2017

BASEL IIIPILL AR 3
DISCLOSURE

AS AT 31 DECEMBER 2017
APS 330: PUBLIC DISCLOSURE

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.
1

ANZ Basel III Pillar 3 disclosure

Table 3

December 2017

Capital adequacy - Capital ratios and Risk Weighted Assets
Dec 17$M

Sep 17$M

Jun 17$M

Corporate

123,815

121,915

126,250

Sovereign

7,277

7,555

6,914

Bank

14,212

13,08013,493

Residential Mortgage

98,88096,267

95,528

Qualifying Revolving Retail

6,997

7,059

7,339

Other Retail30,586

31,07731,560281,767

276,953

281,084

31,137

31,84532,832

16,464

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 approach1
Subject to Standardised approach
Corporate

13,45013,365Residential Mortgage

355

950

2,283

Other Retail

702

2,000

3,068

14,507

16,315

21,815

7,439

7,269

7,822

937

1,083

1,179

3,367

3,369

3,753

339,154

336,834

348,485

Credit risk weighted assets subject to Standardised approach
Credit Valuation Adjustment and Qualifying Central Counterparties
Credit risk weighted assets relating to securitisation exposures
Other assets
Total credit risk weighted assets
Market risk weighted assets

5,966

5,363

6,395

Operational risk weighted assets

37,20837,30538,738Interest rate risk in the banking book (IRRBB) risk weighted assets

11,157

11,611

10,947393,485

391,113404,565

Level 2 Common Equity Tier 1 capital ratio

10.8%

10.6%

9.8%

Level 2 Tier 1 capital ratio

12.9%

12.6%

11.8%

Level 2 Total capital ratio

15.1%

14.8%

14.1%

Total risk weighted assets
Capital ratios (%)

Credit Risk Weighted Assets (CRWA)
Total CRWA increased $2.3 billion (0.7%) from September 2017 to $339.2 billion at December 2017.
This was driven by an increase in Institutional business in Advanced IRB Corporate and Advanced IRB
Bank. There was also an increase in Residential Mortgage CRWA driven by growth in Australia and a
regulatory determined adjustment in New Zealand, partially offset by a decrease in Standardised as aresult of the continued sale of the Retail Asia and Wealth business.
Market Risk, Operational Risk and IRRBB Risk RWA
Traded Market Risk RWA increased $0.6 billion (11.0%) over the quarter driven by increased exposure
to stressed market conditions.
The Operational Risk RWA remained relatively unchanged since September 2017 reflecting a minimalchange in the ANZ operational risk profile.
IRRBB RWA decreased $0.5 billion (3.9%) over the quarter due to a reduction in repricing and yield
curve risks.

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, project finance and object finance.

2

ANZ Basel III Pillar 3 disclosure

Table 4

December 2017

Credit risk exposures

Exposure at Default in Table 4 represents credit exposure net of offsets for credit risk mitigation suchas guarantees, credit derivatives, netting and financial collateral. It includes Advanced IRB,
Specialised Lending and Standardised exposures, however does not include Securitisation, Equities or
Other Assets exposures.
Table 4(a) part (i): Period end and average Exposure at Default 2

Risk
Weighted
Assets$M
123,815

Exposureat Default$M
232,249

Dec 17
Average
Exposure at
Default forthreemonths$M
231,312

Sovereign

7,277

144,529

138,001-

Bank

14,21245,451

44,996--

Residential Mortgage

98,880371,669

369,169

18

9

Qualifying Revolving Retail

6,997

21,894

21,97548

83

Other Retail30,58641,317

41,634112

152

281,767

857,109847,087

195

327

31,13736,56836,887(5)

3

2

Advanced IRB approach
Corporate

Total Advanced IRB approach
Specialised Lending

Individual
Provision
Charge forthreemonths$M
17

Write-offs
for threemonths$M
83-

Standardised approach
Corporate

13,45014,638

14,547

5

Residential Mortgage

355

774

1,611

1

-

Other Retail

702

693

1,341

24

28

14,507

16,105

17,499

30

30

7,439

10,047

9,983

-

-

334,850

919,829

911,456220

360

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

2

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.

3

ANZ Basel III Pillar 3 disclosure

December 2017

Risk
Weighted
Assets$M
121,915

Exposureat Default$M
230,375

Sep 17
Average
Exposure at
Default forthreemonths$M
230,277

Sovereign

7,555

131,473

131,857-

Bank

13,08044,54045,923--

Residential Mortgage

96,267

366,669

365,201

21

12

Qualifying Revolving Retail

7,059

22,055

22,136

65

66

Other Retail

31,077

41,951

42,312

119

144

276,953

837,063

837,706

216

341

31,84537,20537,728(3)

1

13,365

14,455

15,942

1

76

950

2,448

4,343

1

1

2,000

1,988

2,518

31

42

16,31518,89122,803

33

119

7,269

9,919

9,973

-

-

332,382

903,078

908,211

246

461

Risk
Weighted
Assets$M
126,250

Exposureat Default$M
230,179

Jun 17
Average
Exposure at
Default forthreemonths$M229,424

Individual
Provision
Charge forthreemonths$M
64

Write-offs
for threemonths$M
59

Sovereign

6,914

132,241

131,523

-

-

Bank

13,49347,30546,510

5

8

Residential Mortgage

95,528363,733

359,21121

8

Qualifying Revolving Retail

7,339

22,21622,24553

71

Advanced IRB approach
Corporate

Total Advanced IRB approach
Specialised Lending

Individual
Provision
Charge forthreemonths$M
11

Write-offs
for threemonths$M
119-Standardised approach
Corporate
Residential Mortgage
Other Retail
Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

Advanced IRB approach
Corporate

Other Retail31,56042,67342,400126131

281,084

838,347

831,313269

277

32,832

38,251

38,474(1)

1

Corporate

16,464

17,42817,147(2)

4

Residential Mortgage

2,283

6,237

6,357

1

-

Other Retail

3,068

3,048

3,168

41

48

21,81526,713

26,672

40

52

7,822

10,027

9,892

-

-

343,553

913,338

906,351308

330

Total Advanced IRB approach
Specialised LendingStandardised approach

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

4

ANZ Basel III Pillar 3 disclosure

December 2017

Table 4(a) part (ii): Exposure at Default by portfolio type3 4Portfolio Type
Cash
Contingents liabilities, commitments, andother off-balance sheet exposures
Derivatives

Dec 17$M
37,477

Sep 17$M
26,123

Jun 17$M
33,841

Average for thequarter ended
Dec 17$M
31,800153,627

153,775

153,303

153,70239,45038,92240,22639,186

Settlement Balances

22,005

21,532

20,75921,769Investment Securities

66,34866,80260,093

66,575

Net Loans, Advances & Acceptances573,168

568,089575,302570,629

Other assets

3,043

2,558

2,800

2,801

Trading Securities

24,711

25,27727,01424,994

Total exposures

919,829

903,078

913,338

911,456

3

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.

4

Includes assets reclassified as ‘Held for Sale’ for accounting purposes.

5ANZ Basel III Pillar 3 disclosure

December 2017

Table 4(b): Impaired Asset5 6, Past Due Loans7, Provisions and Write-offs
Dec 17

Impaired
Derivatives$M
Portfolios subject to Advanced IRB approach

ImpairedLoans/
Facilities$M

Past Due
Loans ≥
90 days$M

Individual
Provision
Balance$M

Individual
Provision
Charge forthreemonths$M

Write-offs
for threemonths$M

Corporate

-

1,074

163

458

17

83

Sovereign

-

-

-

3

-

-

Bank

-

-

-

-

-

-

Residential Mortgage

-

276

2,228

135

18

9

Qualifying Revolving Retail

-

80

-

-

48

83

Other Retail

-

550

317

276

112

152

1,980

2,708

872

195

327

-

22

15

8

(5)

3

Corporate

1

254

26

142

5

2

Residential Mortgage

-

29

16

10

1

-

Other Retail

-

49

5

2

24

28

Total Standardised approach

1

332

47

154

30

30

Qualifying Central Counterparties

-

-

-

-

-

-

Total

1

2,334

2,770

1,034

220

360

Total Advanced IRB approach
Specialised Lending
Portfolios subject to Standardised approach5

Impaired Derivatives are net of Credit Valuation Adjustment (CVA) of $40 million, being a market value based
assessment of the credit risk of the relevant counterparties (September 2017: $42 million; June 2017: $49 million).

6
Impaired Loans / Facilities include restructured items of $108 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 (September 2017: $167 million; June 2017: $311
million).
7
For regulatory reporting not well secured portfolio managed retail exposures have been reclassified from Past Due
Loans > 90 days to Impaired Loans / Facilities

6

ANZ Basel III Pillar 3 disclosure

December 2017

Sep 17

Impaired
Derivatives$M

ImpairedLoans/
Facilities$M

Past Due
Loans ≥
90 days$M

Individual
Provision
Balance$M

Individual
Provision
Charge forthreemonths$M

Write-offs
for threemonths$M

Portfolios subject to Advanced IRB approach
Corporate

-

1,193

175

520

11

119

Sovereign

-

-

-

3

-

-

Bank

-

-

10

-

-

-

Residential Mortgage

-

259

2,166

126

21

12

Qualifying Revolving Retail

-

99

-

18

65

66

Other Retail

-

586

325

299

119

144

Total Advanced IRB approach

-

2,137

2,676

966

216

341

Specialised Lending

-

25

21

17

(3)

1

Corporate

-

273

34

140

1

76

Residential Mortgage

-

25

19

10

1

1

Other Retail

-

121

6

3

31

42

Total Standardised approach

-

419

59

153

33

119

Qualifying Central Counterparties

-

-

-

-

-

-

Total

-

2,581

2,756

1,136

246

461

Write-offs
for threemonths$M
59

Portfolios subject to Standardised approach

Jun 17

Impaired
Derivatives$M
Portfolios subject to Advanced IRB approach

ImpairedLoans/
Facilities$M

Past Due
Loans ≥
90 days$M

Individual
Provision
Balance$M

Individual
Provision
Charge forthreemonths$M

Corporate

1

1,571

228

616

64

Sovereign

-

-

-

3

-

-

Bank

-

-

10

-

5

8

Residential Mortgage

-

245

2,125

118

21

8

Qualifying Revolving Retail

-

117

-

-

53

71

Other Retail

-

579

323

302

126

131

Total Advanced IRB approach

1

2,512

2,686

1,039

269

277

Specialised Lending

-

29

14

19

(1)

1

Corporate

8

385

44

216

(2)

4

Residential Mortgage

-

30

25

10

1

-

Other Retail

-

226

5

6

41

48

Total Standardised approach

8

641

74

232

40

52

Qualifying Central Counterparties

-

-

-

-

-

-

Total

9

3,182

2,774

1,290

308

330

Portfolios subject to Standardised approach

7

ANZ Basel III Pillar 3 disclosure

December 2017

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 8

Specific
Provision
Balance$M
334Collective Provision

Dec 17
GeneralReserve for
Credit Losses
$M
2,293

Total
$M
2,627

Individual Provision

1,034

-

1,034

Total Provision for Credit Impairment

1,368

2,293

3,661

Specific
Provision
Balance$M

Sep 17
GeneralReserve for
Credit Losses
$M

Total
$M

Collective Provision

352

2,310

2,662

Individual Provision

1,136

-

1,136

Total Provision for Credit Impairment

1,488

2,310

3,798

Specific
Provision
Balance$M

Jun 17
GeneralReserve for
Credit Losses
$M

Total
$M

Collective Provision

350

2,385

2,735

Individual Provision

1,290

-

1,290

Total Provision for Credit Impairment

1,640

2,385

4,025

8
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 5

December 2017

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset
type and facility 9
Dec 17
Original value securitised

ANZ
Originated
$M
(104)

ANZ Self
Securitised
$M
(724)

ANZ
Sponsored$M-

Recognised
gain or loss
on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(104)

(724)

-

-

Securitisation activity by underlying asset type
Residential mortgage

Securitisation activity by facility provided
Liquidity facilities

-

-

-

Notional
amount$M(51)

Funding facilities

-

-

-

(219)

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(229)

Other

-

-

-

7

Total

-

-

-

(492)

Sep 17
Original value securitised

ANZ
Originated
$M
(222)

ANZ Self
Securitised$M(10,213)ANZ
Sponsored$M-

Recognised
gain or loss
on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(222)

(10,213)--

Securitisation activity by underlying asset type
Residential mortgage

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

815

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(635)

Other

-

-

-

4

Total

-

-

-

184

9

Activity represents net movement in outstandings.

9

ANZ Basel III Pillar 3 disclosure

December 2017

Jun 17
Original value securitised

Securitisation activity by underlying asset type
Residential mortgage

ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Recognised
gain or loss on
sale
$M

(129)

102

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

(129)

102

-

-

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

119

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(295)

Other

-

-

-

-

Total

-

-

-

(176)

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.

10

ANZ Basel III Pillar 3 disclosure

December 2017

Table 5(b) part (i): Banking Book – Exposure at Default by exposure type
Securitisation exposure type - On balance sheet
Liquidity facilities
Funding facilities

Dec 17$M
18

Sep 17$M
21

Jun 17
$M
22

6,388

7,004

7,202

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,340

2,569

2,909

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

145

151

173

Total

8,891

9,745

10,306

Dec-17$M-

Sep 17$M
51

Jun 17$M
56

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

51

56

Dec-17$M
18

Sep 17$M
72

Jun 17$M
78

Securitisation exposure type - Off Balance Sheet
Liquidity facilities

Total Securitisation exposure type
Liquidity facilities
Funding facilities

6,388

7,004

7,202

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

2,340

2,569

2,909

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

145

151

173

Total

8,891

9,796

10,36211

ANZ Basel III Pillar 3 disclosure

December 2017

Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type
Dec 17$M

Sep 17$M

Jun 17$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

23

6

Protection provided

-

-

-

Other

-

-

-

Total

-

23

6

Dec 17$M

Sep 17$M

Jun 17$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

-

-

Dec 17$M

Sep 17$M

Jun 17$M

Liquidity facilities

-

-

-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

23

6

Protection provided

-

-

-

Other

-

-

-

Total

-

23

6

Securitisation exposure type - On balance sheet

Securitisation exposure type - Off Balance Sheet

Total Securitisation exposure type12

ANZ Basel III Pillar 3 disclosure
Table 18

December 2017

Leverage ratio

The Leverage Ratio requirements are part of the Basel Committee on Banking Supervision (BCBS)
Basel III capital framework. It is a simple, non-risk based supplement or backstop to the current risk
based capital requirements and is intended to restrict the build-up of excessive leverage in thebanking system.
Consistent with the BCBS definition, APRA’s Leverage Ratio compares Tier 1 Capital to the Exposure
Measure (expressed as a percentage) as defined by APS 110: Capital Adequacy. Currently the
Leverage Ratio is only a disclosure requirement, with implementation as a Pillar 1 requirement by July
2019.
The following information is the short form data disclosure required to be published under paragraph
47 of APS 330

Dec 17$M

Capital and total exposures
20
Tier 1 capital
21

Total exposures

Sep 17$M

Jun 17$M

Mar 17$M

50,57449,32447,59448,091

926,021909,179

925,892

906,454

5.5%

5.4%

5.1%

5.3%

Leverage ratio
22

Basel III leverage ratio

13

ANZ Basel III Pillar 3 disclosure

December 2017

Glossary
ADI

Authorised Deposit-taking Institution.

Basel III Credit Valuation
Adjustment (CVA) capital charge

CVA charge is an additional capital requirement under Basel III
for bilateral derivative exposures. Derivatives not cleared througha central exchange/counterparty are subject to this additional
capital charge and also receive normal CRWA treatment under
Basel II principles.

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 a loss 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 model toadjust fair value to take into account the impact of counterparty
credit quality. The methodology calculates the present value of
expected losses over the life of the financial instrument as afunction of probability of default, loss given default, expectedcredit 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 and otherpayments, will be met in a timely manner. Impaired assets
include impaired facilities, and impaired derivatives. Impaired
derivatives have a credit value adjustment (CVA), which is amarket assessment of the credit risk of the relevant
counterparties.

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

Individual Provision Charge (IPC)

Individual provision charge is the amount of expected credit
losses on financial instruments assessed for impairment on an
individual basis (as opposed to on a collective basis). It takes into
account expected cash flows over the lives of those financial
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 (or other credit
mitigants), the likely return available upon liquidation or
bankruptcy, legal uncertainties, estimated costs involved inrecovery, the market price of the exposure in secondary markets
and the amount and timing of expected receipts and recoveries.

14

ANZ Basel III Pillar 3 disclosure

December 2017Market risk

The risk to ANZ’s earnings arising from changes in interest rates,
currency exchange rates and credit spreads, or from fluctuations
in bond, commodity or equity prices. ANZ has grouped market
risk into two broad categories to facilitate the measurement,
reporting and control of market risk:
Traded market risk - the risk of loss from changes in the value offinancial instruments due to movements in price factors forphysical and derivative trading positions. Trading positions arise
from transactions where ANZ acts as principal with clients or withthe 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 pastdue. Past due facilities include those operating in excess ofapproved arrangements or where scheduled repayments areoutstanding but do not include impaired assets.

Qualifying Central Counterparties(QCCP)QCCP is a central counterparty which is an entity that interposes
itself between counterparties to derivative contracts. Trades with
QCCP attract a more favorable risk weight calculation.

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 consist of
reduction of interest, principal or other payments legally due, oran extension in maturity materially beyond those typically offeredto new facilities with similar risk.

Risk Weighted Assets (RWA)

Assets (both on and off-balance sheet) are risk weighted
according to each asset’s inherent potential for default and what
the likely losses would be in the case of default. In the case of
non asset backed risks (i.e. market and operational risk), RWA isdetermined by multiplying the capital requirements for those risks
by 12.5.

Securitisation risk

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

Write-offs

Facilities are written off against the related provision for
impairment when they are assessed as partially or fully
uncollectable, and after 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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ANZ Basel III Pillar 3 disclosure

December 2017

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ANZ Basel III Pillar 3 disclosure

December 201717