2020
BASEL III PILLAR 3DISCLOSURE

AS AT 30 JUNE 2020
APS 330: 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 3June 2020

Capital adequacy - Capital Ratios and Risk Weighted Assets1
Jun 20Mar 20Dec 19$M$M$M

Corporate

146,850

150,290

139,134

Sovereign

6,656

6,915

6,169

Bank

14,794

18,615

16,357

Residential Mortgage

106,549

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

109,500

107,351

Qualifying Revolving Retail

4,705

4,956

5,101

Other Retail24,27925,08025,678306,784

313,207298,988

38,784

41,07237,085Credit risk weighted assets subject to Advanced IRB approach
Credit Risk Specialised Lending exposures subject to slotting approach1
Subject to Standardised approach
Corporate

12,331

14,626

13,557

Residential Mortgage

214

228

214

Other Retail

38

46

48

12,583

14,90013,819Credit Valuation Adjustment and Qualifying Central Counterparties

7,786

9,679

7,817

Credit risk weighted assets relating to securitisation exposures

2,096

2,142

1,880

Other assets

4,208

4,997

4,603

372,241

385,997364,192

Credit risk weighted assets subject to Standardised approach

Total credit risk weighted assets
Market risk weighted assets

7,609

7,102

5,728

Operational risk weighted assets

46,96147,902

46,773

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

9,874

8,011

7,461

436,685

449,012424,154

Capital ratios (%)

Jun 20Mar 20Dec 19Level 2 Common Equity Tier 1 capital ratio

11.1%

10.8%

10.9%

Level 2 Tier 1 capital ratio

12.9%

12.5%

12.8%

Level 2 Total capital ratio

15.8%

15.5%

15.2%

Basel III APRA level 2 CET1

Jun 20Mar 20Dec 19Common Equity Tier 1 Capital

48,60948,331

46,359Total Risk Weighted Assets

436,685

449,012424,154

Common Equity Tier 1 capital ratio

11.1%

10.8%

10.9%

Basel III APRA level 1 Extended licensed entity CET1

Jun 20Mar 20Dec 19Total Risk Weighted Assets

Common Equity Tier 1 Capital

43,71142,962

41,849Total Risk Weighted Assets

396,235

403,766

383,575

Common Equity Tier 1 capital ratio

11.0%

10.6%

10.9%

Credit Risk Weighted Assets (CRWA)
Total CRWA decreased $13.8 billion (-3.6%) from March 2020 to $372.2 billion at June 2020. The decrease was driven
by the Institutional business across Corporate, Bank and Specialised Lending asset classes from a reduction in lending
exposures combined with the impact of foreign exchange movements across the portfolio.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
Traded Market Risk RWA increased $0.5 billion over the quarter due to increase in 10 Day VaR and Stress VaR.
Operational Risk RWA decreased $0.9 billion over the quarter driven by foreign exchange rates movements.
IRRBB RWA increased $1.8 billion over the quarter due to greater Repricing and Yield Curve Risk volatility.

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

June 2020

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
Jun 20
Advanced IRB approach

Risk
Weighted
Assets$M

Exposure at
Default$M

Corporate

146,850

Sovereign

6,656

Bank
Residential Mortgage
Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach
Specialised Lending

292,410

Average
Exposure at
Default forthree months$M
300,195

Individual
provision
charge forthree months$M
113

181,048

189,162--

14,79450,42557,037--

109,500

382,513381,297

24

16

4,705

15,314

15,721

41

54

Write-offs
for threemonths$M
241

24,27934,49934,7588462306,784

956,209

978,170

262

373

38,78446,31147,374

3-Standardised approach
Corporate

12,331

13,796

14,884(3)

10

Residential Mortgage

214

439

455

1

1

Other Retail

38

38

42

1

4

12,583

14,273

15,381

(1)

15

7,786

9,158

9,582

-

-

365,937

1,025,951

1,050,507

264

388

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
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 threemonth period.

3

ANZ Basel III Pillar 3 Disclosure

June 2020

Table 4(a) part (i): Period end and average Exposure at Default (continued)
Mar 20
Advanced IRB approach

Risk
Weighted
Assets$M

Exposure at
Default$M

Corporate

150,290

Sovereign

6,915

Bank
Residential Mortgage
Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach
Specialised Lending

307,981

Average
Exposure at
Default forthree months$M294,342

Individual
provision
charge forthree months$M
318

Write-offs
for threemonths$M

197,277

181,835--

18,61563,64959,410--107,351

380,082379,512

15

20

4,956

16,128

16,2284256

65

25,08035,01735,38673

95

313,2071,000,134

966,713448

236

41,072

48,436

46,1709-Standardised approach
Corporate

14,626

15,971

15,401

4

24

Residential Mortgage

228

471

457

-

1

Other Retail

46

46

47

-

1

14,900

16,48815,905

4

26

9,679

10,005

9,069

-

-

378,858

1,075,063

1,037,857

461

262

Risk
Weighted
Assets$M

Exposure at
Default$M

139,134

280,704

Individual
provision
charge forthree months$M
38

Write-offs
for threemonths$M

Corporate

Average
Exposure at
Default forthree months$M278,651

Sovereign

6,169

166,395

159,668

-

-

Bank

16,35755,17055,158--Residential Mortgage

106,549

378,944376,160

15

27

5,101

16,327

16,48739

57

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

Dec 19Advanced IRB approach

Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach
Specialised Lending

22

25,67835,75436,03882

101

298,988933,294922,162

174

207

37,08543,903

43,626--

Standardised approach
Corporate

13,557

14,831

13,915(9)-

Residential Mortgage

214

442

444

-

-

Other Retail

48

47

48

-

-

13,81915,32014,407

(9)

-

7,817

8,133

8,741

-

-

357,7091,000,650

988,936165

207

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

4

ANZ Basel III Pillar 3 Disclosure

June 2020

Table 4(a) part (ii): Exposure at Default by portfolio type3
Average for thequarter ended
Jun 20Jun 20Mar 20

$M

$M

$M

$M

Cash

78,611

96,86569,47187,738Contingents liabilities, commitments, and other off-balance
sheet exposures
Derivatives

174,268

170,345

164,703

172,306

52,514

61,962

48,81857,238

60

225

1

143

Investment Securities

85,79084,11277,75884,951

Net Loans, Advances & Acceptances

620,009

Portfolio Type

Settlement Balances

Dec 19609,049

630,971

607,801

Other assets

5,188

4,939

4,608

5,064

Trading Securities

20,47125,64427,49023,058

Total exposures

1,025,951

1,075,063

1,000,650

1,050,507

3
Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each threemonth period.

5ANZ Basel III Pillar 3 Disclosure

June 2020

Table 4(b): Impaired asset4 5, Past due loans6, Provisions and Write-offs
Jun 20
Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthreemonths$M

Writeoffs
for threemonths$M

Corporate

-

1,298

260

478

113

241

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

562

3,382

137

24

16

Portfolios subject to Advanced IRB approach

Qualifying Revolving Retail

-

76

-

-

41

54

Other Retail

-

471

494

264

84

62

Total Advanced IRB approach

-

2,407

4,136

879

262

373

Specialised Lending

-

117

29

25

3

-

Corporate

1

148

19

63

(3)

10

Residential Mortgage

-

9

15

5

1

1

Other Retail

-

16

-

-

1

4

Total Standardised approach

1

173

34

68

(1)

15

Qualifying Central Counterparties

-

-

-

-

-

-

Total

1

2,697

4,199

972

264

388

Portfolios subject to Standardised approach4
Impaired derivatives are net of credit valuation adjustment (CVA) of $2 million, being a market value based assessment of the credit
risk of the relevant counterparties (March 2020: $3 million; December 2019: $4 million).
5
Impaired loans / facilities include restructured items of $258 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 withsimilar risk (March 2020: $226 million; December 2019: $222 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

June 2020

Table 4(b): Impaired asset, Past due loans, Provisions and Write-offs (continued)

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Mar 20Individual
provisionbalance$M

Corporate

-

1,500

218

Sovereign

-

-

-

Bank

-

-

Residential Mortgage-

504

Individual
provision
charge forthreemonths$M

Writeoffs forthreemonths
$M

645

318

65

-

-

-

-

-

-

-

2,791

128

15

20
56

Portfolios subject to Advanced IRB approach

Qualifying Revolving Retail

-

78

-

-

42

Other Retail

-

417

425

225

73

95

Total Advanced IRB approach

-

2,499

3,434

998

448

236

Specialised Lending

-

71

27

14

9

-

Corporate

1

139

14

74

4

24

Residential Mortgage

-

10

9

7

-

1

Other Retail

-

11

5

-

-

1

Total Standardised approach

1

160

28

81

4

26

Qualifying Central Counterparties

-

-

-

-

-

-

Total

1

2,730

3,489

1,093

461

262

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Dec 19Individual
provisionbalance$M

Individual
provision
charge forthreemonths$M

Writeoffs forthreemonths$M

Corporate

-

1,013

201

390

38

22

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

489

2,743

130

15

27

Portfolios subject to Standardised approach

Portfolios subject to Advanced IRB approach

Qualifying Revolving Retail

-

66

-

-

39

57

Other Retail

-

415

401

223

82

101

Total Advanced IRB approach

-

1,983

3,345

743

174

207

Specialised Lending

-

30

31

5

-

-

Corporate

-

125

16

80

(9)

-

Residential Mortgage

-

9

6

7

-

-

Other Retail

-

20

1

-

-

-

Total Standardised approach

-

154

23

87

(9)

-

Qualifying Central Counterparties

-

-

-

-

-

-

Total

-

2,167

3,399

835

165

207

Portfolios subject to Standardised approach

7

ANZ Basel III Pillar 3 Disclosure

June 2020

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

Specific Provision
Balance$M

Jun 20General Reserve for
Credit Losses
$M

Total
$M

Collectively Assessed Provisions for Credit Impairment

538

4,110

4,648

Individually Assessed Provisions

972

-

972

1,510

4,110

5,620

Specific Provision
Balance$M

Mar 20General Reserve for
Credit Losses
$M

Total
$M

Total Provision for Credit Impairment

Collectively Assessed Provisions for Credit Impairment

473

4,028

4,501

Individually Assessed Provisions

1,093

-

1,093

Total Provision for Credit Impairment

1,566

4,028

5,594

Specific Provision
Balance$M

Dec 19General Reserve for
Credit Losses
$M

Total
$M

Collectively Assessed Provisions for Credit Impairment

425

2,902

3,327

Individually Assessed Provisions

835

-

835

1,260

2,902

4,162

Total Provision for Credit Impairment

7

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 of comparison with other published results.

8

ANZ Basel III Pillar 3 Disclosure
Table 5June 2020

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset type andfacility 8
Jun 20
Original value securitised
Securitisation activity by underlying asset
type

(207)

ANZ Self
Securitised
$M
(129)

-

Recognised gainor loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(207)

(129)

-

-

Residential mortgage

ANZ Originated$M

ANZ Sponsored$M

Securitisation activity by facility provided
Liquidity facilities

Notional amount$M-

Funding facilities(105)

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

(255)

Other

1

Total

(359)

Mar 20
Original value securitised
Securitisation activity by underlying asset
type

(118)

ANZ Self
Securitised$M
69,008-

Recognised gainor loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(118)

69,008--Residential mortgage

ANZ Originated$M

Securitisation activity by facility provided

ANZ Sponsored$M

Liquidity facilities

Notional amount$M-

Funding facilities

625

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

(180)

Other

243

Total

688

8

Activity represents net movement in outstanding.

9

ANZ Basel III Pillar 3 Disclosure

June 2020

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

Securitisation activity by underlying asset
type
Residential mortgage

ANZ Originated$M

Dec 19Original value
securitised
ANZ Self
Securitised$M

ANZ Sponsored$M

Recognised gainor loss on sale
$M

(143)

(6,221)--Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(143)

(6,221)-

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities-

Funding facilities

585

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

654

Other

25

Total

1,264

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

June 2020

Table 5(b) part (i): Banking Book: Securitisation - Regulatory credit exposures by exposure typeJun 20Mar 20Dec 19$M$M$M

Liquidity facilities

-

-

-

Funding facilities

8,801

8,799

7,052

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,142

2,397

2,577

-

-

-

Other

348

432

338

Total

11,291

11,628

9,967

Securitisation exposure type - On balance sheet

Holdings of securities (excluding trading book)Protection provided

Jun 20Mar 20Dec 19Securitisation exposure type - Off Balance Sheet

$M

$M

$M

Liquidity facilities

20

22

23

Funding facilities

1,924

1,818

1,735

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

1,944

1,840

1,758

Jun 20Mar 20Dec 19Total Securitisation exposure type

$M

$M

$M

Liquidity facilities

20

22

23

Funding facilities

10,725

10,617

8,787

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,142

2,397

2,577

-

-

-

Other

348

432

338

Total

13,235

13,468

11,725

Holdings of securities (excluding trading book)Protection provided

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

June 2020

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. APRA has not finalised a minimum Leverage Ratio requirement forAustralian ADIs, although they have proposed a minimum of 3.5% for internal ratings based approach ADIs.
The following information is the short form data disclosure required to be published under paragraph 49 of APS 330.
Jun 20Mar 20Dec 19Sep 19

$M

$M

$M

$M

Capital and total exposures
20

Tier 1 capital

21

Total exposures

56,45956,29554,17255,221

1,060,751

1,124,399

1,022,701

989,225

5.3%

5.0%

5.3%

5.6%

Leverage ratio
22

Basel III leverage ratio

12ANZ Basel III Pillar 3 Disclosure
Table 20

June 2020

Liquidity Coverage Ratio disclosure template
Total
Unweighted
Value
$M

Jun 20
Total
Weighted
Value
$M

Total
Unweighted
Value
$M

Mar 20
Total
Weighted
Value
$M

Total
Unweighted
Value
$M

Dec 19Total
Weighted
Value$M

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

176,310

178,751

158,9812

Alternative liquid assets (ALA)
Reserve Bank of New Zealand (RBNZ)
securities

44,75929,29041,402

300

4,511

5,872

3

4

Cash outflows
Retail deposits and deposits from small
business customers

224,255

23,224

208,529

21,470211,449

21,8525of which: stable deposits

96,3604,818

82,5494,127

81,912

4,096

6

of which: less stable deposits

127,895

18,406125,980

17,343

129,537

17,756

252,193

131,113232,218

127,180

211,756

115,753

7

Unsecured wholesale funding

87,016

21,10871,606

17,39865,79215,8569of which: operational deposits (allcounterparties) and deposits in
networks for cooperative banksof which: non-operational deposits(all counterparties)

152,462

97,290149,352

98,522

135,907

89,84012,715

12,715

11,26011,26010,057

10,0578

10

of which: unsecured debt

11

Secured wholesale funding

12

Additional requirements

13
14
15

of which: outflows related toderivatives exposures and othercollateral requirementsof which: outflows related to loss offunding on debt productsof which: credit and liquidity facilities

1,968

1,140

1,412

154,399

51,185

149,498

47,058140,594

38,76834,21434,214

31,15031,15022,91522,915

-

-

-

-

-

15,853

120,185

16,971

118,348

15,908

117,679

16

Other contractual funding obligations

9,724

-

11,345-

10,661-

17

Other contingent funding obligations

91,3544,754

85,3084,377

75,473

4,813

18

Total cash outflows

212,244

201,225

182,598

Cash inflows
19

Secured lending (e.g. reverse repos)

29,1691,987

36,542

2,243

27,3291,480

20

Inflows from fully performing exposures

32,161

22,43730,416

19,071

29,791

19,13021

Other cash inflows

27,07927,07924,34524,34516,031

16,03122

Total cash inflows

88,40951,50391,30345,65973,15136,641

23

Total liquid assets

221,369

212,552

206,255

24

Total net cash outflows

160,741

155,566

145,957

25

Liquidity Coverage Ratio (%)

137.7%

136.6%

141.3%

65

64

66

Number of data points used (simple
average)

Liquidity Coverage Ratio (LCR)
ANZ’s average LCR for the 3 months to 30 June 2020 was 137.7% with total liquid assets exceeding net outflows by
an average of $60.6b.
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.
The liquid asset portfolio continues to be mostly made up of HQLA securities and cash, on average 80% through thequarter.
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, ensuringongoing compliance across the network.

13

ANZ Basel III Pillar 3 Disclosure

June 2020

Glossary
ADI

Authorised Deposit-taking Institution.

Basel III Credit Valuation
Adjustment (CVA) capitalcharge

CVA charge is an additional capital requirement under Basel III for bilateral derivative
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 eventto 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 totake 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 exposure and an asset correlation factor. Impaired derivatives are also subject toa 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

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.

Market risk

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 withclients or with 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 outside ofcontractual 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 failing tooperate 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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