After providing the industry the opportunity to respond to a formal consultation paper issued in January 2017, APRA has released its finalised reporting requirements related to the modernised Economic and Financial Statistics (EFS) in August 2017. Within this article we will provide an overview of the EFS reform to date. This is the first in a series of articles in which we analyze the EFS reform and its impact on the Australian financial institutions in greater detail.
What is EFS?
The Economic and Financial Statistics (EFS) refers to a group of reports collected by APRA from ADIs and RFCs on behalf of the RBA and ABS. RBA and ABS use this data for publication, analysis and policy purposes. The EFS reform is extensive; and comprises of 21 new reporting standards (of which one form (722 Derivatives) is still under discussion).
Why change the reporting standards?
The modernisation of EFS was triggered to improve the relevance of data collected and to improve the accuracy of the reported data. The agencies require (many) additional data points from the industry and wish to bring many of the existing data definitions up-to-date with current (inter)national standards. At the same time the agencies wish to address the data quality issues (and report re-submissions) they have been faced with in recent years by providing clear(er) reporting guidelines, data quality expectations and audit requirements.
Who is impacted?
All Authorised Deposit-taking Institutions (ADIs) and Registered Financial Corporations (RFCs) are impacted by this reform. Generally larger institutions face the largest impact, as many reporting requirements are dependent upon the size of the organization or upon the size a particular portfolio.
What are the deadlines?
The EFS reform is rolled out in 3 phases in 2019 with the first reporting period being March 2019:
Note that existing reports are continued during a (condensed) parallel reporting period.
Which reports are required?
Not all EFS returns are required by all organisations. The reporting requirements depend on:
- the type of organisation: Bank, non-Bank ADI or RFC
- the size of the organisation (measured by Balance Sheet size)
- the size of particular portfolio's within the organisation
For several reports there is a reduced form next to the original form, which has been created to reduce the reporting burden for smaller ADIs. For a detailed overview of the reporting forms click here.
What are the data quality requirements?
Improving data quality lies at the heart of the EFS reform program. The initial proposal on data quality requirements was met with industry wide resistance (most notably due to the related heightened assurance requirements) and the agencies have responded with a principle based practice guide. RPG702.0 - ABSRBA Data Quality for the EFS Collection - sets out a combination of data quality principles (which links back to RPG235 Data Risk Management) and data quality benchmarks.
The data quality benchmarks are a new concept within the Australian regulatory reporting area. Dependent upon the data item type, its priority (as indicated by the agencies) and the size of the reporting entity specific relative and absolute thresholds have been defined. The thresholds range from 0.5% error margin (High priority Stock item for a large institution) to up to 20% error margin (Standard priority flow item for small institution). A full list can be found here.
The Data Quality Practice Guide is under consultation and expected to be finalized in Q4 2017.
Contrary to the initial publication; the agencies announced that the audit requirements for the EFS collection for ADIs will be based solely on the existing audit requirements in APS 310, which will be amended to include Reporting Form ARF 720.0 ABS/RBA Statement of Financial Position, ARF 720.1 ABS/RBA Loans and Finance Leases and ARF 720.2 ABS/RBA Deposits.
As APS 310 does not apply to RFCs, a new Reporting Standard RRS 710 Registered Financial Corporations Audit for the EFS Collection (RRS 710.0) has been released for consultation.
RBA and ABS are looking to collect more, more relevant and more accurate data from the Australian Financial Institutions. Through APRA, they have released their requirements for a modernised EFS collection. All ADIs and RFCs are impacted by these changes and will need to address their data collection and reporting processes accordingly.
All documents issued by APRA related to the EFS reform can be found here.
In our next post we will zoom in to the new data elements which are required in the first phase returns. In the meanwhile please contact us with any questions or feedback.