ANZ Basel III Pillar 3 disclosure

June 2013

2013+

BASEL IIIIIBASELPILLAR33DISCLOSUREDISCLOSUREPILLARQUARTER ENDED 30 June 2013
APS 330: CAPITAL ADEQUACY & RISKMANAGEMENT IN ANZ

1

ANZ Basel III Pillar 3 disclosure

June 2013

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

1

ANZ Basel III Pillar 3 disclosure

June 2013

Scope of application
Top corporate entity
The top corporate entity in the reporting group is Australia and New Zealand Banking Group Limited.

Table 3

Capital adequacy - Capital ratios and Risk Weighted Assets 1
Basel IIIJun 13
Mar 13$M$M

Basel IIDec 12$M

Corporate

123,753

114,700

113,027

Sovereign

4,638

4,382

4,615

Bank

17,584

15,838

11,079Residential Mortgage

46,24944,59743,664

Qualifying Revolving Retail

7,260

7,234

7,028

Other Retail

23,742

23,20022,511

223,226

209,951

201,924

27,436

27,842

27,286

Corporate

18,175

17,157

17,339Residential Mortgage

1,831

1,827

1,863

Qualifying Revolving Retail

1,886

2,068

2,112

Other Retail

1,005

1,248

1,354

22,89722,30022,668Credit Valuation Adjustment2 and Qualifying Central Counterparties3

9,506

8,949

n/a

Credit risk weighted assets relating to securitisation exposures

2,883

2,549

1,132

n/a

n/a

918

3,537

3,387

3,729

289,485

274,978

257,657

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

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

Credit risk weighted assets subject to Standardised approach

Credit risk weighted assets relating to equity exposures
Other assets
Total credit risk weighted assets
Market risk weighted assets

5,101

6,850

6,193

Operational risk weighted assets

28,87528,12528,124

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

17,323

12,629

11,634

340,784

322,582

303,608

Level 2 Common Equity Tier 1 capital ratio

8.0%

8.2%

n/a

Level 2 Tier 1 capital ratio

9.5%

9.8%

10.9%

Level 2 Total capital ratio

11.4%

11.7%

12.1%

Total risk weighted assets
Capital ratios (%)

Credit Risk Weighted Assets (CRWA)
Total CRWA movement increased $14.5 billion (5.3%) from March 2013 to $289.5 billion at June 2013, including a$10.6 billion increase due to foreign currency movements. Significant Basel Asset Class movements include a $9.0
billion (7.9%) increase in AIRB Corporate driven mainly by growth in the Institutional portfolio and foreign currency
impacts, an increase of $1.7 billion (11%) in AIRB Bank driven by growth in Australia and Asia and foreign currency
movements, and an increase of $1.7 billion (3.7%) in AIRB Residential Mortgages driven mainly by growth inAustralian portfolio and foreign currency movements.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
The increase in IRRBB RWA was primarily due to greater repricing and yield curve risk primarily due to lengtheningof Capital.
Market Risk RWA decreased $1.7 billion during the quarter as portfolio diversification increased from lower levels
observed during first half 2013 under the Basel 2.5 Stressed VaR calculation.
1

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

2

Basel III capital reforms have introduced a Credit Value Adjustment (CVA) capital charge on over the counter(OTC) derivative assets.

3
Basel III capital reforms, exposures to Qualifying Central Counterparties (QCCP’s) arising from over the counter(OTC) derivatives, exchange-traded derivatives and securities financing transactions are subject to refined capitalrequirements.

2

ANZ Basel III Pillar 3 disclosure

Table 4

June 2013

Credit risk exposures

Table 4(a) part (i): Period end and average Exposure at Default 4 5 6
Jun 13

Exposureat Default$M

Average
Exposureat Default forthree months$M

Individual
provision
charge forthree months$M

Write-offs forthree months$M

123,753

225,561

216,624

52

88

4,638

83,10280,5505-Bank17,584

121,287

111,830--

Residential Mortgage

46,249267,421

263,487

14

32

Qualifying Revolving Retail

7,260

21,05621,00462

80

Other Retail

23,74235,98735,58787

89

223,226

754,414729,082220

289

27,436

31,54531,933-30

Corporate

18,175

17,96817,47912

8

Residential Mortgage

1,831

4,923

4,565

1

3

Qualifying Revolving Retail

1,886

1,879

1,971

(4)

2

Other Retail

1,005

999

1,121

9

20

22,89725,76925,136

18

33

9,506

4,766

3,141

-

-

283,065

816,494

789,292

238

352

Basel III
Risk Weighted
Assets$M

Corporate
Sovereign

Advanced IRB approach

Total Advanced IRB approach

Specialised LendingStandardised approach

Total Standardised approach

Credit Valuation Adjustment andQualifying Central Counterparties
Total

4
Exposure at Default in Table 4 includes Advanced IRB, Specialised Lending and Standardised exposures, however
does not include Securitisation, Equities or Other Assets exposures. Exposure at Default in Table 4 is gross of credit
risk mitigation such as guarantees, credit derivatives, netting and financial collateral.
5
Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the endof each three month period.
6

December 2012 Exposure at Default has been restated and is gross of credit risk mitigation such as guarantees,credit derivatives, netting and financial collateral.

3

ANZ Basel III Pillar 3 disclosure

June 2013

Mar 13Basel III
Risk Weighted
Assets$M

Exposureat Default$M

Average
Exposureat Default forthree months$M

Corporate

114,700

207,687

206,120

134

176

Sovereign

4,382

77,99877,566

(2)

-

Bank

15,838102,372

102,657--

Residential Mortgage

44,597

259,553

257,38124

16

Qualifying Revolving Retail

7,234

20,951

20,893

51

67

Other Retail

23,20035,18734,89381

70

209,951

703,748

699,510288

329

27,84232,321

31,994(8)85

Corporate

17,157

16,98917,058

13

17

Residential Mortgage

1,827

4,206

4,146

1

1

Qualifying Revolving Retail

2,068

2,062

2,084

(4)

6

Other Retail

1,248

1,242

1,290

8

13

22,30024,49924,578

18

37

8,949

1,516

1,516

-

-

269,042762,084

757,598

298

451

Advanced IRB approach

Total Advanced IRB approach

Specialised Lending

Individual
provision
charge for Write-offs forthree months three months$M$M

Standardised approach

Total Standardised approach

Credit Valuation Adjustment andQualifying Central Counterparties

Total

Dec 12
Basel II
Risk Weighted
Assets$M

Exposureat Default$M

Average
Exposureat Default forthree months$M

Corporate

113,027

204,552

203,517

109

127

Sovereign

4,615

77,134

71,8622-

Bank

11,079102,942

100,925--

Residential Mortgage

43,664

255,208

253,024

11

15

Qualifying Revolving Retail

7,028

20,83520,874

61

79

Other Retail

22,511

34,59933,27757

80

201,924

695,270

683,479240

301

27,286

31,666

31,64147

85

Corporate

17,33917,126

17,547

9

19

Residential Mortgage

1,863

4,086

3,931

-

-

Qualifying Revolving Retail

2,112

2,105

2,063

(5)

2

Advanced IRB approach

Total Advanced IRB approach

Specialised Lending

Individual
provision
charge for Write-offs forthree months three months$M$M

Standardised approach

Other Retail
Total Standardised approach

Total

1,354

1,337

1,242

6

6

22,66824,65424,78310

27251,878

751,590739,903

297

413

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ANZ Basel III Pillar 3 disclosure

June 2013

Table 4(a) part (ii): Exposure at Default by portfolio type 7

Portfolio TypeJun 13$M

Mar 13$M

Dec 12$M

Average for thequarter ended
Jun 13$M

Cash and liquid assets

47,76247,43343,65647,598Contingents liabilities, commitments, andother off-balance sheet exposures

133,304

127,206

125,808130,255

Derivatives

103,492

80,64884,24392,070Due from other financial institutions

19,975

14,51815,89817,247

Investment securities

23,48420,01817,90521,751Loans, advances and acceptances

457,813441,299

431,872449,556

Other assets

4,128

2,788

5,069

3,458

Trading securities

26,53628,174

27,13927,355

Total exposures

816,494

762,084

751,590789,2907

December 2012 Exposure at Default has been restated and is gross of credit risk mitigation such as guarantees,credit derivatives, netting and financial collateral.

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ANZ Basel III Pillar 3 disclosure

June 2013

Table 4(b): Impaired asset 8 9, Past due loans 10, Provisions and Write-offs
Jun 13

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

9

2,227

289

752

52

88

Sovereign

-

1

-

5

5

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

427

989

144

14

32

Qualifying Revolving Retail

-

90

-

-

62

80

Other Retail

-

391

240

211

87

89

Total Advanced IRB approach

9

3,136

1,518

1,112

220

289

66

937

103

157

-

30

Corporate

2

281

37

161

12

8

Residential Mortgage

-

17

11

13

1

3

Qualifying Revolving Retail

-

67

-

48

(4)

2

Other Retail

-

51

4

28

9

20

Total Standardised approach

2

416

52

250

18

33

77

4,489

1,673

1,519

238

352

Specialised Lending

Portfolios subject to Standardised approach

Total

8

Impaired derivatives is net of credit valuation adjustment (CVA) of $110 million, being a market value based
assessment of the credit risk of the relevant counterparties (March 2013: $111 million; December 2012: $117
million).

9

Impaired loans / facilities include restructured items of $543 million for customer facilities in which the originalcontractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring
may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materiallybeyond those typically offered to new facilities with similar risk (March 2013: $524 million; December 2012: $524
million).
10

Not well secured portfolio managed retail exposures have been reclassified from past due loans > 90 days to
impaired loans / facilities from June 2013.

6

ANZ Basel III Pillar 3 disclosure

June 2013

Mar 13

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

10

2,418

282

759

134

176

Sovereign

-

-

-

-

(2)

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

463

907

159

24

16

Qualifying Revolving Retail

-

-

94

-

51

67

Other Retail

-

323

284

202

81

70

Total Advanced IRB approach

10

3,204

1,567

1,120

288

329

Specialised Lending

71

1,055

72

183

(8)

85

Corporate

2

237

39

150

13

17

Residential Mortgage

-

18

3

14

1

1

Qualifying Revolving Retail

-

63

1

46

(4)

6

Other Retail

-

25

14

30

8

13

Total Standardised approach

2

343

57

240

18

37

83

4,602

1,696

1,543

298

451

Portfolios subject to Standardised approach

Total

Dec 12

Impairedderivatives$M

Impairedloans/
facilities$M

Past dueloans ≥
90 days$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

14

2,521

266

817

109

127

Sovereign

-

-

-

2

2

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

454

883

154

11

15

Qualifying Revolving Retail

-

-

81

-

61

79

Other Retail

-

278

230

178

57

80

Total Advanced IRB approach

14

3,253

1,460

1,151

240

301

Specialised Lending

79

1,194

119

270

47

85

Corporate

2

235

46

146

9

19

Residential Mortgage

-

26

4

17

-

-

Qualifying Revolving Retail

-

50

1

50

(5)

2

Portfolios subject to Standardised approach

Other Retail

-

26

14

33

6

6

Total Standardised approach

2

337

65

246

10

27

95

4,784

1,644

1,667

297

413

Total

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ANZ Basel III Pillar 3 disclosure

June 2013

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 11
Jun 13Specific Provision
Balance$M

General Reserve for
Credit Losses
$M

Total
$M

Collective Provision

368

2,524

2,892

Individual Provision

1,519

-

Total Provision for Credit Impairment

1,519
4,411

Mar 13Specific Provision
Balance$M

General Reserve for
Credit Losses
$M

Total
$M

Collective Provision

341

2,428

2,769

Individual Provision

1,543

-

Total Provision for Credit Impairment

1,543
4,312

Dec 12
Specific Provision General Reserve forBalance
Credit Losses$M$M
Collective Provision

330

2,448

Individual Provision

1,667

-

Total Provision for Credit Impairment

Total
$M
2,778
1,667
4,445

11

Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective
Provision for accounting purposes and the Specific Provision and General Reserve for Credit Losses (GRCL) for
regulatory purposes. This does not impact total provisions, and essentially relates to the classification of collectively
assessed provisions on defaulted accounts. The disclosures in this document are based on Individual Provision andCollective Provision, for ease of comparison with other published results.

8

ANZ Basel III Pillar 3 disclosure
Table 5June 2013

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset
type and facility 12 13
Jun 13
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Residential mortgage

-

557

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

557

-

-

Securitisation activity by underlying asset type

Recognised gainor loss on sale
$M

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

(103)

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Other

-

-

-

596

Total

-

-

-

463

(30)

Mar 13
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Recognised gainor loss on sale
$M

Residential mortgage

-

642

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

642

-

-

Securitisation activity by underlying asset type

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

190

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

444

Other

-

-

-

-

Total

-

-

-

634

12

Activity represents net movement in outstandings.

13

Table represents ANZ self securitised programs only.

9

ANZ Basel III Pillar 3 disclosure

June 2013

Dec 12
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Recognised gainor loss on sale
$M

Residential mortgage

-

566

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

566

-

-

Securitisation activity by underlying asset type

Notional amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

450

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

201

Other

-

-

-

-

Total

-

-

-

651

Table 5(a) part (ii): Trading Book - Summary of current period's activity by underlying
asset type and facility
No assets from ANZ's Trading Book were securitised during the reporting period.

Securitisation activities:
ANZ’s key securitisation activities are:
• Securitisation of ANZ originated assets (including self-securitisation) – use of securitisation as afunding, liquidity and capital management tool which may or may not involve the transfer of credit
risk i.e. may or may not provide regulatory capital relief.
• Securitisation of third-party originated assets.
• Provision of facilities and services to securitisations or resecuritisations (where the underlying assets
may be ANZ or third-party originated) e.g. liquidity, funding derivatives and/or credit support,
structuring and arranging services, conduit management and (via ANZ Capel Court Limited) trust
management services.
• Investment in securities - ANZ may purchase notes issued by securitisation programmes.

10

ANZ Basel III Pillar 3 disclosure

June 2013

Table 5(b) part (i): Banking Book – Exposure at Default by exposure type

Jun13
$M

Securitisation exposure type - On balance sheet

Mar13
$M

Dec12
$M

Liquidity facilities

-

-

-

Funding facilities

5,124

5,232

5,384

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,859

2,889

2,309
-

Holdings of securities (excluding trading book)Protection provided

-

-

Other

596

-

-

Total

8,579

8,121

7,693

Securitisation exposure type - Off balance sheet

Jun13
$M

Mar13
$M

Dec12
$M

Liquidity facilities

119

121

234

Funding facilities

-

-

6

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

119

121

240

Jun13
$M

Mar13
$M

Dec12
$M

Total Securitisation exposure type
Liquidity facilities

119

121

234

Funding facilities

5,124

5,232

5,390

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,859

2,889

2,309
-

Holdings of securities (excluding trading book)Protection provided

-

-

Other

596

-

-

Total

8,698

8,242

7,933

11

ANZ Basel III Pillar 3 disclosure

June 2013

Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type

Jun13
$M

Mar13
$M

Dec12
$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

2

17

26

Protection provided

-

-

-

Other

-

-

-

Total

2

17

26

Jun13
$M

Mar13
$M

Dec12
$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

-

-

Jun13
$M

Mar13
$M

Dec12
$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

2

17

26

Protection provided

-

-

-

Other

-

-

-

Total

2

17

26

Securitisation exposure type - On balance sheet

Securitisation exposure type - Off balance sheet

Total Securitisation exposure type12

ANZ Basel III Pillar 3 disclosure

June 2013

Glossary
Collective provision (CP)Collective provision is the provision for credit losses that are
inherent in the portfolio but not able to be individually
identified. A collective provision may only be recognised when aloss event has already occurred. Losses expected as a result of
future events, no matter how likely, are not recognised.

Credit exposure

The aggregate of all claims, commitments and contingent
liabilities arising from on- and off-balance sheet transactions (inthe banking book and trading book) with the counterparty orgroup of related counterparties.

Credit risk

The risk of financial loss resulting from the failure of ANZ’scustomers and counterparties to honour or perform fully theterms of a loan or contract.

Credit Valuation Adjustment (CVA)

Over the life of a derivative instrument, ANZ uses a CVA modelto adjust fair value to take into account the impact ofcounterparty credit quality. The methodology calculates thepresent value of expected losses over the life of the financial
instrument as a function of probability of default, loss given
default, expected credit risk exposure and an asset correlation
factor. Impaired derivatives are also subject to a CVA.

Days past due

The number of days a credit obligation is overdue, commencing
on the date that the arrears or excess occurs and accruing foreach completed calendar day thereafter.

Exposure at Default (EAD)

Exposure At Default is defined as the expected facility exposure
at the date of default.

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

Impaired loans (IL)Impaired loans comprise of drawn facilities
customer’s status is defined as impaired.

Individual provision charge (IPC)

Impaired provision charge is the amount of expected credit
losses on financial instruments assessed for impairment on an
individual basis (as opposed to on a collective basis). It takes
into account expected cash flows over the lives of thosefinancial instruments.

Individual provisions (IP)Individual provisions are assessed on a case-by-case basis for
all individually managed impaired assets taking into
consideration factors such as the realisable value of security (orother credit mitigants), the likely return available uponliquidation or bankruptcy, legal uncertainties, estimated costs
involved in recovery, the market price of the exposure insecondary markets and the amount and timing of expected
receipts and recoveries.

13

where

the

ANZ Basel III Pillar 3 disclosure

June 2013Market risk

The risk to ANZ’s earnings arising from changes in interest
rates, currency exchange rates and credit spreads, or fromfluctuations in bond, commodity or equity prices. ANZ has
grouped market risk into two broad categories to facilitate themeasurement, reporting and control of market risk:
Traded market risk - the risk of loss from changes in the valueof financial instruments due to movements in price factors forphysical and derivative trading positions. Trading positions arise
from transactions where ANZ acts as principal with clients orwith the market.
Non-traded market risk (or balance sheet risk) - comprises
interest rate risk in the banking book and the risk to the AUD
denominated value of ANZ’s capital and earnings due to foreignexchange rate movements.

Operational risk

The risk of loss resulting from inadequate or failed internal
controls or from external events, including legal risk but
excluding reputation risk.

Past due facilities

Facilities where a contractual payment has not been met or thecustomer is outside of contractual arrangements are deemed
past due. Past due facilities include those operating in excess ofapproved arrangements or where scheduled repayments areoutstanding but do not include impaired assets.

Recoveries

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

Restructured items

Restructured items comprise facilities in which the originalcontractual terms have been modified for reasons related to thefinancial difficulties of the customer. Restructuring may consistof reduction of interest, principal or other payments legally due,or an extension in maturity materially beyond those typicallyoffered to new facilities with similar risk.

Risk Weighted Assets (RWA)

Assets which are weighted for credit risk according to a set
formula (APS 112/113).

Securitisation risk

The risk of credit related losses greater than expected due to asecuritisation failing to operate as anticipated, or of the values
and risks accepted or transferred, not emerging as expected.

Write-Offs

Facilities are written off against the related provision for
impairment when they are assessed as partially or fully
uncollectable, and after proceeds from the realisation of any
collateral have been received. Where individual provisions
recognised in previous periods have subsequently decreased or
are no longer required, such impairment losses are reversed in
the current period income statement.

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