APRA issued a letter to all regulated entities about the Economic and Financial Statistics (EFS) guidance, which applies to loans and finance leases that have been granted relief, such as a repayment holiday or deferral, as part of a COVID-19 support package. The key topics covered in this guidance on reporting issues include loans and finance leases past due and impaired, provisions, interest rates, and reconciliation of stocks and flows. APRA also updated the frequently asked questions (FAQs) related to EFS.
Loans and Finance Leases Past Due and Impaired
In line with the recent guidance from APRA, loans that have been granted relief as part of a COVID-19 support package should be excluded from the reporting of loans and finance leases past due and impaired. Similarly, these loans need not be regarded as restructured and should not be reported as internal refinancing commitments.
Reporting entities must continue to provision for loans and finance leases that have been granted relief under the relevant accounting standards. The FAQs on EFS set out how entities should report expected credit loss provisions in the EFS collection (FAQ No. 97).
Where a loan has been granted relief as part of a COVID-19 support package, interest charged to a customer (but not received) should be added to the loan balance and included in credit outstanding. Capitalization will depend on the terms of the contract. Interest charged should be reported at item 7.6 on ARF 742.0A/B and item 5.6 on ARF 743.0. For the purposes of the EFS collection, the interest rate is the contractual interest rate to be paid by the borrower. Where a loan has been granted relief as part of a COVID-19 support package, the contractual interest rate for the loan should be included in all weighted-average interest rate calculations. Loans temporarily not being charged interest should be excluded from all weighted average interest rate calculations.
Stocks and Flows Reconciliation
Where a loan has been granted relief as part of a COVID-19 support package, institutions are required to report scheduled repayments regardless of whether or not a payment is received. In case of missed repayments or deferred repayments, report the amount by which scheduled repayments exceed actual repayments in repayment deficiencies at item 7.10 on Reporting Form ARF 742.0A/B Business Credit Stocks, Flows and Interest Rates (Standard/Reduced) or item 5.10 on Reporting Form ARF 743.0 Housing Finance. Also, where a borrower’s available redraw is used to cover a missed repayment or deferred repayment, this should not be reported as a repayment deficiency. Instead, report the amount that is drawn from available redraw balances to cover the repayment in other draw-downs at item 7.3 on ARF 742.0A/B or item 5.3 on ARF 743.0. A corresponding decrease in available redraw should be reported at item 6.3 on ARF 743.0.
Keywords: Asia Pacific, Australia, Banking, Securities, COVID-19, Statistics, EFS, FAQ, ECL, Credit Risk, Loan Moratorium, Reporting, APRA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleRBNZ Announces Initiatives in Response to COVID-19 Pandemic
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The EBA Single Rulebook question and answer (Q&A) tool updates for this month include answers to ten questions.