2021

BASEL III PILLAR
3 DISCLOSURE

AS AT 30 SEPTEMBER 2021
APS 330: PUBLIC DISCLOSURE

ANZ Basel III Pillar 3 Disclosure

September 2021

Important noticeThis document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meet its
disclosure obligations under the Australian P r u d e n t i a l Regulation Authority (APRA) ADI Prudential Standard(APS) 330: Public Disclosure.

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ANZ Basel III Pillar 3 Disclosure

September 2021

Table of Contents1
Chapter 1 – Introduction ............................................................................................................................... 3
Purpose of this document .................................................................................................................. 3
Chapter 2 - Risk appetite and governance ...................................................................................................... 4
Risk types ...................................................................................................................................... 4
Risk appetite framework ................................................................................................................... 5
Risk management governance ........................................................................................................... 5
Chapter 3 – Capital reporting and measurement .............................................................................................. 9
Chapter 4 – Capital and capital adequacy .......................................................................................................10
Table 1

Capital disclosure template ...............................................................................................10

Table 2Main features of capital instruments ..................................................................................20

Table 6

Capital adequacy .............................................................................................................20

Chapter 5 – Credit risk .................................................................................................................................24
Table 7
Table 8Credit risk – General disclosures .......................................................................................24
Credit risk – Disclosures for portfolios subject to the Standardised approach andsupervisory risk weights in the IRB approach ......................................................................40

Table 9Credit risk – Disclosures for portfolios subject to Advanced IRB approaches ............................41

Table 10Credit risk mitigation disclosures .......................................................................................51

Table 11

General disclosures for derivative and counterparty credit risk .............................................56

Chapter 6 – Securitisation ...........................................................................................................................60
Table 12Banking Book - Securitisation disclosures ...........................................................................63
Trading Book - Securitisation disclosures ............................................................................70

Chapter 7 – Market risk ................................................................................................................................70
Table 13

Market risk – Standard approach .......................................................................................71

Table 14

Market risk – Internal models approach..............................................................................72

Chapter 8 - Operational risk ..........................................................................................................................76
Table 15

Operational risk ..............................................................................................................76

Chapter 9 – Equities ...................................................................................................................................79
Table 16

Equities – Disclosures for banking book positions ................................................................79

Chapter 10 – Interest Rate Risk in the Banking Book .......................................................................................81
Table 17

Interest Rate Risk in the Banking Book ..............................................................................81

Chapter 11 – Leverage and Liquidity Coverage Ratio ........................................................................................84
Table 18

Leverage Ratio ................................................................................................................84

Table 19

Summary comparison of accounting assets vs. leverage ratio exposure measure ....................85

Table 20

Liquidity Coverage Ratio disclosure template ......................................................................86

Table 21

NSFR disclosure template .................................................................................................87

Glossary .....................................................................................................................................................89

1

Each table reference adopted in this document aligns to those required by APS 330 to be disclosed at full year.

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ANZ Basel III Pillar 3 Disclosure

September 2021

Chapter 1 - Introduction
Purpose of this document
This document has been prepared in accordance with the Australian Prudential Regulation Authority (APRA) ADI
Prudential Standard (APS) 330: Public Disclosure.
APS 330 mandates the release to the investment community and general public of information relating to capital
adequacy and risk management practices. APS 330 was established to implement Pillar 3 of the Basel Committee on
Banking Supervision’s framework for bank capital adequacy2. In simple terms, the Basel framework consists of threemutually reinforcing ‘Pillars’:
Pillar 1

Pillar 2

Pillar 3

Minimum capital requirement

Supervisory review process

Market discipline

Minimum capital requirements for
Credit Risk, Operational Risk, Market
Risk and Interest Rate Risk in the
Banking Book

Firm-wide risk oversight, Internal
CapitalAdequacy
Assessment
Process (ICAAP), consideration of
additional risks, capital buffers andtargets and risk concentrations, etc.

Regular disclosure to the market of
qualitative and quantitative aspectsofrisk
management,
capitaladequacy and underlying risk metrics

APS 330 requires the publication of various levels of information on a quarterly, semi-annual and annual basis. This
document is the annual disclosure.
Basel in ANZANZ has received accreditation for the most advanced approaches permitted under Basel for credit risk and operationalrisk, complementing its accreditation for market risk. Effective January 2013, ANZ adopted APRA requirements for BaselIII with respect to the measurement and monitoring of regulatory capital.
Verification of disclosures
These Pillar 3 disclosures have been verified in accordance with Board approved policy, including ensuring consistency
with information contained in ANZ’s Financial Report and in Pillar 1 returns provided to APRA. In addition, ANZ’s external
auditor has performed an agreed upon procedure engagement with respect to these disclosures.
Comparison to ANZ’s Financial Reporting
These disclosures have been produced in accordance with regulatory capital adequacy concepts and rules, rather thanwith accounting policies adopted in ANZ’s financial reports. As such, there are different areas of focus and measures insome common areas of disclosures. These differences are most pronounced in the credit risk disclosures, for instance:The principal method for measuring the amount at risk is Exposure at Default (EAD), which is the estimated amountof exposure likely to be owed on a credit obligation at the time of default. Under the Advanced Internal Ratings Based(AIRB) approach in APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, banks are accredited
to provide their own estimates of EAD for all exposures (drawn, commitments or contingents) reflecting the current
balance as well as the likelihood of additional drawings prior to default.



Loss Given Default (LGD) is an estimate of the amount of losses expected in the event of default. LGD is essentiallycalculated as the amount at risk (EAD) less expected net recoveries from realisation of collateral as well as any post
default repayments of principal and interest.



Most credit risk disclosures split ANZ’s portfolio into regulatory asset classes, which span different areas of ANZ’sinternal divisional and business unit organisational structure.

Unless otherwise stated, all amounts are rounded to AUD millions.

2

Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards: A Revised
Framework, 2004.

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Chapter 2 – Risk appetite and governanceRisk types: ANZ is exposed to a broad range of inter-related business risks.
Capital Adequacy risk is the risk of loss arising from ANZ failing to maintain the level of capital required by
prudential regulators and other key stakeholders (shareholders, debt investors, depositors, rating agencies etc.) tosupport ANZ's consolidated operations and risk appetite. Losses include those arising from diminished reputation, areduction in investor/counter-party confidence, regulatory non-compliance (e.g. fines and banking licence
restrictions) and an inability for ANZ to continue to do business. ANZ pursues an active approach to capitalmanagement, which is designed to protect the interests of depositors, creditors and shareholders.

Compliance risk is the risk of failure to act in accordance with laws, regulations, industry standards and codes,
internal policies and procedures and principles of good governance as applicable to ANZ’s businesses.

Conduct Risk is the risk of loss or damage arising from the failure of ANZ, its employees or agents to appropriately
consider the interests of customers, the integrity of the financial markets and the expectations of the community inconducting its business activities.

Credit risk is the risk of financial loss resulting from a counterparty failing to fulfil its obligations or from a decreasein credit quality of a counterparty resulting in a loss of value.

Market risk stems from ANZ’s trading and balance sheet activities and is the risk to ANZ’s earnings arising fromchanges in interest rates, foreign exchange rates, credit spreads, volatility, correlations or from fluctuations in bond,commodity or equity prices.

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Liquidity and Funding risk is the risk that the Group is unable to meet its payment obligations as they fall due,
including repaying depositors or maturing wholesale debt, or that the Group has insufficient capacity to fundincreases in assets.

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Operational risk is the risk of loss and/or non-compliance with laws resulting from inadequate or failed internal
processes, people and/or systems, or from external events. This definition includes legal risk, and the risk ofreputation loss, or damage arising from inadequate or failed internal processes, people and systems, but excludes
strategic risk.

Strategic risk is risks that affect or are created by an organisation’s business strategy and strategic objectives. A
possible source of loss might arise from the pursuit of an unsuccessful business plan. For example, strategic risk
might arise from making poor strategic business decisions, from the substandard execution of decisions, frominadequate resource allocation, or from a failure to respond well to changes in the business environment.

Technology risk covers the risk of loss and/or non-compliance with laws from inadequate or failed internal
processes, people and systems or systems that deliver Technology assets and services to customers and staff. The
risk includes Technology assets and services delivered or managed by third parties, and external events. An
Information Technology (IT) asset is any instance of software or hardware (includes cloud computing) that is either
owned by ANZ, or licensed to ANZ by an external entity and used in the delivery of services to customers and staff.
The risk specifically includes Information Security and Cyber Security and how information held by ANZ needs to beprotected from inappropriate modification, loss, disclosure and unavailability. The compromise of confidentiality,
integrity or availability of information assets could severely impact ANZ customers, constitute a breach of the law
and regulations, lead to financial loss or additional remediation costs, and negatively impact our reputation. The
scope of this risk includes IT assets that are managed and/or supported by a dedicated technology function within
ANZ, IT assets managed outside of the dedicated technology function by business divisions and third party service
providers used by ANZ to deliver technology services or products.

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Risk Appetite Framework
ANZ's Board is ultimately responsible for ANZ’s risk management framework, which includes the Group Risk Appetite
Statement (RAS). The Group RAS is the document which sets out the Board’s expectations regarding the degree of riskthat ANZ is prepared to accept in pursuit of its strategic objectives and plans.
The articulation of risk appetite and risk tolerances is central to the risk appetite statement. ANZ’s Group RAS conveys
the following:
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The degree of risk (risk appetite) that ANZ is prepared to accept in pursuit of its strategic objectives and plans withconsidering its shareholders’, depositors’ and customers’ interests.
For each key material risk, ANZ sets the maximum level of risk that it is willing to operate within, expressed as arisk tolerance, where appropriate. Risk tolerances translate risk appetite into operational limits for the day-to-day
management of material risks, where possible;
The approach for setting risk tolerances at an appropriate level;
The process for monitoring compliance with each risk tolerance and for taking appropriate action in the event that itis breached;
The timing and process for reviewing of the risk appetite and risk tolerances; andThe cascading and application of Group RAS to Divisions and Business Units.

Risk Management Governance
The Board is principally responsible for overseeing the establishment by Management of a sound risk management
culture with an operational structure and the necessary resources to facilitate effective risk management throughout
ANZ, and which in turn supports the ability of ANZ to operate consistently within its risk appetite and approves the risk
appetite within which management is expected to operate and including ANZ’s risk appetite statement and risk
management strategy. The following lists the Board Committees, in accordance with ANZ Accountability Map under
Banking Executive Accountability Regime (BEAR). From time to time, other ad hoc committees of the Board may beformed.
ANZ Board - is responsible for:
 Charting and monitoring the long-term implementation of ANZ’s strategies, financial objectives and organisationaland risk cultural direction (including ANZ’s purpose, values and expected behaviours);
 Monitoring compliance with regulatory requirements, ethical standards and external commitments, and theimplementation of related policies; Approving the operating plan for ANZ and endorsing ANZ’s strategic direction; Approving the operating plan; theremuneration policy; significant changes to organisational structure; the acquisition, establishment, disposal orcessation of any significant business of ANZ; Appointing and reviewing the performance (including remuneration and incentives) and succession of, the ANZ CEO
and certain senior executive appointees of the Board (Board Appointees); Approving any matters in excess of any discretions that it may have delegated from time to time to the CEO andsenior management, including in relation to credit transactions, market risk limits and expenditure; Overseeing and assessing management’s performance in achieving any strategies and budgets approved by the
Board and in monitoring and managing risk;
 Approving where practicable, the substance of any announcements to the Australian Securities Exchange in relation
to matters that have been the subject of a decision by the Board or any public statements which reflect significant
issues of ANZ policy or strategy;
 Fulfilling its function and duties under ANZ’s Fit and Proper Policy;
 Overseeing the effectiveness of workplace health and safety in the Group; Meeting with APRA on request;
 Reviewing reports from management on progress in relation to actions in ANZ’s Self-Assessment roadmap;
 Reviewing ANZ’s approach to the management of key customer matters, including customer remediation andcustomer complaints; and Approving and overseeing management’s performance in establishing ANZ’s organisational and risk cultural direction,
including ANZ’s purpose, values and expected behaviours
Risk Committee - assists the Board of Directors in: Effective discharge of its responsibilities for business, market, credit, equity and other investment (not including
strategic investments), financial, operational, compliance, liquidity and reputational risk management and for the
management of the Group’s compliance obligations; Providing an objective non-executive oversight of the implementation by management of ANZ's risk management
framework and its related operation and by enabling an institution-wide view of ANZ’s current and future risk
position relative to its risk appetite and capital strength;
 Advising the Board on ANZ's overall current and future risk appetite and risk management strategy; Overseeing management's implementation of the risk management strategy and ongoing effectiveness in seeking
to ensure that ANZ remains appropriately within its risk appetite;
 Reviewing reports from management concerning the Group’s risk management and compliance frameworks,
principles and policies, strategies, processes and controls including the discretions conferred on executive
management and executive management committees, in order to oversee the effectiveness of them and, if thought
fit, approve or vary them;5ANZ Basel III Pillar 3 Disclosure
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September 2021

Reviewing reports from management concerning key material risks (including credit, market, operational risk andcompliance) in order to oversee these risks, assess their effect on capital levels and, in all material respects, attest
to the adherence to APRA Prudential Standard CPS220 Risk Management;
Reviewing reports from management concerning credit transactions, equity and other investments beyond theapproval discretion of the CRO and other executive management, in order to consider and, if thought fit, approvethem;
Overseeing risk associated with individual high risk and non-accrual accounts (and associated provisioning);
Reviewing reports from management concerning changes anticipated for the economic, business and regulatoryenvironment and other factors considered relevant to future strategy and capital requirements, in order to monitor
them in the context of ANZ’s projected business performance and capital adequacy;
Reviewing reports from management concerning the risk implications of new and emerging risks, legislative or
regulatory initiatives and changes, organisational change and major initiatives, in order to monitor them;Constructively challenging management’s proposals and decisions on all aspects of risk management arising from
ANZ’s activities;
Reviewing the performance and setting the objectives of ANZ’s CRO and seeking to ensure the CRO has unfetteredaccess to the Board and the Risk Committee;
Reviewing reports from management concerning resolution of significant risk exposures and risk events (including
significant breaches), in order to monitor them and, if thought fit, approve them;Overseeing compliance by ANZ with applicable external obligations and significant internal polices relating to theoperation of its business;
Reviewing reports from management concerning the Group’s insurance strategy, including the coverage and limitsof the insurance policies managed at a Group level, in order to monitor them and, if thought fit, approve or varythem;
Reviewing reports from management concerning Anti Money Laundering/Counter Terrorism Financing and Sanction
external obligations and internal policies, in order to monitor them and, if thought fit, approve them;
Reviewing reports from management concerning ANZ's approach to risk and governance culture in order to oversee
scope and expected impact on organisational behaviour;
Overseeing APRA risk reporting requirements (as appropriate); andMeeting with APRA on request.

Audit Committee - assists the Board of Directors in: Overseeing and reviewing ANZ's financial reporting principles and policies, controls and procedures;
 Overseeing and reviewing the effectiveness of ANZ’s internal control and risk management framework; Overseeing and reviewing the work of Internal Audit which reports directly and solely to the Chairman of the Audit
Committee. The internal management reporting line for the Group General Manager, Internal Audit is to the CEO;
 Overseeing and reviewing the integrity of ANZ's financial statements and the independent audit thereof, and ANZ’scompliance with legal and regulatory requirements in relation thereto; Overseeing and reviewing any due diligence procedures;
 Overseeing and reviewing prudential supervision procedures and other regulatory requirements to the extent
relating to financial reporting; and With respect to the external auditors:othe appointment, annual evaluation and oversight of the external auditors;oannual review of the independence, fitness and propriety, and qualifications of the external auditors;ocompensation of the external auditors; andowhere deemed appropriate, replacement of the external auditors.
Digital Business and Technology Committee – assists the Board of Directors in: Monitoring and providing guidance as appropriate on matters relating to ANZ's digital transformation, technology,
technology-related innovation and information/cyber security strategies;
 Monitoring the delivery of the key programs that form part of ANZ's digital transformation, technology, technologyrelated innovation and information/cyber security strategies;
 Recommending to the Board and monitoring the delivery of material digital transformation and technology
investments; and Reviewing health and relevance of ANZ’s technology suite, to seek to ensure secure, stable and reliable services.
Human Resource Committee - assists the Board of Directors in: Reviewing and making recommendations to the Board, where appropriate on remuneration (including variable
remuneration arrangements) for ANZ Board Appointees and individual ANZ Material Risk Takers;
 Reviewing and making recommendations to the Board, where appropriate, in respect of the design and funding of
the ANZ Incentive Plan, and remuneration structures for senior executives and others specifically covered by the
ANZBGL Remuneration Policy and ANZ New Zealand (NZ) Remuneration Policy;
 Reviewing and making recommendations to the Board, where appropriate, for amending the ANZBGL Remuneration
Policy and the ANZ NZ Remuneration Policy;
 Considering and approving appointments and terminations for all ANZ Board Appointees, and reviewing succession
plans for enterprise business critical roles, and making recommendations to the Board on such matters relating to
the CEO;

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ANZ Basel III Pillar 3 Disclosure

September 2021

Obtaining external advice, either independently or via management, as appropriate, on remuneration, risk and anyother related matter to supplement members’ knowledge and expertise; andObtaining all information necessary to enable the committee to perform its function.

Ethics, Environment, Social and Governance Committee - assists the Board of Directors in:Reviewing and approving the proposed corporate sustainability objectives for ANZ, and reviewing progress inachieving them;
Reviewing and approving the disclosures relating to ANZ’s Sustainability Framework, objectives and related
performance as set out in the suite of annual reporting documents;
Discussing, questioning and providing advice to management on past, current and emerging ethical,
environmental, social and governance risks and opportunities relevant to the bank’s ability to operate as a fair,
responsible and sustainable business;Receiving reports on past, current and emerging ethical, environmental, social and governance matters;Providing oversight of ANZ’s Ethics and Responsible Business Committee, including receiving the minutes of thatbody and discussing material matters referred to the committee from that body;
Referring to the Board the resolution of any significant ethical or environmental, social and governance matterswhere applicable;
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Reviewing the development of and approving applicable corporate governance policies and principles;
Reviewing ANZ’s Corporate Governance Statement; andIn relation to whistleblowing:oReviewing the effectiveness of management’s process for informing employees of the existence of the
Whistleblower Policy and ANZ Code of Conduct and Ethics;oSeeking to ensure procedures for the receipt, retention and treatment of information submitted confidentiallyby employees and third parties under such policies are established and maintained by management;oReceiving reports from management regarding any material incidents reported under the Whistleblower
Policy; andoReferring any relevant matters to the Audit Committee.
Nomination and Board Operations Committee - supports the Board of Directors in:All matters to do with reviewing Board composition;
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Reviewing and approving the processes in place for evaluating the performance of (i) the Board, (ii) each Standing
Committees and (iii) each Director including the Chairman of the Board but excluding ANZ CEO; andAll other matters to do with the effective and efficient operation of the Board and its Standing Committees.
The above Committees are exclusively comprised of Non-Executive directors. Members, including the Chair of eachcommittee, are appointed by the Board and serve at the discretion of the Board and for such term or terms as theBoard determines. Under ANZ’s BEAR arrangements, the chair and members of each committee are accountablepersons with prescribed responsibility for oversight of the ANZ, as a member of the Board.
Processes and procedures relating to the operation of each of the board committees are documented in the committee
charters and in the Board Committees’ Standing Rules which are on the ANZ corporate governance website:
http://shareholder.anz.com/our-company/corporate-governance.

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Executive Management Committees are responsible for co-ordination of risk matters for each of the areas of risk
management. The following lists ANZ’s key management committees and states their primary purpose, in accordancewith ANZ’s accountability map under BEAR, and related sub-committees:Group Executive Committee (ExCo) - headed by the CEO is ANZ’s leadership team whose role is to support the
CEO in delivering ANZ’s purpose, to shape a world where people and communities thrive. It does this by focusing on:
All Key stakeholders;

ANZ’s Culture and Capabilities; and

Prioritising efforts and allocating resources in line with ANZ’s strategic pillars.

Group Performance and Execution Committee (GPEC) - is charged with the oversight of the Group’s overall
operational performance and position and the execution of the operating plan.
Enterprise Accountability Group – reports to Board Human Resources Committee and is responsible for:

overseeing the ongoing effectiveness of an enterprise-wide accountability and consequence management
framework and being cognisant of its impact on the culture of ANZ;

reviewing and approving the release of, or exercise of the downward adjustment or further deferral discretions inrelation to, deferred remuneration; andreviewing and monitoring the consequences applied to staff who are considered either directly or indirectly
accountable for material risk (financial or non-financial) and compliance events and/ or material internal audit
issues.

Group Asset and Liability Committee (GALCO) - is responsible for the oversight and strategic management of
the Group’s balance sheet activities including balance sheet structure, liquidity, funding, capital management, nontraded interest rate risk and non-traded FX risk. The committee is accountable to the Board Risk Committee in theeffective discharge of its responsibilities.
Credit and Market Risk Committee (CMRC) - is the senior executive management forum responsible for theoversight and control of credit, market, insurance and other material financial risks across the ANZ Group. The
Committee is accountable to the Board Risk Committee in the effective discharge of its responsibilities.
Operational Risk Executive Committee (OREC)- is the primary senior executive management forum responsible
for oversight of Operational Risk and Compliance Risk, expected and unexpected risk profile and the related Control
Environment. The purpose of OREC is to assist the Board Risk Committee in the effective discharge of its
responsibilities for Operational Risk Management and the management of the compliance obligations of ANZ and its
controlled entities.
Ethics and Responsible Business Committee (ERBC) - is a leadership and decision making body that exists toadvance ANZ’s purpose, namely to shape a world where people and communities thrive.
In doing so, the Committee seeks to ensure ANZ operates responsibly and achieves fair and balanced customer
outcomes. The committee considers the social and environmental impacts of the industries, customers andcommunities that ANZ serves. It also considers ANZ’s products and services and how they are provided, as well as
stakeholder and community expectations. The Committee is also accountable to the Board’s Ethics, Environment,
Social and Governance Committee in the effective discharge of its responsibilities.
Credit Ratings System Oversight Committee (CRSOC) - is a sub-committee of CMRC responsible for theoversight and control of the Internal Ratings System for credit risk including credit model approvals and performancemonitoring.
Capital and Stress Testing Oversight Committee (CSTOC) - is a sub-committee of GALCO, with responsibility forthe oversight and control of the Group’s stress testing framework, modelling, processes and outcomes; economic profit
methodology and framework; operational risk capital measurement framework, modelling, processes and outcomes;
capital allocation framework and other capital management (apart from Group ICAAP) and portfolio measurement
related recommendations.
Investment Committee - is responsible to carry out the responsibilities delegated by the ANZ CEO, regarding thefunding and delivery of value from ANZ’s investments in change initiatives. The committee acts as the governance,oversight and advisory board for funding provided to the Divisions and enterprise priorities.
Risk Governance Oversight Committee (RGOC) - is a leadership and decision making body that exists to oversee
ANZ’s response to the self-assessment of governance, culture and accountability, provided to the APRA in November
2018.

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Chapter 3 – Capital reporting and measurement
Capital reporting and measurement
To ensure that an Authorised Deposit-taking Institution (ADI) is adequately capitalised on both a standalone and groupbasis, APRA adopts a tiered approach to the measurement of an ADI’s capital adequacy by assessing the ADI’s financial
strength at three levels:

Level 1 - being the ADI i.e. Australia and New Zealand Banking Group Limited, consolidated with APRA approved
subsidiaries, to form the ADI’s Extended Licensed Entity (ELE).

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Level 2 - being the consolidated group for financial reporting purposes adjusted to exclude associates’ activities andcertain subsidiaries referenced under APS 001: Definitions that undertake the following business activities:
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Insurance businesses (including friendly societies and health funds).
Acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds
management.
Non-financial (commercial) operations.
Securitisation special purpose vehicles to which assets have been transferred in accordance with APRA's
requirements as set out in APS 120: Securitisation.

Level 3 – the consolidated group for financial reporting purposes.

ANZ measures capital adequacy monthly and reports for prudential purposes on a Level 1 and Level 2 basis and is not
yet required to maintain capital on a Level 3 basis; APRA have yet to advise required timing for Level 3 reporting.
This Pillar 3 report is based on the Level 2 prudential structure.
Refer to Note 25 Controlled Entities of ANZ’s 2021 Annual Report for a list of all material subsidiaries and a brief
description of their key activities.

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Chapter 4 – Capital and Capital Adequacy
Table 1

Capital Disclosure template

The head of the Level 2 Group to which this prudential standard applies is Australia and New Zealand Banking Group
Limited.
Table 1 of this chapter consists of a Common Disclosure template that assists users in understanding the differences
between the application of the Basel III reforms in Australia and those rules as detailed in the document Basel III: A
global regulatory framework for more resilient banks and banking systems, issued by the Bank for International
Settlements. The capital disclosure template in this chapter is the post January 2018 version as ANZ is fully applying
the Basel III regulatory adjustments, as implemented by APRA. Note that the capital conservation and countercyclicalbuffers referred to in rows 64 to 67 have been effective since 1 January 2016 and the phase out period for capital
instruments began on 1 January 2013.
The information in the lines of the template has been mapped to ANZ’s Level 2 balance sheet, which adjusts for nonconsolidated subsidiaries as required under APS 001: Definitions. Where this information cannot be mapped on a one to
one basis, it is provided in an explanatory table. ANZ’s material non-consolidated subsidiaries are also listed in thischapter.
Restrictions on Transfers of Capital within ANZANZ operates branches and locally incorporated subsidiaries in many countries. These operations are capitalised at an
appropriate level to cover the risks in the business and to meet local prudential requirements. This level of capitalisation
may be enhanced to meet local taxation and operational requirements. Any repatriation of capital from subsidiaries orbranches is subject to meeting the requirements of the local prudential regulator and/or the local central bank. Apartfrom ANZ’s operations in New Zealand, local country capital requirements do not impose any material call on ANZ’scapital base.
ANZ undertakes banking activities in New Zealand principally through its wholly owned subsidiary, ANZ Bank New
Zealand Limited (ANZ New Zealand), which is subject to minimum capital requirements as set by the Reserve Bank of
New Zealand (RBNZ). ANZ New Zealand maintains a buffer above the minimum capital base required by the RBNZ. This
capital buffer has been calculated via the ICAAP undertaken for ANZ New Zealand, to ensure ANZ New Zealand isappropriately capitalised under stressed economic scenarios.
In March 2021, the RBNZ announced that the restrictions on dividends and redemption of non-CET1 capital
instruments put in place in April 2020 will be eased. The updated restrictions will allow ANZ New Zealand, a New
Zealand subsidiary of ANZBGL to pay up to 50% of their earnings as dividends to shareholders. This restriction willremain in place until 1 July 2022, at which point the RBNZ intends to remove the restrictions completely, subject toprevailing economic conditions. Additionally, as part of the March 2021 update, the RBNZ announced that it willremove the restrictions on redemption of non-CET1 capital instruments.

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Table 1

September 2021

Capital disclosure templateSep-21$M

Reconciliation
Table
Reference
Table A

Common Equity Tier 1 Capital: instruments and reserves
1

Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital

25,626

2

Retained earnings

36,323

3

Accumulated other comprehensive income (and other reserves)

1,372

4

Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned
companies)
Ordinary share capital issued by subsidiaries and held by third parties (amount allowed ingroup CET1)
Common Equity Tier 1 capital before regulatory adjustments

5
6

Table Bn/a2

Table C

63,323

Common Equity Tier 1 capital : regulatory adjustments
7

Prudential valuation adjustments

8

Goodwill (net of related tax liability)

3,089

9

Other intangibles other than mortgage servicing rights (net of related tax liability)

1,036

Table D

10-

Table H

11

Deferred tax assets that rely on future profitability excluding those arising from temporary
differences (net of related tax liability)
Cash-flow hedge reserve

393

12

Shortfall of provisions to expected losses

36

13

Securitisation gain on sale

14

Gains and losses due to changes in own credit risk on fair valued liabilities

15

Defined benefit superannuation fund net assets

16

Investments in own shares (if not already netted off paid-in capital on reported balance sheet)

17

Reciprocal cross-holdings in common equity-

18

Investments in the capital of banking, financial and insurance entities that are outside thescope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital (amount above 10% threshold)
Significant investments in the ordinary shares of banking, financial and insurance entities thatare outside the scope of regulatory consolidation, net of eligible short positions (amount above
10% threshold)
Mortgage service rights (amount above 10% threshold)-Deferred tax assets arising from temporary differences (amount above 10% threshold, net of
related tax liability)
Amount exceeding the 15% threshold

-

19
20
21
22

-

6
163

-

-

24

of which: mortgage servicing rights-of which: deferred tax assets arising from temporary differences
National specific regulatory adjustments (sum of rows 26a - 26j)

Table G-of which: significant investments in the ordinary shares of financial entities

26

Table F-

23
25

Table E

-

7,241

26a

of which: treasury shares

-

26b

-

26c

of which: offset to dividends declared under a dividend reinvestment plan (DRP), to theextent to that the dividends are used to purchase new ordinary shares issued by the ADI
of which: deferred fee income

(356)

26d

of which: equity investment in financial institutions not reported in rows 18, 19 and 23

3,700

Table G26eof which: deferred tax assets not reported in rows 10, 21 and 25

2,357

Table H26f

of which: capitalised expenses

1,495

Table I

26g

34

Table J26h

of which: investments in commercial (non-financial) entities that are deducted under APRA
rules
of which: covered bonds in excess of asset cover in pools

26iof which: undercapitalisation of a non-consolidated subsidiary26j
27of which: other national specific regulatory adjustments not reported in rows 26a to 26i

1128Regulatory adjustments applied to CET1 due to insufficient Additional Tier 1 and Tier 2 tocover deductions
Total regulatory adjustments to CET1

11,96429

Common Equity Tier 1 capital (CET1)

51,35911-

ANZ Basel III Pillar 3 Disclosure
Table 1

September 2021

Capital disclosure templateSep-21$M

Reconciliation
Table
Reference

8,022

Table K

Additional Tier 1 Capital: instruments
30
31

Directly issued qualifying Additional Tier 1 instrumentsof which: classified as equity under applicable accounting standards

32of which: classified as liabilities under applicable accounting standards

33

Directly issued capital instruments subject to phase out from Additional Tier 1

34
35

Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued bysubsidiaries and held by third parties (amount allowed in group AT1)of which: instruments issued by subsidiaries subject to phase out

36

Additional Tier 1 capital before regulatory adjustments

8,022

Table K

274

Table Kn/a8,296

Additional Tier 1 Capital: regulatory adjustments
37

Investments in own Additional Tier 1 instruments

38

Reciprocal cross-holdings in Additional Tier 1 instruments-

39

Investments in the capital of banking, financial and insurance entities that are outside thescope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital (amount above 10% threshold)
Significant investments in the capital of banking, financial and insurance entities that areoutside the scope of regulatory consolidation, (net of eligible short positions)
National specific regulatory adjustments (sum of rows 41a - 41c)

-

40
41
41a

-

155

Table K

27

27

Table K

41cof which: holdings of capital instruments in group members by other group members
on behalf of third partiesof which: investments in the capital of financial institutions that are outside the scope of
regulatory consolidations not reported in rows 39 and 40
of which: other national specific regulatory adjustments not reported in rows 41a and 41b-

Table K

42

Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 cover deductions-

43

Total regulatory adjustments to Additional Tier 1 capital

44

Additional Tier 1 capital (AT1)

8,114

Tier 1 Capital (T1=CET1+AT1)

59,473

41b

45

182

Tier 2 Capital: instruments and provisions
46

Directly issued qualifying Tier 2 instruments

47

Directly issued capital instruments subject to phase out from Tier 2

417

Table L48

57

Table L49

Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued bysubsidiaries and held by third parties (amount allowed in group T2)of which: instruments issued by subsidiaries subject to phase out-

Table L

50

Provisions

51

15,417

1,412

Tier 2 capital before regulatory adjustments

17,303Tier 2 Capital: regulatory adjustments
52

Investments in own Tier 2 instruments

53

Reciprocal cross-holdings in Tier 2 instruments-

54

Investments in the Tier 2 capital of banking, financial and insurance entities that are outside
the scope of regulatory consolidation, net of eligible short positions, where the ADI does not
own more than 10% of the issued share capital (amount above 10%
Significant investments in the Tier 2 capital of banking, financial and insurance entities thatare outside the scope of regulatory consolidation, net of eligible short positions
National specific regulatory adjustments (sums of rows 56a - 56c)

-

55
56
56a
56b
56c
57

50

of which: holdings of capital instruments in group members by other group members onbehalf of third partiesof which: investments in the capital of financial institutions that are outside the scope of
regulatory consolidation not reported in rows 54 and 55
of which: other national specific regulatory adjustments not reported in rows 56a and 56b
Total regulatory adjustment to Tier 2 capital

58

Tier 2 capital (T2)59

Total capital (TC=T1+T2)

60

Total risk-weighted assets based on APRA standards

85

Table L

43
43
178
17,12576,598416,086

12

Table L

Table LANZ Basel III Pillar 3 Disclosure
Table 1

September 2021

Capital disclosure template3
Reconciliation
Table
Reference

Capital ratios and buffers
61

Common Equity Tier 1 ( as a percentage of risk-weighted assets)

62

Tier 1 (as a percentage of risk-weighted assets)

14.3%

63

Total capital (as a percentage of risk-weighted assets)

18.4%

64

Institution specific buffer requirement (minimum CET1 requirement plus capital conservationbuffer plus countercyclical buffer requirements plus G-SIBs buffer requirement, expressed as apercentage of risk-weighted assets)of which: capital conservation buffer requirement3

8.014%

65
66
67
68

12.3%

of which: ADI-specific countercyclical buffer requirements

3.5%
0.014%of which: G-SIB buffer requirement (not applicable)n/aCommon Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets)

7.8%

National minima (if different from Basel III)69

National Common Equity Tier 1 minimum ratio (if different from Basel III minimum)

n/a

70

National Tier 1 minimum ratio (if different from Basel III minimum)n/aNational total capital minimum ratio (if different from Basel III minimum)

n/a

71

Amount below thresholds for deductions (not risk-weighted)
72

Non-significant investments in the capital of other financial entities

408

73

Significant investments in the ordinary shares of financial entities

3,361

74

Mortgage servicing rights (net of related tax liability)

75

Table G

n/aDeferred tax assets arising from temporary differences (net of related tax liability)

2,357

Table H

Applicable caps on the inclusion of provisions in Tier 2
76
77

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised
approach (prior to application of cap)
Cap on inclusion of provisions in Tier 2 under standardised approach

172
203
1,241

79

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratingsbased approach (prior to application of cap)
Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

BLANK

80

Capital instruments subject to phase-out arrangements (only application between 1
January 2018 to 1 January 2022)
Current cap on CET1 instruments subject to phase out arrangements

81

Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)

n/a

82

Current cap on AT1 instruments subject to phase out arrangements

n/a

83
84

Amount excluded from AT1 instruments due to cap (excess over cap after redemptions andmaturities)
Current cap on T2 instruments subject to phase out arrangements

85

Amount excluded from T2 due to cap (excess over cap after redemption and maturities)

78

1,958

n/a

n/a
-

Counter Cyclical Capital Buffer

3

Geographic breakdown of Private Sector Credit
Exposures
RWA for all private sector credit exposures

Hong
Kong $M

Luxembourg$M

Norway$M

Other $M

Total $M

$3,929

Jurisdictional buffer set by national authorities

1.00%

$140

$313

$312,664$317,046

0.50%

1.00%

-

Countercyclical buffer requirement

0.0124%0.0002%-0.0010%-0.0136%

Includes 1.0% buffer applied by APRA to ADIs deemed as domestic systemically important.

13

ANZ Basel III Pillar 3 Disclosure

September 2021

The following table shows ANZ's consolidated balance sheet and the adjustments required to derive the Level 2 Balance
Sheet. The adjustments remove the external assets and liabilities of the entities deconsolidated for prudential purposes
and reinstate any intragroup assets and liabilities, treating them as external to the Level 2 Group.
Balance
Sheet as inpublishedfinancialstatements$M

Adjustments$M

Balancesheet underscope ofregulatory
consolidation$M

151,260(62)

151,198

Settlement Balances owed to ANZ

7,530

-

7,530

Collateral Paid

9,166

-

9,166

Trading securities

44,688-44,688Derivative financial instruments

38,736-

38,736

Investment Securities

83,126(469)

82,657

AssetsCash and Cash Equivalentsof which: Financial Institutions capital instruments85

of which: significant investment in financial institutions
equity instrumentsof which: non-significant investment in financial institutions
equity instrumentsof which: Other entities equity investmentsof which: collectively assessed provision
Net loans and advances

629,719(1,396)of which: deferred fee income

Template andReconciliation
Table
Reference

Table L

990

Table G

339

Table G

31
(31)

Table J
Table E628,323356

Row 26c(3,379)

Table Eof which: individual provisions(666)

Table Eof which: capitalised brokerage & Loan/Lease origination fees

1,434

Table Iof which: collectively assessed provisionof which: CET1 margin lending adjustment

13

of which: AT1 margin lending adjustment-

Regulatory deposits
Due from controlled entitiesof which: Significant investments in the Tier 2 "capital of banking,financial and insurance entities" that are outside the scope of
regulatory consolidation
Shares in controlled entitiesof which: Investment in deconsolidated financial subsidiaries

671

-

671

-

1,382

1,382
85

-

630

BLANK

of which: AT1 significant investment in banking, financial andinsurance entities that are outside the scope of regulatory
consolidation
Investments in associates

1,972

-

of which: Financial Institutionsof which: Other Entities
Current tax assets

57

Deferred tax assets
Goodwill and other intangible assets

630
475

Table G

155

Table K

1,972
1,969

Table G

3

Table J

(1)

56

2,339

(1)

2,338

4,124

(72)

4,052

of which: Goodwill

Table L

Table H

3,089

of which: Software

960

Premises and equipment

2,734

-

2,734

Other assets

2,735

(131)

2,604

978,857(120)

978,737of which: Defined benefit superannuation fund net assets

213

Total Assets

14

Table D

Table F

ANZ Basel III Pillar 3 Disclosure

Liabilities

September 2021

Balance
Sheet as inpublishedfinancialstatements$M

Adjustments$M

Balancesheet underscope ofregulatory
consolidation$M
17,427

Settlement Balances owed by ANZ

17,427-

Collateral Received

5,657

-

5,657

Deposits and other borrowings

743,056(40)

743,016

Derivative financial instruments

36,035-36,035

-

2,102

2,102

Current tax liabilities

419

(33)

386

Deferred tax liabilities

70-

Due to controlled entities

Template andReconciliation
Table
Reference70

Table Hof which: related to intangible assets

0

Table Dof which: related to capitalised expenses

19

Table Iof which: related to defined benefit super assets

50

Table F

Payables and other liabilities
Employee Entitlements
Provisions

8,647

(312)

602

-

8,335
602

2,214

(113)

2,101

of which: individually assessed provision

785

Table Eof which: collectively assessed provision

21

Table E

Debt Issuances

101,054(1,454)of which: Directly issued qualifying Additional Tier 1 instrumentsof which: Additional Tier 1 Instrumentsof which: Directly issued capital instruments subject tophase out from Tier 2of which: Directly issued qualifying Tier 2 instruments

99,6008,029

Table K

477

Table K

417

Table L

15,380

Table L

Total Liabilities

915,181150

915,331

Net Assets

63,676(270)

63,406

Adjustments

Shareholders' equity

Balance
Sheet as inpublishedfinancialstatements$M$M

Balancesheet underscope ofregulatory
consolidation$M

Ordinary Share Capital

25,984(132)

25,852

Table A

226

Tables A & B

1,220

Table B393

Row 11Row 2

of which: Share reserve
Reserves

1,228

(8)

of which: Cash flow hedging reserves
Retained earnings
Share capital and reserves attributable to shareholdersof the company
Non-controlling interests
Total Shareholders' Equity

15

36,453(130)

36,323

63,665(270)

63,39511-

11

63,676(270)

63,406

Template andReconciliation
Table
Reference

Table CANZ Basel III Pillar 3 Disclosure

September 2021

The following reconciliation tables provide additional information on the difference between Table 1 Capital Disclosure
Template and the Level 2 Balance Sheet.
Table A
Issued capitalLess

Sep 21

Table 1

$M

Reference

25,852

Reclassification to Reserves
Regulatory Directly Issued qualifying ordinary shares

Table B
Reserves(226)

Table B

25,626Row 1

Sep 21

Table 1

$M

Reference

1,220

Add

Reclassification from Issued Capital

226

Less

Non qualifying reserves(74)

Reserves for Regulatory capital purposes (amount allowed in group CET1)

Table C
Less

1,372

Table 1

$M

Reference

11

Surplus capital attributable to minority shareholders(9)

Table D
SoftwareRow 3

Sep 21
Non-controlling interests
Ordinary share capital issued by subsidiaries and held by third parties

Table A2

Row 5

Sep 21

Table 1

$M

Reference

960

Add

Other intangible assets

Less

Associated deferred tax liabilities

3

Add

Regulatory reclassification from significant investments in the ordinary shares of banking,financial and insurance entities outside the scope of regulatory consolidation
Other intangibles other than mortgage servicing rights (net of related tax liability)-

Table E73

Table G

1,036

Row 9

Sep 21

Table 1

$M

Reference

Qualifying collective provisionCollectively assessed provision on Loans and advances(3,379)Collectively assessed provision on Investment Securities(31)

Collectively assessed provision on Undrawn commitments

(785)

Less

Non-qualifying collectively assessed provision

436

Less

Standardised collectively assessed provision

172

Less

Non-defaulted expected loss

Row 76

2,346

Non-Defaulted: Expected Loss - Eligible Provision Shortfall-

Qualifying individual provision
Individually assessed provision on Loans and advances
Add

(666)

Individually assessed provision on Undrawn and contingent facilities(21)

Additional individually assessed provision for partial write offs

(204)

Less

Standardised individually assessed provision

Add

Collectively assessed provision on advanced defaulted(396)

Defaulted expected loss

1,272

Less

51

Defaulted: Expected Loss - Eligible Provision Shortfall

36

Gross deduction

36

Table FLess

Sep 21

Table 1

$M

Reference

Defined benefit superannuation fund net assets

213

Associated deferred tax liabilities(50)

Defined benefit superannuation fund net assets

163

16

Row 12

Row 15ANZ Basel III Pillar 3 Disclosure

September 2021

Table G

Sep 21

Table 1

$M

Reference

Investment in deconsolidated financial subsidiaries

475

Less

Regulatory reclassification to Retained Earnings and Other Intangible Assets

(73)

Add

Investment in financial associates

Add

Investment in financial institutions Investment Securities

Less

Amount below 10% threshold of CET1

Add

Significant investments in the ordinary shares of banking, financial and insurance entities thatare outside the scope of regulatory consolidation, net of eligible short positions (amount above
10% threshold)
Deduction amount below the 10% threshold of CET 1

Add

Investments in the capital of banking, financial and insurance entities that are outside thescope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital - Investment Securities

Row 193,361

Row 73

339

3,700
3,700

Row 26d

Sep 21

Table 1

$M

Reference

2,338

Deferred tax liabilities(70)

Deferred tax asset less deferred tax liabilities

2,268

Less

Deferred tax assets that rely on future profitability

AddDeferred tax liabilities on intangible assets, capitalised expenses and defined benefit superassets
Impact of calculating the deduction on a jurisdictional basis-

Deferred tax assets not reported in rows 10, 21 and 25 of the Common Disclosure
Template

Table I
Capitalised brokerage & loan/lease origination fees

Row 10

69
20
2,357

Row 26e

Sep 21

Table 1

$M

Reference

1,434

Capitalised debt and capital issuance expenses

77

Other Capitalised Expenses
Less

Row 73-Equity investment in financial institutions not reported in rows 18, 19 and 23

Deferred tax assets

Add

990
(3,361)

Deduction for equity holdings in financial institutions - APRA regulations

Table H
Add

Table D

1,969

3

Associated deferred tax liabilities(19)

Capitalised expenses

1,495

Table J

Sep 21

Table 1

$M

Reference

Investments in non-financial Investment Securities equities

31

Investments in non-financial associates

3

Non-financial equity exposures (loans)

Row 26f-

Equity exposures to non-financial entities

34

17

Row 26g

ANZ Basel III Pillar 3 Disclosure

September 2021

Table K
Directly issued qualifying Additional Tier 1 Capital Instruments classified as liabilities
Add

Issue costs

Add

Fair value adjustment

Reference

8,029
34

Additional Tier 1 instruments issued by subsidiaries held by third parties
Add

Issue costs

Less

Surplus capital attributable to third party holders

Add

AT1 Instruments issued by subsidiaries and held by third parties (amounts allowed in Group
AT1)
Additional Tier 1 capital before regulatory adjustments

Less

Significant investments in the capital of banking, financial and insurance entities that areoutside the scope of regulatory consolidation
Investments in the capital of financial institutions that are outside the scope of regulatory
consolidations not reported in rows 39 and 40
Other national specific regulatory adjustments not reported
Additional Tier 1 capital

Less

Table 1

$M

(41)

Directly issued qualifying Additional Tier 1 Capital Instruments classified as liabilities

Less

Sep 21

8,022

Row 30477(203)

Table L
Directly issued capital instruments subject to phase out from Tier 2

274

Row 34

8,296

Row 36(155)

Row 40(27)

Row 41b-Row 41c

8,114

Row 44

Sep 21

Table 1

$M

Reference

417

Less

Amortisation of Tier 2 Capital Instruments subject to Phase out

-

Less

Fair value adjustment-

Directly issued capital instruments subject to phase out from Tier 2

417

Row 47

Add

Surplus capital attributable to third party holders

57

Row 48Add

Directly issued qualifying Tier 2 instruments

Add

Issue costs

Add

Fair value adjustment

Add

Provisions

1,412

Tier 2 capital before regulatory adjustments

15,38026
1117,303

Row 51Less

Investments in own Tier 2 instruments (trading limit)(50)

Row 52Less

Significant investments in the Tier 2 capital of banking, financial and insurance entities that areoutside the scope of regulatory consolidation, net of eligible short positions
Investments in the capital of financial institutions that are outside the scope of regulatory
consolidation not reported in rows 54 and 55
Tier 2 capital(85)

Row 55(43)

Row 56b

17,125

Row 58Less

18

ANZ Basel III Pillar 3 Disclosure

September 2021

The following table provides details of entities included within the accounting scope of consolidation but excluded from
regulatory consolidation.
Total Assets

Total Liabilities$M$M

Holding Company--

ANZ ILP Pty Ltd

Incorporated Legal Practice2-

ANZ Investment Services (New Zealand) Limited

Funds Management

38

8

ANZ Lenders Mortgage Insurance Pty. Limited

Mortgage insurance

1,022

491

ANZ Pensions (UK) Limited

Trustee/Nominee

ANZ New Zealand Investments Limited

Funds Management

EntityActivity

ACN 008 647 185 Pty Ltd

ANZ New Zealand Investments Nominees Limited

Nominee

ANZ Wealth New Zealand Limited

Holding Company

-

-

117

39

-

-

124

-

ANZcover Insurance Private Ltd

Captive-Insurance

221

119

Kingfisher Trust 2016-1

Securitisation Trust

603

603

Kingfisher Trust 2019-1

Securitisation Trust

827

827

Shout for Good Pty. Ltd.

Corporate

-

-

19

ANZ Basel III Pillar 3 Disclosure
Table 2September 2021

Main features of capital instruments

As the main features of ANZ’s capital instruments are updated on an ongoing basis, ANZ has provided this information
separately in the Regulatory Disclosures section of its website.

Table 3 Capital adequacy, Table 4 Credit risk, Table 5 Securitisation
The above tables are produced at the quarters ending 30 June and 31 December.

Table 6

Capital adequacy

Capital management
ANZ pursues an active approach to capital management, which is designed to protect the interests of depositors,
creditors and shareholders. This involves the on-going review and Board approval of the level and composition of ANZ’scapital base, assessed against the following key policy objectives:
Regulatory compliance such that capital levels exceed APRA’s, ANZ’s primary prudential supervisor, minimum
Prudential Capital Ratios (PCRs) both at Level 1 (the Company and specified subsidiaries) and Level 2 (ANZ
consolidated under Australian prudential standards), along with US Federal Reserve’s minimum Level 2 requirements
under ANZ’s Foreign Holding Company Licence in the United States of America;Capital levels are aligned with the risks in the business and to meet strategic and business development; andAn appropriate balance between maximising shareholder returns and prudent capital management principles.

ANZ achieves these objectives through an Internal Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts
detailed strategic and capital planning over a medium term time horizon. The Capital Plan is maintained and updated
through a monthly review of forecast financial performance, economic conditions and development of business initiatives
and strategies. The Board and senior management are provided with monthly updates of ANZ’s capital position. Any
actions required to ensure ongoing prudent capital management are submitted to the Board for approval. ANZ annuallyconducts a detailed strategic planning process over a three-year time horizon, the outcomes of which are embodied in
the Strategic Plan. This process involves forecasting key economic variables which Divisions use to determine key
financial data for their existing business. New strategic initiatives to be undertaken over the planning period and theirfinancial impact are then determined. These processes are used for the following:

Review capital ratios, targets, and levels of different classes of capital against ANZ’s risk profile and risk appetite
outlined in the Strategic Plan. ANZ’s capital targets reflect the key policy objectives above, and the desire that under
specific stressed economic scenarios that capital levels have sufficient capital to remain above PCR requirements;

Stress tests are performed under different economic conditions to provide a comprehensive review of ANZ’s capital
position both before and after mitigating actions. The stress tests determine the level of additional capital (i.e. the‘stress capital buffer’) needed to absorb losses that may be experienced during an economic downturn; andStress testing is integral to strengthening the predictive approach to risk management and is a key component inmanaging risks, asset writing strategies and business strategies. It creates greater understanding of the impacts onfinancial performance through modelling relationships and sensitivities between geographic, industry and Divisional
exposures under a range of macro-economic scenarios. ANZ has a dedicated stress testing team within Risk thatmodels and reports to management and the Board Risk Committee on a range of scenarios and stress tests.

Results are subsequently used to:
Recalibrate ANZ’s management targets for minimum and operating ranges for its respective classes of capital suchthat ANZ will have sufficient capital to remain above regulatory requirements; and

Identify the level of organic capital generation and hence determine current and future capital issuance requirementsfor Level 1 and Level 2.

From these processes, a Capital Plan is developed and approved by the Board which identifies the capital issuancerequirements, capital securities maturity profile, and options around capital products, timing and markets to execute theCapital Plan under differing market and economic conditions.
The Capital Plan is maintained and updated through a monthly review of forecast financial performance, economic
conditions and development of business initiatives and strategies. The Board and senior management are provided withmonthly updates of ANZ’s capital position. Any actions required to ensure ongoing prudent capital management are
submitted to the Board for approval.

20

ANZ Basel III Pillar 3 Disclosure

September 2021

Regulatory environment
ANZ’s regulatory capital calculation is governed by APRA’s Prudential Standards which adopt a risk-based capitalassessment framework based on the Basel III capital measurement standards. This risk-based approach requires eligible
capital to be divided by total risk weighted assets (RWA), with the resultant ratio being used as a measure of an
Authorised Deposit-taking Institution’s (ADIs) capital adequacy. APRA determines PCRs for Common Equity Tier 1(CET1), Tier 1 and Total Capital, with capital as the numerator and RWAs as the denominator.
Regulatory capital is divided into Tier 1, carrying the highest capital elements, and Tier 2, which has lower capitalelements, but still adds to the overall strength of the ADI.
Tier 1 capital is comprised of Common Equity Tier 1 capital less deductions and Additional Tier 1 capital instruments.
Common Equity Tier 1 capital comprises shareholders’ equity adjusted for items which APRA does not allow as regulatory
capital or classifies as lower forms of regulatory capital. Common Equity Tier 1 capital includes the following significant
adjustments:


Reserves exclude the hedging reserve and reserves of insurance and funds management subsidiaries;

Retained and current year earnings excluding those of insurance and funds management subsidiaries, but includes
capitalised deferred fees forming part of loan yields that meet the criteria set out in the prudential standard;

Additional Tier 1 capital instruments are high quality components of capital that provide a permanent and unrestrictedcommitment of funds, are available to absorb losses, are subordinated to the claims of depositors and senior creditors
in the event of the winding up of the issuer and provide for fully discretionary capital distributions.
Deductions from the capital base comprise mainly deductions to the Common Equity Tier 1 component. These deductions
are largely intangible assets, investments in insurance entities and associates, capitalised expenses (including loan andorigination fees), and net deferred tax assets.
Tier 2 capital mainly comprises perpetual subordinated debt instruments and dated subordinated debt instruments whichhave a minimum term of five years at issue date.
Total Capital is the sum of Tier 1 capital and Tier 2 capital.
In addition to the prudential capital oversight that APRA conducts over the Company and the Group, the Company’s
branch operations and major banking subsidiary operations are overseen by local regulators such as the Reserve Bankof New Zealand, the US Federal Reserve, the UK Prudential Regulation Authority, the Monetary Authority of Singapore,
the Hong Kong Monetary Authority and the China Banking and Insurance Regulatory Commission who may impose
minimum capitalisation rates on those operations.
Throughout the financial year, the Company and the Group maintained compliance with the minimum Common Equity
Tier 1, Tier 1 and Total Capital ratios set by APRA and the US Federal Reserve (as applicable) as well as applicable
capitalisation rates set by regulators in countries where the Company operates branches and subsidiaries.
Regulatory developments
There are a number of matters currently outstanding that may have an impact on ANZ’s regulatory capital in the future.
Details of these matters are available in ANZ’s 2021 Full Year Results Announcement Group Results section, pages 50
and 51, available on ANZ’s website: shareholder.anz.com/pages/results-announcement.

21

ANZ Basel III Pillar 3 Disclosure
Table 6

September 2021

Capital adequacy - Capital Ratio and Risk Weighted Assets 4 5

The following table provides the composition of capital used for regulatory purposes and capital adequacy ratios.
Sep 21Mar 21

Sep 20$M$M$M

Corporate136,298

135,713

139,415

Sovereign

9,893

7,750

7,545

Bank

9,118

10,092

12,734
110,353

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

Residential Mortgage

110,622

110,206

Qualifying Revolving Retail

3,723

3,678

4,337

Other Retail

19,66020,693

21,794289,314

288,132

296,178

36,97736,47639,001

Corporate

6,632

6,388

10,185

Sovereign

27

76

220

Residential Mortgage

203

203

210

Other Retail

17

23

33

Credit risk weighted assets subject to Standardised approach

6,879

6,690

10,648Credit Valuation Adjustment and Qualifying Central Counterparties

3,270

4,281

7,710

Credit risk weighted assets subject to Advanced IRB approach
Credit risk Specialised Lending exposures subject to slotting approach4
Subject to Standardised approach

Credit risk weighted assets relating to securitisation exposures

2,056

2,220

2,125

Other assets

4,002

4,063

4,375

342,498

341,862

360,037

Total credit risk weighted assets
Market risk weighted assets

7,127

8,955

8,237

Operational risk weighted assets

48,42547,19947,563

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

18,036

10,15013,547416,086

408,166

429,384

Capital ratios (%)5
Level 2 Common Equity Tier 1 capital ratio

12.3%

12.4%

11.3%

Level 2 Tier 1 capital ratio

14.3%

14.3%

13.2%

Level 2 Total capital ratio

18.4%

18.3%

16.4%

Level 1: Extended licensed Common Equity Tier 1 capital ratio

12.0%

12.2%

11.2%

Level 1: Extended licensed entity Tier 1 capital ratio

14.1%

14.2%

13.2%

Level 1: Extended licensed entity Total capital ratio

18.6%

18.6%

16.7%

ANZ Bank New Zealand Limited – Common Equity Tier 1 capital ratio

13.4%

13.1%

11.7%

ANZ Bank New Zealand Limited - Tier 1 capital ratio

16.2%

15.9%

14.4%

ANZ Bank New Zealand Limited - Total capital ratio

16.9%

15.9%

14.4%
Sep 20

Other significant Authorised Deposit-taking Institution (ADI) or overseas bank subsidiary:

Basel III APRA level 2 CET1

Sep 21Mar 21

Common Equity Tier 1 Capital

51,35950,786

48,702

Total Risk Weighted Assets

416,086

408,166

429,384

Common Equity Tier 1 capital ratio

12.3%

12.4%

11.3%

Basel III APRA level 1 Extended licensed entity CET1

Sep 21Mar 21

Sep 20Common Equity Tier 1 Capital

45,55545,85443,904

Total Risk Weighted Assets

379,387

374,939

391,939

Common Equity Tier 1 capital ratio

12.0%

12.2%

11.2%

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

45

ANZ Bank New Zealand Limited’s capital ratios have been calculated in accordance with Reserve Bank of New Zealand prudential
standards.

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ANZ Basel III Pillar 3 Disclosure

September 2021

Credit Risk Weighted Assets (CRWA)
Total Credit RWA marginally increased by $0.6 billion from March 2021 to $342.5 billion at September 2021. Foreignexchange movement increases ($5.0 billion) were predominantly offset by reductions in Australia Retail andCommercial ($2.1 billion) and New Zealand ($1.5 billion), combined with a reduction in derivative exposure reducing
CVA RWA and Credit RWA ($0.9 billion).

Market Risk, Operational Risk and IRRBB RWA
IRRBB RWA increased $7.9 billion due to a deterioration in Embedded Gains combined with an increase in Repricing
and Yield Curve Risk. Traded Market Risk RWA decreased $1.9 billion due to reduction in 10d VaR.

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ANZ Basel III Pillar 3 Disclosure

September 2021

Chapter 5 – Credit risk
Table 7

Credit risk – General disclosures

Definition of credit risk
Credit risk is the risk of financial loss resulting from a counterparty failing to fulfil its obligations or a decrease in credit
quality of a counterparty resulting in a financial loss.
Regulatory approval to use the Advanced Internal Ratings-based approach
ANZ has been given approval by APRA to use the Advanced Internal Ratings (AIRB) based approach to credit risk, under
APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk. As an AIRB bank, ANZ’s internal models
generate the inputs into regulatory capital adequacy to determine the risk weighted exposure calculations for both on
and off-balance sheet exposures, including undrawn portions of credit facilities, committed and contingent exposuresand expected loss (EL) calculations.
ANZ’s internal models are used to generate three key risk components that serve as inputs to the IRB approach to creditrisk:

Probability of Default (PD) is an estimate of the level of the risk of borrower default

Exposure at Default (EAD) is defined as the expected facility exposure at the date of default



Loss Given Default (LGD) is an estimate of the potential economic loss on a credit exposure, incurred as aconsequence of obligor default and expressed as a percentage of the facility’s EAD

Where ANZ is not accredited to use the AIRB based approach to credit risk, ANZ applies the Standardised approach tocredit risk, under APS 112 Capital Adequacy: Standardised Approach to Credit Risk.
Credit risk management framework and policies
ANZ has a comprehensive framework to manage Credit Risk. The framework is top down, being defined by credit
principles and policies. Credit policies, requirements and procedures cover all aspects of the credit life cycle such astransaction structuring, risk grading, initial approval, ongoing management and problem debt management, as well as
specialist policy topics.
The effectiveness of the credit risk management framework is assessed through various compliance and monitoringprocesses. These, together with portfolio selection and risk appetite setting, define and guide the credit process,organisation and staff.
Organisation
The Credit and Market Risk Committee (CMRC) is a senior executive level committee responsible for the oversight andcontrol of credit, market, insurance and material financial risks across the ANZ Group. The Credit Rating System
Oversight Committee (CRSOC) supports the CMRC, by providing oversight and control of the internal ratings system for
credit risk in the wholesale and retail sectors, including credit model approvals and performance monitoring.
The primary responsibility for prudent and profitable management of credit risk assets and customer relationships rests
with the business units. An independent credit risk management function is staffed by risk specialists. Independence isachieved by having all credit risk staff ultimately report to the Chief Risk Officer (CRO), even where they are embedded
in business units. Risk provides independent credit assessment and approval on lending decisions and performs key
roles in portfolio management such as development and validation of credit risk measurement systems, loan asset
quality reporting, and development of the overall governance framework including credit policies and requirements, andadherence to regulations.
The authority to make credit decisions is delegated by the Board to the CEO who in turn delegates authority to the CRO.
The CRO in turn delegates some of their credit discretion to individuals as part of a ‘cascade’ of authority from senior tothe most junior credit officers via the Credit Approval Discretion (CAD) Framework. Within ANZ’s wholesale business,credit approval for material judgemental lending is made on a ‘dual approval’ basis, jointly by the business writer in thebusiness unit and the respective independent credit risk officer. Individuals must be suitably skilled and accredited inorder to be granted and retain credit discretion. Credit discretions are reviewed on an annual basis, and may be varied
based on the holder’s performance.
Programmed credit assessment typically covers retail and some small business lending, and refers to the automatedassessment of credit applications using a combination of scoring (application and behavioural), policy rules and external
credit reporting information. Where an application does not meet the automated assessment criteria it will be referredout for manual assessment

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ANZ Basel III Pillar 3 Disclosure

September 2021

Portfolio direction and performance
The credit risk management framework contains several portfolio direction and performance tools which enable Risk toplay a fundamental role in monitoring the direction and performance of the portfolio. These include:Group and divisional level risk appetite strategies, business writing strategies and Sector and Product Transaction
Guidelines which are prepared by the businesses and set out appetite, planned portfolio growth, capital usage andrisk/return profile, and also identify areas that may require attention to mitigate and improve risk management;Regular portfolio reviews; andExposure concentration limits, covering single customers, and customer groups with economic interdependence,industries and cross border risk, to maintain a diversified portfolio.

ANZ uses portfolio monitoring and analysis tools, technologies and techniques to assist with portfolio risk assessmentand management. These assist in:Monitoring, analysing and reporting ANZ’s credit risk profile and progress in meeting portfolio objectives;

Calculating and reporting ANZ’s collective provision, economic capital, economic loss, regulatory risk weighted assets(RWA) and regulatory expected loss;Assessing impact of emerging issues, and conducting ad-hoc investigations and analysis;Validating rating/scoring tools and credit estimates; and

Ongoing review and refinement of ANZ's credit risk measurement and policy framework.

Credit Risk Reporting
Credit risk management information systems, reporting and analysis are managed centrally and at the divisional andbusiness unit level.
Periodic reporting provides confirmation of the effectiveness of processes, highlights emerging issues and allows
monitoring of portfolio trends by all levels of management and the Board.
Examples of reports include EAD, portfolio mix, risk grade profiles and migrations, RWAs, large exposure reporting, credit
watch and control lists, impaired assets and provisions.
Exposure at default
EAD is defined as the expected facility exposure at the date of default. Unless otherwise stated, throughout this disclosure
EAD represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.
Past due facilities
Facilities where a contractual payment has not been met or the customer is outside of contractual arrangements for amaterial length of time are deemed past due. Past due facilities include those operating in excess of approved
arrangements or where scheduled repayments are outstanding, but do not include impaired assets.
Impaired assets6
A facility for which there is doubt about timely payment of principal, interest and fees being achieved and / or a material
credit obligation is 90 days or more past due and is not well secured. It includes all problem assets, off-balance sheet
exposures (including derivatives) and assets brought to ANZ’s balance sheet through the enforcement of security.
Impaired derivatives have a credit valuation adjustment, which is a market assessment of the credit risk of the relevant
counterparties.
Restructured items
Restructured items comprise facilities in which the original contractual 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 materially beyond those typically offered to new facilities with similar risk.

6
The definition of Impaired Assets for accounting purposes is a default occurs when there are indicators that a debtor is unlikely to fully
satisfy contractual credit obligations to the Group, or the exposure is 90 days past due. Financial assets, including those that are wellsecured, are considered credit impaired for financial reporting purposes when they are in default.

25

ANZ Basel III Pillar 3 Disclosure

September 2021

Collectively Assessed Provisions for Credit Impairment
Collectively assessed provisions for credit impairment represent the Expected Credit Loss (ECL) calculated in accordancewith AASB 9 Financial Instruments (AASB 9) which commenced 1 October 2018. These incorporate forward looking
information and do not require an actual loss event to have occurred for an impairment provision to be recognised.
Under AASB 9, ECL is either measured over 12 months or the expected lifetime of the financial asset, depending on thecredit deterioration since origination, according to the following three-stage approach:Stage 1: At the origination of a financial asset, and where there has not been a significant increase in credit risk sinceorigination, a provision equivalent to 12 months ECL is recognised. For instruments with a remaining maturity of lessthan 12 months, a provision calculated on the remaining term of the maturity is recognised.

Stage 2: Where there has been a significant increase in credit risk (SICR) since origination, a provision equivalent
to lifetime ECL is recognised.

Stage 3: Where there is objective evidence of default or impairment, a provision equivalent to lifetime ECL isrecognised.

In determining what constitutes a SICR, ANZ considers both qualitative and quantitative information, including CCR at
origination and at the reporting date.
ECL is calculated as the product of PD, LGD and EAD at a facility level, discounted for incorporating the effect of timevalue of money. These credit risk factors are adjusted for current and forward looking information through the use of
macro-economic variables in the model.
To determine ECL under IFRS 9, a range of plausible scenarios are considered which are probability weighted. ANZ’s
economic scenario and probability weighting framework considers 4 economic scenarios: Base Case, Downside, Upside,and Stress to determine a probability weighted ECL outcome. Probability weightings are determined via an expert
judgement process that considers:

ANZ Research’s Base Case;
ANZ Base Case comparisons to historical trends and consensus range; andRisks or uncertainties to the Base Case.

Individually Assessed Provisions for Credit Impairment
Individually assessed provisions for credit impairment are calculated in accordance with AASB 9. They are assessed on acase-by-case basis for all individually managed impaired assets taking into consideration factors such as the realisablevalue of security (or other credit mitigants), the likely return available upon liquidation or bankruptcy, legal uncertainties,
estimated costs involved in recovery, the market price of the exposure in secondary markets and the amount and timingof expected receipts and recoveries.
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 individually assessed
provisions recognised in previous periods have subsequently decreased or are no longer required, such impairment losses
are reversed in the current period income statement.
Definition of default
ANZ uses the following definition of default:

ANZ considers that the customer is unlikely to pay its credit obligations in full, without recourse to actions such as
realising security, orthe customer is greater than or equal to 90 days past due on a credit obligation, orthe customer’s overdraft or other revolving facility(ies) have been continuously outside approved limits for 90 or moreconsecutive days.

Specific Provision and General Reserve for Credit Losses
Due to definitional differences, there is a difference in the split between ANZ’s individually assessed provision andcollectively assessed 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 ofcollectively assessed provisions on defaulted accounts. The disclosures in this document are based on individual provisionand collective provision, for ease of comparison with other published results.

26

ANZ Basel III Pillar 3 Disclosure

September 2021

APRA has flagged that the adoption of the forward looking ECL approach means that a GRCL will no longer be required.
This is likely to take effect at the commencement of the revised APS 220 prudential standard expected January 2022.
Exposure at Default in Table 7 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, and excludes Securitisation, Equities or Other Assets exposures.

Table 7(b) part (i): Period end and average Exposure at Default 7
Sep 21
Advanced IRB approach

Risk
Weighted
Assets$M

Corporate136,298

287,932

Average
Exposureat Default
for half year$M279,341

Sovereign

9,893

247,455

237,640

-

Bank

9,118

32,03533,718--110,622410,249

407,901(3)

21

Qualifying Revolving Retail

3,723

13,76913,947

34

60

Other Retail

19,66030,09630,49252

123289,314

1,021,536

1,003,039

69

283

Residential Mortgage

Total Advanced IRB approach
Specialised Lending

Exposureat Default$M

36,97745,03944,271

Standardised approach
Corporate

6,632

6,649

6,547

Individual
provision
charge forhalf year$M(14)

Write-offs
for half
year
$M

-

79

-

-

(5)

-

-

-

-

-

4

2

Sovereign

27

27

48

-

-

Residential Mortgage

203

431

427

1

1

Other Retail

17

16

19

-

-

Total Standardised approach

6,879

7,123

7,041

5

3

Credit Valuation Adjustment andQualifying Central Counterparties

3,270

6,420

8,306

-

-

336,440

1,080,118

1,062,657

69

286

Total

7

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

27

ANZ Basel III Pillar 3 Disclosure

September 2021

Table 7(b) part (i): Period end and average Exposure at Default (continued)
Mar 21
Advanced IRB approach

Risk
Weighted
Assets$M

Exposureat Default$M

Corporate

135,713

270,749

Average
Exposureat Default
for half year$M272,582

Sovereign

7,750

227,824

207,215-

Bank

10,09235,401

38,786--

Residential Mortgage

110,206

405,552

398,93146

71

Qualifying Revolving Retail

3,678

14,125

14,48633

61

Other Retail

20,69330,88831,41059

126

288,132

984,539

963,410187

326

36,47643,502

44,966-1

Corporate

6,388

6,445

8,894

(2)

11

Sovereign

76

69

141

-

-

Residential Mortgage

203

422

429

-

2

Total Advanced IRB approach
Specialised Lending

Individual
provision
charge forhalf year$M
49

Write-offs
for half year
$M

-

68

Standardised approach

Other Retail

23

22

28

2

-

Total Standardised approach

6,690

6,958

9,492

-

13

Credit Valuation Adjustment andQualifying Central Counterparties

4,281

10,192

9,938

-

-

335,579

1,045,191

1,027,806

187

340

Risk
Weighted
Assets$M

Exposureat Default$M

Individual
provision
charge forhalf year$M
126

Write-offs
for half year
$M

-

Total

Sep 20
Advanced IRB approach

Corporate

139,415

274,414

Average
Exposureat Default
for half year$M291,198

Sovereign

7,545

186,605

191,941-

Bank

12,73442,171

52,910--Residential Mortgage

110,353

392,312386,197

39

32

Qualifying Revolving Retail

4,337

14,846

15,487

79

107

Other Retail

21,79431,931

33,474133

131

296,178

942,279

971,207

377

610

39,001

46,43047,4333

2

Corporate

10,185

11,344

13,657

12

18

Sovereign

220

212

106

-

-

Residential Mortgage

210

435

453

2

2

Total Advanced IRB approach
Specialised Lending

340

Standardised approach

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

33

33

40

1

8

10,64812,024

14,256

15

28

7,710

9,684

9,845

-

-

353,537

1,010,417

1,042,741

395

640

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ANZ Basel III Pillar 3 Disclosure

September 2021

Table 7(b) part (ii): Exposure at Default by portfolio type8
Sep 21
Portfolio TypeSep 20

Average forhalf year
Sep 21
$M

$M

$M

$M

Cash

133,269

107,42271,926

120,346

Contingents liabilities, commitments, and other off-balance sheet
exposures
Derivatives

175,410

170,731

171,397

173,071

40,937

46,61450,963

43,776

138

61

133

100

Investment Securities

79,346

88,20689,977

83,776

Net Loans, Advances & Acceptances609,174

Settlement Balances

8

Mar 21

617,951

600,397593,904

Other assets

8,390

7,846

8,728

8,118

Trading Securities

24,677

23,914

23,38924,296

Total exposures

1,080,118

1,045,191

1,010,417

1,062,657

Average for half year is calculated as the simple average of the balances at the start and the end of each six month period.

29

ANZ Basel III Pillar 3 Disclosure

September 2021

Table 7(c): Geographic distribution of Exposure at Default
Sep 21

Portfolio Type

Australia

New Zealand$M$M

Asia Pacific,
Europe andAmericas
$M

Total
$M

Corporate

153,827

41,731

99,023

294,581

Sovereign

124,794

25,98596,703

247,482

Bank

13,252

2,588

16,19532,035Residential Mortgage

309,444

100,805431

410,680

Qualifying Revolving Retail

13,769--13,769Other Retail

21,2278,869

16

30,112

Qualifying Central Counterparties

1,055

685

4,680

6,420

Specialised Lending

32,227

12,687125

45,039Total exposures

669,595

193,350

217,173

1,080,118

Australia

New Zealand$M$M

Asia Pacific,
Europe andAmericas
$M

Total
$M

Mar 21

Portfolio Type
Corporate

150,050

40,34086,804

277,194

Sovereign

111,651

23,482

92,760227,893Bank

13,367

2,781

19,25335,401

Residential Mortgage

312,231

93,322421

405,974

Qualifying Revolving Retail

14,125--

14,125

Other Retail22,1118,777

2230,910Qualifying Central Counterparties

3,394

1,526

5,272

10,192

Specialised Lending

31,26912,111

122

43,502

Total exposures

658,198

182,339

204,654

1,045,191

Australia

New Zealand$M$M

Asia Pacific,
Europe andAmericas
$M

Total
$M

Sep 20

Portfolio Type
Corporate

154,805

41,41389,540285,758

Sovereign

79,134

24,465

83,218186,817Bank

18,131

2,883

21,15742,171

Residential Mortgage

303,867

88,445435

392,747

Qualifying Revolving Retail

14,846--

14,846

Other Retail

22,7479,184

33

31,964

Qualifying Central Counterparties

4,053

2,175

3,456

9,684

Specialised Lending

33,46012,698272

46,430Total exposures

631,043

181,263

198,1111,010,417

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ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(d): Industry distribution of Exposure at Default9 10
Sep 21Entertainment,
Leisure &Tourism$M

5,083

Electricity,
Gas &
Water
Supply$M
12,002

14,601

15

576

-

1

-

-

-

-

-

-

-

Government
and Official
Institutions$M

Manufacturing$M

Personal$M

Property
Services$M

Wholesale
Trade$M

RetailTrade$M

Transport&
Storage
$M

Other
$M

Total
$M

70,55530

39,995297

24,735

21,691

12,991

16,701

21,978294,581

164,252

78,885

1,219

-

1,632

20

-

234

179

247,482

32,020

-

2

-

-

-

6

-

5

32,035---

410,680

-

-

-

-

-

410,680--

13,769

-

-

-

-

-

13,769

12

1,424

8,338

933

1,036

3,073

1,170

4,328

30,112

-

-

-

-

-

-

-

1

6,420

-

116

-

39,565

24

2

896

441

45,039273,785

78,92742,756

433,084

66,865

22,771

16,072

19,001

26,932

1,080,118

25.4%

7.3%

4.0%

40.1%

6.2%

2.1%

1.5%

1.8%

2.5%

100.0%

Financial,
Investment& Insurance$M

Business
Services$M

Construction$M

Corporate

Agriculture,
Forestry,
Fishing &Mining$M
42,791

11,131

Sovereign

470

-

Bank

1

Residential Mortgage-

Qualifying Revolving
RetailOther Retail

-

-

-

-

-

-

2,076

2,280

3,103

73

1,728

538

Qualifying Central
Counterparties
Specialised Lending

-

-

-

-

-

6,419

1,492

7

352

1,825

318

1

Total exposures

46,83013,4198,553

14,476

16,647

4.3%

1.2%

0.8%

1.3%

1.5%

Portfolio Type% of Total

9

Property Services includes Commercial property operators, Residential property operators, Retirement village operators/developers, Real estate agents, Non-financial asset investors and Machineryand equipment hiring and leasing.

10

Other industry includes Health & Community Services, Education, Communication Services and Personal & Other Services.

31

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(d): Industry distribution of Exposure at Default (continued)
Portfolio Type

Corporate

Agriculture,
Forestry,
Fishing &Mining$M
43,390

Sovereign

Business
Services$M

Construction$M

10,4185,377Electricity,
Gas &
Water
Supply$M
12,152

Mar 21Entertainment,
Leisure &Tourism$M

Financial,
Investment& Insurance$M

Government
and Official
Institutions$M

Manufacturing$M

Personal$M

Property
Services$M

Wholesale
Trade$M

RetailTrade$M

Transport&
Storage
$M

Other
$M

Total
$M

14,526

57,13836

37,632421

23,89820,484

17,77321,367277,194
227,893

454

-

14

539

-

137,971

85,974

1,256

-

1,518

22

12,58
2
-

125

20

Bank

-

4

-

23

2

35,351

-

3

-

4

2

7

-

5

35,401

Residential Mortgage

-

-

-

-

-

-

-

-

405,974

-

-

-

-

-

405,974

Qualifying Revolving
RetailOther Retail

-

-

-

-

-

-

-

-

14,125

-

-

-

-

-

14,125

2,148

2,360

3,188

77

1,834

545

12

1,394

8,629

966

1,043

3,194

1,030

4,490

30,91010,192

Qualifying Central
Counterparties
Specialised Lending

-

-

-

-

-

10,192

-

-

-

-

-

-

-

-

1,476

8

346

1,816

306

1

-

-

-

38,161

24

-

917

447

43,502

Total exposures

47,468

12,7908,925

14,607

16,668241,198

86,02240,285429,149

64,547

21,575

19,84526,3291,045,191

4.5%

1.2%

0.9%

1.4%

1.6%

23.1%

8.2%

3.9%

41.1%

6.2%

2.1%

15,78
3
1.5%

1.9%

2.5%

100.0%

Business
Services$M

Construction$M

Financial,
Investment& Insurance$M

Government
and Official
Institutions$M

Manufacturing$M

Personal$M

Property
Services$M

Wholesale
Trade$M

RetailTrade$M

Transport&
Storage
$M

Other
$M

Total
$M

10,594

5,414Electricity,
Gas &
Water
Supply$M
11,511Entertainment,
Leisure &Tourism$M

Corporate

Agriculture,
Forestry,
Fishing &Mining$M
45,44015,041

52,381

42

43,594448

24,48822,22822,113285,758

531

-

15

608

-

99,407

83,099

1,461

-

1,581

27

13,88
4
-

18,580

Sovereign72

16

186,817

Bank

-

1

1

24

2

42,096

-

2

1

5

9

-

28

2

42,171

Residential Mortgage

-

-

-

-

-

-

-

-

392,747

-

-

-

-

-

392,747

Qualifying Revolving
RetailOther Retail

-

-

-

-

-

-

-

-

14,846

-

-

-

-

-

14,846

2,267

2,401

3,234

76

1,956

557

10

1,386

9,168

1,005

1,035

3,315

1,041

4,513

31,964

-

-

-

-

-

9,684

-

-

-

-

-

-

-

-

9,684

% of Total

Sep 20
Portfolio Type

Qualifying Central
Counterparties
Specialised Lending

1,964

10

362

2,016

423

1

-

2

-

40,004

26

-

1,166

456

46,430Total exposures

50,202

13,006

9,026

14,235

17,422

204,126

83,15146,445417,21067,08323,32520,887

27,1001,010,417

5.0%

1.3%

0.9%

1.4%

1.7%

20.2%

8.2%

4.6%

41.3%

6.6%

2.3%

17,19
9
1.7%

2.1%

2.7%

100.0%% of Total

32

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(e): Residual contractual maturity of Exposure at Default11
Sep 21
Portfolio Type≤12 mths$M

1 - 5 years$M

Corporate

135,428

145,349

Sovereign

164,238

55,444

Bank

21,608230

Residential Mortgage
Qualifying Revolving Retail> 5 years$M
13,739No Maturity
Specified$M
65

294,581

27,800-247,482

10,007420-

32,0351,040

385,276

24,134

410,680

Total
$M

-

-

-

13,76913,769Other Retail

11,2784,039

14,792

3

30,112

Qualifying Central Counterparties

4,408

881

663

468

6,420

Specialised Lending

17,99425,4711,557

1745,039Total exposures

355,184

242,231444,247

38,456

1,080,118

Portfolio Type≤12 mths$M

1 - 5 years$M> 5 years
$M

Total
$M

Corporate

121,998

140,590

14,522No Maturity
Specified$M
84

277,194

Sovereign

140,41355,04832,432-

227,893Bank

23,367

11,705329-

35,401229

974

380,081

24,690405,974

Mar 21

Residential Mortgage
Qualifying Revolving Retail

-

-

-

14,125

14,125

Other Retail

11,406

4,371

15,131

2

30,910Qualifying Central Counterparties

7,345

1,374

938

535

10,192

Specialised Lending

18,81622,8851,777

24

43,502

Total exposures

323,574

236,947445,210

39,4601,045,191

Portfolio Type≤12 mths$M

1 - 5 years$M> 5 years
$M

Total
$M

Corporate

123,849

145,885

15,925No Maturity
Specified$M
99285,758

Sovereign

102,470

58,241

26,106-

186,817Bank

26,165

15,596410-

42,171272

925

366,032

25,518392,747

Sep 20Residential Mortgage
Qualifying Revolving Retail

-

-

-

14,846

14,846

Other Retail

11,8304,586

15,548-31,964

Qualifying Central Counterparties

7,025

1,199

906

554

9,684

Specialised Lending

19,56824,8242,008

30

46,430Total exposures

291,179

251,256

426,935

41,0471,010,417

11

No Maturity Specified predominately includes credit cards and residential mortgage equity manager accounts.

33

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(f) part (i): Impaired assets12 13, Past due loans14, Provisions and Write-offs by Industry sector
Sep 21
Industry Sector

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Agriculture, Forestry, Fishing &MiningBusiness Services

-

215

95

58

Individual
provision
charge forhalf year
$M
(9)

-

59

55

33

(10)

12

Construction

-

77

68

41

8

15

Write-offs
for half
year
$M
10

Electricity, gas and water supply

-

9

1

9

-

-

Entertainment Leisure & Tourism

11

130

89

51

11

14

Financial, Investment & Insurance

-

55

68

31

4

3

Government & Official Institutions

-

-

1

-

-

-

Manufacturing

-

45

36

23

(6)

15

Personal

-

508

2,258

160

55

157

Property Services

-

97

63

24

(3)

5

Retail Trade

-

109

88

53

(23)

16

Transport & Storage

1

359

33

43

-

12

Wholesale Trade

-

293

31

123

38

8

Other

-

57

119

38

4

19

Total

12

2,013

3,005

687

69

286

12
Impaired derivatives are net of credit value adjustment (CVA) of nil, being a market value based assessment of the credit risk of therelevant counterparties (March 2021: $1 million; September 2020: $2 million).
13
Impaired loans / facilities include restructured items of $355 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
(March 2021: $300 million; September 2020: $254 million).
14

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

34

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(f) part (i): Impaired assets, Past due loans, Provisions and Write-offs by Industry sector(continued)
Mar 21
Industry Sector

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Agriculture, Forestry, Fishing &MiningBusiness Services

-

366

96

73

Individual
provision
charge forhalf year
$M
(13)

-

102

54

55

(3)

8

Construction

-

84

75

44

13

10

Write-offs
for half
year
$M
37

Electricity, gas and water supply

-

9

1

9

-

-

Entertainment Leisure & Tourism

-

100

71

52

2

19

Financial, Investment & Insurance

-

57

51

26

2

1

Government & Official Institutions

-

-

-

-

-

-

Manufacturing

-

96

46

41

25

20

Personal

-

604

2,463

203

77

192

Property Services

-

117

82

29

2

5

Retail Trade

2

262

92

91

7

23

Transport & Storage

1

359

31

51

3

6

Wholesale Trade

-

320

32

87

60

9

Other

-

62

128

48

12

10

Total

3

2,538

3,222

809

187

340

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Write-offs
for halfyear$M

Agriculture, Forestry, Fishing &MiningBusiness Services

-

601

101

104

Individual
provision
charge forhalf year
$M
30

-

104

50

57

27

25

Construction

-

91

63

44

23

10

Electricity, gas and water supply

-

10

1

9

11

11

Entertainment Leisure & Tourism

-

118

59

63

21

8

Financial, Investment & Insurance

-

62

35

27

5

4

Sep 20Industry Sector

30

Government & Official Institutions

-

-

-

-

-

-

Manufacturing

-

77

28

35

11

13

Personal

-

777

3,107

312

189

232

Property Services

-

142

49

35

4

3

Retail Trade

-

304

80

90

16

24

Transport & Storage

1

113

26

46

18

6

Wholesale Trade

-

68

38

20

19

256

Other

-

75

123

49

21

18

Total

1

2,542

3,760

891

395

640

35

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(f) part (ii): Impaired asset, Past due loans, Provisions and Write-offs
Sep 21
Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forhalf year$M

Writeoffs
for half
year$M

Corporate

11

1,083

217

338

(14)

79

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

363

2,214

93

(3)

21

Portfolios subject to Advanced IRB approach

Qualifying Revolving Retail

-

33

-

-

34

60

Other Retail

-

328

401

187

52

123

11

1,807

2,832

618

69

283

Specialised Lending

-

66

35

13

(5)

-

Portfolios subject to Standardised
approachCorporate

1

119

94

46

4

2

Residential Mortgage

-

10

44

6

1

1

Other Retail

-

11

-

4

-

-

Total Standardised approach

1

140

138

56

5

3

Qualifying Central Counterparties

-

-

-

-

-

-

12

2,013

3,005

687

69

286

Total Advanced IRB approach

Total

36

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(f) part (ii): Impaired asset, Past due loans, Provisions and Write-offs (continued)
Mar 21
Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forhalf year$M

Writeoffs
for half
year$M

Corporate

2

1,498

227

412

49

68

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

434

2,446

113

46

71

Qualifying Revolving Retail

-

38

-

-

33

61

Other Retail

-

363

418

215

59

126

Total Advanced IRB approach

2

2,333

3,091

740

187

326

Specialised Lending

-

75

39

18

-

1

Portfolios subject to Standardised
approachCorporate

1

112

63

43

(2)

11

Residential Mortgage

-

8

29

5

-

2

Other Retail

-

10

-

3

2

-

Total Standardised approach

1

130

92

51

-

13

Qualifying Central Counterparties

-

-

-

-

-

-

Total

3

2,538

3,222

809

187

340

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forhalf year$M

Writeoffs
for half
year$M

Corporate

-

1,298

212

435

126

340

Sovereign

-

-

-

-

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

549

3,004

136

39

32

Qualifying Revolving Retail

-

47

-

-

79

107

Other Retail

-

416

469

248

133

131

Total Advanced IRB approach

-

2,310

3,685

819

377

610

Specialised Lending

-

79

31

14

3

2

Portfolios subject to Standardised
approachCorporate

1

135

28

56

12

18

Residential Mortgage

-

9

16

2

2

2

Other Retail

-

9

-

-

1

8

Total Standardised approach

1

153

44

58

15

28

Qualifying Central Counterparties

-

-

-

-

-

-

Total

1

2,542

3,760

891

395

640

Portfolios subject to Advanced IRB approach

Sep 20

Portfolios subject to Advanced IRB approach

37

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(g): Impaired assets15 16, Past due loans17 and Provisions18 by Geography
Sep 21
Geographic region

11

Impairedloans/
facilities
$M
1,589

New Zealand

-

182

345

71

Asia Pacific, Europe and America

1

242

138

86

605

12

2,013

3,005

687

4,195

Impairedderivatives$M

Past dueloans≥ 90 days$M
2,785

Individual
provisionbalance$M
632

Collective
provisionbalance
$M
3,106
610

Australia

Total

Impairedderivatives$M

Past dueloans≥ 90 days$M
2,522

Individual
provisionbalance$M
530

Collective
provisionbalance
$M
2,987
603

Mar 21
Geographic region

2

Impairedloans/
facilities
$M
1,948

New Zealand

-

334

345

88

Asia Pacific, Europe and America

1

256

92

89

569

Total

3

2,538

3,222

809

4,285

Impairedderivatives$M

Past dueloans≥ 90 days$M
3,245

Individual
provisionbalance$M
688

Collective
provisionbalance
$M
3,727
671

Australia

Sep 20Geographic region

Australia-

Impairedloans/
facilities
$M
1,973

New Zealand

-

392

467

119

Asia Pacific, Europe and America

1

177

48

84

610

Total

1

2,542

3,760

891

5,008

15
Impaired derivatives are net of credit value adjustment (CVA) of nil, being a market value based assessment of the credit risk of therelevant counterparties (March 2021: $1 million; September 2020: $2 million).
16
Impaired loans / facilities include restructured items of $355 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
(March 2021: $300 million; September 2020: $254 million).
17

For regulatory reporting, not well secured portfolio managed retail exposures have been reclassified from past due loans ≥ 90 days to
impaired loans / facilities.
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 thisdocument are based on Individual Provision and Collective Provision, for ease of comparison with other published results.

18

38

ANZ Basel III Pillar 3 disclosure

September 2021

Table 7(h): Provision for Credit Impairment

Half year
Sep 21$M

Half year
Mar 21$M

Half year
Sep 20$M

Balance at start of period

4,285

5,008

4,501

Charge/(Release) to Income Statement

(145)

(678)

669

55

(45)

(114)

Collectively Assessed Provision

Adjustment for exchange rate fluctuations and transfers
UDC Divestment
Total Collectively Assessed Provision

-

-

(48)

4195

4,285

5,008

1,093

Individually Assessed Provision
Balance at start of period

809

891

New and increased provisions

369

455

675

(206)

(180)

(165)

Write-backs
Adjustment for exchange rate fluctuations and transfers

11

(6)

(38)

Discount unwind

(10)

(11)

(12)

Bad debts written off

(286)

(340)

(640)

-

-

(22)

Total Individually Assessed Provision

687

809

891

Total Provisions for Credit Impairment

4,882

5,094

5,899

General Reserve for
Credit Losses
$M
3,759

Total
$M

Collectively Assessed Provision

Specific Provision
Balance$M
436

Individually Assessed Provision

687

-

687

1,123

3,759

4,882

General Reserve for
Credit Losses
$M
3,853

Total
$M

Collectively Assessed Provision

Specific Provision
Balance$M
432

Individually Assessed Provision

809

-

809

1,241

3,853

5,094

General Reserve for
Credit Losses
$M
4,524

Total
$M

Collectively Assessed Provision

Specific Provision
Balance$M
484

Individually Assessed Provision

891

-

891

1,375

4,524

5,899

UDC Divestment

Table 7(j): Specific Provision Balance and General Reserve for Credit Losses19
S
Sep 21

Total Provision for Credit Impairment

4,195

Mar 21

Total Provision for Credit Impairment

4,285

Sep 20Total Provision for Credit Impairment

5,008

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 thisdocument are based on Individual Provision and Collective Provision, for ease of comparison with other published results.

19

39

ANZ Basel III Pillar 3 disclosure
Table 8September 2021

Credit risk – Disclosures for portfolios subject to the Standardised approach and supervisoryrisk weights in the IRB approach

Table 8(b): Exposure at Default by risk bucket20
Sep 21Mar 21

Sep 20

$M

$M

$M

0%

-

-

-

20%

22

19

241

35%

200

189

195

50%

515

516

2,429

Standardised approach exposures

75%

-

-

-

100%

6,088

5,974

8,830

150%

296

259

329

>150%

2

1

-

Capital deductions

-

-

-

7,123

6,958

12,024

Total
Other Asset exposures
0%

-

-

-

20%

748

745

708

35%

-

-

-

50%

-

-

-

75%

-

-

-

100%

3,785

3,860

4,234
-

150%

-

-

>150%

27

22

-

-

-

-

4,560

4,627

4,942

Capital deductions
Total
Specialised Lending exposures
0%

109

151

158

70%

24,48821,756

20,78790%

17,83018,21922,235

115%

2,031

2,660

2,731

250%

581

716

519

Total

45,03943,502

46,43020

Table 8(b) shows exposure at default after credit risk mitigation in each risk category.

40

ANZ Basel III Pillar 3 disclosure
Table 9September 2021

Credit risk – Disclosures for portfolios subject to Advanced IRB
approaches

Portfolios subject to the Advanced IRB (AIRB) approach
The following table summarises the types of borrowers and the rating approach adopted within each of ANZ’s AIRB
portfolios:
IRB Asset Class

Borrower Type

Rating Approach

Corporate

Corporations, partnerships or proprietorships that do not fit
into any other asset class

AIRB

Sovereign

Central governments
Central banks
Certain multilateral development banks

AIRB

Bank

Banks21
In Australia only, other authorised deposit taking institutions(ADI) incorporated in Australia

AIRB

Residential Mortgages

Exposures secured by residential property

AIRB

Qualifying Revolving
RetailAustralian consumer credit cards <$100,000 limit

AIRB

Other Retail

Small business lending
Other lending to consumers

AIRB

Specialised Lending

Income Producing Real Estate22
Project financeObject finance

AIRB – Supervisory
Slotting23

Other Assets

All other assets not falling into the above classes e.g. margin
lending, fixed assets

AIRB – fixed risk
weights

In addition, Where ANZ is not accredited to use the AIRB based approach to credit risk. ANZ has applies the Standardised
approach to credit risk where currently available data does not enable development of advanced internal models for PD,
LGD and EAD estimates. Under the Standardised approach, exposures are mapped to several regulatory risk weights,
mainly based on the type of counterparty and its external rating. For these counterparties, external ratings by Standard& Poor’s and Moody’s Investors Service are used as inputs into the RWA calculation. As described in the section on the
ANZ rating system, ANZ has mapped its master scale to the grading of these two External Credit Assessment Institutions(ECAIs).
ANZ applies its full normal risk measurement and management framework to these segments for internal management
purposes, such as for economic capital. Standardised segments will be migrated to AIRB if they reach a volume thatgenerates sufficient data for development of advanced internal models.
ANZ has not applied the Foundation IRB approach to any portfolios.
The ANZ rating system
As an AIRB bank, ANZ’s internal models generate the inputs into regulatory capital adequacy to determine the risk
weighted exposure calculations for both on and off-balance sheet exposures, including undrawn portions of credit
facilities, committed and contingent exposures and EL calculations. ANZ’s internal models are used to generate the three
key risk components that serve as inputs to the IRB approach to credit risk:PD is an estimate of the level of the risk of borrower default. Borrower ratings are derived by way of rating models
used both at loan origination and for ongoing monitoring.



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



LGD is an estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default
and expressed as a percentage of the facility’s EAD. ANZ’s LGD also includes recognition of the different legal andinsolvency regimes in different countries, where this has been shown to influence recovery outcomes.

21

The IRB asset classification of investment banks is Corporate, rather than Bank.

22

Since 2009, APRA has agreed that some large, well-diversified commercial property exposures may be treated as corporate exposures,in line with the original Basel Committee’s definition of Specialised Lending.
23

ANZ uses an internal assessment which is mapped to the appropriate Supervisory Slot.

41

ANZ Basel III Pillar 3 disclosure

September 2021

Effective maturity is also calculated as an input to the risk weighted exposure calculation for bank, sovereign andcorporate IRB asset classes.
ANZ’s rating system has two separate and distinct dimensions that:

Measure the PD, which is expressed by the Customer Credit Rating (CCR), reflecting the ability to service and repay
debt.



Measure the LGD as expressed by the Security Indicator (SI) ranging from A to G. The SI is calculated by reference
to the percentage of a loan covered by security which can be realised in the event of default. This calculation uses
standard ratios to adjust the current market value of collateral items to allow for historical realisation outcomes. The
security-related SIs are supplemented with a range of other SIs which cover such factors as cash cover, mezzanine
finance, intra-group guarantees and sovereign backing as ANZ’s LGD research indicates that these transaction
characteristics have different recovery outcomes. ANZ’s LGD also includes recognition of the different legal andinsolvency regimes in different countries, where this has been shown to influence recovery outcomes.

ANZ’s corporate PD master scale is APRA approved, and is made up of 27 rating grades. Each level/grade is separately
defined and has a range of default probabilities attached to it. The PD master scale enables ANZ’s rating system to bemapped to the grading’s of external rating agencies, using the PD as a common element after ensuring that default
definitions and other key attributes are aligned.
The following table demonstrates this alignment (for one year PDs):
ANZ CCR

Moody’sStandard & Poor’s

PD Range

0+ to 1-

Aaa to Aa3

AAA to AA-

0.0000 - 0.0346%

2+ to 3+

A1 to Baa1

A+ to BBB+

0.0347 - 0.1636%

3= to 4+

Baa2 to Baa3

BBB to > BB+

0.1637 - 0.4004%

4= to 6=

Ba1 to B1

BB+ to B+

0.4005 – 2.7550%

6- to 7=

B2 to B3

B to B-

2.7551 – 9.7980%

7- to 8+Caa

CCC

9.7981 – 27.1109%

8=

Ca, C

CC, C

27.1110 – 99.9999%

8-, 9 and 10

Default

Default

100%

In the retail asset classes, most facilities utilise credit rating scores. The scores are calibrated to PDs, and used to allocate
exposures to homogenous pools, along with LGD and EAD.
Use of internal estimates other than for regulatory capital purposes
ANZ’s rating system is a fundamental part of credit management and plays a key role in:Lending discretions,

Minimum origination standards,

Concentration limits,Portfolio reporting,Customer profitability measurement,Collectively assessed provision measurement,Management of deteriorating customers (where certain CCR/SI combinations trigger increasing scrutiny),and

Pricing decisions.

42

ANZ Basel III Pillar 3 disclosure

September 2021

PD, LGD and EAD are used in the calculation of capital and in the collectively assessed provisioning process. Regulatory
and economic capital are calculated from the same data sources and starting from the same basis, however there aresome differences between the factors used because several aspects of ANZ’s rating system are adjusted in accordancewith APRA requirements for regulatory capital purposes. The most significant of these adjustments are the use forregulatory capital purposes of downturn LGDs; the imposition of a 20% LGD floor for exposures secured by Australianresidential real estate and the mandatory use of the supervisory slotting approach for project finance and mostcommercial real estate exposures.
Controls surrounding the ratings system
ANZ’s rating system and credit risk estimates are governed by the Board Risk Committee and several executive
management committees, and are underpinned by a comprehensive framework of controls that operate throughout
ANZ. All policies, methodologies, model designs, model reviews, validations, responsibilities, systems and processes
supporting the ratings systems are documented, and subject to review by Internal Audit.
The design, build and implementation of credit rating models resides with a specialist Group-level team. Credit rating
models are owned by central Risk teams. The use (including overrides) and performance of credit rating models ismonitored by the relevant business and their counterparts in Risk, and validated regularly by a separate specialist
Group-level function. This cycle of design, build, implementation, monitoring and validation is overseen by the CRSOC,
and informs the need for new models or recalibration of existing models.
Internal Audit provides third line independent credit related assurance activities, including providing an independent
assessment of both the asset quality in the portfolio and the quality of credit decision making. It also assesses
management controls from a “top down” portfolio oversight perspective as well as credit risk processes from a “bottomup” perspective based on individual customer file reviews.
Risk grades are an integral part of reporting to the Board and executives.
In addition, the use of the rating system’s outputs in key business unit performance measures in processes such asprovisioning and the allocation of capital ensure that the rating system receives robust input from the business units,
not just the specialist modelling teams.
Rating process by asset class
Building reliable and accurate rating tools requires balancing of many factors including data availability (external data
may be used in some circumstances, where it is relevant), the size of the segment (the more customers within thesegment, the more likely that statistically reliable models can be built), and the need to be able to validate the model.
Rating tool approaches include:
Statistical models producing a PD or a LGD, which are developed from internal or external data on defaults.
Statistical models producing an internal rating, which involve calibrating ANZ’s models to external rating data wheredata on defaults is insufficient for statistical purposes (such as banks).
Hybrid statistical and expert models producing an internal rating, which use a mixture of default data and expert input.
Expert models/processes that produce an internal rating, including external rating agency replication models.
Ongoing data collection and testing processes ensure enhanced or new models are introduced as required to maintainand improve the accuracy and reliability of rating processes.

43

ANZ Basel III Pillar 3 disclosure

September 2021

Regardless of what credit risk rating tool is used, lending staff rating a customer are required to review the modelgenerated PD (or CCR) and take into account any out-of-model factors or policy overlays to decide whether or not tooverride the model rating. Overrides of a rating model to a better rating require approval from the independent credit
risk function. The significance of the model for risk grading varies with the customer segment: models will dominate
risk grading of homogenous, simple and data-rich segments such as in Retail, however for complex, specialised businesssegments expert knowledge and the highly customised nature of transactions will influence the rating outcome.
The following table summarises the types of internal rating approaches used in ANZ:IRB Asset Class

Borrower type

Rating Approach

Corporate

Corporations, partnerships or
proprietorships that do not fit into any otherasset class

Mainly statistical models
Some use of expert models and policy
processes

Sovereign

Central governments
Central banks
Certain multilateral development banks
Australian state governments

External rating and expert
judgement

Bank

Banks
In Australia only, other ADIs
incorporated in Australia

Statistically-based models
Review of all relevant and material
information including externalratings

Residential
Mortgages

Exposures secured by residential property

Statistical models

Qualifying Revolving
RetailAustralian consumer credit cards <$100,000
limit

Statistical models

Other Retail

Small business lending
Other lending to consumers

Statistical models

Specialised Lending

Income Producing Real Estate
Project financeObject financeExpert models/Supervisory
Slotting24

Estimation of LGD and EAD
ANZ’s LGD modelling takes into account data on secured recovery, unsecured recovery rates and debt seniority,
geography and internal management costs from several major data sources. Internal data is used as the basis for LGD
estimation in the retail asset class, and is supplemented by external data for the corporate asset class. Given the scarcity
of internal data for Bank and Sovereign Basel asset classes, LGD modelling for these classes is primarily based on
external data.
EAD represents the expected facility exposure at the date of default, including an estimate of additional drawings prior
to default, as well as post-default drawings that were legally committed to prior to default.

24

Specialised Lending exposures are rated with internal rating tools to produce a PD and LGD. These are used in internal processes, but
not for regulatory capital purposes where the exposures are mapped to Supervisory Slots.

44

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(d): Non Retail Exposure at Default subject to Advanced Internal Ratings Based (IRB) approach25 26
27

Sep 21
AAA
< A+
$M

A+
< BBB
$M

BBB
< BB+
$M

BB+
< B+
$M

B+
< CCC
$M

CCC
$M

Default
$M

Total
$M

Exposure at Default
Corporate

32,022

94,10994,734

51,223

12,191

1,681

1,972

287,932

Sovereign

216,732

23,550

3,242

1,436

2,349

146

-

247,455

Bank

7,782

19,924

3,617

657

53

2

-

32,035

Total

256,536

137,583

101,59353,316

14,593

1,829

1,972

567,422

45.3%

24.2%

17.9%

9.4%

2.6%

0.3%

0.3%

100.0%% of Total

Undrawn commitments (included in above)
Corporate

9,341

32,52029,271

8,573

1,510

172

61

81,448

Sovereign

1,307

392

436

28

62

19

-

2,244

Bank

1

409

25

-

-

-

-

435

Total

10,64933,32129,732

8,601

1,572

191

61

84,127

Average Exposure at Default
Corporate

18.091

6.980

2.159

0.835

0.312

0.372

0.914

1.726

Sovereign256.184

158.057

27.70914.96019.9077.693-

183.572

3.421

3.983

2.799

4.641

1.911

0.110

-

3.636
48.1%

Bank

Exposure-weighted average Loss Given Default (%)
Corporate

59.8%

57.1%

45.8%

33.3%

32.2%

38.7%

37.7%

Sovereign

6.0%

18.3%

33.1%

40.7%

53.2%

39.7%

-

8.2%

Bank

57.3%

58.5%

67.5%

69.2%

72.1%

72.4%

-

59.5%
47.3%

Exposure-weighted average risk weight (%)
Corporate

18.7%

32.8%

53.6%

62.3%

90.0%

202.8%

121.6%

Sovereign

1.1%

5.2%

32.4%

81.6%

162.8%

199.7%

-

4.0%

Bank

14.7%

22.9%

69.6%

118.4%

210.2%

356.1%

-

28.5%

25

In accordance with APS 330, EAD in Table 9(d) includes Advanced IRB exposures and excludes Specialised Lending, Standardised,
Securitisation, Equities or Other Assets exposures. Specialised Lending is excluded from Table 9(d) as it follows the Supervisory Slotting
treatment, and a breakdown of risk weightings is provided in Table 8(b).

26

Average EAD is calculated as total EAD post risk mitigants divided by the total number of credit risk generating exposures.

27

Exposure-weighted average risk weight (%) is calculated as CRWA divided by EAD.

45

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(d): Non Retail Exposure at Default subject to Advanced Internal Ratings Based (IRB) approach(continued)
Mar 21
AAA
< A+
$M

A+
< BBB
$M

BBB
< BB+
$M

BB+
< B+
$M

B+
< CCC
$M

CCC
$M

Default
$M

Total
$M

Exposure at Default
Corporate

25,61985,11089,31053,03013,358

1,968

2,354

270,749

Sovereign

195,497

25,578

3,017

1,823

1,901

4

4

227,824

Bank

7,973

22,926

3,675

775

43

9

-

35,401

Total

229,089

133,61496,002

55,62815,302

1,981

2,358

533,974

42.9%

25.0%

18.0%

10.4%

2.9%

0.4%

0.4%

100.0%% of Total

Undrawn commitments (included in above)
Corporate

7,668

30,92529,367

9,255

1,589

189

192

79,185

Sovereign

1,272

207

256

72

10

-

-

1,817

Bank

-

410

6

-

1

-

-

417

Total

8,940

31,542

29,629

9,327

1,600

189

192

81,419Average Exposure at Default
Corporate

14.665

7.900

2.094

0.825

0.303

0.460

0.903

1.589

Sovereign228.920171.665

31.42813.20823.465

0.490

0.701

171.167

4.571

4.752

3.544

5.653

0.937

0.415

-

4.532
47.4%

Bank

Exposure-weighted average Loss Given Default (%)
Corporate

59.1%

56.7%

45.4%

34.9%

31.5%

35.8%

40.6%

Sovereign

5.9%

11.9%

27.3%

27.6%

55.7%

60.7%

18.7%

7.4%

Bank

57.3%

57.4%

64.5%

68.3%

67.8%

66.2%

-

58.3%

Exposure-weighted average risk weight (%)
Corporate
Sovereign

19.3%
1.1%

33.8%
3.3%

53.7%
27.0%

66.1%
53.8%

89.8%
151.8%

183.1%
321.8%

143.9%
-

50.1%
3.4%

Bank

14.9%

23.7%

65.3%

120.8%

206.9%

401.8%

-

28.5%

AAA
< A+
$M

A+
< BBB
$M

BBB
< BB+
$M

BB+
< B+
$M

B+
< CCC
$M

CCC
$M

Default
$M

Total
$M

Sep 20

Exposure at Default
Corporate

24,60382,12891,67956,616

14,593

2,239

2,556

274,414

Sovereign

155,797

23,676

3,109

2,253

1,737

13

20

186,605

Bank

8,054

28,841

4,099

1,129

43

5

-

42,171

Total

188,454

134,645

98,88759,99816,373

2,257

2,576

503,190

37.5%

26.7%

19.7%

11.9%

3.3%

0.4%

0.5%

100.0%% of Total

Undrawn commitments (included in above)
Corporate

8,736

33,47529,496

9,381

1,658

263

180

83,189Sovereign

1,680

86

113

181

23

-

-

2,083

Bank

1

555

26

-

1

-

-

583

Total

10,417

34,116

29,635

9,562

1,682

263

180

85,855

Average Exposure at Default
Corporate

15.011

10.685

2.206

0.856

0.300

0.473

0.830

1.582

Sovereign

168.430215.233

37.45818.77548.251

1.636

2.479

144.655

6.820

7.889

5.654

7.953

1.190

0.235

-

7.321
47.6%

Bank

Exposure-weighted average Loss Given Default (%)
Corporate

58.4%

56.1%

46.7%

36.5%

31.6%

43.3%

40.8%

Sovereign

6.3%

12.0%

35.6%

22.6%

54.8%

63.0%

11.6%

8.2%

Bank

57.4%

59.1%

64.3%

67.9%

69.7%

66.9%

-

59.5%

50.8%

Exposure-weighted average risk weight (%)
Corporate

19.0%

32.5%

53.6%

67.0%

81.8%

234.6%

148.9%

Sovereign

1.4%

3.3%

33.6%

43.1%

148.7%

280.7%

-

4.0%

Bank

15.5%

25.4%

65.5%

120.4%

220.2%

422.3%

-

30.2%

46

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(d): Retail Exposure at Default subject to Advanced Internal Ratings Based (IRB) approach by risk
grade
Sep 21
0.00%<0.11%$M

0.11%<0.30%$M

0.30%<0.51%$M

0.51%<3.49%$M

3.49%<10.09%$M

10.09%<100.00%$M

Default
$M

Total
$M

Residential Mortgage

90,803

94,20368,171

144,757

7,686

2,052

2,577

410,249

Qualifying Revolving Retail

5,276

3,256

1,082

2,938

784

397

36

13,769

834

4,117

1,797

14,754

6,036

1,644

914

30,096

Total

96,913

101,576

71,050

162,449

14,506

4,093

3,527

454,114% of Total

21.3%

22.4%

15.6%

35.8%

3.2%

0.9%

0.8%

100.0%

Exposure at Default

Other Retail

Undrawn commitments (included in above)
Residential Mortgage

22,974

5,800

1,493

8,781

27

15

-

39,090Qualifying Revolving Retail

3,967

2,471

715

1,284

225

52

2

8,716

760

3,277

923

2,996

725

119

24

8,824

27,701

11,5483,131

13,061

977

186

26

56,630

Other Retail
Total
Average Exposure at
Default
Residential Mortgage

0.262

0.223

0.297

0.332

0.322

0.330

0.308

0.279

Qualifying Revolving Retail

0.009

0.008

0.008

0.010

0.010

0.006

0.009

0.009

Other Retail

0.008

0.011

0.011

0.020

0.021

0.010

0.031

0.016

Exposure-weighted average Loss Given Default (%)
Residential Mortgage

19.7%

17.3%

19.7%

20.7%

20.1%

20.0%

19.2%

19.5%

Qualifying Revolving Retail

72.7%

76.0%

74.6%

78.4%

82.0%

80.4%

75.7%

75.6%

Other Retail

58.7%

62.7%

43.5%

40.6%

41.5%

54.1%

43.1%

45.3%

Exposure-weighted average risk weight (%)
Residential Mortgage

4.5%

11.6%

23.0%

44.6%

98.3%

144.9%

187.9%

27.0%

Qualifying Revolving Retail

3.4%

8.0%

16.2%

44.5%

112.2%

218.0%

153.3%

27.0%

Other Retail

35.4%

43.8%

33.5%

54.1%

79.0%

141.3%

206.7%

65.3%

47

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(d): Retail Exposure at Default subject to Advanced Internal Ratings Based (IRB) approach by risk
grade
Mar 21

0.00%<0.11%$M

0.11%<0.30%$M

0.30%<0.51%$M

0.51%<3.49%$M

3.49%<10.09%$M

10.09%<100.00%$M

Default
$M

Total
$M

Residential Mortgage

90,79690,181

66,931

144,061

8,339

2,332

2,912

405,552

Qualifying Revolving Retail

5,274

3,443

1,137

2,962

852

424

33

14,125

798

3,928

1,810

15,305

6,118

1,900

1,029

30,888

Total

96,86897,552

69,878

162,328

15,309

4,656

3,974

450,565% of Total

21.5%

21.7%

15.5%

36.0%

3.4%

1.0%

0.9%

100.0%

Exposure at Default

Other Retail

Undrawn commitments (included in above)
Residential Mortgage

22,634

5,669

1,589

8,780

29

16

-

38,717

Qualifying Revolving Retail

3,786

2,537

738

1,161

207

38

2

8,469

729

3,120

922

3,753

980

169

44

9,717

27,14911,326

3,249

13,694

1,216

223

46

56,903

Average Exposure at
Default
Residential Mortgage

0.260

0.220

0.290

0.320

0.320

0.340

0.310

0.273

Qualifying Revolving Retail

0.010

0.010

0.010

0.010

0.010

0.010

0.010

0.009

Other Retail

0.010

0.010

0.010

0.020

0.020

0.010

0.030

0.016

Other Retail
Total

Exposure-weighted average Loss Given Default (%)
Residential Mortgage

19.8%

17.6%

19.9%

20.8%

20.2%

20.0%

19.5%

19.7%

Qualifying Revolving Retail

72.4%

75.9%

74.6%

78.6%

82.0%

80.2%

75.7%

75.6%

Other Retail

59.0%

62.8%

43.4%

40.9%

42.1%

53.3%

44.0%

45.4%
27.2%

Exposure-weighted average risk weight (%)
Residential Mortgage

4.4%

11.6%

22.5%

44.1%

98.5%

145.3%

192.4%

Qualifying Revolving Retail

3.4%

7.8%

15.6%

43.0%

102.0%

203.1%

152.6%

26.0%

Other Retail

35.3%

44.0%

33.5%

54.3%

80.4%

142.6%

207.0%

67.0%

0.00%
<0.11%$M

0.11%<0.30%$M

0.30%<0.51%$M

0.51%<3.49%$M

3.49%<10.09%$M

10.09%<100.00%$M

Default
$M

Total
$M

Residential Mortgage

87,86385,491

61,628141,183

9,430

3,117

3,600

392,312

Qualifying Revolving Retail

5,305

3,405

1,176

3,371

983

565

41

14,846

732

4,075

1,784

15,508

6,538

2,138

1,156

31,931

Total

93,90092,97164,588160,062

16,951

5,820

4,797

439,089% of Total

21.4%

21.2%

14.7%

36.5%

3.8%

1.3%

1.1%

100.0%

Sep 20

Exposure at Default

Other Retail

Undrawn commitments (included in above)
Residential Mortgage

21,988

5,682

1,656

6,792

32

29

1

36,180Qualifying Revolving Retail

3,999

2,641

800

1,506

298

58

2

9,304

672

3,297

900

3,088

869

180

29

9,035

26,659

11,6203,356

11,386

1,199

267

32

54,519Average Exposure at
Default
Residential Mortgage

0.260

0.220

0.270

0.280

0.310

0.310

0.280

0.259

Qualifying Revolving Retail

0.010

0.010

0.010

0.010

0.010

0.010

0.010

0.009

Other Retail

0.010

0.010

0.010

0.020

0.020

0.010

0.030

0.016

Other Retail
Total

Exposure-weighted average Loss Given Default (%)
Residential Mortgage

19.7%

17.7%

19.6%

20.8%

20.2%

20.0%

19.7%

19.7%

Qualifying Revolving Retail

72.6%

76.0%

74.7%

78.8%

82.1%

81.1%

75.7%

75.9%

Other Retail

57.7%

64.3%

44.3%

41.1%

42.3%

53.5%

42.1%

45.7%

Exposure-weighted average risk weight (%)
Residential Mortgage

4.4%

11.6%

21.8%

44.5%

98.4%

144.8%

181.8%

28.1%

Qualifying Revolving Retail

3.4%

7.8%

15.6%

43.4%

102.1%

211.1%

117.5%

29.2%

Other Retail

37.6%

44.0%

34.4%

54.9%

81.2%

144.6%

190.1%

68.3%

48

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(e): Actual Losses by portfolio type
Half year Sep 21
Basel Asset Class

Write-offs$M

Corporate

Individual provision
charge$M(14)

Sovereign

-

-

Bank

-

-

Residential Mortgage

(3)

21

Qualifying Revolving Retail

34

60

Other Retail

52

123

Total Advanced IRB

69

283

Specialised Lending

(5)

-

5

3

69

286

Standardised approach
Total

79

Half year Mar 21
Basel Asset Class

Write-offs$M

Corporate

Individual provision
charge$M
49

Sovereign

-

-

Bank

-

-

Residential Mortgage

46

71

Qualifying Revolving Retail33

61

Other Retail

59

126

187

326

Total Advanced IRB

68

Specialised Lending-

1Standardised approach

-

13

187

340

Total

Half year Sep 20
Basel Asset Class

Write-offs$M

Corporate

Individual provision
charge$M
126

Sovereign

-

-

Bank

-

-

39

32

Qualifying Revolving Retail

79

107

Other Retail

133

131

Total Advanced IRB

377

610

Residential Mortgage

340

Specialised Lending

3

2Standardised approach

15

28

395

640

Total

Factors impacting the loss experience
The individually assessed credit impairment charge decreased by $118 million driven by decreases across the Australia
Retail and Commercial (-$73 million) and Institutional (-$40 million) divisions. The decrease in the Australia division was
driven by lower impairments in the home loan portfolio as underlying delinquency flows remained subdued due to theimpact of various COVID-19 support initiatives, combined with higher write-backs and recoveries in the Commercial
portfolio. The decrease in the Institutional division was driven by lower transitions to impaired loans.
Write-offs decreased $54 million over the half predominantly driven decrease in Australia Home loan portfolio.

49

ANZ Basel III Pillar 3 disclosure

September 2021

Table 9(f): Average estimated vs. actual PD, EAD and LGD – Advanced IRB
Sep 21
Portfolio Type

Average
Estimated
PD%

Average
Actual PD%

Averageestimated toactual EAD
ratio

Average
Estimated
LGD%

Average
Actual LGD%

Corporate

2.04

1.81

1.14

41.38

35.49

Sovereign

0.42

-

n/a

n/a

n/a

Bank

0.62

0.06

1.02

46.00

58.30

Specialised Lending

n/a

1.87

1.06

n/a

29.86

Residential Mortgage

0.79

0.78

1.01

20.3

1.6

Qualifying Revolving Retail

1.96

1.58

1.11

78.7

65.3

Other Retail

3.97

2.75

1.05

51.6

38.0

APS 330 Table 9(f) compares internal credit risk estimates used in calculating regulatory capital with realised outcomesby portfolio types. It covers the PD, EAD and LGD estimates for the IRB portfolios.
Estimated PD and LGD for Specialised Lending exposures have not been provided, since APRA requires the use of
supervisory slotting for Regulatory EL calculations. Actual PD, EAD ratio, Estimated LGD and Actual LGD for Sovereign
exposures have not been provided, since there were no Sovereign defaults observed in ANZ Sovereign exposures forthe observation period.
Wholesale Portfolios
The estimated PD is based on the average of the internally estimated long-run PDs for obligors that are not in default at
the beginning of each financial year over the period of observation being 2009 to 2019. The actual PD is based on thenumber of defaulted obligors up to August 2021 compared to the total number of obligors measured.
The EAD ratio compares internally estimated EAD prior to default to realised EAD for defaulted obligors over the 12 yearsof observation being 2009 to August 2021. A ratio greater than 1.0 signifies that on average, the actual defaulted
exposures are lower than the estimated exposures at the time of default.
The estimated LGD is the downturn LGD for accounts that defaulted at the beginning of each year during the observation
period being 2009 to September 2019. The actual LGD is based on the average realised losses captured over the period
for the accounts observed at the beginning and defaulted during the observation period. For non-retail portfolios, theestimated and actual LGDs are based on accounts that defaulted up to September 2019. Defaults occurring after
September 2019 have been excluded from the analysis to allow sufficient time for workout period. Actual LGD for defaults
where workouts were not finalised have been estimated to approximate the final actual loss. Defaults where no loss data
has been captured are excluded from the LGD calculation.
A review of historical LGD data is currently being undertaken and may result in changes to Average Actual LGD numbers
detailed above.
Retail Portfolios
The estimated PD is based on the average of the internally estimated long-run PDs for obligors that are not in default at
the beginning of each financial year over the period of observation being 2015 to 2019. The actual PD is based on thenumber of defaulted obligors up to September 2020 compared to the total number of obligors measured.
The EAD ratio compares internally estimated EAD prior to default to realised EAD for defaulted obligors over the periodof observation being 2015 to 2019. A ratio greater than 1.0 signifies that on average, the actual defaulted exposures
are lower than the estimated exposures at the time of default.
The estimated LGD is the downturn LGD for accounts that defaulted at the beginning of each year during the observation
period being 2014 to 2019. The actual LGD is based on the average realised losses over the period for the accounts
observed at the beginning and defaulted during the observation period. Defaults occurring after September 2019 havebeen excluded from the analysis to allow sufficient time for workout period.

50

ANZ Basel III Pillar 3 disclosure

Table 10

September 2021

Credit risk mitigation disclosures

Main types of collateral taken by ANZ
Collateral is used to mitigate credit risk, as the secondary source of repayment in case the counterparty cannot meetits contractual repayment obligations.28 Types of collateral typically taken by ANZ include:Charges over residential, commercial, industrial or rural property,Charges over business assets,

Charges over specific plant and equipment,Charges over listed shares, bonds or securities,

Charges over cash deposits, and

Guarantees and pledges.

Cash and securities under Credit Support Annex (CSA) and Global Master Repurchase Agreement (GMRA) for
Counterparty credit risk in derivative and repo transactions

In some cases, such as where the customer risk profile is considered very sound or by the nature of the product, atransaction may not be supported by collateral.
Our credit policy, requirements and processes set out the acceptable types of collateral, as well as a process by which
additional instruments and/or asset types can be considered for approval.
For derivative transactions, APRA’s CPS 226 “Margining and risk mitigation for non-centrally cleared derivatives” hasmandated Variation Margin and Initial Margin arrangements between covered entities, subject to trading volume
thresholds. The operation of collateral agreements falls under a policy which establishes the control framework designed
to ensure a robust and globally consistent approach to the management of collateralised exposures, as well ascompliance with CPS 226 obligations.
For non-derivative and repo transactions, ANZ’s credit risk modelling teams use historical internal loss data and otherrelevant external data to assist in determining the discount that each type of collateral would be expected to incur in aforced sale. The discounted value is used in the determination of the SI and LGD. For derivative and repo transactions,
ANZ haircuts the value of cash and securities collateral under CSA or GMRA to calculate the regulatory EAD, as per
APRA’s APS 112 and APS 180.
Policies and processes for collateral valuation and management
ANZ has well established policies, requirements and processes around collateral valuation and management that are
reviewed regularly. The concepts of legal enforceability, certainty and current valuation are central to collateralmanagement.
In order to achieve legal enforceability and certainty, ANZ uses standard collateral instruments or has specificdocumentation drawn up by external legal advisers, and where applicable, security interests are registered. The use ofcollateral management systems also provides certainty that the collateral has been properly taken, registered andstored.
In order to rely on the valuation of collateral assets, ANZ has developed comprehensive rules around acceptable typesof valuations (including who may value an asset), frequency of revaluations and standard extension ratios for typicalasset types. Upon receipt of a new valuation, the information is used to recalculate the SI (or to reassess the adequacyof the provision, in the case of an impaired asset), thereby ensuring that the exposure has an updated LGD attached
to it for risk quantification purposes.
Guarantee support
Within wholesale lending, guarantee support for lending proposals is a common component in transaction structuring
for ANZ. The guarantee of a financially stronger party can help improve the PD of a transaction through its explicit
support of the weaker rated borrower.
Guarantees that are recognised for risk rating purposes may be provided by parties that include associated entities,banks, sovereigns or individuals. Credit requirements provide threshold parameters to determine acceptablecounterparties in achieving risk grade enhancement of the transaction.
The suitability of the guarantor is determined by risk rating that guarantor. Not all guarantees or guarantors arerecognised for risk grade enhancement purposes.

For some products, the collateral provided is fundamental to its structuring so is not strictly the secondary source of repayment. For
example, lending secured by trade receivables is typically repaid by the collection of those receivables.

28

51

ANZ Basel III Pillar 3 disclosure

September 2021

Use of credit derivatives for risk mitigation
ANZ may use purchased credit derivatives to mitigate credit risk by lowering exposures to reference entities thatgenerate high concentration risk exposures or to improve risk return performance. Only certain credit derivatives suchas credit default swaps (CDS) are recognised for risk mitigation purposes in the determination of regulatory capital.
Standard, legally enforceable documentation applies.
For regulatory capital purposes, ANZ only recognises protection using credit derivatives where they meet several policy
and regulatory requirements around the strength of the protection offered such as being irrevocable.
A CDS may only be transacted with banks and non-bank financial institutions that have been credit assessed andapproved by a designated specialist credit officer. All parties must meet minimum credit standards and be allocated a
related credit limit. In the event that the creditworthiness of a credit protection provider falls below the minimum
required to provide effective protection, the protection is no longer recognised as an effective risk mitigant for regulatory
purposes.
Additionally, ANZ uses market instruments, mainly interest rate and foreign exchange derivatives, as well as CDS
Indices to hedge the Credit value adjustment (CVA) mark to market volatility of the markets derivative portfolio.
The use of netting
Netting is a form of credit risk mitigation in that it reduces EAD, by offsetting a customer’s positive and negativebalances with ANZ.
In order to apply on-balance sheet netting, the arrangement must be specifically documented with the customer andmeet a number of legally enforceable requirements.
Netting is also used where the credit exposure arises from off-balance sheet market related transactions. For close-out
netting to be utilised with counterparties, a legally enforceable eligible netting agreement in an acceptable jurisdiction
must be in place. This means that each transaction is aggregated into a single net amount and transactions are netted
to arrive at a single overall sum.
Transaction structuring to mitigate credit risk
Besides collateral, guarantee support and derivatives described above, credit risk mitigation can also be furthered by
prudent transaction structuring. For example, the risk in project finance lending can be mitigated by lending covenants,
loan syndication and political risk insurance.
Concentrations of credit risk mitigation
Taking collateral raises the possibility that ANZ may inadvertently increase its risk by becoming exposed to collateralconcentrations. For example, in the same way that an over-exposure to a particular industry may mean that a bank ismore sensitive to the fortunes of that industry, an over-exposure to a particular collateral asset type may make ANZ
more sensitive to the performance of that asset type.
ANZ does not believe that it has any material concentrations of collateral types, given the well diversified nature of its
portfolio and conservative asset extension ratios.
Additional credit risk mitigation for markets derivatives
Right to break clauses are used in master agreement or in trade confirmation to reduce the term of long dated derivativetrades. Additional termination triggers (close out of exposure) such as credit rating downgrade clauses and change inownership clauses included in documentation are used to reduce credit exposure under specific credit events. ANZ uses
central clearing houses to clear certain derivative transactions and reduce bilateral exposure. Settlement throughContinuous Linked Settlement (CLS) is used to eliminate settlement risk for foreign exchange transactions with CLS
members. On top of exchange of Variation margin and Initial Margin, APRA’s CPS 226 also requires to apply risk
mitigation practices for un-cleared derivatives between covered counterparties in the areas of trading relationshipdocumentation, trade confirmation, portfolio reconciliation, portfolio compression, valuation processes and dispute
resolution processes.

52

ANZ Basel III Pillar 3 disclosure

September 2021

Table 10(b): Credit risk mitigation on Standardised approach portfolios – collateral 29 30
Sep 21
Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

8.5%Standardised approach
Corporate

6,649

563

-

Sovereign

27

520

-

Residential Mortgage

431

-

-

0.0%

Other Retail

16

-

-

0.0%

7,123

1,083

-

15.2%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Corporate

6,445

2,523

-

28.1%

Sovereign

69

403

-

85.4%

Residential Mortgage

422

-

-

-

Other Retail

22

-

-

-

6,958

2,926

-

26.6%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Total

Mar 21

Standardised approachTotal

Sep 20Standardised approach
Corporate

11,344

6,436

-

36.1%

Sovereign

212

1,532

-

87.8%

Residential Mortgage

435

-

-

-

Other Retail

33

-

-

-

12,024

7,968

-

39.9%

Total

29
Eligible Collateral could include cash collateral (cash, certificates deposits and bank bills issued by the lending ADI), gold bullion andhighly rated debt securities.

Exposure at Default represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.

30

53ANZ Basel III Pillar 3 disclosure

September 2021

Table 10(c): Credit risk mitigation – guarantees and credit derivatives31
Sep 21
Exposure$M

Exposurescovered by
Guarantees$M

Exposurescovered by
Credit Derivatives$M% Coverage

Advanced IRB
Corporate (incl. Specialised Lending)

332,971

1,276

786

0.6%

Sovereign247,455

4,688

-

1.9%

Bank

32,035

1

37

0.1%

Residential Mortgage

410,249---

Qualifying Revolving Retail

13,769---Other RetailTotal

30,096---

1,066,575

5,965

823

0.6%

Standardised approach
Corporate

6,649

-

4

0.1%

Sovereign

27

-

-

-

Residential Mortgage

431

-

-

-

Other Retail

16

-

-

-

Total

7,123

-

4

0.1%

Qualifying Central Counterparties

6,420

-

-

0.0%

Exposure$M

Exposurescovered by
Guarantees$M

Exposurescovered by
Credit Derivatives$M% Coverage

Mar 21

Advanced IRB
Corporate (incl. Specialised Lending)

314,251

1,563

841

0.8%

Sovereign

227,824

4,440

-

1.9%

Bank

35,401-

18-

Residential Mortgage

405,552---

Qualifying Revolving Retail

14,125---

Other Retail30,888---1,028,041

6,003

859

0.7%

Corporate

6,445

23

10

0.5%

Sovereign

69

-

-

-

Residential Mortgage

422

-

-

-

Other Retail

22

-

-

-

6,958

23

10

0.5%

10,192

-

-

0.0%

Total
Standardised approach

Total
Qualifying Central Counterparties

Exposure at Default represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.

31

54

ANZ Basel III Pillar 3 disclosure

September 2021

Table 10(c): Credit risk mitigation – guarantees and credit derivatives (continued)
Sep 20
Exposure$M

Exposurescovered by
Guarantees$M

Exposurescovered by
Credit Derivatives$M% Coverage

Advanced IRB
Corporate (incl. Specialised Lending)

320,844

1,746

1,070

0.9%

Sovereign

186,605

4,907

-

2.6%

Bank

42,171-

19-

Residential Mortgage

392,312---

Qualifying Revolving Retail

14,846---

Other Retail

31,931---

988,709

6,653

1,089

0.8%

Corporate

11,344

29

11

0.4%

Sovereign

212

-

-

Residential Mortgage

435

-

-

-

Other Retail

33

-

-

-

12,024

29

11

0.3%

9,684

-

-

-

Total
Standardised approach

Total
Qualifying Central Counterparties

55

ANZ Basel III Pillar 3 disclosure
Table 11

September 2021

General disclosures for derivatives and counterparty credit risk

Definition of Counterparty Credit Risk
Counterparty credit risk in derivative transactions arises from the risk of counterparty default before settlement date ofderivative contracts and the counterparty is unable to fulfil present and future contractual payment obligations. The
amount at risk may change over time as a function of the underlying market parameters up to the positive value of thecontract in favor of ANZ.
Counterparty credit risk is present in market instruments (derivatives and forward contracts), and comprises:Settlement risk, which arises where one party makes payment or delivers value in the expectation but withoutcertainty that the counterparty will perform the corresponding obligation in a bilateral contract at settlement date.



Market replacement risk (pre-settlement risk), which is the risk that a counterparty will default during the life of a
derivative contract and that a loss will be incurred in covering the position.

ANZ transacts market instruments with the following counterparties:

End users – would typically use Over the Counter (OTC) derivative instruments provided by ANZ to manage pricemovement risk associated with their core business activity.

Professional counterparties – ANZ may hedge price movement risks by entering into transactions with professionalcounterparties that conduct two-way (buy and sell) business.

Counterparty credit risk requires a different method to calculate exposure at default because actual and potential market
movements impact ANZ’s exposure or replacement cost over the life of derivative contracts. The markets covered bythis treatment include the derivative activities associated with interest rate, foreign exchange, CDS, equity, commodity
and repurchase agreement (repo) products.
Counterparty credit risk governance
ANZ’s counterparty credit risk management is governed by its credit principles, policies and procedures. The Markets
Risk function is responsible for determining the counterparty credit risk exposure methodology applied to market
instruments, in the framework for counterparty credit limit management, measurement and reporting.
The counterparty credit risk associated with derivative transactions is governed by credit limit setting consistent with allcredit exposures to the ANZ Group. Counterparty credit limits are approved by the appropriate credit delegation holders.
Counterparty credit risk measurement and reporting
The approach to measure counterparty credit risk exposure is based on internal models. These measures are referred toas potential credit risk exposure (PCRE) and potential future exposure (PFE) and measure the maximum credit exposureof derivative transactions at future time points to ANZ. PFE is measured at the 97.5th percentile at future pre-describedtime points, and PCRE is a 97.5th percentile averaged over time points.
PCRE factors recognise that prices may change over the remaining period to maturity, and that risk decreases as thecontract’s remaining term to maturity decreases. In general terms PCRE is calculated by applying a risk weighting or
volatility factor to the face value of the notional principal of individual trades.
PFE simulates relevant risk factors in a portfolio by taking into account the relevant volatilities and correlations calibrated
to historical market data.
Exposure at default for regulatory capital
For regulatory capital the Exposure at Default captures the expected positive mark-to-market of a portfolio in the eventof a counterparty default across a one-year time horizon at a 99% confidence level, taking into account any legal
documents in force. It is calculated following Standardised Approach for Counterparty Credit Risk (SA-CCR) under APRA’s
APS180: Capital Adequacy: Counterparty Credit Risk.

56

ANZ Basel III Pillar 3 disclosure

September 2021

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 ofcounterparty credit quality. The methodology calculates the present value of expected losses over the life of the financial
instrument as a function of PD, LGD, and expected credit risk exposure.
APRA requires banks, including ANZ, to hold additional risk based capital to cover the risk of CVA mark to market losses
associated with deterioration in counterparty credit worthiness when entering into derivatives transactions.
ANZ uses market instruments, mainly interest rate and foreign exchange derivatives, as well as CDS Indices to hedge
the CVA mark to market volatility.
Wrong way risk
ANZ’s management of counterparty credit risk also considers the possibility of wrong way risk, which emerges when PD
is adversely correlated with counterparty credit risk exposures.
Counterparty credit risk mitigation and credit enhancements
ANZ’s primary tools to mitigate counterparty credit risk include:

A bilateral netting master agreement (e.g. by International Swaps and Derivatives Association – (ISDA)) allowing
close-out netting of exposures in a portfolio with offsetting contracts, with a single net payment with the same legal
counterparty.

Use of collateral agreements in some transactions based on standard market documentation (i.e. ISDA masteragreement with credit support annex or CSA for derivatives and Global Master Repurchase Agreement or GMRA for
repo) that governs the amount of collateral required to be posted or received by ANZ throughout the life of thecontract. Reasons for requiring collateral include:oVariation Margin – reflects the current mark-to-market exposure.

o

Initial Margin – covers the future potential exposure that could arise from future changes in market valueoSince March 2017, APRA’s CPS 226 “Margining and risk mitigation for non-centrally cleared derivatives” hasmandated Variation Margin and Initial Margin arrangements between covered entities, subject to trading volume
thresholds. The operation of collateral agreements falls under a policy which establishes the control framework
designed to ensure a robust and globally consistent approach to the management of collateralised exposures,
as well as compliance with CPS 226 obligations.

o

APRA’s CPS 226 also requires ADIs to apply risk mitigation practices for un-cleared derivatives between covered
counterparties in the areas of trading relationship documentation, trade confirmation, portfolio reconciliation,
portfolio compression, valuation processes and dispute resolution processes.



Use of right to break clauses in master agreements or in trade confirmation to reduce the term of long dated derivativetrades.



Independent limit setting, credit exposure control, monitoring and reporting of excesses against approved credit
limits.



Additional termination triggers (close out of exposure) such as credit rating downgrade clauses and change inownership clauses included in documentation to reduce credit exposure under specific credit events.

Linking covenants and events of default in existing loan facility agreements to master agreements.

Use of credit derivatives and market instruments to hedge CVA

Settlement through Continuous Linked Settlement (CLS) to eliminate settlement risk for foreign exchangetransactions with CLS members.



Clearing certain derivative transactions through central counterparties clearing houses.

A specific risk appetite for Credit Valuation Adjustment (CVA) exposures, approved by the Board.

Design and implementation of limit framework and monitoring of CVA exposures, to ensure CVA exposure is within
Risk appetite.

In the event of a downgrading of ANZ’s rating by one notch from AA- to A+, as at 30 September 2021, ANZ would not
be required to lodge additional collateral with its counterparties.
In August 2021, the Group amended the terms of its legal agreements with one of its central clearing counterparties
giving effect to this form of legal settlement. As a result of this change, collateral paid and received by the Group underthese agreements is no longer separately recognised, instead settling the Group’s outstanding derivative exposures andreducing the associated carrying values of the derivative asset and liability balances.

57

ANZ Basel III Pillar 3 disclosure

September 2021

Table 11(b): Counterparty credit risk – net derivative credit exposure

Gross positive fair value of contracts
Netting benefits

Sep 21Mar 21$M$M

Sep 20$M

38,736

104,666

135,331(118,097)(23,810)(88,484)

Netted current credit exposure

14,926

16,182

17,234

Collateral held

(5,663)(6,286)(6,287)

Net derivatives credit exposure

9,263

9,896

10,947

Sep 21Mar 21

Sep 20$M$M$M

18,375

18,812

20,222

Counterparty credit risk exposure - by portfolio type
Portfolio Type
Corporate
Sovereign

3,280

3,430

5,212

Bank

12,083

13,313

14,645

Qualifying Central Counterparties

6,239

9,996

9,223

960

1,063

1,661

40,937

46,61450,963

Sep 21Mar 21

Sep 20$M$M$M

Credit Default Swaps

-

-

343

Interest Rate Swaps

-

-

-

Currency Swaps

-

-

-

Other

-

-

-

Total exposures

-

-

343

Specialised Lending
Total exposures
Notional Value of Credit Derivative Hedges
Product Type58

ANZ Basel III Pillar 3 disclosure

September 2021

Table 11(c): Counterparty credit risk exposure – credit derivative transactions
Sep 21
Protection
Bought$M

Protection
Sold
$M

Total
$M

Credit derivative products used for own credit portfolio
Credit default swaps

6,755

2,764

9,519

Total notional value

6,755

2,764

9,519

Credit default swaps

-

-

-

Total return swaps

-

-

-

Total notional value

-

-

-

6,755

2,764

9,519

Protection
Bought$M

Protection
Sold$M

Credit derivative products used for intermediation

Total credit derivative notional value

Mar 21
Total$M

Credit derivative products used for own credit portfolio
Credit default swaps

4,564

414

4,978

Total notional value

4,564

414

4,978

Credit default swaps

-

-

-

Total return swaps

-

-

-

Total notional value

-

-

-

4,564

414

4,978

Protection
Bought$M

Protection
Sold$M

Credit derivative products used for intermediation

Total credit derivative notional value

Sep 20Total$M

Credit derivative products used for own credit portfolio
Credit default swaps

4,157

636

4,793

Total notional value

4,157

636

4,793

343

343

686

-

-

-

343

343

686

4,500

979

5,479

Credit derivative products used for intermediation
Credit default swaps
Total return swaps
Total notional value
Total credit derivative notional value

59

ANZ Basel III Pillar 3 disclosure

September 2021

Chapter 6 – Securitisation
Table 12Securitisation disclosures

Definition of securitisation
A securitisation is a financial structure where the cash flow from a pool of assets is used to service obligations to at least
two different tranches or classes of creditors, typically holders of debt securities, with each class or tranche reflecting a
different degree of credit risk. This stratification of credit risk means that one class of creditors is entitled to receive
payments from the pool before another class.
Securitisation of ANZ originated assets
Securitisations may be categorised as:Traditional securitisations, where legal ownership of the underlying asset pool is transferred to investors, with principal
and interest paid from realisation of or regular cash flows from the assets. The Special Purpose Vehicle (SPV) assets
are insulated from bankruptcy of the seller or servicer.

Synthetic securitisations, where credit risk is transferred to a third party but legal ownership of the underlying assets
remain with the originator e.g. by using credit derivatives or guarantees.

Covered bond transactions, whereby bonds issued by ANZ are secured by assets held in a special purpose vehicle, arenot securitisation exposures.
ANZ adopts securitisation as a funding, capital and liquidity management tool using assets it has originated. This may
involve the transfer of credit risk i.e. may provide regulatory capital relief. ANZ also operates a self-securitisation
program, backed by a pool of residential mortgages, which forms part of the Bank’s liquidity arrangements through accessto government sponsored facilities including the Committed Liquidity Facility and the Term Funding Facility.
For these securitisation programs, ANZ will undertake roles including as the originator, sponsor, servicer and trust
manager. ANZ may retain an exposure to these securitisation programs (including as facility provider and swap provider),consistent with the roles described below in ‘Third Party Securitisation Activities’ and facilities provided as described below
in ‘Risk Management’.
Third Party Securitisation Activities
ANZ’s involvement with securitisation of third-party originated assets, including residential mortgages, auto andequipment loans and trade receivables, comprises of:

Provision of facilities – this may include providing facilities to securitisation vehicles in the form of funding facility
provider and interest rate swap provider. Funding may be provided via an ANZ-sponsored securitisation vehicle whichis consolidated onto the Bank’s financial statements, to certain clients wishing to access securitisation.

Services to securitisation programs may include structuring and arranging services and distributing securities.



Investment in securities – ANZ may purchase notes issued by securitisation programs.

For any assets ANZ has securitised or for SPVs that ANZ sponsors, any role provided by ANZ or its subsidiaries is subject
to market based terms and conditions, and ANZ’s normal approval and review processes. Further, any securitisation
exposures retained by ANZ or its affiliated entities are subject to ANZ’s normal approval and review processes as well as
satisfying the requirements under APS 120: Securitisation.
Governance and Risk Management
Similar to other exposures, securitisation exposures are subject to credit, market, operational liquidity and compliancerisks. Governance of securitisation activities is managed in accordance with ANZ’s established risk management
framework, including the credit risk and market risk frameworks described in Chapters 5 and 7. Roles and responsibilities
are clearly outlined in the Bank’s policies and procedures, including:Appropriate risk management systems to identify, measure, monitor and manage the risks arising from its
involvement in securitisation exposures;Impact of ANZ’s involvement in securitisation exposures on its risk profile; and

How ANZ ensures that it does not provide any implicit support to securitisations with ANZ originated assets.

60

ANZ Basel III Pillar 3 disclosure

September 2021

Funding third party originated exposures and investment in securities are via balance sheet funded arrangements wheresuch arrangements satisfy ANZ’s credit, due diligence and other business requirements.
Many functions within ANZ are involved in securitisation activities given the range of activities undertaken and risks thatneed to be managed. For origination and structuring of securitisation transactions, ANZ has a specialist securitisationteam with independent Risk personnel overseeing operations. Credit decisions require joint approval by Risk business
unit and respective independent credit risk officer. The securitisation team must be involved in all non-trading
securitisation transactions across ANZ, which ensures consistent expert treatment. Where ANZ invests in instruments
issued by securitisation programs, oversight of these exposures by securitisation specialists continue until the
securitisation exposures are repaid in full or sold.
All facilities provided to our investments in securitisation programs (across both the banking and trading books) undergo
initial and ongoing due diligence requirements as outlined by APRA. This includes analysing the risk characteristics of the
securitisation exposure, structure of the transaction and monitoring performance of the underlying assets of thetransaction. In addition, such securitisation exposures are formally reviewed at least annually with credit discretions
being exercised.
Risk reporting of securitisation exposures
Credit risk management information systems, reporting and analysis are managed centrally for all securitisation
exposures. In addition to the formal credit review process for ANZ’s securitisation exposures, internal reporting to theappropriate Risk and management functions provides oversight at the portfolio level. These reports include securitisation
program performance, EAD, portfolio mix, and RWA.
The use and treatment of Credit Risk Mitigation (CRM) techniques with respect to securitisation exposures is assessed ona case-by-case basis in a manner consistent with the bank-wide CRM methodology32.
Regulatory capital approaches
For securitisation exposures held in ANZ’s banking book33, ANZ adopts a Standardised approach (as outlined in APS 120:
Securitisation) to determine the credit risk regulatory capital charge via a hierarchy of approaches.
The primary rating approach is the External Ratings Based Approach (ERBA). For externally rated securitisation exposuresthat satisfy the operational requirements for external credit assessments, ANZ calculates credit risk regulatory capital
based upon the ratings assigned by Standard & Poor’s, Moody’s Investor Services and/or Fitch Ratings as appropriate,seniority of the securitisation exposure and the tenor of the securitisation exposure.
If ERBA is not applicable, ANZ adopts the Supervisory Formula Approach (SFA) for securitisation exposures. In this case,the credit risk regulatory capital calculation takes into account the type and performance of the underlying assets of the
securitisation and the credit support provided to the securitisation exposure.
In relation to securitisation of ANZ originated assets, where:the significant credit risk transfer requirements have been satisfied under APS 120, ANZ is not required to holdcredit risk regulatory capital for the underlying assets of the securitisation, however credit risk regulatory capital iscalculated for the facilities provided to the securitisation;

in absence of significant credit risk transfer being satisfied under APS 120, ANZ holds credit risk regulatory capitalfor the underlying assets of the securitisation however the credit risk regulatory capital for facilities provided to thesecuritisation is not required to be calculated.

Chapter 7 outlines regulatory capital treatment for securitisation exposures held in ANZ’s trading book. In addition, theoperational requirements for the recognition of external credit assessments outlined in APS 120 also apply to these
exposures.

32

For example, various types of analysis including quantitative analysis of credit enhancements are performed for non-externally rated
transactions. Factors such as geography, facility/transaction type and ANZ’s role will determine the applicable CRM techniques to apply.

33
Exposures are classified into either the trading book or the banking book. In general terms, the trading book consists of positions infinancial instruments and commodities held with trading intent or in order to hedge other elements of the trading book, and the banking
book contains all other exposures. Banking book exposures are typically held to maturity, in contrast to the shorter term, trading
nature of the trading book.

61

ANZ Basel III Pillar 3 disclosure

September 2021

Accounting policies
A key consideration in determining the treatment of transactions involving ANZ assets is whether the securitisation
special purpose vehicles (SPVs) should be consolidated under AASB 10: Consolidated Financial Statements. If these
SPVs meet the criteria for consolidation, the assets remain on ANZ’s balance sheet and are classified and valued inaccordance with AASB 9: Financial Instruments. Currently, transactions with all of ANZ’s securitisation SPVs are treatedas financing transactions. Securitisation services based on customer’s generated assets include warehouse and term
fund facilities which are treated as loans.
For synthetic securitisations of ANZ originated assets, any transferred credit exposure is recognised through the fairvalue measurement of the credit derivative established within the structure.
Full details of the principal accounting policies governing ANZ’s securitisation activities are outlined in ANZ’s 2021 Annual
Report, Notes to the Financial Statements. These include the valuation, derecognition, consolidation and income
recognition principles outlined in the accounting policies and key judgements and estimates disclosures in each relevant
note. Note 27 – Structured Entities and Note 28 – Transfers of Financial Assets also provides details about the nature of
ANZ’s securitisation activities and certain accounting policies as they specifically apply to these activities.
During the 2021 financial year, ANZ changed its accounting policy for the separate ANZ BGL (parent company) financial
statements regarding intragroup positions with consolidated securitisation structured entities. ANZ recognises a net nil
position with the securitisation structured entities to reflect the economic substance of fully offsetting transactions when
ANZ transfers mortgages to the structured entities but also holds all of the notes issued by the structured entities. Thischange in accounting policy does not impact the consolidated financial statements of the ANZ Group. These intra-grouptransactions are internal to the Level 1 and Level 2 groups and have no impact on the disclosures in this document.
Further details of the impact are included in Note 35 of ANZ’s 2021 Annual Report.
There have been no other changes to the application of accounting policies in relation to securitisation activities since
the prior year.
To the extent that ANZ has exposures intended to be securitised, they could reside in either the banking or trading book.
To the extent that ANZ has entered into contractual arrangements that could require it to provide financial support for
securitised assets e.g. liquidity facilities, these are recognised in accordance with the accounting policies set out in ANZ’s
2021 Annual Report.

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ANZ Basel III Pillar 3 disclosure

September 2021

Banking Book
Table 12(g): Banking Book: Traditional and synthetic securitisation exposuresSep 21
Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated
$M
1,396

ANZ Self Securitised$M
76,895ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,396

76,895-ANZ Originated$M-

ANZ Self Securitised$M-

ANZ Sponsored$M-

Synthetic securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

-

-

-

ANZ Originated
$M
1,396

ANZ Self Securitised$M
76,895ANZ Sponsored$M-

Aggregate of traditional and synthetic
securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,396

76,895-63

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(g): Banking Book: Traditional and synthetic securitisation exposures (continued)
Mar 21

Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated
$M
1,587

ANZ Self Securitised$M
72,153

ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,587

72,153-

ANZ Originated$M-

ANZ Self Securitised$M-

ANZ Sponsored$M-

Synthetic securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

-

-

-

ANZ Originated
$M
1,587

ANZ Self Securitised$M
72,153

ANZ Sponsored$M-

Aggregate of traditional and synthetic
securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,587

72,153-

Sep 20
Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated
$M
1,793

ANZ Self Securitised$M
85,239ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,793

85,239-ANZ Originated$M-

ANZ Self Securitised$M-

ANZ Sponsored$M-

Synthetic securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

-

-

-

ANZ Originated
$M
1,793

ANZ Self Securitised$M
85,239ANZ Sponsored$M-

Aggregate of traditional and synthetic
securitisations
Underlying asset
Residential mortgage
Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,793

85,239-64

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(h): Banking Book: Impaired and Past due loans relating to ANZ originated securitisations

Sep 21
Underlying asset

Residential mortgage

ANZ
originated$M

ANZ Self
Securitised$M

Impaired$M

Past due$M

53

Lossesrecognised
for the six
month ended
$M
-

1,396

76,895-Credit cards and other personal loans

-

-

-

-

-

Auto and equipment finance

-

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

-

Total

1,396

76,895

-

53

-

ANZ
originated$M

ANZ Self
Securitised$M

Impaired$M

Past due$M

57

Lossesrecognised
for the six
month ended$M-

Mar 21
Underlying asset

Residential mortgage

1,587

72,153-Credit cards and other personal loans

-

-

-

-

-

Auto and equipment finance

-

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

-

Total

1,587

72,153

-

57

-

ANZ
originated$M

ANZ Self
Securitised$M

Impaired$M

Past due$M

214

Lossesrecognised
for the six
month ended$M-

Sep 20Underlying asset

Residential mortgage

1,793

85,239-Credit cards and other personal loans

-

-

-

-

-

Auto and equipment finance

-

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

-

Total

1,793

85,239-214-

Table 12(i): Banking Book: Total amount of outstanding exposures intended to be securitised
No assets from ANZ's Banking Book were intended to be securitised as at the reporting date.

65

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset typeand facility 34
Sep 21

Securitisation activity by underlying asset
type

ANZ Originated$M

Original value
securitised
ANZ Self
Securitised
$M

(191)

4,742

-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(191)

4,742

-

-

Residential mortgage

ANZ Sponsored$M

Securitisation activity by facility provided

Liquidity facilities

Notional
amount$M-

Funding facilities(600)

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

204

Other

9

Total

(387)
Mar 21

Securitisation activity by underlying asset
type

(206)

(13,086)-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(206)

(13,086)--

Residential mortgage

ANZ Originated$M

Original value
securitised
ANZ Self
Securitised$M

Securitisation activity by facility provided

ANZ Sponsored$M

Liquidity facilities

Notional
amount$M-

Funding facilities

500

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

140

Other

17

Total

657

34

Activity represents net movement in outstandings.

66

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset typeand facility (continued)
Sep 20

Securitisation activity by underlying asset
type

ANZ Originated$M

Original value
securitised
ANZ Self
Securitised
$M

(315)

(48,411)-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(315)

(48,411)--

Residential mortgage

Securitisation activity by facility provided

ANZ Sponsored$M

Liquidity facilities

Notional
amount$M-

Funding facilities

701

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

(117)

Other

23

Total

607

67

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(k): Banking Book: Securitisation - Regulatory credit exposures by exposure typeSep 21Mar 21

Sep 20$M$M$M

Liquidity facilities

-

-

-

Funding facilities

7,696

9,028

8,480

Securitisation exposure type - On balance sheet

Underwriting facilities

-

-

-

Lending facilities

-

-

-

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

-

-

-

2,624

2,420

2,280

-

-

-

Other

177

245

330

Total

10,497

11,693

11,090

Sep 21Mar 21

Sep 20$M$M$M

Securitisation exposure type - Off Balance
Sheet
Liquidity facilities
Funding facilities

15

17

19

2,084

2,000

2,112

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

2,099

2,017

2,131

Sep 21Mar 21

Sep 20Total Securitisation exposure type

$M

$M

$M

Liquidity facilities

15

17

19

Funding facilities

9,780

11,028

10,592

Underwriting facilities

-

-

-

Lending facilities

-

-

-

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

-

-

-

2,624

2,420

2,280

-

-

-

Other

177

245

330

Total

12,596

13,71013,221

68

ANZ Basel III Pillar 3 disclosure

September 2021

Table 12(l) part (i): Banking Book: Securitisation - Regulatory credit exposures by risk weight bandSep 21
Securitisation risk
weights≤ 25%

Regulatory
creditexposure$M
12,596

Mar 21Risk
weighted
assets$M
2,056

Regulatory
creditexposure$M
13,710

Sep 20Risk
weighted
assets$M
2,220

Regulatory
creditexposure$M
13,221Risk
weighted
assets$M
2,125>25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

12,596

2,056

13,7102,220

13,221

2,125

Risk
weighted
assets$M-

Regulatory
creditexposure$M-

Riskweighted
assets$M-

Regulatory
creditexposure
$M
-

Total

Sep 21
Resecuritisation risk
weights≤ 25%

Regulatory
creditexposure$M-

Mar 21

Sep 20Risk
weighted
assets$M->25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

Total

-

-

-

-

-

-

Risk
weighted
assets$M
2,056

Regulatory
creditexposure$M
13,710Risk
weighted
assets$M
2,220

Regulatory
creditexposure$M
13,221

Sep 21
Total Securitisation risk
weights≤ 25%

Regulatory
creditexposure$M
12,596

Mar 21

Sep 20Risk
weighted
assets$M
2,125>25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

12,596

2,056

13,7102,220

13,221

2,125

Total

Table 12(l) part (ii): Banking Book: Securitisation - Aggregate securitisation exposures deducted from
CapitalNo longer required under Basel III; defaulted exposures are given a risk weight of 1250% and no longer deductedfrom Capital.

Table 12(m): Banking Book: Securitisations subject to early amortisation treatment
ANZ does not have any Securitisations subject to early amortisation treatment or using Standardised approach.

Table 12(n): Banking Book: Resecuritisation - Aggregate amount of resecuritisation exposures retained orpurchased
ANZ does not have any retained or purchased Resecuritisation exposures.

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ANZ Basel III Pillar 3 disclosure

September 2021

Trading Book
Table 12(o): Trading Book: Traditional and synthetic securitisation exposures
No assets from ANZ's Trading Book were securitised during the reporting period.

Table 12(p): Trading Book: Total amount of outstanding exposures intended to be securitised
No assets from ANZ's Trading Book were intended to be securitised as at the reporting date.

Table 12(q): Trading Book: Securitisation - Summary of current year's activity by underlying asset typeand facility
No assets from ANZ's Trading Book were securitised during the reporting period.

Table 12(r): Trading Book: Traditional and synthetic securitisation exposures
No assets from ANZ's Trading Book were securitised during the reporting period.
Table 12(s): Trading Book: Securitisation – Regulatory credit exposures by exposure type
ANZ does not have any Regulatory credit exposures by exposure type.
Table 12(t)(i) & Table 12(u)(i): Trading Book: Aggregate securitisation exposures subject to Internal
Models Approach (IMA) and the associated Capital requirements
ANZ does not have any Securitisation exposures subject to Internal Models Approach.

Table 12(t)(ii) & Table 12(u)(ii): Trading Book: Aggregate securitisation exposures subject to APS 120
and the associated Capital requirements
ANZ does not have any aggregate Securitisation exposures subject to APS120 and the associated Capital requirements.

Table 12(u)(iii): Trading Book: Securitisation - Aggregate securitisation exposures deducted from Capital
ANZ does not have any Securitisation exposures deducted from Capital.

Table 12(v): Trading Book: Securitisations subject to early amortisation treatment
ANZ does not have any Securitisation exposures subject to early amortisation or using Standardised approach.

Table 12(w): Trading Book: Resecuritisation - Aggregate amount of resecuritisation exposures retained orpurchased
ANZ does not have any retained or purchased Resecuritisation exposures.

70

ANZ Basel III Pillar 3 disclosure

September 2021

Chapter 7 – Market risk
Table 13

Market risk – Standard approach

ANZ uses the standard model approach to measure market risk capital for specific risk35 (APRA does not currently permit
Australian banks to use an internal model approach for this).
Table 13(b): Market risk – Standard approach 36
Sep 21Mar 21

$M

$M

$M

134

134

138

Interest rate risk

Sep 20Equity position risk

-

-

-

Foreign exchange risk

-

-

-

Commodity risk

-

-

-

134

134

138

1,675

1,675

1,725

Total
Risk Weighted Assets equivalent

35

Specific risk is the risk that the value of a security will change due to issuer-specific factors. It applies to interest rate and equity
positions related to a specific issuer.

36

RWA equivalent is the capital requirement multiplied by 12.5 in accordance with APS 110.

71

ANZ Basel III Pillar 3 disclosure
Table 14

September 2021

Market risk – Internal models approach

Definition and scope of market risk
Market Risk stems from ANZ’s trading and balance sheet activities and is the risk to ANZ’s earnings or economic value
arising from changes in interest rates, foreign exchange rates, credit spreads, volatility, correlations or from fluctuations
in bond, commodity or equity prices.
Market risk management of IRRBB is described in Chapter 10 and is excluded from this Chapter.
Regulatory approval to use the Internal Models Approach
ANZ has been approved by APRA to use the Internal Models Approach (IMA) under APS 116 Capital Adequacy: Market
Risk for general market risk and under APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced
ADIs) for interest rate risk in the banking book (IRRBB).
Governance of market risk
The Board Risk Committee supervision of market risk is supported by the Credit and Market Risk Committee (CMRC).
CMRC is responsible for the oversight and control of credit, market, insurance and material financial risks across the ANZGroup and meets at least monthly.
The Market Risk function is a specialist risk management unit independent of the business that is responsible for:

Designing and implementing policies and procedures to ensure market risk exposures are managed within the appetiteand limit framework set by the Board.

Measuring and monitoring market risk exposures, and approving counterparty and associated risks.

The ongoing effectiveness and appropriateness of the risk management framework.

Traded Market Risk
Traded Market Risk is the risk of loss from changes in the value of financial instruments due to movements in price factors
for both physical and derivative trading positions. Trading positions arise from transactions where ANZ acts as principalwith customers, financial exchanges or inter-bank counterparties.
The Traded, Foreign Exchange and Commodity Market Risk Policy and accompanying procedures (together the “TFC
Framework”) governs the management of traded market risk and its key components include:

A clear definition of the trading book.

A comprehensive set of requirements that promote the proactive identification and communication of risk.



A robust Value at Risk (VaR) quantification approach supplemented by comprehensive stress testing.



A comprehensive limit framework that controls all material market risks.

An independent Market Risk function with specific responsibilities.



Regular and effective reporting of market risk to executive management and the Board.

Non-Traded Market Risk
Non-Traded Market Risk is the market risk associated with the management of non-traded interest rate risk, liquidity risk
and foreign exchange exposures from the Group’s foreign currency capital and earnings.
Included in Non-Traded Market risk is Interest Rate Risk in the Banking Book (IRRBB). This is the risk of loss arising fromadverse changes in the overall and relative level of interest rates for different tenors, differences in the actual versus
expected net interest margin, and the potential valuation risk associated with embedded options in financial instruments
and bank products.
In quantifying risk, all material market risk factors need to be identified and reflected within the risk measurement
approach. Non-traded market risk (or balance sheet risk) comprises the management of non-traded interest rate risk,
liquidity risk, and foreign exchange exposures from the Group’s foreign currency capital and earnings.

72

ANZ Basel III Pillar 3 disclosure

September 2021

ANZ has a detailed market risk management and control framework, to support its balance sheet activities, which
incorporates an independent risk measurement approach to quantify the magnitude of market risk within the trading andbalance sheet portfolios. This approach, along with related analysis, identifies the range of possible outcomes that canbe expected over a given period of time, and establishes the likelihood of those outcomes and allocates an appropriate
amount of capital to support these activities.
Markets Risk is a specialist risk management unit independent of the business that is responsible for measuring andmonitoring market risk. Markets Risk has implemented policies and procedures to keep ANZ’s market risk exposuresmanaged within the appetite and limit framework set by the Board.
Measurement of Traded Market Risk
ANZ’s traded market risk management framework incorporates a risk measurement approach to quantify the magnitudeof market risk within trading books. This approach and related analysis identifies the range of possible outcomes that canbe expected over a given period of time and establishes the relative likelihood of those outcomes.
ANZ’s key tools to measure and manage traded market risk on a daily basis are VaR, sensitivity measures and stresstests. VaR is calculated using a historical simulation with a 500-day observation period for standard VaR, and a one-year
stressed period for stressed VaR. Traded VaR is calculated at a 99% confidence level for one and ten-day holding periodsfor Standard VaR, and a ten-day holding period for stressed VaR. All material market risk factors and all trading portfolios
are captured within the VaR model, with the exception of specific risk for interest rates, equity trading, for which capitalis calculated using the Standardised approach.
ANZ also undertakes a wide range of stress tests on the Group trading portfolio and to individual trading portfolios.
Standard stress tests are applied daily measuring the potential loss that could arise from the largest market movements
observed since 2008 over specific holding periods. Holding periods used to calculate stress parameters differ and reflect
the relative liquidity of each product type. Results from stress testing on plausible severe scenarios are also calculated
daily.
VaR and stress tests are supplemented by loss limits and detailed control limits. Loss limits are designed to ensure thatin the event of continued losses from a trading activity, the trading activity is stopped and senior management reviews
before trading resumed. Where necessary, detailed control limits such as sensitivity or position limits are also in place toensure appropriate control is exercised over a specific risk or product.
Comparison of VaR estimates to gains/losses
Back testing involves comparing VaR calculations with corresponding profit and loss to identify how often trading losses
exceed the calculated VaR. For APRA back testing purposes, VaR is calculated at the 99% confidence interval with a oneday holding period.
Back testing is conducted daily, and outliers are analysed to determine whether they are the result of trading decisions,systemic changes in market conditions or issues related to the VaR model (historical data or model calibration).
ANZ uses actual and hypothetical profit and loss data. Hypothetical data is designed to remove the impacts of intraday
trading and sales margins. It is calculated as the difference between the value of the prior day portfolio at prior day
closing rates and the value at current day closing rates. Markets Finance calculates actual profit and loss while Market
Risk calculates hypothetical profit and loss.

73

ANZ Basel III Pillar 3 disclosure

September 2021

Table 14(f): Value at Risk (VaR) and stressed VaR over the reporting period 37
Six months ended Sep 21
Mean$M

99% 1 Day Value at Risk (VaR)

Maximum$M

Minimum$M

Period end$M
3.8

Foreign Exchange

3.1

5.5

1.3

Interest Rate

7.5

12.9

4.6

9.6

Credit

13.1

21.8

5.3

6.3

Commodity

3.1

5.0

2.0

3.1

-

-

-

-

Minimum$M
2.0

Period end$M
3.2

EquitySix months ended Mar 21
99% 1 Day Value at Risk (VaR)

Mean
$M
4.6

Foreign Exchange

Maximum$M
10.0Interest Rate

10.0

19.5

4.4

6.4

Credit

14.4

22.2

9.3

14.8

Commodity

2.4

3.4

1.3

2.6

-

-

-

-

Minimum$M
2.0

Period end$M
2.0

EquitySix months ended Sep 20
99% 1 Day Value at Risk (VaR)

Mean
$M
3.5

Foreign Exchange

Maximum$M
5.2

Interest Rate

9.3

14.0

4.5

9.6

Credit

13.1

17.1

3.6

13.9

Commodity

2.9

4.7

1.3

3.0

-

-

-

-

EquitySix months ended Sep 21
99% 10 Day Stressed VaR

Mean
$M

Maximum$M

Minimum$M

Period end$MForeign Exchange

29.5

55.8

14.3

31.0

Interest Rate

48.8

88.2

27.1

74.1

Credit

47.1

65.9

26.6

30.0

Commodity

31.5

38.8

24.5

25.2

-

-

-

-

Minimum$M
12.5

Period end$M
16.5

EquitySix months ended Mar 21
99% 10 Day Stressed VaR

Mean
$M
39.8

Foreign Exchange

Maximum$M
116.0

Interest Rate

52.8

99.2

23.2

26.5

Credit

49.1

64.5

34.1

47.1

Commodity

29.1

36.8

16.1

29.8

-

-

-

-

Minimum$M
11.4

Period end$M
32.7

EquitySix months ended Sep 20
99% 10 Day Stressed VaR

Mean
$M
29.6

Maximum$M
54.9Interest Rate

65.7

111.3

37.7

59.1

Credit

48.8

77.0

32.5

41.3

Commodity

11.8

18.5

5.0

16.3

-

-

-

-

Foreign Exchange

Equity37

The Foreign exchange VaR excludes foreign exchange translation exposures outside of the trading book.

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ANZ Basel III Pillar 3 disclosure

September 2021

Comparison of VaR estimates with actual gains/losses experienced

Reporting of Traded Market Risk
Market Risk reports the result of daily VaR and stress testing results to senior management in Market Risk and the Markets
business. Market Risk will escalate details of any limit breach to the appropriate discretion holder within Market Risk andto Group Risk, and reports to the CMRC each month.
Market Risk monitors and analyses back testing results daily and reports results to the CMRC quarterly.
Total traded market risks back testing exceptions were within the APS 116 green zone for the period.
Mitigation of market risk
The Market Risk team’s responsibilities, including the reporting and escalation processes described above, arefundamental to how market risk is managed. Market Risk has a presence in all the major dealing operations centres inAustralia, New Zealand, Asia, Europe and America.
Commodities risk
Commodity price risk arises as a result of movement in prices or the implied volatilities of various commodities. All directcommodity price exposures are transferred to the trading book centrally managed by the Markets business and monitoredby Market Risk in accordance with the TFC framework.
Foreign exchange risk
Foreign exchange risk arises as a result of movements in values or the implied volatilities of exchange rates.
Exposures from ANZ’s normal operating business and trading activities are recorded in core multi-currency systems andmanaged within the trading book in accordance with the TFC framework.
Structural exposures from foreign investments and capital management activities are managed in accordance with
policies approved by the Board Risk Committee, with the main objective of ensuring that ANZ’s capital ratio is largely
protected from changes in foreign exchange. As at 30 September 2021, ANZ’s investment in ANZ Bank New Zealand
Limited is the main source of the structural foreign exchange exposure.

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Chapter 8 – Operational risk
Table 15 Operational risk
Definition of operational risk
Operational Risk is the risk of loss and/or non-compliance with laws resulting from inadequate or failed internal
processes, people and/or systems, or from external events. This definition includes legal risk, and the risk of reputation
loss arising from inadequate or failed internal processes, people and systems, but excludes strategic risk.
ANZ’s I.AM (Identify, Act, Monitor) - Compliance and Operational Risk Framework (I.AM Framework), taking into
consideration the internal and external environment in which ANZ operates at any point in time, allows for targeted
focus on particular areas of operational risk. Currently, ANZ has identified Compliance Risk, Conduct Risk andTechnology Risk as separate Key Material Risks, which are managed in accordance to the I.AM Framework
ANZ has been authorised by APRA to use the advanced measurement approach (AMA) for calculation of Operational
Risk capital requirements under APS 115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk.
This methodology applies across all of ANZ. For the purposes of RBNZ capital adequacy, ANZ Bank New Zealand Ltd
uses Reserve Bank of New Zealand standardised approach to Operational risk capital calculation.
Operational risk governance and structure
The primary responsibilities for operational risk are vested by the Compliance and Operational Risk Principles, in the
Board Risk Committee and Operational Risk Executive Committee. Each of the duties of these committees stated in
Chapter 2 – Risk appetite and governance, applies to their responsibilities for Compliance and Operational Risk.
Risk management framework
ANZ operates the three lines of defence model for the management of Operational Risk. Each line of defence has definedroles, responsibilities and escalation paths to support effective two-way communication and management of Operational
Risk at ANZ. There are also on-going review mechanisms in place to ensure the I.AM Framework continues to meetorganisational needs and regulatory requirements.
First line
The Business has first line of defence responsibility for managing Operational Risk including obligations to:take primary accountability for the identification, measurement and management of key risks and the related control
environment.

Second line
Compliance and Operational Risk functions (Divisional/Functional and Group) form the second line of defence.
Divisional/Functional Compliance and Operational Risk is accountable for:


undertaking appropriate review and challenge and independent oversight of business activities including consistent
implementation of the I.AM Framework, across the division.

Group Compliance and Operational Risk is accountable for:

developing and maintaining relevant policies and procedures to ensure continuing appropriateness of the I.AM
Framework and to support its consistent execution;

providing subject matter expertise on the I.AM Framework and relevant policies and procedures to enable consistent
implementation; andsetting and monitoring compliance with the Group Operational Risk, Risk Appetite Statements (RAS).

Third line
Internal Audit forms the third line of defence and is accountable for:


providing independent and objective assurance to management and the ANZ Board regarding the adequacy andcompliance with policy and regulatory requirements;

performing objective assessments across all geographies, divisions, lines of business and processes, and76

ANZ Basel III Pillar 3 disclosure

September 2021

undertaking independent review of the adequacy of the I.AM Framework.

Collectively Internal Audit, Compliance and Operational Risk functions and the Business are responsible for monitoring
and reporting to Executive Management, the Board, Regulators and others on all matters related to the measurement
and management of Compliance and Operational Risk.
Operational Risk Framework
ANZ’s I.AM Framework is delivered through:

Level 1 Compliance and Operational Risk Principles (the Principles) – approved by the Board Risk Committee, outlines
the core standards, outlining roles and responsibilities and minimum requirements of the way in which operationalrisks and obligations are identified, acted on and monitored across ANZ, sets the Principles for governing the overallmeasurement and management of Compliance and Operational Risk across ANZ.

Level 2A Operational Risk Procedures (the Requirements, and Lifecycle, Roles and Responsibilities) – owned by Group
Compliance and Operational Risk, provide the procedures to support the consistent application of Level 1 Principles
across ANZ. The procedures are further augmented by tools, templates, systems and on-going training.

Operational risk mitigation
In line with industry practice, ANZ obtains insurance to cover those Operational Risks where cost-effective premiums canbe obtained. In conducting their business, Business Units are advised to act as if uninsured and not to use insurance asa guaranteed mitigants for operational risk.
ANZ has business continuity, recovery and crisis management plans. The intention of the business continuity and recovery
plans is to ensure critical business functions can be maintained, or restored in a timely fashion, in the event of material
disruptions arising from internal or external events.
Crisis management planning at Group and country levels supplement business continuity plans in the event of a broader
group or country crisis. Crisis management plans include crisis team structures, roles, responsibilities and contact lists,
and are subject to testing.
Operational risk reporting
ANZ’s I.AM Framework includes a global Compliance and Operational Risk platform within ANZ to provide source of truthand greater transparency of Risk, Controls, Obligations and Events information across ANZ. This information is used forinternal and external reporting including operational risk capital calculation and regulatory reporting.
OREC along with various risk committees periodically monitor and oversight the state of Compliance and Operational Risk
management and instigate any necessary corrective actions.
Operational risk management
The objective of ANZ’s approach to Operational Risk is to ensure that risks are identified, assessed, measured,
evaluated, treated, monitored and reported in a structured environment with appropriate governance oversight.
The I.AM Framework includes management and measurement of operational risks and compliance with laws,
regulations, industry standards, codes and principles of good governance, and internal policies and procedures. It isfounded on ANZ’s values and culture, which focus on doing what’s right and being ethical, accountable, trustworthy
and transparent in our decisions.
ANZ takes a risk-based approach to the management of Operational Risks and obligations. This enables ANZ to beconsistent in proactively identifying, assessing, managing, reporting and escalating Operational Risk related risk
exposures, while respecting the specific obligations of each jurisdiction in which we operate.
Day-to-day management of Operational Risk is the responsibility of business unit line management and staff. Risk
management, supported by a strong Risk Culture, ensures all staff are thinking about and managing risk on a daily
basis – “Risk is Everyone’s Responsibility”. However, Senior Management needs visibility of Key Risks. These are therisks that if materialised, would adversely affect the achievement of business objectives, ANZ’s reputation, legal andregulatory compliance or impact key processes.

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ANZ Basel III Pillar 3 disclosure

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ANZ’s advanced measurement approach
Group Operational Risk is responsible for maintaining ANZ’s advance measurement approach (AMA) for the measurement
and allocation of operational risk capital.
Operational Risk Capital is held to protect depositors and shareholders of the bank from rare and severe unexpected
losses. In order to quantify the overall Operational Risk profile, ANZ maintains and calculates Operational Risk Capital on
at least a six monthly basis. The capital model uses the following data as inputs:

historical internal losses captured and reported in the bank wide Compliance and Operational Risk platform;
relevant external losses, sourced from the Operational Risk Data Exchange (ORX), an industry data base comprising
the anonymised loss data from over 90 member banks;

Operational risk scenario - unexpected potential loss estimates for severe but plausible risk events which arecalculated using exposure models developed using business data and inputs from subject matter experts.

Once calculated, the capital is allocated to divisions based on the historic loss experience and exposure to scenarios.
Understanding the divisional exposure to scenarios (and their underlying risk drivers) allows lines of business to consider
capital impacts when making decisions. Accordingly, capital allocations are structured to encourage businesses toeffectively manage their operational risk exposures e.g. improve controls, reduce losses etc.

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ANZ Basel III Pillar 3 disclosure

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Chapter 9 – Equities
Table 16

Equities – Disclosures for banking book positions

Definition and categorisation of equity investments held in the banking book
Equity risk is the risk of financial loss arising from the unexpected reduction in value of equity investments not held in
the trading book including those of the Group’s joint ventures associates. ANZ’s equity exposures in the banking bookare primarily categorised as follows:

Equity investments that are taken for strategic reasons - These transactions represent strategic business initiatives
and include ANZ’s investments in partnership arrangements with financial institutions in Asia and those investments
managed by a dedicated investment manager (1835i). These investments are undertaken after extensive analysis
and due diligence by Group Strategy, internal specialists and external advisors, where appropriate. Board approval isrequired prior to committing to any investments over delegated authorities, and all regulatory notification
requirements are met. Performance of these investments is monitored by both the owning business unit and whereappropriate, either Group Strategy or a dedicated investment oversight group to ensure that it is within expectations.
Equity investments made as the result of a work out of a problem exposure - From time to time, ANZ will take anequity stake in a customer as part of a work out arrangement for problem exposures. These investments are madeonly where there is no other viable option available and form an immaterial part of ANZ’s equity exposures.

Valuation of and accounting for equity investments in the banking bookIn line with Group Accounting Policy the accounting treatment of equity investments depends on whether ANZ has
significant influence over the investee or not.
Investments in associates
Where significant influence exists, the investment is classified as an Investment in Associate in the financial statements.
ANZ adopts the equity method of accounting for associates. ANZ’s share of the profit or loss of associates is included in
the consolidated income statement. The associate investments are recognised at cost plus ANZ’s share of postacquisition net assets less accumulated impairment. Interests in associates are reviewed semi-annually for impairment.
If an indicator of impairment is identified, their recoverable amount is determined being the higher of their fair valueless costs of disposal (market value for listed entities) or a discounted cash flow methodology to assess value in-use(VIU). If the recoverable amount is less than the carrying value of the investment, an impairment is recorded. As at 30
September 2021 the carrying value of the Group’s investment in AMMB Holdings Berhad (Ambank) and PT Bank Pan
Indonesia (PT Panin) were supported by VIU assessments.
Equity instruments held at Fair Value
Where ANZ does not have significant influence over the investee, the instrument is categorised as an investment security
and classified as fair value through profit and loss, with changes in fair value recognised in the income statement, unlessdesignated irrevocably on acquisition as fair value through other comprehensive income (FVOCI). If this election is made,gains or losses are not reclassified from other comprehensive income to profit or loss on disposal of the investment.
However, gains or losses may be reclassified within equity.

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ANZ Basel III Pillar 3 disclosure

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Table 16(b) and 16(c): Equities – Types and nature of Banking Book investments
Sep 21Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

2,941

2,443

Value of unlisted (privately held) equities

399

399

3,340

2,842

Total

Mar 21Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

2,870

3,430

Value of unlisted (privately held) equities

230

230

3,100

3,660

Total

Sep 20Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

3,075

2,314

Value of unlisted (privately held) equities

201

199

3,276

2,513

Half Year

Half Year

Half Year

Sep-21Mar 21

Sep 20

$M

$M

$M

8

-

(2)

(2)

-

-

6

-

(2)

Half Year

Half Year

Half YearSep 21Mar 21

Sep 20

Unrealised gains (losses) on equity investments

$M

$M

$M

Total unrealised gains (losses)

(26)

73

(112)

-

-

-

(26)

73

(112)

Total

Table 16(d) and 16(e): Equities – gains (losses)38

Realised gains (losses) on equity investments
Cumulative realised gains (losses) from disposals
and liquidations in the reporting period
Cumulative realised losses from impairment and writedowns in
the reporting period
Total

Reversal of prior period unrealised gains (losses) from disposals
and liquidations in the reporting period
Total unrealised gains (losses) included in Common
Equity Tier 1, Tier 1 and/or Tier 2 capital

Table 16(f): Equities Risk Weighted Assets
From 1 January 2013 all banking book equity exposures are deducted from Common Equity Tier 1 capital.

38

Table 16(d) and Table 16 (e) are reported on an after-tax basis

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ANZ Basel III Pillar 3 disclosure

September 2021

Chapter 10 – Interest Rate Risk in the Banking Book
Table 17

Interest Rate Risk in the Banking Book

Definition of Interest Rate Risk in the Banking Book (IRRBB)Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates
on ANZ’s future earnings or economic value. The risk generally arises from:

Repricing and yield curve risk - the risk to earnings or economic value as a result of changes in the overall levelof interest rates and/or the relativity of these rates across the yield curve.

Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking
book items.



Optionality risk – the risk to earnings or market value arising from the existence of stand-alone or embedded
options in banking book items.

Regulatory capital approach
ANZ has received approval from APRA to use the IMA for the calculation of regulatory capital for IRRBB, under APS 117
Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs).
Governance
The Board Risk Committee has established a risk appetite for IRRBB and delegated authority to the Group Asset andLiability Committee (GALCO) to manage the strategic position (capital investment term) and oversee the interest raterisk arising from the repricing of asset and liabilities (mismatch risk) in the banking book. GALCO has delegated the
management of this mismatch risk to the Markets business.
Market Risk is the independent function responsible for:

Designing and implementing policies and procedures to ensure that IRRBB exposure is managed within the limit
framework set by the Board Risk Committee.



Monitoring and measuring IRRBB market risk exposure, compliance with limits and policies.

Ensuring ongoing effectiveness and appropriateness of the risk management framework.

Risk Management framework
IRRBB is managed under a comprehensive measurement and reporting framework, supported by an independent Market
Risk function. Key components of the framework include:

A comprehensive set of policies that promote proactive risk identification and communication.

Funds Transfer Pricing framework to transfer interest rate risk from business units so it can be managed by theMarkets business and monitored by Market Risk.



Quantifying the magnitude of risks and controlling the potential impact that changes in market interest rates can haveon the net interest income and balance sheet market value of ANZ.

Regular and effective reporting of IRRBB to executive management and the Board

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ANZ Basel III Pillar 3 disclosure

September 2021

Measurement of interest rate risk in the banking book
ANZ uses the following principal techniques to quantify and monitor IRRBB:Interest Rate Sensitivity - this is an estimate of the change in economic value of the banking book due to a 1 basis
point move in a specific part of the yield curve.

Earnings at risk (EaR) - this is an estimate of the amount of income that is at risk from interest rate movements overa given holding period, expressed to a 97.5% level of statistical confidence.

Value at risk (VaR) - this is an estimate of the impact of interest rate changes on the banking book’s market value,
expressed to a 99% level of statistical confidence for a given holding period.

Market Value loss limits - this mitigates the potential for embedded losses within the banking book.

Stress testing - standard extraordinary forward looking and repricing term assumptions tests are used to highlightpotential risk which may not be captured by VaR, and how the portfolio might behave under extraordinary
circumstances.

The calculations used to quantify IRRBB require assumptions to be made about the repricing term of exposures that do
not have a contractually defined repricing date, such as deposits with no set maturity dates, and prepayments. Changes
to these assumptions require GALCO approval.
Basis and optionality risks are measured using Monte Carlo simulation techniques, to generate a theoretical worst
outcome at a specified confidence level (typically no less than at a 99% level of statistical confidence) less the averageoutcome.
Reporting of interest rate risk in the banking bookMarket Risk analyses the output of ANZ’s VaR, EaR and Stress Testing calculations daily. Compliance with the risk appetiteand limit framework is reported to CMRC, GALCO and the Board Risk Committee.
ANZ’s interest rate risk in the banking book capital requirement
The IRRBB regulatory capital requirements includes a value for repricing and yield curve risk, basis and optionality risks
based on a 99% confidence interval, one year holding period and a six-year historical data set.
Embedded losses also make up the capital requirement and are calculated as the difference between the book value andthe current economic value of banking book items accounted for on an actual basis.
Results of standard shock scenario
The Basel II framework sets out a standard shock scenario of a 200 basis point parallel shift change in interest rates, inorder to establish a comparable test across banks.
Table 17(b) that follows shows the results of this shock by currency of ANZ’s banking book exposures.

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ANZ Basel III Pillar 3 disclosure

September 2021

Table 17(b): Interest Rate Risk in the Banking Book
Change in Economic Value
Standard Shock Scenario Stress Testing:Sep 21Mar 21

Sep 20$M$M$M

200 basis point parallel increase(1,317)

(479)

(229)

200 basis point parallel decrease

1,419

489

227

200 basis point parallel increase

(306)

(224)

(121)

200 basis point parallel decrease

294

209

101

Interest rate shock applied
AUD

NZD

USD
200 basis point parallel increase

(10)

59

(45)

200 basis point parallel decrease

18

(50)

52

GBP
200 basis point parallel increase

34

6

38

200 basis point parallel decrease

(35)

(6)

(38)

200 basis point parallel increase

(153)

(125)

(122)

200 basis point parallel decrease

165

135

132

Other

IRRBB regulatory capital

1,443

812

1,084

IRRBB regulatory RWA

18,036

10,15013,547

IRRBB stress testing methodology
Stress tests within ANZ include standard and extraordinary tests. These tests are used to highlight potential risk which
may not be captured by VaR, and how the portfolio might behave under extraordinary circumstances. Standard stresstests include statistically derived scenarios based on historical yield curve movements. These combine parallel shocks
with twists and bends in the curve to produce a wide range of hypothetical scenarios at high statistical confidence levels,with the single worst scenario identified and reported. Extraordinary stress tests include interest rate moves from
historical periods of stress as well as stresses to assumptions made about the repricing term of exposures. The rate movescenarios include daily changes over the stressed periods and the worst theoretical losses over the selected period areeach reported. Stresses of the repricing term assumptions investigate scenarios where actual repricing terms are
significantly different to those modelled.

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ANZ Basel III Pillar 3 disclosure

September 2021

Chapter 11 – Leverage and Liquidity Coverage Ratio
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 has not finalised a minimum Leverage Ratio
requirement for Australian ADIs, although they have proposed a minimum of 3.5% for ADIs authorised to use the internalratings based approach to credit risk.
At 30 September 2021, the Group’s Leverage Ratio of 5.5% was above the 3% minimum currently proposed by APRA.
Table 18 below shows the Group’s Leverage Ratio calculation as at 30 September 2021 and Table 19 summarises thereconciliation of accounting assets and leverage ratio exposure measure at 30 September 2021.
Table 18

Leverage Ratio
Sep 21Mar 21

Sep 20$M$M$M

On-balance sheet exposures1

On-balance sheet items (excluding derivatives and SFTs, but including collateral)

914,059

889,625

853,357

2(Asset amounts deducted in determining Basel III Tier 1 capital)(12,090)(11,438)(11,527)

3

Total on-balance sheet exposures (excluding derivatives and SFTs)

901,969

878,187

841,830

9,675

10,965

11,28731,87930,55530,360

2,076

671

777

(5,875)(8,271)(10,499)

Derivative exposures4
5
6

Replacement cost associated with all derivatives transactions (ie net of eligible cash
variation margin)
Add-on amounts for PFE associated with all derivatives transactions

8

Gross-up for derivatives collateral provided where deducted from the balance sheet
assets pursuant to the operative accounting framework(Deductions of receivables assets for cash variation margin provided in derivatives
transactions)(Exempted CCP leg of client-cleared trade exposures)

9

Adjusted effective notional amount of written credit derivatives

10(Adjusted effective notional offsets and add-on deductions for written credit
derivatives)
Total derivative exposures

7

11

-

-

-

143

313

979

(129)

(300)

(608)

37,76933,93332,29625,94323,87553,384

Securities financing transaction exposures
12
13

Gross SFT assets (with no recognition of netting), after adjusting for saleaccounting transactions(Netted amounts of cash payables and cash receivables of gross SFT assets)(1,253)(2,012)(1,206)14

CCR exposure for SFT assets

5,794

5,084

6,238

15

Agent transaction exposures

-

-

-

16

Total securities financing transaction exposures

30,48426,94758,416

Other off-balance sheet exposures
17

Off-balance sheet exposure at gross notional amount

260,594

253,217

267,61418(Adjustments for conversion to credit equivalent amounts)(142,746)(139,092)(153,486)

Off-balance sheet items

117,848

114,125

114,128

19

Capital and Total Exposures
20

Tier 1 capital

21

Total exposures

22

Basel III leverage ratio

59,47358,431

56,481

1,088,070

1,053,192

1,046,670

5.5%

5.5%

5.4%

Leverage ratio

84

ANZ Basel III Pillar 3 disclosure
Table 19

September 2021

Summary comparison of accounting assets vs. leverage ratio exposure measureSep 21Mar 21$M$M

Sep 20$M

978,857

1,018,339

1,042,286

1

Total consolidated assets as per published financial statements

2

(120)

(174)

(214)

-

-

-

4

Adjustment for investments in banking, financial, insurance or commercial
entities that are consolidated for accounting purposes but outside the scope of
regulatory consolidation.
Adjustment for assets held on the balance sheet in a fiduciary capacity pursuant
to the Australian Accounting Standards but excluded from the leverage ratio
exposure measure
Adjustments for derivative financial instruments.

(967)(70,733)(103,034)

5

Adjustment for SFTs (i.e. repos and similar secured lending)

4,542

3,073

5,032

6

Adjustment for off-balance sheet exposures (i.e. conversion to credit equivalentamounts of off-balance sheet exposures)
Other adjustments

117,848

114,125

114,128

3

7

Leverage ratio exposure

85(12,090)(11,438)(11,528)

1,088,070

1,053,192

1,046,670

ANZ Basel III Pillar 3 disclosure
Table 20

September 2021

Liquidity Coverage Ratio disclosure templateSep 21
Total
Unweighted
Value
$M

Total
WeightedValue$M

Jun 21
Total
Unweighted
Value
$M

Total
Weighted
Value$M

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

2Alternative liquid assets (ALA)

3Reserve Bank of New Zealand (RBNZ) securities

229,748

210,191

8,025

9,635

22

-

Cash outflows
4
5
6
7
8
9
10

Retail deposits and deposits from small businesscustomersof which: stable depositsof which: less stable deposits
Unsecured wholesale fundingof which: operational deposits (allcounterparties) and deposits in networks forcooperative banksof which: non-operational deposits (allcounterparties)of which: unsecured debt

11

Secured wholesale funding

12

Additional requirements

13of which: outflows related to derivatives
exposures and other collateral requirements

14of which: outflows related to loss of funding on
debt products

15

of which: credit and liquidity facilities

267,495

27,477

255,840

114,957

5,748

111,095

5,555

152,538

21,729144,745

20,523

271,577

141,562

249,291

129,955

98,712

23,84095,93923,163

157,480

102,337

137,885

91,325

15,385

15,385

15,467

15,467681

26,078588

144,670

39,722142,051

37,677

22,824

22,824

21,07021,070----121,846

16,898120,981

16,607

16

Other contractual funding obligations

8,789

-

8,277

-

17

Other contingent funding obligations

101,203

6,006

98,402

6,373

18

Total cash outflows

215,448

200,671

Cash inflows
19

Secured lending (e.g. reverse repos)

13,422

1,580

14,716

1,592

20

Inflows from fully performing exposures

24,857

16,06824,256

15,97921

Other cash inflows

22,636

22,636

20,64820,64822

Total cash inflows

60,91540,284

59,62023

Total liquid assets

237,795

219,826

24

Total net cash outflows

175,164

162,452

25

Liquidity Coverage Ratio (%)

135.8%

135.3%

66

65

Number of data points used (simple average)

38,219Liquidity Coverage Ratio (LCR)
ANZ’s average LCR for the 3 months to 30 Sep 2021 was 135.8% with total liquid assets exceeding net outflows by anaverage of $62.6billion.
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.

86

ANZ Basel III Pillar 3 disclosure
Table 21

September 2021

NSFR disclosure templateSep 21
Unweighted value by residual
maturityNo<66
maturity
monthsmonths
to <
1yr
$M
$M
$M

Available Stable Funding (ASF) Item
1

Capital2of which: regulatory capital3of which: other capital instruments

4

63,679Retail deposits and deposits from small business customers

-

BLANK
≥ 1yr

Weighted
value

$M

$M

-

24,06787,74687,746

63,679--24,067

-

-

-

-

-

253,543

59,474--

287,840

5of which: stable deposits

115,279

11,206--

120,161

6

of which: less stable deposits

138,264

48,268--167,679

169,417248,234

23,974

72,616

197,136

7

Wholesale funding

8of which: operational deposits

105,374---

52,6879of which: other wholesale funding

64,043

248,234

23,974

72,616

144,449

10

Liabilities with matching interdependent assets

11

Other liabilities

12

NSFR derivative liabilities

13

All other liabilities and equity not included in the above categories

14

Total ASF

-

-

-

-

-

19,405

6,051

-

49

49

19,405

6,051

-

-

-

-

49

49
572,771

Required Stable Funding (RSF) Item
15a

Total NSFR (HQLA)

7,189

15b

ALA

3,079

15c

RBNZ securities
Deposits held at other financial institutions for operational
purposes
Performing loans and securitiesof which: Performing loans to financial institutions secured by
Level 1 HQLA
of which: Performing loans to financial institutions secured by
non-Level 1 HQLA and unsecured performing loans to financial
institutionsof which: Performing loans to non- financial corporate clients,
loans to retail and small business customers, and loans tosovereigns, central banks and public sector entities (PSEs)
of which: With a risk weight of less than or equal to 35% under
APS 112

16

1,118
-

-

-

-

14,38994,37548,808464,395

414,231-

20,518

-

-

2,052

576

17,362

7,958

20,611

27,77011,12948,261

33,251

109,375

143,081

-

13

224

515

453

-

7,367

6,911

330,793

235,195

-

6,523

6,117

285,415

195,805

2,684

867

688

3,616

6,133

25

of which: Securities that are not in default and do not qualify as
HQLA, including exchange-traded equities
Assets with matching interdependent liabilities

-

-

-

-

26

Other assets:

23,792

24,238885

3,993

29,067

2,527

-

-

2,148

9,675

-

-

3,624

17
18
19

20
21
22
23
24

27
28
29
30
31

of which: Performing residential mortgagesof which: With a risk weight equal to 35% under APS 112

of which: Physical traded commodities, including goldof which: Assets posted as initial margin for derivative contracts andcontributions to default funds of central counterparties (CCPs)
of which: NSFR derivative assetsof which: NSFR derivative liabilities before deduction of variation
margin postedof which: All other assets not included in the above categories

-

2,187

21,605

1,859

11,941

-

-

2,388

95

885

3,993

19,048--

191,51132

Off-balance sheet items

33

Total RSF

462,496

7,811

34

Net Stable Funding Ratio (%)

123.84%

ANZ's NSFR as at 30 September 2021 was 123.8%, down 0.4% in the quarter since June 2021.
The main sources of Available Stable Funding (ASF) at September 2021 were deposits from Retail and SME customers,
at 50%, with other wholesale funding (including Term Funding Facilities) at 25% and capital at 15% of the total ASF.
The majority of ANZ's Required Stable Funding (RSF) at September 2021 was driven by mortgages at 51% and otherlending to non-FI customers at 31% of the total RSF.

87

ANZ Basel III Pillar 3 disclosure

Table 21

September 2021

NSFR disclosure template (continued)
Jun 21
Unweighted value by residual
maturityNo<66
maturity
monthsmonthsto < 1yr$M$M$M

Available Stable Funding (ASF) Item
1

Capital2of which: regulatory capital3of which: other capital instruments

4

Retail deposits and deposits from small business customers

BLANK
≥ 1yr

Weighted
value

$M

$M

62,177--23,22685,402

62,177--23,22685,402

-

-

-

-

-

240,739

63,186--

277,886
114,153

5of which: stable deposits

107,984

12,177--

6of which: less stable deposits

132,755

51,009--163,733

159,785

251,256

34,79572,664

201,085

7

Wholesale funding

8of which: operational deposits

101,948---

50,9749of which: other wholesale funding

57,837251,256

34,79572,664150,11110

Liabilities with matching interdependent assets

11

Other liabilities

12

NSFR derivative liabilities

13

All other liabilities and equity not included in the above categories

14

Total ASF

-

-

-

-

-

19,595

5,670

-

835

835

5,670

-

-

-

-

835

19,595835
565,208

Required Stable Funding (RSF) Item15(a)Total NSFR (HQLA)

7,797

15(b)

ALA

3,080

15(c)

RBNZ securities
Deposits held at other financial institutions for operational
purposes

16
17
18
19

20
21
22
23

976

Performing loans and securitiesof which: Performing loans to financial institutions secured by
Level 1 HQLA
of which: Performing loans to financial institutions secured by
non-Level 1 HQLA and unsecured performing loans to financial
institutionsof which: Performing loans to non- financial corporate clients,
loans to retail and small business customers, and loans tosovereigns, central banks and public sector entities (PSEs)
of which: With a risk weight of less than or equal to 35%
under APS 112
of which: Performing residential mortgages

-

-

-

-

-

14,457

89,21543,180459,137

406,478-

17,695

8

-

1,774

463

17,141

6,625

19,37325,72011,706

46,071

28,967

107,098

138,400

-

34

192

508

443

-

7,494

6,950

329,007234,807

-

6,624

6,128

282,898

194,768

2,288

814

630

3,659

5,777

25

of which: With a risk weight equal to 35% under APS 112
of which: Securities that are not in default and do not qualify as
HQLA, including exchange-traded equities
Assets with matching interdependent liabilities

-

-

-

-

26

Other assets:

20,821

24,276

1,792

3,133

29,377

2,524

-

-

2,145
3,187

24

27
28
29
30
31

of which: Physical traded commodities, including goldof which: Assets posted as initial margin for derivative contracts andcontributions to default funds of central counterparties (CCPs)
of which: NSFR derivative assetsof which: NSFR derivative liabilities before deduction of variation
margin postedof which: All other assets not included in the above categories

2,594

18,227

2,205

8,857

-

-

12,691

-

-

2,538

204

1,792

3,133

19,301--

182,651

32

Off-balance sheet items

33

Total RSF

455,083

34

Net Stable Funding Ratio (%)

124.20%88

7,375

ANZ Basel III Pillar 3 disclosure

September 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 andalso 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 anddo 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 arisingfrom on- and off-balance sheet transactions (in the banking book andtrading book) with the counterparty or group of related counterparties.

Credit risk

The risk of financial loss resulting from a counterparty failing to fulfil its
obligations, or from a decrease in credit quality of a counterparty resulting
in a loss in value.

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 thelife 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 datethat the arrears 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 dateof default.

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

Impaired loans (IL)Impaired loans comprise of drawn facilities where the customer’s status isdefined 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 (asopposed to on a collective basis). It takes into account expected cash flows
over the lives of those financial instruments.

Individually Assessed
Provisions for Credit
Impairment

Individually assessed provisions for credit impairment are calculated inaccordance with AASB 9 Financial Instruments (AASB 9). They areassessed on a case-by-case basis for all individually managed impaired
assets taking into consideration factors such as the realisable value of
security (or other credit mitigants), the likely return available uponliquidation or bankruptcy, legal uncertainties, estimated costs involved inrecovery, the market price of the exposure in secondary markets and theamount and timing of expected receipts and recoveries.

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September 2021

Internationally Comparable
Basel III Capital Ratio

The Internationally Comparable Basel III CET1 ratios are ANZ’sinterpretation of the regulations documented in the Basel Committee
publications; “Basel 3: A global regulatory framework for more resilientbanks and banking systems” (June 2011) and “International Convergenceof Capital Measurement and Capital Standards” (June 2006). They also
include differences identified in APRA’s information paper entitledInternational Capital Comparison Study (13 July 2015).

Market risk

The risk to ANZ’s earnings arising from changes in interest rates, foreignexchange rates, credit spreads, volatility, correlations 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 ofmarket risk:
Traded market risk - the risk of loss from changes in the value of financial
instruments due to movements in price factors for both physical andderivative trading positions. Trading positions arise from transactions
where ANZ acts as principal with customers, financial exchanges or interbank counterparties.
Non-traded market risk (or balance sheet risk) - comprises interest raterisk in the banking book and the risk to the AUD denominated value of
ANZ’s capital and earnings due to foreign exchange rate movements.

Operational risk

The risk of loss resulting from inadequate or failed internal processes,
people and systems, 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 of contractual arrangements are deemed past due. Past due
facilities include those operating in excess of approved arrangements or
where scheduled repayments are outstanding 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 attracta more favorable risk weight calculation.

Recoveries

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

Restructured items

Restructured items comprise facilities in which the original contractual
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.

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 of default. In the case of non-asset backed risks (i.e. market andoperational risk), RWA is determined by multiplying the capitalrequirements for those risks by 12.5.

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 proceedsfrom 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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September 2021

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ANZ Basel III Pillar 3 Disclosure

June 2017