2014

BASEL IIIPILLAR 3
DISCLOSURE

AS AT 31 DECEMBER 2014
APS 330: PUBLIC DISCLOSURE

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 2014. 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

Table 3

December 2014

Capital adequacy - Capital ratios and Risk Weighted Assets
Dec-14$M

Sep-14$M

Jun-14$M

Corporate

136,776

129,087

124,835

Sovereign

5,216

4,923

4,681

Bank

21,893

20,32920,846

Residential Mortgage

50,95250,06850,821

Qualifying Revolving Retail

7,595

7,546

7,036

Other Retail30,866

26,85826,711

253,298

238,811

234,930

Credit risk Specialised Lending exposures subject to slotting approach 1

31,85229,50529,309Subject to Standardised approach
Corporate

26,154

23,121

25,054

Residential Mortgage

2,463

2,344

1,996

Qualifying Revolving Retail

1,998

1,908

1,796

Other Retail

1,130

1,081

1,066

31,74528,45429,912Credit Valuation Adjustment and Qualifying Central Counterparties

8,686

7,394

7,227

Credit risk weighted assets relating to securitisation exposures

1,011

1,030

1,116

Other assets

3,711

3,691

3,834

330,303308,885

306,328

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

Credit risk weighted assets subject to Advanced IRB approach

Credit risk weighted assets subject to Standardised approach

Total credit risk weighted assets
Market risk weighted assets

6,217

7,048

7,536

Operational risk weighted assets

32,862

31,96931,797

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

9,521

13,627

13,711

378,903361,529359,372

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

8.4%

8.8%

8.3%

Level 2 Tier 1 capital ratio

9.9%

10.7%

10.2%

Level 2 Total capital ratio

11.8%

12.7%

12.1%

Credit Risk Weighted Assets (CRWA)
Total CRWA increased $21.4 billion (6.9%) from September 2014 to $330.3 billion at December 2014, including $8.2
billion increase due to foreign currency movements. Growth in Institutional business contributed to the increase in
AIRB Corporate, Standardised Corporate, Specialised Lending and AIRB Bank asset classes. Growth in the Australianmortgage portfolio added further to the growth in the IRB Residential Mortgage asset class. The increase in IRB Other
Retail asset class includes a reclassification of exposures from IRB Residential Mortgage asset class.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
The increase in Operation Risk RWA is reflective of ANZ’s risk profile and our business growth.
Traded Market Risk RWA for the December quarter was $6.22 billion, a decrease of 12% from the previous quarter,with lower levels of general market risk held over the quarter.
Decrease in IRRBB RWA was due to a reduction in repricing and yield curve risk combined with an improvement inembedded gains.

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

ANZ Basel III Pillar 3 disclosure

Table 4

December 2014

Credit risk exposures

Table 4(a) part (i): Period end and average Exposure at Default 2 3

Risk Weighted
Assets$M136,776

Exposureat Default$M
262,461

Dec 14
Average
Exposureat Default forthree months$M
255,604

Sovereign

5,216

119,267

103,306-

Bank

21,893

128,466

123,678--

297,565410Advanced IRB approach
Corporate

Individual
provision
charge forthree months$M
58

Write-offs forthree months$M
47-

50,952300,724

Qualifying Revolving Retail

7,595

21,755

21,613

44

66

Other Retail30,86645,31742,381

85

123

253,298

877,990

844,147

191

246

31,85237,90436,427

11

8

Corporate

26,154

27,104

26,291

1

1

Residential Mortgage

2,463

6,889

6,724

-

-

1,998

1,990

1,945

7

12

Residential Mortgage

Total Advanced IRB approach
Specialised LendingStandardised approach

Qualifying Revolving Retail
Other Retail
Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

1,130

1,159

1,136

16

20

31,74537,14236,096

24

33

8,686

17,805

14,125--

325,581970,841

930,795

226

287

2
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.
3
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

Advanced IRB approach
Corporate

December 2014

Risk Weighted
Assets$M
129,087

Exposureat Default$M
248,746

Sep 14
Average
Exposure at
Default forthree months$M242,200

Individual
provision
charge forthree months$M
95

Write-offs forthree months
$M
208
-

Sovereign

4,923

87,34690,475-Bank

20,329118,889

114,384--

Residential Mortgage

50,068294,407

293,189

11

20

Qualifying Revolving Retail

7,546

21,471

21,211

45

65

Other Retail26,85839,44539,267

107

111

238,811

810,304

800,726

258

404

29,50534,94934,856(8)

23

Corporate

23,121

25,477

26,637

9

60

Residential Mortgage

2,344

6,559

6,055

3

2

Qualifying Revolving Retail

1,908

1,900

1,845

6

12

Total Advanced IRB approach
Specialised LendingStandardised approach

Other Retail
Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

Advanced IRB approach
Corporate

1,081

1,112

1,086

19

21

28,45435,04835,623

37

95

7,394

10,444

11,387--304,164

890,745882,592

287

522

Risk Weighted
Assets$M

Exposure at
Default$M

Jun 14
Average
Exposure at
Default forthree months$M

Individual
provision
charge forthree months$M

Write-offs forthree months$M

124,835

235,653

233,045

61

168

Sovereign

4,681

93,60384,122--

Bank

20,846

109,879

108,077--

Residential Mortgage

50,821

291,971289,693

13

7

Qualifying Revolving Retail

7,036

20,95021,03755

74

Other Retail

26,711

39,08938,815104100

234,930

791,145774,789

233

349

29,30934,762

34,3662

10

Corporate

25,054

27,79728,463(1)

1

Residential Mortgage

1,996

5,550

5,500

3

-

Qualifying Revolving Retail

1,796

1,789

1,789

5

11

Total Advanced IRB approach
Specialised LendingStandardised approach

Other Retail
Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

1,066

1,060

1,063

13

18

29,912

36,19636,815

20

30

7,227

12,32911,311--

301,378874,432

857,281

255

389

4

ANZ Basel III Pillar 3 disclosure

December 2014

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

26,816

20,866

Average for thequarter ended
Dec-14$M
18,63023,841

154,653

147,702144,212151,179

Dec-14$M

Portfolio Type
Cash
Contingents liabilities, commitments, andother off-balance sheet exposures
Derivatives

Sep-14$M

Jun-14$M

119,465

109,101

91,810114,283

Settlement Balances

37,39425,34829,31531,371

Investment Securities

30,30625,671

25,16627,989Net Loans, Advances & Acceptances

544,800

519,327

517,238

532,064

Other assets

17,8996,321

14,634

12,110

Trading Securities

39,50836,40933,427

37,958

Total exposures

970,841

890,745874,432

930,795

5

ANZ Basel III Pillar 3 disclosure

December 2014

Table 4(b): Impaired asset 4 5, Past due loans 6, Provisions and Write-offs
Dec 14

Impairedderivatives$M
Portfolios subject to Advanced IRB approach

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Corporate

-

1,334

283

573

58

47

Sovereign

-

2

1

2

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

317

1,194

112

4

10

Qualifying Revolving Retail

-

77

-

-

44

66

Other Retail

-

422

308

257

85

123

Total Advanced IRB approach

-

2,152

1,786

944

191

246

29

437

96

99

11

8

Corporate

-

98

41

55

1

1

Residential Mortgage

-

48

10

17

-

-

Qualifying Revolving Retail

-

68

-

34

7

12

Specialised Lending
Portfolios subject to Standardised approach

Other Retail

-

71

5

15

16

20

Total Standardised approach

-

285

56

121

24

33

Qualifying Central Counterparties

-

-

-

-

-

-

29

2,874

1,938

1,164

226

287

Total

4

Impaired derivatives is net of credit valuation adjustment (CVA) of $63 million, being a market value based
assessment of the credit risk of the relevant counterparties (September 2014: $46 million; March 2014: $80 million).

5

Impaired loans / facilities include restructured items of $73 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 2014: $67 million; March 2014: $60
million).

6

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 2014

Sep 14

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

2

1,398

312

574

95

208

Sovereign

-

2

13

2

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

356

1,127

116

11

20

Qualifying Revolving Retail

-

77

-

-

45

65

Other Retail

-

437

245

265

107

111

Total Advanced IRB approach

2

2,270

1,697

957

258

404

Specialised Lending

35

457

88

96

(8)

23

Corporate

-

97

31

56

9

60

Residential Mortgage

-

43

9

16

3

2

Qualifying Revolving Retail

-

70

-

35

6

12

Portfolios subject to Standardised approach

Other Retail

-

69

3

16

19

21

Total Standardised approach

-

279

43

123

37

95

Qualifying Central Counterparties

-

-

-

-

-

-

37

3,006

1,828

1,176

287

522

Total

Jun 14

Impaired
Derivatives$M

Impairedloans/
facilities$M

Past
dueloans ≥90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

10

1,617

339

691

61

168

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

357

1,221

128

13

7

Qualifying Revolving Retail

-

85

-

-

55

74

Other Retail

-

438

234

255

104

100

Total Advanced IRB approach

10

2,497

1,794

1,074

233

349

Specialised Lending

57

572

113

124

2

10

Corporate

-

142

43

93

(1)

1

Residential Mortgage

-

51

7

16

3

-

Qualifying Revolving Retail

-

68

-

36

5

11

Other Retail

-

66

3

21

13

18

Total Standardised approach

-

327

53

166

20

30

67

3,396

1,960

1,364

255

389

Portfolios subject to Standardised approach

Total

7

ANZ Basel III Pillar 3 disclosure

December 2014

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 7
Dec 14

Collective Provision

Specific Provision
Balance$M
286

General Reserve
for Credit Losses
$M
2,535

Individual Provision

1,164

-

Total Provision for Credit Impairment

Total
$M
2,821
1,164
3,985

Sep 14
Specific Provision
Balance$M

General Reserve
for Credit Losses
$M

Total
$M

Collective Provision

283

2,474

2,757

Individual Provision

1,176

-

Total Provision for Credit Impairment

1,176
3,933

Jun 14
Specific Provision
Balance$M

General Reserve
for Credit Losses
$M

Total
$M

Collective Provision

300

2,518

2,818

Individual Provision

1,364

-

Total Provision for Credit Impairment

1,364
4,182

7
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 2014

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset
type and facility 8
Dec-14
Original value securitised
ANZ
Originated$M-

ANZ Self
Securitised
$M
(69)

ANZ
Sponsored$M-

Recognized gainor loss on sale$M

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

(69)

-

-

Securitisation activity by underlying asset type
Residential mortgage-

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

(30)

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

621

Other

-

-

-

9

Total

-

-

-

600

Sep-14
Original value securitised
ANZ
Originated$M-

ANZ Self
Securitised$M
25,422ANZ
Sponsored$M-

Recognised gainor loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

25,422--

Securitisation activity by underlying asset type
Residential mortgage

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

(43)

Funding facilities

-

-

-

(722)

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

1,312
4

Other

-

-

-

Total

-

-

-

8

Activity represents net movement in outstandings.

9551

ANZ Basel III Pillar 3 disclosure

December 2014

Jun-14
Original value securitised
ANZ
Originated$M-

ANZ Self
Securitised
$M
(72)

ANZ
Sponsored$M-

Recognised gainor loss on sale$M

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

(72)

-

-

Securitisation activity by underlying asset type
Residential mortgage-

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

(43)

Funding facilities

-

-

-

-

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(93)

Other

-

-

-

-

Total

-

-

-

(136)

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 2014

Table 5(b) part (i): Banking Book – Exposure at Default by exposure type
Securitisation exposure type - On balance sheet
Liquidity facilities

Dec14
$M
-

Sep14
$M
-

Jun14
$M
-

Funding facilities

4,398

4,599

5,967

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

4,583

3,962

2,556

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

323

356

464

Total

9,304

8,917

8,987

Securitisation exposure type - Off Balance Sheet
Liquidity facilities

Dec14
$M
81

Sep14
$M
70

Jun14
$M
77

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

81

70

77

Total Securitisation exposure type
Liquidity facilities

Dec14
$M
81

Sep14
$M
70

Jun14
$M
77

Funding facilities

4,398

4,599

5,967

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

4,583

3,962

2,556

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

323

356

464

Total

9,385

8,987

9,064

11

ANZ Basel III Pillar 3 disclosure

December 2014

Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type
Dec14
$M
-

Sep 14
$M
-

Jun14
$M
-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

39

10

-

Protection provided

-

-

-

Other

-

-

-

Total

39

10

-

Dec14
$M
-

Sep 14
$M
-

Jun14
$M
-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

-

-

Dec14
$M
-

Sep 14
$M
-

Jun14
$M
-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

39

10

-

Protection provided

-

-

-

Other

-

-

-

Total

39

10

-

Securitisation exposure type - On balance sheet
Liquidity facilities

Securitisation exposure type - Off Balance Sheet
Liquidity facilities

Total Securitisation exposure type
Liquidity facilities

12

ANZ Basel III Pillar 3 disclosure

December 2014

Glossary
Basel III Credit Valuation
Adjustment (CVA) capital charge

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 thisadditional capital charge and also receive normal CRWA
treatment under Basel II principles.

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.

13

where

the

ANZ Basel III Pillar 3 disclosure

December 2014

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.

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.

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

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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ANZ Basel III Pillar 3 disclosure

December 2014

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ANZ Basel III Pillar 3 disclosure

December 201416