Consolidated Exposures – Ultimate Risk Basis

In March 2003, banks and selected Registered Financial Corporations (RFCs) began reporting their international assets, liabilities and country exposures to APRA in ARF/RRF 231 International Exposures. This return is the basis of the data provided by Australia to the Bank for International Settlements (BIS) for its International Banking Statistics (IBS) data collection. APRA ceased the RFC data collection after September 2010.

The IBS data are based on the methodology described in the BIS Guide on International Financial Statistics (see http://www.bis.org/statistics/intfinstatsguide.pdf; Part II International banking statistics). Data reported for Australia, and other countries, on the BIS website are expressed in United States dollars (USD).

Data are recorded on an end-quarter basis.

All banks operating in Australia complete ARF 231. Between March 2003 and September 2010, only those larger RFCs with sizeable overseas assets and/or liabilities completed RRF 231. Bank and RFC positions are reported in Australian dollars (AUD). Non-AUD denominated positions have been converted to AUD using an appropriate end-quarter exchange rate, so changes in reported data between quarters are due not only to changes in positions but also valuation gains or losses due to exchange rate changes.

There are two sets of IBS data: locational data, which are used to gauge the role of banks and financial centres in the intermediation of international capital flows; and consolidated data, which can be used to monitor the country risk exposure of national banking systems. Only consolidated data are reported in this statistical table.

The data in this statistical table summarise the country exposures of Australian-owned banks (and selected RFCs between March 2003 and September 2010). This is a smaller reporting pool than in the series reported in statistical table B11.2, which is based on all banks and RFCs reporting ARF/RRF 231 data. The types of assets included here are consistent with those reported in statistical tables B11.1, B11.2 and B12.1, except that the data are consolidated for Australian-owned reporting entities (i.e. includes the claims on countries of all the offices worldwide of entities with head offices in Australia, but excludes positions between different offices of the same group). Consolidated data only include positions with non-residents (in any currency).

Data are shown for a selected group of countries that account for the bulk of the total. Similar data for other countries are also available in statistical table B13.2.1.

Data presented in this statistical table are ultimate risk claims. Ultimate risk claims cover claims on an immediate counterparty location basis that have been adjusted (via guarantees and other risk transfers) to reflect the location of the ultimate counterparty/risk. Data on immediate risk claims (expressed by the BIS as claims on an immediate borrower basis) are available in complementary statistical tables B13.1 and B13.1.2.

Foreign claims refers to all cross-border claims plus foreign offices’ local claims on residents in both local and foreign currencies. It is equal to the addition of local currency claims of reporting entities’ foreign offices on local residents, and international claims. Data for all these accounts on an immediate risk basis are available in a complementary statistical table B13.1.

International organisations are included in the ‘Public sector’ category in the consolidated data (while in the locational data they can be reported as either bank or non-bank depending on the particular organisation). Official monetary authorities (central banks or similar national and international bodies, such as the BIS) are also included in the public sector in the consolidated data (but are treated as banks in the locational data, B12.1 and B12.2). Publicly-owned entities (other than banks) are classed in the ‘Non-bank private sector’ in the consolidated data (and as non-banks in the locational data).

‘Cross border’ positions are those positions with bank and non-bank counterparties located in a country other than the country of residence of the reporting entity (or its affiliate). This would include, for example, lending by a bank in Australia to a company in France; it would also include loans by that bank’s subsidiary in the UK to a company in France.

‘Local’ claims are those claims of overseas affiliates of the reporting entity on the residents of the countries in which they are located. These are largely in local currencies but include non-local currencies as well.

Derivatives are not included in foreign claims. On- and off-balance sheet derivatives are shown separately as a memo item. ‘Derivatives’ are those on- and off-balance sheet derivative exposures (to the country of ultimate risk) that are in a positive market value position. Negative market values of derivative contracts represent financial liabilities and are therefore excluded from the reporting of financial claims. The data mainly comprise forwards, swaps and options relating to foreign exchange, interest rate, equity, commodity and credit derivative contracts. Credit derivatives, such as credit default swaps and total return swaps, are included in ‘Derivatives’ if they belong to the trading book of a protection-buying reporting entity. Credit derivatives that belong to the banking book are reported as risk transfers by the protection buyer. All credit derivatives are reported as guarantees by the protection seller.

‘Guarantees’ refers to contingent liabilities arising from an irrevocable obligation to pay to a third-party beneficiary when a client fails to perform some contractual obligations. They include: secured, bid and performance bonds; warranties and indemnities; confirmed documentary credits; irrevocable and stand-by letters of credit; acceptances; and endorsements. Guarantees also include the contingent liabilities of the protection seller of credit derivative contracts.

‘Credit commitments’ covers arrangements that irrevocably obligate an institution, at a client’s request, to extend credit in the form of: loans; participation in loans, lease financing receivables, mortgages, overdrafts or other loan substitutes; or commitments to extend credit in the form of the purchase of loans, securities, or other assets (e.g. back-up facilities including those under note issuance and revolving underwriting facilities).


Tags: banks, finance, rba, statistics
Organization: Reserve Bank of Australia