APRA – Page 33 – Digital Finance Analytics (DFA) Blog

APRA On Risk Culture, and ABA’s Response

APRA has released a series of documents on the risk culture within financial services organisations. They will be looking at the risk culture of entities, as well as remuneration and its linkage to risky behaviour.

They are also seeking to harmonise prudential standards across APRA-regulated industries where appropriate and practical. This ensures that like risks are treated in a like manner so that no significant differences arise in the regulatory treatment of entities with similar risks operating in different industries.

The 2008 financial crisis revealed major shortcomings in the way the global financial sector managed risk. This was not solely an issue of poor risk measurement, or weaknesses in internal control structures. It also reflected deficiencies in institutions’ attitudes towards risk. In combination, a poor risk culture and weak risk management (the former often being the root cause of the latter) led to unbalanced and ill-considered risk-taking, to significant losses and, in some cases, to institutional failures. The impact on the financial stability of affected countries was significant.

Although APRA-regulated institutions avoided the worst of the financial crisis, Australia has not been without its own examples of poor risk culture. The failure of HIH Insurance in 2001, for example, highlighted the central role that a weak organisational culture, and a dismissive attitude to risk management, had in the demise of the insurer. Similarly, foreign currency trading losses at a major bank in 2004 identified the link between the risk culture of its trading area and the scant regard given by the business to the underlying risk and management risk limits.

More recently, APRA highlighted the emergence of increased risk-taking within the life insurance industry with respect to the underwriting and pricing of, in particular, group insurance business. At its heart, this stemmed from a focus on growth without, in a number of institutions, adequate regard to the risks that came with it. Similarly, in the past few years, APRA observed that sound market practices for the origination of residential mortgage loans had, in some instances, been sacrificed to considerations of preserving market share and growth.

Unlike the earlier episodes highlighted above, which affected individual institutions, the more recent issues in group risk insurance and mortgage lending have manifested in a deterioration in general industry practices. There is nothing wrong with an institution or an industry pursuing a higher risk strategy, provided it does so consciously, and with appropriate risk management capabilities and financial capacity. In some of these cases, though, hindsight and supervisory scrutiny would suggest that the decision was not a conscious one: considerations of risk were not always front of mind in a highly competitive environment.

It is also interesting to juxtapose these recent experiences with the assertion made by most institutions that they believe they have a good, if not strong, risk culture; to the extent there are deficiencies in the industry, most institutions consider they exist within their peers. And where there have been specific problems identified within their own businesses, ‘bad apples’ are typically seen as the cause. Yet in the case of mortgage lending standards, for example, there were few lenders who could claim their risk culture was sufficient to prevent them succumbing to the weak practices that eroded industry standards.

Unfortunately, a poor risk culture can persist for some time without detection, or immediate damage. Typically, it will be when a poor risk culture is combined with adverse market conditions and/or other stresses that there is greater potential for a build-up of unbalanced and ill-considered decisions to result in significantly adverse, and potentially crippling, financial outcomes. Good times will often mask poor practices. In an Australian context, where the domestic economy has enjoyed 25 years without a serious recession, this should sound a clear note of caution against complacency.

As well as setting out global developments in risk culture, APRA highlighted the following key areas of focus.

Continue to encourage APRA-regulated institutions to focus on risk culture

APRA’s initiatives that will help maintain the prominence of risk culture within regulated institutions include:

engaging with the broader APRA-regulated financial sector – through, for example, speeches and publications such as this one – to reinforce the need for continued focus on risk culture and, where needed, highlighting any areas of concern;

providing information and guidance to industry, where appropriate, on approaches that can be used to assess and strengthen risk cultures;

bilateral discussions with institutions’ senior executives and directors to highlight and seek remediation for any specific concerns that are identified through routine supervision activities; and

conducting pilot on-site reviews at individual institutions focussing specifically on risk culture.

A more anticipatory supervisory approach to risk culture

Although APRA already considers risk culture as part of its ongoing supervisory activities, APRA intends to refine and sharpen its approach to assessing risk culture. Conducting pilot risk culture reviews will form a key component of this work.

APRA expects that this more intensive review will enable it to better anticipate potential risk issues, and strengthen its forward-looking supervisory approach. For example, where a regulated institution is found to have indicators of a poor risk culture, supervisory attention will correspondingly increase. As with APRA’s more general approach to supervision, which focusses on the prevention of problems before they materialise, the goal of these risk culture reviews will be to promote prompt corrective action to any shortcomings identified, or establish mitigating actions. In doing so, the potential for loss from unbalanced and ill-considered risk decisions is reduced, potentially adverse outcomes for depositors, policyholders and superannuation fund members can be avoided, and (in the extreme case) threats to financial stability are eliminated.

Reviewing industry remuneration practices

The remuneration requirements contained in CPS 510 were introduced in 2010 for ADIs and insurers. Requirements for superannuation were introduced in Prudential Standard SPS 510 Governance22 in 2012. The fundamental principle underlying these requirements is that performance-based components of remuneration must be designed to encourage behaviour that supports:

the regulated institution’s long-term financial soundness; and

the risk management framework of the institution.

Remuneration frameworks, and the outcomes they produce, are therefore important barometers and influencers of risk culture.

APRA intends to conduct a stocktake of current industry remuneration practices to gauge how well existing requirements are being implemented, and how they are interacting with the risk cultures of regulated institutions. This will include reviewing the remuneration arrangements and outcomes for some senior executives, risk and control staff, and material risk-takers at a sample of institutions.

APRA will also use this opportunity to compare its remuneration requirements with more recent international regulatory developments and supervisory practices.

This work will commence in 2016 and will continue into 2017. APRA will engage with industry participants, as well as relevant industry experts, throughout this period as it formulates its views.

The Australian Bankers Association welcomed APRA’s announcement.

The Australian Bankers’ Association has welcomed today’s release of an information paper by the Australian Prudential Regulation Authority on the risk culture of financial institutions.

“A lender’s risk culture impacts every decision it makes and is the cornerstone of a stable financial system,” ABA Chief Executive Steven Münchenberg said.

“We welcome initiatives that help banks understand and manage their own risk culture, and we are pleased that APRA has noted an improvement in how directors focus on the risk culture in their organisation,” he said.

“It is important that the tone is set from the top and employees have a clear framework to make decisions that appropriately balance the potential gain with any potential loss.”

APRA’s paper looks at how different organisations approach risk culture and how this relates to company values. It also outlines APRA’s future plans to encourage institutions to focus on risk culture.

Mr Münchenberg said the ABA agreed on the need to build on the work that had already been done.

“There are many elements to a strong risk culture, including having clear business objectives, values and understanding of risk appetite.

“Banks recognise that demonstrating a strong risk culture will increase the public’s trust in the financial sector. We look forward to working with APRA on how risk culture can be strengthened to ensure banks have the right practices and behaviours,” he said.

APRA On Derivatives Margin Rules

APRA has released final requirements for margining and risk mitigation for non-centrally cleared derivatives. APRA has made some changes to the requirements, based on feedback to the earlier consultation process. This is one of the risk mitigation elements brought to the fore post the GFC. APRA has not yet set a commencement date.

The release, CPS 226, provides clarity on the final requirements and it will allow APRA regulated institutions with material levels of non-centrally cleared derivatives to actively continue their preparations. APRA will advise an implementation date and phase-in timetable in due course. APRA says they “continue to support internationally harmonised implementation of the requirements and is monitoring the progress of implementation in other jurisdictions”.

There are two tests to determine whether the rules apply.

First the entity has to be a financial services organisation (authorised deposit-taking institutions (ADIs), general insurers, life companies and registrable superannuation entities (RSE) licensees). However entities such as central banks and certain special purpose vehicles are excluded. These entities must post and collect variation margin and initial margin when it trades with covered counterparties.

Second, there is a threshold which must be met first. APRA has kept the AUD 3 billion threshold for the application of variation margin requirement based on the entity’s group’s aggregate month-end average notional amount of non-centrally cleared derivative transactions.

Both the covered entity AND the covered counterparty has to meet this threshold, else the transactions between them will not be caught by the margin requirements.

There were some significant changes from the earlier drafts, which generally have weakened the requirements.

For example, physically settled foreign exchange forwards and swaps, and the fixed physically settled FX transactions associated with the exchange of principal in cross-currency swaps, have been excluded from the requirement to exchange variation margin. In addition, real estate and infrastructure special purpose vehicles and collective investment vehicles are excluded from the scope of the rules if they enter into derivatives for the sole purpose of hedging. Similarly, non-financial institutions are no longer included as covered counterparties. There are others. You will need to read the fine print to see all the changes.

APRA Highlights Cyber Security

APRA has released the results from their 2016 Cyber Security Survey which ran from October 2015 to March 2016 to gather information on cyber security incidents and their management within APRA-regulated sectors. Respondents to the survey included 37 regulated entities and four significant service providers, covering all APRA-regulated industries, with the exception of private health insurance.

Just over half of all survey respondents – 20 regulated entities and one service provider – experienced at least one cyber security incident in the 12 months leading up to the survey that was sufficiently material to warrant executive management involvement.

Superannuation industry respondents reported a higher occurrence of incidents that warranted reporting to executive management as compared to other industries. While the underlying cause of this was not apparent in the survey results, possible explanations are that the superannuation industry is a more attractive target to perpetrators due to the relatively high customer account balances, and/or variances in reporting thresholds between the industries.

Incidents reported by survey respondents included:

potentially high impact incidents such as advanced persistent threats (APTs), distributed denial of service (DDoS) attacks and compromises of highly privileged access. These were experienced by a number of respondents (21 per cent) and reinforce the value of preparedness (prevention, detection and response controls) in the face of sophisticated
attacks which cannot always be prevented;
ransomware attacks, which represent an increasing threat. The reported incidence of these attacks (14 per cent of respondents) reinforces the importance of frequent system and data back-ups as a last resort mitigation;
potentially reputation damaging incidents such as website defacement and social media account misuse, which were experienced by approximately 1 in 8 entities (12 per cent of respondents). Whilst these incidents have had a low impact and frequency to date, the potential reputational impact necessitates continued vigilance with respect to the management of public facing channels and services; and
other incidents with low impact such as compromise of client accounts, internet banking fraud, phishing and malware attacks. These were experienced by almost 1 in 4 respondents (24 per cent).

They conclude:

To date, no APRA regulated entity has suffered material losses from a cyber incident, and security controls have held up against past attacks. However, this should not provide grounds for complacency. As a result of the expanding sophistication, frequency and impact of cyber attacks, APRA-regulated entities should expect to experience significant cyber security incidents and be prepared for an evolving range of threats. APRA intends to lift the supervisory and regulatory expectations for regulated entities to not only secure themselves against cyber attacks, but to implement improved mechanisms to quickly identify and remediate successful attacks when they occur.

They rightly highlight the cultural dimensions to effective Cyber Security as we discussed recently.

Where Has APRA Gone?

An amusing snip-it. On the day the banks are starting to appear before the economics committee, I noticed the APRA web site was down. Yes, the ADI regulator had disappeared! I wanted to grab some information for analysis I was running. Normal service was resumed just before 11:00 this morning.

Thinking it might be my end, I tried this. Nope, the site was down.

At 8:55am, local time it came back, then went again. At 9:34, we are getting an HTTP Error 503 from APRA. A quick lookup says of 503:

HTTP Error 503 – Service unavailable

Introduction

The Web server (running the Web site) is currently unable to handle the HTTP request due to a temporary overloading or maintenance of the server. The implication is that this is a temporary condition which will be alleviated after some delay. Some servers in this state may also simply refuse the socket connection, in which case a different error may be generated because the socket creation timed out.

Fixing 503 errors

The Web server is effectively ‘closed for repair’. It is still functioning minimally because it can at least respond with a 503 status code, but full service is impossible i.e. the Web site is simply unavailable. There are a myriad possible reasons for this, but generally it is because of some human intervention by the operators of the Web server machine. You can usually expect that someone is working on the problem, and normal service will resume as soon as possible.

Home Lending Continues Higher

The latest APRA monthly banking stats to end August 2016 shows that total lending for housing rose 0.53%, equivalent to an annualised rate of 6.41%, well ahead of inflation and wage growth. Total loans are now $1.487 trillion, up another $7.9 billion in the month.

Within that, owner occupied loans rose 0.63% (up $6bn) and investment loans rose 0.35% (up $1.8bn). Investment loans comprise 35.55% of loans on book, down just a little from last month.

Looking at the individual banks, Westpac grew their portfolio the largest, up $2.5 billion, followed by CBA. ANZ reduced their investment portfolio – perhaps thanks to restatement of loan purpose? Bendigo dropped their portfolio of owner occupied loans in the month.

Here are the current relative shares.

Finally, here is the investment growth, by lender, which is running on a 3 month annualised basis at 2.6%. We see some of the majors growing their investment loans faster than system but below the theoretical 10% speed limit, which has little use currently. A couple of players are running well over however.

The RBA data, out soon will tell use more about the overall portfolio, including non-banks, and also about the restatement adjustments.

Bank Profits Down 27%, Provisions Up To June 2016 – APRA

APRA has released the quarterly ADI performance statistics. On a consolidated group basis, there were 156 ADIs operating in Australia as at 30 June 2016, the same as a year before, despite some changes.

Here is a summary chart for the combined four majors to June 2016.

We see a rise in gross advances, and higher tier 1 capital, though CET1 fell a little. Shareholder capital relative to the lending book rose slightly, but at 5.45% in June, the big banks remain highly leveraged businesses.

Looking more broadly across all ADI’s, the net profit after tax was $27.7 billion to 30 June 2016. This is a decrease of $10.4 billion (27.3 per cent) on the year ending 30 June 2015.

The cost-to-income ratio for all ADIs was 50.7 per cent for the year ending 30 June 2016, compared to 47.4 per cent for the year ending 30 June 2015 while the return on equity for all ADIs was 10.3 per cent for the year ending 30 June 2016, compared to 15.2 per cent for the year ending 30 June 2015.

The total assets for all ADIs was $4.64 trillion at 30 June 2016. This is an increase of $225.3 billion (5.1 per cent) on 30 June 2015. The total gross loans and advances for all ADIs was $2.98 trillion as at 30 June 2016. This is an increase of $139.0 billion (4.9 per cent) on 30 June 2015.

The total capital ratio for all ADIs was 14.1 per cent at 30 June 2016, an increase from 13.1 per cent on 30 June 2015. The common equity tier 1 ratio for all ADIs was 10.2 per cent at 30 June 2016, an increase from 9.5 per cent on 30 June 2015.

The risk-weighted assets (RWA) for all ADIs was $1.84 trillion at 30 June 2016, an increase of $31.1 billion (1.7 per cent) on 30 June 2015. Impaired facilities were $15.0 billion as at 30 June 2016. This is an increase of $0.6 billion (4.2 per cent) on 30 June 2015.

Past due items were $13.0 billion as at 30 June 2016. This is an increase of $0.7 billion (6.0 per cent) on 30 June 2015; Impaired facilities and past due items as a proportion of gross loans and advances was 0.94 per cent at 30 June 2016, unchanged from 0.94 per cent at 30 June 2015; Specific provisions were $7.1 billion at 30 June 2016. This is an increase of $0.6 billion (8.6 per cent) on 30 June 2015; and Specific provisions as a proportion of gross loans and advances was 0.24 per cent at 30 June 2016, an increase from 0.23 per cent at 30 June 2015.

Home Lending Higher In July 2016, But Slowing

The latest monthly banking stats from APRA shows that total lending for home loans by the ADI’s (banks, building societies, credit unions etc.) rose 0.5% in July, down slightly from the previous month. Within that loans for owner occupied loans rose 0.64% to reach $952.5 billion, and investment lending rose 0.3% to $527 billion. Loans for investment property now comprise 35.6% of outstanding loans. So the rate of loan growth is slowing, but the overall level of household debt continues to rise and investment loans are back in favour. Remember too that these numbers are still messed up with ongoing loan reclassification with $43 billion over the period of July 2015 to July 2016, of which $1.0 billion occurred in July.

Looking at individual lender movements, CBA lent more on both the owner occupied and investment side of the ledger.

As a result we see CBA lifting its market share, though Westpac still has a greater share of investment loans.

If we examine the relative growth of loan portfolios against the APRA 10% speed limit, most major players remain within the 10% target.

We will look at the RBA financial aggregates next, which gives us the view of all loans across the market, including the non-bank sector.

A Hybrid Is Not A Higher Yielding Deposit Alternative

Within the APRA speech we discussed earlier, there was an important little paragraph, which warrants separate coverage. It concerns the emergence of “hybrid” instruments, which banks have been offering, with a fixed return higher than deposit interest rates – returns which in the current low interest rate environment many will find attractive. However APRA makes the point, they should not be considered as higher yield alternatives to deposits as they are intrinsically less safe. Should a bank find they fall below certain capital ratios, the hybrid becomes the first line of defence, and will not pay out. These risks need to be understood.

Searching for new capital when a business is distressed, and time is of the essence, is ideally to be avoided. And we want to minimise the risk that the taxpayer has to come to the rescue. With that in mind, the post-crisis regulatory framework has built mechanisms that trigger automatic corrective action to help restore a firm’s capital when it has been diminished. There is a lot of discussion and debate on the merits of so-called bail-inable instruments and bail-in powers, including in response to the FSI’s third recommendation that APRA implement a framework for recapitalisation capacity sufficient to facilitate the orderly resolution of an Australian ADI and minimise taxpayer support. But the idea of bail-in is not something completely new: certain recapitalisation mechanisms already exist in the Australian framework. Examples include:

the use of the capital conservation buffer, which imposes increasing limitations on a ADI’s ability to make discretionary distributions to capital providers and employees as the ADI approaches its minimum regulatory requirements;

the trigger that exists in Additional Tier 1 instruments (often referred to as ‘hybrids’) that provide for the instrument to be written off, or converted to equity,
in the event that an ADI’s capital ratio falls below 5.125 per cent; and

the point of non-viability trigger in both Additional Tier 1 and Tier 2 instruments, which provides for the instruments to be written off or converted to equity in the event that APRA considers that the ADI would become non-viable without such action (or some other form of support).

These latter two recapitalisation mechanisms, in particular, are designed to provide some ‘breathing space’ to allow for orderly resolution. They are not designed to deliver resurrection, but more modestly to provide scope for an ADI’s services to customers to continue while new owners and managers are being put in place. Strengthening this by increasing loss absorption and recapitalisation capacity further, as recommended by the FSI, remains a work in progress and likely to take some time to complete. We are, as I have said elsewhere, hastening slowly in response to that recommendation given the importance of getting the policy settings right.

However, the new mechanisms that have already been instituted within existing capital instruments are a very important part of the new regulatory framework. Viewing these capital instruments as simply higher-yielding substitutes for vanilla fixed-interest investments, let alone deposits, is something to be counselled against, since from APRA’s perspective holders of these instruments are providing the important first lines of defence that we can call into action, in some instances even ahead of shareholders, to aid an orderly resolution.

Capital Is Not Enough – APRA

In a speech by APRA Chairman Wayne Byres, “Finding success in failure” delivered in Sydney today at the Actuaries Institute conference, ‘Banking on Capital’, he discusses capital standards for authorised deposit-taking institutions (ADI’s) and why a sole reliance on capital to deliver financial stability is an unwise strategy:

‘When we judge a bank’s capital to be high or low, or something in the middle, we are making a judgement that takes into account a range of issues that impact on bank risk profiles: funding and liquidity, asset quality, governance, risk management and risk culture, to name a few, all come into the equation in some way or another.’

‘To attempt to provide the community with an iron clad guarantee that nothing can go awry would require severe limitation on the risk-taking ability of the banking system, and prevent it from fulfilling the vital and productive roles that it plays in intermediating between borrowers and lenders and facilitating the smooth functioning of payments throughout the economy. Put simply, a zero failure regime is not desirable.’

‘If we accept that failures, while hopefully still reasonably rare, are nevertheless inevitable, then preparation to minimise their impact is an essential investment.’

‘Planning and investing to facilitate their own demise is something that financial firms inevitably struggle to do, so APRA will be reinforcing its expectations in relation to ADI’s [Financial Claims Scheme (FCS)] testing programs in the near future, with a view to ensuring there is genuine readiness to activate the FCS if it is ever needed.’

APRA, along with our colleagues amongst the Council of Financial Regulators, has spent a great deal of time in recent years looking in a fairly hard-nosed way at how well Australia stacks up against these preconditions. The conclusion was somewhat mixed: there are no glaring deficiencies, but a number of areas for improvement.

The importance of active supervision, and a willingness to intervene where appropriate, were some of the hard lessons that APRA took to heart following the HIH episode. Justice Owen found APRA under-resourced to identify problems, and slow to respond to them once found. These were fair conclusions, and APRA worked hard under my predecessor to build both its capacity and conviction. Fifteen years on from HIH, efforts to further improve our supervision – to identify risks early and respond promptly – remain at the forefront of our latest strategic plan, and I expect they will always feature prominently in APRA’s priorities.

When it comes to powers to intervene, the FSI’s Final Report noted there are some gaps and deficiencies in the Australian statutory framework for crisis management and resolution when compared with international standards.⁶ This includes the need for such things as broader investigation powers; strengthened directions powers; improved group resolution powers; enhanced powers to deal with branches of foreign banks; and more robust immunities to statutory and judicial managers. In his speech last week, the Treasurer noted the Government’s intention to make improvements in this area, which we see as a very valuable (and low cost) investment in the stability in the financial system.

Crisis planning is critical. Last year at this event I spoke about our plans for recovery and resolution planning. During the past year, I’m pleased to say larger ADIs have submitted new plans based on updated guidance issued by APRA, and we are now reviewing and benchmarking the plans in order to highlight areas of better practice that will further increase the credibility of plans in subsequent iterations.⁷ On resolution planning, more detailed work is also underway with specific firms to consider the planning required to ensure that APRA is able to use our resolution powers when needed. Our focus here is on the assessment of critical functions, intra-group dependencies such as critical shared services, and the identification of potential barriers to resolvability.

No matter how good the plan, however, stabilising and restructuring a financial firm that is no longer viable in its current form is rarely going to be a quick and easy exercise. So it is important that, while a resolution plan is being implemented, the firm’s critical functions can be maintained so as to reduce potential losses and minimise the disruption to the broader financial system. Key to doing this is that the firm has the financial resources to allow it to continue to operate while its business is reorganised.

Investment Loans On The Rise

The latest ADI Property Exposures data from APRA to Jun 2016 highlights that interest only loans, and investment property loans are on the rise, along with continued growth in the overall loan book and growth in broker originated loans. However, there are some interesting moving parts as we look across the various ADI’s.

Overall housing loans were up 8.1% compared with June 2015, to $1.44 trillion. The number of housing loans grew 3.7% to 5.62 million loans and the average loan balance rose 4.6% to $252,000. New loans approved in the quarter were $98.4 billion, up 2.1%.

Looking first at loan stock, overall, the mix of investment loans is at around 35% of the total, down from 39% a year ago, reflecting loan reclassification and business mix. We see a slight rise in interest-only mortgages, and a stronger rise in loans with offset facilities.

Looking at the flow of new mortgages, we see a rise in the proportion of new loans for investment purposes, and a rise also in overall loan flows by value.

By value, a greater proportion of loans are being originated by third party (broker) channels, and again we see the rise in interest only loans. There remains a small proportion approved outside normal criteria, but low documentation loans are almost non-existent among ADI’s.

The LVR mix also tells an important story. More loans are being written at lower LVR levels, with the number above 90% falling considerably. More than half are in the range 60-80%, reflecting the refinancing of existing loans as lenders battle for relative share.

If we delve into the differences by lender type, we see that building societies are writing the largest proportion of below 60% LVR loans.

As a result, their loans in higher groups remain below the other lenders.

In the 80-90% LVR range, foreign banks are lending a larger proportion, relative to the other lenders.

Over 90% LVR, and these would generally be the more risky loans, we see the volume falling, with foreign banks lending the least.

Turning to investment loans by lender type, the major banks are lending more than other types of ADI, in percentage terms, well ahead of other domestic banks as well as credit unions and building societies. In the last quarter, major banks grew their books more than in the previous quarter.

Loans approved outside serviceability are down, but major banks are still lending more loans outside normal terms – reflecting competition in the sector and a need to write business. Credit unions have fallen back into line from their peak last year.

Foreign banks have more of their loans originated by brokers, followed by the other non-major domestic banks. Credit unions are the least likely to use brokers.

Finally, we see that the major banks are writing a larger share of interest only loans. Non-major banks appear to have ratcheted down their interest only lending, though foreign banks are on the up.

So, overall what can we conclude? First, loans are still being written, and there is strong competition across the sector. Major banks are growing their books the strongest. The volume of investment loans is rising, and more loans are being originated by brokers and third party channel. We are seeing the regulator in action, as the number of high-LVR loans are down. However, we think more intervention is still required to tame the home lending beast.

Also, bear in mind that some of the high LVR and non-conforming “slack” are being taken up by the non-bank sector. These loans do not form part of the APRA report, or supervision.