Table of contents
Frequently asked questions
Financial Claims Scheme and ADIs
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Current27 September 2018
Financial Claims Scheme - frequently asked technical questions for authorised deposit-taking institutions
Last updated: 27 September 2018
These frequently asked technical questions are published for information purposes only. Their content is not legal advice. Users are encouraged to obtain professional advice about the application of any legislation or prudential standard to their particular circumstances. Users should exercise their own skill and care when relying on any material on this page. APRA disclaims any liability for any loss or damage arising out of any use of or reliance on this information.
Account holders
How are business accounts to be treated?
The Financial Claims Scheme (FCS) covers protected accounts held in locally incorporated authorised deposit-taking institutions (ADIs). The definition of protected account is contained in section 5 of the Banking Act 1959 and focusses on the nature of the account, not its purpose – i.e. the definition does not depend on what the account is used for provided it has the legal features of a protected account. Therefore, if a business account product satisfies the definition of a protected account, it is covered under the Financial Claims Scheme.
In terms of the account-holder, each separate account-holder must be identified and account balances held in protected accounts aggregated and apportioned (as necessary). The key issue is the identity of the entity that holds or keeps the account in its name, as indicated by the ADI’s records.
How an account is treated will depend on the entity type and the way in which the account is held. An account-holder is an entity (as defined in section 960-100 of the Income Tax Assessment Act 1997) and means any of the following:
- an individual;
- a body corporate;
- a body politic;
- a partnership;
- any other unincorporated association or body of persons;
- a trust;
- a superannuation fund; and
- an approved deposit fund.
Business accounts held by a sole trader are considered to be held in the name of the individual account-holder and are to be aggregated to the extent practicable with other protected accounts held by that account-holder with the ADI.
Business accounts held in multiple, yet separate, individual’s names are to be treated in the same manner as joint accounts and the account balance split equally between all named account-holders and aggregated with other applicable individual accounts.
All other business accounts, where the account is held in the name of the business entity, are considered to be a unique entity and treated as a separate account-holder. (November 2013)
How is a partnership account to be treated?
This will depend on how the account has been set up and who is/are the named account-holder(s). If the account is held or kept in the name of a partnership, that partnership will be the account-holder. However business accounts held in multiple, separate names are to be treated in the same manner as joint accounts and the account balance split equally between all named account-holders. (November 2013)
How are accounts held by trusts (other than pooled trust accounts) treated?
The account-holder is the person in whose name the account is held or kept (either alone or jointly with another entity).
Where a protected account holds money for a trust, and is not a pooled trust account, the entity that is the account-holder for Financial Claims Scheme purposes will either be the trust or the trustee(s). This will depend on how the account is designated.
Please note, a legal person can have a number of different capacities and in each of those capacities the person is taken to be a different entity. As such, aggregation of protected accounts depends on the capacity in which the account-holder keeps the account. For example, if more than one account is established in the name of a trustee (or trustees) in their capacity as trustee(s) of the same trust, those accounts should be aggregated for the purpose of determining the application of the Financial Claims Scheme limit.
An account-holder is an entity (as defined in section 960-100 of the Income Tax Assessment Act 1997) and means any of the following:
- an individual;
- a body corporate;
- a body politic;
- a partnership;
- any other unincorporated association or body of persons;
- a trust;
- a superannuation fund; and
- an approved deposit fund. (November 2013)
How is a pooled trust account identified and treated?
A pooled trust account (PTA) is an account held by a trustee (or trustees) of two or more trusts and the account holds funds for two or more of those trusts.
The current requirement (see paragraph 3 of Attachment B to APS 910) is to identify and flag pooled trust accounts to the extent practicable. This provides scope for the possible broadening of treatment of pooled trust accounts at some point in the future subject to legislative requirements. At this stage however, the trustee is treated as the account-holder (see subsection 16AF(3) of the Banking Act 1959) and a single Financial Claims Scheme limit of $250,000 applies in relation to the whole of the pooled trust account. (November 2013)
If a trust has more than one trustee, should ADIs apportion the account entitlement across each trustee?
The account entitlement should not be apportioned amongst the individual trustees. If an account is held in the name of a trust, a trustee, or a group of trustees in their capacity as trustees of a particular trust, there will be one account-holder.
Subsection 960-100(2) of the Income Tax Assessment Act 1997 states that the trustee of a trust, of a superannuation fund or of an approved deposit fund is taken to be an entity consisting of the person who is the trustee, or persons who are the trustees, at any given time. Furthermore, note 2 of that subsection states that ‘The entity that is the trustee of a trust or fund does not change merely because of a change in the person who is the trustee of the trust or fund, or persons who are the trustees of the trust or fund.’
As such, the trustees of a particular trust are considered as a group in respect to their capacity as trustee of that trust. (January 2014)
Audit and attestation
When do the audit and attestation requirements take effect for the single customer view and other requirements of APS 910 when there is no extended transition applicable?
APRA expects the timing of the APS 910 audit work to be aligned with the ADI’s routine audit work carried out under Prudential Standard APS 310 Audit and Related Matters (APS 310). APS 310 requires the appointed auditor to report to APRA and the ADI’s Board (or Board Audit Committee), within three months (four months for non-disclosing entities) of the end of the financial year of the ADI. In other words, a separate audit solely for APS 910 need not be conducted as at the transition dates contained in paragraph 36 of APS 910.
The Chief Executive Officer (CEO) must make the attestation outlined in relevant sub-paragraphs of paragraph 32 of APS 910, depending on whether compliance is required with the single customer view (SCV)-only and/or non-SCV requirements of APS 910 as shown in the table below. The CEO attestation must be made within three months (four months for non-disclosing entities) of the ADIs annual balance date (paragraph 31). APRA expects it would be efficient for this attestation to be made as part of the declarations required by APS 310 (paragraph 34 of APS 910).
This table shows the last possible date by which the first audit and CEO attestation must be provided if no extended transition applies:
31 March | Disclosing | 30 June 2014 | 30 June 2015 |
31 March | Non-disclosing | 31 July 2014 | 31 July 2015 |
30 June | Disclosing | 30 September 2014 | 30 September 2015 |
30 June | Non-disclosing | 30 October 2014 | 31 October 2015 |
31 August | Disclosing | 30 November 2014 | 30 November 2014 |
30 September | Disclosing | 31 December 2014 | 31 December 2014 |
30 September | Non-disclosing | 31 Jnauary 2015 | 31 January 2015 |
31 December | Disclosing | 31 March 2015 | 31 March 2015 |
31 December | Non-disclosing | 30 April 2015 | 30 April 2015 |
[1]
Audit report must provide limited assurance as to whether the ADI has controls to ensure the integrity of the SCV data in accordance with paragraph 27(a) of APS 910.
[2]
This applies to the first attestation only. Thereafter the CEO will attest to sub-paragraphs (a)-(i) of paragraph 32 of APS 910.
[3]
The audit report must provide limited assurance as to whether the ADI has controls to ensure the integrity of systems for generating payment instructions.(November 2014)
If an ADI is granted an extended transition period under APS 910, when is the first audit for SCV requirements and other requirements of APS 910 due?
If an ADI has been granted extended transition for some or all of the requirements under APS 910, an audit on, and CEO attestation in relation to, those APS 910 requirements would be required within three months (four months for non-disclosing entities) of the end of the financial year of the ADI that falls immediately after completion of the approved extended transition period. This is in line with routine audit work carried out under Prudential Standard APS 310 Audit and Related Matters (APS 310). The table in FAQ 2.1 outlines the audit and attestation requirements for SCV-only and non-SCV requirements of APS 910. This table can be used for guidance as to the scope of requirements for the audit and CEO attestation if the extended transition dates for all of APS 910 are not aligned. The first audit and CEO attestation must be provided prior to the end of 2016.
Any remaining requirements of APS 910 that are not the subject of an approved extended transition period must be audited, and addressed in the CEO attestation, in accordance with the transition dates and requirements in paragraph 36 of APS 910 and aligned with the routine audit work carried out under APS 310.(November 2014)
What is the interaction between the audit requirements of APS 310 and APS 910?
In practice, the auditor’s assurance given in the report required under Prudential Standard APS 310 Audit and Related Matters (APS 310) should factor in all APS 910 requirements with which the ADI is expected to be compliant. This approach allows the timing of the APS 910 audit to be aligned with routine audit work in line with APS 310.
A separate report for the APS 910 engagement may be completed but would be submitted together with the APS 310 report. There may be circumstances when the external auditor performing the APS 310 engagement is not in a position to undertake the APS 910 engagement. In those circumstances, a different auditor from the same or different firm can carry out the APS 910 engagement, and communication between the auditors would be expected to be in accordance with Australian Auditing and Professional Standards and ethical requirements. (June 2014)
What do the words 'these controls operated effectively when tested' mean in the context of the audit requirement in paragraph 27(b) of APS 910?
The auditor must provide limited assurance that, when the ADI undertook testing in accordance with the testing requirements in paragraph 25 of APS 910, the ADI’s controls operated effectively. In addition, when conducting the audit, the auditor must undertake their own test of the controls and must provide limited assurance that, when tested by the auditor, the controls operated effectively. The auditor will need to collect sufficient and appropriate evidence when forming their conclusions about the ADI’s controls. (November 2013)
Clearance
What happens to funds that have not been 'cleared' in accordance with the Banking Regulations at the time of generating payment instruction information?
Paragraph 11 of APS 910 requires that an ADI 'must be able, to the extent practicable, to identify payment instruction information'. APRA expects ADIs to be able to identify cleared and uncleared funds accurately, to the extent practicable, at the time of generating the payment instruction information. APRA acknowledges that payment data contained in the payment instruction information may be different from the Finanical Claims Scheme entitlement under the Banking Act 1959 and Banking Regulations 1966. To the extent there are uncleared funds identified as part of the initial FCS entitlement that cannot be paid with a high level of confidence at the time that the payment instruction information is generated by the ADI, these amounts should be excluded from the payment instruction information. Such transactions will be dealt with subsequently by the statutory manager/liquidator of the ADI, once the period of clearance has been met in accordance with the Banking Act and Banking Regulations. (March 2014)
Communications
Can APRA provide guidance on what communication material/scripts might be available for an ADI's frontline staff and when they might be available?
Authorised deposit-taking institutions (ADIs) must be able to communicate with account-holders and other customers in the event that they become a declared ADI under the Financial Claims Scheme (FCS). This includes:
- conveying FCS related information as specified by APRA;
- responding to FCS related enquiries from customers; and
- recording information from account-holders relevant to the preparation of an FCS payment.
These communications would be delivered by ADIs through:
- their current website;
- frequently asked questions;
- internet capabilities;
- telephone, including pre-positioning call centre scripts; and
- call escalation processes.
In conjunction with industry, APRA has developed a set of frequently asked questions that may be used if the ADI is declared under the FCS. These questions are divided into two parts:
Three general FCS questions and answers (Part A of the FCS communication scripts). ADIs can reproduce on their current website (if they maintain one) to provide information about the FCS. APRA encourages ADIs to incorporate the selected questions and answers on their own website (along with a link to the FCS website www.fcs.gov.au) to ensure consistent messaging and public awareness regarding the FCS.
The remainder of the FCS communication scripts (Part B) are only intended to be used in the event of a FCS declaration for an individual ADI, and should not be published unless instructed by APRA. At the time of a declaration, APRA will be in close contact with the declared ADI to confirm the content of the ADI’s proposed FCS communication scripts, and communication protocols before they are made available to the public. For example, some scripts may will be tailored to suit the specific circumstances.
These frequently asked questions are available to all ADIs upon request.
Covered products
Are products marketed as superannuation or retirement products, such as accounts held by SMSFs, protected accounts?
If a product, which is used for superannuation purposes, satisfies the definition of a protected account, it is covered under the Financial Claims Scheme (FCS). The FCS covers protected accounts held in locally incorporated authorised deposit-taking institutions (ADIs). The definition of protected account is contained in section 5 of the Banking Act 1959 and focusses on the nature of the account, not its purpose – i.e. the definition does not depend on what the account is used for, provided it has the legal features of a protected account.
Furthermore, please note that retirement savings accounts (RSAs) are a prescribed account under the Banking Regulations 1966 and hence are explicitly covered. (November 2013)
Are bank bills and negotiable certificates of deposit within the definition of a protected account?
The Financial Claims Scheme (FCS) covers protected accounts held in locally incorporated authorised deposit-taking institutions (ADIs). The definition of protected account is contained in section 5 of the Banking Act 1959.
In APRA’s view, products such as negotiable certificates of deposit or bank bills would not ordinarily fit the definition of a protected account and as such would not be covered by the FCS. Advice may be required from your legal advisors.
Please note that APRA is working with Treasury on resolving any outstanding issues regarding covered products and may provide further clarification in due course. (November 2013)
Are security deposits held as security for loans considered a protected account?
The Financial Claims Scheme (FCS) covers protected accounts held in locally incorporated authorised deposit-taking institutions (ADIs). The definition of protected account is contained in section 5 of the Banking Act 1959 and considers the nature of the account, not its purpose – i.e. the definition does not depend on what the account is used for provided it has the legal features of a protected account. Security deposits, whilst not specifically mentioned, would need to be considered in light of this definition. Advice may be required from your legal advisors.
Please note that APRA is working with Treasury on resolving any outstanding issues regarding covered products and may provide further clarification in due course. (November 2013)
How are prescribed accounts treated?
Subsection 16AH(5) of the Banking Act 1959 provides that where a person has an entitlement under an account of a kind prescribed in the regulations with the declared ADI, APRA must set up an account of the same kind with another ADI for the purposes of payment under the FCS.
The Banking Regulations 1966 define the following kinds of protected account as being prescribed accounts:
- retirement savings accounts;
- farm management deposits;
- first home saver accounts.
Prescribed accounts must be identified and included in the ADI’s single customer view (SCV) (see paragraph 2(c) of Attachment B to APS 910) and reported to APRA in accordance with the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013). Furthermore, prescribed accounts must be allocated the priority set out in paragraphs 4 and 5 of Attachment C to APS 910.
As noted above, where an account-holder has a prescribed account APRA must establish, at another ADI, an account of the same kind on behalf of the account-holder rather than allowing it to be paid out to the account-holder. This is to preserve the status of the prescribed account.
ADIs have the discretion to add additional fields to their SCV and system design which may aid processing of prescribed accounts. (November 2013)
Is a redeemable preference share, such as those issued by mutuals or credit unions, considered a protected account?
It is APRA’s view that a redeemable preference share, would not normally fall within the definition of a protected account in paragraph 5(4) of the Banking Act 1959 as it would not normally be classified as an account. Furthermore, inclusion of a redeemable preference share in the account-holder’s single customer view under APS 910, would not appear to be consistent with the intention or purpose of the FCS as it was intended to provide early access for certain depositors, not owners or members of an ADI in that particular capacity. (March 2014)
End-of-Day
What constitutes an end-of-day report?
There is no end-of-day report as such. End-of-day refers to a point in time defined in APS 910 (i.e. 9am on the day following the date on which the Minister’s declaration is made) when all files are processed and settled, and from which ADIs have 48 hours (72 hours until 31 December 2015) to generate their single customer view (SCV).
The account-holder’s entitlement is calculated from the SCV which is based on the end-of-day balances – being the balances at the time of declaration.
The timing of file processing may need to be adjusted by an ADI in the case of an FCS. It is possible that an ADI could start calculating its SCV from end-of-day balances as soon as the data are available. Having said this, the 48 hour period for generating the SCV is designed to allow for transactions to be processed and posted to systems to enable the correct end-of-day balances for protected accounts to be included in the SCV. (November 2013)
FCS calculations
Can APRA confirm the designation of stored vs. calculated fields contained in the Information Paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013)?
The data fields contained in the Information Paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013) have been compiled by APRA for the purpose of assisting ADIs to pre-position for APS 910 requirements. APRA’s view about whether the data are likely to be calculated or stored, was indicated in the information paper. However, this view is not prescriptive. Subject to APS 910, ADIs have the flexibility to establish and configure their SCV systems in the manner that best meets their business objectives. (January 2014)
If there is no net credit balance in a protected account, is there an FCS entitlement due to be paid to the account-holder?
The starting point for calculating an account-holder’s FCS entitlement is the existence of a net credit balance in their protected account. The net credit balance, at a time, is defined in section 5 of the Banking Act 1959 as the excess of the balance of the account in credit in favour of the account-holder at that time over the amount (if any) of fees, charges and duties that are identified under the agreement. Using the notation in Attachment A to APS 910 described in the Information Paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013), for there to be a net credit balance, APRA expects the account balance or principal (3.5.3) less the accrued fees, charges and duties (3.5.5) to be positive (i.e. 3.5.3-3.5.5>0).
If there is no ‘net credit balance’ as defined above, then there is no FCS entitlement and no FCS payment to the account-holder. The account does not then need to be included in the Single Customer View.
Note that this will still be the case even if:
the accrued interest income credited to the account would produce a positive figure, despite there being a net debit balance (i.e. a negative balance) as at the time of declaration; or
there was a positive balance in the protected account at the time of declaration which was less than the accrued fees, charges and duties payable (i.e. where the deduction of accrued fees, charges and duties results in a net debit balance). (March 2014)
Interest, fees, charges, duties and taxes
How should ADIs treat deposit accounts where state based legislation dictates that items such as interest and/or fees should not be payable/chargeable to the account-holder (for example statutory trusts, controlled monies accounts)?
The Banking Act 1959 does not impose requirements on ADIs in terms of interest and withholding tax or fees, charges and duties payable that contradict other state based legislation. In other words, if interest and withholding tax, or fees, charges and duties would not normally be payable to the particular account type (either due to legislative requirements or the relevant account product disclosure statement), then the Banking Act does not override that. (November 2013)
How are different types of fee structures to be treated?
In accordance with the Banking Act 1959, the definition of ‘net credit balance’ requires fees, charges and duties, that are identified in the agreement under which the account is kept and are payable, to be deducted. Where such fees, charges and duties are payable they are to be included in the single customer view (SCV) and the account-balance adjusted accordingly when performing FCS calculations.
Fees and charges are covered by the product disclosure statement (PDS) and inclusion in the SCV would be determined by circumstances as outlined in the PDS. Much of it may depend on when the fees or charges are payable.
Please refer to the Information paper for authorised deposit-taking institutions: Financial Claims Scheme (August 2013) which outlines the calculation of the fees, charges and duties payable component of the FCS balance. (November 2013)
Where an ADI does not accumulate transactional fees and charges, is there a requirement to build this?
Data fields in the single customer view (SCV) have been provided for fees, charges and duties payable. Subject to APS 910, ADIs have the flexibility to establish and configure their systems in the manner that best meets their business objectives. If, however, ADIs do not have all these data fields in their source systems, they are not required to build system enhancements to populate fields that are not necessary for their FCS calculations. (November 2013)
How are fees and withholding tax to be applied to the FCS payment?
The Information paper for authorised deposit-taking institutions: Financial Claims Scheme (August 2013) explains the calculation of, and provides examples for, the treatment of fees, charges and duties payable and withholding tax in relation to the FCS payment. Where the account-holder entitlement is greater than $250,000, the amount equal to the FCS limit would be paid out less fees, charges and duties payable and applicable withholding tax, which have been calculated on a pro rata basis.
Withholding tax is only paid on the portion of accrued interest forming part of the FCS balance. Subsequent payment of withholding tax, on any portion of accrued interest forming part of the balance over the FCS limit, would be dealt with in the winding up process. As such, account-holders should not be disadvantaged by paying withholding tax on interest they have not yet received.
Please note, this could potentially lead to a situation where an account-holder may receive less than $250,000, due to fees, charges and duties payable and withholding tax being applied. (Note, the component greater than $250,000 including any remaining accrued interest, unpaid fees, charges and duties payable and withholding tax are to be dealt with in the winding up process.) (November 2013)
Is the approach for calculating fees, charges and duties the same as that for calculating accrued interest (ie. from the data they were last applied to the account up until the time of declaration?
APRA expects that accrued interest paid to an account-holder, upon the ADI becoming a declared ADI, is to be calculated from the date that interest was last applied to the account up to the FCS declaration time. As withholding tax is calculated as a percentage of the interest paid to the account-holder, it would be calculated on the same basis.
It is reasonable that an ADI would take a similar approach to the handling of fees, charges and duties payable however the quantum and approach to be taken with fees, charges and duties payable would need to be assessed according to the terms and conditions of each underlying product. Only those fees, charges and duties that are payable are to be deducted from the account entitlement. Furthermore, fees and charges should not be waived or cancelled unless otherwise permitted under the terms and conditions of the protected account (and even then it may be necessary to consider whether such waiver, in a situation where the ADI is insolvent, would be consistent with insolvency laws). Subject to this, ADIs have the flexibility to establish and configure their systems in the manner that best meets their business objectives. (January 2014)
What rate of interest is to be applied to balances in order to calculate the interest accrual?
The accrued interest payable under the Financial Claims Scheme accrues at the contractual daily rate only up until the time of declaration. The balance of the accrued interest between the time of declaration and the time of final settlement may then be recovered in liquidation, as follows.
In relation to the accrual of interest (on any account balance above the FCS limit) after the declaration time, the contractual rate of accrual will continue until a court makes an order for the winding up of the ADI, which would normally occur after the declaration of the FCS. The daily rate of accrual after that date for the purposes of paying claims by creditors would then depend on the provisions of the Corporations Act 2001 and Corporations Regulations 2001 (including sections 554, 563B, 513A and regulation 5.6.70A). ADIs should seek their own legal advice on the effect of these provisions.
Up to time of declaration | Interest as per Terms and Conditions | Interest as per Terms and Conditions | Interest as per Terms and Conditions |
Between declaration and court order for winding up | N/A | Interest as per Terms and Conditions | Interest as per Terms and Conditions |
After court order for winding up until final settlement | N/A | Corporations Act and Regulations | Corporations Act and Regulations |
(September 2014)
Managing the capture of alternative ADI account data
Can a call centre be used to capture alternative ADI account data?
Yes. Subject to APS 910, ADIs have the flexibility to establish and configure the alternative ADI account data capture mechanism(s) in the manner that best meets their business objectives. APRA considers the use of a call centre to collect the alternative ADI account data, in the event that an ADI becomes a declared ADI, to be acceptable in meeting these requirements provided it is done so in accordance with paragraph 16 of APS 910. (September 2014)
Do ADIs need to provide alternative ADI account data capture for accounts with complex access authorities for existing electronic banking users?
In terms of the requirements in paragraph 15 of APS 910, APRA recognises that there may be instances where it is problematic to identify and authenticate/verify an individual who is an existing electronic banking user and is authorised to provide instructions on behalf of the account-holder.
This may occur where a business/corporate account has multiple electronic banking users and/or multiple authorities (where each user has separate access authority) and/or a complicated account structure. It may also occur where a business has multiple accounts with different authorities that are aggregated for SCV purposes.
To clarify and, importantly, maintain consistency with APRA’s policy intent, the account-holder will be regarded as an existing electronic banking user for the purposes of paragraphs 5 and 15 of APS 910 if the person operating the account (whether as the account-holder or its delegate):
- is an individual (including in the capacity of an account-holder who is named as part owner of a joint account or partnership account); and
- can be identified and authenticated using existing electronic banking arrangements; and
- is a person with a unique customer identifier authorised as an electronic signatory in respect of all the protected accounts held by the account-holder, and there is no restriction on that person’s delegated authority to transact on all accounts.
APRA’s view is that the ADI is required to be able to capture alternative ADI account data if these circumstances apply.
However, if these circumstances do not apply, the ADI may still, at its own discretion, capture alternative ADI account data in relation to the account-holder and include these data in the EFT payment instructions to be sent to the RBA as APRA’s paying agent. If the ADI adopts this approach, it must be satisfied that the particular customer identifier to be used is appropriate for that purpose, and that paragraphs 16(a) and (c) to (d) inclusive of APS 910 are met. (October 2014)
Does alternative ADI account data have to be captured and, if so, when?
If an ADI has existing electronic banking users, the ADI must be able to capture alternative ADI account data in relation to those users, unless an exemption has been granted by APRA.
ADIs must pre-position so that they have the capability to capture alternative ADI account data in accordance with paragraphs 15-17 of APS 910. However, ADIs are only expected to begin the capture of alternative ADI account data in the event that the ADI becomes a declared ADI.
Subject to APS 910, ADIs have the flexibility to establish and configure their SCV systems in the manner that best meets their business objectives. (October 2014)
Payment instruction information
What are the fields that are mandatory or critical for the successful generation of account-holder payment instruction information from the single customer view (SCV)?
As mentioned in the Information paper for authorised deposit-taking institutions: Financial Claims Scheme (August 2013), the data fields have been compiled by APRA for the purpose of assisting ADIs to pre-position the approved forms for FCS payments and reports and to provide illustrative examples. If, however, ADIs do not have all these data fields in their source systems, they are not required to build system enhancements to populate fields that are not necessary for their FCS calculations.
The critical fields would generally be regarded as those that are required for the approved forms for FCS payments and reports. The approved forms are available on APRA’s website at www.apra.gov.au/policy. (November 2013)
How are EFT reference numbers and cheque serial numbers advised back to the ADI?
EFT reference numbers and cheque serial numbers originate with the ADI.
For EFT payments, the number is a required field for EFT payment instruction information and must be generated or included by the ADI when the payment instruction is created. The EFT reference number may be the same as the unique account-holder identifier; this is up to the ADI. APRA does, however, expect ADIs to keep a record of the EFT reference number that is sent with the payment instruction information as these numbers are included in the approved forms for both EFT payments and summary report and the FCS account-holder statement.
For cheque payments, the number required is the FCS cheque serial number which is generated by the ADI for each cheque payment being made, in accordance with the RBA FCS specifications. APRA expects ADIs to keep a record of the cheque serial number that is sent with the payment instruction information as these numbers are included in the approved forms for both cheque payments and summary report and the FCS account-holder statement.
For further details, please refer to the RBA FCS specifications for direct credit and cheque payment files which are available on request from fcs@apra.gov.au. (November 2013)
Can APRA provide guidance on what paragraph 21 of APS 910 implies for updating ADI systems to take into account the FCS balance entitlement for protected account-holders?
Paragraph 21 of APS 910 requires ADI’s systems to be able to perform reconciliation of payment amounts. Note that an ADI will need to be able to update the accounts of the account-holder in their systems to reflect the amount of the FCS payment made. It depends on the ADI’s actual system design as to how this is achieved. The purpose of the requirement in paragraph 21 of APS 910 is therefore to ensure that the FCS payments are properly accounted for and outstanding amounts can be dealt with in the appropriate manner by the liquidator in the administration process.
APRA’s view is that the inclusion of the FCS transaction details in the FCS statements to account-holders enhances account-holders’ ability to understand and reconcile the FCS payments to their protected accounts. The FCS account-holder statement is required by subsection 16AHA(2) of the Banking Act 1959. The required fields for the FCS account-holder statement are contained in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013) available on APRA’s website. The FCS account-holder statement would complement, and be separate to, the regular customer account statement.
Furthermore, the ADI’s liability to the depositor will be reduced by the amount of the FCS payment and will be replaced by a liability from the ADI to APRA (as reflected in the FCS account-holder statement). (April 2014)
Are indirect ADI participants in the clearing and settlement system (also known as Tier 2 ADIs) responsible for sending payment instruction information directly to the RBA?
Yes, each ADI is responsible for generating and transmitting its own payment instruction information to the RBA as well as all other required reports contained in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013) to the relevant person nominated by APRA. (January 2014)
What happens if an ADI has more than 900,000 cheques?
After reaching 900,000 cheques, the sequential cheque numbering would need to be restarted from ‘000001’ in a new file after consulting with the ADI’s statutory manager/liquidator.
Theoretically, there should be six or more cheque files (at a minimum) if there are over 900,000 cheques. Note that to reach 900,000 cheques, there would be four files with up to 200,000 cheques in each, plus a fifth file with 100,000 cheques. A sixth file would then be required, after consultation with the ADI’s statutory manager/liquidator (who would arrange for a new FCS account to be established at the RBA for the next batch of cheques to be drawn upon), in which the cheque numbering would be reset to ‘000001’. The cheque numbers from ‘900001’ to ‘999999’ are reserved for use by the ADI’s statutory manager/liquidator. (March 2014)
What files are ADIs required to send to APRA for payment instruction file testing with the RBA?
The scope of testing under paragraph 36 of APS 910 is limited (at this time) to the testing of payment instruction information. This testing focuses on the file format only, to validate that the ADI’s file structure meets the RBA specifications for direct credit and cheque payment files which are available on request from fcs@apra.gov.au. Payment Testing Instructions to assist with testing are also available from fcs@apra.gov.au.
For the testing of payment instruction information, each ADI should submit the test files to APRA via the fcs@apra.gov.au email address at the start of the test window (as booked). As the files are expected to contain masked data they will not require any encryption or password protection (see Payment Testing Instructions for guidelines on masking data).
ADIs are not required to test any other reports or SCV files with APRA/RBA as part of this process. The following table lists the files ADIs are required to send to APRA for initial FCS payment file testing:
(a) EFT payment instruction information | Yes |
(b) Cheque payment instruction information | Yes |
(c) SCV summary report | No |
(d) EFT payments and summary report | No |
(e) Cheque payments and summary report | No |
(f) Exception and summary report | No |
(g) Prescribed accounts and summary report | No |
(h) Australian Taxation Office report | No |
(i) FCS account-holder statement | No |
(j) Other payment summary data report | No |
(k) Cross reference list report | No |
Note: this table refers to reports outlined in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013) and guidance is provided in the Information paper for authorised deposit-taking institutions: Financial Claims Scheme (September 2014)
Once the FCS payments have been paid to account-holders, what will be the trigger for the declared ADI to debit each account-holder's account with the apportioned amount of the FCS payment? More specifically, will APRA provide confirmation to the ADI, by way of written communication, of the FCS payment being processed?
The declared ADI will update each account-holder’s account as per its usual business process and it depends on the ADI’s actual system design as to how this will be achieved. No files will be sent back to the ADI for individual payments successfully made; the ADI will only be advised of any rejected FCS payments. Therefore, the ADI can assume that payment is made from the batch unless otherwise advised by the RBA or APRA. The ADI is to use the value date of the payment file as the date of the payment itself in its systems and reports. It is then up to the statutory manager/liquidator on behalf of the ADI to advise the account-holder accordingly. (August 2014)
Can APRA provide more details of the requirements around transmission of the approved forms for FCS payments as set out in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013)?
In terms of the approved forms for FCS payments, the payment instruction information is expected to be in flat file format. The RBA will process FCS files using the ‘zip’ format which can be generated with any version of WinZip. The requirement to zip FCS files is preferred but not mandatory.
For a declared ADI in an FCS event, the payment instruction information would be transmitted directly to the RBA, most likely via secure RBAnet. This is a straightforward process and there will be guidance available for ADIs with appropriate security (i.e. a secure connection with PINs and passwords). This will be confirmed at the time of the FCS (and any instructions and secure tokens issued) and will depend on the technology available and the circumstances of the declared ADI. All zipped FCS files loaded to RBAnet should include the ‘zip’ extension in the file name.
Please note this FAQ refers to the approved forms for FCS payments. Please refer to FAQ 11.2 for information on the approved forms for FCS reports. (September 2014)
Reports
Do ADIs need to organise a quote to build the account-holder statement that is required under APS 910 with the ADI's mail-house?
No. ADIs need to be pre-positioned to provide the relevant data items to produce an account-holder statement as set out in the approved forms for FCS payments and reports. These data for the account-holder statement must be able to be produced in a comma separated value (CSV) file using valid file characters. In an FCS event, where an ADI is declared, APRA would consult with the relevant manager or liquidator of the declared ADI regarding the sending of the account-holder statements. (November 2013)
Can APRA provide more details of the requirements around transmission of the approved forms for FCS reports as set out in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013)?
In terms of the approved forms for FCS reports, reports may be specifically requested by APRA from time to time or in an FCS event i.e. they are not expected to be transmitted unless requested. In the event that reports are to be transmitted, APRA will liaise with ADIs to determine the most appropriate means of transmission.
Note: It has been brought to APRA’s attention that some ADIs use punctuation in free format text fields and this may include commas. If this is the case an ADI may use an alternative, valid field delimiter for CSV files.
Please also note this FAQ refers to the approved forms for FCS reports. Please refer to FAQ 10.8 for information on the approved forms for FCS payments.(September 2014)
In relation to the Australian Taxation Office (ATO) Report contained in the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013):
Is the ATO Report the same as the annual investment income report (AIIR) report currently provided by ADIs to the ATO?
If the answer to the above is yes, is the intention that ADIs provide a copy fo the AIIR to APRA as well as the ATO?
Accounding to the approved forms for FCS payments and reports, the ATO Report must contain information required by the ATO for the AIIR 'or as notified by APRA in writing'. Is there any other additional information contemplated for inclusion in the ATO Report?
As indicated in the Information Paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013), the ATO Report should contain information required to meet the annual investment income report (AIIR) specification as published and updated from time to time by the ATO, or as notified by APRA in writing.
1.The ATO have advised that the information required for the ATO Report will be the AIIR as the AIIR collects all the required information. Reporters can provide an AIIR: ◦for the full year that covers the time up to the FCS event and another report for the time subsequent to the FCS event, or a single report that straddles the FCS event.
2.The method chosen must align with how the interest is reported to the account holders. For example, if the account holder is provided with separate amounts pre- and post-FCS event then an AIIR needs to be lodged for each period.
3.APRA does not expect ADIs to submit a copy of the AIIR to APRA. However, the information contained therein should be available for review, post payment, in an FCS event.
- There are no current plans for APRA to impose any additional ATO reporting requirements other than those requirements specified under the AIIR.(October 2014)
Can APRA provide clarification about the description of item 8.4 in the information paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013)?
The data item contained at data field 8.4 in the Information Paper: Financial Claims Scheme for authorised deposit-taking institutions (August 2013) is expected to be populated with an up-to-date figure of the value of the total account balance of all deposits (as per the specified D2A codes) as at the time of the declaration or when the report containing 8.4 is requested by APRA. It is intended that the total deposit data at item 8.4 should be calculated using the same methodology as for the D2A monthly data requirements of the equivalent codes.
Please note that item 8.4 includes Australian dollar denominated deposits and those in foreign currency to give a common basis for comparison across the ADI industry. APRA does not expect ADIs to adjust their data by excluding any items. (April 2014)
Single customer view
Would APRA propose to allow customers to update contact details in the days following the FCS declaration (but prior to payment instruction information being prepared)?
Whilst not a requirement of APS 910, in order to facilitate cheque payment processing, it would benefit the administration of the FCS and the payment process if ADIs were able to capture addresses to which cheques must be posted. Subject to APS 910, ADIs have the flexibility to establish and configure their SCV systems in the manner that best meets their business objectives. If ADIs do incorporate this functionality, they may need to determine how such updates to account-holder information could be facilitated, prior to payment instruction information being generated and sent to the RBA. (November 2013)
How accurate does SCV data and payment instruction information have to be?
Paragraph 6 (a) of Attachment A to APS 910 requires that there be controls in place to ensure that ‘data sourced from any product, customer or other ADI system for SCV purposes are complete and accurate, to the extent practicable’. APRA accepts that there are a small number of circumstances and/or customers for which meeting all the requirements of APS 910 and (for SCV calculation purposes) the Banking Act 1959 and Banking Regulations 1966 will not be practical.
This also applies to the requirement in paragraph 32(f) of APS 910 that the CEO must attest ‘that data generated by SCV systems are complete and accurate, to the extent practicable' and the audit requirement in paragraph 27(a) of APS 910. Similarly, APRA interprets the requirement in paragraph 11 of APS 910 - that an ADI must, ‘to the extent practicable’, identify payment instruction information in accordance with Attachment C (including the requirement in paragraph 1 of that Attachment as to accuracy of the calculation) - to mean that in some limited circumstances it may be difficult for ADIs to accurately calculate the size of the FCS payment (see FAQ 3.1).
In particular, APRA recognises that, depending on the exact timing of a Ministerial declaration, certain processes required to meet the APS 910 requirements may have to be run over non-business days. This may be the case where the declaration falls on or around a long weekend. In these instances, payment instruction information should be based on SCV data that are as accurate as practicable in the circumstances. For example, this could mean using accrual components, such as interest, calculated up to the last complete business day before declaration or using a contingency strategy to deal with transactions that are yet to be finalised for FCS purposes (such as cheques deposited but not yet exchanged, or cheque/direct entry items that have been exchanged but are awaiting clearance). In those circumstances, to the extent that the payment data contained in the payment instruction information are ultimately different from the account-holder’s FCS entitlement under the Banking Act and Banking Regulations, APRA expects that the statutory manager/liquidator of the ADI would make additional FCS payments if required. APRA expects ADIs to be mindful to avoid, as far as possible, any overpayment of the account-holder’s initial FCS entitlement. (March 2014)
Testing
Exactly what is meant by 'testing' in the context of establishing balances at end-of-day (EOD)?
Testing refers to the generation of SCV data for testing purposes such as when information is collated for the testing of payment information files with the RBA. In these circumstances, an end-of-day figure based on the account balance held in each protected account will be sufficient for the initial end-of-day balance. When calculating the EOD balance in test scenarios, the ADI can decide whether or not to run an accrual to determine accrued interest and whether or not to calculate fees, charges and duties payable for an account unless otherwise required by APRA or APS 910. (November 2013)
UPDATED What are an ADI's ongoing obligations in relation to testing?
Testing under APS 910 is important to ensure that ADIs are operationally ready to meet their single customer view, payment, reporting and communication obligations. APRA expects ADIs to be conducting regular internal testing on an ongoing basis in accordance with items a) to e) in paragraph 25 of APS 910. To further clarify this obligation for ADIs, APRA has prepared a schedule (below) which outlines the minimum requirements for regular APS 910 testing.
It is expected that ADIs document the results of testing conducted, including any shortcomings associated with FCS related systems, processes and reporting as well as respective causes. ADIs should identify remediation work required to address outstanding deficiencies (where appropriate) together with expected timing to address issues.
Furthermore, the results of such testing, as well as any planned remediation of issues, should form part of the auditor’s assessment and the APS 910 limited assurance report.
These tests must be conducted prior to the ADI’s 2017 year-end and be available for the auditor’s 2017 APS 910 review.
Single Customer View | This test requires the ADI to:
| Half yearly |
Alternative ADI account data capture | This requires the ADI to test and confirm its ability to capture the alternative ADI account data and incorporate that data into the FCS payment instruction information (depending on the ADI’s systems and processes). Note - Masked or test data may need to be developed for this test as ADIs are not required to hold alternative ADI account data for account holders, although some ADIs may do so. | Yearly |
Payment instruction information | Payment instruction information This test requires the ADI to generate (from its source systems or SCV), the payment instruction information in the correct format (including the alternative ADI account data where appropriate). In testing the ability to generate and transmit payment instruction information, ADIs should be able to demonstrate that they can provide this information, and the other information required by APS 910, in the appropriate sequence (i.e. from the time of FCS declaration through to the generation of reports) within designated timeframes. Note: Testing of the payment instruction information using masked data (file format only) was conducted with the RBA for all ADIs prior to the first compliance date for APS 910. | Yearly |
Reports | ADIs must test their ability to generate and transmit reports to APRA and third parties on behalf of APRA in accordance with APS 910 and the Approved forms for payments and reports: Financial Claims Scheme for authorised deposit-taking institutions (August 2013). The test should include all required forms including the report to the ATO. | Yearly |
Communications | ADIs must test communication capabilities with account-holders and other customers if they were to be declared under the FCS including their ability to:
The test should include the effectiveness, timeliness and expected volume capacity of the proposed communication channels. It should also include, as a minimum, the ADI’s website plans for conveying FCS information in the event that the FCS is declared, as well as telephone and internet response capabilities. ADI’s FCS crisis management work flows, contact lists, crisis protocols, system specific instructions, and staffing requirements would form part of this test and could be conducted at the same time or as part of an ADI’s BCP testing. | Yearly (can be conducted in conjunction with BCP testing) |