2021

BASEL III PILLAR
3 DISCLOSURE

AS AT 31 DECEMBER 2021
APS330: PUBLIC DISCLOSURE

Important noticeThis document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meet its disclosure
obligations under the Australian Prudential Regulation Authority (APRA) ADI Prudential Standard (APS) 330: Public
Disclosure.

1

ANZ Basel III Pillar 3 Disclosure

Table 3

December 2021

Capital adequacy - Capital Ratios and Risk Weighted Assets1
Dec 21

Sep 21

Jun 21$M$M$M

Corporate

142,829

136,298

137,358

Sovereign

10,085

9,893

8,657

Bank

9,810

9,118

9,231
110,505

Risk Weighted Assets (RWA)
Subject to Advanced Internal Rating Based (IRB) approach

Residential Mortgage

111,190

110,622

Qualifying Revolving Retail

3,598

3,723

3,618

Other Retail

19,063

19,66020,464Credit risk weighted assets subject to Advanced IRB approach

296,575

289,314289,833

Credit Risk Specialised Lending exposures subject to slotting
approach1

37,56636,97736,423

Corporate

7,263

6,632

5,791

Sovereign

255

27

35

Residential Mortgage

199

203

199

Subject to Standardised approach

Other Retail

15

17

19

Credit risk weighted assets subject to Standardised approach

7,732

6,879

6,044

Credit Valuation Adjustment and Qualifying Central Counterparties

2,909

3,270

3,636

Credit risk weighted assets relating to securitisation exposures

2,037

2,056

2,131

Other assets

4,028

4,002

4,146

350,847

342,498342,213

Total credit risk weighted assets
Market risk weighted assets

7,948

7,127

7,666

Operational risk weighted assets

48,253

48,42547,383

Interest rate risk in the banking book (IRRBB) risk weighted assets

23,87618,036

14,948430,924

416,086

412,210

Capital ratios (%)

Dec 21

Sep 21

Jun 21

Level 2 Common Equity Tier 1 capital ratio

11.6%

12.3%

12.2%

Level 2 Tier 1 capital ratio

13.5%

14.3%

14.1%

Level 2 Total capital ratio

17.4%

18.4%

18.1%

Basel III APRA level 2 CET1

Dec 21

Sep 21

Jun 21

Common Equity Tier 1 Capital

50,18651,35950,245

Total Risk Weighted Assets

430,924

416,086

412,210

Common Equity Tier 1 capital ratio

11.6%

12.3%

12.2%

Basel III APRA level 1 Extended licensed entity CET1

Dec 21

Sep 21

Jun 21

Common Equity Tier 1 Capital

44,10145,55545,424

Total Risk Weighted Assets

393,522379,387

377,876

11.2%

12.0%

12.0%

Total Risk Weighted Assets

Common Equity Tier 1 capital ratio

Credit Risk Weighted Assets (CRWA)
Total Credit RWA increased by $8.3 billion (+2.4%) from September 2021 to $350.8 billion at December 2021. The increase was mainlyin the Corporate asset class, driven by lending growth in the Institutional business.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
IRRBB RWA increased by $5.8 billion over the quarter due to a decline in IToC Embedded Gains.

1

Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing and repayment is from theasset being financed and includes specified commercial property development/investment lending and project finance.

2

ANZ Basel III Pillar 3 Disclosure
Table 4

December 2021

Credit risk exposures

Exposure at Default in Table 4 represents credit exposure net of offsets for credit risk mitigation such as guarantees,credit derivatives, netting and financial collateral. It includes Advanced IRB, Specialised Lending and Standardised
exposures, however does not include Securitisation, Equities or Other Assets exposures.
Table 4(a) part (i): Period end and average Exposure at Default 2
Dec 21
Advanced IRB approach

Risk
Weighted
Assets$M

Exposure at
Default$M

Corporate

142,829

300,272

Average
Exposure at
Default forthree months$M294,101

Sovereign

10,085274,244

260,849

-

Bank

9,810

32,211

32,123--111,190411,804

411,026

12

9

Qualifying Revolving Retail

3,598

13,717

13,74317

32

Other Retail

19,06329,34929,7234358296,575

1,061,597

1,041,565

70

113

37,566

46,24045,6408-

Corporate

7,263

7,228

6,939

-

3

Sovereign

255

491

259

-

-

Residential Mortgage

199

424

428

-

-

Other Retail

15

14

15

-

2

Total Standardised approach

7,732

8,157

7,641

-

5

Credit Valuation Adjustment andQualifying Central Counterparties

2,909

6,572

6,496

-

-

344,782

1,122,566

1,101,342

78

118

Residential Mortgage

Total Advanced IRB approach
Specialised Lending

Individual
provision
charge forthree months$M(2)

Write-offs
for threemonths$M-

14Standardised approach

Total

2

Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each three month
period.

3

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 4(a) part (i): Period end and average Exposure at Default (continued)
Sep 21
Advanced IRB approach

Risk
Weighted
Assets$M

Exposure at
Default$M

Corporate136,298

287,932

Average
Exposure at
Default forthree months$M282,878

Sovereign

9,893

247,455

254,500

-

Bank

9,118

32,03532,198--110,622410,249

409,345(10)11

Qualifying Revolving Retail

3,723

13,76913,88320

33

Other Retail

19,66030,09630,26424

70

289,314

1,021,536

1,023,068

50

156

36,97745,03944,676(5)-

Corporate

6,632

6,649

6,229

2

-

Sovereign

27

27

31

-

-

Residential Mortgage

203

431

426

1

1

Other Retail

17

16

18

-

-

Total Standardised approach

6,879

7,123

6,704

3

1

Credit Valuation Adjustment andQualifying Central Counterparties

3,270

6,420

8,046

-

-

336,440

1,080,118

1,082,494

48

157

Risk
Weighted
Assets$M

Exposure at
Default$M

Individual
provision
charge forthree months$M(30)

Write-offs
for threemonths$M-

Residential Mortgage

Total Advanced IRB approach
Specialised Lending

Individual
provision
charge forthree months$M
16

Write-offs
for threemonths$M-

42Standardised approach

Total

Jun 21
Advanced IRB approach

Corporate

137,358

277,824

Average
Exposure at
Default forthree months$M274,286

Sovereign

8,657

261,545244,684

-

Bank

9,231

32,36033,881--

110,505

408,441

406,996

7

10

Qualifying Revolving Retail

3,618

13,997

14,061

14

27

Other Retail

20,46430,431

30,66028

53289,833

1,024,598

1,004,568

19

127

36,42344,31343,908--

Corporate

5,791

5,808

6,127

2

2

Sovereign

35

35

52

-

-

Residential Mortgage

199

421

422

-

-

Other Retail

19

19

21

-

-

Total Standardised approach

6,044

6,283

6,622

2

2

Credit Valuation Adjustment andQualifying Central Counterparties

3,636

9,672

9,932

-

-

335,936

1,084,866

1,065,030

21

129

Residential Mortgage

Total Advanced IRB approach
Specialised Lending

37

Standardised approach

Total

4

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 4(a) part (ii): Exposure at Default by portfolio type3

Dec 21

Sep 21

$M

$M

$M

$M

Cash

159,941

133,269

136,806

146,605

Contingents liabilities, commitments, and other offbalance sheet exposures
Derivatives

184,178

175,410

175,574

179,794

40,09240,93743,086

40,515

32

138

13

85

Investment Securities

76,56079,346

87,133

77,953

Net Loans, Advances & Acceptances

624,188

Portfolio Type

Settlement BalancesJun 21

Average for thequarter ended
Dec 21

630,426

617,951

607,377

Other assets

8,628

8,390

10,197

8,509

Trading Securities

22,70924,677

24,68023,693

Total exposures

1,122,566

1,080,118

1,084,866

1,101,342

3

Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each three month
period.

5

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 4(b): Impaired asset4 5, Past due loans6, Provisions and Write-offs
Dec 21
Impairedderivatives$M

Impairedloans/
facilities
$M

Past
due
loans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthreemonths$M

Writeoffs
for threemonths$M

Portfolios subject to Advanced IRB
approachCorporate

7

1,027

216

327

(2)

14

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

353

2,126

99

12

9

Qualifying Revolving Retail

-

35

-

-

17

32

Other Retail

-

295

366

192

43

58

Total Advanced IRB approach

7

1,710

2,708

618

70

113

Specialised Lending

-

110

20

22

8

-

Corporate

-

107

77

38

-

3

Residential Mortgage

-

10

42

5

-

-

Other Retail

-

9

-

3

-

2

Total Standardised approach

-

126

119

46

-

5

Qualifying Central Counterparties

-

-

-

-

-

-

Total

7

1,946

2,847

686

78

118

Portfolios subject to Standardised approach4

Impaired derivatives are net of credit valuation adjustment (CVA) of $1 million, being a market value based assessment of the credit
risk of the relevant counterparties (September 2021: $1 million; June 2021: $1 million).

5

Impaired loans / facilities include restructured items of $392 million for customer facilities in which the original contractual terms havebeen modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal
or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk
(September 2021: $355 million; June 2021: $334 million).

6
For regulatory reporting not well secured portfolio managed retail exposures have been reclassified from past due loans ≥ 90 days to
impaired loans / facilities.

6

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 4(b): Impaired asset, Past due loans, Provisions and Write-offs (continued)
Sep 21
Impairedderivatives$M

Impairedloans/
facilities
$M

Past
due
loans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthreemonths$M

Writeoffs forthreemonths$M

Corporate

11

1,083

217

338

16

42

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

363

2,214

93

(10)

11

Qualifying Revolving Retail

-

33

-

-

20

33

Other Retail

-

328

401

187

24

70

11

1,807

2,832

618

50

156

-

66

35

13

(5)

-

Corporate

1

119

94

46

2

-

Residential Mortgage

-

10

44

6

1

1

Portfolios subject to Advanced IRB approach

Total Advanced IRB approach
Specialised Lending
Portfolios subject to Standardised approach

Other Retail

-

11

-

4

-

-

Total Standardised approach

1

140

138

56

3

1

Qualifying Central Counterparties

-

-

-

-

-

-

12

2,013

3,005

687

48

157

Impairedderivatives$M

Impairedloans/
facilities
$M

Past
due
loans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthreemonths$M

Writeoffs forthreemonths$M

Corporate

-

1,175

229

350

(30)

37

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

412

2,372

113

7

10

Qualifying Revolving Retail

-

35

-

-

14

27

Other Retail

-

357

412

209

28

53

Total Advanced IRB approach

-

1,979

3,013

672

19

127

Specialised Lending

-

75

47

18

-

-

Corporate

1

127

67

43

2

2

Residential Mortgage

-

10

29

6

-

-

Other Retail

-

10

-

4

-

-

Total Standardised approach

1

147

96

53

2

2

Qualifying Central Counterparties

-

-

-

-

-

-

Total

1

2,201

3,156

743

21

129

Total

Jun 21

Portfolios subject to Advanced IRB approach

Portfolios subject to Standardised approach

7

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 7
Dec 21

Collectively Assessed Provisions for Credit Impairment

Specific Provision
Balance$M
423

General Reserve for
Credit Losses
$M
3,635

686

-

686

1,109

3,635

4,744

Specific Provision
Balance$M
436

General Reserve for
Credit Losses
$M
3,759

687

-

687

1,123

3,759

4,882

Specific Provision
Balance$M
440

General Reserve for
Credit Losses
$M
3,807

743

-

743

1,183

3,807

4,990

Individually Assessed Provisions
Total Provision for Credit Impairment

Total
$M
4,058

Sep 21

Collectively Assessed Provisions for Credit Impairment
Individually Assessed Provisions
Total Provision for Credit Impairment

Total
$M
4,195

Jun 21

Collectively Assessed Provisions for Credit Impairment
Individually Assessed Provisions
Total Provision for Credit Impairment

7

Total
$M
4,247

Due to definitional differences, there is a variation in the split between ANZ’s Individually and Collectively Assessed Provisions for Credit
Impairment for accounting purposes and the Specific Provision and General Reserve for Credit Losses (GRCL) for regulatory purposes.
This does not impact total provisions, and essentially relates to the classification of collectively assessed provisions on defaulted accounts.
The disclosures in this document are based on Individually and Collectively Assessed Provisions for Credit Impairment, for ease ofcomparison with other published results.

8

ANZ Basel III Pillar 3 Disclosure
Table 5

December 2021

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset type andfacility 8

Securitisation activity by underlying asset
type

ANZ Originated$M

Residential mortgage

Dec 21
Original value securitised
ANZ Self
ANZ Sponsored
Securitised
$M
$M

(84)

(287)

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(84)

(287)

-

-

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities-

Funding facilities(299)

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

362

Other

2

Total

59

Securitisation activity by underlying asset
type
Residential mortgage

ANZ Originated$M

Sep 21
Original value securitised
ANZ Self
ANZ Sponsored
Securitised$M$M

Recognised gainor loss on sale
$M

(98)

2,456

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(98)

2,456

-

-

Securitisation activity by facility provided

Notional amount$M

Liquidity facilities-

Funding facilities(600)

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

8

Recognised gainor loss on sale
$M

151

Other

3

Total

(446)

Activity represents net movement in outstanding.

9

ANZ Basel III Pillar 3 Disclosure

Securitisation activity by underlying asset
type
Residential mortgage

December 2021

ANZ Originated$M

Jun 21
Original value securitised
ANZ Self
ANZ Sponsored
Securitised$M$M

Recognised gainor loss on sale
$M

(93)

2,286

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(93)

2,286

-

-

Securitisation activity by facility provided

Notional amount$M

Liquidity facilities-

Funding facilities
Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

53

Other

6

Total

59

Table 5(a) part (ii): Trading Book - Summary of current period's activity by underlying asset type andfacility
No assets from ANZ's Trading Book were securitised during the reporting period.

10

ANZ Basel III Pillar 3 Disclosure

December 2021

Table 5(b) part (i): Banking Book: Securitisation - Regulatory credit exposures by exposure type

Securitisation exposure type - On balance
sheet
Liquidity facilities
Funding facilities

Dec 21

Sep 21

Jun 21

$M

$M

$M

-

-

-

7,144

7,696

7,955

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements
Holdings of securities (excluding trading book)Protection provided

-

-

-

2,986

2,624

2,473

-

-

-

Other

146

177

196

Total

10,276

10,497

10,624

Dec 21

Sep 21

Jun 21$M$M$M

Securitisation exposure type - Off Balance
Sheet
Liquidity facilities
Funding facilities

14

15

16

2,191

2,084

2,474

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

2,205

2,099

2,490

Dec 21

Sep 21

Jun 21

Total Securitisation exposure type

$M

$M

$M

Liquidity facilities

14

15

16

Funding facilities

9,335

9,780

10,429Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements
Holdings of securities (excluding trading book)Protection provided

-

-

-

2,986

2,624

2,473

-

-

-

Other

146

177

196

Total

12,481

12,596

13,114

Table 5(b) part (ii): Trading Book: Securitisation – Regulatory credit exposures by exposure typeNo assets from ANZ's Trading Book were securitised during the reporting period.

11

ANZ Basel III Pillar 3 Disclosure

Table 18

December 2021

Leverage ratio

The Leverage Ratio requirements are part of the Basel Committee on Banking Supervision (BCBS) Basel III capitalframework. It is a simple, non-risk based supplement or backstop to the current risk based capital requirements and isintended to restrict the build-up of excessive leverage in the banking system.
Consistent with the BCBS definition, APRA’s Leverage Ratio compares Tier 1 Capital to the Exposure Measure (expressed
as a percentage) as defined by APS 110: Capital Adequacy. APRA requires ADIs authorised to use the internal ratings
based approach to credit risk to maintain a minimum leverage ratio of 3.5% from January 2023.
The following information is the short form data disclosure required to be published under paragraph 49 of APS 330.

Capital and total exposures
20

Tier 1 capital

21

Total exposures

Dec 21

Sep 21

Jun 21$M$M$M

Mar 21$M

58,02059,473

57,91958,431

1,128,011

1,088,070

1,079,388

1,053,192

5.1%

5.5%

5.4%

5.5%

Leverage ratio
22

Basel III leverage ratio

12ANZ Basel III Pillar 3 Disclosure
Table 20

December 2021

Liquidity Coverage Ratio disclosure templateDec 21
Total
Unweighted
Value
$M

Total
WeightedValue$M

Sep 21
Total
Unweighted
Value
$M

Total
Weighted
Value$M

Liquid assets, of which:1High-quality liquid assets (HQLA)

229,565

229,748

2

Alternative liquid assets (ALA)

10,7008,025

3

Reserve Bank of New Zealand (RBNZ) securities-

22

Cash outflows
45
6
7

Retail deposits and deposits from small businesscustomersof which: stable deposits

278,347of which: less stable deposits

267,495

27,477

119,886

5,994

114,957

5,748

158,461

22,589152,538

21,729280,746

145,579

271,577

141,562

105,142

25,411

98,712

23,8409of which: operational deposits (all counterparties) anddeposits in networks for cooperative banksof which: non-operational deposits (all counterparties)

160,873

105,437

157,480

102,337

10

of which: unsecured debt

14,731

14,731

15,385

15,385

11

Secured wholesale funding

12

Additional requirements

8

13
14
15

Unsecured wholesale funding

28,583742

of which: outflows related to derivatives exposuresand other collateral requirementsof which: outflows related to loss of funding on debt
productsof which: credit and liquidity facilities

681

155,935

44,943

144,670

39,722

27,42527,42522,824

22,824---

16,898

128,510

17,518

121,846

16

Other contractual funding obligations

8,877

-

8,789

-

17
18

Other contingent funding obligations
Total cash outflows

97,704

6,359
226,206

101,203

6,006
215,448

Cash inflows
19

Secured lending (e.g. reverse repos)

12,7191,437

13,422

1,580

20

Inflows from fully performing exposures

26,663

17,78624,857

16,06821

Other cash inflows

25,95325,953

22,636

22,63622

Total cash inflows

65,33545,17660,91540,28423

Total liquid assets

240,265

237,795

24

Total net cash outflows

181,030

175,164

25

Liquidity Coverage Ratio (%)

132.7%

135.8%

66

66

Number of data points used (simple average)

BLANK

Liquidity Coverage Ratio (LCR)
ANZ’s average LCR for the 3 months to 31 December 2021 was 132.7% with total liquid assets exceeding net outflows
by an average of $59.2b.
The main contributors to net cash outflows were modelled outflows associated with the bank’s corporate and retaildeposit portfolios, offset by inflows from maturing loans. While cash outflows associated with derivatives are material,
these are effectively offset by derivative cash inflows.
ANZ has a well diversified deposit and funding base avoiding undue concentrations by investor type, maturity, market
source and currency.
ANZ monitors and manages its liquidity risk on a daily basis including LCR by geography and currency, ensuring ongoingcompliance across the network.

13

ANZ Basel III Pillar 3 Disclosure

December 2021

Glossary
ADI

Authorised Deposit-taking Institution.

Basel III Credit Valuation
Adjustment (CVA) capitalcharge

CVA charge is an additional capital requirement under Basel III for bilateralderivative exposures. Derivatives not cleared through a central
exchange/counterparty are subject to this additional capital charge and also receive
normal CRWA treatment under Basel II principles.

Collectively Assessed
Provision for Credit
Impairment

Collectively assessed provisions for credit impairment represent the Expected Credit
Loss (ECL) calculated in accordance with AASB 9 Financial Instruments (AASB 9).
These incorporate forward looking information and do not require an actual loss
event to have occurred for an impairment provision to be recognised.

Credit exposure

The aggregate of all claims, commitments and contingent liabilities arising from onand off-balance sheet transactions (in the banking book and trading book) with thecounterparty or group of related counterparties.

Credit risk

The risk of financial loss resulting from the failure of ANZ’s customers andcounterparties to honour or perform fully the terms of a loan or contract.

Credit Valuation Adjustment(CVA)

Over the life of a derivative instrument, ANZ uses a CVA model to adjust fair value
to take into account the impact of counterparty credit quality. The methodology
calculates the present value of expected losses over the life of the financial instrument
as a function of probability of default, loss given default, expected credit risk exposureand an asset correlation factor. Impaired derivatives are also subject to a CVA.

Days past due

The number of days a credit obligation is overdue, commencing on the date that thearrears or excess occurs and accruing for each completed calendar day thereafter.

Exposure at Default (EAD)

Exposure at Default is defined as the expected facility exposure at the date of default.

Impaired assets (IA)Facilities are classified as impaired when there is doubt as to whether the contractual
amounts due, including interest and other payments, will be met in a timely manner.
Impaired assets include impaired facilities, and impaired derivatives. Impaired
derivatives have a credit valuation adjustment (CVA), which is a market assessmentof the credit risk of the relevant counterparties.

Impaired loans (IL)Impaired loans comprise of drawn facilities where the customer’s status is defined as
impaired.

Individual provision charge(IPC)

Individual provision charge is the amount of expected credit losses on financial
instruments assessed for impairment on an individual basis (as opposed to on acollective basis). It takes into account expected cash flows over the lives of thosefinancial instruments.

Individually Assessed
Provisions for Credit
Impairment

Market risk

Individually assessed provisions for credit impairment are calculated in accordancewith AASB 9 Financial Instruments (AASB 9). They are assessed on a case-by-casebasis for all individually managed impaired assets taking into consideration factors
such as the realisable value of security (or other credit mitigants), the likely returnavailable upon liquidation or bankruptcy, legal uncertainties, estimated costs involved
in recovery, the market price of the exposure in secondary markets and the amountand timing of expected receipts and recoveries.
The risk to ANZ’s earnings arising from changes in interest rates, currency exchange
rates and credit spreads, or from fluctuations in bond, commodity or equity prices.
ANZ has grouped market risk into two broad categories to facilitate the measurement,
reporting and control of market risk:
Traded market risk - the risk of loss from changes in the value of financial instruments
due to movements in price factors for physical and derivative trading positions.
Trading positions arise from transactions where ANZ acts as principal with clients orwith the market.
Non-traded market risk (or balance sheet risk) - comprises interest rate risk in thebanking book and the risk to the AUD denominated value of ANZ’s capital andearnings due to foreign exchange rate movements.

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Operational risk

The risk of loss resulting from inadequate or failed internal controls or from external
events, including legal risk but excluding reputation risk.

Past due facilities

Facilities where a contractual payment has not been met or the customer is outsideof contractual arrangements are deemed past due. Past due facilities include those
operating in excess of approved arrangements or where scheduled repayments areoutstanding but do not include impaired assets.

Qualifying Central
Counterparties (QCCP)QCCP is a central counterparty which is an entity that interposes itself between
counterparties to derivative contracts. Trades with QCCP attract a more favorable risk
weight calculation.

Recoveries

Payments received and taken to profit for the current period for the amounts written
off in prior financial periods.

Restructured items

Restructured items comprise facilities in which the original contractual terms havebeen modified for reasons related to the financial difficulties of the customer.
Restructuring may consist of reduction of interest, principal or other payments legallydue, or an extension in maturity materially beyond those typically offered to new
facilities with similar risk.

Risk Weighted Assets (RWA)

Assets (both on and off-balance sheet) are risk weighted according to each asset’s
inherent potential for default and what the likely losses would be in the case ofdefault. In the case of non asset backed risks (i.e. market and operational risk), RWA
is determined by multiplying the capital requirements for those risks by 12.5.

Securitisation risk

The risk of credit related losses greater than expected due to a securitisation failingto operate as anticipated, or of the values and risks accepted or transferred, notemerging as expected.

Write-Offs

Facilities are written off against the related provision for impairment when they areassessed as partially or fully uncollectable, and after proceeds from the realisation of
any collateral have been received. Where individual provisions recognised in previous
periods have subsequently decreased or are no longer required, such impairment
losses are reversed in the current period income statement.

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