1 May 2019Market Announcements Office
ASX Limited
Level 420 Bridge Street
SYDNEY NSW 2000

Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) - Half-Yearly Financial Report submission under the Disclosure andTransparency Rules of the United Kingdom Financial Conduct Authority (“UKDTR Submission”)
The attached UK DTR Submission will be lodged by ANZBGL with the London Stock
Exchange (“LSE”) today, together with ANZ’s 2019 Half Year Results for the six month
period ended 31 March 2019. This UK DTR Submission has been prepared by ANZBGL inorder to comply with the applicable periodic reporting requirements of DTR 4 of theDisclosure and Transparency Rules of the United Kingdom Financial Conduct Authority inconnection with certain debt securities issued by ANZBGL. For completeness, in addition
to lodgement with the LSE, ANZBGL is lodging this UK DTR Submission with applicableexchanges, including the Australian Securities Exchange and the New Zealand Stock
Exchange today.
Yours faithfully

Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
Company Secretary’s Office
ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands Vic 3008
GPO Box 254, MELBOURNE VIC 3001 AUSTRALIA
www.anz.com

1 May 2019DISCLOSURE AND TRANSPARENCY RULES – HALF-YEARLY FINANCIAL REPORTSUBMISSION
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL” or “ANZ”) together with its subsidiaries (the “Group”) – Half-Yearly
Financial Report submission under the Disclosure and Transparency Rules(“DTR”) of the United Kingdom Financial Conduct Authority
The following attached documents constitute ANZ’s 2019 Half-Yearly Financial Report forthe purposes of the disclosure requirements of DTR 4.2:•

The Condensed Consolidated Financial Statements and Notes to Condensed
Consolidated Financial Statements for the half year ended 31 March 2019, Directors’
Report (including matters included by reference) and Directors’ Declaration (as set
out on pages 80 to 120 of ANZ’s Half Year 31 March 2019 Consolidated Financial
Report, Dividend Announcement and Appendix 4D);•

A description of the principal risks and uncertainties for the remaining six months of
the financial year provided in accordance with DTR 4.2.7 R (2); and•A responsibility statement of the Directors of ANZBGL provided in accordance withDTR 4.2.10 R (3)(b).

Page 1 of 27

ANZ’s Half Year 31 March 2019 Consolidated Financial Report, Dividend
Announcement and Appendix 4D
This document was separately lodged by ANZBGL with the applicable stock exchanges,
including the London Stock Exchange and the Australian Securities Exchange on 1 May
2019.

Page 2 of 27

Principal risks and uncertainties for the remaining six months of the financial
year (DTR 4.2.7 R (2))
1.

Introduction
The Group’s activities are subject to risks that can adversely impact its business,
operations, results of operations, reputation, prospects, liquidity, capital resources,financial performance and financial condition (together, the “Group’s Position”).
The risks and uncertainties described below are not the only ones that the Groupmay face. Additional risks and uncertainties that the Group is unaware of, or that theGroup currently deems to be immaterial, may also become important factors that
affect it. If any of the specified or unspecified risks actually occur, the Group’s
Position may be materially and adversely affected.

2. Changes in political and general business and economic conditions,

including disruption in regional or global credit and capital markets, may
adversely affect the Group’s Position
The Group’s financial performance is primarily influenced by the political andeconomic conditions and the level of business activity in the major countries andregions in which the Group operates, trades or raises funding including, without
limitation, Australia, New Zealand, the Asia Pacific, United Kingdom, Europe and theUnited States (the “Relevant Jurisdictions”).
The economic and business conditions that prevail in the Group’s major operating
and trading markets are affected by, among other things, domestic and international
economic events, political events and natural disasters, and by movements andevents that occur in global financial markets.
The global financial crisis that commenced in 2007 saw a sudden and prolonged
dislocation in credit and equity capital markets, a contraction in global economic
activity and the emergence of many challenges for financial services institutions
worldwide.
The impact of the global financial crisis and its aftermath continue to affect regionaland global economic activity, confidence and capital markets. Prudential authorities
have implemented and continue to implement increased regulations in an attempt tomitigate the risk of such events recurring, although there can be no assurance thatsuch regulations will be effective. The Group believes that the global financial crisis
has also had a lasting effect on consumer and business behaviour in advanced
economies, including the major countries and regions in which the Group operates.
Consumers in recent years have reduced their savings rates in the face of weak
income growth, while businesses have been reluctant to invest and inflation has
remained low. Monetary authorities responded to the global financial crisis byintroducing zero or near-zero interest rates across most countries, and the major
central banks took unconventional steps to support growth and raise inflation. Whilesome economic factors have recently improved and some monetary authorities havebegun to increase interest rates, lasting impacts from the global financial crisis andthe potential for escalation in geopolitical risks suggest ongoing vulnerability andpotential adjustment of consumer and business behaviour.
Changes in global political conditions have the potential to lead to extended periodsof increased political and economic uncertainty and volatility in the global financial
markets. For example, the ”Brexit” (as defined below) referendum in the United
Kingdom in June 2016 including the related ongoing negotiations with the European
Union and within UK Parliament), the commencement of Donald Trump’s presidency
in January 2017, and global trade developments relating to, among other things, theimposition or threatened imposition of trade tariffs and levies by major countries
have resulted in increased political and economic uncertainty and volatility in the
Page 3 of 27

global financial markets and may continue to do so. This is in part due to theunknown consequences for global trade, the broader global economy and financial
markets.
The Group’s business in the United Kingdom and elsewhere may be negatively
impacted by the uncertainty regarding the exit of the United Kingdom from theEuropean Union (commonly referred to as “Brexit”), including from a deterioration of
consumer and business activity in the United Kingdom and other countries andgeneral uncertainty in the overall business environment in which the Group operates.
The exit itself could negatively impact the United Kingdom and other economies,
which may adversely affect the Group. In addition, Brexit could lead to legal
uncertainty and potentially divergent national laws and regulations in the United
Kingdom and the European Union, and the Group may incur additional costs or needto make operational changes that reduce revenue as it adapts to potentially divergent
regulatory frameworks. Any of these effects of Brexit, among others, may adversely
the Group’s Position. The Group has made changes to the structure of its business
operations in Europe in anticipation of Brexit, although the financial, trade and legal
implications of Brexit are still uncertain and may be more severe than expected giventhat the final terms upon which the United Kingdom will exit the EU are still not
known and the lack of comparable precedent.
Furthermore, since the commencement of Donald Trump’s presidency, President
Donald Trump has outlined a political and economic agenda for the United States
that, in certain ways, significantly differs from previous U.S. trade, tax, fiscal,
regulatory and other policies. In particular, President Donald Trump has pursued aprotectionist trade policy which includes a series of expansive tariffs, up to andpotentially including the entirety of goods traded between the United States andChina, which may result in adverse effects on the economy of China, one of the
major trading partners of Australia and New Zealand and a significant driver ofcommodity demand and prices in the markets in which the Group and its customers
operate. Anything that adversely affects China’s economic growth may adversely
affect Australian and New Zealand economic activity and, as a result, the Group’s
Position.
Australian political conditions have progressively shifted over recent years. Shorter
tenures for Prime Ministers appear to have become more entrenched, and the focus
on the societal impacts of the financial sector, and other business sectors as well, has
sharpened. The banking tax and Royal Commission have been initiated in thisenvironment. The Royal Commission process itself appears to have exacerbated thisshift, suggesting a sustained period of focus on the financial sector in Australia.
Political and economic uncertainty has in the past led to declines in market liquidity
and activity levels, volatile market conditions, a contraction of available credit, lower
or negative interest rates, weaker economic growth and reduced business
confidence, each of which may adversely affect the Group’s Position. These
conditions may also adversely affect the Group’s ability to raise medium or long-term
funding in the international capital markets.
Geopolitical instability, such as threats of, potential for, or actual conflict, occurringaround the world, such as the ongoing unrest and conflicts in Ukraine, North Korea,
Syria, Egypt, Afghanistan, Iraq, Nicaragua and elsewhere as well as the current highthreat of terrorist activities, may also adversely affect global financial markets,general business and economic conditions and the Group’s ability to continue
operating or trading in an affected country or region, which in turn may adversely
affect the Group’s Position.
Should difficult economic conditions in the Group’s markets eventuate, asset values
in the housing, commercial or rural property markets could decline, unemployment
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could rise and corporate and personal incomes could suffer. Deterioration in global
markets, including equity, property, currency and other asset markets, may impact
the Group’s customers and the security the Group holds against loans and othercredit exposures, which may impact the Group’s ability to recover loans and othercredit exposures.
The Group’s financial performance may also be adversely affected if the Group was
unable to adapt cost structures, products, pricing or activities in response to a drop in
demand or lower than expected revenues. Similarly, higher than expected costs(including credit and funding costs) could be incurred because of adverse changes inthe economy, general business conditions or the operating environment in the
countries or regions in which the Group operates.
Other current economic conditions impacting the Group and its customers include:•changes in the commercial and residential real estate markets in Australia and
New Zealand (see risk factor 6 “Weakening of the real estate markets inAustralia, New Zealand or other markets where the Group does business may
adversely affect the Group’s Position”); and•the demand for natural resources given that sector is a significant contributor toAustralia’s economy and the sector’s significant exposure to Asia, particularly
China and China’s economic growth (see risk factor 7 “Credit risk may adversely
affect the Group’s Position”).

Natural and biological disasters such as, but not restricted to, cyclones, floods,
droughts, earthquakes and pandemics, and the economic and financial market
implications of such disasters domestically and globally, may negatively affectgeneral business and economic conditions in the countries or regions in which theGroup operates and in turn adversely affect the Group’s Position (see risk factor 16:"Impact of future climate change, geological events, plant, animal and humandiseases, and other extrinsic events may adversely affect the Group’s Position").
All or any of the negative political, business, environmental or economic conditions
described above may cause a reduction in demand for the Group’s products andservices and/or an increase in loan and other credit defaults and bad debts, which
may adversely affect the Group’s Position.
3.

Competition in the markets in which the Group operates may adversely
affect the Group’s Position
The markets in which the Group operates are highly competitive and could become
even more so. Factors that contribute to competition risk include mergers,
acquisitions, divestments, joint ventures and alliances, changes in customers’ needs,
preferences and behaviours, entry of new participants, development of new
distribution and service methods and technologies, increased diversification of
products by competitors and changes in regulation such as the rules governing theoperations of banks and non-bank competitors. For example:•

changes in the financial services sector in Australia and New Zealand have madeit possible for non-banks to offer products and services traditionally provided bybanks. Digital technologies and business models are changing customer
behaviour and the competitive environment. Emerging competitors are
increasingly utilising new technologies and seeking to disrupt existing businessmodels in the financial services sector. Existing companies from outside of the
traditional financial services sector may seek to directly compete with the Groupby offering products and services traditionally provided by banks, including by
obtaining banking licences and/or by partnering with existing providers;•banks organised in jurisdictions outside Australia and New Zealand are subject toPage 5 of 27

different levels of regulation and some of these banks may have lower cost
structures, lower capital requirements or a lower cost of capital that may makethem more competitive in the markets where the Group operates;•

consumers and businesses may choose to transact using, or to invest in, newforms of currency (such as cryptocurrencies) in relation to which the Group may
choose not to provide financial services; and•Open Banking (as described below) may lead to increased competition (see risk
factor 4 “Regulatory changes or a failure to comply with laws, regulations or
policies may adversely affect the Group’s Position”).

Increasing competition for customers could also potentially lead to a compression in
the Group’s net interest margins or increased advertising and related expenses toattract and retain customers.
The Group relies on deposits to fund a significant portion of its balance sheet. The
Group competes with banks and other financial services firms for such deposits.
Increased competition for deposits may increase the Group’s cost of funding. To theextent that the Group is not able to successfully compete for deposits, the Groupwould be forced to rely more heavily on other, less stable or more expensive formsof funding, or to reduce lending. This may adversely affect the Group’s Position.
The impact on the Group of an increase in competitive market conditions or atechnological change that puts the Group’s business platforms at a competitive
disadvantage, especially in the Group’s main markets and products, would
potentially lead to a material reduction in the Group’s market share, customers andmargins, which would adversely affect the Group’s Position.
4.

Regulatory changes or a failure to comply with laws, regulations or policies
may adversely affect the Group’s Position
The Group’s businesses and operations are highly regulated. The Group is subject toa substantial number of laws, regulations and policies in the Relevant Jurisdictions inwhich it carries on business and obtains funding and is supervised by a number ofdifferent authorities in each of these jurisdictions.
In Australia, these authorities include the Australian Prudential Regulation Authority(“APRA”), the Reserve Bank of Australia (“RBA”), the Australian Securities andInvestments Commission (“ASIC”), the Australian Securities Exchange (“ASX”), theAustralian Competition and Consumer Commission (“ACCC”), the AustralianTransaction Reports and Analysis Centre (“AUSTRAC”) the Australian Taxation Office(“ATO”) and the Office of the Australian Information Commissioner (“OAIC”). In New
Zealand, these authorities include the Reserve Bank of New Zealand (“RBNZ”) andthe Financial Markets Authority (“FMA”) and the New Zealand CommerceCommission. Prudential authorities such as APRA and the RBNZ have extensive
administrative, practical and investigative powers over the Group’s businesses.
The regulation and supervision of financial services groups such as the Group isincreasingly extensive and complex in Australia and across the Relevant Jurisdictions
and such regulations continue to evolve. Regulatory developments are wide ranging
and include consumer credit and consumer protection, the design and distribution offinancial products, conduct, governance, funding, liquidity, derivatives, capital
adequacy, provisioning, competition, mortgage pricing, remuneration, privacy, dataprotection, data access, prudential matters, anti-bribery and corruption, anti-money
laundering and counter-terrorism financing, economic and trade sanctions andexecutive accountability. The resources allocated to the regulation and supervision offinancial services groups, such as the Group, and the enforcement of laws against
them, such as the Group, have increased in recent years.
Changes to laws, regulations, policies and enforcement activities in Australia and thePage 6 of 27

Relevant Jurisdictions may adversely affect the Group’s Position. Such changes may
impact the corporate structures, businesses, strategies, capital, liquidity, funding andprofitability and the cost structures of the Group and the cost and access to credit forcustomers of the Group, and the wider economies of Australia and New Zealand.
Examples of recent changes to laws, regulations, practices and policies, ordevelopments that may lead to future changes include the following:
Prudential Developments
Implementation of APRA’s revisions to the capital and liquidity framework forAustralian Authorised Deposit-taking Institutions (“ADI”), resulting from the BaselCommittee on Banking Supervision (“BCBS”) Basel 3 capital and liquidity reforms
and the recommendations of the Financial System Inquiry (“FSI”), will continue overthe coming years.
Consistent with the FSI’s recommendation that the capital ratios of ADIs should be“unquestionably strong”, effective from July 2016, APRA increased the capitalrequirements for Australian residential mortgage exposures for ADIs accredited touse the Internal Ratings Based (“IRB”) approach to credit risk (including the Group).
In July 2017, APRA released an information paper outlining APRA’s conclusions withrespect to the quantum and timing of capital increases that will be required for ADIs
to achieve “unquestionably strong” capital ratios. APRA indicated that, in the case of
the four major Australian banks (including the Group), it expects that the increased
capital requirements will translate into the need for an increase in Common Equity
Tier-1 (“CET1”) capital ratios, on average, of around 100 basis points above theirDecember 2016 levels. In broad terms, that equates to a benchmark CET1 capitalratio, under the current capital adequacy framework, of at least 10.5 per cent. APRA
also stated that ADIs should, where necessary, initiate strategies to increase theircapital strength to be able to meet these capital benchmarks by January 1, 2020 at
the latest.
In February 2018, APRA released a discussion paper that commenced theirconsultation on the revisions to the capital framework that will produce“unquestionably strong” capital ratios. The discussion paper summarises APRA’s
proposal regarding risk-based capital approach for credit, market and operational risk
following finalisation of these requirements by the BCBS in December 2017. While
the final form of this proposal will only be determined later in 2020, the Group
expects the implementation of any revisions to the current requirements will result infurther changes to the risk weighting framework for certain asset classes and otherrisk types (such as market and operational risks). APRA has announced that it does
not expect that the changes to the risk weights will necessitate further increases incapital for ADIs, although this could vary by ADI depending on the final
requirements.
Further to the above, APRA released a discussion paper in August 2018 on
adjustments to the overall design of the capital framework to improve transparency,
international comparability and flexibility of the ADI capital framework. The focus of
the proposals is on the presentation of the capital ratios to facilitate comparability
whilst recognising the relative capital strength of ADIs and measures to enhancesupervisory flexibility in times of financial stress. APRA’s consultation for the above iscurrently taking place with final prudential standards planned to be made available
by 2020.
APRA’s prudential standards may also be further supplemented by yet to be released
proposals to implement other key FSI recommendations with regard to:•

Total loss absorbing capacity: On November 8, 2018, APRA released a discussion
paper titled “Increasing the loss-absorbing capacity of ADIs to support orderly
resolution”. The paper is in response to recommendation three of the final report
Page 7 of 27

of the FSI. The paper proposes an increase in total capital requirements of
between 4% and 5% of RWA for domestic systemically important banks (“DSIBs”), such as ANZ. Based on the Group’s RWA of $396 billion as at March 31,
2019, this represents an incremental increase in the total capital requirement ofapproximately $16 billion to $20 billion, with an equivalent decrease in othersenior funding. APRA anticipates that D-SIBs would satisfy the requirement
predominantly with additional Tier 2 capital. D-SIBs will need to satisfy the newrequirement by 2023. ANZ intends to consult with APRA and provide a response.
In addition to the proposals outlined in the paper, APRA noted that it is inprocess of developing a formalised framework for resolution planning and willconsult further on this in 2019; and•Minimum leverage ratio: In November 2018, APRA released draft prudential
standards proposing to set the leverage ratio minimum for internal ratings-based
ADIs at 3.5%, in addition to other changes to the calculation of the exposure
measure.

Given the number of items that are currently open for consultation with APRA, thefinal outcome of the FSI including any further changes to APRA’s prudential
standards or other impacts on the Group remains uncertain. Further changes to
APRA’s prudential standards and the final outcome of the FSI could increase the levelof regulatory capital that the Group is required to maintain, restrict the Group’s
flexibility, require it to incur substantial costs and impact the profitability of one ormore business lines, which may adversely affect the Group’s Position.
Implementation of the BCBS Basel 3 capital and liquidity reforms will continue overthe coming years. The BCBS has recently finalised its reform on the Basel 3
framework focusing on reducing excessive variability in the calculation of risk
weighted assets which is now set for implementation from 2022. These reforms form
the basis for APRA’s proposals on revisions to capital framework as described above.
Banking Executive Accountability Regime (“BEAR”)
BEAR became effective on 1 July 2018. It is a strengthened responsibility andaccountability framework for the most senior and influential directors and executives
in ADI groups. Potential risks to the Group from the BEAR legislation include the riskof penalties and the risk to its ability to attract and retain high-quality directors andsenior executives.
Design and Distribution Obligations and Product Intervention Powers
The Australian Government has passed new legislation intended to enhance theregulation of the design and distribution of financial and credit products in Australia
and to provide ASIC with product intervention powers.
Anti-Money Laundering and Counter Terror Financing Compliance
Scrutiny of banks has increased following the commencement by the AUSTRAC ofcivil penalty proceedings in 2017 against another major Australian bank relating toalleged past and ongoing contraventions of the Anti-Money Laundering and CounterTerrorism Financing Act 2006 (Commonwealth) (see risk factor 5 "Significant fines
and sanctions in the event of breaches of law or regulation relating to anti-money
laundering, counter-terrorism financing and sanctions may adversely affect theGroup’s Position").
Bank Levies
The Australian Government imposed a levy on liabilities for certain large banks,
including the Group, with effect from 1 July 2017 (“Major Bank Levy”). There is arisk that the Australian Government could increase the Major Bank Levy or introduce
new levies on banks. Australian State and Territory governments may introduce
similar levies which may adversely affect the Group’s Position.
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Responsible Consumer Lending
Regulatory policy development and monitoring of responsible consumer lending has
increased significantly in recent years, and continues to drive the review of, andchanges to, business practices. If any additional changes in law, regulation or policy
are implemented, as a result of the development and monitoring of responsible
consumer lending, such changes may impact the manner in which the Group
provides consumer lending services in the future which may adversely affect theGroup’s operations in this area and consequently, the Group’s Position.
Parliamentary Inquiries
There are several on-going Australian Government inquiries into Australia’s banks.
The inquiries could lead to legislative or regulatory changes or measures that may
adversely affect the Group Position.
Australian Consumer Law
The Australian Parliament passed amendments to the Australian Consumer Law on
August 23, 2018. Amongst other things, the amendments increased penalties forbreaches of consumer law from 1 September 2018. The increased penalties relate tounconscionable conduct, false or misleading representations about goods or services,
unfair practices, the safety of consumer goods and product-related services andinformation standards.
Increased ASIC and APRA Funding
The Australian Government announced in March 2019 that ASIC would be provided
with more than $400 million and APRA more that $150 million in additional funding
to support enforcement, regulation and supervision.
Corporate and Financial Sector Penalties
The Treasury Laws Amendment (Strengthening Corporate and Financial Sector
Penalties) Act 2019 significantly increases the sanctions applicable to thecontravention of a range of corporate and financial sector obligations.
ASX Governance Principles and Recommendations
In February 2019, the ASX published a fourth edition of Corporate GovernancePrinciples and Recommendations. The proposed amendments are extensive, and are
expected to have a significant change to corporate governance of listed entities suchas the Group.
Open Banking
Open Banking is part of a proposed new consumer data right in Australia. The
Government has introduced the Treasury Laws Amendment (Consumer Data Right)
Bill 2019 into Parliament. If passed, this could give consumers (both individuals andbusinesses) an entitlement to access, and have transferred to accredited third
parties, Ministerially designated data sets that relate to them (the actual entitlement
is subject to the ACCC promulgating rules enlivening the entitlement). The ACCC has
proposed that the major Australian banks (including the Group) would need to makeavailable generic product data about credit and debit cards, deposit accounts andtransaction accounts. Banks would then need to share consumer data about theseproducts no later than February 2020. In February 2020, product and consumer data
for mortgage accounts will need to be made available. Consumer and product data
concerning certain other products (for example, personal and business loans andcertain other accounts) will need to be made available from 1 July 2020. The
implementation of Open Banking as proposed is contingent upon the passage of theBill through the Australian Parliament. Open Banking may lead to increased
competition, which may adversely affect the Group’s Position.

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“2 Strikes” Rule
Under Australia’s “2 strikes” rule applicable to public companies listed on ASX, 2
successive votes of 25% or more against the adoption of the Company’s
remuneration report would require the Company to put an ordinary resolution toshareholders to determine whether to hold a “spill meeting” where all non-executive
Directors who approved the most recent remuneration report would need to standfor re-election by shareholders (by ordinary resolution). It should be noted that
under the ASX rules and the Company’s Constitution, non-executive Directors mustnormally stand for re-election every 3 years and under the Corporations Act 2001
and the Company’s Constitution, shareholders with sufficient standing can seek toremove or appoint non-executive Directors (by ordinary resolution) at any time (viageneral meeting) or at an Annual General Meeting.
While the adoption of the remuneration report was approved by shareholders at the2018 AGM, there were sufficient votes against the adoption of it for ANZ to receive
its “first strike” under the “2 strikes” rule.
New Zealand Developments
The New Zealand Government and its agencies, including the RBNZ, the FMA and the
New Zealand Commerce Commission, have supervisory oversight of the Group’s New
Zealand businesses. There have been a series of regulatory releases from these andother authorities that have proposed significant regulatory changes for financial
institutions. These changes include, among other things:•

RBNZ revised outsourcing policy in September 2017 and ANZ New Zealand’s
revised conditions of registration;•

Discussion Paper on RBNZ’s review of capital requirements;•

the enactment of the Financial Services Legislation Amendment Act 2019 andreplacement of the Financial Advisers Act 2008;•

the New Zealand Government review of the Reserve Bank Act; and•proposed amendments to the Credit Contracts and Consumer Finance Act 2003.

Other Offshore Developments
In addition to the various legal, regulatory and prudential developments describedabove, there have been a series of other regulatory developments in Relevant
Jurisdictions other than Australia and New Zealand. These include, by way of
example:•proposals for changes to financial regulations in the United States (including
potential legislative changes to the Dodd-Frank Act and potential revision to its
Volcker Rule);•changes to senior executive accountability in Singapore and Hong Kong;•changes to English and European law following Brexit;•

introduction of greater data protection regulations in Europe, including theGeneral Data Protection Regulations which came into effect in May 2018;•

the Markets in Financial Instruments Directive 2 in the European Economic Area;
and•

implementation of phases 4 and 5 of the initial margin requirements foruncleared OTC derivatives in a number of the Relevant Jurisdictions. These rules
are commonly referred to as the Uncleared Margin Rules (nUMR”), and margin
collected and posted under UMR is referred to as “regulatory margin.” As agreed
in the revised implementation timeline with the Basel Committee on Bank

Page 10 of 27

Supervision and International Organization of Securities Commissions, UMR
began to be phased-in in September 2016 for the largest market participants.
Broader implementation of variation margin (“VM”) requirements occurred in
March 2017, while initial margin (“IM”) requirements continue to phase-in
annually through 2020. For example, in the United States, U.S. prudential
regulators and the CFTC have implemented UMR and, for certain swap dealers,
including ANZ, through guidance issued by the regulators the VM compliance
date was extended to 1 September 2017. The final phases of UMR will occur on
1 September 2019 and 2020, when a large number of additional counterparties
will be brought into scope for IM requirements. The significant number ofcounterparties coming into scope in the final phases will create a significant
demand on market resources across participants and service providers in a
relatively short time period. This transition requires significant operational andtechnology builds that must be undertaken to meet the new demand. In
addition, there are a large number of contractual agreements to be negotiatedbetween and among counterparties and collateral custody agents.
Examples of recent heightened scrutiny from authorities in Australia include thefollowing:
Royal Commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial
Services Industry was established in December 2017. The Government released thefinal report of the Commission in February 2019. The Commission has made 76
recommendations concerning law reform, self-regulatory standards and theoperations of ASIC and APRA. The Government and the opposition Australian Labor
Party have released their intended responses to the recommendations. Depending on
how the recommendations are implemented by Government post the upcoming
elections, and followed by regulatory agencies, they could result in additional costs
and may lead to further exposures, including exposures associated with further
regulator activity or potential customer exposures such as class actions, individual
claims or customer remediation or compensation activities. The recommendations
may also lead to adjustments in the competitive environment of the Group. The
outcomes and total costs associated with these possible exposures and changes
remain uncertain.
Productivity Commission
The Productivity Commission, an independent research and advisory body to theAustralian Government, has undertaken an inquiry into competition in Australia’s
financial system. The final report of the Productivity Commission was released inAugust 2018. The Australian Government's response to the final report may lead toregulatory change, which may adversely affect the Group's Position.
Mortgage Price Inquiry
In May 2017, the Federal Treasurer directed the ACCC to conduct an inquiry into
prices charged or proposed to be charged by ADIs affected by the Major Bank Levy inrelation to residential mortgage products. A final report was published on 11
December 2018. Findings in the report may lead to competition related policychanges or increased regulatory scrutiny.
Foreign Exchange Inquiry
In October 2018, the ACCC commenced an inquiry into foreign currency conversion
services. The ACCC will examine price competition amongst suppliers of foreign
currency conversion services and consider whether there are impediments toeffective competition. The ACCC is expected to provide its final report to the Federal
Treasurer in May 2019.
Page 11 of 27

Any failure by the Group to comply with laws, regulations and policies in any
Relevant Jurisdiction may adversely affect the Group’s Position. This may include
regulatory investigations, legal or regulatory sanctions, financial or reputational loss,
litigation, fines, penalties, restrictions on the Group’s ability to do business,
revocation, suspension or variation of conditions of relevant regulatory licences orother enforcement or administrative action or agreements (such as enforceable
undertakings).
Such failures also may result in the Group being exposed to the risk of litigation
brought by third parties (including through class action proceedings). The outcome ofany litigation (including class action proceedings) may result in the payment ofcompensation to third parties and/or further remediation activities. For information in
relation to the Group’s litigation and contingent liabilities, see risk factor 28“Litigation and contingent liabilities may adversely affect the Group’s Position” andNote 19 of condensed consolidated financial statements for the period ended 31
March 2019 as set out in the Group’s 2019 Half Year Results Announcement “2019Interim Financial Statements”.
5.

Significant fines and sanctions in the event of breaches of law or regulation
relating to anti-money laundering, counter-terrorism financing andsanctions may adversely affect the Group’s Position
Anti-money laundering, counter-terrorist financing and sanctions compliance havebeen the subject of significant regulatory change and enforcement in recent years.
The increasingly complicated environment in which the Group operates hasheightened these operational and compliance risks. Furthermore, the upward trend incompliance breaches by global banks and the related fines and settlement sums
mean that these risks continue to be an area of focus for the Group. Following the
AUSTRAC civil penalty proceedings in 2017 against a major Australian bank relating
to alleged past and ongoing contraventions of the AML Act, there may be increased
regulatory scrutiny of other Australian banks, including the Group, and significant
changes to the anti-money laundering regulatory framework. While the full scope ofany changes, if any, is not known, the Group may incur additional costs associatedwith regulatory compliance that may adversely affect the Group’s Position. The riskof non-compliance with anti-money laundering, counter-terrorist financing andsanction laws remains high given the scale and complexity of the Group. For
example, emerging technologies, such as cryptocurrencies, may limit the Group’s
ability to track the movement of funds. A failure to operate a robust programme tocombat money laundering, bribery and terrorist financing or to ensure compliancewith economic sanctions may have serious financial, legal and reputational
consequences for the Group and its employees. Consequences can include fines,
criminal and civil penalties, civil claims, reputational harm and limitations on doing
business in certain jurisdictions. These consequences, individually or collectively may
adversely affect the Group’s Position. The Group’s foreign operations may place theGroup under increased scrutiny by regulatory authorities, and subject the Group to
increased compliance costs.

6.

Weakening of the real estate markets in Australia, New Zealand or othermarkets where the Group does business may adversely affect the Group’s
Position
Residential and commercial property lending, together with real estate development
and investment property finance, constitute important businesses of the Group.
Major sub-segments within the Group's lending portfolio include:•

residential housing loans (owner occupier and investment); andPage 12 of 27

•

commercial real estate loans.

Since 2009, the world’s major central banks have embarked upon unprecedented
monetary policy stimulus. The resulting weight of funds searching for yield continues
to drive underlying property markets in the Group’s core property jurisdictions(Australia, New Zealand, Singapore and Hong Kong). Values for completed tenanted
properties and residential house prices, particularly in metro east coast Australianand New Zealand markets, have steadily risen until 2018. The fall in Australian house
prices in 2018 was the largest since the GFC. Nationally house prices are approximately
7% below their late 2017 peak, although they are still almost 30% higher since the startof 20131.
Should the Group’s regulators impose supervisory measures impacting the Group’s
residential or commercial lending, or if Australian residential and commercial
property price growth subsides or valuations decline, the demand for the Group’s
residential and commercial property lending products may decrease which may
adversely affect the Group’s Position. Declining asset prices could impact customers
and counterparties and the value of the security (including residential andcommercial property) the Group holds against loans which may impair the Group’s
ability to recover amounts owing to the Group if customers or counterparties were todefault. A significant decrease in Australian and New Zealand housing valuations
triggered by, for example, an event or a series of events in the local or global
economy or lack of confidence in market values, and in conjunction with higher costof living, rising interest rates and/or rising unemployment, could adversely impact
the Group’s residential lending activities. In the case of residential loans, customers
with high levels of leverage could show a higher propensity to default, and in theevent of such defaults the decrease in security values, could cause the Group to
incur higher credit losses, which may adversely affect the Group’s financial
performance. The demand for the Group’s residential lending products may also
decline due to buyer concerns about decreases in values or concerns about risinginterest rates, which may make the Group’s lending products less attractive topotential homeowners and investors. A material decline in residential housing prices
may also cause losses in the Group’s residential development portfolio if customers
who are pre- committed to purchase these dwellings are unable or unwilling tocomplete their contracts and the Group is forced to re-sell these dwellings at a loss.
The Group's portfolio of commercial property loans may be particularly susceptible toasset price deflation, tenancy risk and delivery risk, which may result in higher credit
losses, refinance risk and deteriorating security values. A significant decrease incommercial property valuations or a significant slowdown in the commercial realestate markets in the Relevant Jurisdictions could result in a decrease in new lending
opportunities or lower recovery rates which may in turn materially and adversely
impact the Group’s Position.
7.

Credit risk may adversely affect the Group’s Position
As a financial institution, the Group is exposed to the risks associated with extending
credit to other parties, including incurring credit-related losses that can occur as aresult of a counterparty being unable or unwilling to honour its contractual
obligations. Credit losses can and have resulted in financial services organisations
realising significant losses and in some cases failing altogether. The Group is also
subject to the risk that its rights against third parties may not be enforceable incertain circumstances, which may result in credit losses. Should material credit losses
occur to the Group’s credit exposures, this may adversely affect the Group’s Position.

1 Source: RBA Financial Stability Review, April 2019
Page 13 of 27

Less favourable business or economic conditions, whether generally or in a specificindustry sector or geographic region, or natural disasters, could cause customers or
counterparties to fail to meet their obligations in accordance with agreed terms.
For example, the Group’s customers and counterparties in or with exposure to:•

the Australian natural resources sector which is particularly exposed to any
prolonged slowdown in the Chinese economy could be materially and adversely
impacted by a decline in natural resource prices;•former government owned and now privatised assets such as electricity
distribution networks, ports, road and rail networks could be materially andadversely impacted if these assets were being valued at historically high levels
due to the value of the capital and profitability of these investments being
vulnerable to changes in government regulatory policy, interest rate andcurrency exchange rate movements. Long-term interest rate and currency
hedges are provided by banks, including the Group, to manage these risks.
These long-term hedge exposures have volatile mark to market characteristics
which are unsupported by collateralised security agreements for out of themoney positions. Counterparty insolvency has the potential to expose the Groupto large uncovered derivative liabilities; and•the dairy industry in Australia and New Zealand, which is particularly exposed toexcess milk production from other developed countries being sold into traditional
markets, could be materially and adversely impacted by a decline in commodity
prices.

Credit risk may also arise from certain derivative, clearing and settlement contracts
the Group enters into, and from the Group’s dealings with, and holdings of, debt
securities issued by other banks, financial institutions, companies, governments andgovernment bodies where the financial conditions of such entities are affected byeconomic conditions in global financial markets.
The risk of credit-related losses may also be increased by a number of factors,
including deterioration in the financial condition of the economies in which the Group
operates, a sustained high level of unemployment in the markets in which the Group
operates, more expensive imports into Australia and New Zealand due to the reduced
strength of the Australian and New Zealand dollars relative to other currencies, adeterioration of the financial condition of the Group’s counterparties, a reduction in
the value of assets the Group holds as collateral, and a reduction in the market valueof the counterparty instruments and obligations it holds.
In addition, in assessing whether to extend credit or enter into other transactions
with customers and/or counterparties, the Group relies on information provided by oron behalf of customers and/or counterparties, including financial statements andother financial information. The Group may also rely on representations of customers
and independent consultants as to the accuracy and completeness of that
information. The Group’s financial performance could be negatively impacted to theextent that it relies on information that is inaccurate or materially misleading.
The Group holds provisions for credit impairment. The amount of these provisions isdetermined by assessing the extent of impairment inherent within the Group’s lending
portfolio, based on current information. This process, which is critical to the Group’s
Position, requires subjective and complex judgements, including forecasts of how
current and future economic conditions might impair the ability of borrowers to repay
their loans. However, if the information upon which the assessment is made proves
to be inaccurate or if the Group fails to analyse the information correctly, theprovisions made for credit impairment may be insufficient, which may adversely
affect the Group’s Position.

Page 14 of 27

8.

Challenges in managing the Group’s capital base could give rise to greater
volatility in capital ratios, which may adversely affect the Group’s Position
The Group’s capital base is critical to the management of its businesses and accessto funding. Prudential regulators of the Group include, but are not limited to, APRA,RBNZ and various regulators in the United States, the United Kingdom and thecountries in the Asia Pacific region. The Group is required by its primary regulator,
APRA, to maintain adequate regulatory capital.
Under current regulatory requirements, risk-weighted assets and expected loan
losses increase as counterparty’s risk grade worsens. These regulatory capitalrequirements are likely to compound the impact of any reduction in capital resulting
from lower profits in times of stress. As a result, greater volatility in capital ratios
may arise and may require the Group to raise additional capital. There can be no
certainty that any additional capital required would be available or could be raised onreasonable terms.
The Group’s capital ratios may be affected by a number of factors, such as (i) lower
earnings (including lower dividends from its deconsolidated subsidiaries such as thosein the insurance and funds management businesses as well as from its investment inassociates), (ii) increased asset growth, (iii) changes in the value of the Australian
dollar against other currencies in which the Group operates (particularly the New
Zealand dollar and U.S. dollar) that impact risk weighted assets or the foreign
currency translation reserve (iv) changes in business strategy (including acquisitions,divestments and investments or an increase in capital intensive businesses) and (v)changes in regulatory requirements.
APRA has now implemented prudential standards to accommodate Basel 3. Certain
other regulators have either implemented or are in the process of implementing
regulations, including Basel 3, which seek to strengthen, among other things, theliquidity and capital requirements of banks, funds management entities and insurance
entities, though there can be no assurance that these regulations have had or will
have their intended effect. These regulations, together with any risks arising fromany regulatory changes (including those arising from APRA’s response to theremaining FSI recommendations, further changes from APRA’s “unquestionably
strong” requirements or the requirements of the BCBS), are described in risk factor 4"Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s Position".

9.

The Group’s credit ratings could change and adversely affect the Group’s
ability to raise capital and wholesale funding and constrain the volume of
new lending which may adversely affect the Group’s Position
The Group’s credit ratings have a significant impact on both its access to, and cost of,capital and wholesale funding. They may also be important to customers or
counterparties when evaluating the Group’s products and services. Credit ratings andrating outlooks may be withdrawn, qualified, revised or suspended by credit rating
agencies at any time. The methodologies used by ratings agencies to determine
credit ratings and rating outlooks may be revised in response to legal or regulatorychanges, market developments or for any other reason.
The Group’s credit ratings or rating outlooks could be affected by a change in thecredit rating of the Commonwealth of Australia, the occurrence of one or more of theother risks identified in this document, a change in the ratings methodologies or byother events. As a result, downgrades in the Group’s credit ratings could occur that
do not reflect changes in the general economic conditions or the Group's financial
condition.
In addition, the ratings of individual securities (including, but not limited to, certain
Page 15 of 27

Tier 1 capital and Tier 2 capital securities and covered bonds) issued by the Group(and other banks globally) could be impacted from time to time by changes in theregulatory requirements for those instruments as well as the ratings methodologies
used by rating agencies.
Any future downgrade or potential downgrade to the Group’s credit ratings or rating
outlooks may reduce access to capital and wholesale debt markets, which could leadto an increase in funding costs, constraining the volume of new lending and affect thewillingness of counterparties to transact with the Group, which may adversely affect
the Group’s business, operations, financial condition and reputation.
Credit ratings are not a recommendation by the relevant rating agency to invest in
securities offered by the Group.
10. Operational risk events may adversely affect the Group’s Position

Operational risk is the risk of loss and/or non-compliance with laws resulting frominadequate or failed internal processes, people and systems or from external events.
This definition includes legal risk, and the risk of reputational loss or damage arisingfrom inadequate or failed internal processes, people, and/or systems, but excludes
strategic risk.
Operational risk is typically classified into risk event type categories to measure andcompare risks on a consistent basis. Examples of operational risk events according tocategory are as follows:•internal fraud: fraud involving employees, contractors or any internal party to
the Group who acts by deception or with dishonesty to obtain property belonging
to another or obtain financial advantage for themselves or cause any financial
disadvantage to the Group or others. This includes financial planners and/or
authorised representatives (and their employees) of dealer groups owned orcontrolled by ANZ;•

external fraud: fraudulent acts or attempts which originate from outside theGroup more commonly associated with digital banking, lending, and cards
products. Specific threats include ATM skimming, malware and phishing attacks
and fraudulent applications and transactions, where financial advantage is
obtained;•

employment practices and workplace safety: employee relations, diversity anddiscrimination, and health and safety risks to the Group’s employees;•

loss of key staff or inadequate management of human resources including the
Chief Executive Officer (“CEO”) and the management team of the CEO;•clients, products and business practices: risk of market manipulation or anticompetitive behaviour, failure to comply with disclosure obligations, productdefects, incorrect advice, money laundering and misuse or unauthorised
disclosure of customer information;•business disruption (including systems failures): risk that the Group’s banking
operating systems are disrupted or fail;•damage to physical assets: risk that a natural disaster or terrorist or vandalism
attack damages the Group’s buildings or property; and•execution, delivery and process management: is associated with losses resulting
from, among other things, process errors made by the Group’s employees
caused by inadequate or poorly designed internal processes, or the poor
execution of standard processes, vendor, supplier or outsource provider errors,
failures in the management of data and data integrity or failed mandatory
reporting errors.

Loss from operational risk events may adversely affect the Group’s Position. Suchlosses can include fines, penalties, loss or theft of funds or assets, legal costs,
Page 16 of 27

customer compensation, loss of shareholder value, reputation loss, loss of life or
injury to people, and loss of property and/or information.
11. Reputational risk events as well as operational failures and regulatorycompliance failures may give rise to reputational risk which may adversely
affect the Group’s Position
Reputational risk may arise as a result of an external event or the Group’s own
actions, which include operational and regulatory compliance failures, and adversely
affect perceptions about the Group held by the public (including the Group’s
customers), shareholders, investors, regulators or rating agencies. The impact of arisk event on the Group’s reputation may exceed any direct cost of the risk event
itself and may adversely impact the Group’s Position.
The Group may incur reputational damage where one of its practices fails to meet
community expectations. As these expectations may exceed the standard required inorder to comply with applicable law, the Group may incur reputational damage even
where it has met its legal obligations. A divergence between community expectations
and the Group’s practices could arise in a number of ways, including in relation to our
product and services disclosure practices, pricing policies and use of data. Further,
the Group’s reputation may also be adversely affected by community perception of
the broader financial services industry.
Additionally, certain operational and regulatory compliance failures may give rise to
reputational risk. Such operational and regulatory compliance failures include, but are
not limited to:•

failures related to fulfilment of identification obligations;•new failures related to new product development;•

failures related to ongoing product monitoring activities;•

failures related to suitability requirements when products are sold outside of thetarget market;•

market manipulation or anti-competitive behaviour;•

failure to comply with disclosure obligations;•inappropriate crisis management/response to a crisis event;•

inappropriate handling of customer complaints;•

inappropriate third party arrangements;•

privacy breaches; and•unexpected risks (e.g. credit, market, operational or compliance).

Damage to the Group’s reputation may have wide-ranging impacts, including
adverse effects on the Group’s profitability, capacity and cost of sourcing funding,increased regulatory scrutiny and availability of new business opportunities. The
Group’s ability to attract and retain customers could also be adversely affected if theGroup’s reputation is damaged, which may adversely affect the Group’s Position.
12. Conduct-related risk events or behaviours may adversely affect the Group’s

Position
The Group defines conduct-related risk as the risk of loss or damage arising from thefailure of the Group, its employees or agents to appropriately consider the interestsof consumers, the integrity of the financial markets, and the expectations of thecommunity in conducting the Group’s business activities.
Conduct-related risks can result from:Page 17 of 27

•

the provision of unsuitable or inappropriate advice (for example, advice that is
not commensurate with a customer’s needs and objectives or appetite for risk);•

the representation of, or disclosure about, a product or service which is
inaccurate, or does not provide adequate information about risks and benefits tocustomers;•a failure to deliver product features and benefits in accordance with terms,
disclosures, recommendations and/or advice;•a failure to appropriately avoid or manage conflicts of interest;•

sales and/or promotion processes (including incentives and remuneration for
staff engaged in promotion, sales and/or the provision of advice);•the provision of credit, outside of the Group’s policies and standards; and•trading activities in financial markets, outside of the Group’s policies andstandards.

The Group is regulated under various legislative regimes in the countries in which it
operates that provide for customer protection in relation to advisory, marketing andsales practices. These may include, but are not limited to, appropriate managementof conflicts of interest, appropriate accreditation standards for staff authorised toprovide advice about financial products and services, disclosure standards, standards
for ensuring adequate assessment of client/product suitability, quality assurance
activities, adequate record keeping, and procedures for the management ofcomplaints and disputes.
There has been an increasing regulatory and community focus on conduct-related
risk globally. For further discussion, see risk factor 4 “Regulatory changes or a failure
to comply with laws, regulations or policies may adversely affect the Group’s
Position” and risk factor 28 “Litigation and contingent liabilities may adversely affect
the Group’s Position”.
Conduct-related risk events may expose the Group to regulatory actions, restrictions
or conditions on banking licences and/or reputational consequences which may
adversely affect the Group's Position.
13. Disruption of information technology systems or failure to successfully

implement new technology systems could significantly interrupt the Group’sbusiness, which may adversely affect the Group’s Position
The Group and its service offerings (including digital banking) are highly dependent
on information technology systems. Therefore, there is a risk that these information
technology systems, or the services the Group uses or is dependent upon, might bedisrupted, due to hardware or software or third party service provider failure, as wellas cyber-attacks, such as a distributed denial of service.
Most of the Group’s daily operations are computer-based and information technology
systems are essential to providing effective services to customers. The Group is also
conscious that threats to information technology systems are continuously evolving
and that cyber threats and risk of attacks are increasing. The Group may not be able
to anticipate or implement effective measures to prevent or minimise disruptions
caused by cyber threats because the techniques used can be highly sophisticatedand those perpetuating the attacks may be well- resourced. Service disruption risks
includes the complete or partial failure of platform software or hardware
components, including internal data centre or cloud based infrastructure, due toamong other things, third party misperformance, capacity constraints toaccommodate growth, asset obsolescence, architectural complexity or failed systemchanges.
To manage these risks, the Group has system resilience, disaster recovery, asset
lifecycle, cyber protection and change management measures in place. However,Page 18 of 27

there can be no guarantee that the steps the Group is taking in this regard will beeffective and any failure of systems could result in business interruption, customer
dissatisfaction and turnover, legal or regulatory breaches and fines and ultimately
damage to reputation and/or a weakening of the Group’s competitive position, which
may adversely affect the Group’s Position.
In addition, the Group has an ongoing obligation to refresh, update and implement
new information technology systems, to ensure currency and information security
resiliency and to enhance business capabilities and digital banking services for theGroup’s customers. For example, the Group is working towards implementing the
new Open Banking regime and simplified architectures for its core banking
applications. The Group may not implement these projects effectively or execute
them efficiently, which could lead to increased project costs, delays in complying withregulatory requirements, unstable or insecure systems or a decrease in the Group’s
ability to service its customers. ANZ New Zealand relies on the Group to provide anumber of information technology systems, and any failure of the Group’s systems
may directly affect ANZ New Zealand.
14. Risks associated with information security including cyber-attacks, may

adversely affect the Group’s Position
Information security means protecting information and information technology
systems from unauthorised access, use, disclosure, disruption, modification, perusal,
inspection, recording or destruction. As a bank, the Group handles a considerable
amount of personal and confidential information about its customers and its own
internal operations, including in Australia, New Zealand, India, the United States,
Europe, Singapore and China. This information is processed and stored on bothinternal and third party hosted environments, hence security controls need to be
operated effectively by the Group and its vendors to ensure information issafeguarded.
The Group operates in multiple countries and the risks to its systems are inherently
higher in certain countries where, for example, political threats or targeted cyberattacks by terrorist or criminal organisations are greater.
The Group employs a team of information security experts who are responsible forthe development and implementation of the Group’s Information Security Policy andControls.
The Group is conscious that cyber threats, such as advanced persistent threats,
distributed denial of service, malware and ransomware, are continuously evolving,
becoming more sophisticated and increasing in volume and that it may be unable toanticipate and implement control measures effectively and timely to adequately
mitigate such risks. Accordingly, information about the Group and/or its customers
may be inadvertently or illegally accessed, stolen and inappropriately distributed
which could result in breaches of privacy laws, regulatory sanctions and fines, legal
action and claims for compensation, or erosion of the Group’s competitive market
position and loss of reputation.
15. Impact of future climate events, geological events, plant, animal and humandiseases, and other extrinsic events may adversely affect the Group’s
Position
The Group and its customers are exposed to climate - related events. These events
include severe storms, drought, fires, cyclones, hurricanes, floods and rising sea
levels. The Group and its customers may also be exposed to other events such as
geological events (including volcanic seismic activity or tsunamis), plant, animal andhuman diseases or a pandemic.
Depending on their severity, events such as these may temporarily interrupt orPage 19 of 27

restrict the provision of some local services such as ANZ branch or business centers
or Group services, and may also adversely affect the Group’s financial condition orcollateral position in relation to credit facilities extended to customers, which may
adversely affect the Group’s business, operations and financial condition.
16. Risks associated with lending to customers that could be directly or

indirectly impacted by climate risk may adversely affect the Group’s
Position
The Group’s most material climate-related risks result from its lending to businessand retail customers, including credit-related losses incurred as a result of acustomer being unable or unwilling to repay debt, or impacting the value andliquidity of collateral.
The Group’s Risk Management Framework incorporates the risks associated withlending to customers that could be directly or indirectly impacted by climate risk,
under our material risk category of Credit Risk. The risk could be directly fromclimate related events, and indirectly from changes to laws, regulations, or otherpolicies such as carbon pricing and climate risk adaptation or mitigation policies,
which may impact the customer’s supply chain or to their own customer’s ability topurchase. This may result in credit related losses as a result of the customer being
unable or unwilling to repay debt, which may adversely affect the Group’s Position.
17. Liquidity and funding risk events may adversely affect the Group’s Position

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 wholesaledebt) or that the Group has insufficient capacity to fund increases in assets. Liquidityand funding risk is inherent in all banking operations due to the timing mismatch
between cash inflows and cash outflows. Reduced liquidity could lead to an increasein the cost of the Group’s borrowings and constrain the volume of new lending, which
may adversely affect the Group’s Position.
Deterioration in market conditions and/or investor confidence in the Group may
materially impact the Group’s ability to replace maturing liabilities and accessfunding (in a timely and cost effective manner), which may adversely impact theGroup’s Position.
The Group raises funding from a variety of sources, including customer deposits andwholesale funding in Australia and offshore markets to meet its funding requirements
and to maintain or grow its business generally. Developments in major markets canadversely affect liquidity in global capital markets. For example, in times of liquidity
stress, if there is damage to market confidence in the Group or if funding inside oroutside of Australia is not available or constrained, the Group’s ability to accesssources of funding and liquidity may be constrained and it will be exposed to liquidityand funding risk. In any such cases, the Group may be forced to seek alternative
funding. The availability of such alternative funding, and the terms on which it may
be available, will depend on a variety of factors, including prevailing market
conditions and the Group’s credit ratings at that time (which are strongly influenced
by Australia’s sovereign credit rating). Even if available, the cost of these funding
alternatives may be more expensive or on unfavourable terms, which may adversely
affect the Group’s Position.
18. Changes in monetary policies may adversely affect the Group’s Position

Central monetary authorities (including the RBA, the RBNZ, the United States
Federal Reserve, the Bank of England and the monetary authorities in the Asian
jurisdictions in which the Group operates) set official interest rates or take othermeasures to affect the demand for money and credit in their Relevant Jurisdictions.
In addition, in some jurisdictions, currency policy is also used to influence general
Page 20 of 27

business conditions and the demand for money and credit. These measures andpolicies can significantly affect the Group’s cost of funds for lending and investing
and the return that the Group will earn on those loans and investments. These factors
impact the Group’s net interest margin and can affect the value of financial
instruments it holds, such as debt securities and hedging instruments. The measuresand policies of the central monetary authorities can also affect the Group’s
borrowers, potentially increasing the risk that they may fail to repay loans. Changes
in interest rates and monetary policy are difficult to predict and may adversely affect
the Group’s Position.
19. Acquisitions and/or divestments may adversely affect the Group’s Position

The Group regularly examines a range of corporate opportunities, including
acquisitions and divestments, with a view to determining whether those opportunities
will enhance the Group’s strategic position and financial performance.
Divestments that the Group has previously announced but not yet completed
include:•OnePath Pensions and Investments in Australia;•

One Path life insurance business in Australia;•

ANZ’s 55% interest in Cambodian joint venture ANZ Royal Bank; and•ANZ’s retail, commercial, small-medium sized enterprise banking businesses in
Papua New Guinea.

The transactions remain subject to regulatory approvals and/or other completion
conditions.
There can be no assurance that any acquisition (or divestment) would have theanticipated positive results, including results relating to the total cost of integration(or separation), the time required to complete the integration (or separation), theamount of longer-term cost savings, the overall performance of the combined (orremaining) entity, or an improved price for the Group’s securities. Additionally, there
are risks relating to the completion of any particular transaction occurring, including
counterparty and settlement risk, or the non-satisfaction of any completion
conditions (for example, relevant regulatory or third party approvals). The Group’s
operating performance, risk profile and capital structure may be affected by these
corporate opportunities and there is a risk that the Group’s credit ratings may beplaced on credit watch or downgraded if these opportunities are pursued.
Integration (or separation) of an acquired (or divested) business can be complex andcostly, sometimes including combining (or separating) relevant accounting and dataprocessing systems, and management controls, as well as managing relevant
relationships with employees, customers, regulators, counterparties, suppliers andother business partners. Integration (or separation) efforts could createinconsistencies in standards, controls, procedures and policies, as well as diverting
management attention and resources. This may adversely affect the Group’s ability
to conduct its business successfully and impact the Group’s operations or results.
Additionally, there can be no assurance that employees, customers, counterparties,
suppliers and other business partners of newly acquired (or retained) businesses willremain post-acquisition (or post - divestment), and the loss of employees,
customers, counterparties, suppliers and other business partners may adversely
affect the Group’s operations or results. Further, there is a risk that completion of anagreed transaction may not occur, including due to failure of the counterparty tosatisfy its completion conditions or because other completion conditions such as
obtaining relevant regulatory or other approvals are not satisfied.

Page 21 of 27

20. Sovereign risk events may destabilise global financial markets and may

adversely affect the Group’s Position
Sovereign risk is the risk that foreign governments will default on their debt
obligations, be unable to refinance their debts as and when they fall due or
nationalise parts of their economy. Sovereign risk remains in many economies,
including the United States, the United Kingdom, China, Europe and Australia. Should
one sovereign default, there could be a cascading effect to other markets andcountries, the consequences of which, while difficult to predict, may be similar to or
worse than those experienced during the global financial crisis and subsequent
sovereign debt crises.
Such events could destabilise global financial markets and adversely affect theGroup’s Position.
21. Market risk events may adversely affect the Group’s Position

Market risk is the risk of loss arising from adverse changes in interest rates, currency
exchange rates, credit spreads, or from fluctuations in bond, commodity or equity
prices. For purposes of financial risk management, the Group differentiates between
traded and non-traded market risks. Traded market risks principally arise from theGroup’s trading operations in interest rates, foreign exchange, commodities andsecurities. The non-traded market risk is predominantly interest rate risk in thebanking book. Other non-traded market risks include transactional and structuralforeign exchange risk arising from capital investments in offshore operations andnon-traded equity risk.
22. Changes in exchange rates may adversely affect the Group’s Position

As the Group conducts business in several different currencies, its businesses may beaffected by a change in currency exchange rates. Additionally, as the Group’s annual
and interim reports are prepared and stated in Australian dollars, any appreciation in
the Australian dollar against other currencies in which the Group earns revenues(particularly to the New Zealand dollar and U.S. dollar) may adversely affect theGroup’s reported earnings.
The Group has put in place hedges to partially mitigate the impact of currencychanges, but there can be no assurance that the Group’s hedges will be sufficient oreffective, and any further appreciation may have an adverse impact upon the Group’s
earnings.
23. Unexpected changes to the Group’s licence to operate in any jurisdiction

may adversely affect the Group’s Position
The Group is licensed to operate in various countries, states and territories.
Unexpected changes in the conditions of the licenses to operate by governments,
administrations or regulatory agencies which prohibit or restrict the Group fromtrading in a manner that was previously permitted may adversely impact the Group’s
Position.
24. Insurance risk events may adversely affect the Group’s Position

Insurance risk is the risk of loss due to unexpected changes in current and future
insurance claim rates. The Group is exposed to insurance risk events, predominantlyin the Group’s life insurance business in Australia which is a Discontinued Operation,
the sale of which is expected prior to the end of financial year 2019. In the Group’s
life insurance business, insurance risk arises primarily through mortality (death) andmorbidity (illness and injury) risks being greater than expected and, in the case ofannuity business, should annuitants live longer than expected. If the Group incurs
losses due to insurance risk events, such losses may adversely affect the Group’s
Position.
Page 22 of 27

25. Increasing compliance costs, the risk of heightened penalties and ongoingregulatory scrutiny with respect to the significant obligations imposed by
global tax reporting regimes (which are still evolving), may adversely affect
the Group’s Position
There have been important and substantial changes to, and increasing regulatory
focus on, compliance by all global financial institutions, including the Group, with
global tax reporting regimes, including the United States Foreign Account Tax
Compliance Act (“FATCA”), the OECD’s Common Reporting Standard (“CRS”) andsimilar anti-tax avoidance regimes. Current regulatory focus also includes
enforcement and the due implementation of detailed global tax reporting rules andframeworks to close down the circumvention of global tax reporting regimes andenforcement in the case of non-compliance.
As a global financial institution, the Group operates in a high volume and globallyinterlinked operating environment. The highly complex and rigid nature of theobligations under the various global tax reporting regimes in this context present
heightened operational and compliance risks for the Group. This may be coupled withthe current increased regulatory scrutiny of global financial institutions (including theGroup) and the increasing trend in compliance breaches by global financial
institutions and related fines for non-compliance in general. Accordingly, compliancewith global tax reporting regimes will continue to be a key area of focus for theGroup.
The scale and complexity of the Group, like other global financial institutions, meansthat the risk of inadvertent non-compliance with the FATCA, CRS and other tax
reporting regimes is high. A failure to successfully operate the implemented
processes could lead to legal, financial and reputational consequences for the Groupand its employees. Consequences include fines, criminal and civil penalties, civil
claims, reputational harm, competitive disadvantage, loss of business and constraints
on doing business. These consequences, individually or collectively, may adversely
affect on the Group’s Position.
FATCA requires financial institutions globally to undertake ongoing and extensive
customer based obligations, including collecting and providing information on
account holders who are identified as U.S. citizens or tax residents to the U.S.
Internal Revenue Service (“IRS”), either directly or via local tax authorities.
If the ongoing detailed obligations under FATCA are not adequately met, the Group
and/or customers could be subject to a 30 percent withholding tax on certain
amounts payable to them. Under a related but separate set of obligations under
FATCA, the United States could also require the Group to provide certain information
to upstream United States payers and the Group could face adverse consequenceswhere it does not do so in line with the applicable rules and regulations.
The Group is also reliant upon Intergovernmental Agreements (“IGAs”) between the
United States and the applicable jurisdictions in which the Group’s related entities
and subsidiaries are organised continuing to be in effect (in order to overcome any
local law impediments). Otherwise the Group may also be subject to broader
compliance issues, significant withholding exposure, competitive disadvantage andother operational impacts.
The CRS provides for the Automatic Exchange of (financial account) Information intax matters. Over 100 jurisdictions have committed to implement the CRS which now
impacts the vast majority of the Group’s business globally. Early implementation
phases are progressing in many countries in which the Group has operations, forPage 23 of 27

example, Australia, New Zealand, Cayman Islands, Hong Kong, Japan, Singapore
and the United Kingdom.
Implementation is also required, but presents unique challenges in, developing
countries where the Group has operations, such as in the Pacific region. The local
regulators in these countries are generally assisted by a ‘partner’ country which may
introduce standards which can be challenging to implement.
CRS requirements, though similar to FATCA in spirit, have considerable country bycountry variations and may have more significant and negative customer experienceramifications. For example, CRS requires a higher standard of compliance in many
respects, such as collection of self-certification at the point of account opening, withsignificant penalties for non-collection or failed reporting in respect of prescribedcustomer information.
As one example of tightening regulatory focus, the OECD and certain countries theGroup operates within are now moving to mandate blocking (and eventual closure) of
accounts where any aspect of the detailed requirements for collection have not beenmet (e.g. failure to provide the requisite tax identification number(s)). Along withbeing a significant negative experience for the relevant customers, this may
adversely affect the Group’s Position (and if not similarly implemented by financial
institution counterparts, may present a significant competitive disadvantage).
Ongoing OECD peer review and other regulatory review activities are also alreadyresulting in further extension and expansion of existing obligations together withincreased focus on compliance with the CRS pushing each country of adoption toensure that its penalty regime is sufficiently adequate to deter financial institution,intermediary and customer non-compliance.
In line with other global financial institutions, the Group has made, and is expected
to continue to make, significant investments in order to seek to ensure ongoingcompliance with the extensive and evolving requirements of FATCA, the CRS,
avoidance and loophole model rules and the various other in-country tax reporting
initiatives in each country within its global network.
26. Changes in the valuation of some of the Group’s assets and liabilities may

adversely affect the Group’s earnings and/or equity
The Group applies accounting standards which require that various financial
instruments, including derivative instruments, assets and liabilities classified as fairvalue through other comprehensive income, and certain other assets and liabilities(as per Note 14 of the 2019 Interim Financial Statements) are measured at fair value
with changes in fair value recognised in earnings or equity.
Generally, in order to establish the fair value of these instruments, the Group relies
on quoted market prices or, where the market for a financial instrument is not
sufficiently active, fair values are based on present value estimates or othervaluation techniques which incorporate the impact of factors that would influence thefair value as determined by a market participant. The fair value of these instruments
is impacted by changes in market prices or valuation inputs which may have amaterial adverse effect on the Group’s earnings and/or equity.
In addition, the Group may be exposed to a reduction in the value of non-lending
related assets as a result of impairments which are recognised in earnings. The
Group is required to assess the recoverability of goodwill balances at least annuallyand other non-lending related assets including premises and equipment, investment
in associates, capitalised software and other intangible assets (including acquired
portfolio of insurance and investment business and deferred acquisition costs) where
there are indicators of impairment.

Page 24 of 27

For the purpose of assessing the recoverability of the goodwill balances, the Group
uses either a discounted cash flow or a multiple of earnings calculation. Changes in
the assumptions upon which the calculation is based, together with expected changes
in future cash flows, may materially impact this assessment, resulting in the potential
write-off of a part or all of the goodwill balances.
In respect of other non-lending related assets, in the event that an asset is no longer
in use, or that the cash flows generated by the asset do not support the carrying
value, impairment may be recorded.
27. Changes to accounting policies may adversely affect the Group’s financial

position and results of operations
The accounting policies that the Group applies are fundamental to how it records andreports its financial position and results of operations. Management must exercise
judgement in selecting and applying many of these accounting policies so that they
not only comply with the applicable accounting standards or interpretations but thatthey also reflect the most appropriate manner in which to record and report on theGroup’s financial position and results of operations. However, these accounting
policies may be applied inaccurately, resulting in a misstatement of the Group’s
financial position and results of operations. In addition, the application of new orrevised accounting standards or interpretations may adversely affect the Group’s
financial position and results of operations. The impact of new accounting standards
effective for the first time in the Group’s 2019 financial year is outlined in Note 1 ofthe 2019 Interim Financial Statements.
In some cases, management must select an accounting policy from two or morealternatives, any of which would comply with the relevant accounting standard orinterpretation to the Group and be reasonable under the circumstances, yet might
result in reporting materially different outcomes than would have been reported
under the alternative.
28. Litigation and contingent liabilities may adversely affect the Group’s

Position
From time to time, the Group may be subject to material litigation, regulatory
actions, legal or arbitration proceedings and other contingent liabilities which may
adversely affect the Group’s Position.
The Group had contingent liabilities as at March 31, 2019 in respect of the matters
outlined in Note 19 of the 2019 Interim Financial Statements.
Note 19 includes, among other things, descriptions of:bank fees litigation;benchmark/rate actions;capital raising actions;

franchisee litigation;regulatory and customer exposures;the Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry; and

security recovery actions.

In recent years there has been an increase in the number of matters on which theGroup engages with its regulators. There have been significant increases in thenature and scale of regulatory investigations and reviews, civil and criminal
enforcement actions (whether by court action or otherwise) and the quantum of fines
issued by regulators, particularly against financial institutions both in Australia andPage 25 of 27

globally. The nature of these interactions can be wide ranging and, for example,
currently include a range of matters including responsible lending practices, productsuitability and distribution, interest and fees and the entitlement to charge them,
wealth advice, insurance distribution, pricing, competition, conduct in financial
markets and capital market transactions, reporting and disclosure obligations andproduct disclosure documentation . The Group has received various notices andrequests for information from its regulators as part of both industry-wide and Groupspecific reviews and has also made disclosures to its regulators at its own instigation.
There may be exposures to customers which are additional to any regulatory
exposures. These could include class actions, individual claims or customer
remediation or compensation activities. The outcomes and total costs associated withsuch reviews and possible exposures remain uncertain.
There is a risk that contingent liabilities may be larger than anticipated or that
additional litigation, regulatory actions, legal or arbitration proceedings or othercontingent liabilities may arise.

Page 26 of 27

Responsibility statement of the Directors of ANZBGL in accordance with DTR
4.2.10 R (3)(b) of the Disclosure and Transparency Rules of the United
Kingdom Financial Conduct Authority
The Directors of Australia and New Zealand Banking Group Limited confirm to the best of
their knowledge that:
ANZ’s 2019 Half-Yearly Financial Report (as defined on page 1 of this DTR half-yearlyfinancial report submission) includes a fair review of:(i)an indication of the important events that have occurred during the first six
months of the financial year, and their impact on the Condensed Consolidated
Financial Statements; and(ii)

a description of the principal risks and uncertainties for the remaining six monthsof the financial year.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

30 April 2019

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