2013
ANZ Basel III Pillar 3 disclosure

September 2013

BASEL IIIPILLAR 3 DISCLOSURE

YEAR ENDED 30 SEPTEMBER 2013
APS330: PUBLIC DISCLOSURE
REMUNERATION DISCLOSURE

0ANZ Basel III Pillar 3 disclosure

September 2013

Important noticeThis document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meetits disclosure obligations under the Australian Prudential Regulation Authority (APRA) ADI Prudential
Standard (APS) 330: Public Disclosure.
This disclosure was prepared as at 30 September 2013. ANZ has a continuous disclosure policy, underwhich ANZ will immediately notify the market of any material price sensitive information concerning theGroup, in accordance with legislative and regulatory disclosure requirements.

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ANZ Basel III Pillar 3 disclosure

September 2013

Remuneration Disclosure
Basis of DisclosureThis document presents the 2013 financial year (2013) remuneration disclosures of Australia and New
Zealand Banking Group Limited (ANZ), as required by the Australian Prudential Regulation Authority(APRA) ADI Prudential Standard APS 330 Public Disclosures.
The disclosures contained in this document are based on information that is consistent with information
provided to ANZ’s external auditor. However, the information provided is for regulatory disclosure
purposes, rather than accounting disclosures, and may not be comparable to other information disclosed
by ANZ. Additional information on ANZ’s remuneration policies and structures is contained in the ANZ
Annual Report.
Bodies that oversee Remuneration
The ultimate responsibility for the sound and prudent management of remuneration at ANZ rests with theANZ Board. The Board is assisted in overseeing remuneration matters, including adherence to ANZ
remuneration policies and practices, by the Board Human Resources Committee (HRC).
The HRC met five times during the 2013 financial year. Committee fees for the HRC chair for the 2013
financial year were $55,000 and for HRC members were $25,000.
The purpose, powers and duties of the HRC are set out in the HRC Charter. The HRC pays particularattention to the remuneration of the senior executive population, the highest paid individuals, individuals
who could have a material impact on ANZ’s financial soundness, the remuneration structures ofindividuals who perform a risk and financial control role and adherence to the ANZ Remuneration Policy.
The ANZ Remuneration Policy applies to all ANZ employees globally, including:•Senior ManagersSenior Managers are the Responsible Person roles as detailed in ANZ’s Remuneration Policy.
ANZ’s current Responsible Persons are the CEO, Management Board members and other key
roles identified in ANZ’s Fit and Proper Policy. For 2013, ANZ had a total of 23 senior manager
roles.

•Material Risk Takers
Material Risk Takers (MRT) are any other persons (not covered by the Senior Manager definitionabove), for whom a significant portion of total remuneration is based on performance and whoseactivities, individually or collectively, may affect the financial soundness of ANZ. For ANZ theseare Senior Executives who can influence the Group’s capital; funding and liquidity; market risk;
underwriting risk; and/or credit and counterparty risk and for 2013 represented 8 roles.

As at 30 September 2013, the HRC consisted of six members, all of whom are independent NonExecutive Directors1.
Throughout the course of the year the HRC has made all remuneration-related decisions, andrecommendations to the Board, independently of management. The HRC also has free and unfetteredaccess to ANZ employees, and to relevant external advisors, when required.
During 2013, management commissioned information, which was provided to the HRC, from external
advisors including Ernst & Young, Hay Group, Herbert Smith Freehills, McLagan, Mercer (Australia) Pty
Ltd, Oliver Wyman and PricewaterhouseCoopers. Information received from external advisors related toremuneration market data and analysis, market practice on the structure and design of incentive
programs, legislative requirements and interpretation of governance and regulatory requirements.
Design and Structure of Remuneration Processes
The ANZ Remuneration Policy provides the HRC and management with a consistent framework formanaging remuneration and remuneration-related matters, the framework addresses:•Remuneration mix and market positioning•
Fixed and variable remuneration•Shareholding guidelines and hedging prohibitions•
Independence of Risk and Financial Control Personnel•
Requirements for other ANZ APRA Regulated Entities and Registered Superannuation Entity
Licensees and United Kingdom based employees•Engagement of remuneration consultants
1ANZ Board Chairman is an ex-officio member of the Committee and does not receive a Committee member fee.

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September 2013

The primary objectives of the ANZ Remuneration Policy are:•creating and enhancing value for all ANZ stakeholders;•emphasising the ‘at risk’ components of total rewards in order to increase alignment withshareholders and encourage behaviour that supports both the long-term financial soundness andthe risk management framework of ANZ, and deliver superior long-term total shareholder
returns;•
differentiating rewards in line with ANZ’s culture of rewarding for out-performance anddemonstration of values led behaviours; and•providing a competitive reward proposition to attract, motivate and retain the highest quality
individuals in order to deliver ANZ’s business and growth strategies.
Performance and remuneration outcomes for all Risk and Financial Control Personnel are determined by
the appropriate reporting manager within these functions directly, and not the business that theindividual supports. This ensures individuals are remunerated independently of the business theyoversee.
The HRC last reviewed the ANZ Remuneration Policy in February 2013. As a result of the review, theBoard approved changes to the ANZ Remuneration Policy to include the new Institutional Total Incentives
Performance Plan (TIPP) and new regulatory requirements for Registrable Superannuation Entities.
Remuneration at ANZ
ANZ’s short-term incentive spend is adjusted each year to reflect ANZ’s performance outcomes, and isapproved by the Board. Individual remuneration at ANZ is comprised of fixed remuneration and variableremuneration.
Fixed remuneration: Fixed remuneration is designed to reward individuals for their skills andexperience, and the accountability of their role. Fixed remuneration is reviewed annually with regard to
local market practices and affordability.
Variable remuneration: ANZ’s variable remuneration opportunity provides relevant employees with “atrisk” reward component(s) designed to drive performance in the short-term and the medium to longterm.
The Board has on-going and absolute discretion to adjust unvested performance-based variable
remuneration downwards, or to zero at any time.
Adjustments may occur to assist in protecting the financial soundness of ANZ or if the Board
subsequently considers that having regard to information which has come to light after the grant ofdeferred remuneration, the deferred remuneration was not justified.
Each year the mix of cash and equity an individual receives varies, as the value of the variable
remuneration increases or decreases, to reflect individual, business and ANZ overall performanceoutcomes for the year.
An individual’s variable remuneration may comprise a short-term incentive opportunity and a long-term
incentive opportunity, or a blended short and long-term incentive opportunity.
Short-term incentives
The short-term incentive opportunity supports ANZ’s strategic annual performance objectives. Todetermine and approve the annual short-term incentive pool, the Board assesses performance against abalanced scorecard of measures.
For 2013, examples of some of the key performance measures under each of the balanced scorecard
categories used to assess performance are provided below. ANZ has used a balanced scorecard approach
for a number of years. The categories within the balanced scorecard were refined from six categories in2012 (Finance, Customer, Shareholder Returns, People, Connectivity and Process/Risk) to the following
five categories in 2013.
High Performing• Cash profit• Economic profit• Return on equity• Cash earnings per share

Most Respected• Senior leaders as rolemodels• Employee engagement• Workforce diversity

3Well Managed• Maintainstrong
creditrating• Core funding ratio• Cost to income ratio• Number of outstanding
internal audit items

ANZ Basel III Pillar 3 disclosure
Best Connected• Growth in Asia Pacific,
Europe and America

September 2013

Customer Driven• Customer
satisfaction(based on external survey
outcomes)

Performance measures within each of the division’s balanced scorecards are strategically aligned to theperformance measures within the ANZ balanced scorecard.
Individual performance metrics, which form part of an individual’s annual objectives, are tailored toreflect the nature of the role.
Individual remuneration outcomes are discretionary and linked to both ANZ and individual performanceoutcomes for all senior managers and material risk takers. Each individual’s performance is assessed atyear end against their agreed balanced scorecard of financial and non-financial objectives. Demonstrationof the ANZ Values and an assessment of compliance, risk management and behaviour forms afundamental aspect of the performance assessment. Risk and Compliance input is a critical part of theassessment process in determining the performance of ANZ and in ensuring that individual remuneration
has been appropriately assessed with regard to risk. Individual reward outcomes are then determined,taking into consideration both the individual’s performance and the performance of ANZ overall. Awards
may be below, at or above the individual’s target opportunity.
Short-term incentives are delivered in cash up to the mandatory deferral threshold. The HRC regularly
reviews the threshold at which mandatory deferral is applied, the quantum of variable remuneration
which is subjected to deferral and the time period over which deferral occurs.
For 2013, deferral applies to 50% of short-term incentive payments exceeding $100,0002. Half thedeferred portion is deferred for one year and half is deferred for two years; the deferred equity remains
at risk, and can be clawed back at the discretion of the Board until the vesting date.
Long-term incentives
The Board/HRC approves the allocation of long-term incentives to senior managers and material risktakers. The long-term incentive plan is delivered in equity, which provides alignment of a significant
portion of an individual’s remuneration to sustained growth in shareholder value over the longer-term.
To further align an individual’s remuneration with ANZ’s actual performance outcomes, ANZ determines
LTI grants after the end of the performance year to which the grant relates (i.e. grants made during
2013 related to performance during 2012).
All long-term incentive equity is deferred for three years and remains at risk, and can be clawed back,until vesting.
Equity granted to the CEO and Management Board3 is delivered as Performance Rights and in order tovest must meet both a time and a relative Total Shareholder Return (TSR) performance hurdle4. If thehurdles are not met then the awards lapse.
Equity granted to individuals in roles below the level of CEO and Management Board in the 2013 financial
year was delivered as ANZ Deferred Equity (shares or share rights) subject to a time based hurdle5.
Total Incentive Performance Plan (TIPP)In determining the incentive pool for TIPP, which applies to Institutional specific Product and Relationshipbusinesses, the Board takes into consideration performance against a balanced scorecard of measures.
The TIPP balanced scorecard considers a range of Financial, Customer, Risk, Process Efficiency andPeople measures.
Individual reward outcomes are determined after taking into consideration the individual’s performanceand relevant business performance.

2

Or the local equivalent for overseas individuals, mandatory deferral is subject to a minimum deferral amount of$25,000 (or the local equivalent).

3

With the exception of the CRO whose deferred share rights were subject to a 3 year time-based hurdle to ensure
greater impartiality and independence of this role.

4From 2014, Performance Rights granted during the period will be divided into two equal tranches with Tranche 1subject to TSR relative to a select Financial Services Comparator Group and Tranche 2 subject to TSR relative to an
ASX50 Comparator Group.
5

Equity delivered in the 2014 financial year was delivered as a blend of Performance Rights and Deferred Equity.

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ANZ Basel III Pillar 3 disclosure

September 2013

Payments made under the TIPP are delivered in cash up to $80,000. Mandatory deferral applies to 60%of payments exceeding $80,0006 and this is deferred evenly over three years. The equity remains at risk
and can be clawed back until the vesting date.
Current and Future Risks
ANZ has an Enterprise-wide risk management framework which takes into account a range of risks
managed within ANZ, both at the Enterprise level and individual business level.
Risk appetite is set using both qualitative and quantitative measures across the major risk classes
including liquidity, market, financial, credit and operational risk to ensure business objectives andperformance are measured and monitored on a risk-adjusted basis and within appetite.
To ensure consistent monitoring year on year, the Board considers performance against a balanced
scorecard of measures to determine the incentive pools. This helps to ensure that the incentive pools areshaped by risk considerations. The CRO reviews and provides input to the Board/HRC on incentive pools
taking into consideration the risk and return tradeoffs.
The ANZ Remuneration Policy through the risk management framework ensures the design, monitoring,measurement and remuneration outcomes occur within the broader framework of ANZ’s riskmanagement targets and thresholds.
The design and operation of all variable remuneration schemes are required to adhere to a set of policy
principles and governance standards which require the approval of the Finance, Risk, and HR functions.
Individual incentive awards are made on the basis of a risk adjusted view of both financial and nonfinancial performance. However, if the assessment of performance subsequently proves to be inaccurate
or incorrect, the unvested deferred awards can be clawed back by the Board.
Quantitative Disclosures for Senior Managers and Material Risk Takers
The following quantitative disclosures are provided with reference to the ANZ Remuneration Policy andcurrent practices, and include individuals who met the definitions of Senior Manager or Material RiskTaker at any stage during the financial year.
Table 1 (H & J): Remuneration - fixed, variable and other remuneration
Table 1 provides a view of how remuneration is paid or communicated to individuals. Consistent with theRemuneration Report Non Statutory Remuneration Disclosure table approach: Fixed remuneration relates
to amounts for/paid during the financial year. Variable remuneration relates to the communicated cash
and equity values (fair value) received, that is paid/granted, in/during the financial year that relate to theprior financial year. This approach has been chosen over the Statutory Remuneration Disclosure
approach (i.e. the inclusion of cash STI for the financial year and also the accounting expense of prioryear STI and LTI share-based payments in the financial year) as it provides greater transparency to thevalue communicated and actually granted to individuals during the financial year.
No guaranteed bonuses, sign-on awards or termination payments have been paid/granted in the financial
year to Senior Management or Material Risk Takers.
Financial Year 2013
Number of people
Fixed remuneration (cash – non-deferred) $’000

Senior Management

Material Risk Takers

23

8

19,167

4,134

Variable remuneration
Number of people

22

7Cash (non-deferred) $’000

16,371

8,558

Shares and share-linked instruments (deferred) $’000

26,574

10,413

6

Or the local equivalent for overseas individuals, mandatory deferral is subject to a minimum deferral amount of$18,000 (or the local equivalent).

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ANZ Basel III Pillar 3 disclosure

September 2013

Table 2 (I & K): Deferred remuneration exposed to implicit and explicit adjustments
Value is 1-day Volume Weighted Average Price of ANZ shares on vesting date (paid out)/30 September
2013 (outstanding), by the number of shares/rights (face value). Reductions are determined comparing
these values to the allocation value at grant. All outstanding deferred remuneration is exposed to ex post
explicit and implicit adjustments. ANZ does not provide retained remuneration.
Explicit adjustments reflect lapse, due to performance conditions not being met and/or due to cessationof employment. Implicit adjustments reflect share price reductions in the value of equity from grant.
All deferred remuneration is deferred into equity.

Financial Year 2013
Senior Management

Material Risk Takers

34,7689,160

110,81133,286

Total reductions due to ex post explicit adjustments $’000(8,603)(1,565)

Total reductions due to ex post implicit adjustments $’000--

Deferred remuneration paid out
Vested shares and share-linked instruments $’000
Outstanding deferred remuneration
Unvested shares and share-linked instruments $’000
Deferred remuneration reductions

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