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Unpacking APRA’s SME Guarantee Scheme data collection (ARS 920.0)

The Australian Government’s response to the coronavirus pandemic has been swift and wide sweeping. Recent policy announcements are targeted at supporting households and domestic businesses address the significant economic impact of the virus. Current forward estimates value the stimulus at $320B, with further announcements likely to follow once all Australians can go back to work.

Behind the scenes the Australian Government has been working closely with the Council of Financial Regulators to promote financial system stability and resilience. Most notably was the coordinated response from the RBA, Treasury and APRA to the $40B SME Guarantee Scheme, which allows domestic banks to take advantage of low cost funding provided by the RBA’s new term funding facilities.

APRA has been tasked with the SME Guarantee Scheme data collection. The collection will allow Treasury to more closely monitor lending to SME businesses. APRA will also use the data for prudential regulatory purposes. The new collection fits into a myriad of recent announcements by APRA which are designed to allow banks more time and resource to dedicate towards maintaining their operations and supporting customers.

Unpacking the SME Guarantee Scheme

The SME Guarantee Scheme came into effect on 8 April 2020 and is designed to enhance lenders’ willingness and ability to provide credit to SMEs. The flow funds are intended to cushion the economic effect of the coronavirus pandemic on domestic businesses. Unpacking the lending criteria in the SME Guarantee Scheme is important in helping understand the design of APRA’s new reporting standard and data collection.

The Australian Government will guarantee $40B worth of loans under the SME Guarantee Scheme. SMEs with an annual turnover of up to $50M can access loans of up to $250K per person for business purposes. The Australian Government will provide security to lenders by guaranteeing up to 50% of the risk associated with the loans. Borrowers are required to repay the principal within 3 years.

Similar to the Financial Claims Scheme, APRA will act as a data collection and exchange agency to facilitate SME Guarantee Scheme monitoring activities. Currently APRA does not collect lending data at the granularity or frequency required to support monitoring activities under their existing suite of reporting standards. This led to the development of ARS 920.0 Australian Government Small and Medium Enterprise (SME) Guarantee Scheme, which came into effect on 17 April 2020 for regulated ADIs and RFCs.

What is collected under ARS 920.0?

The new reporting standard is built on definitions introduced in the Economic and Financial Statistics (EFS) collection. Put another way, ARS 920.0 outlines new loan portfolio reporting requirements which extend on data treatments defined in ARS 701.0 ABS/RBA Definition for the EFS collection. Regulated ADIs and RFCs are required to submit data on SME Guarantee Scheme facilities at a portfolio and loan level to APRA.

Reporting at a loan level to APRA is a new requirement and brings a number of privacy considerations. Borrower name, ABN and guarantor names are all required under ARS 920.0 for SME Guarantee Scheme backed loans. APRA outlines data risks associated with sensitive and personally identifiable information in CPG 235 – Managing Data Risk. Data life cycle management guidance, as well as desensitisation and end-user computing controls, from CPG 235 applies to data collected under ARS 920.0.

ADIs and RFCs are required to report two forms under ARS 920.0. Data in these forms are subject to processes and controls developed by the reporting entities to assure the completeness and reliability of information. While APRA does not explicitly mention APS 310 or RRS 710.0 requirements, Treasury did outline audit requirements for lenders’ scheme data. The first ARS 920.0 collection is due on 1 May 2020 and is to be submitted via D2A.

Reporting treatments for ARF 920.0

ARF 920.0 collects entities’ SME Guarantee Scheme loans on a domestic book reporting basis. It is broken into two sections: portfolio to date and portfolio as at the end of the current period. Items reported in the first section should be treated as stock, entities need to report all scheme-backed loans from the commencement of the SME Guarantee Scheme to reporting period date. In contrast, items in section 2 should only be reported if they are active at the end of the reporting period.