APRA proposes changes to the EFS collection
APRA is currently consulting on changes to standards and guidance material for the Economic and Financial Statistics (EFS) data collection. The consultation, which is open to written submissions until Friday, 25 September comes at a time when ADIs and RFCs are under significant operational pressure to process loan deferrals and embed reporting processes for the new SME Guarantee Scheme and COVID-19 collections.
In a letter to industry APRA presented the changes as a formalisation of EFS FAQs and deferred collection dates. Other amendments are to ensure sufficient coverage of ADIs and RFCs in publications. While these changes appear minor in scope, they can pose significant implications to ADIs and RFCs regulatory reporting programs. Entities currently undertaking reporting uplifts will be faced with additional resource planning considerations.
In this article we summarise some of the key proposed changes and unpack what it means for finance and regulatory reporting teams. For more details on other recent APRA reporting announcements – like changes to revaluation requirements for residential real estate – visit our insights section on the RegCentric website.
Recommencing regulatory consultations
In August 2020, APRA made the decision to recommence public consultations on select policy reforms. Shortly after APRA published its revised 2020-24 Corporate Plan, which remains largely unchanged with the exception of additional COVID-19 risk and supervision considerations. Added flexibility for the timing of planned deliverables in the later years of the Corporate Plan may offer some respite to ADIs’ regulatory teams.
APRA’s announcement to amend EFS standards and guidance material by consultation is another sign that the regulator is transitioning back into its BAU operational model. By comparison, other recent regulatory reporting changes have been expedited through direct engagement with ADIs and publicly announced through industry letters. This was part of APRA’s approach to offer reporting relief to ADIs and RFCs whilst also delivering COVID-19 related reporting requirements.
Regulatory reporting teams should also be aware of the open consultation on ARS 210.0 (Liquidity) which closes on Saturday, 17 October. This consultation aims to formalise additional reporting requirements like funding maturities and minimum liquidity holdings currently reported in ARF 210.5 (Daily Liquidity Report). This is a sign that APRA is targeting data quality after the regulator made swift alterations to ARF 210.5 and requested 136 ADIs to submit it either weekly or bi-weekly from 1 April 2020.
Summary of key EFS proposed changes
The EFS collection has only been in operation for 18 months, with phase 1 commencing in March 2019 and phases 2 and 3 in July and September 2019 respectively. During this time APRA has maintained a FAQ to assist entities with reporting treatments. This is because the EFS collection requires a greater breadth and depth of data than previously reported in the Domestic Books collection.
The health and economic uncertainty surrounding the COVID-19 pandemic led APRA to extend EFS parallel reporting periods and delay the implementation of certain phase 3 standards. This was to promote operational resilience in entities and allow more resource to be directed towards customer needs. It was also an acknowledgement of the additional reporting burden placed on entities following the rapid introduction of the new SME Guarantee Scheme and COVID-19 collections.
As APRA transitions back to its BAU operational model a review of the proposed EFS changes suggest data quality, consistency of reporting across entities and internal controls are firmly on the regulators radar. The table below summaries key changes by EFS standard and guidance.
The formalisation of quarterly reporting due dates to 35 calendar days across relevant EFS standards will likely provide more time for internal review and sign-off within regulatory reporting teams. Another sweeping change is the introduction of explicit Category A entity listings rather than using sector categories. This proposed change will ensure that the agencies have adequate coverage of ADIs and RFCs in publications.
The deferred commencement dates for ARS 722.0 (ABS/RBA Derivatives) and ARS 730.1 (ABS/RBA Fees Charged) is another formality which will provide some relief to regulatory reporting teams. This means ARF 722.0 will commence for the quarter ending March 2021. The annual ARF 730.1 will commence for the year ending June 2021 on a 4 calendar month reporting schedule, which still presents challenges for entities that do not balance on the June financial year end.
A common theme in the ARS 740 series was the proposed tightening of definitions for problem reporting item borrower-accepted commitments. A notable reduction in the housing credit reporting threshold for ARF 743.0 will increase coverage in APRA publications. The proposed reclassification of Impaired to Past due and not well-secured in ARS 720.1 (ABS/RBA Loans and Financial Leases) will also cause reporting burden. This is because the underlying data is used for the compilation and reconciliation of numerous non-EFS ADI reporting forms.
Strategic regulatory reporting uplifts
The EFS consultation comes at a time of increased uncertainty around credit reporting requirements due to the unprecedented effects of the COVID-19 pandemic. The majority of changes are scheduled to come into effect for the June 2021 reporting period. This coincides with the winding back of a number of Australian Government stimulus packages – such as JobKeeper (ends in March 2021) and the SME Guarantee Scheme (ends in June 2021) – which presents further credit risk considerations for ADIs and RFCs.
Amendments to definitions in RPG 701.0 will require finance and regulatory reporting teams to revisit EFS solution designs. Proposed changes to EFS reporting forms in terms of non-performing exposures will require loan back book exercises. Other proposed new reporting items, albeit not many, will require ADIs and RFCs to introduce changes to their EFS reporting solutions.
Finance and regulatory reporting teams will need to be strategic in their approach to EFS uplifts to ensure they maximise their return on investment in APRA reporting solutions. This is evident as the newly developed standards for the SME Guarantee Scheme and COVID-19 collections borrowed heavily from EFS reporting treatments. Any mid-to-long term plans should also take into account APS 220 (Credit Risk Management) changes and Basel III capital reporting requirements which are looming on the 2023 horizon.
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