2016

BASEL IIIPILL AR 3
DISCLOSURE

AS AT 31 DECEMBER 2016
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 2016

Capital adequacy - Capital ratios and Risk Weighted Assets
Dec 16$M

Sep 16$M

Jun 16$M

Corporate

132,930

130,799

136,916

Sovereign

6,850

6,634

6,622

Bank

15,26014,884

16,027

Residential Mortgage

86,45084,27558,600Qualifying Revolving Retail

7,276

7,334

7,676

Other Retail

31,71531,36031,302

280,481275,286

257,143

Credit risk Specialised Lending exposures subject to slotting approach1

34,83836,10035,831

Subject to Standardised approach
Corporate

20,65820,45923,074

Residential Mortgage

2,472

2,493

2,606

Other Retail

3,295

3,277

3,402

26,42526,22929,082Credit Valuation Adjustment and Qualifying Central Counterparties

9,326

9,371

9,078

Credit risk weighted assets relating to securitisation exposures

1,263

1,203

1,202

Other assets

3,412

3,844

3,876

355,745

352,033

336,212

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

Credit risk weighted assets subject to Advanced IRB approach

Credit risk weighted assets subject to Standardised approach

Total credit risk weighted assets
Market risk weighted assets

7,122

6,188

6,312

Operational risk weighted assets

38,83338,66137,737

Interest rate risk in the banking book (IRRBB) risk weighted assets
Total risk weighted assets
Capital ratios (%)
Level 2 Common Equity Tier 1 capital ratio

10,645

11,70011,468412,345

408,582391,729

9.5%

9.6%

9.7%

Level 2 Tier 1 capital ratio

11.4%

11.8%

11.8%

Level 2 Total capital ratio

14.0%

14.3%

14.4%

Credit Risk Weighted Assets (CRWA)
Total CRWA increased $3.7billion (1%) from September 2016 to $355.8 billion at December 2016. Thiswas predominantly driven by foreign currency movements and growth in the Australia Residential
Mortgage portfolio.
Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)
Decrease in IRRBB RWA over the quarter was due to lower repricing and yield curve risk. Traded Market
Risk RWA increased by 15% over the quarter driven by an upward impact for the first time inclusion ofLinear Funding Valuation Adjustment (FVA) hedges. The Operational Risk RWA remained relatively
unchanged since September 2016 reflecting minimal change in the ANZ operational risk profile.

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

ANZ Basel III Pillar 3 disclosure

Table 4

December 2016

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$M132,930

Exposureat Default$M
231,385

Dec 16
Average
Exposureat Default forthree months$M
230,351

Sovereign

6,850

132,900

126,917-Bank

15,26051,48950,182--

Residential Mortgage

86,450354,954351,674148

Qualifying Revolving Retail

7,276

22,274

22,33553

72

Other Retail

31,71542,74942,520109

135

280,481835,751

823,979272

253

34,83839,59840,028(2)

2

Corporate

20,65821,74921,502

10

16

Residential Mortgage

2,472

6,779

6,815

-

1

Other Retail

3,295

3,291

3,285

45

51

26,42531,81931,602

55

68

9,326

9,482

9,965

-

-

351,070916,650

905,574325

323

Advanced IRB approach
Corporate

Total Advanced IRB approach
Specialised Lending

Individual
provision
charge forthree months$M
96

Write-offs forthree months$M38-Standardised approach

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 2016

Risk Weighted
Assets$M
130,799

Exposureat Default$M
229,317

Sep 16
Average
Exposure at
Default forthree months$M
232,130

Sovereign

6,634

120,933

118,975

2

Bank

14,884

48,87549,911--

Residential Mortgage

84,275348,394

346,78523

7

Qualifying Revolving Retail

7,334

22,39522,483

49

69

Other Retail31,36042,291

42,101

121

141

275,286

812,205

812,385486

526

36,10040,45840,424-

6

Corporate

20,45921,254

21,953

71

25

Residential Mortgage

2,493

6,851

7,002

-

2

Other Retail

3,277

3,279

3,342

42

43

26,22931,38432,297

113

70

9,371

10,448

10,090--346,986

894,495

895,198

599

602

Risk Weighted
Assets$M

Exposure at
Default$M

Jun 16
Average
Exposure at
Default forthree months$M

Individual
provision
charge forthree months$M

Write-offs forthree months$M

Advanced IRB approach
Corporate

Total Advanced IRB approach
Specialised Lending

Individual
provision
charge forthree months$M
291

Write-offs forthree months
$M
309
-

Standardised approach

Total Standardised approach
Credit Valuation Adjustment andQualifying Central Counterparties
Total

Advanced IRB approach
Corporate

136,916

234,943

237,982

175

159

Sovereign

6,622

117,018

117,618

-

2

Bank

16,02750,94750,037--

Residential Mortgage

58,600345,176

341,24510

10Qualifying Revolving Retail

7,676

22,57022,49455

72

Other Retail31,302

41,91041,427130134

257,143

812,564

810,803370

377

35,83140,391

39,899(1)

2

Corporate

23,07422,651

22,57136

36

Residential Mortgage

2,606

7,153

7,168

2

1

Other Retail

3,402

3,404

3,480

41

48

29,082

33,20833,219

79

85

9,078

9,733

8,713

-

-

331,134

895,896

892,634

448

464

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 2016

Table 4(a) part (ii): Exposure at Default by portfolio type3

Dec 16$M

Sep 16$M

Jun 16$M

32,486

27,054

24,341

Average for thequarter ended
Dec 16$M
29,770152,531

154,142

156,442

153,337

45,682

41,641

41,884

43,662

Settlement Balances

19,486

16,662

20,736

18,074

Investment Securities

59,63358,42654,40159,030

Net Loans, Advances & Acceptances

573,511563,545564,373

568,528

Portfolio Type
Cash
Contingents liabilities, commitments, andother off-balance sheet exposures
Derivatives

Other assets

3,550

3,134

4,327

3,342

Trading Securities

29,771

29,891

29,392

29,831

Total exposures

916,650

894,495

895,896905,574

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.

5ANZ Basel III Pillar 3 disclosure

December 2016

Table 4(b): Impaired asset4 5, Past due loans6, Provisions and Write-offs
Dec 16

Impairedderivatives$M
Portfolios subject to Advanced IRB approach

Impairedloans/
facilities$M

Past dueloans ≥ 90
days
$M

Individual
provisionbalance$M

Individual
provision
charge forthree months$M

Write-offs
for threemonths$M

Corporate

-

1,878

167

715

96

38

Sovereign

-

-

-

6

-

-

Bank

-

-

11

-

-

-

Residential Mortgage

-

225

1,926

99

14

8

Qualifying Revolving Retail

-

87

-

-

53

72

Other Retail

-

524

279

276

109

135

Total Advanced IRB approach

-

2,714

2,383

1,096

272

253

Specialised Lending

-

45

34

21

(2)

2

16

Portfolios subject to Standardised approach
Corporate

16

389

24

235

10

Residential Mortgage

-

33

19

9

-

1

Other Retail

-

237

5

7

45

51

16

659

48

251

55

68

-

-

-

-

-

-

16

3,418

2,465

1,368

325

323

Total Standardised approach
Qualifying Central Counterparties
Total

4

Impaired derivatives are net of credit valuation adjustment (CVA) of $66 million, being a market value based
assessment of the credit risk of the relevant counterparties (September 2016: $63 million; June 2016: $72 million).

5
Impaired loans / facilities include restructured items of $425 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 2016: $403 million; June 2016: $251
million).
6
For regulatory reporting not well secured portfolio managed retail exposures have been reclassified from past dueloans > 90 days to impaired loans / facilities

6

ANZ Basel III Pillar 3 disclosure

December 2016

Sep 16

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

1

1,795

178

653

291

309

Sovereign

-

-

-

6

2

-

Bank

-

-

11

-

-

-

Residential Mortgage

-

220

1,981

94

23

7

Qualifying Revolving Retail

-

89

-

-

49

69

Other Retail

-

515

255

281

121

141

Total Advanced IRB approach

1

2,619

2,425

1,034

486

526

Specialised Lending

-

42

38

23

-

6

13

440

18

237

71

25

Residential Mortgage

-

29

11

8

-

2

Other Retail

-

233

7

5

42

43

13

702

36

250

113

70

-

-

-

-

-

-

14

3,363

2,499

1,307

599

602

Portfolios subject to Standardised approach
Corporate

Total Standardised approach
Qualifying Central Counterparties
Total

Jun 16

Impaired
Derivatives$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

-

1,540

214

672

175

159

Sovereign

-

-

-

4

-

2

Bank

-

-

12

-

-

-

Residential Mortgage

-

211

1,992

78

10

10

Qualifying Revolving Retail

-

96

-

-

55

72

Other Retail

-

517

289

280

130

134

Total Advanced IRB approach

-

2,365

2,507

1,034

370

377

Specialised Lending

-

68

27

36

(1)

2

36

Portfolios subject to Standardised approach
Corporate

14

427

14

202

36

Residential Mortgage

-

33

10

11

2

1

Other Retail

-

230

7

(3)

41

48

14

690

31

210

79

85

-

-

-

-

-

-

14

3,122

2,565

1,280

448

464

Total Standardised approach
Qualifying Central Counterparties
Total

7

ANZ Basel III Pillar 3 disclosure

December 2016

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses 7
Dec 16

Collective Provision

Specific Provision
Balance$M
354

General Reserve
for Credit Losses
$M
2,506

Total
$M
2,860

Individual Provision

1,368

-

1,368

Total Provision for Credit Impairment

1,722

2,506

4,228

Specific Provision
Balance$M

General Reserve
for Credit Losses
$M

Total
$M

Collective Provision

350

2,526

2,876

Individual Provision

1,307

-

1,307

Total Provision for Credit Impairment

1,657

2,526

4,183

Specific Provision
Balance$M

General Reserve
for Credit Losses
$M

Total
$M

Collective Provision

353

2,580

2,933

Individual Provision

1,280

-

1,280

Total Provision for Credit Impairment

1,633

2,580

4,213

Sep 16

Jun 16

7
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 2016

Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset
type and facility 8
Dec 16
Original value securitised
ANZ
Originated
$M
1,871

ANZ Self
Securitised
$M
549

ANZ
Sponsored$M-

Recognized gainor loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

1,871

549

-

-

Securitisation activity by underlying asset type
Residential mortgage

Securitisation activity by facility provided
Liquidity facilities

-

-

-

Notional
amount$M
20

Funding facilities

-

-

-

220

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(239)

Other

-

-

-

68

Total

-

-

-

69

Sep 16
Original value securitised
ANZ
Originated$M-

ANZ Self
Securitised
$M
672

ANZ
Sponsored$M-

Recognised gainor loss on sale$M-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

672

-

-

Securitisation activity by underlying asset type
Residential mortgage

Liquidity facilities

-

-

-

Notional
amount$M-

Funding facilities

-

-

-

317

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(934)

Securitisation activity by facility provided

Other

-

-

-

11

Total

-

-

-

(606)

8

Activity represents net movement in outstandings.

9

ANZ Basel III Pillar 3 disclosure

December 2016

Jun 16
Original value securitised
ANZ
Originated$M

ANZ Self
Securitised$M

ANZ
Sponsored$M

Residential mortgage

-

727

-

-

Credit cards and other personal loans

-

-

-

-

Auto and equipment finance

-

-

-

-

Commercial loans

-

-

-

-

Other

-

-

-

-

Total

-

727

-

-

Securitisation activity by underlying asset type

Recognised gainor loss on sale
$M

Notional
amount$M

Securitisation activity by facility provided
Liquidity facilities

-

-

-

-

Funding facilities

-

-

-

105

Underwriting facilities

-

-

-

-

Lending facilities

-

-

-

-

Credit enhancements

-

-

-

-

Holdings of securities (excluding trading book)

-

-

-

(78)

Other

-

-

-

7

Total

-

-

-

34

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 2016

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

Dec 16$M
28

Sep 16$M
5

Jun 16
$M
5

6,921

6,791

6,256

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

3,737

3,975

4,812

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

162

152

166

Total

10,848

10,923

11,239Securitisation exposure type - Off Balance Sheet
Liquidity facilities

Dec 16$M
62

Sep 16$M
61

Jun 16$M
64

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities (excluding trading book)

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

62

61

64

Dec 16$M90

Sep 16$M
66

Jun 16$M
69

Total Securitisation exposure type
Liquidity facilities
Funding facilities

6,921

6,791

6,256

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

3,737

3,975

4,812

Holdings of securities (excluding trading book)Protection provided

-

-

-

Other

162

152

166

Total

10,91010,984

11,30311

ANZ Basel III Pillar 3 disclosure

December 2016

Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type
Dec 16$M-

Sep 16$M-

Jun 16$M-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

13

19

2

Protection provided

-

-

-

Other

-

-

-

Total

13

19

2

Dec 16$M-

Sep 16$M-

Jun 16$M-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

-

-

-

Protection provided

-

-

-

Other

-

-

-

Total

-

-

-

Dec 16$M-

Sep 16$M-

Jun 16$M-

Funding facilities

-

-

-

Underwriting facilities

-

-

-

Lending facilities

-

-

-

Credit enhancements

-

-

-

Holdings of securities

13

19

2

Protection provided

-

-

-

Other

-

-

-

Total

13

19

2

Securitisation exposure type - On balance sheet
Liquidity facilities

Securitisation exposure type - Off Balance Sheet
Liquidity facilities

Total Securitisation exposure type
Liquidity facilities

12

ANZ Basel III Pillar 3 disclosure

Table 18

December 2016

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. APRA has not
finalised a minimum Leverage Ratio requirement for Australian ADIs, although the current BCBS
proposal is for a minimum of 3%. Currently the Leverage Ratio is only a disclosure requirement. APRA
intends to consult on the appropriate application of the Leverage Ratio as a minimum requirement forAustralian ADIs once BCBS finalises its calibration for implementation as a Pillar 1 requirement by
January 2018.
The following information is the short form data disclosure required to be published under paragraph
47 of APS 330

Dec 16$M

Capital and total exposures
20
Tier 1 capital
21

Total exposures

Sep 16$M

Jun 16$M

Mar 16$M

47,09648,28546,35645,062927,021904,836

909,177

888,850

5.1%

5.3%

5.1%

5.1%

Leverage ratio
22

Basel III leverage ratio

13

ANZ Basel III Pillar 3 disclosure

December 2016

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 valuation 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)

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 accountexpected 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.

Internationally Comparable Basel
III Capital

The Internationally Comparable Basel 3 CET1 ratio incorporates
differences between APRA and both the Basel Committee Basel III
framework (including differences identified in the March 2014
Basel Committee Regulatory Consistency Assessment Programme(RCAP) on Basel III implementation in Australia) and its
application in major offshore jurisdictions.

14

ANZ Basel III Pillar 3 disclosure

December 2016

Market 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 2016

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ANZ Basel III Pillar 3 disclosure

December 201617