strategic pricing determined by management. This transfer price is an overlay determined
by management policy that is designed to influence the asset or liability composition of the balance sheet. If the internal transfer prices calculated by your reporting institution contain components that do not fit in one of the categories above (or if they do not incorporate interest rate risk and/or liquidity risk transfer pricing), please contact APRA for further guidance. PROXY: If, in reporting cost/value of funds, the ADI or RFC faces significant difficulties in providing accurate information by purpose, the agencies may consider allowing a proxy methodology involving allocation or apportionment based on product characteristics and/or other information. An ADI or RFC in this situation should seek reporting advice from APRA.
1.16 Treatment of fixed interest rate products once the fixed period
ends
Finance (loans, finance leases and bill acceptances) with a fixed interest rate should be reported as having a fixed interest rate for the period that the fixed interest rate applies. When the fixed interest rate period ends, the finance should then be reported as having a variable interest rate (assuming that the customer has not entered into a new fixed interest rate period) from that point onwards. Some fixed-term finance may contain provisions for the interest rate to be reset at regular short-term intervals over the term of the agreement (and remain fixed in the interim between resets). Such finance should be classified as having a variable interest rate. Similarly, short-term debt instruments with any provision for regular changes in their interest rates are to be classified as having a variable interest rate (e.g. 9 month bill, with quarterly resets).
1.17 Residual maturity
1.17.1 Hybrid securities
The residual maturity of hybrid securities should be based on the period until the next call date.

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1.18 Funds held on behalf of/in trust for clients
The domestic books definition does not consolidate funds management operations. Any deposits with the domestic books entity (including those by funds management operations) should be reported on the ARF 720.0A/B, ARF 720.2A/B, ARF 720.3 and ARF 747.0A/B (as applicable). The sectoral classification should be based on the counterparty with whom the reporting entity is making the deposit and has a position with on a flow of funds basis, not on an ultimate risk basis. Example 1: funds manager deposits Consider the situation where a funds manager makes a deposit with a bank on behalf of a household. This should be reported by the bank as a deposit by a funds manager. If the funds manager is a related party, the deposit should be reported as an intra-group liability. If the funds manager is a non-related party, the deposit should be reported as a deposit. Where the direct legal entity facing the reporting institution is a trustee, a responsible entity, or a custodian acting on behalf of a trust, reporting entities should classify the counterparty according to the sectoral classification of the trust, and not e.g. a deposit by a financial auxiliary (i.e. trustee, a responsible entity, or custodian).
1.19 Treatment of short-sold positions
Report securities held for trading and securities not held for trading by adjusting for the value of short-sold positions (that is, report the value of securities held less the value of securities sold short). Where the short-sold position exceeds the asset position, the amount to be reported will be negative. For example, a reporting entity may have a trading book comprised of the following positions:

$1 million of purchased equity securities; and
$100,000 of short sold equity securities
In this example, the amount to be reported for securities held for trading that are equity securities is $900,000.

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2. Form-specific Guidance
2.1 ARF 720.0A/B: ABS/RBA Statement of Financial Position
(Standard) / (Reduced)
2.1.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.16 Treatment of fixed interest rate products once the fixed period ends;
1.17 Residual maturity;
1.18 Funds held on behalf of/in trust for clients; and
1.19 Treatment of short-sold positions.
2.1.2 Foreign currency conversion
The general requirements of AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB

for translation are:

translate foreign currency monetary items outstanding at the reporting date at the spot rate at
the reporting date;17
translate foreign currency non-monetary items that are measured at historical cost in a foreign
currency using the exchange rate at the date of the transaction;18
translate foreign currency non-monetary items that are measured at fair value at the exchange
rate at the date when fair value was determined.
AASB 9 Financial Instruments (AASB 9) applies to many foreign currency derivatives. In addition, AASB 121 applies when an entity translates amounts relating to derivatives from its functional currency to its presentation currency. As foreign currency derivatives are measured at fair value at reporting date, they should be translated at the spot rate at the reporting date. Translate equity items using the foreign currency exchange rate at the date of investment or acquisition. Post-acquisition changes in equity are required to be translated on the date of the movement. 17 Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency. Spot rate means the exchange rate for immediate delivery. 18 Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent), goodwill, intangible assets, inventories, property, plant and equipment and provisions that are to be settled by the delivery of a non-monetary asset.

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Exchange differences for monetary items arising from a foreign currency transaction are generally recognised in profit and loss in the period in which they arise. Exceptions include: a monetary item that is designated as a hedging instrument in a cash flow hedge; a hedge of a net investment; or a fair value hedge of an equity instrument for which an entity has elected to present changes in fair value in other comprehensive income. For these exceptions, the gain or loss that is presented in other comprehensive income (in accordance with AASB 9 requirements) includes any related foreign exchange component.
4. translate financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associated entity, joint venture entity or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity. Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation must be recognised as a separate component of equity. Translation of financial reports should otherwise follow the requirements in AASB 121.
2.1.3 Treatment of foreign currency forwards/swaps with legs in different
currencies
Each leg should be converted to AUD using the relevant spot rate per differing currency.
2.1.4 Treatment of repurchase agreements and securities lending
Transactions related to repurchase agreements (repos) and securities lending are to be recorded consistent with AASB 9. Repos – General treatment In a repo, the security (collateral) will remain as an asset on the balance sheet of the seller and is not derecognised, in accordance with AASB 9. If the security is sold under repo in exchange for cash:

the seller records an increase in assets (i.e. cash), and the purchaser records a decrease
in assets (i.e. cash) as a result of the sale.
the seller records a liability representing the payable due to the purchaser to reflect its
obligation to return the cash once the purchaser returns the security (collateral) to the seller at the end of the transaction.
The purchaser will record a corresponding asset representing the receivable due from the
seller.

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Securities lending – General treatment
In a securities loan, the security loaned will remain as an asset on the balance sheet of the lender and is not derecognised, in accordance with AASB 9. If the security is lent in exchange for cash collateral under a securities lending agreement:

the lender records an increase in assets (i.e. cash), and the purchaser/borrower records a
decrease in assets as a result of the loan.
the lender records a liability representing the payable due to the borrower to reflect its
obligation to return the cash collateral once the borrower returns the security to the lender at the end of the transaction.
The borrower will record a corresponding asset representing the receivable due from the
lender.
If the security is lent in exchange for non-cash collateral, then there is no impact on reporting for ARF 720.0A/B (the lender continues to recognise the securities on its balance sheet) except that, where the value of the security is reported in ‘Item 3: Total securities held for trading’ of ARF 720.0A, the value of that security should also be reported in ‘Item 3.2: Total securities held for trading: of which: Securities lent or sold under repurchase agreements’ on ARF 720. Example 1: Bank A sells securities to Bank B under a repurchase agreement (or lends them against cash collateral) Bank A (Seller) Bank B (Purchaser) Assets Liabilities Assets Liabilities Securities Payable due to Bank B Receivable due from Bank A Proceeds from sale under repo / cash collateral from securities lending less Value of funds transferred under repo / cash collateral under securities borrowing Reporting on ARF 720.0A/B for the Seller / Lender Although the repo seller/securities lender continues to recognise the securities sold or lent as an asset, the reporting of the securities lent/sold under repo on ARF 720.0A/B will depend on whether the securities were issued by a related party or a non-related party. If the securities lent/sold under repo are issued by a related party, they should be reported under ‘Item 12:
Total intra-group assets’ on ARF 720.0A/B. If the securities lent/sold under repo are issued by a non-related party, they should be reported under ‘Item 3: Total securities held for trading’ against the appropriate security type on ARF 720.0A, or under ‘Item 3: Total debt securities’ or ‘Item 4: Total equity securities’ against the appropriate security type on ARF 720.0B. These securities should also be reported in ‘Item 3.2: Total securities held for trading: of which:
Securities lent or sold under repurchase agreements’ on ARF 720.0A.
Where applicable, the reporting of the liability representing the payable due to the purchaser/borrower of the securities in the books of the seller/lender will depend on whether

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 55 the purchaser/borrower is a related party or a non-related party. If the purchaser/borrower is a non-related party, it should be reported under ‘Item 18.6: Payables related to securities lent under securities lending arrangements or sold under repurchase agreements’. If the purchaser/borrower is a related party, it should be reported under ‘Item 20: Total intra-group liabilities’. If the securities were sold or lent against cash collateral, the seller should record the funds received under the relevant asset type e.g. cash. Reporting on ARF 720.0A/B for the Purchaser / Borrower The securities borrowed or purchased under repo should not be reported on ARF 720.0A/B. Where applicable, the reporting of the asset representing the receivable due from the seller/lender of the securities will depend on whether the seller/lender is a related party or a non-related party. If the seller/lender is a non-related party, it should be reported under ‘Item 10.4: Receivables related to securities borrowed under securities lending arrangements or purchased under repurchase agreements’ on ARF 720.0A/B. If the seller/lender is a related party, it should be reported under ‘Item 12: Total intra-group assets’ on ARF 720.0A/B. If the securities were purchased or borrowed against cash collateral, the purchaser should report a decline in funds under the relevant asset type e.g. cash.
2.1.5 Treatment of securitisation
2.1.5.1 Special Purpose Vehicles
SPVs are a separate legal entity to the ADI or RFC.
In the case of ADIs and RFCs that are a related party of an ADI, the following treatment applies.

SPVs should not be consolidated within domestic books reporting.
Any positions between the ADI or RFC and an SPV that is a related party will need to be
recorded as an intra-group asset or liability.
For any SPV that has been established for the purpose of holding assets in a cover pool
for covered bonds, the securitised assets should be treated as on-balance sheet. That is, any assets in a cover pool that have been transferred to an SPV must not be derecognised from the domestic books balance sheet of the reporting entity. In addition, the covered bonds are issued by an ADI and should therefore be included as a debt security issued by that ADI for reporting purposes.
For all other assets that have been transferred to an SPV for the purposes of
securitisation, refer to the accounting standards to determine whether the securitised assets should be treated as on-balance sheet or off-balance sheet. Note that, in contrast to reporting to APRA for prudential purposes, the EFS collection does not use the ‘securitisation deconsolidation principle’.

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RFCs that are not a related party of an ADI should consolidate resident SPVs that are controlled entities for the purposes of domestic books reporting (see Section 1.4.4 Consolidation of SPVs by RFCs for more detail). All assets that have been originated by, or transferred to, a controlled SPV for the purposes of securitisation should therefore be treated as on-balance sheet securitised assets. Any intra-group positions and transactions between the RFC and these SPVs should not be reported. Example 1: Off-balance sheet securitisation (ADIs and RFCs that are related parties of ADIs) Step 1: a bank has some loans (or any other assets), that it would like to securitise. Step 2: the bank sells the loans to the SPV. In this example, the purchase by the SPV is funded by a loan from the bank. However, this purchase could have also been funded in a number of other ways. Step 3: the SPV creates securities backed by the loans. In this example, a portion of the securities issued by the SPV is purchased by the bank, and the remaining securities are purchased by other entities. The SPV uses the proceeds from the sale to repay the original loan from the bank. Once the assets to be securitised have been sold to the SPV, they should no longer be reported on ARF 720.0A/B. Any loans (or other funding) to an SPV that is a related party should be reported in ‘Item 12: Total intra-group assets’. These assets due from SPVs that are related parties should also be reported on ARF 720.3. Any securities held that are issued by an SPV that is a related party should be recorded in ‘Item 12: Total intra-group assets’. These securities should also be reported on ARF 720.3 and either ARF 720.4 for debt securities or ARF 720.5 for equity securities. Asset-backed securities issued by an SPV that is a related party should be treated as debt securities, not intra-group loans. Step 1: Prior to securitisation Bank SPV Assets Liabilities Assets Liabilities Loans Funding for loans

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Step 2: Bank sells loans to be securitised to the SPV Bank SPV Assets Liabilities Assets Liabilities Funding for loans Loan to SPV Loans Loan from bank Step 3: SPV issues securities Bank SPV Assets Liabilities Assets Liabilities Funding for loans Loans Portion of securities issued by SPV held by bank Funds from repayment of remaining portion of loan to SPV Securities issued by SPV Example 2: On-balance sheet securitisation Step 1: a bank has some loans (or any other assets), that it would like to securitise. Step 2: the bank sells the loans to the SPV. In this example, the purchase by the SPV is funded by a loan from the bank. However, this purchase could have also been funded in a number of other ways. Because the bank does not derecognise the loans but does notionally transfer them to the SPV, the bank records a liability equal to the value of the loans transferred to the SPV. The SPV records a corresponding asset representing the value of the loans transferred by the bank. Step 3: the SPV creates securities backed by the loans. Step 3A – Self-Securitisation: all of the securities issued by the SPV are purchased by the bank and the loan is extinguished. Step 3B – Other on-balance sheet securitisation: in this example, a portion of the securities issued by the SPV are purchased by the bank, and the remaining securities are purchased by

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 58 other entities. The SPV uses the proceeds from the sale to repay a portion of the original loan from the bank. The assets to be securitised that have been transferred to the SPV should be reported on ARF 720.0A/B against the relevant asset item. For example, loans to non-related parties should be reported in ‘Item 6: Total loans and finance leases’. These assets should also be reported in ‘Item 13.1: Total assets including intra-group assets: of which: Assets that have been securitised’ against the appropriate asset type. Any interest and fees accrued on these loans but not yet charged to the customer (i.e. as recorded in ‘Item: 10.1 Interest receivable’ and ‘Item 10.11: Fees and commissions receivable’) should be reported in ‘Item 13.1.2: of which:
Assets that have been securitised: Other’.
The liability representing the value of loans that have been transferred should be reported in ‘Item 20: Total intra-group liabilities’. It should also be identified in ‘Item 20.1: of which:
Liabilities to SPVs representing the value of assets transferred for securitisation’. Any loans (or other funding) to an SPV that is a related party should be reported in ‘Item 12:
Total intra-group assets’. These assets due from SPVs that are related parties should also be reported on ARF 720.3. Any securities held that are issued by an SPV that is a related party should also be recorded in ‘Item 12: Total intra-group assets’. These securities held should also be reported on ARF 720.3 and either ARF 720.4 for debt securities or ARF 720.5 for equity securities. Asset-backed securities issued by an SPV that is a related party should be treated as debt securities, not intragroup loans. Step 1: Prior to securitisation Bank SPV Assets Liabilities Assets Liabilities Loans Funding for loans Step 2: Bank transfers loans to be securitised to the SPV Bank SPV Assets Liabilities Assets Liabilities Loans Funding for loans Loan to SPV Liability representing value of loans transferred Asset representing value of loans transferred Loan from bank

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Step 3/3A: SPV issues securities (self-securitisation) Bank SPV Assets Liabilities Assets Liabilities Loans Funding for loans Liability representing value of loans transferred Asset representing value of loans transferred Securities issued by SPV Securities issued by SPV Step 3/3B: SPV issues securities (other on-balance sheet securitisation) Bank SPV Assets Liabilities Assets Liabilities Loans Funding for loans Liability representing value of loans transferred Asset representing value of loans transferred Portion of securities issued by SPV held by bank Securities issued by SPV Funds from repayment of remaining portion of loan to SPV Example 3: On-balance sheet securitisation by an RFC that is not a related party of an ADI Step 1: an RFC originates some loans that it would like to securitise. Step 2: the RFC sells the loans to an SPV that is a controlled entity. In this example, the purchase by the SPV is funded by a loan from the RFC. Because the SPV is consolidated within the domestic books of the RFC:

the assets to be securitised that have been transferred to the SPV continue to be reported
on the domestic books balance sheet of the RFC; that is, the loans should be reported in ‘Item 6: Total loans and finance leases’ on ARF 720.0A/B.
the loans should not be reported in ‘Item 13.1: Total assets including intra-group assets:
of which: Assets that have been securitised’, ‘Item 20: Total intra-group liabilities’ or ‘Item

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20.1: of which: Liabilities to SPVs representing the value of assets transferred for securitisation’.

the RFC should not report the intra-group loan to the SPV.
Step 3: the SPV creates securities backed by the loans.
Step 4: in this example, a portion of the securities issued by the SPV are purchased by the RFC, and the remaining securities are purchased by other entities. The SPV uses the proceeds from the sale to repay a portion of the original loan from the RFC. Asset-backed securities issued by an SPV that is a controlled entity should be treated as debt securities issued, and reported in ‘Item 16.2: Debt securities’. These securities should also be reported on ARF 720.6. Any securities held by the RFC that are issued by an SPV that is a controlled entity should not be reported.
2.1.5.2 Assets in a cover pool for covered bonds
Even when assets inside a covered bond collateral pool are segregated into an SPV, the covered bond remains a direct obligation of the issuing ADI. Any assets held in a covered bond SPV must therefore not be derecognised from the domestic books balance sheet of the reporting entity. The cover pool assets should be reported on ARF 720.0A/B against the relevant asset item; for example, loans to non-related parties should be reported in ‘Item 6: Total loans and finance leases’. These assets should also be reported in ‘Item 13.1: Total assets including intra-group assets: of which: Assets that have been securitised’ against the appropriate asset type. Since the covered bonds are issued by the ADI itself, they should be reported as a debt security issued by that ADI in ‘Item 16.1: Total borrowings: debt securities’ on ARF 720.0B and ‘Item 16.2: Total borrowings: debt securities’ on ARF 720.0A. These debt securities should also be reported on ARF 720.6. Any loans or other funding to an SPV that is a related party should be reported in ‘Item 12: Total intra-group assets’. These assets due from SPVs that are related parties should also be reported on ARF 720.3 against the appropriate institution type. Because the ADI does not derecognise the cover pool assets but notionally transfers them to the SPV, it must also record a liability equal to the value of the assets transferred. This should be reported in ‘Item 20: Total intra-group liabilities’.

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2.1.6 Treatment of bills of exchange
Bills of exchange (bills) should only be reported on ARF 720.0A/B if they are held and/or accepted by your reporting institution. See the table below for the particular items on ARF 720.0A/B where these bills should be reported. Bills that have been endorsed (and neither held or accepted by your reporting institution) should not be reported on ARF 720.0A/B. Reporting of bills of exchange Assets Liabilities Bills held & accepted by your institution ARF 720.0A:
Item 3: Total securities held for trading or
Item 4: Total securities not held for trading
ARF 720.0B:
Item 3: Total debt securities
Not reported
Bills held by your institution but not accepted by your institution ARF 720.0A:
Item 3: Total securities held for trading or
Item 4: Total securities not held for trading
ARF 720.0B:
Item 3: Total debt securities
Not reported
Bills accepted but not held by your institution Item 5: Net acceptances of customers This item represents a contra asset that reflects the ADI’s or RFC’s claim against each drawer of a bill of exchange (where the bill is held by a third party). Item 15: Total acceptances This item represents the liability of the ADI or RFC to pay (to a third party) bills of exchange drawn on customers.
2.1.7 Treatment of margin monies
In the reporting of margin monies, a distinction should be made between ‘repayable’ and ‘nonrepayable’ 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.

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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, 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 deposit 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. Non-repayable margin represents an effective transfer of ownership of the collateral between 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 nonrepayable margin is recorded as a reduction in the financial derivative asset; the contraentry is an increase in another financial asset. For example, when debt securities are used to meet non-repayable margin obligations, the contra-entry would be an increase or decrease in ‘Item 3: Total securities held for trading’ on ARF 720.0A or ‘Item 3: Total debt securities’ on ARF 720.0B. 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.
2.1.8 Treatment of settlement account balances
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 a reporting entity has elected to use trade date accounting under AASB 9, outstanding security 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.
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).

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

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2.1.9 Treatment of interbank loans and deposits
Assets/liabilities arising from positions with other financial institutions (e.g. interbank assets/liabilities), should be treated no differently from assets/liabilities arising from positions with other types of counterparties. Report these positions based on the type of asset/liability, the residency and the related-party status of the financial institution.
2.1.10 Funds on deposit with other financial institutions
As a guide, any funds on deposit that are redeemable or withdrawable on demand may be considered to be ‘at call’. Funds on deposit that do not fit this description may be considered ‘not at call’ (e.g. funds with non-transaction deposit-like characteristics).
2.1.11 Section A: Assets
Note that the treatment of residents and non-residents in ARF 720.0A/B ‘Section A: Assets’ differs from the previous version of this form (ARF/RRF 320.0), where residents and nonresidents were separately identified.
2.1.12 ARF 720.0A Item 3: Securities held for trading
In accordance with AASB 9, securities held for trading are measured at fair value through profit or loss. In accordance with AASB 9, all investments in equity instruments and contracts on those instruments must be measured at fair value. However, in limited circumstances, cost may be an appropriate estimate of fair value. Cost is never the best estimate of fair value for investments in quoted equity instruments (or contracts on quoted equity instruments).
2.1.14 ARF 720.0B Item 3: Total debt securities
Include both debt securities held for trading and debt securities not held for trading.
2.1.15 ARF 720.0B Item 4: Total equity securities
Include both equity securities held for trading and equity securities not held for trading.
2.1.16 Item 10: Total other assets
Interest receivable
Item 10.1 requires institutions to report the interest that has accrued during the period but has not yet been received for interest-bearing assets. This item should exclude the interest that has been received. Interest received should be included in the value of the relevant asset (such as loans or debt securities). PROXY: If information on interest receivable (Item 10.1) split by loans and finance leases (Item 10.1.1) and securities and other interest-earning assets (Item 10.1.2) is not available, apportionment of total interest receivable based on interest received for these product types is acceptable.

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Capitalised expenses
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: Capitalised expenses’ until amortised. Derivative financial instruments Report all derivatives recognised and measured in accordance with requirements in the Australian Accounting Standards (e.g. AASB 132 Financial Instruments: Presentation (AASB 132), AASB 7 Financial Instruments: Disclosures (AASB 7) and AASB 9. Derivatives are categorised according to whether the reporting entity holds them in the trading book or the banking book. For a given derivative instrument, report the net (market) value as either an asset or a liability. That is, do not separately record the clean price as an asset and accrued interest as a liability (or vice versa). Fees and commissions receivable Item 10.11 requires institutions to report fees and commissions that have been earned (accrued) during the period but not yet received. This item should exclude fees and commissions that have been earned and received or capitalised (i.e. added to the outstanding value of the loan amount, as per the terms of the loan contract). Fees and commissions that have been earned and received should be included in the value of the relevant asset(such as ‘Item 1.1: Notes and coins’ or ‘Item 2: Funds on deposit’, as appropriate) and recognised as income in ARF 730.0. Any fees and commissions that have been earned and capitalised by the entity should be reported in Item 6. PROXY: If information on fees and commissions receivable split by resident households (Item 10.11.1), resident non-financial businesses (Item 10.11.2) and resident financial institutions (Item 10.11.3) is not available, estimation or proxy methodology is acceptable, including using fees and commissions received by product to estimate the split between these sectors. Other assets (Item 10.12) Generally include:

commodities other than unallocated gold;
gold bullion (physical and allocated gold, including gold certificates relating to allocated
gold);
valuables; and
prepayments
Unallocated gold (including gold certificates relating to unallocated gold) should be reported under Item 1.2. ‘Non-financial assets’ are those 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 (para. 11).
2.1.17 ARF 720.0A/0B Item 12: Total intra-group assets

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Item 12 collects information on the value of total assets due from related parties (intra-group assets). Investments in related parties should be reported in item 12, along with the total value of assets due from related parties.
2.1.18 Section B: Liabilities
Note that the treatment of residents and non-residents in ARF 720.0A/B, ‘Section B: Liabilities’ differs from the previous version of this form (ARF/RRF 320.0), where residents and nonresidents were separately identified.
2.1.19 Item 14 Total deposits
Exclude treasury-related short and long-term borrowings from other ADIs. Report these in Item 16 as loans.
2.1.20 Item 16 Total borrowings
Include treasury-related short and long-term borrowings from other ADIs. Report these as loans.
2.1.21 Item 18: Total creditors and other liabilities
Interest payable
Item 18.4 requires institutions to report the interest that has accrued during the period, but not yet been paid on interest-bearing liabilities. This item should exclude the interest that has been paid. Interest paid should be included in the value of the relevant liability (such as deposits, loans or debt securities). PROXY: If information on interest payable (Item 18.4) split by debt securities (Item 18.4.1), deposits (Item 18.4.2), loans and finance leases (Item 18.4.3) and other liabilities (Item 18.4.4) is not available, apportionment of total interest payable based on interest paid on these product types would be acceptable. Derivative financial liabilities Report all derivatives recognised and measured in accordance with the requirements in the Australian Accounting Standards (e.g. AASB 132, AASB 7 and AASB 9). Derivatives are categorised according to whether the reporting entity holds them in the trading book or the banking book. For a given derivative instrument, report the net (market) value as either an asset or a liability. That is, do not separately record the clean price as an asset and accrued interest as a liability (or vice versa). Other (ARF 720.0A Item 18.11 or ARF 720.0B Item 18.12) Item 18.11 (ARF 720.0A) / 18.12 (ARF 720.0B) requires institutions to report fees and commissions that have been received during the period, but not yet earned. This item should

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 67 exclude fees and commissions that have been earned. Fees and commissions earned should be included in the value of the relevant asset (such as deposits or debt securities). PROXY: If information on fees and commissions received but not yet earned split by resident households (ARF 720.0A Item 18.11.1 / ARF 720.0B Item 18.12.1), resident non-financial businesses (ARF 720.0A Item 18.11.2 / ARF 720.0B Item 18.12.2) and resident financial institutions (ARF 720.0A Item 18.11.3 / ARF 720.0B Item 18.12.3) is not available, estimation or proxy methodology is acceptable, including using fees and commissions received by product to estimate the split between sectors. Liabilities relating to unallocated gold should also be reported in item 18.11 (ARF 720.0A) /
18.12 (ARF 720.0B).

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2.2 ARF 720.1A/B: ABS/RBA Loans and Finance Leases (Standard)
/ (Reduced)
2.2.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.9 Residential property purpose - owner-occupied and investment housing;
1.10 Secured by residential property;
1.11 Location of property;
1.12 Types of financial assets and liabilities; and
1.16 Treatment of fixed interest rate products once the fixed period ends.
2.2.2 Treatment of securitisation
Refer to Section 2.1.5 Treatment of securitisation for guidance and examples of the treatment of securitisation. SPVs should not be consolidated within domestic books. Any loans to SPVs that are related parties should be excluded from ARF 720.1A/B. These should be reported on ARF 720.3. Reporting on ARF 720.1A/B: off-balance sheet securitisation Once the assets to be securitised have been sold to the SPV and derecognised for accounting purposes, they should only be reported in ‘Item 5: Outstanding principal balance of securitised loans and finance leases held off-balance sheet’ on ARF 720.1A or ‘Item 4: Outstanding principal balance of securitised loans and finance leases held off-balance sheet’ on ARF 720.1B. These assets should be excluded from all other items on ARF 720.1A/B. Reporting on ARF 720.1A/B: on-balance sheet securitisation The assets to be securitised that have been transferred to the SPV but not derecognised for accounting purposes should be reported on ARF 720.1A/B in all items except in ‘Item 5:
Outstanding principal balance of securitised loans and finance leases held off-balance sheet’ on ARF 720.1A or ‘Item 4: Outstanding principal balance of securitised loans and finance leases held off-balance sheet’ on ARF 720.1B. This applies to all assets that have been transferred to an SPV for the purposes of being held in a cover pool for covered bonds.

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2.2.3 Item 1: Gross outstanding loans and finance leases – by counterparty,
currency & residual maturity
Maturing in one year or less
Any loan or finance lease products that do not have a maturity date should be treated as having a residual maturity of greater than 12 months. These products should not be reported in column 3 of Item 1 on ARF 720.1A. Individual provisions PROXY: Where individual provisions are not available by counterparty or purpose, the counterparty and purpose splits may be apportioned based on the value of credit outstanding to each counterparty and purpose. Collective provisions PROXY: Where collective provisions are not available by counterparty or purpose, the counterparty and purpose splits may be apportioned based on the value of credit outstanding to each counterparty and purpose.
2.2.4 Item 3: Characteristics of business loan and finance leases
Syndicated loans
Only syndicated loans that are made to resident entities should be reported in item 3.1.1 of ARF 720.1A. Where a separate funding vehicle is established for a 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 institution makes a loan to a group of borrowers through an agent – syndicated loans should be reported based on the residency of the borrowers. TRANSITIONAL PROXY: Where information on syndicated loans is not currently available, the reporting institution should use business-as-usual points of contact (e.g. annual reviews) prior to the commencement of reporting for the EFS Collection in 2019 to determine the correct categorisation applying to large business loans. Where no business-as-usual points of contact occur within this time period, the ADI or RFC may allocate based on an internal allocation methodology. This would be updated at the next business-as-usual point of contact with the counterparty.
2.2.5 Item 6: Loans and finance leases to residents – past due and impaired
Reporting of non-performing exposures should be consistent with the data reported in the Credit Exposures and Provisions Return (ARF 220.0 Credit Exposures and Provisions). ADIs are encouraged to revisit APS 220 and ARS 220.0 to ensure they operate in accordance with prudential reporting requirements. Commercial property lending PROXY: When reporting commercial property lending in this item, reporting institutions may use the total of the ‘Residential property construction’ and ‘Non-residential property

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 70 construction’ industry categories defined in ARS 701.0 may be used as a proxy for commercial property lending.

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2.3 ARF 720.2A/B: ABS/RBA Deposits (Standard) / (Reduced)
2.3.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities; and
1.16 Treatment of fixed interest rate products once the fixed period ends; and
1.18 Funds held on behalf of / in trust for clients.
2.3.2 Transaction vs non-transaction deposits
Example of instantaneous transfer to a linked account A customer has an online savings account that cannot be used to directly make payments or transfers to any account other than their nominated linked account.
If this linked account is a transaction deposit account (i.e. meets none of the criteria in the
definition of a non-transaction deposit) with the same reporting institution as their online savings account and any funds transferred from the online savings account to the transaction deposit account are instantaneously available in the transaction deposit account, then the online savings account should be classified as a transaction deposit account.
If this linked account is not a transaction deposit account (i.e. meets one or more of the
criteria in the definition of a non-transaction deposit) or is with another institution such that there may be a delay between when the funds are available in the linked account or is with the same reporting institution but any funds transferred from the online savings account to the transaction deposit account are not typically instantaneously available in the transaction deposit account, then the online savings account should be classified as a nontransaction deposit account. Examples of restrictions/penalties on number of withdrawals or transfers A customer has an account that provides them with 10 free transactions per month, and charges a nominal fee (that approximates the cost of providing that transaction service) on any transactions above this limit.
This account, provided it did not meet any of the other criteria listed above, would be
considered a transaction deposit account as the fee would not be considered a penalty. A customer has an account that provides them with unlimited free electronic transactions and charges a nominal fee (that approximates the cost of providing that transaction service) on cheque or over-the-counter transactions.

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This account, provided it did not meet any of the other criteria listed above, would be
considered a transaction deposit account as the fees would not be considered a penalty (and, in addition, there is a fee-free transaction option). A customer has an account that provides them with 10 free transactions per month, and charges a fee of $10 (that considerably exceeds the cost of providing that transaction service) on any transactions above this limit.
This account would be considered a non-transaction deposit account as the fee would be
considered a penalty.
A customer has an account that does not charge a fee for transactions, but that pays an extra 3 per cent bonus interest if the customer makes less than two withdrawals per month.
This account would be considered a non-transaction deposit account as the loss of bonus
interest on the entire deposit balance would be considered a penalty.
A customer has an account where bonus interest is lost if the account balance has not increased over the month.
This account would be considered a transaction deposit account. 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. Example of restrictions/penalties on early withdrawal/transfer of funds A customer has a breakable term deposit. The customer may withdraw their funds immediately at any time, but would face a penalty of $50.
This account would be considered a non-transaction deposit account as the fee for
immediate withdrawal of funds would be considered a penalty.
2.3.3 Fixed-term deposits
Any deposit that provides a fixed date on which the funds are repayable should be treated as a fixed-term deposit. If the fixed-term deposit is breakable – for example, the funds may be withdrawn prior to the fixed date after providing a notice of withdrawal (with or without a delay in receiving the funds) – the deposit should be treated as a fixed-term deposit until notice of withdrawal is provided. Once a notice of withdrawal is provided:
if there is a fixed date in the future on which the funds may be withdrawn (i.e. in 30 days)
then the deposit should still be classified as a fixed-term deposit.
if there is no fixed date in the future on which the funds may be withdrawn – i.e. they are
available immediately or within a few days – then the deposit should no longer be classified as a fixed-term deposit (it should be classified as a transaction deposit or other nontransaction deposit as appropriate).
2.3.4 Rolling notice of withdrawal accounts

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Deposit products without a fixed maturity date that offer redemption following a notice of withdrawal period (typically 30 days) should be classified as other non-transaction deposit accounts until notice of withdrawal is provided. Once notice of withdrawal is given:

if there is a fixed date in the future on which the funds may be withdrawn (i.e. in 30 days)
then the deposit should be classified as a fixed-term deposit;
if there is no fixed date in the future on which the funds may be withdrawn – i.e. they are
available immediately or within a few days – then the deposit should be classified as transaction deposit or other non-transaction deposit as appropriate.
2.4 ARF 720.3: ABS/RBA Intra-group Assets and Liabilities
2.4.1 General guidance
Applicable sections of general guidance include:
1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.17 Residual maturity;
1.18 Funds held on behalf of / in trust for clients; and
1.19 Treatment of short-sold positions.
2.4.2 Reporting by asset and liability type
For further detail on how to report by asset and liability type on ARF 720.3, refer to the instructions and guidance for ARF 720.0A. When applying ARF 720.0A instructions and guidance to ARF 720.3, ignore any instructions that state to exclude positions with related parties (intra-group assets or liabilities) or to include positions with non-related parties. Also note that the treatment of provisions on the two forms differs: on ARF 720.3, the value of credit outstanding for loans and finance leases should be reported net of individual provisions but gross of collective provisions; on ARF 720.0, loans and finance leases should be reported net of both individual provisions and collective provisions.
2.4.3 Related party type
For Australian-owned ADIs, the sum of assets (or liabilities) due from (due to) their overseas operations (i.e. overseas branches and overseas-based banking operations) should correspond to the sum of items 2.1.2 and 2.1.3 (items 4.1.2 and 4.1.3). For foreign-owned ADIs and RFCs, the value of assets (or liabilities) due from (due to) their overseas operations should correspond to the value reported in item 2.1.1 (item 4.1.1) for their parent entity, or item 2.1.5 (item 4.1.5) for all other related parties.

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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 items. Items 2.1.2, 2.1.3, 4.1.2 and 4.1.3 are not relevant for RFCs.
2.4.4 Treatment of securitisation
In the case of ADIs and RFCs that are a related party of an ADI, loans to related-party SPVs should be reported in ‘Item 1.1.5: Loans and finance leases’ and ‘Item 2.1.4: Assets due from SPVs’. Note, this is the funding provided to the SPV and not the value of the loans transferred for securitisation. Any securities held by ADIs or RFCs that are a related party of an ADI that are issued by a related-party SPV should be reported in the relevant items under ‘Item 1.1.2: Securities held for trading’ or ‘Item 1.1.3: Securities not held for trading’, as well as Item ‘2.1.4: Assets due from SPVs’. This does not apply to covered bonds, since these are issued by an ADI itself. Since on-balance securitised assets are only notionally transferred to the SPV, the liability equal to the value of the assets transferred should be reported in ‘Item 3.1.4: Creditors and other liabilities’ and ‘Item 4.1.4: Liabilities due to SPVs’. The same treatment applies for assets in a covered bond collateral pool.
2.4.5 Treatment of covered bond trusts
Consider the following example:

An ADI provides an intra-group loan of $30bn to a related-party covered bond trust. This
should be reported in ‘Item 1.1.5: Loans and finance leases’ and ‘Item 2.1.4: Assets due from SPVs’ on ARF 720.3.
This loan is used to fund the notional transfer of $30bn of mortgages into the cover pool.
This should be reported in ‘Item 3.1.4: Creditors and other liabilities’ and ‘Item 4.1.4:
Liabilities due to SPVs’ on ARF 720.3.
The ADI issues $25bn of covered bonds backed by the loans in the cover pool.
Subordination
Funding extended to the covered bond trust will be subordinated to the extent that it has been used to fund loans up to the value of the covered bonds issued. Please see ARS 701.0 for the definition of subordination. Using the example above: $25bn of the $30bn loan should be reported as subordinated on ARF 720.3, since this amount must first be repaid to the covered bond holders; and $5bn should not be reported as subordinated, since no other creditors have a claim on this amount. The liability to the covered bond trust is the value of loans that have been notionally transferred. This value should not be reported as subordinated, since the loans are legally being held in trust (even though these loans remain on-balance sheet for EFS reporting purposes). Using the example above, the entire $30bn notional liability would not be reported as subordinated.

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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 loans to be held in a covered bond collateral pool should be reported as secured, since the loans act as security for that funding. Using the example above, the full $30bn loan to the covered bond trust should be reported as secured. The notional liability to the covered bond trust ($30bn in the example above) is also effectively secured by the loans transferred to the trust and should also be reported as secured.
2.5 ARF 720.4: ABS/RBA Debt Securities Held
2.5.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.17 Residual maturity; and
1.19 Treatment of short-sold positions.
2.5.2 Valuation
Closing balances should be reported at market value effective at the reference date. Where denominated in foreign currency, market values of foreign currency should be converted to AUD at the spot rate effective as at the reference date. PROXY: If market value is not available (i.e. when relevant observable market data does not exist), report fair value measured in accordance with AASB 13 Fair Value Measurement. Apply these valuation methods to all debt securities held. Discounts or haircuts should not be subtracted from the value (for example, where securities are eligible for repo with the RBA).
2.5.3 State, territory and local government / central borrowing authorities
Particular care should be taken to determine whether debt securities that appear to be issued by State, Territory and local government are actually issued by central borrowing authorities. State central borrowing authorities have taken over almost all bond issuance for funding required by State, Territory and local governments. The Australian Capital Territory (ACT) general government is the only state or territory that issues securities directly.

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2.5.4 Intra-group assets
Report all debt securities held, including holdings of debt securities issued by related parties that are not consolidated within domestic books.
2.5.5 Treatment of securitisation
Refer to Section 2.1.5 Treatment of securitisation for guidance and examples on the treatment of securitisation. Securities held that are issued by SPVs that are related parties but are not consolidated within domestic books should be reported on this form. Any securities issued by SPVs that are consolidated within domestic books should not be reported on this form. Instead, these securities should be reported on ARF 720.6 (see Section
1.4.4 Consolidation of SPVs by RFCs for further details on when SPVs should be consolidated).
2.5.6 Treatment of repurchase agreements and securities lending
Refer to Section 2.1.4 Treatment of repurchase agreements and securities lending for guidance and examples on the treatment of repurchase agreements (repos) and securities lending. Securities lent or sold under repo should be reported on ARF 720.4 where they are recognised on the domestic books balance sheet. Securities borrowed or purchased under repo should not be reported on ARF 720.4.
2.5.7 Asset-backed securities
Include all asset-backed securities that are held on the domestic books balance sheet that that are issued by entities that are not consolidated within domestic books. These securities should be reported against the relevant maturity and counterparty types. If the asset-backed securities are issued by SPVs that are owned by the reporting institution or the same parent entity as the reporting institution but are not consolidated within domestic books, these should also be reported as debt securities issued by related parties (Item 1.1 for short-term debt securities or Item 2.1 for long-term debt securities) and as asset-backed securities issued by related SPVs (Item 1.2.2.4.8.1 for short-term debt securities or Item 2.4.4.8.1 for long-term debt securities). Asset-backed securities issued by entities that are consolidated within domestic books should not be reported on this form.
2.5.8 Reconciliation between ARF 720.4 and ARF 720.0A & ARF 720.3
The sum of short-term and long-term debt securities held reported on ARF 720.4 is equivalent to the sum of debt securities reported under securities held for trading and securities not held for trading on ARF 720.0A and debt securities reported under securities held for trading and securities not held for trading on ARF 720.3, apart from differences in valuation methodology. Values may not reconcile exactly because debt securities are reported at market value on ARF
720.4 and may be reported on a different basis on ARF 720.0A and ARF 720.3 (according to

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 77 accounting treatment). See the table below for the specific items that should be equivalent, if it were not for the different valuation bases. Reconciliation between ARF 720.4 and ARF 720.0A & ARF 720.3 if ARF 720.0A and ARF 720.3 were reported at market values ARF 720.4 ARF 720.0A & ARF 720.3 Item 1: Total short-term debt securities held – Column 1: Total Plus Item 2: Total long-term debt securities held – Column 1: Total Item 3.3 on ARF 720.0A: Total securities held for trading: debt securities – Column 1: Total Plus Item 4.1 on ARF 720.0A: Total securities not held for trading: debt securities – Column 1: Total Plus Item 1.1.2.2 on ARF 720.3: Total intra-group assets: securities held for trading: debt securities – Column 1: Total Plus Item 1.1.3.2 on ARF 720.3: Total intra-group assets: securities not held for trading: debt securities – Column 1: Total When these items are valued at market value.
2.6 ARF 720.5: ABS/RBA Equity Securities Held
2.6.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.17 Residual maturity; and
1.19 Treatment of short-sold positions.
2.6.2 Valuation
Closing balances should be reported at market price effective at the reference date. Where denominated in foreign currency, market values of foreign currency should be converted to AUD at the spot rate effective as at the reference date.

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PROXY: If market value is not available (i.e. when relevant observable market data does not exist), report at fair value measured in accordance with AASB 13 Fair Value Measurement.
2.6.3 Intra-group assets
All equity securities held should be reported, including holdings of shares and other equities issued by related parties.
2.6.4 Treatment of repurchase agreements and securities lending
Refer to Section 2.1.4 Treatment of repurchase agreements and securities lending for guidance and examples on the treatment of repurchase agreements (repos) and securities lending. Securities lent or sold under repo should be reported on ARF 720.5 where they are recognised on the domestic books balance sheet. Securities borrowed or purchased under repo should not be reported on ARF 720.5.
2.6.5 Reconciliation between ARF 720.5 and ARF 720.0A & ARF 720.3
The sum of equity securities held reported on ARF 720.5 is equivalent to the sum of equity securities reported under securities held for trading and securities not held for trading on ARF 720.0A and any securities held for trading and securities not held for trading on ARF 720.3, apart from differences in valuation methodology. Note that the values may not reconcile exactly because equity securities are reported at market value on ARF 720.5 and may be reported on a different basis on ARF 720.0A and ARF 720.3. See the table below for the specific items that should be equivalent, if it were not for the different valuation bases.

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Reconciliation between ARF 720.5 and ARF 720.0A & ARF 720.3 if ARF 720.0A and ARF 720.3 were reported at market values ARF 720.5 ARF 720.0A & ARF 720.3 Item 1: Total equity securities listed on the ASX and issued by residents – Column 1: Total plus Item 2: Total equity securities not listed on the ASX and issued by residents – Column 1: Total plus Item 3: Total equity securities issued by nonresidents – Column 1: Total Item 3.4 on ARF 720.0A: Total securities held for trading: equity securities – Column 1: Total plus Item 4.2 on ARF 720.0A: Total securities not held for trading: equity securities – Column 1: Total plus Item 1.1.2.3 on ARF 720.3: Total intra-group assets: securities held for trading: equity securities – Column 1: Total plus Item 1.1.3.3 on ARF 720.3: Total intra-group assets: securities not held for trading: equity securities – Column 1: Total When these items are valued at market value.
2.7 ARF 720.6: ABS/RBA Securities Issued
2.7.1 General guidance
Applicable sections of general guidance include:

1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities; and
1.17 Residual maturity.
2.7.2 Valuation
Closing balances should be reported at market value effective at the reference date. Where denominated in foreign currency, market values of foreign currency should be converted to AUD at the spot rate effective as at the reference date. PROXY: If market value is not available (i.e. when relevant observable market data does not exist), report at fair value measured in accordance with AASB 13 Fair Value Measurement.

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2.7.3 Treatment of securitisation
Refer to Section 2.1.5 Treatment of securitisation for guidance and examples of the treatment of securitisation.
2.7.4 Treatment of covered bonds
Irrespective of the use of an SPV for segregation of the assets in a covered bond collateral pool, covered bonds are considered to be issued by the ADI itself and should therefore be included as a debt security issued by that ADI for reporting purposes.
2.7.5 Bills of exchange
Bills of exchange reported in items 1.1.1 and 1.2.1 should be bills of exchange drawn on the reporting institution. Do not report acceptances of bills of exchange drawn on other entities.
2.7.6 Asset-backed securities
Include any asset-backed securities that are issued by entities that are consolidated within domestic books. This means that ADIs and RFCs that are a related party of an ADI should not include assetbacked securities that are issued by related party SPVs, except for any SPVs that have been established for the purpose of holding assets in a cover pool for covered bonds. RFCs that are not a related party of an ADI should include asset-backed securities issued by SPVs that are consolidated within domestic books on this form (see Section 1.4.4 Consolidation of SPVs by RFCs).
2.7.6 Hybrid securities treated as liabilities
Note that regulatory capital instruments, including Tier 2 capital instruments, are defined to be hybrid securities in ARS 701.0. All hybrid securities treated as liabilities under Australian accounting standards should also be reported in ‘Item 3: Total hybrid securities treated as liabilities’ on ARF 720.6.
2.7.7 Reconciliation between ARF 720.6 and ARF 720.0A & ARF 720.3
The sum of short-term debt securities excluding hybrids and long-term debt securities excluding hybrids and hybrid securities treated as liabilities issued on ARF 720.6 are equivalent to the sum of short-term debt securities and long-term debt securities issued on ARF 720.0A and debt securities issued on ARF 720.3, apart from differences in valuation methodology. Note that the values may not reconcile exactly because securities issued are reported at market value on ARF 720.6 and may be reported on a different basis on ARF 720.0A and ARF 720.3. See the table below for the specific items that should be equivalent, if it were not for the different valuation bases.

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Reconciliation between ARF 720.6 and ARF 720.0A & ARF 720.3 if ARF 720.0A and ARF 720.3 were reported at market values ARF 720.6 ARF 720.0A & ARF 720.3 Item 1: Total short-term debt securities excluding hybrids – column 1: AUD plus Item 1: Total short-term debt securities excluding hybrids – column 2: FX (AUD equivalent) plus Item 2: Total long-term debt securities excluding hybrids – column 1: AUD plus Item 2: Total long-term debt securities excluding hybrids – column 3: FX (AUD equivalent) plus Item 3: Total hybrid securities treated as liabilities – column 1: AUD plus Item 3: Total hybrid securities treated as liabilities – column 3: FX (AUD equivalent) Item 16.2 on ARF 720.0A: Total borrowings: debt securities – column 1: Short-term Plus Item 16.2 on ARF 720.0A: Total borrowings: debt securities – column 2: Long-term Plus Item 3.1.3.1 on ARF 720.3: Total intra-group liabilities: borrowings: debt securities – column 1: Total. When these items are valued at market value.
2.8 ARF 720.7: ABS/RBA Bill Acceptances and Endorsements
2.8.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia; and
1.12 Types of financial assets and liabilities.
2.8.2 Valuation
Closing balances should be reported at market value effective at the reference date. Where denominated in foreign currency, market values of foreign currency should be converted to AUD at the spot rate effective as at the reference date. PROXY: If market value is not available (i.e. when relevant observable market data does not exist), report at fair value measured in accordance with AASB 13 Fair Value Measurement.

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2.9 ARF 721.0A/B: ABS/RBA Repurchase Agreements and
Securities Lending (Option A) / (Option B)
2.9.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia; and
1.12 Types of financial assets and liabilities.
2.9.2 Option A vs Option B
If a reporting institution is indifferent between options, reporting of Option A is preferred. However, if it is more difficult or costly for an ADI or RFC to report on Option A than Option B, then the ADI of RFC may select to report on Option B instead. To switch between reporting on Option A and Option B, the ADI or RFC is requested to notify APRA in advance. Switching between reporting on Option A and Option B should occur infrequently (i.e. switching should not occur more frequently than once a year).
2.9.3 Valuation
Closing balances should be reported at market value effective at the reference date. Where denominated in foreign currency, market values of foreign currency should be converted to AUD at the spot rate effective as at the reference date. If market value is not available (i.e. when relevant observable market data does not exist), report at fair value measured in accordance with AASB 13 Fair Value Measurement.
2.9.4 Exchange-Traded Funds (ETFs)
PROXY: Where exchange-traded funds are not separately identifiable from other non-moneymarket financial investment funds, these may be estimated using an appropriate proxy or apportionment method.
2.9.5 Haircut
The haircut may be reported as the haircut applied at the origination of the transaction.
2.9.6 Collateral
The value and characteristics of collateral reported should typically include that relating to the initial value of collateral provided, adjusted for any change in the value and/or characteristics

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 83 of collateral provided due to changes in market valuations and/or the addition of further collateral due under margining arrangements. PROXY: If the reporting institution is unable to provide the required information on the value and/or characteristics of additional collateral provided under margining arrangements – for example, because this information is not available at the trade level – these values may be excluded from reporting.
2.9.7 Repo rate
In calculating the repo rate, reporting institutions are requested to use 365 days as the number of days in a year, consistent with the Australian Financial Markets Association (AFMA) repo conventions and the Australian Office of Financial Management (AOFM) pricing formulae.
2.10 ARF 722.0: ABS/RBA Derivatives
2.10.1 General guidance
Applicable items of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia (SESCA); and
1.17 Residual maturity.
2.10.2 Purpose of reporting
The form is designed to meet international economic statistical reporting requirements as prescribed by the 2008 System of National Accounts (SNA08) and Balance of Payments Manual 6 (BPM6). These economic statistical frameworks consider derivatives as more than a financial instrument used for risk management such as hedging. Derivatives according to these frameworks are financial instruments in their own right, like loans and securities, and contribute to an economy’s accumulation of financial assets and liabilities and its overall net financial wealth.
2.10.3 Principles of reporting under economic statistical frameworks
The principles underlying the reporting of financial instruments through the Australian Accounting Standards Board (AASB) are broadly in line with reporting principles within the SNA08 and BPM 6 economic statistical frameworks. However, for derivatives, there are significant divergences in reporting requirements between the AASB and the economic statistical frameworks, and therefore the reporting of derivatives on this form does not align with AASB. Specifically, the divergences result in reporting for statistical purposes that requires:
financial derivatives to be treated as a financial instrument that can be traded and carries
a market valuation that is linked to, but valued separately from, the underlying instrument on which the derivative is based;

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positions and flows associated with the financial derivative to be reported separately;
assets and liabilities of derivatives on a gross basis, that is, derivatives should not be
reported on net basis;
settlements (cash receipts and payments) as transactions and market value changes and
accruing interest (e.g., on swap coupons) as revaluations. The transactions and revaluations will not reconcile back to items in the profit and loss (P&L) statement; and
reporting of all warrants.
Table 1 below illustrates the divergence between AASB, and SNA08 and BPM6 reporting for
derivative by comparing the reporting requirements for loans.
Table 1: AASB and SNA08/BPM6 reporting for loans and a swap
Instrument
/counterparty AASB reporting SNA08/BPM 6 reporting Asset position ADI loan with non-resident (Asset position) ADI loan asset position with non-resident ADI loan asset position with non-resident Swap with trading company (Asset position) Net asset or net liability position:
(offset with swaps with other counterparties)
Swap (gross positive position)
Liability position ADI loan with non-resident
(Liability position)
ADI loan liability position with nonresident
ADI loan liability position with nonresident
Swap with trading company
(Liability position)
Net asset or net liability position:
(offset with swaps with other counterparties)
Swap
(gross negative position)
Asset transactions ADI loan with non-resident
(Asset position)
Transactions
(issuance less repayments)
Transaction
(issuance less repayments)
Swap with trading company (Asset position)
Net transactions (offset with swaps with other counterparties) Transactions (cash receipts and payments on a contract by contract basis) Liability transactions ADI loan with non-resident (Liability position) Transactions (issuance less repayments) Transactions (issuance less repayments)

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Swap with trading company
(Liability position)
Net transactions (offset with swaps with other counterparties) Transactions (cash receipts and payments on a contract by contract basis) The major objective of reporting on ARF 722.0 is to reconcile the opening and closing positions for derivatives through:

transactions and revaluations during the period for those derivatives with resident
counterparties; and
transactions, market value changes, exchange rate variations and other changes
for those derivatives with non-resident counterparties.
Reporting on ARF 722.0 is not an attempt to reconcile the net transactions and revaluations back to the P&L statement. Reporting on ARF 722.0 is not expected to reconcile with forms using AASB (e.g ARF 118.0), and thus will not have validation points with such forms. Employee stock options should be excluded. Adjustments, where possible, should not be included in reported values. This is because adjustments are often not consistent across reporting entities. If adjustments cannot be removed from reported values, then any adjustments included in reported values must also be reported separately in Item 10 at either the counterparty or portfolio level. Hedging should not be included in reported values. Within the SNA08 and BPM6 reporting, the transactions and positions are of equal priority within these economic statistics.
2.10.4 Types of derivatives
Report the value of the derivatives; do not include the value of the underlying financial instrument. The form categorises derivatives to the following instrument types:
options;
forwards;
swaps; and
other.
Report credit derivatives where these are not classified as options or forward-type instruments in the ‘Other’ instrument category. Report Commodity / Electricity contracts, FX spot, Swaption, and FRA in the ‘Other’ instrument category. Report Total return swaps in the ‘Swaps’ instrument category. When categorising derivatives it is important that each contract is only reported under one category to avoid double counting. The categories; Options, Forwards, Swaps and Other as outlined in the SNA08.

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Futures should only be reported at item 9.
Exclude buy-sellback and sell-buyback transactions.
Example 1: Swap
ADI A sets up to pay fixed-rate and receive floating-rate from resident Company XYZ. The swap was initiated in March quarter and settles in December quarter. There was no payment to initiate the contract and payments will be made semi-annually in June and December. These payments are the net of the receive floating and pay fixed legs of the contract. ADI A would report in the ARS 722.0 for the March, June, September, and December quarters as shown in Tables 2, 3, 4 and 5:
At the end of March quarter, the swap had a market value of $10 million.
Table 2: ARF 722.0 - Swap – March quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position:
Gross positive mark to market value Transactions Revaluations Closing position:
Gross positive mark to market value
(1) (2) (3) (4) (5) (6)
Private nonfinancial corporations Swaps 0 0 10,000,000 10,000,000 During the June quarter a $5 million net coupon receipt was received by the ADI and, at the end of June quarter, the swap had a market value of $12 million.

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Table 3: ARF 722.0 - Swap – June quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross positive mark to market value Transactions Revaluations Closing position: Gross positive mark to market value (1) (2) (3) (4) (5) (6) Private nonfinancial corporations Swaps 10,000,000 -5,000,000 7,000,000 12,000,000 At the end of September quarter the swap had a market value of $5 million. No net coupon payments were received during the quarter.
Table 4: ARF 722.0 - Swap – September quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross positive mark to market value Transactions Revaluations Closing position: Gross positive mark to market value (1) (2) (3) (4) (5) (6) Private nonfinancial corporations Swaps 12,000,000 0 -7,000,000 5,000,000 During December quarter, a $4 million net coupon receipt was received and at the end of December quarter the swap expires.

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Table 5: ARF 722.0 - Swap – December quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross positive mark to market value Transactions Revaluations Closing position: Gross positive mark to market value (1) (2) (3) (4) (5) (6) Private nonfinancial corporations Swaps 5,000,000 -4,000,000 -1,000,000 0 Example 2: Forward In terms of ARS 722.0 requirements, a forward is reported the same way as the swap in Example 1. The only difference is that a forward has one settlement period, whereas a swap can have multiple settlement periods. If a derivative contract is entered into and settled within the same reporting period, this should be reported in the transactions and revaluations but have no impact on the opening and closing positions. ADI A sets up to pay $3 million AUD and receive €1.8 million EUR at €0.60 from resident RFC Z. The forward was initiated and settled in the same quarter. There was no payment to initiate the contract and the payment will be made within the period. This payment are the net of the receive EUR and pay AUD legs of the contract. During the quarter, the AUD depreciates against the EUR from €0.60 to €0.50, hence a $0.6 million gain was made and at the end of the quarter the forward expires. ADI A would report on the ARS 722.0 for that reporting period as shown in Table 6:

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Table 6: ARF 722.0 - Forward
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross positive mark to market value Transactions Revaluations Closing position: Gross positive mark to market value (1) (2) (3) (4) (5) (6) Registered financial corporations Forwards 0 -600,000 600,000 0 Example 3: Options European Option In March quarter, ADI A enters into a European-style option agreement with a superannuation fund to buy 1,000,000 XYZ shares at a pre-set price of $10 per share from the superannuation fund. The option premium is $0.4 million. The option expires in December quarter. The payment of the option premium is treated as a transaction ($0.4 million). The erosion of the premium (or time value) is treated as a revaluation (-$0.1 million). ADI A would report on the ARS 722.0 for March, June, September, and December quarters in tables 7, 8, 9, and 10 as follows:
At the end of March quarter, the share price is $10 per share, which suggests a zero intrinsic value.

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Table 7: ARF 722.0 - Option – March quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position:
Gross positive mark to market value Transactions Revaluations Closing position:
Gross positive mark to market value
(1) (2) (3) (4) (5) (6)
Superannuation funds Options 0 400,000 -100,000 300,000 In June quarter, the market value of Company XYZ shares rise to $30 per share. Therefore the intrinsic value, equal to the difference between the market value and the pre-set price multiplied by the number of shares, is $20 million. The premium has eroded by a further $0.1 million. The $19.9 million revaluation is equal to the intrinsic value ($20 million) less the erosion of time value ($0.1 million).
Table 8: ARF 722.0 - Option – June quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position:
Gross positive mark to market value Transactions Revaluations Closing position:
Gross positive mark to market value
(1) (2) (3) (4) (5) (6)
Superannuation funds Options 300,000 0 19,900,000 20,200,000 In September quarter, the market value of Company XYZ shares rises to $31 per share, making the intrinsic value equal to $21 million. The premium erodes by a further $0.1 million. The $0.9 million revaluation is equal to the $1 million increase in the intrinsic value less the erosion of premium.

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Table 9: ARF 722.0 - Option – September quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position:
Gross positive mark to market value Transactions Revaluations Closing position:
Gross positive mark to market value
(1) (2) (3) (4) (5) (6)
Superannuation funds Options 20,200,000 0 900,000 21,100,000 In December quarter, the market value of Company XYZ shares is $31 per share. The premium erodes by $0.1 million and the option expires. The cash receipt of $21 million closes the option position.
Table 10: ARF 722.0 - Option – December quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position:
Gross positive mark to market value Transactions Revaluations Closing position:
Gross positive mark to market value
(1) (2) (3) (4) (5) (6)
Superannuation funds Options 21,100,000 -21,000,000 -100,000 0 American Option The ADI enters into an American-style option contract with a US clearing member trading on the London Clearing House. The option has the following features:

no opening position as there were no existing contracts at the end of the last reporting
period;
The option is to buy 300,000 XYZ shares from an ADI in the US at a pre-set price of USD$2
per share from the ADI;
the option premium is USD $50,000, paid up-front;
during that month share price rises to USD$2.50 and the ADI exercises the option;
between entering into the option and exercising the option the USD/AUD exchange rate
changed from USD $0.625 to USD $0.75;

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the option is exercised before the end of the period, leaving no closing position.
The ADI would record the following for the quarter in Table 11;
Table 11: ARF 722.0 - Option
Item 6: Derivatives with resident and non-resident clearing houses and central counterparties that are not margined Country of clearing house and central counterparty Instrum ent type Net opening position Opening position:
of which gross positive
Opening position:
of which gross negative
Net transacti ons

Market value changes
Exchange rate variations
Other change s
Net closing position
Closing position
: of which gross positive
Closing position:
of which gross negative
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) United Kingdom Option 0 -186,667 200,000 -13,333 0 The country of exchange is the UK, not the nationality of the clearing member. Initially the option is worth its premium (USD $50,000/0.625 = AUD $80,000). Option premiums are recognised as transactions. Then the AUD appreciates against the USD. The premium is now worth AUD $66,667 (USD $50000 / 0.75). The erosion of the premium is an exchange rate variation of AUD$13,333 (AUD $80,000 – AUD $66,667). The share price increases from USD$2 to USD$2.50, increasing the market value of the option by AUD $200,000 (USD $150,000/0.75). This is a market value change. The reporting ADI exercises the option, with a net cash receipt of AUD $266,667 (Net transactions show AUD $80,000 – AUD$266,667) and the value of the option becomes zero.
2.10.5 Item 9: Futures with resident and non-resident counterparties
The form requires the reporting of futures separately in item 9 in recognition of their balance sheets positions being equal to zero due to these settling on a daily basis. Futures should be reported using mark-to-market values. Include derivatives with resident related parties in other sectors (e.g. an ADI would exclude trades with a related resident ADI) and non-resident related parties (e.g. an offshore branch) but exclude trades made within domestic book entity desks and same sector resident related parties (e.g. an ADI would exclude trades with a related resident ADI). Futures have the following unique features:

they are only traded on an exchange, which is a type of clearing house;
they have a value of zero for the opening and closing positions as they are fully margined
(or settled) daily to account for any mark-to-market changes (timing differences should be ignored when reporting futures, and local Australian exchange timing used);

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ADIs can have several derivative contracts with the exchange which are settled on a net
basis.
Country of exchange refers to where the counter-party risk associated with the derivative is borne. If the risk is borne by the exchange then the 'country of exchange' should be the country where the exchange is located, regardless of the nationality of the clearing member. If the risk is borne by another counter-party, such as a clearing house, then report the country of residence of that counter-party. Example 4: Resident Futures An ADI has Futures contracts with the Australian Stock Exchange (ASX). Since the ASX is a resident, the country of exchange is Australia. During the quarter the entity makes a net gain of $100 million. The net gain can be broken down into $150 million positive and $50 million negative. The entity would report the following for the quarter in Table 12:
Table 12: ARF 722.0 - Futures
Item 9: Futures with resident and non-resident counterparties Country of exchange Net transactions during the period Revaluations with gross positive value during the period Revaluations with gross negative value during the period (1) (2) (3) (4) Australia -100,000,000 150,000,000 50,000,000 For item 9, values in column 3 and 4 should be reported as a positive numbers. A net cash receipt should be shown as a negative number in column 2. Similarly a net cash payment should be shown as a positive number in column 2. Column 4 less column 3 should equal column 2, as futures are fully margined or settled daily to account for any mark-to-market changes.
2.10.6 Assets and liabilities
Derivatives on an asset side should be reported separately to those on a liability side. Therefore, the form requires reporting of gross positive mark to market (MTM) value and gross negative MTM value of derivatives separately. If the contract starts and finishes in an asset position, show
a cash receipt as a negative transaction; and
a cash payment as a positive transaction.
Similarly, if the contract starts and finishes in a liability position, show
a cash receipt as a positive transaction;
a cash payment as a negative transaction.
Items 1, 2, 3, and 4 require a splitting of transactions by asset or liability side. If the institution is unable to do this, e.g., in the case of a netting agreement that are difficult to unwind for

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 94 reporting purposes or the derivative switches during the quarter and there is uncertainty as to the position the derivative is in at the time the settlement is received, then:

show a cash receipt as a negative transaction on the asset side, rather than estimating
splits between a negative transaction on the asset side and a positive transaction on the liability side; and
show a cash payment as a negative transaction on the liability side, rather than
estimating splits between a negative transaction on the liability side and a positive transaction on the asset side. Items 7 and 8 are also split by asset or liability side for residual maturity of derivatives. Example 5: Swap that switches positions (a) Assume a swap with a private non-financial corporation has an opening position of $30 million asset (gross positive market value) and a closing position of $30 million liability (gross negative market value). During the quarter there is a net cash receipt of $4 million was received by the ADI. Revaluations in this case, is used as a balancing item between the opening position on the positive mark to market contracts and the negative mark to market contracts. (b) Assume a swap with a superannuation fund has an opening position of $20 million liability (gross negative market value) and a closing position of $20 million asset (gross positive market value). During the quarter there are no cash settlements. Revaluations, in this case, is used as a balancing item between the opening position on the negative mark to market contracts and the positive mark to market contracts. The entity would report the following for the quarter in Table 13:

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Table 13: ARF 722.0 - Swap – December quarter
Item 1: Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross positive mark to market value Transactions Revaluations

Closing position: Gross positive mark to market value (1) (2) (3) (4) (5) (6) Private nonfinancial corporations Swaps 30,000,000 -4,000,000 -26,000,000 0 Superannuation Funds Swaps 0 0 20,000,000 20,000,000
1.1. Total derivatives with a
gross positive mark to market value 30,000,000 -4,000,000 -6,000,000 20,000,000 Item 2: Derivatives with gross negative mark to market values and resident counterparties excluding clearing houses and central counterparties Type of counterparty Instrument type Opening position: Gross negative mark to market value Transactions Revaluations

Closing position: Gross negative mark to market value (1) (2) (3) (4) (5) (6) Private nonfinancial corporations Swaps 0 0 30,000,000 30,000,000 Securitisers Swaps 20,000,000 0 -20,000,000 0
2.1. Total derivatives with a
gross negative mark to market value 20,000,000 0 10,000,000 30,000,000 If any adjustments are included in reported values, these should also be reported separately in Item 10.

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2.10.7 Counterparties
Include trades with resident related parties in other sectors, also called ‘intra-group’, under the relevant counterparty type for items 1 and 2 , but exclude same-sector resident related parties (e.g. an ADI would exclude trades with a related resident ADI). Exclude trades made within domestic book entity desks (e.g. between Sydney desk and Melbourne desk within an ADI or RFC). For items 1 and 2 that exclude clearing houses and central counterparties, the form requires the derivative positions and flows (transactions and revaluations) by resident counterparties, by SESCA counterparty type. Items 3 and 4 also exclude clearing houses and central counterparties.

For items 3, 4, 7 and 8 report for non-resident counterparties only. Further, items 3 and 4 require a breakdown of derivative positions and flows by country. Include derivatives entered into by the domestic book entity with non-resident related parties (e.g. an offshore branch). Refer to Section 1.5 Standard Economic Sector Classifications of Australia for more details on classifying counterparties under SESCA. Households and Community Service Organisations are not to be reported on this form. Clearing houses and central counterparties The form uses the term clearing houses and central counterparties to represent recognised clearing houses and central counterparties that interpose themselves between counterparties to derivatives traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer. A central counterparty becomes counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. It is recognised that the increased use of central counterparties for OTC derivatives and derivatives with exchanges will result in some difficulty in the reporting of derivatives based on the economic statistical frameworks. As a result, the form has separated the reporting of derivatives with clearing houses and central counterparties into:

futures, where the balance sheet positions are equal to zero due to these derivative
settling on a daily basis. Futures are reported at item 9;
derivatives with clearing houses and central counterparties that are margined. These are
reported at item 5; and
derivatives with clearing houses and central counterparties that are not margined. These are
reported in item 6.
Items 5, 6, and 9 require reporting the exchange, clearing house and central counterparty by country. Clearing houses and central counterparties should also be reported in items 7 and 8.

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Table 14: Summary of ARF 722.0 items
Item Name Residency Inclusions
1 Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties Residents Exclude clearing houses and central counterparties Exclude futures 2 Derivatives with gross negative mark to market values and resident counterparties excluding clearing houses and central counterparties Residents Exclude clearing houses and central counterparties Exclude futures 3 Derivatives with gross positive mark to market values and non-resident counterparties excluding clearing houses and central counterparties Non-residents Exclude clearing houses and central counterparties Exclude futures 4 Derivatives with gross negative mark to market values and non-resident counterparties excluding clearing houses and central counterparties Non-residents Exclude clearing houses and central counterparties Exclude futures 5 Derivatives with resident and non-resident clearing houses and central counterparties that are margined Residents and nonresidents Only clearing houses and central counterparties Exclude futures 6 Derivatives with resident and non-resident clearing houses and central counterparties that are not margined Residents and nonresidents Only clearing houses and central counterparties Exclude futures 7 Derivatives with closing gross positive mark to market values and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties) Non-residents Include clearing houses and central counterparties, and all other counterparties Exclude futures 8 Derivatives with closing gross negative mark to market values Non-residents Include clearing houses and central

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 98 and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties) counterparties, and all other counterparties Exclude futures 9 Futures with resident and nonresident counterparties Residents and nonresidents Include clearing houses and central counterparties, and all other counterparties Adjustments Adjustments are calculated and applied at different levels, by each reporting entity. Adjustments, where possible, should not be included in reported values. If adjustments cannot be removed from reported values, then any adjustments included in reported values must also be reported separately in item 10 at either the counterparty or portfolio level. This is to make reported values comparable between entities and purposes of meeting international reporting standards.
2.10.8 Opening and closing positions
For reporting of opening and closing positions, do not offset contracts:

in an asset position with contracts in a liability position; or
in different types of derivative instruments; or
with different counterparties.
The opening and closing balance reported on this form will not line up with the derivatives items reported on the ARF 720.0A/B, as the reporting on ARF 722.0 does not follow AASB. Derivatives that are entered into and settled within the same reporting period should be reported but will balance to zero and not impact opening and closing positions. Refer to example 2 or section 2.10.10 Valuations and 2.10.11 Transactions for more details on reporting derivatives that are entered into and settled within the same reporting period. For item 1, all derivatives in a positive opening position are to be reported in column 3 and all those in a positive closing position are to be reported in column 6 by counterparty and derivative type. For item 2, all derivatives in a negative opening position are to be reported in column 3 and those in a negative closing position are to be reported in column 6. For both item 1 and 2, the derivatives reported in column 3 will not necessarily be the same derivatives as those reported in column 6 as some derivatives will switch during the quarter from an asset to a liability position, or vice versa. The same treatment should be applied for equivalent opening and closing positions in items 3 and 4. Items 5 and 6 require reporting of the net opening and net closing positions with resident and non-resident clearing houses and central counterparties and the net transactions and revaluations.

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The gross closing positive and negative positions are also to be reported, noting that the gross closing positions should reconcile with the opening positions of the next reporting period. Residual maturity For all non-resident derivatives the residual maturity is required to be reported in items 7 and
8. This includes derivatives with non-resident related parties (e.g. an offshore branch).
Residual maturity refers to the residual maturity of the closing positions for the quarter and is the time remaining until the derivative is due to be settled. This is required to measure the foreign currency exposure risks of derivatives. It is not the residual maturity of the underlying financial instrument. Example 6: Maturity An ADI has the following derivative contracts:
(a) A new forward contract to sell AUD$2.5m for USD$2m at $0.80c to a counterparty in New York, and a maturity of 15 months. (b) An existing forward contract to sell AUD$2m for CNY¥10.0m at ¥5.00 to a counterparty in Singapore. It settles at the end of the quarter. (c) An existing forward contract to sell USD$3.2m for GBP£2.4m for £0.75 to a counterparty in London and a residual maturity of 90 days. During the quarter:

USD/AUD depreciated from $0.80 USD to $0.75 USD.
CNY/AUD depreciated from ¥5.50 CNY to ¥4.50 CNY.
GBP/USD remains unchanged at £0.80 GBP.
The entity would report the following for the quarter in Table 15;

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Table 15: ARF 722.0 - Forward
Item 7: Derivatives with closing gross positive mark to market values and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties) Residual maturity of contract ($AUD) Currency of closing position <= 90 days >90 days <= 6 months >6 months <= 1year >1 year <=5 years >5 years Total (1) (2) (3) (4) (5) (6) (7) USD (a) 0 166,667 0 166,667 Item 8: Derivatives with closing gross negative mark to market values and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties) Residual maturity of contract ($AUD) Currency of closing position <= 90 days >90 days <= 6 months >6 months <= 1year >1 year <=5 years >5 years Total (1) (2) (3) (4) (5) (6) (7) USD (c) 266,667 0 266,667 (a) This new forward is a USD asset because it has an AUD leg. At the end of the quarter the mark to market is an asset of $0.167m ((USD$2m/0.75) – (USD$2m/0.80) = $2.667m – $2.5m= $0.167m AUD). (b) This existing forward has an opening liability position of $0.182m but the derivative is settled to 0 at the end of the reporting period and is therefore not recorded on either table. (c) This existing forward is a USD liability because the USD leg is generating the liability ((£2.4m/0.8) – (£2.4m/0.75)= $3m – $3.2m = – $0.2m USD). The USD value of the liability does not change over the quarter however the AUD equivalent has increased due to the change in the USD/AUD exchange rate (USD$0.2m/0.75 = $0.267m AUD).

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 101 Currency Currency of the closing positions refers to the currency in which the derivative is likely to be settled. Closing positions denominated in foreign currency should be converted to AUD using the exchange rate as at the end of the reporting period. This applies to all items except item 9. In item 7 and 8, for a derivative that involves the exchange of AUD for a foreign currency, record under that foreign currency whether buying or selling that currency. For a derivative that involves the exchange of two or more foreign currencies, report the currency that is being paid to settle to zero. That is:

if an asset position is being settled, then show the currency you are buying / receiving;
if a liability position is being settled, then show the currency you are selling / paying.
For example, if an ADI has a derivative contract to swap USD for Yen and the Yen appreciates against the USD, then this becomes an asset for the ADI because they are now receiving more Yen for their USD than the market rate. The ADI would settle this asset back to zero by receiving money, in this case Yen. Hence the currency of the closing asset position should be in Yen. Similarly, if the Yen depreciates against the USD, then this becomes a liability for the ADI because they are now receiving less Yen for their USD than the market rate. The ADI would settle this liability back to zero by paying money, in this case USD. The currency of the closing liability position should be in USD. For items 1, 2, 3, 4, 5, and 6 the opening position should equal the previous reporting period’s closing position. Transactions, where denominated in foreign currency, should be converted to AUD at the spot rate effective as at the date the transaction occurred. Refer to section 2.10.11 Transactions for more details. Revaluations should be used to reconcile opening and closing positions, including exchange rate variations. Refer to section 2.10.10 Valuations for more details on exchange rate variations. Any currencies not included in the List 1.2 should be reported as an aggregate in ‘Other’.
2.10.9 Treatment of Margins
Initial margins consist of cash or other collateral to protect the counterparty against default risk. The ownership of the margin remains with the entity that deposited it. Initial margin payments in cash are classified as deposits (if the debtor’s liabilities are part of broad money) or in other accounts receivable/payable. Variation margins can be treated as settlement or collateral. When the variation margin is treated as settlement, gains or losses from derivatives are shown in the entities cash position and the derivatives carrying value reverts to zero with each variation settlement (derivative transaction). If variation margins are treated as collateral adjustments to the amount of posted collateral have no effect on the carrying value of the derivative.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 102 Derivatives with clearing houses and central counterparties that are margined means that the variation margins are being used as settlement. When taken to the extreme, margining produces a zero balance sheet position (footprint) for the derivative. This is the case for futures which are fully margined or settled daily to square off any revaluations of the derivative. Futures positions should be measured at local Australian exchange close timing in respect to their revaluation, acknowledging likely immaterial differences to geographical exchange close differences may arise. Futures should be included at item 9. Derivatives that are margined can still have a balance sheet position (footprint), such as when the margining only takes place when a specific threshold is reached. Margined derivatives other than Futures should be recorded at item 5. When variation margins are treated as collateral, they should be excluded from transactions in the derivative as adjustments to the amount of posted collateral have no effect on the holding value of the derivative. Derivatives with clearing houses and central counterparties that are not margined means that the variation margins are being treated as collateral or the derivative is not subject to a margining process and these should be reported at item 6. Include derivatives with resident related parties in other sectors (e.g. an ADI would exclude trades with a related resident ADI) and non-resident related parties (e.g. an offshore branch) but exclude trades made within domestic book entity desks and same sector resident related parties (e.g. an ADI would exclude trades with a related resident ADI). Example 7: Margins An ADI has several swap contracts with a resident clearing house with the following features;

at the beginning of the quarter there is a net asset position of $20,000: equal to
$40,000 gross positive and $20,000 gross negative;
during the quarter there was a net cash receipt of $10,000;
during the quarter there was a holding loss of $60,000;
at the end of the quarter there was a net liability position of $50,000: equal to $10,000
gross positive and $60,000 gross negative.
The ADI would record the following for the quarter in Table 16;

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Table 16: ARF 722.0 - Margined Swap
Item 5: Derivatives with resident and non-resident clearing houses and central counterparties that are margined Country of clearing house and central counterparty Instrument type Net opening position Opening position:
of which gross positive
Opening position:
of which gross negative
Net transacti ons
Market value change s
Exchang e rate variation s
Other change s
Net closing position
Closing position:
of which gross positive
Closing position:
of which gross negative
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Australia Swaps 20,000 40,000 20,000 -10,000 -60,000 -50,000 10,000 60,000 Since the clearing house is a resident counterparty, the country is Australia. Hence, all revaluations are to be reported under market value changes. Example 8: Not margined An ADI has several swap contracts with non-resident and resident clearing houses with the following features; At the beginning of the quarter there is:
a) a net asset position of $15,000 with CEC Belgium, equal to $24,000 gross positive and $9,000 gross negative. These comprise mostly of EURO/AUD forwards; b) a net asset position of $210,000 with ASX, equal to $310,000 gross positive and $100,000 gross negative. These comprise of swaps denominated in AUD; c) a net liability position of $63,000 with ICE in USA, equal to $41,000 gross positive and $104,000 gross negative. These comprise mostly of USD/AUD forwards; During the quarter

The AUD depreciated against all major currencies resulting in positive market value
changes for forward assets and negative market value changes for forward liabilities.
there was a favourable change in the Bank Bill Swap Rate resulting in positive market
value changes for swaps;
The ADI would record the following for the quarter in Table 17:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 104
Table 17: ARF 722.0 – Non-margined Derivatives
Item 6: Derivatives with resident and non-resident clearing houses and central counterparties that are not margined Country of nonresident clearing house and central counterparty Instrument type Net opening position Opening position:
of which gross positive
Opening position:
of which gross negative
Net transacti ons
Market value change s
Excha nge rate variati ons
Other chang es
Net closing position
Closing position:
of which gross positive
Closing position:
of which gross negative
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Belgium (a) Forwards 15,000 24,000 9,000 -2,100 3,200 16,100 24,800 8,700 Australia (b) Swaps 210,000 310,000 100,000 -30,000 12,000 192,000 272,000 80,000 United States of America (c) Forwards -63,000 41,000 104,000 9,000 -18,800 -72,800 44,000 116,800
6.1. Total derivatives
that are not margined 162,000 375,000 213,000 -23,100 -3,600 135,300 340,800 205,500 If any adjustments are included in reported values, these should also be reported separately in item 10.
2.10.10 Valuations
Market valuation should be used for both over-the-counter (OTC) and exchange-traded (ET) derivatives. The market value is equivalent to the dirty price. The clean price and the accrued interest should not be reported separately. Revaluations represent:

the holding gain and losses arising from changes in market values of the contracts;
accrued interest ( e.g. swap coupons); and
other changes that are not transactions (such as write offs).
Revaluations can also be used to reconcile the opening and closing positions and amend for those derivatives which have switched sides during the quarter, or balancing derivatives that are entered into and settled within the same reporting period. Refer to example 2 for balancing using revaluations and transactions. Execution costs and initial margin calls should be excluded from revaluations.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 105 Practical implementation The guidance below is provided in recognition that the reporting of transactions and revaluations on the basis required for the economic statistical framework may be operationally challenging. For resident counterparties, the revaluations are not required to be split into components. This applies to items 1, 2, 5, and 6 for derivatives with all resident counterparties. For international reporting requirements under the Balance of Payments Manual 6 (BPM6) items 3, 4, 5, and 6 require a breakdown of revaluations into market value changes, exchange rate variations and other changes for non-resident counterparties. Market value changes Market value changes When reporting gross positions of derivative with non-resident counterparties, market value changes refer to the impact on the value of the stock of financial liabilities and assets due to changes in their price excluding any exchange rate movements. Market value changes include holding gains/losses during the period arising from changes in value of the underlying instrument on which the derivative is based, such as interest rates, and are realised at the end of each reporting period as part of the gross closing position for the derivatives. For derivatives involving swapping AUD into another currency, or currencies, as the underlying instrument, the effect of change in exchange rate on the derivatives should be treated as a market value change. Exchange rate variations Exchange rate variations refer to the change in value of the derivative due to changes in the exchange rate between the AUD and other currencies when outstanding amounts (gross positive and negative positions) of the derivatives are settled.
Table 18: Market value changed and exchange rate variation reporting
Splitting revaluations into exchange rate variations and market value changes when dealing with non-resident counterparties Type of derivative Market value change Exchange rate variation Currency forward / swap with one leg in AUD. Eg Swapping AUD for USD All market value change Currency forward / swap – no AUD leg. Eg Swapping USD for GBP – no swapping sides Balance Change between AUD and the currency that gives you the opening position (currency of closing position t-1). Currency forward / swap – no AUD leg. Eg Balance, eg to bring the asset side to zero Change between AUD and the currency that gives you the opening position (currency of closing position t-1). Entered as ER variation on the opening side.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 106 Swapping USD for GBP – swapping sides and to give the liability position When reporting for those derivatives in gross positions with resident counterparties the effect of change on exchange rate on the derivative is absorbed into revaluations. The split between market value changes, exchange rate variations, and other changes is required for the purposes of meeting international reporting standards. Other changes Other changes refers to changes to the stock of financial assets and liabilities not due to transactions, market value changes and exchange rate variations and may include reclassifications and write offs. Can also include country reclassification when the counterparty moves country during the reporting period. Example 9: Revaluations An ADI has the following derivative contracts:
a) A new forward contract to sell AUD$2.5m for USD$2m at $0.80c to a counterparty in New York, and a maturity of 15 months. b) An existing forward contract to sell AUD$2m for CNY¥10m at ¥5.00 to a counterparty in Singapore. It settles at the end of the quarter. c) An existing forward contract to sell USD$3.2m for GBP£2.4m for £0.75 to a counterparty in London and a residual maturity of 9 months. During the quarter:

USD/AUD depreciated from $0.80 USD to $0.75 USD.
CNY/AUD depreciated from ¥5.50 CNY to ¥4.50 CNY.
GBP/USD depreciates from £0.80 GBP to £0.65 GBP.
The ADIs would report the following for the quarter in Table 19;
Table 19: ARF 722.0 - Forward
Item 3: Derivatives with gross positive mark to market values and non-resident counterparties excluding clearing houses and central counterparties Country of nonresident debtor Opening position:
Gross positive mark to market value
Transaction s
Valuation and other changes Closing position:
Gross positive mark to market value
Market value changes
Exchange rate variations
Other
Changes
(1) (2) (3) (4) (5) (6) (7)

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 107 United States of America (a) 0 0 166,667 0 0 166,667 Singapore (b) 0 -222,222 222,222 0 United Kingdom (c) 0 656,410 656,410
3.1. Total
derivatives with a gross positive mark to market value 0 -222,222 1,045,299 0 0 823,077 Item 4: Derivatives with gross negative mark to market values and non-resident counterparties excluding clearing houses and central counterparties Country of nonresident debtor Opening position:
Gross negative mark to market value
Transaction s
Valuation and other changes Closing position:
Gross negative mark to market value
Market value changes
Exchange rate variations
Other
Changes
(1) (2) (3) (4) (5) (6) (7)
Singapore
(b) 181,818 0 -181,818 0
United
Kingdom
(c) 250,000 0 -266,667 16,667 0 0
4.1. Total
derivatives with a gross negative mark to market value 431,818 0 -448,485 16,667 0 0 (a) This new forward has an opening position of 0 as the contract price is the same as the exchange rate at the start of the quarter. It is USD asset because it has an AUD leg.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 108 At the end of the quarter the mark to market is an asset of $0.167m ((USD$2m/0.75) – (USD$2m/0.80) = $2.667m – $2.5m= $0.167m AUD). As this change in value is due to the change in the market value of the derivative it is recorded all in market value changes. (b) This existing forward has an opening liability position of $0.182m as the contract price is less than the exchange rate at the start of the quarter. It is a CNY asset/liability because it has an AUD leg. At the end of the quarter prior to settlement, the mark to market is an asset of $0.222m ((¥10m/4.5) - (¥10m/5.0) = $2.222m - $2m). As this change in value is due to the change in the market value of the derivative it is recorded all in market value changes. This is firstly shown by closing the liability position of $0.182m through market value changes and creating an asset position to $0.222m through market value changes. Finally the derivative is settled to 0 using transactions. (c) This existing forward has an opening liability position of $0.25m (USD$0.2m/0.80) as the contract price is less than the exchange rate at the start of the quarter ((£2.4m/0.8) – (£2.4m/0.75) = $3m – $3.2m = – $0.2m USD). It is a USD liability because the USD leg is generating the liability. Over the quarter the forward moves from a USD liability (AUD $0.25m) to a GBP asset (AUD $0.66m, USD $2.4m/0.65 – USD $3.2m = USD$ 0.5m / 0.75 = AUD $0.66m). Exchange variation contributes AUD -$0.02m (increasing AUD liability due to depreciation of the AUD against the USD, USD $0.2m/0.75 - USD $ 0.2m/0.80 = AUD $0.02m); and market value change contributes AUD $0.93m (AUD $0.66m + AUD $0.27m). If any adjustments are included in reported values, these should also be reported separately in Item 10.
2.10.11 Transactions
Transactions represent the settlements of the mark to market (MTM) position when reporting gross positions of derivatives. Specifically, transactions in derivatives include:

the payment to initiate the contract less the payment to settle the contract within the
quarter;
associated cash flows such as interest payments, premiums and variation margins (where
they are regarded as settling the derivative).
Do not report realised gains and losses as derivative transactions (as per AASB) for the reporting basis of the economic statistical framework because transactions in this form include the payment to initiate the derivative (e.g. an Option premium including those paid upfront or in instalments). Do not report fixed-value fees such as brokerage fees or up-front swap fees. Report transactions for derivatives that are entered into and settled within the same reporting period. These derivatives have no impact on the opening or closing positions. Refer to example 2 for balancing opening and closing positions using revaluations and transactions. Transactions can be likened to cash receipts and payments.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 109 Transactions for derivatives involving exchange rates Transactions should be converted to AUD at the spot rate effective as at the date the transaction occurred. Transactions excluding clearing houses and central counterparties For items 1, 2, 3, and 4 report all transactions related to derivatives in a gross positive MTM value (asset) position separately from transactions related to derivatives in a gross negative MTM value (liability) position. Do not offset contracts:

in an asset position with contracts in a liability position or vice versa; or
in different types of derivative instrument; or
with different counterparties.
If the contract starts and finishes in an asset position, show
a cash receipt as a negative transaction; and
a cash payment as a positive transaction.
Similarly, if the contract starts and finishes in a liability position, show
a cash receipt as a positive transaction;
a cash payment as a negative transaction.
Transactions with clearing houses and central counterparties For items 5, 6, and 9 report net transactions of the derivatives, that is transactions in a gross positive MTM value (asset) may be netted off with transactions in a gross negative MTM value (liability). Do not offset contracts:
in different types of derivative instruments; or
with different clearing houses and central counterparties.
2.11 ARF 723.0: ABS/RBA Margin Lending
2.11.1 General guidance
Applicable sections of general guidance include:
1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.13 Borrower-accepted commitments;

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1.15 Interest rates; and
1.16 Treatment of fixed interest rate products once the fixed period ends.
2.11.2 Prime broking
Margin loans provided through a reporting institution’s prime brokerage business are in scope of the margin lending definition for the purposes of the EFS collection, as long these loans 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.
2.11.3 Linked collateral and deposit accounts
Linked collateral and deposit accounts should be excluded from the value of credit outstanding for margin lending (i.e. do not subtract the value in the accounts from the outstanding value of the lending facility).
2.11.4 Item 1: New borrower-accepted margin loan commitments – by interest
rate type
For internal refinancing commitments report the total value of the new borrower-accepted commitment.
2.11.5 Item 2: Margin loans – by number of customers and loans
Example 1: customer with 1 margin loan with $50,000 credit outstanding Customers Loans Number (1) Number (2) Value (3)
1.1 Total margin lending to residents 1 1 50,000
0.0.0. of which: Credit outstanding 1 1
Example 2: customer with 2 margin loans – one with $50,000 credit outstanding and one with $25,000 credit outstanding Customers Loans Number (1) Number (2) Value (3)
1.1. Total margin lending to residents 1 2 75,000
1.1.1. of which: Credit outstanding 1 2

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 111 Example 3: customer with 2 margin loans – one with $50,000 credit outstanding and one with a zero balance Customers Loans Number (1) Number (2) Value (3)
1.1. Total margin lending to residents 1 2 50,000
1.1.1. of which: Credit outstanding 1 1

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 112 Example 4: customer with 2 margin loans – one with $50,000 credit outstanding and one with a net-deposit balance of $10,000 Customers Loans Number (1) Number (2) Value (3)
1.1. Total margin lending to residents 1 2 50,000
1.1.1. of which: Credit outstanding 1 1
2.11.6 Item 3: Credit limits on margin loans to residents
The credit limit for margin lending should reflect the maximum that the borrower can draw down based on the notional credit limit in the loan contract and the loan conditions (such as the maximum allowable loan-to-valuation ratio). The credit limit reported should always be the lower of these limits. The credit limit for margin lending can be equal to or lower than the credit limit in the loan contract. The credit limit cannot be higher than the credit limit in the loan contract. Example 1 A borrower has a margin loan. The loan conditions state the notional credit limit is $100,000 and the maximum loan-to-valuation ratio is 60%. The borrower has $200,000 worth of collateral against this loan. In this example, the borrower has enough collateral to draw down the entire value of the loan without breaching the maximum loan-to-valuation ratio. The credit limit reported will be equal to the credit limit in the loan contract ($100,000). Example 2 A borrower has a margin loan. The loan conditions state the notional credit limit is $100,000 and the maximum loan-to-valuation ratio is 60%. The borrower has $100,000 worth of collateral against this loan. In this example, the borrower does not have enough collateral to draw down the entire value of the loan without breaching the maximum loan-to-valuation ratio. The credit limit reported will be lower than the credit limit in the loan contract ($60,000). Item 10: Security underlying margin loans outstanding to residents – largest 10 exposures to listed companies (by market capitalisation) The value of market capitalisation of a company should be obtained from an appropriate thirdparty source.

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2.11.7 Reconciliation between ARF 723.0 and ARF 741.0 & ARF 745.0
Item 1.1 New borrower-accepted margin loan commitments to residents during the quarter Total new commitments for margin loans to residents reported in item 1.1 on ARF 723.0 should be equivalent to the sum of commitments for margin lending reported on ARF 741.0 and ARF 745.0, apart from differences in the reporting periods. ARF 723.0 is reported quarterly while ARF 741.0 and ARF 745.0 are reported monthly, thus the sum of the monthly values reported on ARF 741.0 and ARF 745.0 during the quarter, should equal the values reported on ARF 723.0 for the same quarter. See the table below for the specific items that should be equivalent, if it were not for the different reporting periods. Reconciliation between ARF 723.0 and ARF 741.0 & ARF 745.0 where an ADI or RFC reports all relevant forms ARF 723.0 ARF 741.0 & ARF 745.0 Item 1.1: Total new borrower-accepted margin loan commitments to residents during the quarter – Column 1: Value Item 1.1 on ARF 741.0: New borrower-accepted commitments to resident non-related parties during the month – Column 2: Margin lending plus Item 2.1 on ARF 745.0: New borrower-accepted commitments to residents during the month – Column 2: Margin lending Summed over each month in the calendar quarter corresponding to the reporting period for ARF 723.0.
2.11.8 Reconciliation between ARF 723.0 and ARF 742.0A/0B
Item 4 Margin loans outstanding to residents by counterparty & type of margin loan The total number of margin loans outstanding to residents reported in item 4 (column 3) on ARF 723.0 should be equivalent to the total number of margin lending facilities outstanding for all business types reported in item 3 (column 4) on either ARF 742.0A or ARF 742.0B, whichever is applicable, where there is a one-for-one relationship between the number of margin loans and the number of margin lending facilities. If there are some margin loans that may be aggregated in accordance with the definition of a facility, then the total number of margin lending facilities outstanding will be less than the total number of margin loans outstanding.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 114 Reconciliation between ARF 723.0 and ARF 742.0A/ARF742.0B where an ADI or RFC reports all relevant forms ARF 723.0 ARF 742.0A or ARF 742.0B Item 4: Margin loans outstanding to residents by counterparty and type of margin loan – Column 3: Number of loans Item 3 on ARF 742.0A or ARF 742.0B, whichever is applicable: Margin lending credit outstanding for all business types – Column 4: Number of facilities When no margin loans meet the definition of a lending facility.
2.12 ARF 730.0: ABS/RBA Statement of Financial Performance
2.12.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.9 Residential property purpose - owner-occupied and investment housing;
1.12 Types of financial assets and liabilities; and
1.18 Funds held on behalf of / in trust for clients.
2.12.2 Finance lease income
A finance lease refers to the leasing or hiring of tangible assets under an agreement that transfers from the lessor to the lessee substantially all the risks and benefits incident to ownership of the assets, without transferring the legal ownership. Income earned from a finance lease should be recorded as interest income. Treatment of finance leases should be in accordance with AASB 16 Leases (AASB 16).
2.12.3 Operating lease income
An operating lease is a lease under which the lessor effectively retains substantially all the risks and benefits incidental to ownership of the leased asset. An operating lease is a lease other than a finance lease. Income earned on operating leases should be recorded as non-interest income. Treatment of operating leases should be in accordance with AASB 16.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 115
2.12.4 Item 1: Interest income
ADIs and RFCs are to report interest income from both residents and non-residents; and from both related parties and non-related parties. Interest income on notes and coins Notes and coins represent holdings of physical currency. Some reporting institutions may receive interest income on the working balance of notes held under cash distribution arrangements. For most reporting institutions, reporting a zero value for this item would be valid. Allocating interest income by financial instrument – using ARF 330.1 PROXY: For ADIs, it may be useful to initially split the total domestic book interest income earned into instruments categories as described in the instructions for Reporting Form ARF 330.1.L:
Interest Income and Interest Expense (Licensed ADI) (ARF 330.1.L) – see Table 1 below. Note that for RFCs, Reporting Form RRF 331.0: Selected Revenue and Expense (RRF 331.0) only categorises interest income by debt securities and housing loans. RFCs may instead use the methodology based on the balance sheet forms to allocate total interest income earned by financial instruments (see Table 2 below).

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Table 1: Map of Interest Income from ARF 330.1.L to ARF 730.0
ARF 330.1.L ARF 730.0
Cash and liquid assets (PL02500) and
Other deposits (PL13090)
Item 1.1.1: Notes and coins and
Item 1.1.2: Deposits
Trading securities: Total (PL02501) and
Investment securities: Physical (PL02502)
Item 1.1.3: Short-term debt securities and
Item 1.1.4: Long-term debt securities
Derivative - banking book: hedging (PL02503) Item 1.1.5: Derivatives – banking book hedging Loans and advances (PL02504 to PL02509) Item 1.1.6: Loans and finance leases Other investments (PL02513) and Other interest-earning assets (PL02514) Item 1.1.7: Other interest-earning assets Investment / loans to parent entity (PL02510) and Investment / loans to controlled entities (PL02511) and Investment / loans to associate / joint ventures (PL02512) Pro-rated using information in ARF 720.3; and then mapped to Items 1.1.2, 1.1.3, 1.1.4, 1.1.6 and 1.1.7 Allocating interest income by financial instrument – using balance sheet information PROXY: The categories of the interest-earning assets from the domestic books balance sheet (ARF 720.0A/B, ARF 720.1A/B, ARF 720.3 and ARF 720.4) may be used to allocate and or validate the interest income earned by financial instrument categories required on ARF 730.0 – see Table 2 below.

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Table 2: Map of Interest Income from ARF 730.0 to the corresponding item on balance sheet
ARF 730.0 Balance sheet forms
Item 1.1.1: Notes and coins – Column 1: Interest income ARF 720.0A/B: Item 1.1: Notes and coins – Column 1: Total Item 1.1.2: Deposits – Column 1: Interest income ARF 720.0A: Item 2: Total funds on deposit at other financial institutions – Column 5: Total or ARF 720.0B: Item 2: Total funds on deposit at other financial institutions – Column 3: Total and ARF 720.3: Item 1.1.1: Funds on deposit at other financial institutions - Column 1: Total Item 1.1.3: Short-term debt securities – Column 1: Interest income ARF 720.4: Item 1: Total short-term debt securities held – Column 1: Total Item 1.1.4: Long-term debt securities – Column 1: Interest income ARF 720.4: Item 2: Total long-term debt securities held – Column 1: Total Item 1.1.5: Derivative – banking book hedging – Column 1: Interest income ARF 720.0A/B: Item 10.3.2: Derivative financial instruments: banking book derivatives – Column 1: Total and ARF 720.3: Item 1.1.7.1.2: Other assets: banking book derivatives – Column 1: Total Item 1.1.6: Loans and finance leases – Column 1:
Interest income
ARF 720.0A/B: Item 6: Total loans and finance leases – Column 1: Total gross of provisions and ARF 720.3: Item 1.1.5: Loans and finance leases – Column 1: Total Example 1: Allocating interest income – short and long term debt securities The method outlined in steps (a) to (f) illustrates a possible way to allocate interest income earned to short-term and long-term securities utilising information from ARF 330.1.L and the balance sheet forms. a) split the domestic book total income from interest earning assets (Item 1.1 of ARF 730.0) into instrument categories by apportioning using the values reported on ARF 330.1.L as a proxy. b) calculate an indicator quarterly market interest rate, for short-term and long-term debt securities from the RBA Statistical Tables F1, F2 and F3 or from internal indicator rates within your reporting institution. c) for each type of short-term debt security held at the end of the reporting period (Item 1 of ARF 720.4) multiply by the indicator market interest rate determined in step (b) to

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 118 obtain an estimate of interest income by type of short-term debt security. Aggregate the interest income to calculate total interest income earned for short-term debt securities. d) for each type of long-term debt security held at the end of the reporting period (Item 2 of ARF 720.4) multiply by the indicator market interest rate determined in step (b) to obtain an estimate of interest income by type of long-term debt security. Aggregate the interest income to calculate total interest income earned for long-term debt securities. e) pro-rate the total interest income allocated to short-term and long-term debt securities (step (a)) by interest income derived in step (c) for short-term securities. f) pro-rate the total interest income allocated to short-term and long-term debt securities (step (a)) by interest income derived in step (d) for long-term securities. Loans and finance leases interest income by counterparty It is acknowledged that reporting of counterparty information required for interest income earned from loans and finance leases may be a challenge for some ADIs and RFCs as the reporting system for obtaining financial performance information is designed around business units (customer segmentation) and product classifications within these units.
Table 3 maps the four counterparty sectors to an indicative set of ADI/RFC business units.
Table 3: Map of ARF 730 counterparties for loans and finance leases to ADI/RFC Business Units
ARF 730.0- Counterparty ADI/RFC Business Units Households Retail/Consumer/Personal Private unincorporated businesses Micro and Small Business Other private non-financial corporations Medium & Large Business/Corporate/Institutional Other Large Business/Corporate/Institutional (a) Households
Table 3 indicates that interest income earned from households on loans and finance leases
should map directly to the interest income generated from retail/consumer/personal business units. PROXY: ARF 730.0 requires a further breakdown of interest income earned from households to the categories shown in Table 4. These categories may be estimated using product type. ADIs/RFCs may therefore be able to allocate the interest income earned to housing (owneroccupied and investment), and personal (credit cards and other) by using loan product information within the business unit related to households.

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Table 4: Map of ARF 730 Sectors to ADI/RFC Business Units/Products
ARF 730.0 - Household - Counterparty Business Units / Products Housing loans

Owner-occupied
Investment
Home loan products
Owner-occupied home loans
Investor home loans
Personal loans
Credit cards
Other
Personal loan products
Credit card products
Other products

PROXY: If ADIs/RFCs are unable to allocate interest income earned for housing and personal by using loan product information, ADIs/RFCs may estimate this information using information from ARF 720.1A/B and indicator interest rates (similar to the method used for deposits in Example 2: Interest expense – deposits accounts in Section 2.12.5 Item 4: Interest expense). Indicator interest rates may be calculated as follows:

For owner-occupier and investor housing, calculate the quarterly interest rate information
from Item 1 on ARF 744.0A/B. If ARF 744.0A/B is not reported by your reporting institution, use interest rate information from internal indicator rates within your reporting institution.
For personal, calculate the quarterly interest rates using interest rate information from
Item 1 on ARF 746.0A/B. If ARF 746.0A/B is not reported by your reporting institution, use interest rate information from internal indicator rates within your reporting institution. (b) Private unincorporated businesses
Table 3 indicates that interest income earned from private unincorporated business on loans
and finance leases should map directly to the interest income generated by micro and small business units. PROXY: For ADIs/RFCs that are not able to identify small business customers into a separate business units, small business customers may be identified by an ADI’s/RFC’s internal business indicators such as annual turnover and debt exposure, revenue, total lending limits, business lending limits and/or through product information. See Section 1.7 Business Size for further guidance. PROXY: If ADIs/RFCs are unable to allocate interest income earned for private unincorporated businesses using loan product information, ADIs/RFCs may estimate this information using information from ARF 720.1A/B and indicator interest rates (similar to the method used for deposits in Example 2: Interest expense – deposits accounts in Section 2.12.5 Item 4: Interest expense). Indicator interest rates may be calculated using internal indicator rates within your reporting institution.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 120 (c) Private non-financial corporations and other
Table 3 indicates that interest income earned from other private non-financial corporations and
the ‘other’ counterparty sectors on loans and finance leases would both map to interest income generated by large business/corporate/institutional business units. Interest income generated from medium size businesses would map directly to other private non-financial corporations. The ‘other’ counterparty includes financial institutions, public sector units, community service organisations and property trusts. In general, it is expected that ADIs and RFCs do not provide significant amounts of loans and finance leases to entities included in the ‘other’ category. The majority of the loans and finance leases – and therefore the interest income earned – from large businesses (in the Corporate/Institutional business units) are expected to be earned by providing loans and finance leases to other private non-financial corporations. ADIs/RFCs may find it difficult to distinguish between the interest income earned for the ‘other’ and other private non- financial corporations. If possible:

PROXY: ADIs and RFCs are encouraged to identify the entities that fall into the ‘other’
category as described above, estimate their interest income earned and derive, as a residual, interest income earned from other private non-financial corporations; or
PROXY: estimate interest income earned for the two categories using information on
ARF 720.1A/B and internal indicator interest rates used within your reporting institution (similar to the method used for deposits in Example 2: Interest expense – deposits accounts in Section 2.12.5 Item 4: Interest expense).
2.12.5 Item 4: Interest expense
ADIs and RFCs should report interest expense incurred from both residents and non-residents; and from related parties and non-related parties. Interest expense incurred is not separately identified for non-residents nor related parties; instead they are included in the total and instrument splits. Allocating interest expense by financial instrument PROXY: ADIs may find it useful to initially split the total domestic book interest expense incurred into instrument categories described in the instructions for ARF 330.1.L. The categories are:
deposits;
other borrowings;
derivatives - banking book;
bonds, notes and long-term borrowings;
loan capital;
loans from parent entity, controlled entities and associates/joint ventures; and
other interest-bearing liabilities.
The current reporting standard for RFCs RRF 331.0 only categorises interest expense by debt securities on issue and ‘other’. RFCs may use the methodology illustrated in Example 1 above to allocate total interest expense by financial instruments based on ARF 730.0 (see Table 6).
Table 5 below provides a concordance map from the current ARF 330.1.L to ARF 730.0.

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Table 5: Map of Interest Expense from ARF 330.1.L to ARF 730.0
ARF 330.1.L ARF 730.0
Deposits (PL02549) Item 4.1.1: Deposits
Derivatives - banking book (PL02551) Item 4.1.5: Derivative – banking book hedging Bonds, notes and long-term borrowing (PL02552) and Loan capital (PL02553) Item 4.1.2: Short-term debt securities; Item 4.1.3: Long-term debt securities; and Item 4.1.4: Loans and finance leases Other borrowings (PL02550) and Other interest-bearing liabilities (PL02557) Item 4.1.6: Other interest-bearing liabilities Loans from parent entity (PL02554) and Loans from controlled entities (PL02555) and Loans from associates / joint ventures (PL02556) Allocated to long-term borrowing in ARF 330.1.L and the item mapped to Item 4.1.4 in ARF 730.0. PROXY: The categories of interest-bearing liabilities from the domestic books balance sheet forms (ARF 720.0A/B, ARF 720.2A/B, ARF 720.3 and ARF 720.6) along with an indicator interest rate may be used to allocate and or validate the interest expense incurred by financial instrument categories required on ARF 730.0 (similar to the methods used in Example 1:
Allocating Interest Income – short and long term debt securities and Example 2: Interest expense – deposits accounts). Indicator interest rates may be calculated using interest rate information from Item 1 on ARF 747.0A/B and ARF 748.0A/B. If ARF 747.0A/B and ARF 748.0A/B are not reported by your reporting institution, use interest rate information from RBA Statistical table F1 and F3, and/or internal indicator rates within your reporting institution.
Table 6 provides a map of the interest expense incurred by financial instrument from ARF 730.0
to the corresponding balance sheet items on ARF 720.0A/B, ARF 720.2A/B, ARF 720.3 and ARF 720.6.

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Table 6: Map of Interest Expense from ARF 730.0 to the corresponding items on balance sheet
forms
ARF 730.0 Balance sheet forms
Item 4.1.1: Deposits – Column 1: Interest expense ARF 720.0A/B: Item 14: Total deposits – Column 1: Total and ARF 720.3: Item 3.1.1: Deposits – Column 1:
Total
Item 4.1.2: Short-term debt securities – Column 1: Interest expense ARF 720.6: Item 1: Total short-term debt securities excluding hybrids – Column 1: AUD and ARF 720.6: Item 1: Total short-term debt securities excluding hybrids – Column 2: FX (AUD equivalent) Item 4.1.3: Long-term debt securities – Column 1: Interest expense ARF 720.6: Item 2: Total long-term debt securities excluding hybrids – Column 1: AUD and ARF 720.6: Item 2: Total long-term debt securities excluding hybrids – Column 2: FX (AUD equivalent) Item 4.1.4: Loans and finance leases – Column 1: Interest expense ARF 720.0A/B: Item 16.3: Loans and finance leases - Column 1: Short-term and ARF 720.0A/B: Item 16.3: Loans and finance leases - Column 1: Long-term and ARF 720.3: Item 3.1.3.2: Loans and finance leases – Column 1: Total Item 4.1.5: Derivatives: banking book hedging – Column 1: Interest expense ARF 720.0A/B: Item 18.8.2: Banking book derivatives – Column 1: Total and ARF 720.3: Item 3.1.4.1.2: Creditors and other liabilities: banking book derivatives – Column 1:
Total
PROXY: Similar methodology to that illustrated in Example 1 above may be used to allocate interest expense by financial instrument using information from ARF 330.1.L, ARF 720.0A/B and the supplementary balance sheet forms. Deposits interest expense by counterparty

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 123 It is acknowledged that reporting of counterparty information required for deposit interest expense incurred will be a challenge for ADIs/RFCs as the reporting system for obtaining financial performance information is designed around business units (customer segmentation) and the product classifications within these units.
Table 7 maps the four counterparty sectors to an indicative set of ADI/RFC business units.
Table 7: Map of ARF 730 counterparties for deposit accounts to ADI Business Units
ARF 730.0 - Counterparty ADI Business Units
Households Retail/Consumer/ Personal
Other private non-financial corporations Medium & Large Business/ Corporate/Institutional Self-managed superannuation funds Retail/Consumer/ Personal Other Large Business/ Corporate/Institutional
Table 7 indicates that there is not a one-to-one relationship between the counterparties
required for deposit accounts in ARF 730.0 and business units. ADIs/RFCs may find it difficult to allocate interest expense incurred from deposit accounts to these counterparties. Example 2 below provides a suggested allocation methodology. Example 2: Interest expense – deposit accounts PROXY: Steps (a) to (e) in the example below illustrate how to allocate interest expense incurred for deposit accounts using information from ARF 330.1.L, ARF 720.0A/B and supplementary forms (see Table 5 and Table 6 above). a) Split the domestic book total expense from interest-bearing liabilities (Item 4.1 of ARF 730.0) into instrument categories by using the splits in ARF 331.0.L as a proxy to obtain the amount of interest expense incurred allocated to deposits; b) Derive the balances for deposit accounts from Item 1 of ARF 720.2A/B and use a quarterly indicator interest rate for the categories below:

households;
self-managed superannuation funds;
other private non-financial corporations; and
other (total deposits account balances less the 3 categories above).
c) Calculate a quarterly indicator interest rate, for the relevant categories using interest rate information from Item 1 from ARF 747.0A/B. If ARF747.0 A/B is not reported by your reporting institution, this can be calculated using internal indictor rates within your reporting institution. d) Derive interest expense estimates for households and self-managed superannuation funds on ARF 730.0. Pro-rate the total interest expense (obtained for the deposit products for the Retail/Consumer/Personal business unit) by the derived interest expense estimates for households and self-managed superannuation funds.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 124 e) Derive interest expense estimates for other private non-financial corporations and the ‘other’ category on ARF 730.0. Pro-rate the total interest expense (obtained for the deposit products for the Medium & Large Business/Corporate/Institutional business unit) by the derived interest expense estimates for private non-financial corporations and ‘other’. For operating lease expenses:

interest expense on operating lease liabilities should be reported at item 4.1.6 Operating
lease liabilities;
depreciation expense on right-of-use assets should be reported at item 6.1.2
Depreciation of property, plant and equipment;
short-term lease payments, payments for leases of low-value assets, variable lease
payments not included in the measurement of lease liabilities and service components previously embedded in the lease should be reported at item 6.1.1 Operating lease rental expense.
2.12.6 Item 5: Personnel expense
Employer contributions into superannuation
Follow accrual accounting practices when reporting employer contributions made by employers on behalf of employees into superannuation funds. For example, imputation may be required if the fund is overfunded (and the employer is on a contribution holiday) or the fund is an unfunded, defined benefit scheme and therefore needs to ensure a level of contributions consistent with the actuarial recommendations.
2.12.7 Item 8: Other operating expense
Fees and commissions – of which: financial institutions Reporting institutions are requested to report any fees and commissions paid to financial institutions (including related parties). This item includes (but is not limited to) fees paid by the reporting institution to other financial institutions for:
servicing a loan;
investment management fees;
loan syndication fees; and
underwriting fees.
Exclude fees and commissions already accounted for in interest expense incurred because they are an integral part of the effective interest rate of a financial instrument, in accordance with Australian Accounting Standards. Note that the treatment of fees on ARF 730.0 is different to the reporting of fees on ARF 730.1. On ARF 730.1, all fees are included regardless of whether they can be treated as interest expense under the accounting standards.

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2.12.8 Item 15: Multi-state operations
As ARF 730.0 is to be completed on a domestic books basis, only the wages and salaries of persons paid by entities that are consolidated within domestic books should be reported. If an employee is based outside of Australia, but their wage is an expense of the domestic book of the ADI or RFC, report the employee’s wage in accordance with the location of the business cost centre responsible for paying the employee’s wage.
2.12.9 Item 16: Employment
Number of employees working for this business
As ARF 730.0 is to be completed on a domestic books basis, only the number of persons working in entities that are consolidated within domestic books should be reported. If an employee is based outside Australia, but is deemed to be employee of an entity consolidated within the domestic books of the ADI/RFC, then they should be reported on this form. If not, they should be excluded from ARF 730.0 entirely.
2.12.10 Merger and restructuring expenses
Where possible, recognise merger and restructuring expenses at the most appropriate expense category. For example:

capitalised wages and salaries related to integration should be reported at item 13.1.1
Capitalised wages and salaries;
severance and redundancies as a result of the integration should be reported at item 5.1.1
Total wages and salaries;
professional fees should be reported at item 8.1.4 Fees and commissions; and,
integration expenses not separately identifiable, or without an appropriate expense
category should be reported at item 8.1.9 Other operating expense.
2.13 ARF 730.1: ABS/RBA Fees Charged
2.13.1 General guidance
Applicable sections of general guidance include:
1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.7 Business size;
1.8 Identifying (predominant) purpose class and sub-class; and
1.12 Types of financial assets and liabilities.
2.13.2 Reporting basis

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 126 Note that the treatment of fees is on ARF 730.1 is different to the reporting of fees on ARF 730.0. On ARF 730.1, unless explicitly excluded, all fees should be reported regardless of whether they can be treated as interest expense under the accounting standards. As per the form name, the primary focus is on quantifying fees charged to customers (net of any rebates exemptions or waivers offered to the customer), not the reporting institution’s perception of income derived from fees charged which may or may not involve further netting of various expenses incurred by the reporting institution. As such, fees charged will not necessarily reconcile with non-interest income reported in the reporting institution’s annual profit and loss financial statements compiled in accordance with accounting standards.
2.13.3 Reporting coverage
Any fee income earned from fees charged to related parties are outside the scope of this form. Accordingly, fee income from fees charged to SPVs that are related parties should not be included on this form. Fee income from fees charged to SPVs that are non-related parties should be included under the relevant item. Any fee income earned from fees charged to a custody business should not be included on the form if that custody business falls outside the scope of domestic books.
2.13.4 Counterparty splits
PROXY: Where information on fees charged is not available by counterparty type, the ADI may use an appropriate allocation method to split fees charged across counterparties.

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2.13.5 Item 1: Fees charged on deposit accounts
Do not include fees on overdrawn accounts with a pre-arranged overdraft facility. These fees should be included in loan fees charged. Fees should be included for accounts that do not have pre-arranged overdraft facilities, such that they attract penalty interest rates if they become overdrawn, but do not include the penalty interest charged for becoming overdrawn without authorisation.
2.13.6 Item 2: Fees charged on loans and finance leases
Include fees on overdrawn accounts with a pre-arranged overdraft facility. Include fees on loans and finance leases that have been securitised and where the loans and finance leases are held on-balance sheet. Refer to Section 2.1.5 Treatment of securitisation for more detail on the treatment of securitisation. Fees charged on personal loans and finance leases should include fees associated with margin lending to households. Do not include merchant service fees or transaction fees for debit cards. Merchant service fees are included in merchant fees charged to private and public sector businesses. Debit card transaction and account keeping fees should be included in fees charged on deposit accounts.
2.14 ARF 741.0: ABS/RBA Business Finance
2.14.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.6 Australian and New Zealand Standard Industry Classification;
1.7 Business size;
1.8 Identifying (predominant) purpose class and sub-class;
1.11 Location of property;
1.12 Types of financial assets and liabilities; and
1.13 Borrower-accepted commitments.
2.14.2 Borrower-accepted commitments for business finance
Generally include:
secured and unsecured finance for business purposes;
finance to private and public sector businesses whether or not the finance is secured by
residential property;
external refinancing;
internal refinancing;

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finance leases for business purposes; and
acceptance of bills of exchange by your institution.
Generally exclude:
finance to households for housing purposes. This should be reported on ARF 743.0;
finance to households for personal purposes. This should be reported on ARF 745.0;
deposits;
the purchase of securities; and
borrower-accepted commitments contingent on some specified eventuality (e.g. bill
endorsements, guarantees, letters of credit, standby agreements) unless and until that eventuality occurs.
2.14.3 Credit limits
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 approval from the lender. The concept of a credit limit does not apply to borrower-accepted commitments for finance leases or bill acceptances. Only report bill acceptances as they are accepted. Fixed-term loans The credit limit and credit outstanding on a fixed-term business loan as at the end of the month may be equivalent in many cases. However, there may also be instances where, through options like redraw facilities (or similar), credit outstanding differs from the credit limit. Charge cards Where an explicit credit limit is not available on a charge card, report the credit limit as the value of credit outstanding. Margin lending facilities See guidance provided for Item 3 of ARF 723.0.
2.14.4 Reporting construction finance and finance for the purchase of property
by location
When reporting by location, report according to the location of the construction site or property that the finance will be used for, not the location of the branch where the commitment was made, where the headquarters of the business are located, or where the collateral is located (if these differ from the location sought). Reporting institutions submitting ARF 741.0 are expected to be able to meet this requirement for the bulk of finance commitments in their portfolio.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 129 Where a single commitment is taken out to fund the construction or purchase of property across multiple states, the entire value of the commitment should be reported against the state where the greatest value of the funds will be used.

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2.14.5 Item 2.1: New borrower-accepted commitments for business loans – by
purpose
Acquisitions
When reporting loans and finance leases for the purposes of acquisitions, either the accounting definition or legal definition of control may be used.
2.14.6 Reconciliations within ARF 741.0
Item 1.1 New borrower-accepted commitments to resident non-related parties during the month The value of total new borrower-accepted commitments for fixed-term business loans to resident non-related parties reported in Item 1.1 (column 4) on ARF 741.0 is equivalent to the sum of new borrower-accepted commitments for fixed-term business loans to resident nonrelated parties for small, medium and large business reported in item 2.1 (columns 1, 2 and 3), less fixed-term margin lending. The sum of new borrower-accepted commitments for credit cards and other revolving credit facilities to resident non-related parties reported in item 1.1 (columns 1 and 3) on ARF 741.0 is equivalent to the sum of new borrower-accepted commitments for revolving credit facilities to resident non-related parties for small, medium and large businesses reported in item 2.2 (columns 1, 2 and 3), less revolving credit facilities for margin lending. See the table below for the specific items that should be equivalent, if it were not for the distribution of margin lending across selected fixed-term loan and revolving credit items on ARF 741.0.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 131 Reconciliation within ARF 741.0 taking account of the distribution of margin lending across selected fixed-term and revolving items ARF 741.0 ARF 741.0 Item 1.1: New borrower-accepted commitments to resident non-related parties during the month – Column 4: Fixed-term loans Item 2.1: Total new borrower-accepted commitments for fixed-term business loans to resident non-related parties – Column 1: Small plus Column 2: Medium Plus Column 3: Large Less any fixed-term margin lending reported in item 2.1 (columns 1 to 3). Item 1.1: New borrower-accepted commitments to resident non-related parties during the month – Column 1: Credit cards plus Column 3: Other revolving credit facilities Item 2.2: Total new borrower-accepted commitments for revolving business loans to resident non-related parties – Column 1: Small plus Column 2: Medium plus Column 3: Large Less any revolving credit facilities for margin lending reported in item 2.2 (columns 1 to 3).
2.15 ARF 742.0A/B: ABS/RBA Business Credit Stocks, Flows and
Interest Rates (Standard) / (Reduced)
2.15.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;

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1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.6 Australian and New Zealand Standard Industry Classification;
1.7 Business size;
1.8 Identifying (predominant) purpose class and sub-class;
1.10 Secured by residential property;
1.12 Types of financial assets and liabilities;
1.14 Identifying facilities;
1.15 Interest rates; and
1.16 Treatment of fixed interest rate products once the fixed period ends.
2.15.2 Business finance funded during month
Generally include:
secured and unsecured finance;
finance to private and public sector businesses whether or not the finance is secured by
residential property;
external refinancing;
internal refinancing;
finance leases for business purposes; and
acceptance of bills of exchange by your reporting institution.
Generally exclude:
finance to households for housing purposes. This should be reported on ARF 744.0A/B;
finance to households for personal purposes. This should be reported on ARF 746.0A/B;
deposits with financial institutions; and
the purchase of securities.
2.15.3 Credit outstanding, net of offset account balances
For loans with attached offset accounts, report the value of the loan that would attract interest. For example:
for an offset account that fully offsets interest payments (see Example 1), record the value
of the loan less the offset account balance up to the value of credit outstanding (i.e. value reported should be greater than or equal to zero);
for an offset account that only partially offsets interest payments, record the value of the
loan less the portion of the offset account balance that is equivalent to a fully offset balance (see Example 2) up to the value of credit outstanding (i.e. value reported should be greater than or equal to zero). For loans with attached set-off accounts, report the value of the loan less the value of deposits in the set-off account up to the value of credit outstanding (i.e. value reported should be greater than or equal to zero). Example 1: Full offset

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 133 For a loan with $800 000 of credit outstanding, 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
Example 2: Partial offset
For a loan with $800 000 of credit outstanding, 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% 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
2.15.4 Funded
All amounts funded during the reporting period should be reported in the relevant items of ARF 742.0A/B, irrespective of whether or not these amounts were drawn down (see instructions in ARS 742.0). 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. Loan amounts drawn down during the reporting period are to be reported in Table 7 of ARF 742.0A/B. Internal refinances Where an internal refinance occurs, the total value of the refinance should be reported as ‘funded in the month’, not just the amount by which the credit limit was increased. This is to reflect the new interest rate that applies to the entirety of the funds as contributing to the average marginal rate on new lending. Construction loans Where construction loans are funded and drawn down in stages, report only the value funded in the month (not the total value of the commitment).
2.15.5 Split facilities
See Section 1.14 Identifying facilities in general guidance.
Where a facility may involve both a mix of interest rate types (i.e. fixed interest rate and variable interest rate) and a mix of repayment types (e.g. interest-only and amortising), apportion value across the relevant line items. When reporting the weighted average interest rate, each interest rate should be weighted by the value of its corresponding balance outstanding. When reporting the number of facilities broken down by repayment type, report each facility only once according to the predominant repayment type. Similarly, when reporting the number of facilities broken down by interest rate type, report each facility only once according to the predominant interest rate type. 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.

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2.15.6 Interest rates
See Section 1.15 Interest rates in general guidance.
As per the general guidance for interest rates, all interest rates reported are to be contractual rates, not effective rates (inclusive of some fees). Interest rates reported are to exclude fees charged to borrowers; fees are to be reported separately on ARF 730.1. Fixed-term loans with interest rates that are periodically reset throughout the duration of the loan should be reported as variable interest rate loans. For example, a 3-year loan with an interest rate that is calculated as a spread to a 90-day reference market rate would be reported as a variable interest rate loan. 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 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 as at the end of the month. Where the contractual interest rate cannot be determined for an undrawn loan, exclude this loan from the calculation of the weighted average interest rate.
2.15.7 Interest charged
‘Item 7.6: 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 742.0A/B. This is distinct from interest accrued on an accounting basis. Interest that has accrued but not yet been charged is recorded in ‘Item 10.1: Interest receivable’ on ARF 720.0A/B and is not included in Item 7 of ARF 742.0A/B.
2.15.8 Reconciliations within ARF 742.0A/B
Table 6 Fixed-term business loans – by residual term
For credit outstanding, the total number of facilities, value and weighted average interest rate for fixed-term business loans to resident non-related parties reported by business type in Table 6 (columns 3, 4 and 5) on ARF 742.0A/B is equivalent to fixed-term loans to resident non-related parties reported by business type in Table 3 (columns 3, 4 and), plus fixed-term margin lending. For funded in the month, the total number of facilities, value and weighted average interest rate for fixed-term business loans to resident non-related parties reported by business type in Table 6 (columns 7, 8 and 9) on ARF 742.0A/B is equivalent to fixed-term loans to resident non-related parties reported by business type in Table 3 (columns 6, 7 and 8), plus fixed-term margin lending. 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.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 135 See the table below for the specific items that should be equivalent, if it were not for the possible inclusion of both fixed-term and revolving margin loans in the margin lending item in
Table 3.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 136 Reconciliation within ARF 742.0A/B the possible inclusion of both fixed-term and revolving margin loans in the margin lending item ARF 742.0A/B ARF 742.0A/B
Table 6: Fixed-term business loans – by residual
term – Small – Credit outstanding – Column 3:
Number of facilities
Table 3: Business finance – by finance type –
Small – Fixed-term loans - Credit outstanding – Column 3: Number of facilities Plus any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Medium – Credit outstanding – Column 3:
Number of facilities
Table 3: Business finance – by finance type –
Medium – Fixed-term loans - Credit outstanding – Column 3: Number of facilities Plus any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Large – Credit outstanding – Column 3:
Number of facilities
Table 3: Business finance – by finance type –
Large – Fixed-term loans - Credit outstanding – Column 3: Number of facilities Plus any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Small – Credit outstanding – Column 4:
Value
Table 3: Business finance – by finance type –
Small – Fixed-term loans - Credit outstanding – Column 4: Value Plus any fixed-term margin lending with the same characteristics reported in the same table.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 137
Table 6: Fixed-term business loans – by residual
term – Medium – Credit outstanding – Column 4:
Value
Table 3: Business finance – by finance type –
Medium – Fixed-term loans - Credit outstanding – Column 4: Value Plus any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Large – Credit outstanding – Column 4:
Value
Table 3: Business finance – by finance type –
Large – Fixed-term loans - Credit outstanding – Column 4: Value Plus any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Small – Credit outstanding – Column 5:
Interest rate
The weighted average of:
Table 3: Business finance – by finance type –
Small – Fixed-term loans - Credit outstanding – Column 5: Interest rate and the interest rate for any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Medium – Credit outstanding – Column 5:
Interest rate
The weighted average of:
Table 3: Business finance – by finance type –
Medium – Fixed-term loans - Credit outstanding – Column 5: Interest rate and the interest rate for any fixed-term margin lending with the same characteristics reported in the same table.
Table 6: Fixed-term business loans – by residual
term – Large – Credit outstanding – Column 5:
Interest rate
The weighted average of:
Table 3: Business finance – by finance type –
Large – Fixed-term loans - Credit outstanding – Column 5: Interest rate and the interest rate for any fixed-term margin lending with the same characteristics reported in the same table.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 138 Item 7.13: Fixed-term business loan credit outstanding to resident non-related parties as at the end of the month – Column 1: Value
Table 3: Business finance – by finance type –
Small – Fixed-term loans - Credit outstanding – Column 4: Value Plus
Table 3: Business finance – by finance type –
Medium – Fixed-term loans - Credit outstanding – Column 4: Value Plus
Table 3: Business finance – by finance type –
Large – Fixed-term loans - Credit outstanding – Column 4: Value Plus any fixed-term margin lending with the same characteristics reported in the same table.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 139
2.16 ARF 743.0: ABS/RBA Housing Finance
2.16.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.9 Residential property purpose - owner-occupied and investment housing;
1.11 Location of property;
1.12 Types of financial assets and liabilities;
1.13 Borrower-accepted commitments;
1.14 Identifying facilities; and
1.16 Treatment of fixed interest rate products once the fixed period ends;
2.16.2 Applications and borrower-accepted commitments for housing finance
Generally include:
secured and unsecured finance;
finance to your employees;
bridging finance for housing;
external refinancing; and
internal refinancing.
Generally exclude:
finance for business purposes. This should be reported on ARF 741.0;
finance for personal purposes. This should be reported on ARF 745.0; and
commitments for revolving credit loans secured by residential property where the
predominant purpose at application is business or personal. These should be reported on ARF 741.0 or ARF 745.0 as appropriate.
2.16.3 Portable home loans
Mortgage mobility is being offered by a number of lenders as a service to their borrowers. The resulting security substitution is likely to involve a borrower transferring the security on an existing housing loan from one residential property to another residential property. Reporting guidance In cases where there is no change to state of the residential property that the funds are being used for, and the borrower exercises the option under their existing loan agreement to transfer the security on the loan to another residential property, the transaction should not be reported as a new commitment.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 140 In cases where there is a change to the state of the residential property that the funds are being used for, the transaction should be reported as a new commitment.
2.16.4 Interest offset arrangements and redraw facilities on fixed-term loans
Interest on a borrower’s savings is offset against interest owed on a loan. Some or all of the repayments in excess of the minimum required repayment can be withdrawn. Reporting guidance If the borrower only withdraws the excess of repayments then there is no new finance associated with these arrangements. As such, no new commitment should be reported on any lending activity forms (ARF 741.0, ARF 743.0 and ARF 745.0). The redrawn amount should, however, be included in amounts drawn (credit outstanding). Where more than the excess repayments are redrawn, then this is considered new lending finance. A new commitment should be reported in the relevant lending activity collection.
2.16.5 Bridging finance commitments
Bridging finance is typically a short-term commitment for finance that will be repaid once further finance has been obtained or the following the sale of property. Reporting guidance The total, or gross, value of bridging finance commitments should be reported. For example, if you make a commitment for bridging finance for $150 000 and your borrower anticipates repaying $100 000 upon the sale of their previous residential property, then the full, or gross, value of the commitment should be reported, i.e. $150 000, not the anticipated or actual net.
2.16.6 Item 1: New applications for housing loans
An application should be reported as received when sufficient information and/or relevant documentation has been submitted to allow the application to be initially assessed. After the application has been initially assessed, there may still be further information or documentation that is required from the borrower before a decision has been made to provide finance. Where a borrower submits a single loan application that covers different purposes (e.g. a loan for housing purposes and a loan for personal purposes), use the predominant purpose principle to determine if the loan application should be reported as for housing purposes. Some institutions may record multiple applications for the same borrower, where two different, alternative loans are applied for or where the features of the original application are varied. Alternatively, some institutions may record only one application. Either method is acceptable provided the ADI or RFC advises APRA by email the method they are using to report applications. If this method changes over time, APRA should also be advised by email at the time when the change occurs.
2.16.7 Item 2: New borrower-accepted commitments for housing loans – by
location and purpose

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 141 Purpose sub-class See Section 1.8 Identifying (predominant) purpose class and sub-class in general guidance. Construction Lending to households to purchase an off-the-plan dwelling should be reported as a purchase of a newly erected dwelling, not as a construction loan. Example 1: Off-the-plan purchase Consider a household seeking finance to purchase an off-the-plan dwelling. Upon completion of construction, the household may apply for finance from the ADI or RFC. The resulting borrower-accepted commitment would be recorded as for the purchase of a newly erected dwelling (not for construction). If the household had previously received a loan for the deposit, the additional finance for purchase should still be reported as finance for a newly erected dwelling, not as an internal refinance. Alterations, additions and repairs Alterations, additions and repairs should only be separately reported where this purpose subclass represents the predominant purpose of the finance. It is likely that most finance for alterations, additions and repairs would instead qualify as an internal or external refinance. Example 2: Top-up for alterations, additions and repairs on a different residential property If new finance for alterations, additions and repairs relating to a different property exceeds the balance of an existing housing loan relating to the original property then the combined amount should be reported as a new housing commitment (with the purpose sub-class as alterations, additions and repairs) and the location should be determined by the location of the new property, not the existing one. Foreign-sourced income A commitment should be reported as being serviced by foreign-sourced income where any of the ‘allowable income’ taken into account by the reporting institution to assess the serviceability of that commitment qualifies as foreign-sourced income. This applies whether the commitment was made inside or outside the reporting entity’s standard serviceability assessment policy. The share of income that qualifies as foreign-sourced income is irrelevant. If a borrower declares some foreign-sourced income, such as income streams derived from governments overseas or non-government entities incorporated overseas, but this income is not taken into account in the serviceability assessment, then the commitment should not be reported as being serviced by foreign-sourced income. Please note, whether a commitment qualifies as including foreign-sourced income for EFS reporting purposes is not intended to impact lending to these customers.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 142
2.16.8 Item 3: New borrower-accepted commitments for housing loans to
resident first-home buyers – by location
Identification of first-home buyers should not rely solely on whether they are applying for a ‘First Home Owner Grant’. A first-home buyer can only be a first-home buyer once. If a loan applicant previously bought a dwelling for the first time for investment purposes, but are now applying for loan for the purposes of owner-occupied housing for the first time, they would not be classified as a firsthome buyer. If there is more than one party to the loan, a loan is classified as being to a first-home buyer if none of the borrowing parties to the commitment have previously owned a dwelling. Note that it is not necessary for the individual status of each party to the loan to be recorded, only the final determination (i.e. whether the loan qualifies as first-home buyer).
2.16.9 Item 5: Fixed-term housing loans to residents – stocks and flows
reconciliation
Loans that were classified as written off as at the end of the previous reporting period should be excluded from the opening balance of credit outstanding. Loans that are classed as written off as at the end of the current reporting period should be excluded from the closing balance of credit outstanding. Where loans are written off or recovered during the month, report the value of the loan written of or recovered in the item designated for this purpose. An adjustment should also be made in the balancing item to offset the value of any flow items associated with these loans. Drawdowns Report each draw down stage on construction loans as a draw down for a new loan (Item 5.2). Interest charged ‘Item 5.6: 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 5.6 of ARF 743.0. This is distinct from interest accrued on an accounting basis. Interest that has accrued but not yet been charged is recorded in ‘Item 10.1: Interest receivable’ on ARF 720.0A/B and is not included in Item 5 of ARF 743.0. Scheduled repayments The scheduled repayment may exceed the minimum required repayment possible under the loan conditions. For example, following an interest rate reduction, the customer may need to contact their lender in order to have the interest rate on their loan reduced to the lowest possible rate – otherwise, their scheduled repayment would remain unchanged. If the scheduled repayment is automatically adjusted following an interest rate reduction, then this lower amount should be considered the scheduled repayment from the date at which it takes effect.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 143 Scheduled repayments should be reported in Item 5.7 regardless of whether these payments were received from the borrower or 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 drawn down from the redraw facility in item 5.3. Balancing item If the borrower was previously non-resident and became a resident during the month report in ‘Item 5.13 Other changes to the balance of loan credit outstanding between reporting periods’.
2.16.10 Item 7: Fixed-term housing loans outstanding to residents – future
scheduled repayments
Calculating the number of scheduled repayments To scale the stock of accumulated excess repayments and balances in associated redraw and offset accounts by the scheduled monthly repayment, the following steps may be taken:
1. convert the scheduled repayment to a monthly frequency if required, using simple
multiplication or division.
2. divide the stock of accumulated excess repayments and balances in associated redraw
facilities and offset accounts by the (implied) scheduled monthly repayment. If the number of scheduled repayments does not equal a whole number, it should be rounded to the nearest whole number. Example 1 Consider the situation where a customer has a housing loan with:

Credit outstanding of $500,000;
Offset account balance of $5,000;
Available redraw facility balance of $10,000;
Other excess repayments that can be used to meet future schedule payments of $2,500;
and
Scheduled monthly repayments of $625 per week.
1. Calculating funds available to meet future repayments:
Value of offset balances, available redraw balances and other excess repayments (item 6.6) = closing balance of offset accounts (Item 6.1) + available redraw balances (Item 6.3) + stock of other excess repayments that can be used to meet future scheduled payments (Item 6.5). Value of offset balances, available redraw balances and other excess repayments = $5,000 + $10,000 + $2,500 Value of offset balances, available redraw balances and other excess repayments = $17,500

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 144
2. Converting weekly repayments into monthly repayments:
Scheduled monthly repayment = scheduled weekly repayment x 4 Scheduled monthly repayments = $625 x 4 Scheduled monthly repayment = $2,500

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 145
3. Calculating the number of future scheduled repayments
Future scheduled repayments (Item 7) = funds available to meet future repayments (step 1, or Item 6.6) / Scheduled monthly repayment (step 2) Future scheduled repayments = $17,500 / $2,500 Future scheduled repayments = 7 Treatment of interest-only loans 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 for 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). In such cases, the next 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 facilities 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. Treatment of split facilities See Section 1.14 Identifying facilities for general guidance. Where a loan consists of a mix of interest-only and amortising components, split the scheduled repayment and stock of accumulated excess repayments and balances in associated redraw facilities and offset accounts and perform and report the calculation separately for both components of the facility.
2.16.11 Reconciliation between ARF 743.0 and ARF 720.2A/B
Item 6.1 Closing balance of offset accounts
The sum of the closing balance of offset accounts for fixed-term owner-occupied housing loans and fixed-term investment housing loans reported in Item 6.1 (columns 1 and 2) on ARF 743.0 should be less than or equal to the closing balance of housing loan offset accounts reported in item 1.1.1.1 (column 7/column 4) for all housing loans on ARF 720.2A/B. The values may not be always be equal because the closing balance of offset accounts for fixedterm housing loans reported on ARF 743.0 excludes offset accounts linked to revolving credit housing loans and to housing loans that are 90 days or more past-due or impaired. Reconciliation between ARF 743.0 and ARF 720.2A/B once offset accounts attached to past due, impaired and revolving housing loans are accounted for ARF 743.0 ARF 720.2A/B Item 6.1: Closing balance of offset accounts – Column 1: Owner-occupied For ARF 720.2A:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 146 plus Item 6.1: Closing balance of offset accounts – Column 2: Investment Plus the closing balance of offset accounts linked to revolving credit housing loans and housing loans that are 90 days or more past-due or impaired. Item 1.1.1.1: Total deposits: resident deposits:
households: of which: housing loan offset accounts – column 7: Total deposits For ARF 720.2B:
Item 1.1.1.1: Total deposits: resident deposits:
households: of which: housing loan offset accounts – column 4: Total deposits
2.17 ARF 744.0A/B: ABS/RBA Housing Credit Stocks, Flows and
Interest Rates (Standard) / (Reduced)
2.17.1 General guidance
Applicable items of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.9 Residential property purpose - owner-occupied and investment housing;
1.12 Types of financial assets and liabilities;
1.14 Identifying facilities;
1.15 Interest rates; and
1.16 Treatment of fixed interest rate products once the fixed period ends.
2.17.2 Housing finance funded during month
Generally include:
secured and unsecured finance;
finance to your employees;
bridging finance for housing;
external refinancing; and
internal refinancing.
Generally exclude:
finance for personal purposes. This should be reported on ARF 746.0A/B;
finance for business purposes. This should be reported on ARF 742.0A/B; and
revolving credit facilities that are secured by residential property where the predominant
purpose at application is personal or business. These should be reported on ARF746.0 A/B or ARF 742.0A/B as appropriate.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 147
2.17.3 Split facilities (number)
See Section 1.4 Identifying facilities for general guidance.
Where a facility may involve both a mix of interest rate types (i.e. fixed interest rate and variable interest rate) and a mix of repayment types (e.g. interest-only and amortising), apportion value across the relevant line items. However, when reporting the number of facilities broken down by repayment type, report each facility only once according to the predominant repayment type. Similarly, when reporting the number of facilities broken down by interest rate type, report each facility only once according to the predominant interest rate type.
2.17.4 Funded
Internal refinances
Where an internal refinance occurs, the total value of the refinance should be reported as ‘funded in the month’, not just the amount by which the credit limit was increased. This is to reflect the new interest rate that applies to the entirety of the funds as contributing to the average marginal rate on new lending. Construction loans Where construction loans are funded and drawn down in stages, report only the value funded in the month (not the total value of the commitment).
2.17.5 Item 1: Housing loans outstanding – by type
Value net of offset account balances
For loans with attached offset accounts, report the value of the loan that would attract interest. For example:

for an offset account that fully offsets interest payments (see Example 1), record the value
of the loan less the offset account balance up to the value of credit outstanding (i.e. value reported should be greater than or equal to zero);
for an offset account that only partially offsets interest payments, record the value of the
loan less the portion of the offset account balance that is equivalent to a fully offset balance (see Example 2) up to the value of credit outstanding (i.e. value reported should be greater than or equal to zero). Example 1: Full offset For a loan with $800 000 of credit outstanding, 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
Example 2: Partial offset
For a loan with $800 000 of credit outstanding, with $200 000 in a linked offset account that is partially offset against the outstanding balance of the loan for the purposes of calculating

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 148 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% 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

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 149
2.17.6 Reconciliation between ARF 744.0A/B and ARF 720.1A/B
Item 1.1.1 Total owner-occupied housing credit outstanding to residents – of which:
Revolving credit
The value of credit outstanding for revolving credit facilities for the purposes of owner-occupied housing reported in Item 1.1.1 (column 4) on ARF 744.0A/B should be greater than or equal to the value of credit outstanding reported for owner-occupied revolving credit facilities that are secured by residential property in Item 2.1.2.1.1.1 (column 1) on ARF 720.1A/B. The values may not be always be equal because revolving credit facilities for the purposes of owner-occupied housing loans reported on ARF 744.0A/B may be unsecured or secured by collateral other than residential property. Item 1.2.1 Total investment housing credit outstanding to residents – of which: Revolving credit The value of credit outstanding for revolving credit facilities for the purposes of investment housing reported in item 1.2.1 (column 4) on ARF 744.0A/B should be greater than or equal to the value of credit outstanding reported for investment revolving credit facilities secured by residential property in Item 2.1.2.1.1.1 (column 2) on ARF 720.1A/B. The values may not be always be equal because revolving credit facilities for the purposes of investment housing loans reported on ARF 744.0A/B may be unsecured or secured by collateral other than residential property. Reconciliation between ARF 744.0A/B and ARF 720.1A/B once unsecured housing loans or housing loans secured by collateral other than residential property are taken into account ARF 744.0A/B ARF 720.1A/B Item 1.1.1: Total owner-occupied housing credit outstanding to residents: of which: revolving credit – Column 4: Value Item 2.1.2.1.1.1: Total loans and finance leases to resident households: by security type: of which: secured by residential property: of which:
revolving credit – Column 1: Owner-occupied housing Plus revolving credit for owner-occupied housing that is unsecured or secured by collateral other than residential property. Item 1.2.1: Total investment housing credit outstanding to residents: of which: revolving credit – Column 4: Value Item 2.1.2.1.1.1: Total loans and finance leases to resident households: by security type: of which: secured by residential property: of which:
revolving credit – Column 2: Investment housing Plus revolving credit for investment housing that is unsecured or secured by collateral other than residential property.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 150
2.18 ARF 745.0: ABS/RBA Personal Finance
2.18.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.10 Secured by residential property;
1.12 Types of financial assets and liabilities; and
1.13 Borrower-accepted commitments.
2.18.2 Borrower-accepted commitments for personal finance
Generally include:
secured and unsecured finance;
finance to your employees;
revolving credit facilities that are secured by residential property where the predominant
purpose at application is personal;
external refinancing; and
internal refinancing.
Exclude:
finance for housing purposes. This should be reported on ARF 743.0;
finance for business purposes. This should be reported on ARF 741.0; and
commitments for revolving credit facilities that are secured by residential property where
the predominant purpose at application is housing or business. These should be reported on ARF 743.0 or ARF 741.0 as appropriate.
2.18.3 Credit limits
Charge cards
See the specific guidance for ARF 741.0.
Margin lending facilities
See guidance provided for Item 3 of ARF 723.0.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 151
2.19 ARF 746.0A/B: ABS/RBA Personal Credit Stocks, Flows and
Interest Rates (Standard) / (Reduced)
2.19.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.8 Identifying (predominant) purpose class and sub-class;
1.10 Secured by residential property;
1.12 Types of financial assets and liabilities;
1.14 Identifying facilities;
1.15 Interest rates; and
1.16 Treatment of fixed interest rate products once the fixed period ends.
2.19.2 Personal finance funded during month
Generally include:
secured and unsecured finance;
finance to your employees;
revolving credit facilities that are secured by residential property where the predominant
purpose at application is personal;
external refinancing; and
internal refinancing.
Exclude:
finance for housing purposes. This should be reported on ARF 744.0A/B;
finance for business purposes. This should be reported on ARF 742.0A/B; and
revolving credit facilities that are secured by residential property where the predominant
purpose at application is housing or business. These should be reported on ARF 744.0A/B or ARF 742.0A/B.
2.19.3 Credit card interest rates
See section on interest rates in general guidance.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 152
2.20 ARF 747.0A/B: ABS/RBA Deposit Stocks, Flows and Interest
Rates (Standard) / (Reduced)
2.20.1 General guidance
Applicable sections of general guidance include:

1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.5 Standard Economic Sector Classifications of Australia;
1.12 Types of financial assets and liabilities;
1.15 Interest rates; and
1.18 Funds held on behalf of / in trust for clients.
2.20.2 Fixed-term deposits
Any deposit that provides a fixed date on which the funds are repayable should be treated as a fixed-term deposit. If the fixed-term deposit is breakable – for example, the funds may be withdrawn prior to the fixed date after providing a notice of withdrawal (with or without a delay in receiving the funds) – the deposit should be treated as a fixed-term deposit until notice of withdrawal is provided. Once a notice of withdrawal is provided:
if there is a fixed date in the future on which the funds may be withdrawn (i.e. in 30 days)
then:
o the deposit should still be classified as a fixed-term deposit; o the residual term should be based on the new fixed date (e.g. 30 days’ time); and o the deposit should not be reported as a new fixed-term deposit (on ARF 747.0A/B).
if there is no fixed date in the future on which the funds may be withdrawn – i.e. they are
available immediately or within a few days:
o the deposit should no longer be classified as a fixed-term deposit (it should be classified as a transaction deposit or other non-transaction deposit as appropriate).
2.20.3 Rolling notice of withdrawal accounts
Deposit products without a fixed maturity date that offer redemption following a notice of withdrawal period (typically 30 days) should be classified as other non-transaction deposit accounts until notice of withdrawal is provided. Once notice of withdrawal is given:
if there is a fixed date in the future on which the funds may be withdrawn (i.e. in 30 days)
then:
o the deposit should be classified as a fixed term deposit; the residual term should be based on the new fixed date (e.g. 30 days’ time); and o the deposit should be reported as a new fixed-term deposit (on ARF 747.0A/B).

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 153

if there is no fixed date in the future on which the funds may be withdrawn – i.e. they are
available immediately or within a few days:
o the deposit should be classified as transaction deposit or other non-transaction deposit as appropriate.
2.20.4 Interest-bearing deposits
Deposit products with a contractual rate that references a benchmark market rate are considered interest-bearing. This applies even if the referenced market rate falls to or below 0 per cent for a period of time. A deposit should only be reported as non-interest-bearing if the contractual rate is specified to be zero.
2.21 ARF 748.0A/B: ABS/RBA Wholesale Funding Stocks, Flows
and Interest Rates (Standard) / (Reduced)
2.21.1 General guidance
Applicable items of general guidance include:
1.1 General guide to reporting by counterparty;
1.2 Residency;
1.3 Related parties;
1.4 Domestic books consolidation;
1.8 Identifying (predominant) purpose class and sub-class;
1.12 Types of financial assets and liabilities;
1.15 Interest rates;
1.16 Treatment of fixed interest rate products once the fixed period ends; and
1.17 Residual maturity.
2.21.2 Interest rates on debt securities
Contractual interest rates are to be reported as an outright rate rather than a spread. Where the security is issued in a foreign currency, the interest rate should not be converted back to an implied AUD rate. As for other interest rates, the interest rate provided should be on an annualised basis. Zero-coupon securities should be reported as fixed interest rate. Do not exclude interest rates that are less than or equal to zero from reporting; in particular, include them when calculating a weighted average interest rate. Examples A bank issues a floating interest rate debt security in Australia at a spread over 3-month BBSW.
The interest rate reported would be the end-of-period value of 3-month BBSW plus the
spread (annualised if required).

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 154 A bank issues a fixed interest rate debt security in Australia with a semi-annual coupon payment of 2.5 per cent.

The interest rate reported would be the 2.5 per cent semi-annual rate, annualised.
A bank issues a discount security in Australia, with an implied (annualised) yield of 2 per cent.
The interest rate reported would be 2 per cent.
A bank issues a floating interest rate debt security in the US at a spread over 1-month LIBOR.
The interest rate reported would be the end-of-period value of 1-month LIBOR plus the
spread (annualised if required).
A bank issued a fixed interest rate debt security in the UK with a semi-annual coupon payment of 4 per cent.
The interest rate reported would be the 4 per cent semi-annual rate, annualised.
2.21.3 Reporting term or tenor in a direct entry field
The reporting of term or tenor should be based on the loan or instrument issued, not the underlying assets. In most cases, institutions are required to identify the term or tenor of a loan or instrument as belonging to one of several categories or buckets. In some cases the weighted average term or tenor is requested as a direct entry field. In these cases, the instructions direct institutions to express the term or tenor as the number of days (from origination for the original term or tenor, and from the end of the reporting period for residual maturity) divided by 365 days. This standardises the term to one year, for ease of calculation and reporting. Example A 90-day term deposit (original maturity) would be expressed as 90 days/365 days = 0.25 years
2.21.4 Calculating a weighted average term
The weighted average term is the weighted sum of the individual terms (original or residual, as directed) where the weights used are the corresponding balances expressed as a share of the total balance for that category. Weighted average term may be calculated using the formula below. 𝑤𝑤 ℎ𝑡𝑡 𝑡𝑡 𝑎𝑎𝑎𝑎 𝑎𝑎𝑎𝑎 𝑡𝑡 𝑡𝑡 = �𝑡𝑡 𝑡𝑡𝑖𝑖 × 𝑤𝑤 ℎ𝑡𝑡𝑖𝑖 𝑖𝑖 Where weighti = the balance for item i divided by the sum of balances for all items i.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 155 Example A bank’s short-term debt securities on issue are as follows:
Example: short-term debt securities on issue
Short-term debt security Outstanding balance Term 1 $350m 0.25 2 $600m 0.17 3 $550m 0.38 The weighted average term would be calculated as:
0.25 years × $350m/$1500m + 0.17 years × $600m/$1500m + 0.38 years × $550m/$1500m =
0.27 years
2.21.5 Asset-backed securities
Report the value and interest rate based on the asset-backed securities issued and not the underlying assets. The tenor of ‘Item 1.4: Memo item: Asset-backed securities’ and ‘Item 2.4:
Memo item: Asset-backed securities’ should be calculated using the weighted average life of the securities as estimated at issuance, based on internal assumptions, rather than the contractual maturity of either the asset-backed securities or the underlying assets. Covered bonds that are asset-backed should not be reported in ‘Item 1.4: Memo item: Assetbacked securities’ or ‘Item 2.4: Memo item: Asset-backed securities’ of ARF 748.0A/B. Assetbacked securities and covered bonds are defined distinctly and treated separately in the EFS collection (see ARS 701.0).
2.21.6 Bills of exchange
Bills of exchange should be treated as short-term debt securities.
For other debt securities report the interest rate on a bill of exchange as the annualised yield. Do not report the discount rate.
2.21.7 Item 3: Benchmark rate on senior unsecured debt
The guiding principle in reporting Item 3 is to report the ADI or RFC’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 institution or other comparable institutions, but it may also be interpolated or based on secondary market spreads or estimated in some other way where recent comparable issuance is not available. The reported rates should incorporate any relevant costs (such as

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 156 hedging costs and issuance fees) that are included in the internal calculation of the entity’s benchmark rate reference curve. The unsecured funding benchmark rate is not to be expressed as a spread. That is, even if the reporting institution would typically consider that 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. The unsecured funding benchmark rate for a foreign currency should be reported on an AUD (or AUD equivalent) basis. Adjustments for relevant hedging costs (such as a cross-currency basis) should be included in the figure reported for the USD and EUR rates.
2.21.8 Treatment of hybrid securities treated as liabilities
The tenor of hybrid securities should be calculated using the period between issuance and the next call date, rather than the contractual maturity date, for the purpose of the relevant items on ARF 748.0. All hybrid securities treated as liabilities should be classified 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. This means that no hybrid securities treated as liabilities should be reported in ‘Item 1.1: Outstanding debt securities: short-term’ or ‘Item 2.1: New issuance of debt securities:
short-term’ on ARF 748.0, or in column 1 of ‘Item 16: Total borrowings’ on ARF 720.0. The residual maturity of hybrid securities treated as liabilities should be calculated using the length of time from the reporting period until the next call date, rather than the contractual maturity date. That is, hybrid securities should be reported in the ‘Matures in 12 months or less’ item codes on ARF 748.0 when the next call date is within 12 months of the reporting period, irrespective of whether the original maturity is less than or equal to one year. Hybrid securities treated as liabilities should be reported as either fixed interest rate or variable interest rate depending on the interest rate which applies at the reporting date. Hybrid securities treated as liabilities with a fixed interest rate should be reported as such until the interest rate changes to a variable interest rate.
2.21.9 Item 4: Other interest-bearing liabilities outstanding
As a guide, include any interest-bearing liabilities contained in Item 19 reported on ARF 720.0A/B that are not already reported in this form. Do not include any interest-bearing liabilities due to related parties. The value of funds reported in Item 4 should be reported on an AUD or AUD-equivalent basis.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 157
2.21.10 Item 5: Other new interest-bearing liabilities
As a guide, include any interest-bearing liabilities reported in Item 4 that did not exist prior to the reporting period. The value of funds reported in Item 5 should be reported on an AUD or AUD-equivalent basis.
2.21.11 Item 6: Hedging
The interest income and expense associated with the hedging of banking book assets and liabilities relates specifically to payment streams on derivatives used to hedge banking book assets and/or liabilities. These amounts should reflect the payables/receivables in the month, irrespective of whether these were actually paid or received. Foreign currency interest payments/receipts should be converted to Australian dollars at the end-of-period spot rate. Where an ADI or RFC is unable to separately report interest income and expense items, they may report the net interest as either an income or an expense item, as applicable.
2.21.12 Reconciliation between ARF 748.0A and ARF 730.0
Item 6.1 Total derivatives hedging banking book assets and liabilities Interest income earned and interest expense incurred on total derivatives hedging banking book assets and liabilities reported on ARF 748.0A should be equivalent to the interest income earned and interest expense incurred on derivative hedging banking book assets and liabilities reported on ARF 730.0, apart from differences in the reporting periods. ARF 748.0A is reported monthly while ARF 730.0 is reported quarterly, thus the sum of the monthly values reported on ARF 748.0A during the quarter, should equal the values reported on ARF 730.0 for the same quarter. See the table below for the specific items that should be equivalent, if it were not for the different reporting periods. Reconciliation between ARF 748.0A and ARF 730.0 once differences in reporting periods are taken into account ARF 748.0A ARF 730.0 Item 6.1: Total derivatives hedging banking book assets and liabilities – Column 2: Interest income Summed over each month in the calendar quarter corresponding to the reporting period for ARF 730.0. Item 1.1.5: Total interest-earning assets:
Derivatives - banking book hedging – Column 1:
Interest income
Item 6.1: Total derivatives hedging banking book assets and liabilities – Column 3: Interest expense Summed over each month in the calendar quarter corresponding to the reporting period for ARF 730.0. Item 4.1.5: Total interest-bearing liabilities:
Derivatives - banking book hedging – Column 1:
Interest expense

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 158 Glossary Terms that are defined in ARS 701.0 or in this guidance appear in bold italics. ABS Australian Bureau of Statistics established under the Australian Bureau of Statistics Act 1975. APRA Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998. EFS collection Comprises the EFS reporting standards and data collected under the EFS reporting standards.

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY 159

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