2013

ANZ Basel III Pillar 3 disclosure+

December 2013

BASEL IIIPILLAR 3 DISCLOSURE
BASEL IIPILLAR 3 DISCLOSURE

QUARTER ENDED 31 DECEMBER 2013
APS 330: PUBLIC DISCLOSURE

1ANZ Basel III Pillar 3 disclosure

December 2013

Important noticeThis document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) tomeet its disclosure obligations under the Australian Prudential Regulation Authority (APRA) ADI
Prudential Standard (APS) 330: Public Disclosure.
This disclosure was prepared as at 31 December 2013. ANZ has a continuous disclosure policy, underwhich ANZ will immediately notify the market of any material price sensitive information concerning
the Group, in accordance with legislative and regulatory disclosure requirements.

1

ANZ Basel III Pillar 3 disclosure

December 2013

Scope of application
Top corporate entity
The top corporate entity in the reporting group is Australia and New Zealand Banking Group Limited.

Table 3

Capital adequacy - Capital ratios and Risk Weighted Assets 1
Dec 13$M

Basel IIISep 13$M

Jun 13$M

Corporate

124,250

121,586

123,753

Sovereign

4,360

4,360

4,638

Bank

21,701

16,27017,584

Residential Mortgage

49,39647,55946,249Qualifying Revolving Retail

7,167

7,219

7,260

Other Retail25,83924,32823,742

232,713

221,322

223,226

28,35927,64027,436

Corporate

24,281

19,285

18,175Residential Mortgage

2,081

1,922

1,831

Qualifying Revolving Retail

1,819

1,728

1,886

Other Retail

1,070

985

1,005

29,251

23,92022,897

Credit Valuation Adjustment2 and Qualifying Central Counterparties3

9,170

8,501

9,506

Credit risk weighted assets relating to securitisation exposures

2,803

2,724

2,883

Other assets

4,083

3,544

3,537

306,379

287,651

289,485

Risk weighted assets (RWA)
Subject to Advanced Internal Rating Based (IRB) approach

Credit risk weighted assets subject to Advanced IRB approach
Credit risk Specialised Lending exposures subject to slotting approach
Subject to Standardised approach

Credit risk weighted assets subject to Standardised approach

Total credit risk weighted assets
Market risk weighted assets

5,988

4,303

5,101

Operational risk weighted assets

32,05429,02428,875Interest rate risk in the banking book (IRRBB) risk weighted assets
Total risk weighted assets

18,264

18,287

17,323362,685

339,265

340,784

8.0%

Capital ratios (%)
Level 2 Common Equity Tier 1 capital ratio

7.9%

8.5%

Level 2 Tier 1 capital ratio

9.6%

10.4%

9.5%

Level 2 Total capital ratio

11.2%

12.2%

11.4%

Credit Risk Weighted Assets (CRWA)
Total CRWA increased $18.7 billion (6.5%) from September 2013 to $306.4 billion at December 2013, including a$5.0 billion increase due to foreign currency movements. Portfolio growth contributed a further $11.0 billion, withgrowth in the Institutional portfolio contributing to the increase in the AIRB Bank and Corporate Asset Classes andgrowth in Australian mortgages portfolio contributing to the increase in the AIRB Residential Mortgage Asset Class.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
Market Risk RWA increased $1.7 billion (39.2%) to $6.0 billion in line with increased levels of Traded Market Risk.
The increases are distributed across a variety of instruments and portfolios.
The increase in Operational Risk RWA is reflective of our business growth and recognises global and local industry
trends.

1

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

2

Credit Value Adjustment (CVA) is the capital charge on over the counter (OTC) derivative assets.

3

Qualifying Central Counterparties (QCCP’s) exposures arising from over the counter (OTC) derivatives, exchangetraded derivatives and securities financing transactions are subject to refined capital requirements.

2

ANZ Basel III Pillar 3 disclosure

Table 4

December 2013

Credit risk exposures

Table 4(a) part (i): Period end and average Exposure at Default 4 5
Dec 13

Exposureat Default$M

Average
Exposureat Default forthree months$M

Individual
provision
charge forthree months$M

Write-offs forthree months$M

124,250

235,007229,547

4

90

4,360

87,38380,615--

Bank

21,701

113,981

108,309--

Residential Mortgage

49,396282,271

278,513

3

8

Qualifying Revolving Retail

7,167

21,19921,187

51

70

Other Retail25,83937,80637,42079

89

232,713

777,647755,591137

257

28,35932,87732,475(2)

16

Corporate

24,281

26,181

22,9693

3

Residential Mortgage

2,081

5,670

5,431

1

8

Qualifying Revolving Retail

1,819

1,812

1,767

5

11

Basel III
Risk Weighted
Assets$M

Corporate
Sovereign

Advanced IRB approach

Total Advanced IRB approach

Specialised LendingStandardised approach

Other Retail
Total Standardised approach

Credit Valuation Adjustment andQualifying Central Counterparties
Total

1,070

1,064

1,022

13

16

29,251

34,72731,189

22

38

9,170

6,976

6,023

-

-

299,493852,227825,278

157

311

4
Exposure at Default in Table 4 includes Advanced IRB, Specialised Lending and Standardised exposures, however
does not include Securitisation, Equities or Other Assets exposures. Exposure at Default in Table 4 is gross of credit
risk mitigation such as guarantees, credit derivatives, netting and financial collateral.
5
Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the endof each three month period.

3

ANZ Basel III Pillar 3 disclosure

December 2013

Sep 13

Exposureat Default$M

Average
Exposureat Default forthree months$M

Individual
provision
charge forthree months$M

Write-offs forthree months$M

121,586

224,087

215,887

168

152

4,360

73,84675,922--

Bank

16,270102,636

102,504--

Residential Mortgage

47,559274,755

267,154

9

19

Qualifying Revolving Retail

7,219

21,17421,06353

72

Other Retail24,32837,034

36,111

79

99

221,322733,532

718,641

309

342

27,64032,07232,197

6

21

Corporate

19,28519,756

18,373

8

63

Residential Mortgage

1,922

5,191

4,699

3

2

Qualifying Revolving Retail

1,728

1,721

1,892

(3)

1

985

980

1,111

11

12

23,92027,64826,075

19

78

8,501

5,069

3,293

-

-

281,383

798,321780,206

334

441

Individual
provision
charge forthree months$M

Write-offs forthree months$M

Basel III
Risk Weighted
Assets$M

Corporate
Sovereign

Advanced IRB approach

Total Advanced IRB approach

Specialised LendingStandardised approach

Other Retail
Total Standardised approach

Credit Valuation Adjustment andQualifying Central Counterparties
Total

Jun 13Basel III
Risk Weighted
Assets$M

Exposureat Default$M

Average
Exposureat Default forthree months$M

Corporate

123,753

225,561

216,624

57

88

Sovereign

4,638

83,10280,550--Bank

17,584

121,287

111,830--

Residential Mortgage

46,249267,421

263,487

14

32

Qualifying Revolving Retail

7,260

21,05621,00462

80

Other Retail

23,74235,98735,58787

89

223,226

754,414729,082220

289

27,436

31,54531,933-30

Corporate

18,175

17,96817,47912

8

Residential Mortgage

1,831

4,923

4,565

1

3

Qualifying Revolving Retail

1,886

1,879

1,971

(4)

2

Other Retail

1,005

999

1,121

9

20

22,89725,76925,136

18

33

9,506

4,766

3,141

-

-

283,065

816,494

789,292238

352

Advanced IRB approach

Total Advanced IRB approach

Specialised LendingStandardised approach

Total Standardised approach

Credit Valuation Adjustment andQualifying Central Counterparties
Total

4

ANZ Basel III Pillar 3 disclosure

December 2013

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

Portfolio TypeDec 13$M

Sep 13$M

Jun 13$M

Average for thequarter ended
Dec 13$M

Cash and liquid assets

50,00938,76747,76244,388Contingents liabilities, commitments, andother off-balance sheet exposures

142,518

133,668

133,304

138,093

Derivatives

96,91890,368103,492

93,643Due from other financial Institutions

13,061

11,991

19,975

12,526

Investment Securities

25,61324,20723,48424,910

Net Loans, Advances & Acceptances

486,905

468,000

457,813477,453

Other assets

6,429

2,956

4,128

4,693

Trading Securities

30,77428,364

26,53629,569Total exposures852,227

798,321816,494825,275

5

ANZ Basel III Pillar 3 disclosure

December 2013

Table 4(b): Impaired asset 6 7, Past due loans 8, Provisions and Write-offs
Dec 13
Impairedloans/
facilities$M

Impairedderivatives$M

Past dueloans ≥
90 days$M

Individual
provision
charge forthree months$M

Individual
provisionbalance$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

-

2,047

377

738

4

90

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

371

1,054

129

3

8

Qualifying Revolving Retail

-

79

-

-

51

70

Other Retail

-

367

198

210

79

89

Total Advanced IRB approach

-

2,864

1,629

1,077

137

257

59

743

94

116

(2)

16

Corporate

-

156

26

97

3

3

Residential Mortgage

-

44

10

7

1

8

Qualifying Revolving Retail

-

87

-

52

5

11

Specialised Lending

Portfolios subject to Standardised approach

Other Retail

-

58

3

26

13

16

Total Standardised approach

-

345

39

182

22

38

Credit Valuation Adjustment andQualifying Central Counterparties

-

-

-

-

-

-

59

3,952

1,762

1,375

157

311

Total

6
Impaired derivatives is net of credit valuation adjustment (CVA) of $78 million, being a market value based
assessment of the credit risk of the relevant counterparties (September 2013: $93 million; June 2013: $110 million).
7

Impaired loans / facilities include restructured items of $329 million for customer facilities in which the originalcontractual terms have been 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 materiallybeyond those typically offered to new facilities with similar risk (September 2013: $341 million; June 2013: $536
million).
8

Not well secured portfolio managed retail exposures have been reclassified from past due loans > 90 days to
impaired loans / facilities from June 2013.

6

ANZ Basel III Pillar 3 disclosure

December 2013

Sep 13
Impairedloans/
facilities$M

Impairedderivatives$M

Past dueloans ≥
90 days$M

Individual
provision
charge forthree months$M

Individual
provisionbalance$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

2

2,286

308

790

168

152

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

398

1,026

134

9

19

Qualifying Revolving Retail

-

78

-

-

53

72

Other Retail

-

390

233

213

79

99

Total Advanced IRB approach

2

3,152

1,567

1,137

309

342

65

857

97

145

6

21

Corporate

-

172

21

100

8

63

Residential Mortgage

-

44

9

14

3

2

Qualifying Revolving Retail

-

65

-

45

(3)

1

Other Retail

-

58

4

26

11

12

Total Standardised approach

-

339

34

185

19

78

Credit Valuation Adjustment andQualifying Central Counterparties

-

-

-

-

-

-

67

4,348

1,698

1,467

334

441

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Specialised Lending

Portfolios subject to Standardised approach

Total

Jun 13

Impairedloans/
facilities$M

Impairedderivatives$M

Past dueloans ≥
90 days$M

Portfolios subject to Advanced IRB approach
Corporate

9

2,228

289

757

57

88

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

427

989

144

14

32

Qualifying Revolving Retail

-

90

-

-

62

80

Other Retail

-

391

240

211

87

89

Total Advanced IRB approach

9

3,136

1,518

1,112

220

289

66

937

103

157

-

30

Corporate

2

281

37

161

12

8

Residential Mortgage

-

17

11

13

1

3

Qualifying Revolving Retail

-

67

-

48

(4)

2

Other Retail

-

51

4

28

9

20

Total Standardised approach

2

416

52

250

18

33

77

4,489

1,673

1,519

238

352

Specialised Lending

Portfolios subject to Standardised approach

Total

7

ANZ Basel III Pillar 3 disclosure

December 2013

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 9
Dec 13Specific Provision
Balance$M

General Reserve for
Credit Losses
$M

Total
$M

Collective Provision

339

2,617

2,956

Individual Provision

1,375

-

Total Provision for Credit Impairment

1,375
4,331

Sep 13Specific Provision
Balance$M

General Reserve for
Credit Losses
$M

Total
$M

Collective Provision

346

2,541

2,887

Individual Provision

1,467

-

Total Provision for Credit Impairment

1,467
4,354

Jun 13Specific Provision General Reserve forBalance
Credit Losses$M$M
Collective Provision

368

2,524

Individual Provision

1,519

-

Total Provision for Credit Impairment

Total
$M
2,892
1,519
4,411

9
Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective
Provision 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 Individual Provision andCollective Provision, for ease of comparison with other published results.

8

ANZ Basel III Pillar 3 disclosure
Table 5

December 2013

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset
type and facility 10
Dec 13
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Residential mortgage

-

2,225

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

2,225

-

-

Securitisation activity by underlying asset type

Recognised gainor loss on sale
$M

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

454

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(150)

Other

-

-

-

-

Total

-

-

-

304

Sep 13
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Recognised gainor loss on sale
$M

Residential mortgage

-

456

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

456

-

-

Securitisation activity by underlying asset type

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

661

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

150

Other

-

-

-

589

Total

-

-

-

1400

10

Activity represents net movement in outstandings.

9

ANZ Basel III Pillar 3 disclosure

December 2013
Jun 13
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Recognised gainor loss on sale
$M

Residential mortgage

-

577

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

577

-

-

Securitisation activity by underlying asset type

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

(103)

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(30)

Other

-

-

-

596

Total

-

-

-

463

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

Securitisation activities:
ANZ’s key securitisation activities are:
• Securitisation of ANZ originated assets (including self-securitisation) – use of securitisation as afunding, liquidity and capital management tool which may or may not involve the transfer of credit
risk i.e. may or may not provide regulatory capital relief.
• Securitisation of third-party originated assets.
• Provision of facilities and services to securitisations or resecuritisations (where the underlying assets
may be ANZ or third-party originated) e.g. liquidity, funding derivatives and/or credit support,
structuring and arranging services, conduit management and (via ANZ Capel Court Limited) trust
management services.
• Investment in securities - ANZ may purchase notes issued by securitisation programmes.

10

ANZ Basel III Pillar 3 disclosure

December 2013

Table 5(b) part (i): Banking Book – Exposure at Default by exposure type

Dec 13$M

Securitisation exposure type - On balance sheet

Sep 13$M

Jun 13$M

Liquidity facilities

-

-

-

Funding facilities

6,735

5,806

5,124

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,890

3,040

2,859

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

429

589

596

Total

10,054

9,435

8,579

Securitisation exposure type - Off balance sheet

Dec 13$M

Sep 13$M

Jun 13$M

Liquidity facilities

124

113

119

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

124

113

119

Dec 13$M

Sep 13$M

Jun 13$M

Total Securitisation exposure type
Liquidity facilities

124

113

119

Funding facilities

6,735

5,806

5,124

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,890

3,040

2,859

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

429

589

596

Total

10,178

9,548

8,698

11

ANZ Basel III Pillar 3 disclosure

December 2013

Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type

Dec 13$M

Sep 13$M

Jun 13$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

11

21

2

Protection provided

-

-

-

Other

-

-

-

Total

11

21

2

Dec 13$M

Sep 13$M

Jun 13$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

-

-

Dec 13$M

Sep 13$M

Jun 13$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

11

21

2

Protection provided

-

-

-

Other

-

-

-

Total

11

21

2

Securitisation exposure type - On balance sheet

Securitisation exposure type - Off balance sheet

Total Securitisation exposure type12

ANZ Basel III Pillar 3 disclosure

December 2013

Glossary
Collective provision (CP)Collective provision is the provision for credit losses that are
inherent in the portfolio but not able to be individually
identified. A collective provision may only be recognised when aloss event has already occurred. Losses expected as a result of
future events, no matter how likely, are not recognised.

Credit exposure

The aggregate of all claims, commitments and contingent
liabilities arising from on- and off-balance sheet transactions (inthe banking book and trading book) with the counterparty orgroup of related counterparties.

Credit risk

The risk of financial loss resulting from the failure of ANZ’scustomers and counterparties to honour or perform fully theterms of a loan or contract.

Credit Valuation Adjustment (CVA)

Over the life of a derivative instrument, ANZ uses a CVA modelto adjust fair value to take into account the impact ofcounterparty credit quality. The methodology calculates thepresent 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 to a CVA.

Days past due

The number of days a credit obligation is overdue, commencing
on the date that the arrears or excess occurs and accruing foreach 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 towhether the contractual amounts due, including interest andother 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 assessment of the credit risk of the relevant
counterparties.

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

Individual provision charge (IPC)

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

Individual provisions (IP)Individual provisions are assessed on a case-by-case basis for
all individually managed impaired assets taking into
consideration factors such as the realisable value of security (orother credit mitigants), the likely return available uponliquidation or bankruptcy, legal uncertainties, estimated costs
involved in recovery, the market price of the exposure insecondary markets and the amount and 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 fromfluctuations in bond, commodity or equity prices. ANZ has
grouped market risk into two broad categories to facilitate themeasurement, reporting and control of market risk:
Traded market risk - the risk of loss from changes in the valueof financial instruments due to movements in price factors forphysical 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 the banking book and the risk to the AUD
denominated value of ANZ’s capital and earnings due to foreignexchange rate movements.
13

where

the

ANZ Basel III Pillar 3 disclosure

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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 thecustomer is outside of contractual arrangements are deemed
past due. Past due facilities include those operating in excess ofapproved arrangements or where scheduled repayments areoutstanding but do not include impaired assets.

Recoveries

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

Restructured items

Restructured items comprise facilities in which the originalcontractual terms have been modified for reasons related to thefinancial difficulties of the customer. Restructuring may consistof reduction of interest, principal or other payments legally due,or an extension in maturity materially beyond those typicallyoffered to new facilities with similar risk.

Risk Weighted Assets (RWA)

Assets which are weighted for credit risk according to a set
formula (APS 112/113).

Securitisation risk

The risk of credit related losses greater than expected due to asecuritisation failing to operate as anticipated, or of the values
and risks accepted or transferred, not emerging as expected.

Write-Offs

Facilities are written off against the related provision for
impairment when they are assessed 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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