2023
BASEL IIIPILLAR 3
DISCLOSURE
AS AT 30 SEPTEMBER 2023
APS 330: PUBLIC DISCLOSURE

ANZ Basel III Pillar 3 Disclosure

September 2023

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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Table of Contents1
Chapter 1 – Introduction ............................................................................................................................... 3
Purpose of this document .................................................................................................................. 3
Chapter 2 - Risk appetite and governance ...................................................................................................... 5
Risk types ...................................................................................................................................... 5
Risk appetite framework ................................................................................................................... 6
Risk management governance ........................................................................................................... 6
Chapter 3 – Capital reporting and measurement .............................................................................................10
Chapter 4 – Capital and capital adequacy .......................................................................................................11
Table 1

Capital disclosure template ...............................................................................................11

Table 2Main features of capital instruments ..................................................................................21

Table 6

Capital adequacy .............................................................................................................21

Chapter 5 – Credit risk .................................................................................................................................25
Table 7
Table 8Credit risk – General disclosures .......................................................................................25
Credit risk – Disclosures for portfolios subject to the Standardised approach andsupervisory risk weights in the IRB approach ......................................................................42

Table 9Credit risk – Disclosures for portfolios subject to Advanced IRB approaches ............................43

Table 10Credit risk mitigation disclosures .......................................................................................55

Table 11

General disclosures for derivative and counterparty credit risk .............................................61

Chapter 6 – Securitisation ...........................................................................................................................65
Table 12Banking Book - Securitisation disclosures ...........................................................................68
Trading Book - Securitisation disclosures ............................................................................75

Chapter 7 – Market risk ................................................................................................................................76
Table 13

Market risk – Standard approach .......................................................................................76

Table 14

Market risk – Internal models approach..............................................................................77

Chapter 8 - Operational risk ..........................................................................................................................81
Table 15

Operational risk ..............................................................................................................81

Chapter 9 – Equities ...................................................................................................................................84
Table 16

Equities – Disclosures for banking book positions ................................................................84

Chapter 10 – Interest Rate Risk in the Banking Book .......................................................................................86
Table 17

Interest Rate Risk in the Banking Book ..............................................................................86

Chapter 11 – Leverage and Liquidity Coverage Ratio ........................................................................................89
Table 18

Leverage Ratio ................................................................................................................89

Table 19

Summary comparison of accounting assets vs. leverage ratio exposure measure ....................90

Table 20

Liquidity Coverage Ratio disclosure template ......................................................................91

Table 21

NSFR disclosure template .................................................................................................92

Glossary .....................................................................................................................................................94

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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September 2023

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 Public Disclosure Prudential Standard requires locally-incorporated authorised deposit-taking institutions (ADIs)
to meet minimum requirements for the public disclosure of key information on their capital, risk exposures, remuneration
practices and, where applicable, leverage ratio, liquidity coverage ratio, net stable funding ratio and indicators for theidentification of potential global systemically important banks, so as to contribute to the transparency of financial markets
and to enhance market discipline.
This document is prepared for ANZ BH Pty Ltd (ANZ Bank HoldCo) in accordance with Board policy and the APS 330
reporting standard requirements. It presents information on the Group’s Capital Adequacy and Risk Weighted Assets
calculations for credit risk, securitisation, traded market risk, interest rate risk in the banking book and operational risk.
Establishment of a new group organisational structure
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme ofarrangement a non-operating holding company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding
company of the ANZ Group and implemented a restructure to separate ANZ’s banking and certain non-banking
businesses into the ANZ Bank Group and ANZ Non-Bank Group (Restructure). The ANZ Bank Group comprises ANZBGL
and the majority of its businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ NonBank Group comprises banking-adjacent businesses developed or acquired by the ANZ Group, to focus on bringing newtechnology and banking-adjacent services to the ANZ Group’s customers, and a separate service company.
The APS 330 disclosure has been prepared on the level 2 basis being ANZ Bank HoldCo as the head of ANZ’s Level 2
banking group following the Restructure (formerly Australia and New Zealand Banking Group Limited for prior years).
Basel in ANZAPRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are
set out in APRA’s Banking Prudential Standard documents. ANZ has implemented these new requirements from 1 January
2023. The new capital adequacy key requirements include changes to APS 110 Capital Adequacy (APS 110), APS 112
Capital Adequacy: Standardised Approach to Credit Risk (APS 112) and APS 113 Capital Adequacy: Internal Ratingsbased Approach to Credit Risk (APS 113) with key features of the reforms including:•

improving the flexibility of the capital framework, through larger capital buffers that can be used by banks tosupport lending during periods of stress;•changes to risk weighted assets (RWA) through more risk-sensitive risk weights increasing capital requirements
for higher risk lending and decreasing it for lower risks;•changes to loss given default rates (LGD) including approved use of an internal ratings-based (IRB) approved
LGD model for mortgage portfolios;•

an increase in the IRB scaling factor (from 1.06x to 1.1x);•

requirement that IRB ADIs calculate and disclose RWA under the standardised approach and the introductionof a capital floor at 72.5% of standardised RWA; and•use of prescribed New Zealand authority’s equivalent prudential rules for the purpose of calculating the Level 2
regulatory capital requirement.

In addition, operational RWA is now calculated under APS 115 Capital Adequacy: Standardised Measurement Approach
to Operational Risk (APS 115) which replaced the previous advanced methodology from December 2022.
The revisions to the prudential standards resulted in changes to capital treatments, calculations, and the format of thedisclosures from the 31 March 2023 period. Comparative periods reported before March 2023 in this document remain
based on the pre 1 January 2023 prudential standards and have not been restated.
The application of APRA Capital Reform in January 2023 reduced RWA by $34.5 billion, equivalent to a 100 bps CET1
ratio benefit. This was partially offset by APRA’s expectations that ADIs operate a higher capital ratio to maintain an
unquestionably strong level.

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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 these disclosures. These differences are most pronounced in the credit risk disclosures, forinstance:

The principal method for measuring the amount at risk is Exposure at Default (EAD), which is the estimated exposure
owed on a credit obligation at the time of default. Under the Internal Ratings Based (IRB) approach in APS 113
Capital Adequacy: Internal Ratings-based Approach to Credit Risk, banks are accredited to provide their own
estimates of EAD or use supervisory estimates for all exposures (drawn, commitments or contingents) reflecting
the current balance as well as the likelihood of additional drawings prior to default. Note APS 113 no longer permits
the use of own estimates (internally modelled credit conversion factors (CCFs)) for committed non-retail exposuresand non-revolving retail, therefore ANZ apply supervisory CCFs as detailed in APS 112.



Loss Given Default (LGD) is an estimate of the loss expected in the event of default. LGD is essentially calculated
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.
Suncorp Bank Acquisition
On 18 July 2022, the ANZ Group announced an agreement to purchase 100% of the shares in SBGH Limited, theimmediate non-operating holding company of Suncorp Bank. The acquisition was subject to Australian Competition andConsumer Commission (ACCC) authorisation or approval. The ACCC declined to grant authorisation for this acquisitionin August 2023 and this decision is currently subject to review by the Australian Competition Tribunal. In addition, theacquisition remains subject to satisfaction of certain conditions, including Federal Treasurer approval and certain
amendments to the State Financial Institution and Metway Merger Act 1996 (QLD). ANZBGL will also have a terminationright under the Suncorp Bank Sale Agreement if APRA issues a written communication to ANZBGL under or in connection
with APS 222 Associations with Related Entities to the effect that ANZBGL must not proceed with completion of theacquisition. Assuming the conditions are satisfied, and merger approval is granted, it is expected to occur in mid-calendar
year 2024.

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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 credit obligations or from adecrease in credit quality of a counterparty resulting in a loss of value.

Financial Crime Risk covers the following risks at ANZ:oMoney Laundering (ML) Risk – the risk that ANZ may reasonably face from its products and/or services being
misused to facilitate the processing of the proceeds of crime to conceal their illegal origins and make themappear legitimate;oTerrorism Financing (TF) Risk – the risk that ANZ may reasonably face from its products and/or services being
misused to facilitate the provision or collection of funds with the intention or knowledge that they be used tocarry out acts associated in support of terrorists or terrorist organisations;oSanctions Risk – the risk of failing to comply with laws and regulations relating to sanctions imposed bygovernments and multinational bodies as a result of ANZ’s products and services being misused to facilitateprohibited sanctioned activities; andoFraud Risk – the risk that ANZ may reasonably face from its products and/or services being misused to facilitate
intentional acts by one or more individuals, involving the use of deception to obtain an unjust or illegal
advantage arising from internal or external sources.



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.



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.



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. This
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 (including 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 business continuity management, privacy obligations and Information Security and Cyber
Security and how information held by ANZ needs to be protected 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:The degree of risk (risk appetite) that ANZ is prepared to accept in pursuit of its strategic objectives and plansconsidering 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 if it is breached;The timing and process for reviewing of the risk appetite and risk tolerances; andThe 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 the Banking Executive
Accountability Regime (BEAR). From time to time, other ad hoc committees of the Board may be formed.
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 remuneration policy; significant changes to organisational structure; the acquisition, establishment,
disposal, or cessation of any significant business of ANZ;Approving the issue of any shares, options, equity instruments or other equity securities in 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;

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

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;

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, approve
them;



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 vary
them;



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); and

Meeting 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:oooothe appointment, annual evaluation and oversight of the external auditors;
annual review of the independence, fitness and propriety, and qualifications of the external auditors;
compensation of the external auditors; andwhere 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.

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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 Performance and Remuneration Policy and ANZ New Zealand (NZ) Performance and 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;

Obtaining external advice, either independently or via management, as appropriate, on remuneration, risk and anyother related matter to supplement members’ knowledge and expertise; andObtaining 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;

Reviewing the development of and approving applicable corporate governance policies and principles;
Reviewing ANZ’s Corporate Governance Statement; andIn 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;
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; andAll 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; andreviewing 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 theGroup’s balance sheet activities including balance sheet structure, liquidity, funding, capital management, non-tradedinterest rate risk and non-traded FX risk. The committee is accountable to the Board Risk Committee in the effective
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.
The committee seeks to ensure ANZ operates responsibly and achieves fair, ethical and balanced stakeholder
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, Socialand Governance Committee in the effective discharge of its responsibilities.
Credit Ratings System Oversight Committee (CRSOC) - is a sub-committee of CMRC, the senior management
forum responsible for the oversight and control of the Internal Ratings System for credit risk including credit model
approvals and performance monitoring.
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 to carry out the responsibilities delegated by the CEO of ANZ, regarding the funding anddelivery of value from ANZ’s investments in change initiatives. The committee acts as the governance, oversight andadvisory 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 APRA in November 2018.
The Committee is accountable to the Board in the effective discharge of its responsibilities.
Group Executive People Committee (GEPC) - is a leadership and decision making body charged with advancing
ANZ’s people strategy and priorities in line with the ANZ’s purpose, strategy and aspirational culture.
Financial Crime OREC Sub-Committee (FCOSC) - is the primary senior executive management forum responsible
for oversight of the Financial Crime risk profile and the related Control Environment. The purpose of FCOSC is to assist
OREC in the effective discharge of its responsibilities for financial crime obligations of ANZBGL and its controlled entities.
Processes and procedures relating to the operation of each of the Executive Management Committees are documented
in the committee charters which are available on Max: Management committee registers (anz.com).

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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., ANZBGL, consolidated with APRA-approved subsidiaries, to form the ADI’s Extended
Licensed Entity (ELE).



Level 2 - being the consolidated ANZBGL group for financial reporting purposes adjusted to exclude associates’
activities and certain subsidiaries referenced under APS 001: Definitions that undertake the following businessactivities:

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 ANZGHL group for financial reporting purposes.

ANZ measures capital adequacy monthly and reports for prudential purposes on a Level 1 and Level 2 basis. This Pillar
3 report is based on the Level 2 prudential structure.
Following the implementation of the Non-operating holding company structure in January 2023, APRA’s authority for
ANZGHL to be a non-operating holding company (NOHC) of an ADI includes five conditions for ANZ’s capital management
framework. Two of these are quantitative requirements being:

ANZGHL must always ensure that the quality and quantity of the total capital of the Level 3 group is equivalent to,or greater than, the quality and quantity of the sum of the total capital of the consolidated ANZ Bank Group and theconsolidated ANZ Non-Bank Group.



ANZGHL must calculate and manage capital for the ANZ Non-Bank Group in accordance with an Economic Capital
Model (ECM), which requires the amount of capital held, in the form of Common Equity Tier 1 (CET1), to be equal
to or greater than the capital requirement as calculated under the ECM.

For further details on Level 3 Capital, refer to Note 25 Capital Management of ANZGHL’s 2023 Annual Report.
For a list of all material subsidiaries and a brief description of their key activities, refer to Note 25 Controlled Entities of
ANZBGL’s 2023 Annual Report.

10

ANZ Basel III Pillar 3 Disclosure

September 2023

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 ANZ BH Pty Ltd (ANZ Bank HoldCo).
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, Finalised
Basel III post-crisis reforms issued by the Bank for International Settlements. The capital disclosure template in thischapter is the post January 2018 version as ANZ is fully applying the Basel III regulatory adjustments, as implemented
by APRA.
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 oneto-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.

11ANZ Basel III Pillar 3 Disclosure
Table 1

September 2023

Capital disclosure templateSep-23$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

28,7792

Retained earnings

41,1303

Accumulated other comprehensive income (and other reserves)(1,652)

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 B

2

Table C68,259Common Equity Tier 1 capital: regulatory adjustments
7

Prudential valuation adjustments

8

Goodwill (net of related tax liability)-

9

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

10
11

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

12

Shortfall of provisions to expected losses

13

Securitisation gain on sale

2,977
984

Table D-

Table H

(1,872)272

14

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

208

15

Defined benefit superannuation fund net assets

128

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)

-

19
20
21
22

Deferred tax assets arising from temporary differences (amount above 10% threshold, net of
related tax liability)
Amount exceeding the 15% threshold23

of which: significant investments in the ordinary shares of financial entities

24

of which: mortgage servicing rights

25
26

Table E--

Table F

Table Gn/an/aof which: deferred tax assets arising from temporary differences
National specific regulatory adjustments (sum of rows 26a - 26j)

7,768

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

(430)

26d

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

3,515

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

2,579

Table H26f

of which: capitalised expenses

2,099

Table I

26g

2

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 subsidiary-

26jof which: other national specific regulatory adjustments not reported in rows 26a to 26i

3

27

-

28

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

10,46529

Common Equity Tier 1 capital (CET1)

57,79412-

ANZ Basel III Pillar 3 Disclosure
Table 1

September 2023

Capital disclosure templateSep-23$M

Reconciliation
Table
Reference

8,409

Table K

Additional Tier 1 Capital: instruments
30
31
32

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

8,409

Table K

33

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

Table K

34-

Table K

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

n/a
8,409

Table K

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

22

22

Table K

41cof 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 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)

8,232

45

Tier 1 Capital (T1=CET1+AT1)

66,02641b-

177
Table K

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

23,504
-

48

-

49

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

50

Provisions

51

Tier 2 capital before regulatory adjustments

Table L

1,776

Table L

25,280

Table L

50

Table L

Tier 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

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

85

Table L

186

Table L

131
55

57

Total regulatory adjustment to Tier 2 capital

321

58

Tier 2 capital (T2)

24,95959

Total capital (TC=T1+T2)

90,98560

Total risk-weighted assets based on APRA standards

13

433,327

Table LANZ Basel III Pillar 3 Disclosure
Table 1

September 2023

Capital disclosure template2
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)

15.2%

63

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

21.0%

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 requirement2

65
66

of which: ADI-specific countercyclical buffer requirements

67
68

13.3%

9.9083%4.75%
0.6583%of which: G-SIB buffer requirement (not applicable)n/aCommon Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets)

8.8%

National minima (if different from Basel III)69

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

70

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

n/a
n/a

71

National total capital minimum ratio (if different from Basel III minimum)

n/aAmount below thresholds for deductions (not risk-weighted)
72

Non-significant investments in the capital of other financial entities

230

73

Significant investments in the ordinary shares of financial entities

3,439

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)

2,579

Table H

131

Table E

Applicable caps on the inclusion of provisions in Tier 2
76
77
78

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

193

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

1,645

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

n/a

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

n/a

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)

n/a

1,987

n/a

Counter Cyclical Capital Buffer

RWA for all private
sector exposures
Country

2

Jurisdictional Buffer

Countercyclical buffer
requirement

$M

%

%

Hong Kong
Luxembourg
NorwaySwedenUnited Kingdom
Australia
Germany

3,936
617
317
178
5,271
192,532
1,776

1.000
0.500
2.500
2.000
2.000
1.000
0.750

0.01220.00100.00250.00110.03280.59900.0041

FranceNetherlands
Other

1,890
861
114,040

0.500
1.000
n/a

0.00290.0027n/a

Total

321,4180.6583

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

14

ANZ Basel III Pillar 3 Disclosure

September 2023

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.

AssetsBalance
Sheet as inpublishedfinancialstatements$M

Cash and Cash Equivalents

Adjustments$M

168,154

Balancesheet underscope ofregulatory
consolidation$M

Template andReconciliation
Table
Reference

168,154

Settlement Balances owed to ANZ

9,349

9,349

Collateral Paid

8,558

8,558

Trading securities

37,00437,004

Derivative financial instruments

60,40660,406

Investment Securities

96,969of which: Financial Institutions capital instruments

85
(320)

Table L

96,649of which: significant investment in financial institutions equity
instrumentsof which: non-significant investment in financial institutions equity
instrumentsof which: Other entities equity investments

848

Table G

76

Table G

2

Table Jof which: collectively assessed provision(35)

Table ENet loans and advances

707,694(891)

of which: deferred fee income

706,803(430)

Row 26c(3,180)

Table Eof which: individual provisions(366)

Table Eof which: capitalised brokerage & Loan/Lease origination
feesof which: CET1 margin lending adjustment

3,475

Table Iof which: collectively assessed provision-of which: AT1 margin lending adjustment-

Regulatory deposits

646

Due from controlled entities-of which: Significant investments in the Tier 2 "capital ofbanking, financial and insurance entities" that are outside thescope of regulatory consolidation
Shares in controlled entities--

646
91

91
85

-

497

Table L497

of which: Investment in deconsolidated financial subsidiaries

341

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

155

Table K

2,321

2,321

of which: Financial Institutions

2,321

Current tax assets

37

Table G

37

Deferred tax assets

3,386

(1)

3,385

Goodwill and other intangible assets

3,961

(71)

3,890

Table Hof which: Goodwill

2,977

Row 8

of which: Software

913

Table D

Premises and equipment

2,360

Other assets

5,196

(153)

5,043

2,360

1,106,041(848)

1,105,193

of which: Defined benefit superannuation fund net assets

176

Total Assets

15

Table F

ANZ Basel III Pillar 3 Disclosure

Liabilities

September 2023
Balance
Sheet as inpublishedfinancialstatements$M

Adjustments$M

Settlement Balances owed by ANZ

19,267

19,267

Collateral Received

10,382

10,382

Deposits and other borrowings

815,203

Derivative financial instruments

57,482

Due to controlled entities

32

57,482
668

668

Current tax liabilities

305

(71)

234

Deferred tax liabilities

60

of which: related to capitalised expenses
of which: related to defined benefit superannuation fundassetsPayables and other liabilities

15,932

Employee Entitlements
Provisions3

Template andReconciliation
Table
Reference

815,235-of which: related to intangible assets

(344)

60

Table H-

Table D

5

Table I

48

Table F

15,588

568

568

1,714

1,714

of which: collectively assessed provision3

817

Table Eof which: individually assessed provision3

10

Table E

Debt Issuances

116,014(878)

of which: Directly issued qualifying Additional Tier 1 instrumentsof which: Additional Tier 1 Instrumentsof which: Directly issued qualifying Tier 2 instruments
Total Liabilities

115,136
8,232

Table K-

Table K

23,707

Table L

1,036,927(593)

1,036,334

69,114(255)

68,859Adjustments

Shareholders' equity

Balance
Sheet as inpublishedfinancialstatements$M$M

Balancesheet underscope ofregulatory
consolidation$M

Ordinary Share Capital

29,082(77)

29,005

Table A

226

Tables A & B

Net Assetsof which: Share reserve
Reserves(1,796)of which: Cash flow hedging reserves
Retained earnings
Share capital and reserves attributable to shareholdersof the company
Non-controlling interests
Total Shareholders' Equity

3

Balancesheet underscope ofregulatory
consolidation$M

Provisions are on undrawn and contingent facilities.

16

Template andReconciliation
Table
Reference(1,796)

Table B

(1,872)

Row 11Row 2

41,306(176)

41,13068,592(253)

68,339

522

(2)

520

69,114(255)

68,859

Table CANZ Basel III Pillar 3 Disclosure

September 2023

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 23

Table 1

$M

Reference

29,005

Reclassification to Reserves
Regulatory Directly Issued qualifying ordinary shares

Table B
Reserves(226)

Table B

28,779Row 1

Sep 23

Table 1

$M

Reference(1,796)Add

Reclassification from Issued Capital

226

Less

Non qualifying reserves(82)

Reserves for Regulatory capital purposes (amount allowed in group CET1)(1,652)
Sep 23$M

Table C

Less

Row 3

Table 1
ReferenceNon-controlling interests
Less

Table A

522

Ineligible Non-controlling Interests(512)

Surplus capital attributable to minority shareholders(8)

Ordinary share capital issued by subsidiaries and held by third parties

Table D
Software2

Row 5

Sep 23

Table 1

$M

Reference

913

Add

Other intangible assets

Less

Associated deferred tax liabilities

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 E

71

Table G

984

Row 9

Sep 23

Table 1

$M

Reference

Qualifying collective provisionCollectively assessed provision on Loans and advances(3,180)

Collectively assessed provision on Investment Securities(35)

Collectively assessed provision on Undrawn commitments

(817)

Less

Non-qualifying collectively assessed provision

LessStandardised collectively assessed provisionLess

Non-defaulted expected loss

354
131

Row 76

1,902

Non-Defaulted: Expected Loss - Eligible Provision Shortfall-

Qualifying individual provision
Individually assessed provision on Loans and advances
Add

(366)

Individually assessed provision on Undrawn and contingent facilities(10)

Additional individually assessed provision for partial write offs

(181)

Less

Standardised individually assessed provision

Add

Collectively assessed provision on advanced defaulted(339)

Defaulted expected loss

1,137

Less

31

Defaulted: Expected Loss - Eligible Provision Shortfall

272

Gross deduction

272

17

Row 12

ANZ Basel III Pillar 3 Disclosure

September 2023

Table FLess

Sep 23

Table 1

$M

Reference

Defined benefit superannuation fund net assets

176

Associated deferred tax liabilities(48)

Defined benefit superannuation fund net assets

128

Table G

Sep 23

Table 1

$M

Reference

Investment in deconsolidated financial subsidiaries

341

Less

Regulatory reclassification to Retained Earnings and Other Intangible Assets

(71)

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

848(3,439)Row 73-

Row 193,439

Row 7376

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

3,515

Deduction for equity holdings in financial institutions - APRA regulations

3,515

Deferred tax assets

Row 26d

Sep 23

Table 1

$M

Reference

3,385

Add

Deferred tax liabilities

3,325

Less

Deferred tax asset less deferred tax liabilities
Deferred tax assets that rely on future profitability

Less

Net Deferred tax assets associated with reserves ineligible for inclusion in regulatory capital

(805)

Add

Deferred tax liabilities on intangible assets, capitalised expenses and defined benefit
superannuation fund assets
Impact of calculating the deduction on a jurisdictional basis(60)-

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

37
22
2,579

Row 26e

Sep 23

Table 1

$M

Reference

3,475

Capitalised debt and capital disposal & issuance expenses
Other Capitalised Expenses
Less

Table D

2,321

Table HAdd

Row 1586(1,457)

Associated deferred tax liabilities(5)

Capitalised expenses

2,099

Row 26f

Sep 23

Table 1

Table J
Investments in non-financial Investment Securities equities

2

Investments in non-financial associates-

Non-financial equity exposures (loans)-

Equity exposures to non-financial entities2

18

Row 26g

ANZ Basel III Pillar 3 Disclosure

September 2023

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

Table 1

$M

Reference

8,232

Add

Issue costs

(1)

Add

Fair value adjustment

178

Directly issued qualifying Additional Tier 1 Capital Instruments classified as liabilities

8,409

Row 30Additional 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

8,409

Row 36Less

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(155)

Row 40(22)

Row 41b-Row 41c

Additional Tier 1 capital

8,232

Row 44Less
Less

Table L-Row 34

Sep 23

Table 1

$M

Reference-Row 48Add

Surplus capital attributable to third party holders

Add

Directly issued qualifying Tier 2 instruments

23,707

Less

Tier 2 instruments subject to amortisation4(2,000)Add

Issue costs

Add

Fair value adjustment

Add

Provisions

1,776

Row 50Tier 2 capital before regulatory adjustments

25,280Row 51(50)

Row 52(85)

Row 55

26
1,771

Less

Investments in own Tier 2 instruments (trading limit)

Less

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

Less

4

Sep 23(186)

Row 56

24,959Row 58APRA requires these instruments to be amortised by 20% of the original amount during each of the last five years to maturity.

19

ANZ Basel III Pillar 3 Disclosure

September 2023

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

Total Assets

Total Liabilities

$M

$M
-

ACN 008 647 185 Pty Ltd

Holding Company-

ANZ ILP Pty Ltd

Incorporated Legal Practice3-

ANZ Investment Services (New Zealand) Limited

Funds Management

16

-

814

413

ANZ Lenders Mortgage Insurance Pty. Limited

Mortgage insurance

ANZ Pensions (UK) Limited

Trustee/Nominee

ANZ New Zealand Investments Limited

Funds Management

ANZ New Zealand Investments Nominees Limited

Nominee--

ANZ Cover Insurance Private Ltd

Captive-Insurance

242

200

-

-

122

32

Kingfisher Trust 2016-1

Securitisation Trust

382

382

Kingfisher Trust 2019-1

Securitisation Trust

504

504

Shout for Good Pty. Ltd.

Corporate

1

1

20

ANZ Basel III Pillar 3 Disclosure
Table 2September 2023

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
the Capital 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.

21

ANZ Basel III Pillar 3 Disclosure

September 2023

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 (ADI’s) 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 2023 Full Year Results Announcement Group Results section, page 50,
available on ANZ’s website: shareholder.anz.com/pages/results-announcement.

22

ANZ Basel III Pillar 3 Disclosure
Table 6

September 2023

Capital adequacy - Capital Ratio and Risk Weighted Assets

5 6 7 8 (Hide)

Under the revised prudential standard requirements that apply from 1 January 2023 a number of new asset classes
have been introduced with one asset class (Banks) has been retired. The retired asset classes will continue to show
data from prior periods.
The following table provides the composition of capital used for regulatory purposes and capital adequacy ratios.
Sep 23

Mar 23

Sep 22$M$M$M

Corporate

62,66862,680146,069

Sovereign

n/a

n/a

10,955

Bank

n/a

n/a

12,071

Residential Mortgage5

96,29086,726

113,590

Retail SME

9,684

10,065n/aQualifying Revolving Retail

3,243

3,325

3,272

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

Other Retail

1,644

1,709

17,029173,529

164,505

302,986

Corporate

34,81938,808n/a

Sovereign

10,252

11,199n/aFinancial Institutions

30,87532,832n/aCredit risk weighted assets subject to Foundation IRB approach

75,946

82,839

n/a

3,369

3,577

39,792

Corporate

5,611

4,911

6,235

Sovereign

165

88

29

2,065

1,809

224

Credit risk weighted assets subject to Advanced IRB approach
Subject to Foundation IRB approach

Credit risk Specialised Lending exposures subject to slotting approach6
Subject to Standardised approach

Residential Mortgage
Other Retail

44

32

11

Other Assets

3,255

4,138

n/a

11,14010,978

6,499

Credit Valuation Adjustment and Qualifying Central Counterparties

4,000

3,449

3,865

Credit risk weighted assets relating to securitisation exposures

2,395

2,229

2,424

n/a

n/a

3,876

78,662

77,717n/a

349,041

345,294

359,442

Market risk weighted assets

10,264

11,737

9,282

Operational risk weighted assets8

42,31942,31947,931

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

31,70331,88738,063

-

4,277

n/a

433,327

435,514454,718

Credit risk weighted assets subject to Standardised approach

Other assets
Exposures of New Zealand banking subsidiaries7
Total credit risk weighted assets

RWA adjustment for the IRB capital floor
Total risk weighted assets

5

While APRA approved ANZ’s Australian Mortgages LGD model for regulatory capital purposes, a $9.6 billion RWA overlay has been
applied pending recalibration of the model.

6
Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing and repayment is from theasset being financed and is considered project finance.

Includes $20.0 billion credit RWA in supervisory overlays resulting from risk weight floors required by RBNZ. Refer to September 2023
ANZ NZ Disclosure Statement for details.

7

Includes a $6.25 billion operational risk RWA overlay ($500 million capital), subject to APRA’s acceptance of ANZ’s satisfactory
remediation of matters identified through the Self-Assessments into Governance, Culture and Accountability.

823

ANZ Basel III Pillar 3 Disclosure
Table 6

September 2023

Capital adequacy - Capital Ratio and Risk Weighted Assets9 (Hide)Sep 23

Mar 23

Sep 22$M$M$M

Credit Risk9

544,739546,653n/aMarket risk weighted assets

10,264

11,737n/aOperational risk weighted assets

42,31942,319

n/a

n/a

n/a

n/a

597,322600,709n/a

Credit Risk

349,041

345,294n/aMarket risk weighted assets

10,264

11,737n/aOperational risk weighted assets

42,31942,319n/aInterest rate risk in the banking book (IRRBB) risk weighted assets

31,70331,887n/aTotal Risk Weighted Assets

433,327

431,238

n/aCapital floor at 72.5%

433,058

435,514

n/a

-

4,277

n/a

Capital ratios (%)

Sep 23

Mar 23

Sep 22

Level 2 Common Equity Tier 1 capital ratio

13.3%

13.2%

12.3%

Level 2 Tier 1 capital ratio

15.2%

15.1%

14.0%

Level 2 Total capital ratio

21.0%

20.6%

18.2%

Level 1: Extended licensed Common Equity Tier 1 capital ratio

13.2%

12.9%

12.0%

Level 1: Extended licensed entity Tier 1 capital ratio

15.5%

15.2%

14.0%

Level 1: Extended licensed entity Total capital ratio

22.2%

21.6%

18.9%

Other significant Authorised Deposit-taking Institution (ADI) or overseas banksubsidiary:
ANZ Bank New Zealand Limited – Common Equity Tier 1 capital ratio

Capital Floor
Risk weighted assets under the standardised approach

Interest rate risk in the banking book (IRRBB) risk weighted assets
Total Risk Weighted Assets
Risk weighted assets prior to application of floor

Capital floor adjustment

12.5%

12.2%

12.4%

ANZ Bank New Zealand Limited - Tier 1 capital ratio

14.1%

13.8%

15.0%

ANZ Bank New Zealand Limited - Total capital ratio

15.5%

15.2%

16.4%

Basel III APRA level 2 CET1

Sep 23

Mar 23

Sep 22

Common Equity Tier 1 Capital

57,794

57,38055,872

Total Risk Weighted Assets

433,327

435,514454,718

Common Equity Tier 1 capital ratio

13.3%

13.2%

12.3%

Basel III APRA level 1 Extended licensed entity CET1

Sep 23

Mar 23

Sep 22

Common Equity Tier 1 Capital

48,41747,80347,091

Total Risk Weighted Assets

367,093

370,395

392,018

Common Equity Tier 1 capital ratio

13.2%

12.9%

12.0%

Credit Risk Weighted Assets (CRWA):
Credit RWA increased $3.7 billion in the half to $349 billion. This includes:
Volume growth (+$0.2 billion) with an increase in Australia Mortgage EAD of $13 billion driving a $3 billion RWA increase, offset by
reductions in Institutional Corporate and Financial exposures.

Portfolio Risk (+ $3.7 billion) driven by moderate increases in delinquency and loss given default profile in Mortgage portfolios inAustralia and New Zealand.



Data, models and methodology (-$1.2 billion), with reductions in Institutional (-$4.9 billion) partially offset by an increase of
approximately $3.5 billion in Australia Mortgages. The Mortgages increase is largely an artifact of the current PD model’s responseto changes in product packages sold to ANZ customers. A new model which addresses this has been submitted for Regulatory
approval.



Foreign exchange and other movements (+$1.0 billion).

Market Risk, Operational Risk and IRRBB RWA
Traded Market Risk RWA decreased by $1.5 billion over the half, mainly driven by decrease in Stressed VaR.
IRRBB RWA decreased primarily as a result of the reduction in Embedded Losses.
ANZ continues to use the Standardised Measurement Approach (SMA) for calculation of Operational Risk capital as per APS 115 Capital
Adequacy: Standardised Measurement Approach to Operational Risk. Year-on-year operational risk RWA decreased by $5.6 billion, with
a $6.0 billion reduction from ANZ’s adoption of the SMA in December 2022 under APRA Capital Reforms partially offset by foreignexchange-driven movements of $0.4 billion.

9
RWA for residential mortgages for the Group excluding New Zealand banking subsidiaries exposures measured under the IRB approach
is $125.2 billion when calculated under the standardised approach.

24

ANZ Basel III Pillar 3 Disclosure

September 2023

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.
Portfolios with approval to use the Internal Ratings based (IRB) approach
ANZ has APRA approval to use the four approaches under the Internal Ratings based approach to credit risk, under APS
113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk.
As an IRB bank, ANZ’s internal models generate the inputs into regulatory capital adequacy under the four approaches(see below), 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 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 over a 12-month horizon;

Exposure at Default (EAD) represents the expected outstanding at the time of default, including an estimate ofadditional drawings prior to default (based on supervisory credit conversion factors), plus post-default drawings
that were legally committed to prior to default; and

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

Effective maturity (M) is also calculated as an input to the risk weighted exposure calculation for wholesale asset
classes.
Internal Rating Based Approaches:Foundation IRB (FIRB) - ANZ provide its own estimates of PD and M, and use APRA supervisory estimates for LGD
and EAD;Advanced IRB (AIRB) - ANZ use its own estimates of PD, LGD (excluding senior unsecured and subordinatedcorporate exposures) and M, and use APRA supervisory estimates for EAD;



Retail IRB approach - ANZ use its own estimates of PD, LGD and EAD (excluding non-revolving retail exposures forwhich ANZ use APRA supervisory EAD estimates); andSupervisory slotting approach - ANZ use its own mapping of credit exposures to the supervisory slotting categories,
and APRA supervisory risk weights and APRA supervisory estimates for EAD.

Portfolios subject to Standardised Approach to Credit Risk
Exposures are either prescribed the standardised approach, such as Non-standard mortgages, Margin lending and Fixed
Assets, or are subject to the standardised approach on the basis ANZ is not approved to use the IRB approach to credit
risk.
Where ANZ does not have APRA approval to apply the IRB approach to specific portfolios, ANZ applies the Standardised
approach to credit risk, under APS 112 Capital Adequacy: Standardised Approach to Credit Risk. This relates to portfolios
where available data does not enable development of advanced internal models for PD, LGD and EAD estimates.
Under the Standardised approach, exposures are mapped to regulatory risk weights, mainly based on the type ofcounterparty such as: Sovereign, Bank, Corporate and its external rating where the borrower is externally rated.
For these counterparties, external ratings by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are used
as inputs into the RWA calculation. As described in the section on the ANZ rating system, ANZ has mapped its masterscale to the grading of these three External Credit Assessment Institutions (ECAIs).
Exposures secured by property, risk weights are generally driven by Loan to Value Ratios (LVR) after accounting for
dependency on property-related cash flow.
ANZ also applies the above approach to meeting the new requirement that IRB ADIs calculate and disclose RWA under
the standardised approach.
ANZ applies its full normal risk measurement and management framework to these segments for internal management
purposes. Standardised segments will be migrated to IRB (AIRB or FIRB) if they reach a volume that generates sufficient
data for development of advanced internal models.

25

ANZ Basel III Pillar 3 Disclosure

September 2023

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 approving sector and customer appetite, development and validation of credit
risk measurement systems, loan asset quality reporting, sensitivity analysis and stress testing in response to economic
scenarios 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. Credit decisions are subject to Division level hind sighting using a risk-based
approach, with material approvals oversighted by the Group CRO, CRO Institutional and the Board Risk Committee.
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.
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. In
all cases, Risk plays an active role for the review and challenge of appetite settings, industry deep dives and stresstesting reports;



Wholesale portfolio Red/Amber/Green (RAG) ratings for industries and portfolio reviews are re-assessed on aquarterly basis ensuring our view of risks and potential impacts dynamically respond to changing external market
conditions; 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 loss, regulatory risk weighted assets (RWA) andregulatory expected loss;Assessing impact of emerging issues, and conducting ad-hoc investigations and deep dive portfolio reviews;

Validating rating/scoring tools and credit estimates; and

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

26

ANZ Basel III Pillar 3 Disclosure

September 2023

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
early alerts, watch and control lists, policy or appetite exceptions, impaired assets and provisions.
Exposure at Default (EAD)
EAD represents the expected outstandings at the time of default, including an estimate of additional drawings prior todefault (based on supervisory credit conversion factors), plus post-default drawings that were legally committed to prior
to default. Unless otherwise stated, throughout this disclosure EAD is net of offsets for credit risk mitigation such as
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 assets10
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.
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 was applicable to ANZ from 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
since origination, a provision equivalent to 12 months ECL is recognised. For instruments with a remaining maturityof less than 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 probabilityof default at origination and at the reporting date.
For wholesale asset classes ECL is calculated as the product of PD, LGD and EAD at a facility level, discounted forincorporating the effect of time value of money. For retail asset classes, ECL is calculated as the product of PNPL, LGNPL
and EANPL, where non-performing loans (NPL) are equivalent to impaired assets. 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 Severe 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; and

Risks or uncertainties to the Base Case.

10

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.

27

ANZ Basel III Pillar 3 Disclosure

September 2023

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.

Non-performing facilities
An exposure that is in default.
Specific Provision and provision held against performing exposures
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 provision held against performing
exposures 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 from 1 January 2023 present
the specific provision balance and charge per the requirements of APS 330, and the individual provision balance andcharge for ease of comparison with other published results.

28

ANZ Basel III Pillar 3 Disclosure

September 2023

Exposure at Default in Table 7 represents credit exposure net of offsets for credit risk mitigation such as netting andfinancial collateral. It includes Advanced IRB, Specialised Lending and Standardised exposures, and excludes
Securitisation, Equities or Other Assets exposures.
From 1 January 2022 ANZ adopted APRA’s revised requirements under APS 220: Credit Risk Management. The revised
standard no longer includes requirements in relation to impaired assets, specific provisions or the General Reserve for
Credit Losses (GRCL). ANZ continued to disclose these items until 1 January 2023 when APS 330 requirements werechanged to align to the revised APS 220 standard.

Table 7(b) part (i): Period end and average Exposure at Default 11
Sep 23
Risk
Weighted
AssetsIndividual
provision
charge forhalf year$M

Write-offs
for half
year

10

$M

$M

Average
Exposureat Default
for half year
$M

Corporate

62,668140,016

136,576

7

Residential Mortgage

96,290337,478

331,0731012Retail SME

9,684

16,51016,75425

48

Qualifying Revolving Retail

3,243

12,817

12,95726

43

Other Retail

1,644

1,557

1,588

11

34

173,529508,378498,948

79

147

Subject to Advanced IRB approach

Total Advanced IRB approach

Exposureat Default$M

Subject to Foundation IRB approach
Corporate

34,81993,34997,242

17-

Sovereign

10,252

229,463

250,808--

Financial Institution

30,875

108,478

108,886(1)-

Total Foundation IRB approach

75,946431,290456,936

16-

Specialised Lending Exposures
Subject to Supervisory Slotting

3,369

4,019

4,169

-

-

Corporate

5,611

6,428

5,978

(10)

4

Sovereign

165

165

126

-

-

2,065

2,269

2,140

1

2
6

Subject to Standardised approach

Residential Mortgage
Other Retail

44

32

28

2

Other Assets

3,255

5,920

6,900

-

-

Total Standardised approach

11,14014,814

15,172(7)

12Credit Valuation Adjustment andQualifying Central Counterparties

4,000

7,035

6,624

-

-

Exposures of New Zealand banking
subsidiaries

78,662

197,204

196,24935

65

346,646

1,162,740

1,178,098

123

224

Total

11
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.

29

ANZ Basel III Pillar 3 Disclosure

September 2023

Table 7(b) part (i): Period end and average Exposure at Default (continued)
Mar 23
Risk
Weighted
Assets$M$M

Average
Exposureat Default
for half year
$M

Corporate

62,680133,136-

40

Residential Mortgage

86,726324,670--

12

Retail SME

10,065

16,997-843

Qualifying Revolving Retail

3,325

13,097-23

42

Other Retail

1,709

1,618

-

7

23

164,505

489,518

-

78

144

Advanced IRB approach

Total Advanced IRB approach

Exposureat Default

Individual
provision
charge forhalf year$M

Write-offs
for half
year

24

$M

Foundation IRB approach
Corporate

38,808101,134

-

(123)

7

Sovereign

11,199272,154---

Financial Institution

32,832

109,294-(1)-

Total Foundation IRB approach

82,839482,582

-

(124)

7

Specialised Lending Exposures
Subject to Supervisory Slotting

3,577

4,318

-

-

-

Corporate

4,911

5,526

-

(3)

20

Sovereign

88

88

-

-

-

1,809

2,011

-

-

-

32

24

-

(2)

-

Standardised approach

Residential Mortgage
Other Retail
Other Assets

4,138

7,879

-

-

-

10,97815,528-(5)20

Credit Valuation Adjustment andQualifying Central Counterparties

3,449

6,212

-

-

-

Exposures of New Zealand banking
subsidiaries

77,712

195,293-21

14343,060

1,193,451

-

(30)

185

Total Standardised approach

Total

30

ANZ Basel III Pillar 3 Disclosure

September 2023

Table 7(b) part (i): Period end and average Exposure at Default (continued)

Risk
Weighted
AssetsAdvanced IRB approach

Exposureat Default

Sep 22Average
Exposureat Default
for half year

Individual
provision
charge forhalf year

Write-offs
for half
year

$M

$M

$M

$M

$M

Corporate

146,069

327,238

313,041(12)

36

Sovereign

10,955

266,845

260,006

-

-

Bank

12,07140,47938,263--

Residential Mortgage

113,590

414,125

412,877(12)

14

Qualifying Revolving Retail

3,272

13,30913,410

12

45

Other Retail

17,02927,08827,877(2)

106302,986

1,089,084

1,065,474

(14)

201

39,792

48,742

47,980(1)-

Corporate

6,235

5,976

6,039

7

4

Sovereign

29

146

162

-

-

Residential Mortgage

224

435

426

1

1

Total Advanced IRB approach
Specialised LendingStandardised approach

Other Retail

11

10

11

(1)

-

Total Standardised approach

6,499

6,567

6,638

7

5

Credit Valuation Adjustment andQualifying Central Counterparties

3,865

7,916

7,354

-

-

353,142

1,152,309

1,127,446

(8)

206

Total

Table 7(b) part (ii): Exposure at Default by portfolio type12

Portfolio Type
Cash
Contingent liabilities, commitments, and other off-balance sheet
exposures
Derivatives

Sep 23

Mar 23

Sep 22$M$M$M

Averageforhalf year
Sep 23$M

137,316

176,681

152,042

156,999

171,361

172,166

183,411

171,764

46,577

44,69553,87545,636

15

12

34

14

Investment Securities

93,56089,381

81,19891,471

Net Loans, Advances & Acceptances

Settlement Balances

684,917674,528

653,303679,723

Other assets

9,589

13,199

9,163

11,394

Trading Securities

19,40522,78919,28321,097

Total exposures

1,162,740

1,193,451

1,152,309

1,178,098

12

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

31

ANZ Basel III Pillar 3 Disclosure

September 2023

Table 7(c): Geographic distribution of Exposure at Default
Sep 23$M$M

Asia Pacific,
Europe andAmericas$M

Corporate

167,329-

72,464

239,793

Sovereign

113,504-

116,124

229,628

Financial Institution

38,004-70,474

108,478

Residential Mortgage

339,042286

419

339,747

Retail SME

16,5091-

16,510Qualifying Revolving Retail12,817--

12,817

Other Retail

1,580

-

9

1,589

Qualifying Central Counterparties

1,251

-

5,784

7,035

Specialised Lending

3,391

-

628

4,019

Other assets

5,470

-

450

5,920

-

197,204-

197,204

698,897

197,491

266,352

1,162,740

Australia

New Zealand

Total

Portfolio Type

Exposures of New Zealand banking
subsidiaries
Total exposures

Australia

New Zealand

Total
$M

Mar 23$M$M

Asia Pacific,
Europe andAmericas$M

Corporate

164,403-75,393

239,796

Sovereign

148,495-

123,747

272,242

Financial Institution

39,256-70,038109,294

Residential Mortgage

326,023251407

326,681

Retail SME

16,997--

16,997

Qualifying Revolving Retail

13,097--

13,097

Other Retail

1,632

-

10

1,642

836

-

5,376

6,212

Specialised Lending

3,632

-

686

4,318

Other assets

7,373

-

506

7,879

-

195,293-

195,293

721,744

195,544

276,163

1,193,451

Australia

New Zealand$M$M

Asia Pacific,
Europe andAmericas
$M

Total
$M

Corporate

165,339

40,234

127,641

333,214

Sovereign

126,677

25,114

115,200

266,991Bank

17,3593,082

20,03840,479Residential Mortgage

316,163

97,962435

414,560

Portfolio Type

Qualifying Central Counterparties

Exposures of New Zealand banking
subsidiaries
Total exposures$M

Sep 22

Portfolio Type

Qualifying Revolving Retail

13,309--13,309Other Retail

19,4097,679

1027,098

924

399

6,593

7,916

Specialised Lending

36,11812,352272

48,742

Total exposures695,298

186,822

270,189

1,152,309

Qualifying Central Counterparties

32

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(d): Industry distribution of Exposure at Default 13
Sep 23Government
and Official
Institutions$M

Financial,
Investment&
Insurance$M

Manufacturing

Personal

13,021

5,716

$M

$M

$M

$M

$M

$M

$M

$M

$M

15

43,34040

52,986

19,783

13,151

15,47518,326

239,793

594

-

15

94

163,230

61,768

2,514

-

226

1

-

768

129

229,628

106,880

-

478

-

102

268

61

54

68

-

-

108,478

-

-

-

-

339,747

-

-

-

-

-

2,360

2,245

339,747

38

1,267

428

9

1,076

261

167

863

2,293

719

3,762

-

-

16,510

-

-

-

-

-

-

12,817

-

-

-

-

-

Other Retail-12,817

-

-

-

-

-

-

-

1,589

-

-

-

-

-

Other Assets

1,589

-

-

-

-

-

522

-

-

-

20

-

-

-

5,378

Qualifying Central Counterparties

5,920

-

-

-

-

-

7,035

-

-

-

-

-

-

-

-

7,035

Specialised Lending subject tosupervisory slotting

1,651

-

-

1,582

224

-

-

-

-

-

-

-

501

61

4,019

Exposures of New Zealandbanking subsidiaries

16,239

2,859

1,384

1,942

1,831

23,668

9,527

3,964

113,580

11,825

2,850

1,854

1,461

4,220

197,204

Total exposures

47,193

19,112

8,660

15,762

16,437

307,479

71,31951,372

468,034

65,32623,765

17,35918,97831,944

1,162,740

4.1%

1.6%

0.7%

1.4%

1.4%

26.4%

6.1%

4.4%

40.3%

5.6%

2.0%

1.5%

1.6%

2.7%

100.0%

Entertainment,
Leisure &Tourism$M

Electricity,
Gas &
Water
Supply$M

4,922

11,591

1

31

112

78

-

1,022

Qualifying Revolving Retail

Agriculture,
Forestry,
Fishing &Mining$M

Business&
Property
Services$M

Construction

Corporate

27,647

13,780

Sovereign

366

Financial Institutions

268

Residential Mortgage-

Portfolio Type

Retail SME% of Total

13

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

33

Commercial
Property

Wholesale
Trade

RetailTrade

Transport&
Storage

Other

Total

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(d): Industry distribution of Exposure at Default (continued)
Mar 23

Portfolio Type
Corporate

Agriculture,
Forestry,
Fishing &Mining$M

Business&
Property
Services$M

Construction

Entertainment,
Leisure &Tourism$M

Electricity,
Gas &
Water
Supply$M

25,67814,281Government
and Official
Institutions$M

Financial,
Investment&
Insurance
$M

4,849

13,304

Manufacturing

Personal

12,562

5,376

Commercial
Property

Wholesale
Trade

RetailTrade

Transport&
Storage

Other

Total

$M

$M

$M

$M

$M

$M

$M

$M

$M

16

42,10932

52,32522,605

13,167

14,69218,800239,796

Sovereign

389

-

30

465

-

205,300

62,183

2,299

-

1,014

12

-

411

139

272,242

Financial Institutions

299

136

84

15

92

107,605

-

461

-

115

277

66

61

83

109,294

Residential Mortgage

-

-

-

-

-

-

-

-

326,681

-

-

-

-

-

326,681

1,092

2,386

2,302

43

1,305

438

9

1,120

260

167

876

2,372

779

3,848

16,997

Qualifying Revolving Retail

-

-

-

-

-

-

-

-

13,097

-

-

-

-

-

13,097

Other Retail

-

-

-

-

-

-

-

-

1,642

-

-

-

-

-

1,642

Other Assets

4

12

4

24

-

125

-

1

1

1

1

3

2

7,701

7,879

Qualifying Central Counterparties

-

-

-

-

-

6,212

-

-

-

-

-

-

-

-

6,212

Specialised Lending subject tosupervisory slotting

1,808

-

-

1,677

263

-

-

-

-

-

-

-

513

57

4,318

Exposures of New Zealandbanking subsidiaries

16,520

2,847

1,575

2,153

1,830

11,782

20,172

4,200

111,449

12,609

3,015

1,718

1,518

3,905

195,293

Total exposures

45,79019,662

8,844

17,681

16,052336,838

82,38050,190453,162

66,231

26,786

17,326

17,97634,533

1,193,451

3.8%

1.6%

0.7%

1.5%

1.3%

28.2%

6.9%

4.2%

38.0%

5.5%

2.2%

1.5%

1.5%

2.9%

100.0%

Agriculture,
Forestry,
Fishing &Mining$M

Business&
Property
Services$M

Construction

Entertainment,
Leisure &Tourism

Manufacturing

Personal

Commercial
Property

Wholesale
Trade

RetailTrade

Transport&
Storage

Other

Total

$M

Financial,
Investment&
Insurance$M

Government
and Official
Institutions$M

Electricity,
Gas &
Water
Supply
$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

Corporate

43,976

18,494

5,715

15,257

14,54886,832

19

46,254

189

19,93827,442

13,963

17,73222,855333,214

Sovereign266,991

Retail SME% of Total

Sep 22

Portfolio Type

422

-

16

519

1

197,670

65,070

1,908

-

825

15

-

421

124

Bank

-

-

-

-

-

40,234

-

237

-

-

1

4

1

2

40,479Residential Mortgage

-

-

-

-

-

-

-

-

414,560

-

-

-

-

-

414,560

Qualifying Revolving Retail

-

-

-

-

-

-

-

-

13,309

-

-

-

-

-

13,309

1,766

2,729

2,800

58

1,538

493

8

1,326

7,246

257

970

2,794

972

4,141

27,098

-

-

-

-

-

7,916

-

-

-

-

-

-

-

-

7,916

Specialised Lending

1,407

5

311

1,486

262

1

-

-

-

44,513

-

-

540

217

48,742

Total exposures

47,571

21,227

8,842

17,32016,349333,146

65,09749,725435,304

65,53428,428

16,761

19,66627,3391,152,309

4.1%

1.8%

0.8%

1.5%

1.4%

28.9%

5.6%

4.3%

37.8%

5.7%

2.5%

1.5%

1.7%

2.4%

100.0%

Other Retail
Qualifying Central Counterparties% of Total

34

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(e): Residual contractual maturity of Exposure at Default14
Sep 23
Portfolio Type< 12 mths$M

1 - 5 years$M

Corporate

99,796

125,414

Sovereign

162,735

26,914

Financial Institution

68,717

Residential Mortgage

14,581No Maturity
Specified$M
2

239,793

39,979-229,628

38,555

1,206-

108,478

190

229

329,100

10,228339,747

3,526

2,179

10,805-

16,510---12,817

12,817

Other Retail

317

11

1,261

-

1,589

Other Assets

-

-

-

5,920

5,920

4,639

1,138

644

614

7,035

660

2,220

1,139

-

4,019

43,651

39,771

102,965

10,817

197,204

Total exposures

384,231

236,431501,680

40,398

1,162,740

Portfolio Type< 12 mths$M

1 - 5 years$M> 5 years
$M

Total
$M

Corporate

91,527130,379

17,888No Maturity
Specified$M
2

239,796

Sovereign

148,456

91,70832,078-272,242

Financial Institution

64,59042,876

1,828-

109,294

Residential Mortgage

196

210

312,614

13,661

326,681

3,586

2,356

11,055-

16,997---

13,097

13,097

Other Retail

325

24

1,293

-

1,642

Other Assets

-

-

-

7,879

7,879

4,069

1,108

474

561

6,212

444

2,595

1,279

-

4,318

44,47838,473

101,692

10,650195,293

Total exposures

357,671309,729

480,201

45,8501,193,451

Portfolio Type< 12 mths$M

1 - 5 years$M> 5 years
$M

Total
$M

Corporate148,707167,246

17,215No Maturity
Specified$M
46

333,214

Sovereign

195,060

41,46430,467-

266,991Bank

30,456

9,641

382

-

40,479222852

391,648

21,838414,560

Retail SME
Qualifying Revolving Retail

QCCP
Specialised Lending subject tosupervisory slotting
Exposures of New Zealandbanking subsidiaries> 5 years
$M

Total
$M

Mar 23Retail SME
Qualifying Revolving Retail

QCCP
Specialised Lending subject tosupervisory slotting
Exposures of New Zealandbanking subsidiaries

Sep 22

Residential Mortgage
Qualifying Revolving Retail

-

-

-

13,30913,309Other Retail

10,181

2,957

13,960-27,098

Qualifying Central Counterparties

5,689

1,077

722

428

7,916

Specialised Lending

18,62428,2591,847

1248,742

Total exposures

408,939

251,496456,241

35,633

1,152,309

14

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

35

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(f) part (i): Non-performing facilities, Provisions and Write-offs by Industry sector
Sep-23
Non-performing facilities
Exposure

Specific
provisionbalance

Individual provisioned facilities

Industry Sector$M$M

Specific
provision
charge forhalf year
$M

$M

$M

Individual
provision
charge forhalf year$M

Agriculture, Forestry, Fishing & Mining

342

65

8

92

44

9

Business & Property Services

99

32

1

34

19

4

7

Commercial Property

345

33

22

232

19

14

38

Construction

7

Exposure

Individual
provision
Balance

Write-offs
for half
year

5

$M

128

47

(2)

43

29

-

Electricity, gas & water supply

5

2

-

2

1

-

-

Entertainment Leisure & Tourism

185

33

-

56

18

10

13

Financial, Investment & Insurance

16

6

-

7

4

-

11

Government & Official Institutions

-

-

-

-

-

-

-

109

32

7

41

22

6

6

Manufacturing
Personal

3,099

310

40

197

92

59

113

Retail Trade

176

60

27

79

40

23

10

Transport & Storage

53

17

(7)

26

13

(1)

6

Wholesale Trade

70

30

(3)

35

24

(3)

3

Other

394

63

-

240

51

2

5

Total

5,021

730

93

1,084

376

123

224

36

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(f) part (i): Non-performing facilities, Provisions and Write-offs by Industry sector (continued)
Mar 23
Non-performing facilities
Exposure
SpecificSpecific
provision
provisionbalancecharge forhalf year
Industry Sector
Agriculture, Forestry, Fishing & Mining
Business & Property Services
Commercial Property
Construction
Electricity, gas & water supply
Entertainment Leisure & Tourism
Financial, Investment & Insurance
Government & Official Institutions
Manufacturing
Personal
Retail Trade
Transport & Storage
Wholesale Trade

Individual provisioned facilities
Exposure
Individual
Individual
Write-offs
provision
provisionfor half
Balancecharge foryear
half year

$M
294
130
170
185
5

$M
56
49
48
58
3

$M
(12)
3
7
2
-

$M
90
41
57
56
2

$M
33
24
41
37
2

$M
(2)
3
11
2
-

$M
1
5
1
11
-

220
37
85
2,473
137
88
90

47
15
28
339
41
32
31

(7)
(26)
(1)
61
(1)
1
(109)

39
18
34
191
46
33
42

22
13
19
101
25
22
26

(3)
(24)
38
3
1
(103)

14
8
11
88
12
1
1

Other

385

58

44

179

56

44

32

Total

4,299

805

(38)

828

421

(30)

185

Write-offs
for halfyear$M

Sep 22
Industry Sector

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Agriculture, Forestry, Fishing & Mining

-

129

137

32

Individual
provision
charge forhalf year$M(28)

Business Services

-

41

28

25

(1)

6

Construction

-

63

48

40

11

7

Individual
provisionbalance$M

23

Electricity, gas & water supply

-

2

-

2

(6)

1

Entertainment Leisure & Tourism

7

180

56

44

11

14

Financial, Investment & Insurance

-

33

38

25

6

11

Government & Official Institutions

-

-

-

-

-

-

Manufacturing

-

44

22

29

7

6

Personal

-

498

1,726

113

(3)

105

Property Services

-

69

89

33

(5)

3

Retail Trade

-

49

58

32

1

8
7

Transport & Storage

-

72

14

18

(2)

Wholesale Trade

-

270

48

120

(1)

7

Other

-

33

93

29

2

8

Total

7

1,483

2,357

542

(8)

206

37

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(f) part (ii): Non-Performing Facilities, Provisions and Write-offs15
Sep 23
Non-performing exposures
Exposure
SpecificSpecific
provision
provisionbalancecharge forhalf year

Individually provisioned exposures
Exposure
Individual
Individual
Write-offs
provision
provisionfor halfbalancecharge foryear
half year
BLANK

Advanced IRB approach
Corporate
Residential Mortgage
Retail SME
Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach

$M
640
2,363
385
34
41
3,463

$M
161
160
102
27
38
488

$M
4
(7)
20
26
10
53

$M
281
119
95
22
517

$M
101
43
61
20
225

$M
7
10
25
26
11
79

$M
10
12
48
43
34
147

232
2

50
1

17
(1)

-

BLANK

Foundation IRB approach
Corporate
Sovereign
Financial Institution

242
4

50
1

17
(2)

Total Foundation IRB approach

246

51

15

BLANK

234

51

16

-

Specialised Lending Subject toSupervisory Slotting

-

-

-

BLANK

-

-

-

-

127
81
6
214

43
11
1
55

(21)
2
2
(17)

41
15
6
62

30
9
1
40

(10)
1
2
(7)

4
2
6
12

Exposures of New Zealand banking
subsidiaries

1,098

136

42

271

60

35

65

Total

5,021

730

93

1,084

376

123

224

Standardised approach
Corporate
Residential Mortgage
Other Retail
Total Standardised approach

15

BLANK

ANZ may recognise IPRE under the Specialised Lending asset class as eligible collateral where:

Losses from lower risk IPRE lending are less than 0.3% of total IPRE exposures in each of the past three years



Losses from total IPRE lending are less than 0.5% of total IPRE exposures in each of the past three years
Low Risk IPRE

Total IPRE

Sep-21

Sep-22

Sep-23

Sep-21

Sep-22

Sep-23

Individual provision charge(losses)

$0.0m

$0.0m

$0.0m

$0.0m

$14.8m$25.0m

As % of total IPRE Exposure

0.0%

0.0%

0.0%

0.0%

0.03%

0.05%

38

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(f) part (ii): Non-Performing Facilities, Provisions and Write-offs (continued)
Mar 23
Non-performing exposures
Exposure
SpecificSpecific
provision
provisionbalancecharge forhalf year

Individually provisioned exposures
Exposure
Individual
Individual
Write-offs
provision
provisionfor halfbalancecharge foryear
half year
BLANK

Advanced IRB approach
Corporate
Residential Mortgage
Retail SME
Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach
Foundation IRB approach
Corporate
Sovereign
Financial Institution
Total Foundation IRB approach
Specialised Lending Subject toSupervisory SlottingStandardised approach
Corporate
Residential Mortgage
Other Retail
Total Standardised approach
Exposures of New Zealand banking
subsidiaries
Total

$M
663
2,065
414
34
54
3,230

$M
160
181
123
27
46
537

$M
28
2
25
11
66

$M
288
129
120
30
567

$M
99
47
77
27
250

$M
40
8
23
7
78

$M
24
12
43
42
23
144

26
15
41

27
10
37

(123)
(1)
(124)

7
7

BLANK

29
29
58

27
11
38

(123)
(1)
(124)

-

-

-

-

-

-

-

194
69
8
271

66
8
1
75

(8)
(1)
(2)
(11)

68
10
8
86

40
6
1
47

(3)
(2)
(5)

20
20

740

155

31

134

87

21

14

4,299

805

(38)

828

421

(30)

185

BLANK

Impairedderivatives$M

Impairedloans/
facilities$M

Sep 22
Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forhalf year$M

Write-offs
for half
year$M

Portfolios subject to Advanced IRB approach
Corporate
SovereignBank
Residential Mortgage
Qualifying Revolving Retail
Other Retail
Total Advanced IRB approach

7
7

568
371
29
225
1,193

272
1,759
247
2,278

251
63
133
447

(12)
(12)
12
(2)
(14)

36
14
45
106
201

Specialised Lending

-

51

15

29

(1)

-

Portfolios subject to Standardised approach
Corporate
Residential Mortgage
Other Retail
Total Standardised approach

-

200
31
8
239

55
9
64

57
6
3
66

7
1
(1)
7

4
1
5

Qualifying Central Counterparties

-

-

-

-

-

-

Total

7

1,483

2,357

542

(8)

206

39

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(g): Non-performing and Provisions16 by Geography
Sep 23
Geographic region

Non-Performing
facilities
$M
3,739

Individual
provision balance$M
259

Collective
provision balance
$M
2,693

1,101

60

738

181

57

601

5,021

376

4,032

Non-Performing
facilities
$M
3,298

Individual
provision balance$M
267

Collective
provision balance
$M
2,681

New Zealand

749

87

719

Asia Pacific, Europe and America

252

67

640

4,299

421

4,040

Australia
New Zealand
Asia Pacific, Europe and America
Total

Mar 23
Geographic region

Australia

Total

Sep 22

Geographic region
Australia
New Zealand
Asia Pacific, Europe and America
Total

Impairedderivatives$M
7
7

Impairedloans/
facilities
$M
1,075
143
265
1,483

Past dueloans≥ 90 days
$M
1,901
391
65
2,357

Individual
provisionbalance
$M
379
72
91
542

Collective
provisionbalance
$M
2,617
590
646
3,853

16
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 Provisions held against performing exposures 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.

40

ANZ Basel III Pillar 3 disclosure

September 2023

Table 7(h): Provision for Credit Impairment

Collectively Assessed Provision
Balance at start of period
Charge/(Release) to Income Statement

Half year
Sep 23$M

Half year
Mar 23$M

Half year
Sep 22
$M

4,040

3,853

3,757

(11)

163

60

3

24

36

4,032

4,040

3,853

Adjustment for exchange rate fluctuations and transfers
Total Collectively Assessed Provision

Individually Assessed Provision
Balance at start of period

421

542

636

New and increased provisions

239

237

219

Write-backs

(50)

(166)

(118)

-

(1)

18

Discount unwind

(10)

(6)

(7)

Bad debts written off

(224)

(185)

(206)

Total Individually Assessed Provision

376

421

542

Total Provisions for Credit Impairment

4,408

4,461

4,395

Adjustment for exchange rate fluctuations and transfers

Table 7(j): Specific Provision Balance and Provisions held against performing exposures17
S
Sep 23Specific Provision
Balance$M
Collectively Assessed Provision

354

Provisions held
against performing
exposures$M
3,678

Individually Assessed Provision

376

-

376

Total Provision for Credit Impairment

730

3,678

4,408

Specific Provision
Balance
$M

Total
$M

Total
$M

4,032

Mar 23

Collectively Assessed Provision

384

Provisions held
against performing
exposures$M
3,656

Individually Assessed Provision

421

-

421

Total Provision for Credit Impairment

805

3,656

4,461

General Reserve for
Credit Losses
$M
3,464

Total
$M

Collectively Assessed Provision

Specific Provision
Balance$M
389

Individually Assessed Provision

542

-

542

Total Provision for Credit Impairment

931

3,464

4,395

4,040

Sep 223,853

17
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 Provisions held against performing exposures 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.

41

ANZ Basel III Pillar 3 disclosure
Table 8September 2023

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 bucket18

Standardised approach exposuresSep 23

Mar 23

Sep 22

$M

$M

$M

0%

-

-

1

20%

213

95

145

30%

73

71

-

35%

-

-

178

50%

288

230

319

60%

352

299

-

70%

1,460

808

-

75%

-

-

-

85%

1,138

1,041

-

90%

21

13

-

100%

5,074

4,759

5,562

110%

76

53

-

150%

199

280

348

>150%

-

-

14

Capital deductions

-

-

-

8,894

7,649

6,567

0%

2,739

3,299

-

20%

-

766

641

35%

-

-

-

50%

-

-

-

75%

-

-

-

100%

3,119

3,782

3,650

150%

20

24

-

>150%

42

8

39

Total
Other Asset exposures

Capital deductions
Total

-

-

-

5,920

7,879

4,330

Specialised Lending exposures
0%

-

-

122

70%

2,128

2,195

27,159

90%

1,254

1,546

18,038

110%

286

293

2,971

115%

327

284

-

250%
Total

24
4,019

4,318

452
48,74218

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

42

ANZ Basel III Pillar 3 disclosure
Table 9September 2023

Credit risk – Disclosures for portfolios subject to IRB approaches

Portfolios subject to the Advanced IRB (AIRB) and Foundation IRB (FIRB) 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
Pre-Jan 2023

Rating Approach
Post-Jan 2023

Remains post-January 2023
Corporate

Corporations, partnerships or proprietorshipsthat do not fit into any other asset class
Income Producing Real Estate (from January
2023)
Securities firms, insurance companies andleveraged funds (pre-January 2023)

AIRB

AIRB orFIRB where annual
revenue > $750m

Sovereign

Central governments
Central banks
Certain multilateral development banks

AIRB

FIRB

Residential Mortgages

Exposures secured by residential property

AIRB

AIRB

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

AIRB

AIRB

Other Retail

Small business lending (moved to Retail SME
from January 2023)
Other lending to consumers

AIRB

AIRB

Specialised Lending
subject to supervisory
slotting

Income Producing Real Estate
Pre 1 January 2023.

IRB – Supervisory
Slotting

N/A

Project financeObject finance

IRB – Supervisory
Slotting

IRB – Supervisory
Slotting

Other Assets

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

AIRB – fixed risk
weights

Standardised

Banks
Other authorised deposit taking institutions(ADI) incorporated in Australia

AIRB

Retired January 2023
Bank

New from January 2023
Retail SME

Small business lending

AIRB

Financial Institutions

Banks, securities firms, insurance companies
and leveraged funds

FIRB

Exposures of New
Zealand banking
subsidiaries

Includes all exposures in all asset classes for
New Zealand banking subsidiaries
Reported within all pre-January 2023 asset
classes as per APS 113.

AIRB andSupervisory
Slotting

In addition, where ANZ is not accredited to use the IRB based approach to credit risk, ANZ applies the Standardised
approach to credit risk as detailed on page 26.

43

ANZ Basel III Pillar 3 disclosure

September 2023

The ANZ rating system
As an IRB 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 expected loss (EL) calculations. ANZ’s internal models are used togenerate 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 over a 12-month horizon. Borrower ratings are derived
by way of rating models used both at loan origination and for ongoing monitoring.



EAD represents the expected outstanding at the time of default, including an estimate of additional drawings prior
to default (based on supervisory credit conversion factors), plus post-default drawings that were legally committed
to prior to default.



LGD is an estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default,
expressed as a percentage of the facility’s EAD.

Effective maturity (M) is also calculated as an input to the risk weighted exposure calculation for Financial Institution,
Sovereign and Corporate IRB asset classes.
For wholesale 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 (K),
Subordinated debt (M), intra-group guarantees (I) and Sovereign (S). ANZ’s LGD also includes recognition of thedifferent legal and insolvency 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 BBB-

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+Caa1 to Caa3

CCC+ to CCC-

9.7981 – 27.1109%

8=

Ca to CCC to 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 toallocate 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.

44

ANZ Basel III Pillar 3 disclosure

September 2023

For the wholesale asset class, PD, LGD, M and EAD are used in the calculation of capital and in the collectively assessed
provisioning process. For the retail asset class, PD, LGD and EAD are used in the calculation of capital, and PNPL, EANPL
and LGNPL are used in the collectively assessed provisioning process. Regulatory and internal expected loss arecalculated from the same data sources and starting from the same basis, however there are some differences between
the factors used because several aspects of ANZ’s rating system are adjusted in accordance with APRA requirements
for regulatory capital purposes. The most significant of these adjustments are the use for regulatory capital purposesof downturn LGDs; the application of regulatory prescribed scalars such as the mortgages scalars of 1.4, 1.7 and 2.5
and the mandatory use of the supervisory slotting approach for project finance.
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 Grouplevel function. This cycle of design, build, implementation, monitoring and validation is overseen by the CRSOC, andinforms 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 an 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 tomaintain and improve the accuracy and reliability of rating processes.

45

ANZ Basel III Pillar 3 disclosure

September 2023

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 table on page 44 summarises the types of borrowers and the rating approach adopted within each of ANZ’s IRB
portfolios.
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.
EAD represents the expected outstanding at the time of default, including an estimate of additional drawings prior todefault (based on supervisory credit conversion factors), plus post-default drawings that were legally committed toprior to default.

46

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(d): Non Retail Exposure at Default subject to Internal Ratings Based (IRB) approach19 20 21
Sep 23AAA
to AA$M

A+
to BBB+$M

BBB
to BBB$M

BB+
to B+
$M

B
to B$M

CCC+
to C
$M

Default

Total

$M

$M

Corporate-

80,27181,75661,423

8,057

752

1,106

233,365

Sovereign

196,607

26,807

2,440

1,475

2,120

14

-

229,463-

94,07011,348

2,540

491

25

4

108,478

3,383

6,932

17,245

19,362

3,957

897

447

52,223

199,990

208,080

112,789

84,80014,625

1,688

1,557

623,529

32.1%

33.4%

18.1%

13.6%

2.3%

0.3%

0.2%

100.0%

49,745

Exposure at Default

Financial Institutions
New Zealand
Total% of Total
Undrawn commitments(included in above)
Corporate
Sovereign
Financial Institutions
New Zealand
Total
Average Exposure at
Default
Corporate
Sovereign
Financial Institutions
New Zealand
Exposure-weighted average
Loss Given Default (%)
Corporate
Sovereign
Financial Institutions
New Zealand
Exposure-weighted averagerisk weight (%)
Corporate
Sovereign
Financial Institutions
New Zealand-

22,186

18,228

8,525

692

61

53

982

384

44

77

3

-

-

1,490

-

12,692

1,109

240

49

1

-

14,091

423

2,859

3,771

2,072

239

43

9

9,416

1,405

38,121

23,152

10,914

983

105

62

74,742-18.293

3.962

1.233

0.678

0.201

0.960

2.547

243.627252.89916.37716.031

18.1200.729-

177.878

-

5.921

5.313

1.910

0.703

0.105

0.215

5.342

7.942

2.732

1.221

0.862

0.844

0.397

1.271

1.115

-

45.6%

35.5%

24.1%

22.4%

32.0%

34.6%

35.5%

6.8%

25.4%

50.0%

49.9%

49.9%

50.0%

-

10.1%

-

49.2%

48.9%

45.2%

39.8%

39.0%

35.9%

49.0%

65.0%

43.2%

35.5%

27.2%

25.1%

33.8%

34.0%

34.5%

41.8%

-

26.5%

42.9%

53.8%

72.3%

210.4%

64.1%

1.2%

6.7%

46.5%

99.8%

159.5%

277.8%

-

4.5%

-

22.9%

56.6%

88.5%

114.3%

256.4%

-

28.5%

30.7%

45.2%

68.5%

74.9%

112.5%

216.3%

75.8%

71.3%

19
In accordance with APS 330, EAD in Table 9(d) includes IRB (Advanced and Foundation) exposures and excludes Specialised Lending
subject to supervisory slotting, Standardised, Securitisation and Equities.
20

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

21

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

47

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(d): Non Retail Exposure at Default subject to Internal Ratings Based (IRB) approach (continued)
Mar 23
AAA
< A+
$M

A+
< BBB
$M

BBB
< BB+
$M

BB+
< B+
$M

B+
< CCC
$M

CCC
$M

Default
$M

Total
$M

Corporate-

82,65884,251

Sovereign240,067

25,6782,362

58,927

6,608

978

848

234,270

1,541

2,481

25

-

-

94,417272,154

11,399

2,944

478

27

29

3,249

109,294

6,731

18,175

20,468

3,533

654

230

53,040243,316

209,484

116,187

83,88013,100

1,684

1,107

668,758

36.4%

31.3%

17.4%

12.5%

2.0%

0.3%

0.2%

100.0%

51,331

Exposure at Default

Financial Institutions
New Zealand
Total% of Total
Undrawn commitments(included in above)
Corporate
Sovereign-

22,834

20,281

7,590

539

62

25

1,367

220

68

28

1

1

-

1,685

-

12,338

1,288

253

47

17

-

13,943Financial Institutions
New Zealand
Total

407

2,780

4,057

2,387

182

31

5

9,849

1,774

38,172

25,694

10,258

769

111

30

76,808Average Exposure at
Default
Corporate
Sovereign-19.961

4.118

1.170

0.602

0.232

0.862

2.569

288.196302.100

15.63316.398206.7141.144-

227.363

Financial Institutions
New Zealand

-

8.145

6.165

2.237

0.732

0.111

0.941

6.967

6.988

2.504

1.169

0.869

0.766

0.570

0.866

1.098

36.5%

Exposure-weighted average
Loss Given Default (%)
Corporate
Sovereign
Financial Institutions
New Zealand

-

46.2%

36.3%

24.8%

24.2%

31.3%

37.8%

6.4%

25.2%

50.0%

50.0%

50.0%

50.0%

-

9.2%

-

49.5%

49.1%

45.0%

38.4%

46.9%

33.6%

49.2%

27.3%

25.5%

37.6%

41.1%

34.2%

43.1%

64.8%

44.7%

34.3%

Exposure-weighted average risk
weight (%)
Corporate
-

27.9%

43.7%

52.1%

71.1%

204.2%

84.3%

Sovereign

1.1%

6.6%

48.4%

108.7%

164.2%

254.1%

-

4.1%

-

24.8%

60.4%

89.2%

116.0%

307.6%

-

30.0%

32.0%

30.1%

47.1%

67.8%

113.0%

241.2%

79.5%

58.9%

Financial Institutions
New Zealand48

ANZ Basel III Pillar 3 disclosure

September 2023
Sep 22

AAA
< A+
$M

A+
< BBB
$M

BBB
< BB+
$M

BB+
< B+
$M

Corporate

40,661

122,256

97,488

Sovereign236,858

21,519

3,997

Bank

12,73822,289Total

290,257% of Total
Undrawn commitments(included in above)
Corporate
Sovereign

B+
< CCC
$M

CCC
$M

Default
$M

Total
$M

57,079

7,082

1,258

1,414

327,238

1,635

2,745

91

-

266,845

4,127

1,287

34

4

-

40,479166,064

105,61260,001

9,861

1,353

1,414

634,562

45.7%

26.2%

16.6%

9.5%

1.6%

0.2%

0.2%

100.0%

10,602

37,83825,836

8,466

789

124

61

83,716

1,062

960

467

37

14

8

-

2,548

Bank

52

635

13

-

-

-

-

700

Total

11,71639,433

26,316

8,503

803

132

61

86,964

Exposure at Default

Average Exposure at
Default
Corporate

19.44613.276

2.885

0.852

0.479

0.249

0.979

2.449

Sovereign171.387

182.365

22.32919.01368.633

5.374-

146.217

9.974

1.378

0.186

-

4.730

49.0%

Bank

4.718

4.398

6.732

Exposure-weighted average
Loss Given Default (%)
Corporate
58.9%

58.1%

45.1%

32.0%

28.5%

38.5%

43.8%

Sovereign

5.8%

16.0%

37.4%

41.4%

56.3%

45.1%

-

7.9%

Bank

58.9%

59.5%

67.0%

67.7%

71.1%

64.0%

-

60.4%

Exposure-weighted average risk
weight (%)
Corporate
18.1%

33.7%

53.3%

62.0%

82.3%

205.0%

125.6%

44.6%

Sovereign

1.0%

4.6%

34.2%

82.2%

174.1%

230.3%

-

4.1%

Bank

15.5%

24.8%

71.5%

119.2%

178.3%

390.0%

-

29.8%

49

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade
Sep 230.00%<0.11%$M

0.11%<0.30%$M

0.30%<0.51%$M

0.51%<3.49%$M

83,97160,151

36,181

143,396

40

344

610

9,237

3,499

4,106

1,436

2,852

Other Retail

72

32

35

New Zealand

3,528

39,421

Total

91,110% of Total

18.9%

3.49%
<10.09%$M

10.09%<100.00%$M

Default
$M

Total
$M

9,820

1,575

2,384

337,478

4,831

1,053

395

16,510

654

236

34

12,817

1,159

129

84

46

1,557

31,78638,183

780

136

694

114,528

104,054

70,048

194,827

16,214

3,084

3,553

482,890

21.5%

14.5%

40.3%

3.4%

0.6%

0.7%

100.0%

20,168

4,140

1,531

8,831

43

10

6

34,729

33

219

285

1,551

370

63

13

2,534

2,482

3,014

946

1,151

126

34

2

7,755

Other Retail

67

29

31

148

22

4

-

301

New Zealand

2,959

5,897

1,310

3,368

193

7

4

13,73825,70913,2994,103

15,049

754

118

25

59,057

Residential Mortgage

0.290

0.363

0.380

0.421

0.373

0.351

0.367

0.364

Retail SME

0.081

0.068

0.054

0.065

0.109

0.030

0.070

0.068

Qualifying Revolving Retail

0.009

0.009

0.008

0.010

0.008

0.007

0.008

0.009

Other Retail

0.002

0.001

0.001

0.004

0.002

0.004

0.004

0.003

New Zealand

0.039

0.071

0.140

0.105

0.006

0.002

0.063

0.078

Exposure at Default
Residential Mortgage
Retail SME
Qualifying Revolving Retail

Undrawn commitments (included in above)
Residential Mortgage
Retail SME
Qualifying Revolving Retail

Total
Average Exposure at Default

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

12.3%

13.5%

13.7%

15.1%

14.6%

14.2%

26.3%

14.0%

Retail SME

13.3%

19.5%

26.8%

28.3%

31.9%

50.3%

37.1%

30.7%

Qualifying Revolving Retail

72.5%

75.8%

75.4%

78.9%

82.2%

80.8%

75.7%

76.0%

Other Retail

73.8%

79.7%

76.1%

76.0%

76.9%

78.3%

75.7%

76.2%

New Zealand

19.7%

16.8%

19.9%

25.8%

79.8%

82.6%

20.3%

21.3%

Exposure-weighted average risk weight (%)
Residential Mortgage

6.3%

10.1%

18.4%

41.9%

91.9%

156.2%

284.0%

28.5%

Retail SME

3.4%

9.5%

20.5%

43.7%

65.7%

130.2%

237.1%

58.7%

Qualifying Revolving Retail

4.2%

7.9%

16.1%

45.2%

108.2%

211.2%

135.6%

25.3%

Other Retail

16.4%

36.5%

53.6%

101.9%

129.6%

204.4%

179.2%

105.6%New Zealand

33.7%

32.4%

31.2%

33.4%

126.2%

175.6%

10.5%

33.1%

50

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade(continued)
Mar 230.00%<0.11%$M

0.11%<0.30%$M

0.30%<0.51%$M

0.51%<3.49%$M

84,49459,57635,867

132,676

43

373

655

9,468

3,566

4,202

1,468

2,901

Other Retail

75

33

35

New Zealand

3,484

39,772

Total

91,662% of Total

19.6%

3.49%
<10.09%$M

10.09%<100.00%$M

Default
$M

Total
$M

8,463

1,475

2,119

324,670

4,887

1,157

414

16,997

682

245

33

13,097

1,189

141

90

55

1,618

30,94736,870

656

128

549

112,406

103,956

68,972

183,104

14,829

3,095

3,170

468,788

22.2%

14.7%

39.1%

3.2%

0.7%

0.7%

100.0%

Exposure at Default
Residential Mortgage
Retail SME
Qualifying Revolving Retail

Undrawn commitments (included in above)
Residential Mortgage

19,861

3,048

889

6,860

33

8

2

30,701

37

234

320

1,736

446

81

15

2,869

2,541

3,100

972

1,182

132

34

2

7,963

Other Retail

69

29

31

148

22

4

-

303

New Zealand

2,911

5,920

1,297

3,242

190

6

4

13,57025,41912,331

3,509

13,168

823

133

23

55,406

Residential Mortgage

0.282

0.347

0.362

0.405

0.353

0.337

0.356

0.348

Retail SME

0.081

0.070

0.055

0.064

0.106

0.032

0.067

0.067

Qualifying Revolving Retail

0.009

0.009

0.008

0.010

0.008

0.007

0.008

0.009

Other Retail

0.002

0.001

0.001

0.004

0.002

0.003

0.004

0.003

New Zealand

0.039

0.071

0.137

0.098

0.005

0.002

0.052

0.077

Retail SME
Qualifying Revolving Retail

Total
Average Exposure at Default

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

11.9%

13.0%

13.2%

14.6%

13.2%

13.9%

25.8%

13.5%

Retail SME

11.0%

16.5%

24.4%

25.6%

48.1%

31.2%

37.0%

28.7%

Qualifying Revolving Retail

72.3%

75.8%

75.3%

78.7%

80.8%

82.2%

75.7%

75.9%

Other Retail

73.7%

79.6%

76.1%

76.0%

78.2%

76.1%

74.3%

76.0%

New Zealand

10.8%

12.3%

18.4%

23.0%

31.3%

25.8%

15.4%

17.5%

Exposure-weighted average risk weight (%)
Residential Mortgage

6.4%

9.9%

17.9%

40.6%

87.8%

151.1%

258.0%

26.7%

Retail SME

2.8%

7.9%

18.6%

38.9%

65.1%

130.0%

213.1%

59.2%

Qualifying Revolving Retail

4.2%

8.0%

16.0%

44.9%

108.3%

212.1%

136.9%

25.4%

Other Retail

16.3%

36.6%

53.5%

101.5%

127.8%

204.8%

170.7%

105.6%New Zealand

33.7%

32.4%

31.2%

33.9%

121.3%

178.3%

9.1%

33.2%

51

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade(continued)
Sep 220.00%<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

88,30093,05265,417

156,131

7,338

1,568

2,319

414,125

Qualifying Revolving Retail

3,615

4,245

1,480

2,965

714

260

30

13,309

762

3,654

1,639

13,269

5,715

1,428

621

27,088

Total

92,677

100,951

68,536

172,365

13,767

3,256

2,970

454,522% of Total

20.4%

22.2%

15.1%

37.9%

3.0%

0.7%

0.7%

100.0%

Exposure at Default

Other Retail

Undrawn commitments (included in above)
Residential Mortgage

22,694

5,865

1,486

9,840

27

11

4

39,927

Qualifying Revolving Retail

2,574

3,145

999

1,280

149

39

2

8,188

687

2,837

844

2,674

634

100

19

7,795

25,955

11,847

3,329

13,794

810

150

25

55,910

Other Retail
Total
Average Exposure at Default
Residential Mortgage

0.264

0.222

0.301

0.356

0.338

0.334

0.298

0.287

Qualifying Revolving Retail

0.008

0.009

0.008

0.010

0.008

0.007

0.008

0.009

Other Retail

0.008

0.010

0.010

0.019

0.024

0.010

0.026

0.016

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

19.7%

17.2%

19.4%

20.6%

20.1%

20.0%

19.0%

19.4%

Qualifying Revolving Retail

72.1%

75.8%

75.2%

78.5%

82.1%

80.8%

75.7%

75.7%

Other Retail

57.4%

61.7%

45.3%

39.0%

39.4%

53.1%

43.3%

43.9%

Exposure-weighted average risk weight (%)
Residential Mortgage

4.5%

11.7%

22.9%

45.2%

97.7%

145.1%

165.3%

27.4%

Qualifying Revolving Retail

3.7%

7.6%

15.4%

42.9%

104.0%

204.7%

130.4%

24.6%

Other Retail

34.4%

43.4%

35.7%

52.0%

75.5%

138.2%

226.4%

62.9%

52

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(e): Actual Losses by portfolio type

Half year Sep 23
Basel Asset Class
Corporate

Individual provision charge$M
24

Net Write-offs
$M
10

-

-

Sovereign
Financial Institutions(1)-

Residential Mortgage

1012Retail SME

25

48

Qualifying Revolving Retail26

43

Other Retail11

34

Total IRB

95

147

Specialised Lending subject to supervisory slottingStandardised approach
Exposures of New Zealand banking subsidiaries
Total

-

-

(7)

12

35

65

123

224

Half year Mar 23
Basel Asset Class
Corporate

Individual provision charge$M(83)

Write-offs
$M
31

-

-

Sovereign
Financial Institutions(1)-

Residential Mortgage-

12

Retail SME

843

Qualifying Revolving Retail

23

42

Other Retail

7

23

(46)

151

Total IRB
Specialised Lending subject to supervisory slottingStandardised approach
Exposures of New Zealand banking subsidiaries
Total

-

-

(5)

20

21

14

(30)

185

Half year Sep 22
Basel Asset Class
Corporate

Individual provision charge$M(12)

Write-offs$M
36

Sovereign

-

-

Bank

-

-

(12)

14

Residential Mortgage
Qualifying Revolving Retail

1245

Other Retail

(2)

106

Total Advanced IRB

(14)

201

Specialised Lending

(1)

-

7

5

(8)

206

Standardised approach
Total

Factors impacting the loss experience
The individually assessed credit impairment charge increased $153 million driven by the Corporate Asset class due toimpairment of several single name exposures and higher write-backs in the March 2023 half, combined with lower writebacks in the SME Banking portfolio, and the Home Loans portfolio driving the increases in the Retail Asset classes.
Write offs have increased $39 million due to a single named exposure in New Zealand.

53

ANZ Basel III Pillar 3 disclosure

September 2023

Table 9(f): Average estimated vs. actual PD, EAD and LGD – IRB
Sep 23
Portfolio Type

Average
Actual PD%

Corporate

Average
Estimated
PD
%
1.87

Sovereign

0.76

Financial Institutions

1.63

Averageestimated toactual EAD
ratio
1.17

Average
Estimated
LGD
%
38.81

-

n/a

n/a

n/a

0.54

0.32

1.26

37.43

23.50

Specialised Lending

n/a

0.58

1.09

n/a

31.00

Residential Mortgage

0.93

0.77

1.01

18.69

1.40

Qualifying Revolving Retail

1.62

1.19

1.15

80.48

63.37

Retail SME

4.76

3.80

1.04

39.96

22.39

Other Retail

3.88

2.99

1.06

66.23

57.51

New Zealand Wholesale

1.44

0.57

1.11

42.10

20.95

New Zealand Retail

2.19

1.04

1.03

31.92

9.51

Average
Actual LGD%
32.37

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 Prudential Standard changes from 1 January 2023 have introduced a number of new asset classes. Changes havebeen made in the historical time series used to determine wholesale portfolio averages.

New Zealand wholesale obligors previously included in the Corporate, Sovereign, Bank and Specialised Lending
portfolios are now reported under ‘Exposures of New Zealand banking subsidiaries’ asset class and hence moved
into the New Zealand Wholesale portfolio;Income Producing Real Estate obligors formerly included in Specialised Lending have moved into the Corporate
portfolio; and
Non-bank Financial Institutions were moved into the new Financial Institutions portfolio, along with existing Bank
obligors from prior periods.
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 2022. The actual PD is based on thenumber of defaulted obligors up to August 2023 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 14
years of observation being 2009 to August 2023. 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 2021. 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 2021. Defaults occurring after
September 2021 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 September of each year over the period of observation being 2018 to 2022. The actual PD is based on the number ofdefaulted obligors up to September 2023 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 2018 to 2023. 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 September of each year during the observation
period being 2017 to 2021. 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 2022 havebeen excluded from the analysis to allow sufficient time for workout period.

54

ANZ Basel III Pillar 3 disclosure

Table 10

September 2023

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.22 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;Guarantees and pledges; and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.

22

55

ANZ Basel III Pillar 3 disclosure

September 2023

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 performance 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 diverse range of pledged collateral, and well embedded collateral review processes.
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. In addition to the exchange of Variation margin and Initial Margin, APRA’s CPS 226 also requires the following
risk mitigation practices to be established for un-cleared derivatives between covered counterparties: trading relationshipdocumentation; trade confirmation; portfolio reconciliation; portfolio compression; valuation processes; and dispute
resolution processes.

56

ANZ Basel III Pillar 3 disclosure

September 2023

Table 10(b): Credit risk mitigation on Standardised approach portfolios – collateral 23 24
Sep 23
Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Corporate

6,428

Sovereign

165

62

-

1.0%

-

-

-

2,269

-

-

-

32

-

23

41.9%

Standardised approach

Residential Mortgage
Other Retail
Other assets
Total

5,920

903

-

13.2%

14,814

965

23

6.3%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Foundation IRB approach
Corporate

93,349

-

540

0.6%

Sovereign229,463

-

5,585

2.4%

Financial Institution

108,478

-

26

-

Total

431,290

-

6,150

1.4%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Mar 23Standardised approach
Corporate

5,526

205

796

15.3%

Sovereign

88

270

203

84.3%

Residential Mortgage
Other Retail
Other assets

2,011

-

-

-

24

-

14

36.8%

7,879

1,225

-

13.5%

15,528

1,700

1,013

14.9%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

Corporate

101,134

-

970

1.0%

Sovereign272,154

-

5,498

2.0%

Financial Institution

109,294

-

2

-

Total

482,582

-

6,470

1.3%

Exposure$M

Eligible Financial
Collateral$M

Other Eligible
Collateral$M% Coverage

TotalFoundation IRB approach

Sep 22Standardised approach
Corporate

5,976

713

-

10.5%

Sovereign

146

1,635

-

91.8%

Residential Mortgage

435

-

-

-

Other Retail

10

-

-

-

6,567

2,348

-

26.1%

Total

23
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.

24

57

ANZ Basel III Pillar 3 disclosure

September 2023

Table 10(c): Credit risk mitigation – guarantees and credit derivatives25

Sep 23

Advanced IRB
Corporate (incl. Specialised Lending)
SovereignBank
Residential Mortgage
Retail SME
Qualifying Revolving Retail
Other Retail
Total

Exposure atdefault$M

Exposurescovered by
Guarantees$M

Exposurescovered by
CreditDerivatives$M% Coverage

144,035
337,478
16,51012,8171,557
512,397

4,144
4,144

-

2.9%
0.8%

93,349229,463
108,478
431,290

2,785
4,907
424
8,116

1,310
1,310

3.0%
2.1%
1.6%
2.2%

6,428
165
2,269
32
5,920
14,814

234
234

-

3.6%
1.6%

197,204

265

-

0.1%

7,035

-

-

-

Foundation IRB
Corporate
Sovereign
Financial Institutions
Total
Standardised approach
Corporate
Sovereign
Residential Mortgage
Other Retail
Other Assets
Total
Exposures of New Zealand banking
subsidiaries
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.

25

58

ANZ Basel III Pillar 3 disclosure

September 2023

Table 10(c): Credit risk mitigation – guarantees and credit derivatives26 (continued)
Mar 23

Exposure atdefault$M

Exposurescovered by
Guarantees$M

Exposurescovered by
CreditDerivatives$M% Coverage

Advanced IRB
Corporate (incl. Specialised Lending)
SovereignBank
Residential Mortgage
Retail SME
Qualifying Revolving Retail
Other RetailTotal

137,454
324,670
16,997
13,097
1,618
493,836

9,265
9,265

-

6.7%
1.9%

Foundation IRB
Corporate
Sovereign
Financial Institutions
Total

101,134
272,154
109,294
482,582

8,114
5,232
194
13,540

1,305
1,305

8.0%
1.9%
1.4%
3.1%

5,526
88
2,011
24
7,879
15,528

471
9
480

-

8.5%
10.6%
3.1%

195,293

330

-

0.2%

6,212

-

-

-

Standardised approach
Corporate
Sovereign
Residential Mortgage
Other Retail
Other Assets
Total
Exposures of New Zealand banking
subsidiaries
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.

26

59

ANZ Basel III Pillar 3 disclosure

September 2023

Table 10(c): Credit risk mitigation – guarantees and credit derivatives (continued)
Sep 22
Exposure at
Default$M

Exposurescovered by
Guarantees$M

Exposurescovered by
Credit Derivatives$M% Coverage

Advanced IRB
Corporate (incl. Specialised Lending)

375,980

1,342

868

0.6%

Sovereign266,845

4,972

-

1.9%

Bank

40,479

-

38

0.1%

Residential Mortgage

414,125---

Qualifying Revolving Retail

13,309---Other Retail

27,088---1,137,826

6,314

906

0.6%

Corporate

5,976

9

-

0.2%

Sovereign

146

-

-

-

Residential Mortgage

435

-

-

-

Total
Standardised approach

Other Retail

10

-

-

-

Total

6,567

9

-

0.1%

Qualifying Central Counterparties

7,916

-

-

-

60

ANZ Basel III Pillar 3 disclosure
Table 11

September 2023

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 worse case 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 and PFE factors recognise that prices may change over the remaining period to maturity, and that risk decreases
as the contract’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. To measurecounterparty credit risk exposure, PCRE and PFE take into account legal document in force, as well as credit risk
mitigation tools like margin or Right-to-break clauses.
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.

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ANZ Basel III Pillar 3 disclosure

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Credit valuation adjustment (CVA)
ANZ uses a model to adjust the fair value of the CVA held which takes into account the impact of counterparty credit
quality. The methodology calculates the present value of the expected losses over the life of a derivative as a functionof Probability of Default (PD), Loss Given Default (LGD), and expected exposure profile.
As the CVA changes over the life of a derivative due to changes in credit spreads, ANZ uses CDS Indices to hedge themark to market impacts. Other market risks are also hedged with interest rate and foreign exchange derivatives.
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 derivative transactions.
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 – in addition to the variation margin, covers the future potential exposure that could arise fromfuture changes in market value over a defined period of risk.

oSince 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
derivative trades.

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 to hedge CVA mart-to-market volatility.

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 2023, ANZ would not
be required to lodge additional collateral with its counterparties.
The terms of legal agreements with some of ANZ central clearing counterparties central clearer have been amended togive effect to” settled-to-market” legal settlement. As a result of this change, collateral paid and received by the Group
under these agreements is no longer separately recognised, instead settling the Group’s outstanding derivative
exposures and reducing the associated carrying values of the derivative asset and liability balances.

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ANZ Basel III Pillar 3 disclosure

September 2023

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

Gross positive fair value of contracts
Netting benefits
Netted current credit exposure
Collateral held
Net derivatives credit exposure

Sep 23

Mar 23$M$M

Sep 22$M

60,40645,61490,174(38,070)(29,634)(57,277)

22,336

15,98032,897(13,049)(6,309)(16,342)

9,287

9,671

16,555

Sep 23

Mar 23

Sep 22

Counterparty credit risk exposure - by portfolio type
Portfolio Type
Corporate

$M

$M

$M

9,716

8,797

24,956

Sovereign

3,595

3,161

4,354

Bank

25,10925,414

16,506

Qualifying Central Counterparties

8,110

7,229

7,916

47

94

143

46,577

44,69553,875

Sep 23

Mar 23

Sep 22$M$M$M

Credit Default Swaps

-

-

-

Interest Rate Swaps

-

-

-

Currency Swaps

-

-

-

Other

-

-

-

Total exposures

-

-

-

Specialised Lending
Total exposures
Notional Value of Credit Derivative Hedges
Product Type63

ANZ Basel III Pillar 3 disclosure

September 2023

Table 11(c): Counterparty credit risk exposure – credit derivative transactions
Sep 23
Protection
Bought$M

Protection
Sold
$M

Total
$M

Credit derivative products used for own credit portfolio
Credit default swaps

10,862

8,503

19,365

Total notional value

10,862

8,503

19,365Credit derivative products used for intermediation
Credit default swaps

-

-

-

Total return swaps

-

-

-

Total notional value
Total credit derivative notional value

-

-

-

10,862

8,503

19,365

Protection
Bought$M

Protection
Sold$M

Mar 23
Total$M

Credit derivative products used for own credit portfolio
Credit default swaps

12,664

9,789

22,453

Total notional value

12,664

9,789

22,453Credit derivative products used for intermediation
Credit default swaps

-

-

-

Total return swaps

-

-

-

Total notional value
Total credit derivative notional value

-

-

-

12,664

9,789

22,453

Protection
Bought$M

Protection
Sold$M

Sep 22
Total$M

Credit derivative products used for own credit portfolio
Credit default swaps

13,59910,82324,422

Total notional value

13,59910,82324,422Credit derivative products used for intermediation
Credit default swaps

-

-

-

Total return swaps

-

-

-

Total notional value
Total credit derivative notional value

64

-

-

-

13,59910,82324,422

ANZ Basel III Pillar 3 disclosure

September 2023

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.
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.

Securitisation of ANZ-originated assets
ANZ adopts securitisation as a funding, capital and liquidity management tool using assets it has originated. This may
involve the transfer of credit risk and thereby 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 by providing
access to government sponsored facilities including 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’.
Covered bond transactions, whereby bonds issued by ANZ are secured by assets held in a special purpose vehicle, arenot securitisation exposures.
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 in 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.

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ANZ Basel III Pillar 3 disclosure

September 2023

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 the business unit
and respective independent credit risk officer. The securitisation team must be involved in all non-trading securitisationtransactions 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 in line with requirements outlined by APRA. This includes analysing the risk characteristicsof 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 methodology27.
Regulatory capital approaches
For securitisation exposures held in ANZ’s banking book28, 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.
Under APRA’s new capital framework, ANZ’s New Zealand banking subsidiaries regulated by the Reserve Bank of New
Zealand (RBNZ) are required to calculate capital requirements for any securitisation exposures held using the RBNZ’sprudential framework rather than APRA’s framework. These exposures are included in the exposures of New Zealandbanking subsidiaries in Table 6 rather than in Table 12.
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.

27

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.

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.
28

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ANZ Basel III Pillar 3 disclosure

September 2023

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.
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 meetthe criteria for consolidation, the assets remain on the balance sheet of ANZ’s consolidated financial statements and areclassified and valued in accordance with AASB 9: Financial Instruments. Currently, transfers to securitisation SPVs aretreated as financing transactions in the separate financial statements of ANZBGL because it retains substantially all of
the risks and rewards of assets transferred to the SPVs.
Securitisation services based on customer’s generated assets include warehouse and term fund facilities which are treatedas loans.
For synthetic securitisations of ANZ-originated assets, any transferred credit exposure is recognised through the fair value
measurement of the credit derivative established within the structure.
Full details of the principal accounting policies governing ANZ’s securitisation activities are outlined in ANZBGL’s 2023
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. There havebeen no 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
ANZBGL’s 2023 Annual Report.

67

ANZ Basel III Pillar 3 disclosure

September 2023

Banking Book
Table 12(g): Banking Book: Traditional and synthetic securitisation exposuresSep 23
Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated$M
865

ANZ Self Securitised$M
68,901ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

865

68,901-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
865

ANZ Self Securitised$M
68,901ANZ Sponsored$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

865

68,901-

68

ANZ Basel III Pillar 3 disclosure

September 2023

Table 12(g): Banking Book: Traditional and synthetic securitisation exposures (continued)
Mar 23
Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated$M
970

ANZ Self Securitised$M
68,635ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

970

68,635-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
970

ANZ Self Securitised$M
68,635ANZ Sponsored$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

970

68,635-

Sep 22
Traditional securitisations
Underlying asset
Residential mortgage

ANZ Originated
$M
1,094

ANZ Self Securitised$M
85,858ANZ Sponsored$M-

Credit cards and other personal loans

-

-

-

Auto and equipment finance

-

-

-

Commercial loans

-

-

-

Other

-

-

-

Total

1,094

85,858-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
1,094

ANZ Self Securitised$M
85,858ANZ Sponsored$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

1,094

85,858-69

ANZ Basel III Pillar 3 disclosure

September 2023

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

Sep 23
Underlying asset

Residential mortgage

ANZ
originated$M

ANZ Self
Securitised$M

Nonperforming$M

21

Lossesrecognised
for the six
months
ended
$M
-

865

68,901Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

Other

-

-

-

-

Total

865

68,901

21-

ANZ
originated$M

ANZ Self
Securitised$M

Nonperforming$M

12

Mar 23
Underlying asset

Residential mortgage

Lossesrecognised
for the six
months
ended
$M
-

970

68,635Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

Other

-

-

-

-

Total

970

68,63512-

ANZ
originated$M

ANZ Self
Securitised$M

Impaired$M

Past due$M48

Sep 22
Underlying asset

Residential mortgage

Lossesrecognised
for the six
months
ended
$M
-

1,094

85,858-Credit cards and other personal loans

-

-

-

-

-

Auto and equipment finance

-

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

-

Total

1,094

85,858-48-

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.

70

ANZ Basel III Pillar 3 disclosure

September 2023

Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset typeand facility 29
Sep 23
Original value securitised
Securitisation activity by underlying asset
type

ANZ Originated$M

ANZ Self
Securitised$M

ANZ Sponsored
$M

(105)

266

-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(105)

266

-

-

Residential mortgage

Securitisation activity by facility provided

Liquidity facilities

Notional
amount$M-

Funding facilities

1,000

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

(629)

Other

1

Total

372
Mar 23
Original value securitised

Securitisation activity by underlying asset
type

(124)

44

-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(124)

44

-

-

Residential mortgage

ANZ Originated$M

ANZ Self
Securitised$M

ANZ Sponsored$M

Securitisation activity by facility provided

Liquidity facilities

Notional
amount$M-

Funding facilities

74

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

(654)

Other

1

Total

(579)

29

Activity represents net movement in outstandings.

71

ANZ Basel III Pillar 3 disclosure

September 2023

Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset typeand facility (continued)
Sep 22
Original value securitised
Securitisation activity by underlying asset
type

(149)

2,306

-

Recognised
gain
or loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(149)

2,306

-

-

Residential mortgage

ANZ Originated$M

ANZ Self
Securitised$M

ANZ Sponsored$M

Securitisation activity by facility provided

Liquidity facilities

Notional
amount$M-

Funding facilities

1,486

Underwriting facilities-

Lending facilities-

Credit enhancements-

Holdings of securities (excluding trading book)

112

Other

1

Total

1,599

72

ANZ Basel III Pillar 3 disclosure

September 2023

Table 12(k): Banking Book: Securitisation - Regulatory credit exposures by exposure typeSep 23

Mar 23

Sep 22$M$M$M

Liquidity facilities

-

-

-

Funding facilities

9,886

8,976

9,433

Securitisation exposure type - On balance sheet

Underwriting facilities

-

-

-

Lending facilities

-

-

-

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

-

-

-

2,070

2,698

3,352

-

-

-

Other

92

116

55

Total

12,048

11,79012,840

Sep 23

Mar 23

Sep 22$M$M$M

Securitisation exposure type - Off Balance
Sheet
Liquidity facilities
Funding facilities

10

11

12

3,191

2,191

2,128

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

3,201

2,202

2,140

Sep 23

Mar 23

Sep 22

Total Securitisation exposure type

$M

$M

$M

Liquidity facilities

10

11

12

Funding facilities

13,077

11,167

11,561

Underwriting facilities

-

-

-

Lending facilities

-

-

-

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

-

-

-

2,070

2,698

3,352

-

-

-

Other

92

116

55

Total

15,24913,992

14,98073

ANZ Basel III Pillar 3 disclosure

September 2023

Table 12(l) part (i): Banking Book: Securitisation - Regulatory credit exposures by risk weight bandSep 23
Securitisation risk
weights≤ 25%

Regulatory
creditexposure$M
15,249Mar 23Riskweighted
assets$M
2,406

Regulatory
creditexposure$M
13,992

Sep 22Riskweighted
assets$M
2,229

Regulatory
creditexposure$M
14,980Risk
weighted
assets$M
2,424>25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

15,2492,406

13,992

2,229

14,9802,424

Risk
weighted
assets$M-

Regulatory
creditexposure$M-

Riskweighted
assets$M-

Regulatory
creditexposure
$M
-

Total

Sep 23
Resecuritisation risk
weights≤ 25%

Regulatory
creditexposure$M-

Mar 23

Sep 22Riskweighted
assets$M->25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

Total

-

-

-

-

-

-

Risk
weighted
assets$M
2,406

Regulatory
creditexposure$M
13,992Riskweighted
assets$M
2,229

Regulatory
creditexposure$M
14,980

Sep 23
Total Securitisation risk
weights≤ 25%

Regulatory
creditexposure$M
15,249Mar 23

Sep 22Riskweighted
assets$M
2,424>25 ≤ 35%

-

-

-

-

-

-

>35 ≤ 50%

-

-

-

-

-

-

>50 ≤ 75%

-

-

-

-

-

-

>75 ≤ 100%

-

-

-

-

-

-

>100 ≤ 650%

-

-

-

-

-

-

1250% (Deduction)

-

-

-

-

-

-

15,2492,406

13,992

2,229

14,980

2,424

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.

74

ANZ Basel III Pillar 3 disclosure

September 2023

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.

75

ANZ Basel III Pillar 3 disclosure

September 2023

Chapter 7 – Market risk
Table 13

Market risk – Standard approach

ANZ uses the standard model approach to measure market risk capital for specific risk30 (APRA does not currently permit
Australian banks to use an internal model approach for this).
Table 13(b): Market risk – Standard approach 31
Sep 23

Mar 23

$M

$M

$M

114

132

113

Equity position risk

-

-

-

Foreign exchange risk

-

-

-

Commodity risk

-

-

-

114

132

113

1,425

1,650

1,413

Interest rate risk

Total
Risk Weighted Assets equivalent30

Sep 22

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.

31

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

76

ANZ Basel III Pillar 3 disclosure
Table 14

September 2023

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.

77

ANZ Basel III Pillar 3 disclosure

September 2023

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 identify 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.

78

ANZ Basel III Pillar 3 disclosure

September 2023

Table 14(f): Value at Risk (VaR) and stressed VaR over the reporting period 32
Six months ended Sep 23
99% 1 Day Value at Risk (VaR)

Mean
$M
3.3

Maximum$M
6.2

Interest Rate

8.5

15.3

5.0

6.6

Credit

5.0

7.7

3.2

5.9

Commodity

2.9

4.9

1.8

4.0

-

-

-

-

Minimum$M
1.6

Period end$M
3.9

Foreign Exchange

EquityMinimum$M
2.1

Period end$M
2.8

Six months ended Mar 23
99% 1 Day Value at Risk (VaR)

Mean
$M
2.6

Maximum$M
3.9Interest Rate

8.4

17.6

5.3

5.8

Credit

4.1

5.9

2.5

3.9

Commodity

3.1

6.6

2.0

2.6

-

-

-

-

Minimum$M
1.1

Period end$M
1.8

Foreign Exchange

EquitySix months ended Sep 22
99% 1 Day Value at Risk (VaR)

Mean
$M
2.0

Maximum$M
4.0

Interest Rate

7.1

10.1

5.0

7.6

Credit

2.3

3.0

1.6

2.6

Commodity

2.3

4.9

1.4

4.3

-

-

-

-

Minimum$M
9.7

Period end$M
15.1

Foreign Exchange

EquitySix months ended Sep 23
99% 10 Day Stressed VaR

Mean
$M
27.3

Maximum$M
77.4

Interest Rate

82.1

157.8

36.7

38.8

Credit

28.8

37.8

19.4

32.2

Commodity

23.9

37.0

11.8

37.0

-

-

-

-

Minimum$M
21.2

Period end
$M
57.0
103.8

Foreign Exchange

EquitySix months ended Mar 23
99% 10 Day Stressed VaR

Mean
$M
44.6

Maximum$M
82.3

Interest Rate

86.4

125.6

59.0

Credit

26.3

39.5

14.3

21.1

Commodity

27.4

41.6

20.7

22.3

-

-

-

-

Minimum$M
11.7

Period end$M
34.2

Foreign Exchange

EquitySix months ended Sep 22
99% 10 Day Stressed VaR

Mean
$M
25.1

Maximum$M
62.0Interest Rate

67.2

127.5

35.5

86.8

Credit

18.7

26.1

11.4

13.8

Commodity

22.3

35.9

15.5

27.3

-

-

-

-

Foreign Exchange

Equity32

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

79

ANZ Basel III Pillar 3 disclosure

September 2023

Comparison of VaR estimates with actual gains/losses experienced

Traded Risk: Actual PnL vs VaR

Millions

03 Apr 2023 to 29 Sep 2023

15
10Actual PnL

5
0
‐5
‐10
‐15
0

5

10

15

Millions
VaR

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.
As highlighted in the chart above, when using actual profit and loss data, back-testing exceptions for the Trading Book
have been as expected over the past year. Given the extreme market volatility, there have been a larger number of
exceptions when using hypothetical profit and loss data and this has required the addition of a plus factor for market risk
capital purposes.
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
exposures are transferred to the trading book centrally managed by the Markets business and monitored by Market Riskin 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 2023, ANZ’s investment in ANZ Bank New Zealand
Limited is the main source of the structural foreign exchange exposure.

80

ANZ Basel III Pillar 3 disclosure

September 2023

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, but excludes strategic risk. At ANZ, Operational Risk is managed in close partnership with compliance risk, whichis the risk of failure to act in accordance with laws, regulations, industry standards and codes, internal policies andprocedures and principles of good governance as applicable to ANZ’s businesses.
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, Financial
Crime Risk and Technology Risk as separate Key Material Risks, which are managed in accordance with the I.AM
Framework. ANZ is in the process of adopting the 16 Operational Risk Themes provided under the Operational Risk
Exchange (ORX) Taxonomy, which is a simplified and industry standard approach to the classification of Operational
Risk.
ANZ uses the Standardised Measurement Approach (SMA) for calculation of Operational Risk capital requirements under
APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk. This methodology applies acrossall of ANZ. For the purposes of RBNZ capital adequacy, ANZ Bank New Zealand Ltd uses Reserve Bank of New Zealandstandardised approach to Operational Risk capital calculation.
Operational risk governance and structure
The primary responsibilities for operational risk are vested by the ANZ Group Risk Management Strategy, 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 clearly
defined roles, 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 meet organisational needs and regulatory requirements.
First line
The Business has first line of defence responsibility for managing Compliance and Operational Risk including obligationsfor:
identification, measurement and management of key risks, obligations and the related control environment acrossthe business.
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 oversight and independent review & challenge and assurance over business activities
including consistent implementation of the I.AM Framework, across the division/function.

Group Compliance and Operational Risk is accountable for:

developing and maintaining the I.AM Framework and relevant policies and procedures;providing subject matter expertise on the I.AM Framework and relevant policies and procedures to enable consistent
implementation; and

supporting the establishment of, 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;

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ANZ Basel III Pillar 3 disclosure

September 2023



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

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 Policy (the Policy) – approved by the Board Risk Committee, outlines thecore standards, outlining roles and responsibilities and minimum requirements of the way in which operational risks
and obligations are identified, acted on and monitored across ANZ, sets the approach 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 Policy
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 mitigant 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 governance risk and compliance (‘GRC’) platform within ANZ that operates as
the source of truth and provides greater transparency of Risk, Controls, Obligations and Events information across ANZ.
This information is used for internal and external reporting including regulatory reporting.
The Operational Risk Executive Committee (‘OREC’) monitors and oversees at an enterprise level the state of Complianceand Operational Risk management (including via the standardised ‘Non-Financial Risk Dashboard’) and instigate anynecessary corrective actions. Divisional and Business Unit level Risk Management committees also operate to ensure
matters of relevance are escalated to OREC accordingly.
Operational risk management
The objective of ANZ’s approach to Operational and Compliance Risk is to ensure that risks are identified, assessed,
measured, evaluated, treated, monitored and reported in a structured environment with appropriate governanceoversight. Further, that a control environment is in place to not only manage those risks but ensure traceability throughto our obligations. ANZ manages Compliance and Operational Risk in the best interests of its customers and thecommunity and to meet the expectations of the regulators.
The Compliance and Operational Risk Policy (Level 1) establishes the fundamental requirements at ANZ which inform
policies, processes, and procedure development of ANZ’s management of Compliance and Operational Risk, throughtimely and appropriate identification, action and monitoring. It is part of ANZ’s Risk Management Framework and ANZ’s
I.AM (Identify, Act, Monitor) Framework (Level 2). ANZ takes a risk-based approach to the management of operationalrisks and obligations, which means it assigns enhanced resource and oversight to those Risks and obligations that may
cause the Bank and its Customers greater harm. This enables ANZ to be consistent in proactively identifying, assessing,managing, reporting and escalating Operational Risk related risk exposures, while respecting the specific obligations ofeach jurisdiction in which ANZ operates.
Day-to-day management of Operational Risk is the responsibility of the 1st Line Business. Risk management, supported
by a strong Risk Culture, ensures all staff are thinking about and managing risk on a continuous basis – “Risk isEveryone’s Responsibility”, and Senior Management maintain oversight of those risks that if materialised, would
adversely affect ANZ.

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ANZ Basel III Pillar 3 disclosure

September 2023

ANZ’s approach to Operational Risk Capital AdequacyGroup Finance is responsible for the Operational Risk calculation under SMA, whilst Group Compliance and Operational
Risk is accountable for the measurement and allocation of Operational Risk Regulatory Capital within ANZ.
Operational Risk Capital is held to protect depositors and shareholders from rare and severe unexpected losses. ANZ
maintains and calculates Operational Risk Capital on an annual basis, per APS 115 Capital Adequacy: Standardised
Measurement Approach to Operational Risk.
Once calculated, the capital is allocated to divisions based on contribution to Group operational risk capital and the historicloss experience. Accordingly, capital allocations are structured to encourage businesses to effectively manage theiroperational risk exposures e.g., improve controls, reduce losses etc.

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ANZ Basel III Pillar 3 disclosure

September 2023

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 and associates. ANZ’s equity exposures in the banking
book are 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. These investments areundertaken after extensive analysis and due diligence by Group Strategy, internal specialists and external advisors,
where appropriate. Board approval is required prior to committing to any investments over delegated authorities, andall regulatory notification requirements are met. Performance of these investments is monitored by both the owningbusiness unit and where appropriate, 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 increase or decrease in net assets less accumulated impairment. Interests in associates are reviewed semiannually for impairment. If an indicator of impairment is identified, their recoverable amount is determined being thehigher of their fair value less 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 2023 the carrying values of the Group’s investments in AMMB Holdings Berhad(Ambank) and PT Bank Pan Indonesia (PT Panin) were supported by their market value or VIU.
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 recorded in other comprehensive income and 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

September 2023

Table 16(b) and 16(c): Equities – Types and nature of Banking Book investments
Sep 23Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

3,179

2,900

Value of unlisted (privately held) equities

98

98

3,277

2,998

Total

Mar 23Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

3,122

3,146

Value of unlisted (privately held) equities

97

97

3,219

3,243

Total

Sep 22Equity investments$M
Balance sheet value

Fair value

Value of listed (publicly traded) equities

2,970

3,807

Value of unlisted (privately held) equities

619

619

3,589

4,426

Half Year

Half Year

Half Year

Sep-23

Mar 23

Sep 22

Realised gains (losses) on equity investments

$M

$M

$M

Cumulative realised gains (losses) from disposals
and liquidations in the reporting period
Cumulative realised losses from impairment and write-downs in
the reporting period

(3)

-

-

-

-

-

(3)

-

-

Half Year

Half Year

Half Year

Sep-23Mar-23

Sep-22

(44)

9

(95)

-

-

-

(44)

9

(95)

Total

Table 16(d) and 16(e): Equities – gains (losses)33

Unrealised gains (losses) on equity investments
Total unrealised gains (losses)
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.

33

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

85

ANZ Basel III Pillar 3 disclosure

September 2023

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 Internal Model Approach (IMA) for the calculation of regulatory capitalfor 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 2023

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 2023

Table 17(b): Interest Rate Risk in the Banking Book
Change in Economic Value
Standard Shock Scenario Stress Testing:Sep 23

Mar 23

Sep 22$M$M$M

200 basis point parallel increase

(478)

(460)

(729)

200 basis point parallel decrease

473

452

751

200 basis point parallel increase

(118)

(37)

(140)

200 basis point parallel decrease

105

15

124

Interest rate shock applied
AUD

NZD

USD
200 basis point parallel increase

13

16

109

200 basis point parallel decrease

(17)

(21)

(116)

200 basis point parallel increase

(54)

(77)

(70)

200 basis point parallel decrease

62

92

85

Other

IRRBB regulatory capital

2,536

2,551

3,045

IRRBB regulatory RWA

31,70331,88738,063

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 and potential future scenarios, including behavioural characteristics as well as stresses toassumptions made about the repricing term of exposures. The rate move scenarios include changes over the stressed
periods and the worst theoretical losses over the selected period are reported. Stresses of the repricing term assumptions
investigate scenarios where actual repricing terms are significantly different to those modelled.

88

ANZ Basel III Pillar 3 disclosure

September 2023

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 requires ADIs authorised to use the internal ratings
based approach to credit risk to maintain a minimum leverage ratio of 3.5% from January 2023.
At 30 September 2023, the Group’s Leverage Ratio of 5.4% was above the 3.5% minimum requirement. Table 18 below
shows the Group’s Leverage Ratio calculation as at 30 September 2023 and Table 19 summarises the reconciliation of
accounting assets and leverage ratio exposure measure at 30 September 2023.
Table 18

Leverage Ratio
Sep 23

Mar 23

Sep 22$M$M$M

On-balance sheet exposures1

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

996,947

1,025,480

966,226

2(Asset amounts deducted in determining Basel III Tier 1 capital)(12,284)(11,965)(12,138)

3

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

984,663

1,013,515

954,088

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

19,984

13,95919,60631,992

33,127

38,739

4,683

2,777

3,058

(6,253)(5,370)(9,714)8Gross-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

Derivative exposures
4
5
6
7

11

-

-

-

9,740

10,154

10,823(9,138)(10,035)(10,712)51,00844,61251,80047,84039,64729,502(2,159)(2,495)

(899)

5,066

6,604

6,967

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)

14

CCR exposure for SFT assets

15

Agent transaction exposures

16

Total securities financing transaction exposures

-

-

-

50,74743,75635,570

Other off-balance sheet exposures
17

Off-balance sheet exposure at gross notional amount

297,020

297,629

285,816

18(Adjustments for conversion to credit equivalent amounts)(158,719)(156,630)(158,963)

Off-balance sheet items

138,301

140,999

126,853

19

Capital and Total Exposures
20

Tier 1 capital

21

Total exposures

22

Basel III leverage ratio

66,02665,56463,5581,224,719

1,242,882

1,168,311

5.4%

5.3%

5.4%

Leverage ratio

89

ANZ Basel III Pillar 3 disclosure
Table 19

September 2023

Summary comparison of accounting assets vs. leverage ratio exposure measure1

Total consolidated assets as per published financial statements

2

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.

5

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

6

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

3

7

Leverage ratio exposure90

Sep 23

Mar 23$M$M

Sep 22$M

1,106,041

1,111,605

1,085,729

(848)

(864)

173

-

-

-

(9,398)(1,002)(38,375)

2,907

4,109

6,069

138,301

140,999

126,853(12,284)(11,965)(12,138)

1,224,719

1,242,882

1,168,311

ANZ Basel III Pillar 3 disclosure
Table 20

September 2023

Liquidity Coverage Ratio disclosure templateSep 23
Total
Unweighted
Value
$M

Total
WeightedValue$M

Jun 23
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

265,713271,021

-

-

2,192

2,615

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

13
14
15

of which: outflows related to derivatives
exposures and other collateral requirementsof which: outflows related to loss of funding on
debt productsof which: credit and liquidity facilities

263,220

25,517

260,584

117,575

5,879

117,0725,854

145,645

19,638

143,512

18,988281,002

146,698

297,473

159,085

93,53622,553

95,42823,001

174,870

111,549

185,373

119,412

12,596

12,596

16,672

16,672

5,405

24,842

1,874

195,559

70,639184,51762,06348,20648,20640,70140,701---

21,362

147,353

22,433

143,816

16

Other contractual funding obligations

7,764

-

8,515

-

17

Other contingent funding obligations

118,609

8,024

120,339

8,012

18

Total cash outflows

256,283

255,876

Cash inflows
19

Secured lending (e.g. reverse repos)

28,3601,549

25,679

1,682

20

Inflows from fully performing exposures

24,954

17,19026,35017,835

21

Other cash inflows

36,01636,01628,57728,57722

Total cash inflows

89,33054,75580,60623

Total liquid assets

267,905

273,636

24

Total net cash outflows

201,528

207,782

25

Liquidity Coverage Ratio (%)

132.9%

131.7%

65

655655

Number of data points used (simple average)

48,094

Liquidity Coverage Ratio (LCR)
ANZ’s average LCR for the 3 months to 30 September 2023 was 132.9% with total liquid assets exceeding net outflows
by an average of $66.4 billion.
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.

91

ANZ Basel III Pillar 3 disclosure
Table 21

September 2023

NSFR disclosure templateSep 23Available Stable Funding (ASF) Item
1

Capital2of which: regulatory capital3of which: other capital instruments

4

Retail deposits and deposits from small business customers

Unweighted value by residual maturity

BLANK

No
maturity<6
months

Weightedvalue$M
68,690

≥ 1yr

$M

6
months
to <
1yr
$M

$M

$M

-

-

30,927

99,617
99,617

68,690--30,927

-

-

-

-

-

241,825

85,575--

301,317
126,505

5of which: stable deposits

115,399

17,765--6of which: less stable deposits

126,426

67,810--174,812167,556

304,01443,996

70,841

220,467

7

Wholesale funding

8of which: operational deposits

93,077---46,5389of which: other wholesale funding

74,479304,01443,996

70,841

173,929

10

Liabilities with matching interdependent assets

11

Other liabilities

12
13
14

-

-

-

-

-

19,62014,158

358

3,705

3,884

of which: NSFR derivative liabilitiesof which: All other liabilities and equity not included in theabove categories
Total ASF

19,62014,158

-

-

-

-

358

3,705

3,884
625,285

Required Stable Funding (RSF) Item
15a

Total NSFR (HQLA)

15b

ALA

15c

RBNZ securities

16

Deposits held at other financial institutions for operational
purposes
Performing loans and securities

17
18
19

20

21
22

8,439
809
919

of 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

-

-

-

-

-

14,209120,422

48,444

547,055

485,212-41,378

-

-

4,138

955

25,76012,911

39,71350,98812,02347,31730,381

130,652

157,135

-

402

374

14,942

10,100

-

5,025

4,809

368,444

264,121

23

of which: Standard loans to individuals with an LVR of 80%
or below

-

4,116

3,936

297,201

202,67424

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

1,231

916

294

8,445

8,830

25

Assets with matching interdependent liabilities

26

Other assets:

27

of which: Physical traded commodities, including gold28

of which: Assets posted as initial margin for derivative
contracts and contributions to default funds of central
counterparties (CCPs)
of which: NSFR derivative assets

29
30
31

-

-

-

-

-

29,91540,216853

3,300

33,428

3,958

-

-

2,472

of which: NSFR derivative liabilities before deduction ofvariation margin postedof which: All other assets not included in the above categories

27,444

2,101
3,364

15,036--877

20,481

-

-

4,096

741

853

3,300

22,989--201,679

32

Off-balance sheet items

33

Total RSF

537,430

8,623

34

Net Stable Funding Ratio (%)

116.35%

ANZ's NSFR as at 30 September 2023 was 116.3%, down 1.6% in the quarter since June 2023.
The main sources of Available Stable Funding (ASF) at September 2023 were deposits from Retail and SME customers,
at 48%, with other wholesale funding (including Term Funding Facilities) at 28% and capital at 16% of the total ASF.
The majority of ANZ's Required Stable Funding (RSF) at September 2023 was driven by mortgages at 49% and otherlending to non-FI customers at 29% of the total RSF.

92

ANZ Basel III Pillar 3 disclosure

Table 21

September 2023

NSFR disclosure template (continued)
Jun 23Available Stable Funding (ASF) Item
1

Capital2of which: regulatory capital3of which: other capital instruments

4

Retail deposits and deposits from small business customers

Unweighted value by residual maturity

BLANK

No
maturity<6
months

Weightedvalue$M
68,938

≥ 1yr

$M

6
months
to <
1yr
$M

$M

$M

-

-

32,445

101,383
101,383

68,938--32,445

-

-

-

-

-

238,21280,182--

293,062
123,657

5of which: stable deposits

113,352

16,813--6of which: less stable deposits

124,860

63,369--169,405

168,770309,10747,55462,913

213,740

7Wholesale funding

8of which: operational deposits

98,874---49,4379of which: other wholesale funding

69,896309,10747,55462,913

164,30310

Liabilities with matching interdependent assets

11

Other liabilities

12of which: NSFR derivative liabilities

13of which: All other liabilities and equity not included in theabove categories

14

-

-

-

-

-

12,865

13,404

150

3,047

3,122

12,865

13,404

-

-

-

150

3,047

Total ASF

3,122
611,307

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

8,053

15(b)

ALA

2,009

15(c)

RBNZ securities

16

Deposits held at other financial institutions for operational
purposes
Performing loans and securities

17
18
19

20

21
22

924

of 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 tofinancial 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:

-

-

-

-

-

13,435

117,988

41,861

528,798

465,554-

40,008

-

-

4,001

566

24,437

9,862

22,55931,721

11,606

47,796

26,814150,394

171,938

-

480

398

15,335

10,408

-

5,218

4,749

347,684

249,401

-

4,371

3,959

281,277

192,136

1,263

529

436

8,161

8,493

25

of which: Standard loans to individuals with an LVR of 80%
or belowof 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:

27,59639,334

1,474

2,570

33,046

3,720

-

-

23
24

27

of which: Physical traded commodities, including gold28

of which: Assets posted as initial margin for derivative
contracts and contributions to default funds of central
counterparties (CCPs)
of which: NSFR derivative assets

29
30
31

2,514

of which: NSFR derivative liabilities before deduction ofvariation margin postedof which: All other assets not included in the above categories

25,083

2,137
3,162

13,837--433

21,333

-

-

4,267

445

1,474

2,570

23,048--205,773

8,747

32

Off-balance sheet items

33

Total RSF

518,333

34

Net Stable Funding Ratio (%)

117.94%93

ANZ Basel III Pillar 3 disclosure

September 2023

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.

94

ANZ Basel III Pillar 3 disclosure

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.
95

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September 2023