5 November 2018

Company Announcements
Australian Securities Exchange
Level 420 Bridge Street
SYDNEY NSW 2000

Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) - Annual 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 the Group’s Annual Report and ANZBGL’s 2018
Financial Statements for the year ended 30 September 2018. This UK DTR Submission
has been prepared by ANZBGL in order to comply with the applicable periodic reporting
requirements of DTR 4 of the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority in connection with certain debt securities issued by ANZBGL.
For completeness, in addition to lodgement with the LSE, ANZBGL is lodging this UK DTR
Submission with the Australian Securities Exchange (“ASX”) 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

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

5 November 2018DISCLOSURE AND TRANSPARENCY RULES – ANNUAL FINANCIALREPORT SUBMISSION
Australia and New Zealand Banking Group Limited (“ANZBGL” or
the “Company”) together with its subsidiaries (“ANZ” or the “Group”) –AnnualFinancial
Reportsubmission
under
the
DisclosureandTransparency Rules (“DTR”) of the United Kingdom Financial Conduct
Authority
The following attached documents constitute ANZ’s 2018 Annual Financial Report forthe purposes of the disclosure requirements of DTR 4.1:



The Group’s 2018 Annual Report for the year ended 30 September 2018;

The Company’s 2018 Financial Statements for the year ended 30 September 2018;

A description of the principal risks and uncertainties for the Group provided inaccordance with DTR 4.1.8 (2); andA responsibility statement of the Directors of ANZBGL provided in accordance withDTR 4.1.12 (3)(b).

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

1

ANZ’s 2018 Annual Report and ANZBGL’s 2018 Financial Statements
These documents were separately lodged by ANZ with applicable stock exchanges,
including the London Stock Exchange and the Australian Securities Exchange, on
5 November 2018.

2

Principal risks and uncertainties faced by the Group (DTR 4.1.8 (2))
1. Introduction
The Group’s activities are subject to risks that can adversely impact its business, operations andfinancial condition. The risks and uncertainties described below are not the only ones that theGroup may face. Additional risks and uncertainties that the Group is unaware of, or that the Groupcurrently deems to be immaterial, may also become important factors that affect it. If any of thespecified or unspecified risks actually occur, the Group’s business, operations, financial condition,or reputation could be materially and adversely affected. In this section, where we refer to theimpact on the Group’s business, operations and financial condition and similar references, suchreferences include the impact on the business prospects of the Group.
2. Changes in political and general business and economic conditions, including
disruption in regional or global credit and capital markets, may adversely affect theGroup’s business, operations and financial condition
The Group’s financial performance is primarily influenced by the political and economic conditions
and the level of business activity in the major countries and regions in which the Group operates
or trades namely Australia, New Zealand, the Asia Pacific, Europe and the United States.
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, politicalevents and natural disasters, and by movements and events that occur in global financial markets.
For example, 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 theemergence of many challenges for financial services institutions worldwide.
The impact of the global financial crisis and its aftermath continue to affect regional and global
economic activity, confidence and capital markets. Prudential authorities have implemented andcontinue to implement increased regulations in an attempt to mitigate the risk of such eventsrecurring, although there can be no assurance that such regulations will be effective. The Group
believes that the global financial crisis has also had a lasting effect on consumer and businessbehaviour in the advanced economies, including the major countries and regions in which theGroup 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 by introducing zero or near-zero
interest rates across most countries, and the major central banks took unconventional steps to
support growth and raise inflation. While some economic factors have recently improved and somemonetary authorities have begun to increase interest rates, lasting impacts from the global
financial crisis and the potential for escalation in geopolitical risks suggest ongoing vulnerability
and potential adjustment of consumer and business behaviour.
Changes in global political conditions, such as the ‘Brexit’ referendum in the United Kingdom on
June 23, 2016 (and the related negotiations with the European Union), the commencement ofDonald Trump’s presidency in January 2017, and global trade developments relating to, among
other things, the imposition or threatened imposition of trade tariffs and levies by major countries
have resulted in increased political and economic uncertainty and volatility in the global financial
markets and may continue to do so. This is in part due to the unknown consequences for global
trade, the broader global economy and financial markets.
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 a protectionist trade policy which includes a seriesof expansive tariffs, up to and potentially including the entirety of goods traded between the
United States and China, which may result in adverse effects on the economy of China, one ofAustralia’s major trading partners and a significant driver of commodity demand and prices in themarkets in which the Group and its customers operate. Anything that adversely affects China’s
economic growth could adversely affect Australian economic activity and, as a result, the Group’sbusiness, operations and financial condition.
Australian political conditions have progressively shifted over recent years. Shorter tenures forPrime Ministers appears to have become more entrenched, and the focus on the societal impacts3

of the financial sector, and other business sectors as well, has sharpened. The banking tax andRoyal Commission have been initiated in this environment. The Royal Commission process itself
appears to have exacerbated this shift, 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 could adversely affect
the Group’s business, operations and financial condition. 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, occurring around theworld, such as the ongoing unrest and conflicts in Ukraine, North Korea, Syria, Egypt, Afghanistan,Iraq, Nicaragua and elsewhere as well as the current high threat of terrorist activities, may also
adversely affect global financial markets, general business and economic conditions and theGroup’s ability to continue operating or trading in an affected country or region, which in turn may
adversely affect the Group’s business, operations and financial condition.
Should difficult economic conditions in the Group’s markets eventuate, asset values in the housing,commercial or rural property markets could decline, unemployment could rise and corporate andpersonal incomes could suffer. Deterioration in global markets, including equity, property, currency
and other asset markets, could impact the Group’s customers and the security the Group holds
against loans and other credit exposures, which may impact the Group’s ability to recover loans
and other credit exposures.
The Group’s financial performance could also be adversely affected if the Group were unable toadapt 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 in the economy, general business conditions or theoperating 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 in Australia, New Zealandor other markets where the Group does business may adversely affect the Group’sbusiness, operations and financial condition”); andthe demand for natural resources given that sector is a significant contributor to Australia’s
economy and that 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 business,
operations and financial condition”).

Natural and biological disasters such as, but not restricted to, cyclones (for example, Cyclone
Debbie in March 2017 and Cyclone Marcus in March 2018), floods, droughts, earthquakes andpandemics, and the economic and financial market implications of such disasters domestically andglobally, may negatively affect general business and economic conditions in the countries orregions in which the Group operates and in turn adversely affect the Group’s business, operations
and financial condition (see risk factor 16: "Impact of future climate change, geological events,
plant, animal and human diseases, and other extrinsic events may adversely affect the Group’sbusiness, operations and financial condition").
All or any of the negative political, business, environmental or economic conditions describedabove could cause a reduction in demand for the Group’s products and services and/or an increasein loan and other credit defaults and bad debts, which could adversely affect the Group’s business,
operations and financial condition.
3. Competition in the markets in which the Group operates may adversely affect theGroup’s business, operations and financial condition
The markets in which the Group operates are highly competitive and could become even more so.
Factors that contribute to competition risk include mergers and acquisitions, changes in customers’
needs, preferences and behaviours, entry of new participants, development of new distribution andservice methods and technologies, increased diversification of products by competitors andchanges in regulation such as the rules governing the operations of banks and non-bankcompetitors.
4For example:
•

•
•
•

changes in the financial services sector in Australia and New Zealand have made it possible
for non-banks to offer products and services traditionally provided by banks, such as
payments, home loans, and credit cards. Digital technologies and business models arechanging customer behaviour and the competitive environment. Emerging competitors are
increasingly utilising new technologies and seeking to disrupt existing business models in
the financial services sector. Existing companies from outside of the traditional financial
services sector may seek to directly compete with the Group by offering products andservices traditionally provided by banks, including by obtaining banking licenses and/or by
partnering with existing providers;banks organised in jurisdictions outside Australia and New Zealand are subject to different
levels of regulation and some of these banks may have lower cost structures that may
make them more competitive in the markets where the Group operates;
consumers and businesses may choose to transact using, or to invest in, new forms ofcurrency (such as cryptocurrencies) in relation to which the Group may choose not toprovide financial services; andOpen Banking (as defined 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 business, operations, financial condition and reputation”).

Increasing competition for customers could also potentially lead to a compression in the Group’s
net interest margins or increased advertising and related expenses to attract 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
could increase the Group’s cost of funding. To the extent that the Group is not able to successfullycompete for deposits, the Group would be forced to rely more heavily on other, less stable or more
expensive forms of funding, or to reduce lending. This may adversely affect the Group’s business,
operations, or financial condition.
The impact on the Group of an increase in competitive market conditions or a technological changethat 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 and margins, which would adversely affect the Group’s business, operations andfinancial condition.
4. Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s business, operations, financial condition and reputation
The Group’s businesses and operations are highly regulated. The Group is therefore subject to a
substantial number of laws, regulations and policies in the numerous jurisdictions in which it
carries on business and obtains funding and is supervised by a number of different regulatory andsupervisory authorities. These jurisdictions include, without limitation, Australia, New Zealand, theUnited States, Europe and countries in the Asia Pacific region.
In Australia, these regulatory and supervisory authorities include, among others, the Australian
Prudential Regulation Authority (“APRA”), the Reserve Bank of Australia (“RBA”), the Australian
Securities and Investments Commission (“ASIC”), the Australian Securities Exchange (“ASX”), theAustralian Competition and Consumer Commission (“ACCC”), the Australian Transaction Reports
and Analysis Centre (“AUSTRAC”) the Australian Taxation Office (“ATO”) and the Office of theAustralian Information Commissioner(“OAIC”). In New Zealand, the Reserve Bank of New Zealand(“RBNZ”) and the Financial Markets Authority (“FMA”) have supervisory oversight of the Group’s
New Zealand businesses. Prudential regulatory and supervisory authorities such as APRA andRBNZ have extensive administrative, practical and investigative powers over the Group’sbusinesses. The Group is also subject to regulation and supervision by a number of bodies outsideof Australia and New Zealand.
The regulation and supervision of financial services groups such as the Group is increasingly
extensive and complex in Australia and the other jurisdictions where the Group conducts businessand raises funds. This is particularly the case in the areas of consumer credit and consumer
protection (including in the design and distribution of financial products), conduct, funding,liquidity, derivatives, capital adequacy, provisioning, competition, mortgage pricing, remuneration,
privacy, data protection, data access, prudential regulation, anti-bribery and corruption, anti5

money laundering and counter-terrorism financing, economic and trade sanctions and executive
accountability. The resources allocated to the regulation and supervision of financial services
groups, such as the Group has also increased in recent years.
Changes to laws, regulations and policies in Australia and the other jurisdictions where the Group
conducts business and raises funds may materially and adversely affect the Group’s business,
operations, financial condition and reputation. Such changes may impact the corporate structures,
businesses, strategies, capital, liquidity, funding and profitability and the cost structures of theGroup and the cost and access to credit for customers of the Group, and the wider economy.
Examples of recent changes to laws, regulations and policies, or developments that may lead tofuture changes include, without limitation:•

Prudential Developments: Implementation of APRA’s revisions to the capital and liquidity
framework for Australian Authorised Deposit-taking Institutions (“ADI”), resulting from theBasel Committee on Banking Supervision (“BCBS”) Basel 3 capital and liquidity reforms
and the recommendations of the Financial System Inquiry (“FSI”), will continue over the
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 to use theInternal Ratings Based (“IRB”) approach to credit risk (including the Group).
Subsequently, on 19 July 2017, APRA released an information paper outlining APRA’s
conclusions with respect to the quantum and timing of capital increases that will be
required for ADIs to achieve “unquestionably strong” capital ratios. APRA indicated that, inthe case of the four major Australian banks (including the Group), it expects that theincreased 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 capital ratio,
under the current capital adequacy framework, of at least 10.5 per cent. APRA also statedthat ADIs should, where necessary, initiate strategies to increase their capital strength tobe able to meet these capital benchmarks by 1 January 2020 at the latest.
In February 2018, APRA released two discussion papers that commenced APRA’s
consultation on:--

revisions to the capital framework that will produce “unquestionably strong” capitalratios. The discussion paper summarises APRA’s proposal regarding risk-based
capital approach for credit, market and operational risk following finalisation ofthese requirements by the BCBS in December 2017. While the final forms of these
proposals will only be determined later in 2020, the Group expects theimplementation of any revisions to the current requirements will result in further
changes to the risk weighting framework for certain asset classes and other risk
types (such as market and operational risks). APRA has announced that it does notexpect 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; andthe design and application of a minimum leverage ratio requirement as acomplement to the risk-based capital framework proposal above. APRA has
proposed a minimum leverage ratio requirement of 4% (Basel minimum is 3%).

Further to the above, APRA released a discussion paper in August 2018 on adjustments tothe 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 therelative capital strength of ADI and measures to enhance supervisory flexibility in times offinancial stress. APRA’s consultation for the above is currently taking place with final
prudential standards planned to be made available by 2020. APRA has proposed an
implementation date of 2021, which is one year earlier than the BCBS’s equivalent, with nophase-in arrangements.
APRA’s prudential standards may also be further supplemented by yet to be released
proposals to implement other key FSI recommendations including to implement aminimum total loss absorbing capacity requirement where certain senior debt could be“bailed in” to recapitalise a stressed financial institution.
6

Given the number of items that are currently open for consultation with APRA, the final
outcome of the FSI including any further changes to APRA’s prudential standards or otherimpacts on the Group remains uncertain. Further changes to APRA’s prudential standards
and the final outcome of the FSI could increase the level of regulatory capital that theGroup is required to maintain, restrict the Group’s flexibility, require it to incur substantial
costs and impact the profitability of one or more business lines, which could adversely
affect the Group’s business, operations, financial condition and reputation.
Implementation of the BCBS Basel 3 capital and liquidity reforms will continue over the
coming years. The BCBS has recently finalised its reform on the Basel 3 framework
focussing 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 which became effective on 1
July 2018, is a strengthened responsibility and accountability framework for the mostsenior and influential directors and executives in ADI groups. Potential risks to the Group
from the BEAR legislation include the risk of penalties and the risk to its ability to attract
and retain high-quality directors and senior executives.

•

Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention
Powers) Bill 2018: The Australian Government has proposed new legislation intended toenhance the regulation of the design and distribution of financial products in Australia andto provide ASIC with product intervention powers.

•

The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other
Measures) Act 2018 (“Crisis Management Act”) passed into law in March 2018. The
Crisis Management Act amended the Banking Act (among other statutes applicable tofinancial institutions in Australia) to further enhance APRA’s powers to facilitate the orderly
resolution of the entities it regulates (and their subsidiaries) in times of distress. Additional
powers which could impact the Group, include greater oversight, management anddirections powers in relation to the Group entities which were previously not regulated by
APRA, increased statutory management powers over regulated entities within the Groupand changes which are designed to give statutory recognition to the conversion or write-offof regulatory capital instruments.

•

Anti-Money Laundering and Counter Terror Financing Compliance: Scrutiny of banks has
increased following the commencement by the AUSTRAC of civil penalty proceedings in2017 against another major Australian bank relating to alleged past and ongoing
contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act
2006 (Commonwealth) (see risk factor 5 "Significant fines and sanctions in the event ofbreaches of law or regulation relating to anti-money laundering, counter-terrorism
financing and sanctions may adversely affect the Group’s business, operations, financial
condition and reputation").

•Bank Levies: The Australian Government imposed a levy on liabilities for certain largebanks, 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 AustralianState and Territory Governments may introduce similar levies which could adversely affect
the Group’s business operations and financial condition.

•

Responsible consumer lending: Regulatory policy development and monitoring of
responsible consumer lending has increased significantly in recent years, and continues todrive the review of, and changes 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 reviews and changes could adversely affect theGroup’s business, reputation and financial condition.

•

Parliamentary Enquiries: There are several on-going Australian Government inquiries into
Australia’s four major banks. The inquiries could lead to legislative or regulatory changes
or other regulatory or other measures that may adversely affect the Group.

•

Financial System Inquiry Report: The final report of the FSI (released on 7 December2014) concluded a comprehensive inquiry into Australia’s financial system, which wasestablished by the Australian Government in late 2013. The final report of the FSI included
7

a wide-ranging set of recommendations. In Australia, APRA is responsible for implementing
the final recommendations of the FSI that are aimed at strengthening the resilience ofAustralia’s financial system including (among other things) setting capital standards toensure that capital ratios of Australian ADIs are “unquestionably strong”.
•

Australian Consumer Law: The Australian Parliament passed amendments to the AustralianConsumer Law on 23 August 2018. Amongst other things, the amendments increased
penalties for breaches of consumer law from 1 September 2018. The increased penalties
relate to unconscionable conduct, false or misleading representations about goods orservices, unfair practices, the safety of consumer goods and product-related services andinformation standards.

•

Increased ASIC Funding: On 7 August 2018, the Australian Government announced it
would inject a further $70.1 million into the ASIC to ensure it has the resources andpowers needed to combat misconduct in the financial services industry and across all
corporations for the protection of Australian consumers.

•

ASIC Enforcement Bill: On 26 September 2018, the Australian Treasury released theTreasury Laws Amendment (ASIC Enforcement) Bill 2018, which proposes to strengthen
penalties for corporate and financial sector misconduct consistent with the ASIC
Enforcement Review Taskforce recommendations•

ASX Governance Principles and Recommendations: On 2 May 2018, the ASX publishedtheir Corporate Governance Council consultation draft of a proposed fourth edition of
the Principles and Recommendations. The proposed amendments are extensive, and if
implemented, would have a significant change to corporate governance of listed entities.
Submissions to the ASX proposed changes have closed, however the debate on these
proposals will likely be ongoing throughout the remainder of 2018. The Council plans torelease the final version in early 2019, with the new Principles andRecommendations coming in from 1 July 2019.

•

Treasury Laws Amendment (Consumer Data Right) Bill 2018 (to implement “Open
Banking”); Open Banking is part of a new consumer data right in Australia and a key
recommendation of a Productivity Commission Inquiry into data availability and use thatprovides consumers with access and control over their data on all products recommended
by the Open Banking Review. Under Open Banking, all major Australian banks (including
the Group) will need to make data available on various products including credit and debit
cards, deposit and transaction accounts by 1 July 2019 and mortgages by 1 February
2020. Data on all products recommended by the Open Banking Review will be available by
1 July 2020. On 15 August 2018, Treasury released draft legislation and explanatory
materials for consultation. The ACCC will be releasing a framework paper on the rules forOpen Banking in the second half of the 2018 calendar year. Open Banking may lead toincreased competition, which could adversely affect the Group’s business, operations andfinancial condition.

•

Offshore Developments: In addition to the BCBS reforms described above, there havebeen a series of other regulatory releases from authorities in various jurisdictions outsideof Australia where the Group operates and raises funds that have proposed significant
regulatory changes for financial institutions. These changes include, among other things:-

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;
introduction of greater data protection regulations in Europe, including the General
Data Protection Regulations which came into effect on 25 May 2018;
the Markets in Financial Instruments Directive 2 in the European Economic Area;
amendments to the United Kingdom’s Criminal Finances Bill (which has
extraterritorial reach); andimplementation of phases 4 and 5 of the initial margin requirements for uncleared
OTC derivatives in various jurisdictions.

In addition, United Kingdom and European authorities may also propose significant
regulatory changes as a result of ‘Brexit’ that may impact the Group.
8The Australian financial services industry is currently under heightened scrutiny and the AustralianGovernment, other regulators and parliamentary bodies are increasingly initiating reviews andinquiries into the industry. For example:•

Royal Commission: The Royal Commission into Misconduct in the Banking, Superannuation
and Financial Services Industry was established on 14 December 2017. The Commission
has been asked to submit its final report by 1 February 2019 (an interim report was
released on 28 September 2018). The Commission is likely to result in additional costs andmay lead to further exposures, including exposures associated with further regulator
activity or potential customer exposures such as class actions, individual claims orcustomer remediation or compensation activities. The outcomes and total costs associatedwith these possible exposures remain uncertain.

•

Productivity Commission: The Productivity Commission, an independent research andadvisory body to the Australian Government, has undertaken an inquiry into competition inAustralia’s financial system. The final report of the Productivity Commission was releasedon 3 August 2018. The Australian Government's response to the final report may lead toregulatory change, which could adversely affect the Group's business, operations andfinancial condition.

•

Mortgage Price Inquiry: On 9 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 in relation to residential mortgage products. An interim report was
published on 15 March 2018. On 21 June 2018, the Federal Treasurer announced, an
extension to the reporting period for the ACCC’s inquiry and requested delivery of the final
report by no later than 19 November 2018.

•

Foreign Exchange Inquiry: On 2 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 areimpediments to effective competition. The ACCC is expected to provide its final report to
the Federal Treasurer in May 2019.

Any failure by the Group to comply with laws, regulations and policies in the jurisdictions in which
it operates and obtains funds may adversely affect the Group’s business, operations, financial
condition and reputation. This may include regulatory investigations, legal or regulatory sanctions,financial or reputational loss, litigation, fines, penalties, restrictions on the Group’s ability to dobusiness, revocation, suspension or variation of conditions of relevant regulatory licenses or otherenforcement 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 of any litigation (including class action
proceedings) may result in the payment of compensation 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 business,
operations, financial condition and reputation” and Note 33 of consolidated financial statements forthe financial year ended 30 September 2018 as set out in the Group’s 2018 Annual Report (“2018
Financial Statements”).
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 the Group’s business, operations, financial condition and reputation
Anti-money laundering, counter-terrorist financing and sanctions compliance have been thesubject of significant regulatory change and enforcement in recent years. The increasingly
complicated environment in which the Group operates has heightened these operational andcompliance risks. Furthermore, the upward trend in compliance breaches by global banks and therelated fines and settlement sums mean that these risks continue to be an area of focus for theGroup. Following the AUSTRAC civil penalty proceedings in 2017 against a major Australian bankrelating 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 theanti-money laundering regulatory framework. While the full scope of any changes, if any, is notknown, the Group may incur additional costs associated with regulatory compliance that may
adversely affect the Group’s business, operations, financial condition and reputation.

9

The risk of non-compliance with anti-money laundering, counter-terrorist financing and sanction
laws remains high given the scale and complexity of the Group. For example, emerging
technologies, such as cryptocurrencies, could limit the Group’s ability to track the movement offunds. A failure to operate a robust programme to combat money laundering, bribery and terrorist
financing or to ensure compliance with economic sanctions could have serious financial, legal andreputational consequences for the Group and its employees. Consequences can include fines,
criminal and civil penalties, civil claims, reputational harm and limitations on doing business incertain jurisdictions. These consequences, individually or collectively may adversely affect theGroup’s business, operations, financial condition and reputation. The Group’s foreign operations
may place the Group 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 other markets
where the Group does business may adversely affect the Group’s business,
operations and financial condition
Residential and commercial property lending, together with real estate development andinvestment 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); and•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 HongKong). Values for completed tenanted properties and residential house prices, particularly in metro
east coast Australian and New Zealand markets, have steadily risen until 2018 and began to fall in
the recent months.
Should the Group’s regulators impose supervisory measures impacting the Group’s residential orcommercial lending, or if Australian home and commercial property price growth subsides orvaluations decline, the demand for the Group’s home and commercial property lending products
may decrease which may adversely affect the Group’s business, operations and financial condition.
Declining asset prices could impact customers and counterparties and the value of the security(including residential and commercial 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, forexample, an event or a series of events in the local or global economy or lack of confidence inmarket values, and in conjunction with higher cost of living, rising interest rates and/or rising
unemployment, could adversely impact the Group’s home lending activities. In the case ofresidential loans, customers with high levels of leverage could show a higher propensity to default,
and in the event of such defaults the decrease in security values, could cause the Group to incur
higher credit losses, which could adversely affect the Group’s financial performance. The demand
for the Group’s home lending products may also decline due to buyer concerns about decreases invalues or concerns about rising interest rates, which could make the Group’s lending products lessattractive to potential homeowners and investors. A material decline in residential housing prices
could also cause losses in the Group’s residential development portfolio if customers who are precommitted to purchase these dwellings are unable or unwilling to complete their contracts and theGroup is forced to re-sell these dwellings at a loss.
The Group's portfolio of commercial property loans may be particularly susceptible to asset pricedeflation, tenancy risk and delivery risk, which may result in higher credit losses, refinance risk
and deteriorating security values. A significant decrease in commercial property valuations or asignificant slowdown in the commercial real estate markets where the Group does business could
result in a decrease in new lending opportunities or lower recovery rates which may in turnmaterially and adversely impact the Group’s business, operations and financial condition.
7. Credit risk may adversely affect the Group’s business, operations and financial
condition
As a financial institution, the Group is exposed to the risks associated with extending credit toother parties, including incurring credit-related losses that can occur as a result 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 in10

certain circumstances, which could result in credit losses. Should material credit losses occur to
the Group’s credit exposures, this may adversely affect the Group’s business, operations andfinancial condition.
Less favourable business or economic conditions, whether generally or in a specific industry sector
or geographic region, or natural disasters, could cause customers or counterparties to fail to meettheir 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 and adversely impacted if
these assets were being valued at historically high levels due to the value of the capitaland profitability of these investments being vulnerable to changes in government
regulatory policy, interest rate and currency 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 the money
positions. Counterparty insolvency has the potential to expose the Group to large
uncovered derivative liabilities; and•the dairy industry in Australia and New Zealand, which is particularly exposed to excess
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 otherbanks, financial institutions, companies, governments and government bodies where the financial
conditions of such entities are affected by economic 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 Zealanddollars relative to other currencies, a deterioration 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 value of 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 or on behalf of customers
and/or counterparties, including financial statements and other financial information. The Group
may also rely on representations of customers and independent consultants as to the accuracy andcompleteness of that information. The Group’s financial performance could be negatively impacted
to the extent that it relies on information that is inaccurate or materially misleading.
The Group holds provisions for credit impairment. The amount of these provisions is determined byassessing the extent of impairment inherent within the Group’s lending portfolio, based on current
information. This process, which is critical to the Group’s financial condition and results, 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 theinformation correctly, the provisions made for credit impairment may be insufficient, which could
adversely affect the Group’s business, operations and financial condition.
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 business, operations andfinancial condition
The Group’s capital base is critical to the management of its businesses and access to 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 the countries 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 asa counterparty’s risk grade worsens. These regulatory capital requirements are likely to compound11

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 raisedon reasonable 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 those in the insurance andfunds management businesses as well as from its investment in associates), (ii) increased asset
growth, (iii) changes in the value of the Australian dollar against other currencies in which theGroup operates (particularly the New Zealand dollar and U.S. dollar) that impact risk weighted
assets or the foreign currency translation reserve and (iv) changes in business strategy (including
acquisitions, divestments and investments or an increase in capital intensive businesses).
APRA has now implemented prudential standards to accommodate Basel 3. Certain otherregulators have either implemented or are in the process of implementing regulations, including
Basel 3, which seek to strengthen, among other things, the liquidity and capital requirements ofbanks, funds management entities and insurance entities, though there can be no assurance thatthese regulations have had or will have their intended effect. Some of these regulations, together
with any risks arising from any regulatory changes (including those arising from APRA’s responseto the remaining 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 business,
operations or financial condition and reputation".
9. The Group’s credit ratings could change and adversely affect the Group’s ability toraise capital and wholesale funding and constrain the volume of new lending which
may adversely affect the Group’s business, operations, financial condition andreputation
The Group’s credit ratings have a significant impact on both its access to, and cost of, capital andwholesale funding. Credit ratings may be withdrawn, qualified, revised or suspended by credit
rating agencies at any time. Rating outlooks may also be revised at any time. The methodologies
used by ratings agencies to determine credit ratings and rating outlooks may be revised in
response to legal or regulatory changes, market developments or for any other reason.
The Group’s credit ratings or rating outlooks could be revised at any time in response to a change
in the credit rating of the Commonwealth of Australia or the occurrence of one or more of theother risks identified in this document or any other reason.
In addition, the ratings of individual securities (including, but not limited to, certain Tier 1 capitaland 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 the regulatory 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 lead to an increase in funding
costs, constraining the volume of new lending and affect the willingness of counterparties totransact 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 business, operations andfinancial condition
Operational risk is the risk of loss and/or non-compliance with laws resulting from inadequate or
failed internal processes, people and systems or from external events. This definition includes legalrisk, and the risk of reputational loss or damage arising from inadequate or failed internal
processes, people, systems, management of data and data integrity, but excludes strategic risk.
Operational risk is typically classified into risk event type categories to measure and compare risks
on a consistent basis. Examples of operational risk events according to category are as follows:

12

•

•

•
•
•
•
•
•

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 obtainfinancial advantage for themselves or cause any financial disadvantage to the Group orothers. This includes financial planners and/or authorised representatives (and theiremployees) of dealer groups owned or controlled by ANZ;
external fraud: fraudulent acts or attempts which originate from outside the Group morecommonly associated with digital banking, lending, and cards products. Specific threats
include ATM skimming, malware and phishing attacks and fraudulent applications andtransactions, 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 anti-competitive
behaviour, failure to comply with disclosure obligations, product defects, 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; andexecution, delivery and process management: is associated with losses resulting from,among other things, process errors made by the Group’s employees caused by inadequateor poorly designed internal processes, or the poor execution of standard processes,
vendor, supplier or outsource provider errors or failed mandatory reporting errors.

Loss from operational risk events could adversely affect the Group’s business, operations andfinancial condition. Such losses can include fines, penalties, loss or theft of funds or assets, legal
costs, customer compensation, loss of shareholder value, reputation loss, loss of life or injury topeople, and loss of property and/or information.
11. Reputational risk events as well as operational failures and regulatory compliance
failures may give rise to reputational risk which may adversely affect the Group’sbusiness, operations and financial condition
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 theGroup held by the public (including the Group’s customers), shareholders, investors, regulators or
rating agencies. The impact of a risk event on the Group’s reputation may exceed any direct costof the risk event itself and may adversely impact the Group’s business, operations and financial
condition.
The Group may incur reputational damage where one of its practices fails to meet community
expectations. As these expectations may exceed the standard required in order to comply withapplicable 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 bycommunity perception of the broader financial services industry.
Additionally, certain operational and regulatory compliance failures may give rise to reputationalrisk. Such operational and regulatory compliance failures include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•

failures in customer on-boarding where customer identification obligations are not fulfilled;
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 the target
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; andunexpected risks (e.g. credit, market, operational or compliance).
13

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 andavailability of new business opportunities. The Group’s ability to attract and retain customers could
also be adversely affected if the Group’s reputation is damaged, which could adversely affect theGroup’s business, operations and financial condition.
12. Conduct-related risk events or behaviours may adversely affect the Group’sbusiness, operations, financial condition and reputation
The Group defines conduct-related risk as the risk of loss or damage arising from the failure of theGroup, its employees or agents to appropriately consider the interests of consumers, the integrityof the financial markets, and the expectations of the community in conducting the Group’sbusiness activities.
Conduct-related risks can result from:
•
•
•
•
•
•
•

the provision of unsuitable or inappropriate advice (for example, advice that is notcommensurate 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 to customers;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; andtrading activities in financial markets, outside of the Group’s policies and standards.

The Group is regulated under various legislative regimes in the countries in which it operates thatprovide for customer protection in relation to advisory, marketing and sales practices. These may
include, but are not limited to, appropriate management of conflicts of interest, appropriate
accreditation standards for staff authorised to provide 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 example, in Australia the Royal Commission has been established to inquire into misconduct byfinancial services entities (see risk factor 4 “Regulatory changes or a failure to comply with laws,
regulations or policies may adversely affect the Group’s business, operations, financial condition
and reputation” and risk factor 28 “Litigation and contingent liabilities may adversely affect theGroup’s business, operations, financial condition and reputation”).
Conduct-related risk events may expose the Group to regulatory actions, restrictions or conditions
on banking licences and/or reputational consequences which could adversely affect the Group'sbusiness, operations, financial condition and reputation.
13. Disruption of information technology systems or failure to successfully implement
new technology systems could significantly interrupt the Group’s business, which
may adversely affect the Group’s business, operations and financial condition
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 theservices the Group uses or is dependent upon, might fail, due to hardware or software failure, as
well as unauthorised access or use.
Most of the Group’s daily operations are computer-based and information technology systems are
essential to maintaining effective communications with customers. The Group is also consciousthat 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 that may be caused by all cyber threats because thetechniques used can be highly sophisticated and those perpetuating the attacks may be wellresourced. The exposure to systems risks includes the complete or partial failure of information
technology systems, or data centre infrastructure, the inadequacy of internal and third-party
information technology systems due to, among other things, failure to keep pace with industry
14

developments and the inability of the existing systems to effectively accommodate growth,prevent unauthorised access and integrate existing and future acquisitions and alliances.
To manage these risks, the Group has disaster recovery and information technology governance inplace. However, there can be no guarantee that the steps the Group is taking in this regard will beeffective and any failure of these systems could result in business interruption, customer
dissatisfaction, legal or regulatory breaches and liability and ultimately loss of customers, financial
compensation, damage to reputation and/or a weakening of the Group’s competitive position,
which could affect the Group’s business, operations and financial condition.
In addition, the Group has an ongoing need to update and implement new information technology
systems, in part to assist the Group in satisfying regulatory demands, ensuring information
security, enhancing digital banking services for the Group’s customers and integrating the various
segments of the Group’s business. For example, the Group has recently implemented voicebiometrics for customer transactions on mobile devices, implemented the industry New Payments
Platform and working towards implementing the new Open Banking regime. The Group may not
implement these projects effectively or execute them efficiently, which could lead to increased
project costs, delays in the ability to comply with regulatory requirements, failure of the Group’s
information security controls or a decrease in the Group’s ability to service its customers. ANZ New
Zealand relies on the Group to provide a number of information technology systems, and any
failure of the Group’s systems could directly affect ANZ New Zealand.
14. Risks associated with information security including cyber-attacks, may adversely
affect the Group’s business, operations, financial condition and reputation
Information security means protecting information and information technology systems fromunauthorised 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.
The Group operates in multiple countries and the risks to its systems are inherently higher incertain countries where, for example, political threats or targeted cyber-attacks by terrorist or
criminal organisations are greater.
The Group employs a team of information security experts who are responsible for thedevelopment and implementation of the Group’s Information Security Policy. The Group also uses
third parties to process and manage information on its behalf, and any failure by such third parties
could adversely affect the Group’s business.
The Group is conscious that threats to information technology systems are continuously evolving
and that cyber threats, including but not limited to, cyber compromise, advanced persistent
threats, distributed denial of service, malware and ransomware attacks, and the risk of suchattacks are increasing, and as such the Group may be unable to develop policies and procedures toadequately address or mitigate such risks. Accordingly, information about the Group and/or its
clients may be inadvertently accessed, inappropriately distributed or illegally accessed or stolen.
The Group may not be able to anticipate or to implement effective measures to prevent or
minimise damage that may be caused by all information security threats because the techniques
used can be highly sophisticated and those perpetuating the attacks may be well resourced. Any
unauthorised access of the Group’s information technology systems or unauthorised use of its
confidential information could potentially result in disruption of the Group’s operations, breaches ofprivacy laws, regulatory sanctions, legal action, and claims for compensation or erosion to theGroup’s competitive market position, which could adversely affect the Group’s business,
operations, financial conditions and reputation.
15. Disruption to electricity markets and gas markets may adversely affect the Group’sbusiness, operations and financial condition
During 2016 and 2017, there have been various events in Australia that have affected retail,commercial and industrial electricity and gas users. These events include the closure of theHazelwood coal power station in Victoria, black-outs in South Australia and export demand forQueensland liquefied natural gas.

15

Some of these events resulted in higher electricity and gas prices, as well as disruption toelectricity and gas markets. The cost of sustained high prices may flow through to business andconsumers. The potential inability of businesses to pass through this cost increase to customers
may lead to credit risk associated with the Group’s customers. The impact of higher electricity costfor consumers could lead to reduced consumption and indirectly impact the demand for goods andservices, contributing to lower business profitability. Higher electricity costs may also increase theConsumer Price Index and influence upward adjustments to interest rate settings.
The Australian federal government and the South Australian state government have invested inenergy storage schemes to assist in minimising disruption. The Australian federal government has
also enacted legislation to preserve gas supply to local markets. Potential disruption to the energy
network may have a negative impact on the Group’s credit exposure to in the energy supply chain.
These effects may adversely affect the Group’s customers or the Group’s collateral position in
relation to credit facilities extended to such customers, which may adversely affect the Group’sbusiness, operations and financial condition.
16. Impact of future climate change, geological events, plant, animal and humandiseases, and other extrinsic events may adversely affect the Group’s business,
operations and financial condition
The Group and its customers are exposed to climate related events, including climate change.
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 geologicalevents (including volcanic seismic activity or tsunamis), plant, animal and human diseases or apandemic.
Depending on their severity, events such as these may temporarily interrupt or restrict theprovision of some local or Group services, and may also adversely affect the Group’s financial
condition or collateral position in relation to credit facilities extended to customers, which may
adversely affect the Group’s business, operations and financial condition.
17. Liquidity and funding risk events may adversely affect the Group’s financial
performance, liquidity, capital resources, business, operations and financial
condition
Liquidity 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 fund increases in assets. Liquidity risk is inherent in all banking operations due to thetiming mismatch between cash inflows and cash outflows.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings and constrain thevolume of new lending, which could adversely affect the Group’s profitability. Deterioration in
investor confidence in the Group could materially impact the Group’s cost of borrowing, and theGroup’s ongoing operations and funding.
The Group raises funding from a variety of sources, including customer deposits and wholesalefunding in Australia and offshore markets to meet its funding obligations and to maintain or growits business generally. In times of liquidity stress, if there is damage to market confidence in theGroup or if funding inside or outside of Australia is not available or constrained, the Group’s ability
to access sources of funding and liquidity may be constrained and it will be exposed to liquidity
risk. In any such cases, the Group may be forced to seek alternative funding. The availability ofsuch alternative funding, and the terms on which it may be available, will depend on a variety offactors, including prevailing market conditions and the Group’s credit ratings (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 could adversely affect theGroup’s financial performance, liquidity, capital resources, business, operations and financial
condition.
Since the advent of the global financial crisis in 2007, developments in major markets (including
the United States, Europe and China) have adversely affected the liquidity in global capital
markets and increased funding costs, for significant periods, compared with the period
immediately preceding the global financial crisis.

16

More recently, the provision of significant amounts of liquidity by major central banks globally has
helped mitigate near term liquidity concerns, although no assurance can be given that suchliquidity concerns will not return, particularly when this liquidity is incrementally withdrawn by
central banks. The manner in which this process unfolds over the coming years will be a major
determinant of market conditions and a deterioration in market conditions may limit the Group’s
ability to replace maturing liabilities and access funding in a timely and cost-effective mannernecessary to fund and grow the Group’s businesses.
18. Changes in monetary policies may adversely affect the Group’s business, operations
and financial condition
Central monetary authorities (including the RBA, the RBNZ, the United States Federal Reserve, theBank of England and the monetary authorities in the Asian jurisdictions in which the Group
operates) set official interest rates or take other measures to affect the demand for money andcredit in their relevant jurisdictions. For instance, the U.S. Federal Reserve increased interest rates
in December 2016, March, June and December 2017, and March, June and September 2018,
though the Australian Reserve Bank lowered interest rates in May 2016 and August 2016 and hassince kept the interest rates on hold. In addition in some jurisdictions, currency policy is also used
to influence general business conditions and the demand for money and credit. These measuresand policies can significantly affect the Group’s cost of funds for lending and investing and thereturn 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 measures and 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 business, operations and financial condition.
19. Acquisitions and/or divestments may adversely affect the Group’s business,
operations and financial condition
The Group regularly examines a range of corporate opportunities, including acquisitions anddivestments, with a view to determining whether those opportunities will enhance the Group’s
strategic position and financial performance.
Divestments that the Group has announced from 30 September 2017 to the date of this Principal
Risk and Uncertainties document include:•
OnePath Pensions and Investments (“P&I”) and aligned dealer group businesses (“ADGs”)
in Australia;•
ANZ’s interest in Metrobank Card Corporation;• One Path life insurance business in Australia;• One Path life insurance business in New Zealand;• 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.
In relation to sale of P&I and ADGs to IOOF, on 1 October 2018 ANZ completed the divestment of
ADGs to IOOF and entered into a debt note to transfer a partial economic interest in the expectedeconomics of its P&I business to IOOF from 2 October 2018. Legal completion of the P&I businessis expected to occur during the 2019 calendar year.
The transactions above remain subject to regulatory approvals and other completion conditions.
During the fiscal year ended 30 September 2018:•
the Group completed the divestment of its interest in Metrobank Card Corporation;•
the Group completed the divestment of a 20% interest in Shanghai Rural Commercial
Bank;•
the Group finalised the sale of its retail and wealth businesses in Indonesia, Taiwan and
Vietnam (in addition to China, Singapore and Hong Kong which completed during thepreceding financial year); and•the Group announced in March 2018 it was exploring a range of options for UDC Finance's
future, including a possible initial public offering (IPO) of ordinary shares. The Groupadvised on 31 October 2018 that it will not be pursuing an IPO following the completion ofa strategic review of this business. It may still consider a sale in the future, and has
decided to put on hold sale discussions and focus on continuing to grow the business.
17

There can be no assurance that any acquisition (or divestment) would have the anticipatedpositive results, including results relating to the total cost of integration (or separation), the timerequired to complete the integration (or separation), the amount of longer-term cost savings, theoverall performance of the combined (or remaining) 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 be placed on credit watch or downgraded if
these opportunities are pursued.
Integration (or separation) of an acquired (or divested) business can be complex and costly,
sometimes including combining (or separating) relevant accounting and data processing systems,
and management controls, as well as managing relevant relationships with employees, customers,
regulators, counterparties, suppliers and other business partners. Integration (or separation)
efforts could create inconsistencies in standards, controls, procedures and policies, as well as
diverting management attention and resources. This could 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 will remain post-acquisition (or postdivestment), and the loss of employees, customers, counterparties, suppliers and other business
partners could adversely affect the Group’s operations or results. Further, there is a risk thatcompletion of an agreed 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 approvals are not satisfied.
20. Sovereign risk events may destabilise global financial markets and may adversely
affect the Group’s liquidity, business, operations and financial condition
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. Sovereignrisk 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
and countries, 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 the Group’s liquidity,
business, operations and financial condition.
21. Market risk events may adversely affect the Group’s business, operations andfinancial condition
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 offinancial risk management, the Group differentiates between traded and non-traded market risks.
Traded market risks principally arise from the Group’s trading operations in interest rates, foreignexchange, commodities and securities. The non-traded market risk is predominantly interest raterisk in the banking book. Other non-traded markets risks include transactional and structuralforeign exchange risk arising from capital investments in offshore operations and non-traded
equity risk.
22. Changes in exchange rates may adversely affect the Group’s business, operations
and financial condition
As the Group conducts business in several different currencies, its businesses may be affected by achange in currency exchange rates. Additionally, as the Group’s annual and interim reports areprepared and stated in Australian dollars, any appreciation in the Australian dollar against othercurrencies in which the Group earns revenues (particularly to the New Zealand dollar and U.S.
dollar) may adversely affect the Group’s reported earnings.
The Group has put in place hedges to partially mitigate the impact of currency changes, but there
can be no assurance that the Group’s hedges will be sufficient or effective, and any further
appreciation could have an adverse impact upon the Group’s earnings.

18

23. Unexpected changes to the Group’s license to operate in any jurisdiction may
adversely affect the Group’s business, operations and financial condition
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 from trading in a manner that was previously permitted may
adversely impact the Group’s business, operations and financial condition.
24. Insurance risk events may adversely affect the Group’s business, operations andfinancial condition
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, predominantly in the Group’s life insurance
business in Australia which is a Discontinued Operation, the sale of which is expected in earlyfinancial year 2019. In the Group’s life insurance business, insurance risk arises primarily throughmortality (death) and morbidity (illness and injury) risks being greater than expected and, in thecase of annuity 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 business, operations
and financial condition.
25. Increasing compliance costs, the risk of heightened penalties and ongoing regulatory
scrutiny with respect to the significant obligations imposed by global tax reporting
regimes (which are still evolving), may adversely affect the Group’s business,
operations, financial condition and reputation
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”) and similar anti-tax avoidance regimes. Current regulatory
focus also includes enforcement and the due implementation of detailed global tax reporting rules
and frameworks to close down the circumvention of global tax reporting regimes and enforcementin the case of non-compliance.
As a global financial institution, the Group operates in a high volume and globally interlinked
operating environment. The highly complex and rigid nature of the obligations under the various
global tax reporting regimes in this context present heightened operational and compliance risks
for the Group. This may be coupled with the current increased regulatory scrutiny of global
financial institutions (including the Group) and the increasing trend in compliance breaches by
global financial institutions and related fines for non-compliance in general. Accordingly,
compliance with global tax reporting regimes will continue to be a key area of focus for the Group.
The scale and complexity of the Group, like other global financial institutions, means that the riskof 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 andreputational consequences for the Group and its employees. Consequences include fines, criminaland civil penalties, civil claims, reputational harm, competitive disadvantage, loss of business andconstraints on doing business. These consequences, individually or collectively, could adversely
affect the Group’s business, operations, financial condition and reputation.
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 US could also require the Groupto provide certain information to upstream US payers and the Group could face adverse
consequences where it does not do so in line with the applicable rules and regulations.
The Group is also reliant upon Intergovernmental Agreements (“IGAs”) between the U.S. and theapplicable jurisdictions in which the Group’s related entities and subsidiaries are organizedcontinuing to be in effect. Otherwise the Group may also be subject to broader compliance issues,
significant withholding exposure, competitive disadvantage and other operational impacts.
19

The CRS provides for the Automatic Exchange of (financial account) Information in tax matters.
Over 100 jurisdictions have committed to implement the CRS which now impacts the vast majorityof the Group’s business globally. Early implementation phases are progressing in many countries inwhich the Group has operations, for 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 by country
variations and may have more significant and negative customer experience ramifications. For
example, CRS requires a higher standard of compliance in many respects, such as collection ofself-certification at the point of account opening, with significant penalties for non-collection or
failed reporting in respect of prescribed customer information.
As one example of tightening regulatory focus, the OECD and certain countries the Group operates
within are now moving to mandate blocking (and eventual closure) of accounts where any aspectof the detailed requirements for collection have not been met (e.g. failure to provide the requisite
tax identification number(s)). Along with being a significant negative experience for the relevant
customers, this could adversely effect on the Group’s business, operations, financial condition andreputation (and if not similarly implemented by financial institution counterparts, significant
competitive disadvantage).
Ongoing OECD peer review and other regulatory review activities are also already resulting infurther extension and expansion of existing obligations together with increased focus oncompliance with the CRS pushing each country of adoption to ensure that its penalty regime issufficiently 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 tomake, significant investments in order to ensure ongoing compliance with the extensive andevolving 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 have amaterial adverse effect on 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 held for sale (where fair value is lower
than the carrying values) and certain other assets and liabilities (as per Note 17 of the 2018
Financial Statements) are recognised 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 other accepted valuation techniques which incorporate
the impact of factors that would influence the fair value as determined by a market participant.
The fair value of these instruments is impacted by changes in market prices or valuation inputs
which could have a material 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 asa result of impairments which are recognised in earnings. The Group is required to assess therecoverability of goodwill balances at least annually and other non-financial 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.
For the purpose of assessing the recoverability of the goodwill balances, the Group uses either adiscounted 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, could materially
impact this assessment, resulting in the potential write-off of a part or all of the goodwill balances.
In respect of other non-financial 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.
20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 and reports its
financial position and results of operations. Management must exercise judgement in selecting andapplying many of these accounting policies so that they not only comply with the applicableaccounting standards or interpretations but that they also reflect the most appropriate manner inwhich to record and report on the Group’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 or revised
accounting standards or interpretations could adversely affect the Group’s financial position andresults of operations. The impact of new accounting standards effective for the Group’s 2019financial year is outlined in Note 1 of the 2018 Financial Statements.
In some cases, management must select an accounting policy from two or more alternatives, anyof which might comply with the relevant accounting standard or interpretation to the Group and bereasonable under the circumstances, yet might result in reporting materially different outcomesthan would have been reported under the alternative.
28. Litigation and contingent liabilities may adversely affect the Group’s business,
operations, financial condition and reputation
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’sbusiness, operations and financial condition.
The Group had contingent liabilities as at September 30, 2018 in respect of the matters outlined in
Note 33 of the 2018 Financial Statements.
Note 33 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 the Group engages
with its regulators. There have been significant increases in the nature and scale of regulatory
investigations and reviews, enforcement actions (whether by court action or otherwise) and thequantum of fines issued by regulators, particularly against financial institutions both in Australia
and globally. The Group also instigates engagement with its regulators. The nature of theseinteractions can be wide ranging and, for example, currently include a range of matters including
responsible lending practices, product suitability, wealth advice, pricing and competition, conduct
in financial markets and capital market transactions and product disclosure documentation . The
Group has received various notices and requests for information from its regulators as part of bothindustry-wide and Group-specific 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 orcompensation activities. The outcomes and total costs associated with such 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 other contingent liabilities may arise.

21

Responsibility statement of the Directors of ANZBGL in accordance with Rule4.1.12 (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 2018 Annual Financial Report (as defined on page 1 of this DTR Annual Financial
Report submission) includes:(i)a fair review of the development and performance of the business and theposition of the Group and the undertakings included in the consolidation taken asa whole; together with(ii)

a description of the principal risks and uncertainties faced by the Group.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

30 October 201822