7 May 2024
Market Announcements Office
ASX Limited
Level 420 Bridge Street
SYDNEY NSW 2000
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) - Half-Yearly Financial Report submission under the Disclosure andTransparency Rules of the United Kingdom Financial Conduct Authority (“UK DTR
Submission”)
The attached UK DTR Submission will be lodged by ANZBGL with the London Stock
Exchange (“LSE”) today, together with ANZBGL’s 2024 Half Year Consolidated Financial
Report for the six-month period ended 31 March 2024. 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 applicable exchanges, including the Australian Securities Exchange today.
Yours faithfully

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

Australia and New Zealand Banking Group Limited
9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522

7 May 2024
DISCLOSURE AND TRANSPARENCY RULES – HALF-YEARLY FINANCIAL REPORTSUBMISSION
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZBGL”) together with its subsidiaries (the “Group”) – Half-Yearly Financial
Report submission under the Disclosure and Transparency Rules (“DTR”) of theUnited Kingdom Financial Conduct Authority
The following attached documents constitute ANZBGL’s 2024 Half-Yearly Financial Reportfor the purposes of the disclosure requirements of DTR 4.2:•

The Condensed Consolidated Financial Statements and Notes to Condensed
Consolidated Financial Statements for the half year ended 31 March 2024, Directors’
Report (including matters included by reference) and Directors’ Declaration (as set out
on pages 3 to 46 of ANZBGL’s Half Year 31 March 2024 Consolidated Financial Report);•

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

1

ANZBGL’s Half Year 31 March 2024 Consolidated Financial Report
This document was separately lodged by ANZBGL with the applicable stock exchanges,
including the London Stock Exchange and the Australian Securities Exchange on 7
May 2024.

2

Principal risks and uncertainties faced by Australia and New Zealand Banking Group
Limited ABN 11 005 357 522 (“ANZBGL”) and its subsidiaries ((ANZBGL together
with its subsidiaries, the “Group”) (DTR 4.2.7 R (2)) (“Principal Risk andUncertainties”)
Introduction
The Group’s activities are subject to risks and uncertainties that can materially andadversely impact its business, business model, operations, results of operations,
reputation, prospects, liquidity, capital resources, financial performance and financial
condition (together, the “Group’s Position”). These risks and uncertainties may befinancial or non-financial and may result from external factors over which the Group may
have little or no control. The risks and uncertainties described below are not the only
ones that the Group may face. Additional risks and uncertainties that the Group isunaware of, or that the Group currently does not consider material, may also become
important factors that affect it. If any of the specified or unspecified risks anduncertainties actually occur (individually or collectively), the Group’s Position may bematerially and adversely affected, with the result that the trading price or value of theGroup's equity or debt securities could decline and investors could lose all or part of theirinvestment.
Risks related to the Group's business activities and industry
1.

Changes in political and economic conditions, particularly in Australia, New
Zealand, the Asia Pacific region, the United Kingdom (“UK”), Europe and theUnited States (the “Relevant Jurisdictions”), may adversely affect the Group’s
Position
The Group’s financial performance is influenced by the political, economic and financial
conditions in the countries and regions in which the Group, its customers and its
counterparties carry on business. The Group can give no assurances as to the likely
future conditions in the economies of the Relevant Jurisdictions where the Group has its
main operations or other jurisdictions in which the Group operates or obtains funding.
The political, economic and financial conditions in the Relevant Jurisdictions may be
impacted by a range of factors including, but not limited to, domestic and international
economic events, the stability of the banking system and any related implications forfunding and capital markets, other changes in financial markets, global supply chain
developments, political developments, pandemics and natural disasters.
Instability in political conditions may result in uncertainty, declines in market liquidity
and increases in volatility in global financial markets and may adversely impact economic
activity in the Relevant Jurisdictions, which could in turn adversely affect the Group’s
Position. Recent examples include the conflict in Ukraine, the Israel-Hamas war andrecent conflict between Israel, Iran and Iran’s proxies and the associated implementationof economic security-related legislation, the possibility of that war expanding into wider
regional conflict in the Middle East, sanctions and trade restrictions in various markets,and heightened tensions between the United States and China, including with respect tothe status of Taiwan.
Although the Group does not operate in and does not currently have any material direct
exposure to Israel, Gaza, Iran, Russia or Ukraine, any prolonged market volatility or
economic uncertainty could adversely affect the Group’s Position. Tensions between the
United States and China also have the potential to adversely impact the markets inwhich the Group operates and the Group’s Position. These geopolitical issues have led tothe implementation of economic security-related legislation and trade restrictions inmany markets, including enhanced inbound and outbound investment screening
mechanisms, anti-coercion instruments, sanctions, export controls and security-relatedindustrial policy.
Inflationary pressure remains relatively high in many economies, including in the3Relevant Jurisdictions. Excessively strong demand for goods and services, geopoliticaltensions, and global economic challenges, such as supply chain issues, weather
conditions in agricultural regions, high energy prices, high food prices and tight labour
markets, have contributed to high inflation, which has increased the cost of living andreduced disposable income for consumers. Persistently high inflation may exacerbate
market volatility, further slow economic growth and increase unemployment, each ofwhich may cause further declines in business and investor confidence and increase therisk of customer defaults, which could adversely affect the Group’s Position.
China is one of Australia’s and New Zealand’s major trading partners and a significant
driver of commodity demand and prices in many of the markets in which the Group andits customers operate. Any heightening of geopolitical tensions and the occurrence of
events that adversely affect China’s economic growth and Australia’s and New Zealand’s
economic relationship with China, including the implementation of additional tariffs andother protectionist or economic security-related trade policies, including sanctions, could
adversely affect Australian or New Zealand economic activity and, as a result, could
adversely affect the Group’s Position. Furthermore, if there were a broad-based andsustained economic slowdown in China, the health of the Chinese financial system may
be adversely impacted, which could have negative effects on the global financial systemand economy. This could result in an economic downturn, counterparties defaulting on
their obligations, countries introducing capital controls, and could adversely affect theGroup’s Position. Refer to risk factor 5 “Changes in the real estate markets in Australia,
New Zealand or other markets where the Group does business may adversely affect theGroup’s Position”.
The stability of banking systems has come under scrutiny in recent times as a result of
the failure of certain banking institutions in the United States and Europe. The risk ofcontagion from the failure of a bank or other financial institution could materially impact
the Group’s ability to replace maturing liabilities and access funding in a timely and costeffective manner, which could adversely affect the Group’s Position. Additionally,collapses of certain financial institutions in the United States, Europe or elsewhere could
result in changes to capital and other regulatory requirements applicable to the Group,
which may affect the Group’s Position. Refer to risk factor 13 “Liquidity and funding risk
events may adversely affect the Group’s Position”.
There has been a rise in investor caution across global commercial real estate markets asinvestors are reallocating to other investment classes or waiting for greater certainty
regarding inflation and interest rates, particularly as a result of weakening sentiment in
the United States and Europe. A global liquidity constraint could compound the effects of
weakening fundamentals on valuations and refinance risk in commercial real estatemarkets. Negative developments in commercial real estate markets could lead to increased
credit losses from business insolvencies, increased financial stress and defaults fromhigher leveraged borrowers, which could adversely affect the Group’s Position. Refer torisk factor 5 “Changes in the real estate markets in Australia, New Zealand or othermarkets where the Group does business may adversely affect the Group’s Position”.
If economic conditions deteriorate in the Relevant Jurisdictions, asset values in housing,commercial or rural property markets could decline, unemployment could rise andcorporate and personal incomes could decline. Deterioration in global markets, including
equity, property, currency and other asset markets, may impact the Group’s customers
and the security the Group holds against loans and other credit exposures. This may
impact the Group’s ability to recover loans and other credit exposures. Should any ofthese occur, the Group’s Position could be adversely affected. Refer to risk factor 10“Credit risk may adversely affect the Group’s Position”.
2.

Competition in the markets in which the Group operates may adversely affect
the Group’s Position
The markets in which the Group operates are highly competitive. Competition is
expected to continue to increase. Competitors include foreign/offshore financial service
providers who expand in Australia or New Zealand, new non-bank entrants and smaller
providers. Examples of factors that may affect competition and negatively impact the4Group’s Position include:•

entities that the Group competes with, including those outside of Australia and
New Zealand, could be subject to lower levels of regulation and regulatory activity.
This could allow them to offer more competitive products and services, because
those lower levels of regulation may give them a lower cost base and/or the ability
to attract employees that the Group would otherwise seek to employ;•

digital technologies and business models are changing customer behaviour and thecompetitive environment. Competitors are increasingly utilising new technologies
including artificial intelligence (“AI”) and disrupting existing business models in thefinancial services sector;•

companies from outside of the financial services sector are directly competing with
the Group by offering products and services traditionally provided by banks. This
includes new entrants obtaining banking licenses and partnering with existing
competitors;•

consumers and businesses may choose to transact using, or to invest or store
value in, new forms of currency (such as cryptocurrencies, which are largely
unregulated, or central bank digital currencies) in relation to which the Group may
choose not, or may not be able, to provide financial services, competitively. A newform of currency could change how financial intermediation and markets operate
and, with that, may adversely impact the competitive and commercial position of
the Group; and•the Australian and New Zealand Governments may consider implementing policies
that further increase competition in the banking market. For example, the AustralianCompetition and Consumer Commission’s (“ACCC”) inquiry into the market for the
supply of retail deposit products, which released its final report in December 2023,
made recommendations concerning retail deposits. The Australian Parliament’s
inquiry into economic dynamism, competition and business formation, which
released its final report in March 2024, made recommendations, such as treasury
examining mechanisms to increase consumer engagement with mortgages anddeposit products, designed to boost competition including in the banking sector
specifically. In August 2023, the Australian Government commenced a review of its
competition laws and institutions which is expected to last at least two years. In
June 2023, the New Zealand Government released an exposure draft of a Customer
and Product Data Bill, which contemplates the introduction of a consumer data rightthat would seek to improve consumers’ ability to compare and switch products. The
New Zealand Commerce Commission is conducting a market study into competition
for personal banking services and has recently released its draft report, which
includes sixteen draft recommendations to improve competition for the long-term
benefit of consumers. For example, with work already underway on the Customer
and Product Data Bill, the Commerce Commission has recommended that the New
Zealand Government should set clear deadlines and work with the industry to ensure
open banking (which allows banks to share a customer’s financial data with third
parties only if the customer instructs them to do so) is fully operational by mid2026. The Commerce Commission is expected to publish its final report by August2024. Whilst these recommendations, inquiries, bills and reviews may result in theimplementation of regulations designed to increase competition in the banking
market, the impact of these recommendations, inquiries, bills and reviews on theGroup remains unclear.

The impact on the Group of an increase in competitive market conditions or atechnological change that puts the Group’s business platforms at a competitive
disadvantage, especially in the Group’s main markets and products, could lead to amaterial reduction in the Group’s market share, customers and margins and adversely
affect the Group’s Position. Increased competition for deposits may increase the Group’s
cost of funding. If the Group is not able to successfully compete for deposits, the Groupmay be forced to rely on less stable and/or more expensive forms of funding, or to
reduce lending. This may adversely affect the Group’s Position. Geopolitical andeconomic disruptions could have a significant impact on competition and profitability inthe financial services sector due to funding cost and credit provision increases, changes
in interest rates, insufficient liquidity, implementation of business continuity plans,changes to business strategies and regulatory safe harbours. A low-growth environment
may lead to heightened competitive intensity and margin compression, particularly

5amongst traditional competitors with strong business models.
3.

Acquisitions and divestments may adversely affect the Group’s Position
The Group regularly examines a range of corporate opportunities, including acquisitions
and divestments, to determine whether those opportunities will enhance the Group’s
strategic position and financial performance. Integration (or separation) of an acquired(or divested) business can be complex and costly. It sometimes includes combining (orseparating) accounting and data processing systems, technology platforms andmanagement controls, as well as managing relationships and contracts with employees,
customers, regulators, counterparties, suppliers and other business partners. The loss of
key relationships and personnel from an acquisition or divestment could have an adverse
effect on the Group’s Position.
There is no assurance that any acquisition (or divestment) will have the anticipatedpositive results around synergies, cost or cost savings, time to integrate (or separate)
and overall performance, as the underlying assumptions for the acquisition (ordivestment) may not prove to be accurate or achievable. Any acquisition (or divestment)
may also impact the Group’s credit ratings, cost of funds and access to further funding,which could in turn adversely affect the Group’s funding and liquidity positions.
Integration (or separation) efforts could create inconsistencies in standards, controls,
procedures and policies, as well as diverting management attention and resources. Thereis a risk of counterparties making claims in respect of completed or uncompleted
transactions against the Group that could adversely affect the Group’s Position. All or
any of these factors could adversely affect the Group’s ability to conduct its businesssuccessfully and impact the Group’s operations or results. There is no assurance that
employees, customers, counterparties, suppliers and other business partners of newly
acquired (or retained) businesses will remain post-acquisition (or post-divestment).
Further, there is a risk that completion of an agreed transaction may not occur whether
in the form originally agreed between the parties or at all, including due to failure of theGroup or the counterparty to satisfy completion conditions or because other completion
conditions such as regulatory, shareholder or other approvals are not satisfied. Should
any of these integration or separation risks occur, this could adversely affect the Group’s
Position.
Transactions that the Group has announced but not completed include an agreementwith Suncorp Group Limited (“SGL”) to purchase 100% of the shares in SBGH Limited,the immediate non-operating holding company of Suncorp Bank. The ACCC declined to
grant authorization for this acquisition in August 2023. This decision was reviewed by theAustralian Competition Tribunal. On 20 February 2024, the Australian Competition
Tribunal delivered its decision to authorise the acquisition. As at the date of thisdocument, no applications for judicial review of the Tribunal’s decision have been filed
and the ACCC has indicated that it will not seek a judicial review of the Tribunal’s
decision. Subject to no third party seeking judicial review by the Full Federal Court andthe remaining acquisition conditions being satisfied in due course, including Federal
Treasurer approval and certain amendments to the State Financial Institutions andMetway Merger Act 1996 (QLD), the acquisition will proceed.
ANZBGL will also have a termination right under the Suncorp Bank Sale Agreement if
APRA issues a written communication to ANZBGL under or in connection with APS 222(Associations with Related Entities) to the effect that ANZBGL must not proceed withcompletion of the acquisition.
Completion of the acquisition is expected to occur in calendar third quarter of 2024. If theremaining acquisition conditions are not satisfied, a third party seeks judicial review of theAustralian Competition Tribunal’s decision or APRA issues such a communication, theacquisition may not proceed.
The terms and conditions of the Federal Treasurer’s approval that is granted or relevant
amendments to the Queensland legislation may impose conditions, limitations,obligations or costs, or place restrictions on the conduct of the Group or its business6

following the acquisition or require changes to the terms of the transaction. There can be
no assurance that any such conditions, obligations or restrictions (if imposed) will nothave the effect of delaying or preventing completion of the transaction, imposing
additional material costs on or materially limiting the revenues of the Group following theacquisition or otherwise reducing the anticipated benefits of the acquisition to the Group,
any of which might have an adverse effect on the Group.
ANZBGL undertook a due diligence process in relation to the proposed acquisition of
Suncorp Bank which relied in part on a review of financial, technology, legal and otherinformation provided in respect of Suncorp Bank or was otherwise provided at meetings
with Suncorp Bank management. Despite making reasonable efforts as part of the due
diligence investigations, ANZBGL has not been able to verify the accuracy, reliability orcompleteness of all the information provided to it. If any information provided or relied
upon by ANZBGL in its due diligence proves to be incorrect, incomplete or misleading,there is a risk that the actual financial position and performance of Suncorp Bank may bedifferent to the expectations. There is also no assurance that the due diligence conducted
was conclusive, and that all material issues and risks in respect of the proposed
acquisition have been identified and avoided or mitigated, therefore, there is a risk thatissues or risks may arise that may adversely impact the Group. SGL has provided
ANZBGL with certain indemnities relating to certain pre-completion matters as well as
certain representations and warranties in favour of ANZBGL. There is a risk that these
protections may be insufficient to cover liabilities relating to these matters, which may
have an adverse impact on the Group’s financial performance and position. As is usual,the warranties and indemnities are also subject to certain financial claims thresholds andother limitations.
If for any reason any announced acquisition or divestment, including the acquisition of
Suncorp Bank, is not completed, the Group’s ongoing business may be adversely
impacted and the Group may be subject to a number of risks. These risks include:
•
•
•

•

4.

financial markets may react negatively, resulting in negative impacts on theGroup’s securities and other adverse impacts;
the Group may experience negative reactions from its customers, vendors, andemployees;
the Group will have incurred expenses and will be required to pay certain costs
relating to the acquisition, whether or not the acquisition is completed, such aslegal, accounting, investment banking, and other professional and administrative
fees; andmatters relating to the acquisition may require substantial commitments of timeand resources by the Group’s management, which could otherwise have been
devoted to other opportunities that may have benefited the Group.

The Restructure of the Group that established a non-operating holding company
may adversely affect the Group’s Position
In 2023, the Group implemented a restructure (“Restructure”) that resulted in ANZGroup Holdings Limited (“ANZGHL”) becoming the new listed parent company of theGroup in place of ANZBGL. ANZGHL is a non-operating holding company (“NOHC”) andis authorised as such for the purposes of the Australian Banking Act. The Australian
Prudential Regulation Authority’s (“APRA”) prudential framework for NOHCs is expected
to become effective from 2025, following a period of industry consultation, which iscurrently ongoing. There is a risk that APRA’s final regulatory framework for NOHCs of
Authorised Deposit-Taking Institutions (“ADI”) and the regulation of ANZGHL over time
will differ from the existing regulatory framework and increase the regulatory risk of theGroup. This may have negative consequences for the Group and require further changes
to be made to its structure. The post Restructure operating model may fail to function as
expected and/or may fail to realise the anticipated benefits, and further changes may
therefore be required to the Group structure. To the extent this occurs, this may
adversely affect the Group’s Position.

5.

Changes in the real estate markets in Australia, New Zealand or other markets
where the Group does business may adversely affect the Group’s Position
Residential and commercial property lending, together with real estate development andinvestment property finance, are important businesses of the Group. Major sub-7

segments within the Group’s lending portfolio include:•

residential housing loans (owner occupier and investment); and•commercial real estate loans (investment and development).

Whilst residential property prices have generally remained resilient to date, the scale andpace of interest rate rises have resulted in commercial property prices declining inAustralia and New Zealand since 2021 and in some segments the full extent of suchproperty price declines may not have yet been evidenced in softening market demandand valuations, despite a more stable interest rate outlook. The extent of property pricechanges will ultimately depend on any future interest rate rises or persistently highinterest rates and their impact on the economy.
APRA included credit-based macroprudential policy measures within its Prudential
Standard APS 220 Credit Risk Management (“APS 220”) with effect from 1 January
2023. These may be used by APRA to address systemic risks if needed. Future changes
to these measures by APRA could restrict the Group’s flexibility and impact the
profitability of one or more businesses. Refer to risk factor 16 “Regulatory changes or a
failure to comply with laws, regulations or policies may adversely affect the Group’s
Position”.
Higher interest rates and rising costs of living have put pressure on household balance
sheets, and this has and is likely to continue to impact demand for residential andcommercial property. These pressures are resulting in an increase in residential property
related delinquencies in New Zealand, which, having been at low levels since COVID-19,
have become more elevated over the year to March 2024. In Australia, an increase indelinquencies has also been evidenced in the last six months since late 2023.
Increases in interest rates may affect debt serviceability, increase loan defaults
experienced by the Group’s borrowers, place pressure on loan covenants and reducedemand for commercial and residential property and the Group’s associated lending
products in both Australia and New Zealand. To address current high inflation levels,interest rates may be maintained at higher levels for a longer period. Any future interest
rate rises or persistently high interest rates could also lead to increased credit losses
from business insolvencies, increased mortgage stress and defaults, a potential adverse
impact on markets, and a potential downturn in the Australian and New Zealandeconomies. This may in turn impact the ability of tenants to pay rent and in turndecrease the quality of real estate earnings of the Group’s borrowers.
Recent interest rate increases, asset price inflation and yield compression, may cause
declines in interest coverage ratios and asset values. Valuations are presently lagging
market sentiment. The Group has been observing declining values for existing security andexpects further declines in some segments in the next 12 months. Dated valuations
benefit from a buffer created following asset price inflation until the middle of 2022. This
may result in increased refinance risk and require equity contributions from borrowers
towards debt reduction and/or a restructure of facilities. Secondary grade assets may be
more susceptible to a decline in prices. This may be the case if investors have overlooked“fundamentals” in a highly competitive and liquid market (debt and equity). Refinance risk
could be increased if there are liquidity constraints in the banking sector. The Group has
observed some signs of change in sentiment in non-bank debt markets as investors rebalance portfolios and change expectations in the face of greater uncertainty and volatility.
This has resulted in an increased cost of financing rather than reduction in liquidity and thenon-bank debt market remains an available source of refinancing. Non-bank financiers
have supported the pre-development land and property development sector in recent
years, so the number of new project starts may decline given higher cost of funding or if
non-bank financiers begin to withdraw support from weaker sponsors.
Construction risk issues, including supply chain constraints and a rapid rise in material
costs, compounded by labour shortages and increased labour costs, may impact
contractor profitability, cash flow and liquidity and financial stability, which in turn may
impact delivery risk associated with commercial and larger residential development
projects (including the development of land and apartments) and the feasibility of such8

developments and underlying land values in the short to medium term.
The COVID-19 pandemic triggered an ongoing change in the demand and supply
dynamics in the office sector as certain flexible working arrangements have continued,
which may impact tenancy demand, reduce rental growth, increase incentives provided
by owners to renters, soften investor demand, yield expectations and value, particularly
for secondary grade assets with weaker environmental, social and governance (“ESG”)(specifically energy efficiency) credentials, given tenants are being more discerning in aless competitive market.
While valuation degradation is not uniform across all commercial real estate sectors, someinstitutional and private investor clients may see their real estate investment portfolios
diminish in value as a result of changes in the real estate market. This could potentially leadto a weakening in their risk profile and a reduction in their willingness and/or ability to repay
related loan facilities owed to the Group.
Whilst the Australian and New Zealand commercial real estate markets have remained
relatively robust despite high inflation and a rapid rise in interest rates, weaker real estatemarkets in Europe, America and China could have a contagion effect on demand forAustralian and New Zealand assets from foreign equity and debt capital markets.
Each of the factors outlined above may adversely affect the Group’s Position.
6.

Sovereign risk events may destabilise global financial markets and may
adversely affect the Group’s Position
Sovereign risk is the risk that governments will default on their debt obligations and be
unable to refinance their debts as and when they fall due, thereby destabilising parts of
their economies. Sovereign risk may adversely impact the Group directly, throughadversely impacting the value of the Group’s assets, or indirectly, through destabilising
global financial markets, thereby adversely impacting the Group’s Position. Sovereignrisk exists in many economies, including the Relevant Jurisdictions. If a sovereigndefaults, it could impact other markets and countries, the consequences of which may besimilar to or worse than those experienced during the global financial crisis andsubsequent sovereign debt crises.

7.

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

8.

Changes in exchange rates may adversely affect the Group’s Position
The Group conducts business in several different currencies. Accordingly, its businesses
may be affected by movements in currency exchange rates. The Group’s annual andinterim reports are prepared and stated in Australian dollars. Any change in the value ofthe Australian dollar against other currencies in which the Group earns revenues(particularly the New Zealand dollar and the U.S. dollar) or holds capital, may adversely
affect the Group’s reported earnings and capital ratios. The Group currently hedges topartially mitigate the impact of currency changes. There is no assurance that the Group’s
hedges will be sufficient or effective, and any change in the value of the Australian dollar
against other currencies in which the Group earns its revenue, or holds capital, may
have an adverse impact on the Group’s Position.

9.

Pandemics and other public health crises may adversely affect the Group’s
Position

9

The effects of a pandemic or other public health crisis may impact the Group’s Position
and the domestic and global economy, as was the case with the COVID-19 pandemic.
Further, variants with respect to diseases may develop that impact the Group’s
customers and businesses and could lead to government action, which could adversely
impact the Group’s Position. Additionally, supply chain disruption and mobility
constraints resulting from pandemics or public health crises could result in a decline in
the Group’s profit margins and could impact customers’ cash flows, capital, liquidity andfinancing needs. Political and economic conditions following such events may cause
reduced demand for the Group’s products and services, an increase in loan and othercredit defaults, bad debts, and impairments and an increase in the cost of the Group’s
operations. If any of these occur, the Group’s Position could be adversely affected.
Risks related to the Group’s financial situation
10.

Credit risk may adversely affect the Group’s Position
As a financial institution, the Group is exposed to the risks resulting from or associatedwith extending credit, including incurring credit-related losses that can occur as a resultof 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.
The risk of credit-related losses continues to be impacted by conditions relating toincreased interest rates, high inflation, global supply chain disruptions and heightenedpolitical tensions, particularly those referred to in risk factor 1 “Changes in political andeconomic conditions, particularly in Australia, New Zealand, the Asia Pacific region, theUnited Kingdom (“UK”), Europe and the United States (the “Relevant Jurisdictions”), may
adversely affect the Group’s Position”. The risk of credit-related losses has increased dueto the factors described above and may further increase as a result of less favourable
conditions, whether generally or in a specific industry sector or geographic region, which
could cause customers or counterparties to fail to meet their obligations. These
conditions include, but are not limited to, weakened confidence in the stability of thebanking system generally or particular financial institutions that may impact the Group,
its customers or counterparties, a sustained high level of unemployment, continued
increase in interest rates and inflationary conditions, and a reduction in the value of
assets the Group holds as collateral or the market value of the counterparty instruments
and obligations it holds.
Some of the Group’s customers and counterparties with exposures to these sectors may
be particularly vulnerable:•industries exposed to the unwinding of government stimulus packages andincreasing interest rates;•industries reliant on consumer discretionary spending;•industries that are exposed to fuel supply shortages and rising costs including
aviation, road transport, shipping and agriculture, particularly given the Ukraine andMiddle East conflicts and their impact on oil and gas prices, production and supply;•

participants in energy or commodity markets that are exposed to rising margin
requirements under derivatives that arise due to price volatility;•

mining operations that are exposed to a sustained fall in commodity prices due tosupply or demand fluctuation;•industries at risk of sanctions, geopolitical tensions or trade disputes (these include
technology, agriculture, communications and financial institutions);•

industries exposed to declining global growth and disruption to global supply chains.
These include but are not limited to the retail, wholesale, automotive, manufacturing

10and packaging industries;•

the commercial property sector (including construction and contractors), which has
been exposed to a rapid rise in interest rates, impacting serviceability and putting
downward pressure on valuations, particularly in the office sector given occupancy
levels have not returned to pre-COVID-19 levels. Changes in working patterns withwhat is seemingly a permanent increase in people working from home has seen agreater distinction between Premium / A Grade Office and B / C Grade Officeaccommodation (including weaker ESG credentials), with the latter experiencing an
increase in vacancies, decline in rents, increase in tenancy incentives and softeningof yields and valuation. A weakening in discretionary spending could also impact
rental growth and investor demand in the retail sector. In some markets,
commercial contractors and sub-contractors may continue to face cash flow andliquidity issues over the next 12 to 24 months as current projects run off and thevolume of forward-looking projects are diminished. Whilst supply chain constraints
and building material cost increases have somewhat stabilised, labour availability
and mobility issues have increased given competing demand from AustralianGovernment infrastructure projects in major capital cities. Following a period of
reduced margins or operating losses, contractors need to recapitalise to fundworking capital requirements for their forward book, including supporting bonding
arrangements;•

industries facing labour supply shortages and which are reliant on access to bothskilled and unskilled migrant workers, including tourism and hospitality, technology,
agriculture, retail, health, construction and services;•

customers and industries exposed to disruption from physical climate risk (e.g.
bushfires, floods, storms and drought) and transition risk (e.g. carbon reduction
requirements and resulting changes in demand for goods and services or liquidity).
For more information on climate-related risks, see risk factor 22 “Impact of futureclimate events, biodiversity loss, human rights, geological events, plant, animaland human diseases, and other extrinsic events may adversely affect the Group’s
Position”;•

industries exposed to the volatility in exchange rates and foreign exchange
markets generally; and•banks and financial services companies, as they may experience pressure on
liquidity due to impacts of rapidly rising interest rates and the flow on impacts toasset values, which could result in the deterioration of credit ratings, the need for
restructuring and recapitalisation, losses of confidence in financial institutions or afinancial default.

The Group is also subject to the risk that its rights against third parties may not be
enforceable in certain circumstances, which may result in credit losses. Should material
credit losses occur to the Group’s credit exposures, this may adversely affect the Group’s
Position.
Credit risk may also arise from certain derivative, clearing and settlement contracts that
the Group enters into, and from the Group’s dealings with, and holdings of, debt
securities issued by other banks, financial institutions, companies, governments andgovernment bodies where the financial conditions of such entities are affected byeconomic conditions in global financial markets.
In assessing whether to extend credit or enter into other transactions with customers
and counterparties, the Group relies on information provided by or on behalf ofcustomers and counterparties, including financial statements and other financial
information. The Group may also rely on representations of customers and independent
consultants as to the accuracy and completeness of that information. The Group’s
financial performance could be negatively impacted to the extent that it relies on
information that is incomplete, inaccurate or materially misleading.
The Group holds provisions for credit impairment that are determined based on current
information and subjective and complex judgements of the impairment within theGroup’s lending portfolio. If the information upon which the assessment is made isinaccurate or the Group fails to analyse the information correctly, the provisions madefor credit impairment may be insufficient, which may adversely affect the Group’s

11Position.
11.

Challenges in managing the Group’s capital base could give rise to greater
volatility in capital ratios, which may adversely affect the Group’s Position
The Group’s capital base is critical to the management of its businesses and access tofunding. Prudential regulators of the Group include, but are not limited to, APRA, theReserve Bank of New Zealand (“RBNZ”) and regulators in the United States, the UK and
the countries in the Asia Pacific region. The Group is required to maintain adequate
regulatory capital by its primary regulator APRA and the RBNZ for ANZ Bank New
Zealand Limited and its subsidiaries (the “ANZ New Zealand Group”).
Under current regulatory requirements, risk-weighted assets and expected loan losses
increase as a counterparty’s risk grade worsens. These regulatory capital requirements
are likely to compound the impact of any reduction in capital resulting from lower profits
in times of stress. As a result, greater volatility in capital ratios may arise and may
require the Group to raise additional capital. There is no certainty that any additional
capital required would be available or could be raised on reasonable terms.
The Group’s capital ratios may be affected by a number of factors including (i) lower
earnings (including lower dividends from its deconsolidated subsidiaries such as those in
the insurance business as well as from its investment in associates), (ii) 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 (“RWA”) or the foreign currency translation reserve, (iv) changes inbusiness strategy (including acquisitions, divestments and investments or an increase incapital intensive businesses) and (v) changes in regulatory requirements.
For more information on recent prudential regulation changes that have impacted, orthat may impact the Group, see risk factor 16 “Regulatory changes or a failure to comply
with laws, regulations or policies may adversely affect the Group’s Position”. An inabilityof the Group to maintain its regulatory capital may adversely affect the Group’s Position.

12.

The Group’s credit ratings could change and adversely affect the Group’s ability
to raise capital and wholesale funding and constrain the volume of new lending,which may adversely affect the Group’s Position
The Group’s credit ratings have a significant impact on its access to, and cost of, capitaland wholesale funding. The Group’s credit ratings may also be important to customers or
counterparties evaluating the Group’s products and services. Credit ratings and rating
outlooks may be withdrawn, qualified, revised or suspended by credit rating agencies at
any time. The methodologies used by ratings agencies to determine credit ratings andrating 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 negatively affected by a change inthe credit ratings or rating outlooks of the Commonwealth of Australia or New Zealand,
the occurrence of one or more of the other risks identified in this section, a change inratings methodologies or by other events or factors, including volatility in the banking
sector. As a result, downgrades in the Group’s credit ratings or rating outlooks could
occur that do not reflect changes in the general economic conditions or the Group’s
financial condition. The ratings of individual securities (including, but not limited to,certain Tier 1 capital and Tier 2 capital securities and covered bonds) issued by theGroup (and other banks globally) could be impacted by changes in the regulatory
requirements for those instruments as well as the ratings methodologies used by rating
agencies.
Any downgrade or potential downgrade to the Group’s credit ratings or rating outlooks
may reduce access to capital and wholesale debt markets and could lead to an increasein funding costs, constrain the volume of new lending and affect the willingness ofcounterparties to transact with the Group, which may adversely affect the Group’s
Position. Credit ratings are not a recommendation by the relevant rating agency to invest12

in securities offered by the Group.
13.

Liquidity and funding risk events may adversely affect the Group’s Position
Liquidity and funding risk is the risk that the Group is unable to meet its payment
obligations as they fall due (including repaying depositors and wholesale creditors) orthat the Group has insufficient capacity to fund increases in assets. Liquidity and funding
risk is inherent in banking operations due to the timing mismatch between cash inflows
and cash outflows.
Deterioration and volatility in market conditions and a decline in investor confidence in
the Group may materially impact the Group’s ability to replace maturing liabilities andaccess funding in a timely and cost-effective manner, which may adversely impact theGroup’s Position. Advances in technology allow customers to withdraw funds deposited
with the Group faster and may accelerate the risks associated with on-demand liabilities,
such as transactional and savings deposits.
The Group raises funding from a variety of sources, including customer deposits andwholesale funding in domestic and offshore markets to meet its funding requirements
and to maintain or grow its business. Developments in major markets can adversely
affect liquidity in global capital markets. For example, in times of liquidity stress, if thereis damage to market confidence in the Group or if funding inside or outside of domestic
markets is not available or constrained, the Group’s ability to access sources of funding
and liquidity may be constrained and the Group will be exposed to liquidity and funding
risk.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings,
constrain the volume of new lending and adversely affect the Group’s ability to fulfill
meeting deposit withdrawal demands, which may adversely affect the Group’s Position.

14.

Changes in the valuation of some of the Group’s assets and liabilities may
adversely affect the Group’s earnings and equity and the Group’s Position
The Group applies accounting standards, which require that various financial
instruments, including derivative instruments, assets and liabilities classified as fair value
through other comprehensive income, assets and liabilities classified as fair value
through profit or loss, and certain other assets and liabilities (as per Note 12 of thecondensed consolidated financial statements for the half year ended 31 March 2024 as
set out in the Group’s Half Year 31 March 2024 Consolidated Financial Report (“2024Interim Financial Statements”)) are measured at fair value with changes in fair value
recognised in earnings or equity.
Generally, to measure the fair value of these instruments, the Group relies on quoted
market prices, present value estimates or other valuation techniques that incorporate
the impact of factors that a market participant would take into account when pricing theasset or liability. Certain other assets, including some unlisted equity investments, arevalued using discounted cash flow techniques. The fair value of these instruments is
impacted by changes in market prices or valuation inputs that may adversely affect theGroup’s earnings and/or equity.
The Group may be exposed to a reduction in the value of non-lending related assets as aresult of impairments that are recognised in earnings. The Group must test at least
annually the recoverability of goodwill balances and intangible assets with indefinite
useful lives or not yet available for use and other non-lending related assets including
premises and equipment (including right-of-use assets arising from leases), investment
in associates, capitalised software and other intangible assets where there are indicatorsof impairment.
To assess the recoverability of goodwill balances, the Group uses a multiple of earnings
calculation. Changes in the assumptions upon which the calculation is based, together
with changes in earnings, may materially impact this assessment, resulting in thepotential write-off of a part or all of the goodwill balances.
In respect of other non-lending related assets, if an asset is no longer in use or the cash

13

flows generated by the asset do not support the carrying value, impairment charges may
be recorded. This, in conjunction with the other potential changes above, could impact
the Group’s Position.
15.

Changes to accounting policies may adversely affect the Group’s Position
The accounting policies that the Group applies are fundamental to how it records andreports its financial position and results of operations. Management exercises judgement
in selecting and applying many of these accounting policies. This is so that the Group
complies with the applicable accounting standards or interpretations and reflects themost appropriate manner in which to record and report on the Group’s financial position
and results of operations. These accounting policies may be applied inaccurately,
resulting in a misstatement of the Group’s financial position. The application of new orrevised accounting standards or interpretations may also adversely affect the Group’s
Position. The Group discloses the impact of new accounting standards that are effective
for the first time in any reporting period, in the notes to the consolidated financial
statements for that period. In some cases, management must select an accounting
policy from two or more alternatives, any of which would comply with the relevant
accounting standard or interpretation and be reasonable under the circumstances, yet
might result in reporting materially different outcomes than would have been reported
under the alternative.
Legal and regulatory risk

16.

Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s Position
The Group’s businesses and operations are highly regulated. The Group is subject tolaws, regulations, and policies, including industry self-regulation, in the Relevant
Jurisdictions (“Regulations”). Regulations may be affected by a variety of factors,
including recommendations made by inquiries conducted by the Australian Government
or other regulators. Regulations continue to change, including with little or no notice,
and are generally increasing in scope, scale, complexity, cost and speed of requiredcompliance. Changes to Regulations and any associated increases in compliance costs
may affect the profitability of the Group, change the level of competition that the Groupfaces or affect the ability of the Group to conduct one or more elements of its business.
In addition, regulators are coming under increased pressure to take enforcement actions
against entities that are not compliant with Regulations. The increasing complexity ofRegulations and increased propensity for sanctions and more severe financial penalties
for breaches could adversely affect the Group’s results and reputation.
Regulations can and do affect the operating environment of, and impose significant
compliance costs on, the Group. A failure by the Group to comply with Regulations or
manage regulatory change could result in regulatory investigations, litigation, legal or
regulatory sanctions, public criticism, financial or reputational loss, restrictions on theGroup’s ability to do business, fines or other enforcement or administrative actions or
penalties. Any of these may adversely affect the Group’s Position. Themes of recent
Regulations include, but are not limited to, the prudential position of financial
institutions, increasing transparency, the protection of customers, regulatory
enforcement and the protection and use of information. Set out below are examples ofrecent or potential regulatory changes that could affect the Group’s Position.
Prudential regulation
Changes to prudential regulation can increase the level of regulatory capital that the Groupis required to maintain, restrict the Group’s flexibility, require it to incur substantial costs
and impact the profitability of one or more business lines, any of which may adversely
affect the Group’s Position
Recent prudential regulation changes that have impacted, or that may impact theGroup’s Position, include:

14

•

Prudential framework, financial risks and liquidity: APRA implemented its final
requirements in relation to capital adequacy and credit risk for ADIs on 1 January
2023. Minor updates were also made in November 2023 to: APS 180 Capital
Adequacy: Counterparty Credit Risk, APS 120 Securitisation and CPS 320 Actuarial
and Related Matters became effective on 1 January 2024. APRA continues to consult
and finalise revisions to a number of prudential standards including APS 111 Capital
Adequacy: Measurement of Capital, APS 117 Interest Rate Risk In the Banking Book,
which is expected to be finalised in the middle of 2024 and to come into effect on 1
October 2025, APS 220 Credit Risk Management, Additional Tier 1 capital, APS 330
Public Disclosure and APS and APG 210 Liquidity. Given the number of items that are
yet to be finalised by APRA, the aggregate outcome from all changes to APRA’s
prudential standards relating to their review of ADIs ‘unquestionably strong’ capitalframework remains uncertain.

•

Operational risk management: In July 2023, APRA finalised prudential standard CPS
230 Operational Risk Management, which sets out minimum standards for managing
operational risk, including updated requirements for business continuity planningand service provider risk management. The effective date of compliance is 1 July
2025. The Group is continuing to work through the implementation process, which
requires changes to systems, operations and contractual arrangements with third
parties.

•

Recovery and exit planning: APRA finalised its Prudential Standard CPS 190
Recovery and Exit Planning (“CPS 190”) in December 2022. CPS 190 is aimed at
reinforcing the resilience of the financial system. Under CPS 190, entities are
required to develop and maintain credible plans for managing periods of severe
financial stress. The standard became effective on 1 January 2024 for banks andinsurers.

•

Resolution planning: APRA finalised Prudential Standard CPS 900 Resolution Planning(“CPS 900”) in May 2023. CPS 900 requires certain entities, including significant
financial institutions, to develop a resolution plan in cooperation with APRA, so theentity can be managed by APRA in an orderly manner where the entity is unable to,or is likely to be unable to, meet its obligations or suspends, or is likely to suspend,
payments. The standard became effective on 1 January 2024.

•

ADI capital framework: APRA issued a discussion paper in September 2023 to
explore options for, and seek feedback from stakeholders on, improving theeffectiveness of Additional Tier 1 Capital in Australia. In addition, in December 2023,
APRA released for consultation proposed minor amendments to the capitalframework for ADIs. One update is related to Prudential Standard APS 112 Capital
Adequacy: Standardised Approach to Credit Risk, which could potentially reduce
standardised RWA. ADIs now calculate RWA under both the internal ratings-based(“IRB”) RWA approach and the standardised RWA approach. When the standardised
RWA multiplied by 72.5% is greater than the IRB RWA, the difference is added as an
adjustment to the total IRB RWA. Therefore, any reduction in the standardised RWA
may reduce (or eliminate) the quantum of the IRB capital floor adjustment. The
Group responded to APRA’s consultation in March 2024 and APRA is conducting aquantitative impact study with selected ADIs. Given the number of items that are
yet to be finalised by APRA, the aggregate final outcome from all changes to APRA's
prudential standards relating to their review of ADIs “unquestionably strong” capitalframework remains uncertain.

•

Loss absorbing capacity: APRA announced its decision on loss-absorbing capacity
requiring Australian D-SIBs in July 2019, including ANZBGL, to increase their total
capital by 3% of RWA by January 2024. On 2 December 2021, APRA announced
that it had finalised its loss-absorbing capacity requirements and stated that it will
require Australian D-SIBs to increase their total capital by a further 1.5% of RWA
by January 2026. Inclusive of the previously announced interim increase of 3%,
this will result in a total increase to the minimum total capital requirement of 4.5%
of RWA. APRA expects the requirement to be satisfied predominantly withadditional Tier 2 capital with an equivalent decrease in other senior funding. The
amount of the additional total capital requirement will be based on the Group’s
actual RWA as at January 2026.

•

RBNZ revisions to capital adequacy: The RBNZ’s revised capital adequacy
requirements for New Zealand banks, which are set out in the Banking Prudential

15

Requirements documents, are being implemented in stages during a transition
period from October 2021 to July 2028. The net impact on the Group’s Level 1
CET1 capital by the end of the transition period in 2028 is dependent on the
additional capital required by ANZ Bank New Zealand Limited to comply with theincreased capital requirements. Whether the additional capital requirement for ANZBank New Zealand Limited results in financial implications for ANZGHL will also
depend on whether the Group’s Level 1 CET1 ratio is lower than the Group’s Level
2 CET1 ratio in 2028. Given the level of uncertainty of these outcomes, the futurefinancial impact of the RBNZ’s revised capital adequacy requirements is not able tobe quantified currently.
•

NZ contingent capital instruments: ANZ Bank New Zealand Limited’s contingent
capital instruments will no longer be treated as eligible regulatory capital. The
contingent capital Additional Tier 1 instruments (“Contingent AT1 Instruments”)
will progressively lose eligible regulatory capital treatment over the transition
period to 1 July 2028. The maximum eligible regulatory capital value of Contingent
AT1 Instruments is the total outstanding value at 30 September 2021(“Contingent AT1 Base”) reduced by 12.5% of the Contingent AT1 Base on 1
January of each year from 2022 to 2028, with no Contingent AT1 Instruments
eligible from 1 July 2028.

Other Australian regulation
Other recent developments relating to Australian regulation that have impacted, or that
may impact the Group in the future include:•

Climate-related financial disclosure: The Australian Government has released draft
legislation to introduce mandatory requirements for large business and financial
institutions, including the Group, to disclose their climate-related risks andopportunities. If the legislation is enacted as drafted, the Group would need toprepare climate-related financial disclosures for the annual reporting period
starting after 1 January 2025. The disclosure is proposed to include scenario
analysis and climate resilience assessments, climate-related plans, identificationand management of climate-related financial risks and opportunities and scope 1
and 2 emissions. As drafted, the legislation would require the Group to report
Scope 3 emissions from the annual reporting period starting after 1 January 2026.
Assurance requirements and a modified liability framework would apply to thereporting. The Group could face increased reporting costs and scrutiny concerning
its climate-related financial disclosures.

•

Privacy: The Australian Government has announced the pathway for privacy
reform following a review of the Privacy Act. It includes amendments to the Privacy
Act to address some proposals and further consultation on broad reform proposals.
These changes could impact how the Group uses individuals’ information including
by requiring it to seek more specific consents and restricting the insights that canbe obtained from the information.

•

Cyber Security: The Australian Government has consulted on proposed new cybersecurity legislation and on changes to the Security of Critical Infrastructure Act
2018 to address gaps in current laws and improve security and resilience. These
include a ransomware reporting obligation for businesses and strengthened
consequence management powers for the Minister for Cyber Security. Separately,
the Australian Government has introduced legislation to establish an accreditation
scheme for entities providing digital identity services. Implementation of thelegislation could result in increased costs for the Group and may give rise toregulatory enforcement proceedings, for example, if the Group wishes to become aprovider of digital identity or to use digital identities as a part of its onboarding
process for customers, which may, in turn, adversely affect the Group’s Position.
• Scams: The Australian Government has committed to introduce, and commenced
consultation on, new mandatory industry codes to outline the responsibilities of theprivate sector in relation to scam activity, with a focus on banks, digitalcommunications platforms and telecommunications providers. Separately theAustralian Banking Association (“ABA”) and its member banks released a ScamsSafe Accord outlining initiatives to prevent, detect, and disrupt scams affecting

16

individual and small business customers. It is possible that the Group will need tomeet increased standards with respect to the identification, prevention andremediation of scam activity that concerns its customers. This may include
standards or expectations concerning when the Group will be liable to reimburse orcompensate customers for losses arising from scam activity. The New Zealand
Minister of Commerce and Consumer Affairs has written an open letter to the New
Zealand banking sector outlining the New Zealand Government's expectations forprotection against scams. These expectations include banks prioritising work tocommence rolling out a confirmation of payee system by the end of 2024, updating
the Code of Banking Practice within the year to provide further measures to protect
consumers from scams and fraudulent activity, and investigating, and providing an
update to the Minister by the end of September 2024 on a voluntary
reimbursement scheme for victims of authorised payment scams. The introductionof additional regulatory obligations arising from these workstreams may adversely
affect the Group’s Position.
•

Physical banking: The ACCC has granted interim authorisation to the ABA, its
member banks, and other relevant industry participants to discuss and developarrangements to maintain the physical distribution of cash throughout theAustralian economy and to implement certain business continuity measures. The
authorisation applications by the ABA followed concerns expressed by the major
supplier of cash-in-transit services in Australia, Armaguard, that the industry is notsustainable in its current form given the declining use of cash. Disruptions to cashin-transit services could have a material impact on the Group’s ability to provide
cash to customers. Measures concerning cash-in-transit (which could include
business continuity measures) could result in increased costs to the Group. In
addition, the Senate Rural and Regional Affairs and Transport References
Committee is conducting an inquiry into branch closures in regional areas, with its
final report due in May 2024. The result of such inquiry may include
recommendations that the Australian government impose standards on banks
concerning their presence in regional and rural areas. Recommendations of theCommittee may be relevant to the operation and nature of the Group’s branch
network, potentially increasing its costs.

•

Executive Accountability: Since 15 March 2024 ANZGHL and ANZBGL have beenaccountable entities directly regulated by the Financial Accountability Regime (the“FAR”). Under the FAR each of ANZGHL, ANZBGL and certain senior personnel are
subject to or impacted by new or heightened accountability obligations. From 15
March 2025 any insurers or licensed superannuation trustees within the Group will
also be accountable entities directly regulated by the FAR and subject to or
impacted by those new or heightened accountability obligations. Potential risks to
the Group include the risk of penalties and the risk to the Group’s ability to attract
and retain directors and senior executives.

Other New Zealand regulation
The New Zealand Government and regulatory authorities have proposed and have
implemented significant legislative and regulatory changes for New Zealand financial
institutions. These changes include a conduct regime for financial institutions, a climate
related financial risk disclosure regime, a consumer data right and the replacement of theexisting prudential supervision regime for banks with a deposit takers regime, including adepositor compensation scheme. Such changes may adversely affect the ANZ New
Zealand Group, potentially impacting its corporate structures, businesses, strategies,
capital, liquidity, funding and profitability, cost structures, and the cost of and access tocredit for its customers and the wider economy. This in turn may adversely affect theGroup’s Position.
17.

Litigation and contingent liabilities may adversely affect the Group’s Position
From time to time, the Group may be subject to material litigation, regulatory actions,
legal or arbitration proceedings and other contingent liabilities that may adversely affect
the Group’s Position.
The Group had contingent liabilities as at 31 March 2024 in respect of the matters
outlined in Note 17 of the 2024 Interim Financial Statements. Note 17 includes, among
other things, the following matters:17•regulatory and customer exposures;•South African rate action;•

capital raising action;•

Esanda dealer car loan litigation;•

OnePath superannuation litigation;•

New Zealand loan information litigation;•

Credit cards litigation;•

the Royal Commission;•

security recovery actions; and•warranties, indemnities and performance management fees.

The Group regularly engages with its regulators in relation to regulatory investigations,surveillance and reviews, reportable situations, civil enforcement actions (whether bycourt action or otherwise), formal and informal inquiries and regulatory supervisory
activities in Australia and globally. The Group has received various notices and requests
for information from its regulators as part of both industry-wide and Group-specificreviews and has also made disclosures to its regulators at its own instigation. The natureof these interactions can be wide ranging and, for example, may include or haveincluded in recent years a range of matters including responsible lending practices,
regulated lending requirements, product suitability and distribution, interest and fees
and the entitlement to charge them, customer remediation, wealth advice, insurance
distribution, pricing, competition, conduct in financial markets and financial transactions,capital market transactions, anti-money laundering and counter-terrorism financing
obligations, privacy obligations and information security, business continuity
management, reporting and disclosure obligations and product disclosure
documentation. There may be exposures to customers that are additional to any
regulatory exposures. These could include class actions, individual claims or customer
remediation or compensation activities. The outcomes and total costs associated withsuch reviews and possible exposures remain uncertain. There is however 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.
18.

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 Position
Anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and sanctions
compliance have been the subject of significant regulatory change and enforcement inrecent years. The increasingly complicated environment in which the Group operates hasheightened these operational and compliance risks. Furthermore, increased transparency
around the outcomes of compliance issues at financial institutions domestically andglobally together with related fines and settlement sums mean that these risks continue
to be an area of focus for the Group.
The Australian Government began a consultation process on potential reforms to the AML
and CTF regulatory regime in 2023. The consultation has two parts: the simplificationand modernisation of the regime; and the implementation of ‘Tranche II’ reforms toextend the regime to certain ‘high-risk’ professions, including lawyers, accountants, trustand company service providers, real estate agents and dealers in precious metals andstones. The impact of this development on the Group is not yet clear. The reform process
could lead to new regulatory requirements, which may adversely affect the Group’s
Position.
The New Zealand Government has also undertaken a review of its Anti-Money
Laundering and Countering Financing of Terrorism Act 2009 (“AML/CFT Act”). The firstof three tranches of regulations were introduced in July 2023 (consisting of largely

18

definitional changes and clarifications). The second and third tranches of regulation arebeing introduced in June 2024 and June 2025 respectively, and will make changes tovarious existing obligations (including customer due diligence, enhanced due diligence,and ongoing due diligence requirements) as well as introducing new obligations. It is
anticipated that further reform will be made via amendments to the primary AML/CFT Act
in due course, following further public consultation on areas identified through the review
that have not been introduced via regulations. The timing for any further legislativechange is currently unknown. Although there is no clear view of the outcome of thereforms at this stage, the reform process could lead to new regulatory requirements
being imposed on the Group, which may adversely affect the Group’s Position.
Due to the Ukraine conflict, there are currently a large number of sanctions applied to
Russia, and other countries, by regulators around the globe. Whilst many governments
across the United States, Europe, Australia and New Zealand agree in relation to
sanctions targets, the nuances and specific restrictions are not fully aligned. Companies
are assessing their risk appetite regarding ongoing business activity with or in Russia orwith Russian owned entities. This has heightened the operational and compliance risks innavigating those transactions and dealings that are considered lawful, or within othercounterparties’ risk appetite. This situation is expected to continue whilst the conflictpersists.
In Australia, in recent years, there has been an increase in action taken by AML/CTF
regulators against ‘Reporting Entities’. A ‘Reporting Entity’ is a legal entity that provides
at least one ‘designated service’ to a customer, such as opening a bank account orproviding a loan. Since 2017, the Australian Transaction Reports and Analysis Centre(“AUSTRAC”) has taken three public enforcement actions (resulting in fines and otherpenalties) against major banks in Australia, as well as actions against a number of otherbanks, casinos and other Reporting Entities, using its various regulatory powers including
appointment of auditors and infringement notices.
In New Zealand, the RBNZ has stated that its appetite for taking formal enforcement
action for breaches of the New Zealand AML and CTF legislation has increased. The
propensity for other regulators (including in Asia and the Pacific) to take action for noncompliance with AML/CTF laws has also increased.
Close monitoring of the different levels and types of financial crimes continues across theGroup. Scams continue to be pervasive and evolve quickly and to the extent that new
risks emerge, there is a continuing risk that the management of alerts for potential
money laundering or terrorism financing activities may be impacted.
The risk of non-compliance with AML/CTF and sanction laws remains high given the scaleand complexity of the Group and the lack of clarity around some mandatory reporting
requirements. Emerging technologies, such as those provided by virtual asset service
providers (e.g., digital currency exchanges and wallet providers) as well as increasingly
complex remittance arrangements via fintechs and other disruptors, may limit theGroup’s ability to track the movement of funds, develop relevant transaction monitoring,and meet reporting obligations. The complexity of the Group’s technology, and theincreasing frequency of changes to systems that play a role in AML/CTF and sanctions
compliance puts the Group at risk of failing to identify an impact on the systems andcontrols in place. A failure to operate a robust program to report the movement of funds,
combat money laundering, terrorism financing, and other serious crimes may haveserious financial, legal and reputational consequences for the Group and its employees.
Consequences can include fines, criminal and civil penalties, civil claims, reputationalharm and limitations on doing business in certain jurisdictions. These consequences,individually or collectively, may adversely affect the Group’s Position. The Group’s
foreign operations may place the Group under increased scrutiny from regulatory
authorities and subject the Group to increased compliance costs.
19.

Changes in monetary policies may adversely affect the Group’s Position
Central monetary authorities (including the RBA, the RBNZ, the United States Federal
Reserve, the European Central Bank, the Bank of England and monetary authorities in
the Asian jurisdictions in which the Group operates) set official interest rates or takeother measures to affect the demand for money and credit in their relevant jurisdictions.

19

In some jurisdictions, currency policy is used to influence general business conditions
and the demand for money and credit. These measures and policies can significantly
affect the Group’s cost of funds for lending and investing and the return that the Groupwill 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 andmay adversely affect the Group’s Position. Refer to risk factor 5 “Changes in the realestate markets in Australia, New Zealand or other markets where the Group does
business may adversely affect the Group’s Position” and risk factor 10 “Credit risk may
adversely affect the Group’s Position”.
20.

Ongoing significant compliance costs with respect to the evolving and extensive
Automatic Exchange of Information (“AEoI”) obligations imposed by global
customer tax transparency regimes may adversely affect the Group’s Position
There continues to be mandatory and substantial changes to, and increasing regulatory
focus on, compliance by all global Financial Institutions (“FIs”), including the Group,with global customer tax transparency regimes, under the Foreign Account Tax
Compliance Act (“FATCA”), the Organisation for Economic Co-operation andDevelopment’s (“OECD’s”) Common Reporting Standard (“CRS”) and similar anti-tax
avoidance regimes. This includes global regulatory movement to enforcement andpenalty activities and increasing regulatory implementation of additional complianceframework requirements, compliance assessment requirements, questionnaires, onsite
financial institution audits, evidentiary requirements, detailed rules and frameworks toclose down circumventions and deter, detect and penalise non-compliance. The ongoingOECD government level peer reviews and IRS and regulatory FI compliance review/audit
requirements increase scrutiny and therefore unplanned workload of FIs globally. Eachcountry of CRS adoption is being pushed by the OECD to ensure its penalty regime issufficient to deter and penalise non-compliance.
As the Group is an in scope FI operating in a globally interlinked operating environment,
the highly complex and rigid nature of the obligations under each country’s varied
implementation of these regimes present heightened operational and compliance risks
for the Group. As international regulatory compliance frameworks mature and regulators
shift focus to enforcement (which may include financial penalties and other more generaltax risk framework implications), this may result in significant penalty provision
requirements and reputational damage in the event of failures. Accordingly compliancewith global customer tax transparency regimes is a key area of focus and major cost for
the Group.
Under FATCA and other relevant U.S. Treasury Regulations, the Group could be subject
to:•a 30% withholding tax on certain amounts (including amounts payable tocustomers), and be required to provide certain information to upstream payers, aswell as other adverse consequences, if the ongoing detailed obligations are notadequately met; and•broader compliance issues, significant withholding exposure, competitive
disadvantage and other operational impacts if the FATCA Intergovernmental
Agreements between the United States and the applicable jurisdictions in which
the Group operates cease to be in effect.

Under the CRS, the Group:•

faces challenges in developing countries where the Group has operations, such as
the Pacific region. The local regulators in these countries are generally assisted bya ‘partner’ country. The introduction of standards and evidentiary requirements
continue to be challenging to implement and adhere to;•must deal with substantial ongoing country specific variations in local law andregulatory implementation, with significant broader ‘justified trust’ ramifications

20

and penalties for non-collection or failed reporting in respect of prescribedcustomer information;•is under increasingly stringent regulatory scrutiny and measures as regulators turntheir focus to the effectiveness of FI implementation. This tightening of regulatory
focus, at a varying pace in each country, can lead to a significant negative
experience for affected customers (including unilateral account blocking andclosure, underlying client issues resulting from same and potential direct customer
penalties), which may adversely affect the Group’s Position and if not similarly
implemented by other FIs, may present a significant competitive disadvantage andloss of business;•

faces poor customer outcomes with customers who may feel aggrieved as a resultof blocking and closure impacts including increased potential exposure to legal andthird party liability. This may be particularly the case if the Group has notcommunicated the regulatory issue clearly to a customer or has blocked or closed
the account incorrectly (for example, due to a data or process error); and•continues to deal with the substantial implementation challenges associated withthe complex requirements relating to intermediaries, which may increase the riskof regulatory ramifications.

The scale and complexity of the Group means that the risk of non-compliance with
FATCA, CRS and other tax reporting regimes is high. The loss of key resources andcritical subject matter expertise, combined with the challenge of finding qualified
replacements, increases the risk of non-compliance with these obligations. A failure to
successfully operate the implemented processes or to identify and implement all
obligations could lead to legal, financial and reputational consequences for the Groupand its employees. Consequences include fines, criminal and civil penalties, civil claims,
reputational harm, competitive disadvantage, loss of business and constraints on doing
business.
External factors, such as natural disasters and the continuing effects of the COVID-19
pandemic, have resulted in challenges for staff, including unplanned staff absences,
access to systems, tools and information, and impacted the delivery of the Group’s
regulatory obligations on requisite timeframes, including mandatory FATCA and CRS
regulatory reporting, customer follow-up strategies, resolution and action of regulatory
recommendations, as well as continuous improvement activities required to achieve thezero rate of error expected by regulators. The Group’s global taxation obligations inrelation to the enterprise’s own tax lodgements and payments may similarly be
impacted. Initial leniency from global regulators continues to be tightened or withdrawn
due to the regulatory expectation for FIs to adapt to the ongoing challenges presented
by external factors, thus heightening the risk of regulatory scrutiny, associated penalties
and reputational ramifications resulting from any deficiencies or delays in meeting
regulatory obligations.
These consequences, individually or collectively, may adversely affect the Group’s
Position.
21.

Unexpected changes to the Group’s licence to operate in any jurisdiction may
adversely affect the Group’s Position
The Group is licensed to operate in various jurisdictions. Unexpected changes in theconditions of the licenses to operate by governments, administrations or regulatory
agencies that prohibit or restrict the Group from trading in a manner that was previously
permitted may adversely affect the Group’s Position.
Environmental, social and governance risks

22.

Impact of future climate events, biodiversity loss, human rights, geologicalevents, plant, animal and human diseases, and other extrinsic events may
adversely affect the Group’s Position
The Group and its customers are exposed to ESG risks, including climate related events,
geological events (such as volcanic or seismic activity or tsunamis), biodiversity loss
including as a result of species extinction or decline, ecosystem degradation and nature

21

loss (“Biodiversity Loss”), plant, animal and human diseases or pandemics such as
COVID-19 and human rights risks. Each of these can cause significant impacts on theGroup’s operations and its customers.
Climate related events may include severe storms, drought, fires, cyclones, hurricanes,
floods and rising sea levels. The impact of these events may be widespread throughsecond order impacts. For example, the economic impacts of a drought may extend
beyond primary producers to other customers of the Group, including suppliers to theagricultural sector, and to those who reside in, and operate businesses within, affected
communities. As a result, the Group may be exposed to climate-related events directly,
and through the impact of these events on its customers (Refer to Risk Factor 24 “Risks
associated with lending to customers that could be directly or indirectly impacted byclimate risk may adversely affect the Group’s Position”).
Biodiversity Loss is an emerging risk that the Group is seeking to understand further.
Biodiversity risks are closely linked to climate related risks. Biodiversity risks can arise
from lending to customers that are dependent on nature or whose actions may havenegative impacts on nature. These risks can also arise from legal and regulatorychanges, which impact the Group directly or indirectly through the Group’s customers.
Failure to manage these risks may lead to financial and non-financial risks and may
adversely affect the Group’s Position.
Human rights risks relate to the safety and security of the Group’s people, labour rights,
modern slavery, privacy and consumer protection, corruption and bribery, environmental
protection and land access and rights. The Group uses risk-based due diligence toidentify human rights risks and impacts associated with its business relationships. Failure
to manage these risks may adversely affect the Group’s Position.
Laws and regulations relating to climate change, biodiversity, human rights, or other
ESG risks, as well as the perspectives of shareholders, employees and stakeholders, may
affect whether and on what terms and conditions the Group engages in certain activities
or offers certain products. Depending on their frequency and severity, these risks may
interrupt or restrict the provision of services such as the Group branch or businesscentres or other Group services. They may also adversely affect the Group’s financial
condition or collateral position in relation to credit facilities extended to customers, which
in turn may adversely affect the Group’s Position.
23.

The Group’s risk management framework may fail to manage all existing risks
appropriately or detect new and emerging risks fast enough, which could
adversely affect the Group’s Position
Risk management is an important part of the Group’s activities. It includes theidentification, measurement, monitoring and mitigation of the Group’s risk and reportingon the Group’s risk profile and effectiveness of identified controls. Effectiveness of theGroup’s risk management framework is not fully assured. This includes effectiveness inrelation to existing risks and new and emerging risks that the Group may not anticipate
or identify in a timely manner and for which its controls may not be effective. Failure to
manage risks effectively could adversely impact the Group’s reputation or compliancewith regulatory obligations.
The effectiveness of the Group’s risk management framework is connected to theestablishment and maintenance of a sound risk management culture, supported byappropriate remuneration structures. A failure in designing or effectively implementing
appropriate remuneration structures, could have an adverse impact on the Group’s risk
culture and effectiveness of the Group’s risk management frameworks.
The Group seeks to continuously improve its risk management frameworks. It has
implemented, and regularly reviews, its risk management policies and allocates
additional resources across the Group to manage and mitigate risks. Such efforts may
not insulate the Group from exposure to risks or give full assurance that the Group’s risk
management framework will be effective. A failure in the Group’s risk management
processes or governance could result in the Group suffering unexpected losses andreputational damage, and failing to comply with regulatory obligations, which could

22

adversely affect the Group’s Position.
24.

Risks associated with lending to customers that could be directly or indirectly
impacted by climate risk may adversely affect the Group’s Position
The Group’s most material climate-related risks arise from lending to business and retailcustomers. Customers may be affected directly by physical and transition risks. These
include the effect of extreme weather events on a customer’s business or property,
including impacts to the cost and availability of insurance and insurance exclusions,changes to the regulatory and policy environment in which the customer operates,
disruption from new technology and changes in demand towards low carbon products andservices. Climate related risks may indirectly affect a customer through impacts to its
supply chain.
Climate risks may affect the ability of customers to repay debt, result in an increased
probability of default, result in ‘stranded assets’, and impact the amount the Group is able
to recover due to the value or liquidity of collateral held as security being impaired.
Examples of climate-related events in Australia that have impacted customer revenue
include severe drought conditions, bushfires in 2019 and 2020, and severe flooding in
2021 and 2022, as well as recent flooding events in Queensland during December 2023.
Similar events have occurred in New Zealand in recent years such as Cyclone Gabrielle inFebruary 2023 and severe flooding in 2023.
Risks associated with climate change are subject to increasing regulatory, political andsocietal focus.
Further embedding climate change risk into the Group’s risk management framework
and adapting the Group’s operation and business strategy to address the risks andopportunities posed by climate change and the transition to a low carbon economy, could
have a significant impact on the Group.
Internal control, operations and reputational risk25.

Non-financial risk events may adversely affect the Group’s PositionNon-financial risk is the risk of loss and/or non-compliance (including failure to act inaccordance with laws, regulations, industry standards and codes, and internal policies)
resulting from inadequate or failed internal processes, people, system and/or data, orfrom external events. This includes operational risk and the risk of reputation loss but
excludes strategic risk.
Non-financial risk categories under the Group’s risk taxonomy include:•

financial crime (the risk of money laundering, sanctions violations, bribery andcorruption, and “Know-Your-Customer” failure). See risk factor 18 “Significant fines
and sanctions in the event of breaches of law or regulation relating to anti-money
laundering, counter-terrorism financing and sanctions may adversely affect theGroup’s Position”;•

internal fraud (fraud attempted or perpetrated by an internal party (or parties)
against the organisation);•external fraud (fraud or theft attempted or perpetrated against the organisation by
an external party (that is, a party without a direct relationship to the Group(excluding customers)) without involvement of an employee);•business continuity (failure of the business continuity management framework);•

physical security (the risk of damage to the Group’s physical assets, client assets, or
public assets for which the Group is liable, and (criminal) injury to the Group’s
employees or affiliates);•

people (the risk of breaching employment legislation, mismanaging employee
relations and failing to ensure a safe working environment);•

transaction processing and execution (failure to process, manage and executetransactions and other processes correctly and appropriately);23•

technology (the risk associated with the outage of systems, including hardware,
software and networks). See risk factor 29 “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
Position”;•

conduct (the risk of loss or damage arising from the failure of the Group, its
employees or agents to appropriately consider the interests of consumers, theintegrity of the financial markets and the expectations of the community, in
conducting the Group’s business activities). See risk factor 28 “Conduct risk events
may adversely affect the Group’s Position”;•

legal (the risk of execution errors in legal procedures and processes);•regulatory risk (failure to comply with any legal or regulatory obligations that are
not captured through other mentioned risks). See risk factor 16 “Regulatory changes
or a failure to comply with laws, regulations or policies may adversely affect theGroup’s Position”;•

third party (the risk of failing to manage third party relationships and risks
appropriately, for example, not taking reasonable steps to identify and mitigate
additional operational risks resulting from the outsourcing of services orfunctions);•

information security including cyber (the risk of information security incidents,
including the loss, theft or misuse of data/information — this covers all types ofdata, and can include the failure to comply with rules concerning information
security). See risk factor 30 “Risks associated with information security, including
cyber-attacks, may adversely affect the Group’s Position”;•

data (the risk of failing to appropriately manage and maintain data, including all
types of data, for example, client data, employee data and the Group’s proprietarydata (includes privacy)). See risk factor 31 “Data management risks may adversely
affect the Group’s Position”;•

model (the potential for adverse consequences from model errors based on thedesign, development, use and/or report of a model to inform business decisions).
See risk factor 32 “Modelling risks may adversely affect the Group’s Position”; and•statutory reporting and tax (the risk of failing to meet statutory reporting and tax
payments/filing requirements). Statutory reporting includes all external reportingthat the Group is obliged to perform (e.g. regulatory reporting, financial reporting).

Loss from risk events may adversely affect the Group’s Position. Such losses can include
fines, penalties, imposts (including capital imposts), loss or theft of funds or assets, legal
costs, customer compensation, loss of shareholder value, reputation loss, loss of life or
injury to people, and loss of property and information.
Pursuant to APRA and RBNZ requirements, the Group and ANZ New Zealand Group must
maintain “operational risk capital” reserves in the event future operational events occur.
All major offices have returned to at least a blended/hybrid working environment,
including adapting to remote working arrangements since the COVID-19 pandemic.
Reliance on digital channels, including in the Group’s operations, continues to remain
high, which in turn heightens the risks associated with cyber-attacks and any disruption
to system/service availability. Whilst business continuity plans have been tested andrefined during the pandemic, and remain subject to ongoing review, impacts tosystem/service availability still have the ability to impact the Group’s Position from a
reputational, financial, customer and compliance perspective.
As the Group increases the adoption of AI, which includes technologies such as machinelearning through predictive analytics, process automation and decision generation to
support its customers and business processes, the Group may become more exposed toassociated AI risks, such as inaccurate decisions or unintended consequences that are24

inconsistent with the Group’s policies or values. These could have adverse financial andnon-financial impacts on the Group.
26.

Human capital risk, which relates to the inability to attract, develop, motivate
and retain the Group’s people to meet current and future business needs, could
result in poor financial and customer outcomes and reduce the ability of theGroup to deliver against customer and other stakeholders’ expectations
Key executives, employees and directors play an integral role in the operation of theGroup's business and its pursuit of its strategic objectives. The unexpected departure of
an individual in a key role or the Group's failure given the challenges in the current
environment to recruit, develop and retain an appropriately skilled and qualified person
into these roles particularly in areas such as digital, technology, risk or compliance, could
have an adverse effect on the Group’s Position.

27.

Reputational risk events as well as operational failures and regulatorycompliance failures may give rise to reputational risk, which may undermine
the trust of stakeholders, erode the Group’s brand and adversely affect theGroup’s Position
The Group’s reputation is a valuable asset and a key contributor to the support that it
receives from the community in respect of its business initiatives and its ability to raisefunding or capital. Reputational risk may arise as a result of an external event or theGroup’s actual or perceived actions and practices, which include operational andregulatory compliance failures. The occurrence of such events may adversely affectperceptions about the Group held by the public (including the Group’s customers),
shareholders, investors, regulators and rating agencies. The impact of a risk event on
the Group’s reputation may exceed any direct cost of the risk event itself and may
adversely impact the Group’s Position.
The Group may suffer reputational damage where one of its practices fails to meet
community expectations. Community expectations are continually changing and evolving.
If expectations exceed the standard required to comply with applicable law, the Groupmay 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 ofways including in relation to its product and services disclosure practices, pricing policies
and use of data. The Group’s reputation may be adversely affected by community
perception of the broader financial services industry, particularly in an environment ofrising interest rates. Reputational damage may arise from the Group’s failure to effectively
manage risks, enforcement or supervisory action by regulators, adverse findings from
regulatory reviews and failure or perceived failure to adequately respond to community,
environmental and ethical issues. From time to time the Group may be subjected toheightened public scrutiny and potential reputational damage as a result of the actions ofactivist shareholders. Areas which have attracted investor activism in Australia primarily
relate to environmental and social issues and include concerns about the actions of theGroup itself or parties that the Group finances.
Operational and regulatory compliance failures or perceived failures may give rise to
reputational risk. Such operational and regulatory compliance failures include, but are
not limited to:•

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

failures related to ongoing product monitoring activities;•

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

failure to comply with disclosure obligations;•failure to properly manage risk (e.g., credit, market, operational or compliance);•

market manipulation or anti-competitive behaviour;•

inappropriate crisis management/response to a crisis event;•

inappropriate handling of customer complaints;
25

•

inappropriate third party arrangements;•

privacy breaches; and•unexpected risks.

Damage to the Group’s reputation may have wide-ranging impacts, including adverse
effects on the Group’s profitability, capacity and cost of funding, increased regulatory
scrutiny, regulatory enforcement actions, additional legal risks and limiting theavailability 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
may adversely affect the Group’s Position.
28.

Conduct risk events may adversely affect the Group’s Position
Conduct risk is the risk of loss or damage arising from the failure of the Group, its
employees or agents to appropriately consider the interests of consumers, the integrityof the financial markets, and the expectations of the community in conducting theGroup’s business activities.
Conduct risks include:•

the provision of unsuitable or inappropriate advice to customers;•

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 advice;•a failure to appropriately avoid or manage conflicts of interest;•

inadequate management of complaints or remediation processes;•a failure to respect and comply with duties to customers in financial hardship; and•unauthorised trading activities in financial markets, in breach of the Group’s
policies and standards.

There has been an increasing regulatory and community focus on conduct risk, includingin Australia and New Zealand. Financial pressure has increased for customers with therising cost-of-living and reduction in disposable income creating pressure on
affordability. This may impact both the ability to lend to customers and/or the extent towhich forbearance may need to be offered to those already struggling. It is expected toincrease the number of customers that may fall into financial difficulty, and therefore
increase the need for the Group to provide enhanced support. As this occurs, it is likely
to have the greatest impact on customers in challenging financial circumstances. This isan evolving situation. The Group will need to continue to address the increased demand
for forbearance and provide appropriate tailored solutions to address complex customer
needs to help mitigate the risk of customer harm.
Where a conduct risk event occurs, the Group has a centralised team responsible forcustomer remediation programs, including addressing conduct issues identified in Group
reviews. Conduct risk events may not only negatively impact customers and market
integrity, but may expose the Group to regulatory actions, restrictions or conditions onbanking licenses and reputational consequences that may adversely affect the Group’s
Position. Remediation programs may not be implemented appropriately or may lead tofurther remediation work being required, resulting in litigation, regulatory action andincreasing cost to the Group, which may adversely affect the Group’s Position. For
further discussion of the increasing regulatory focus on conduct risk, see risk factor 16“Regulatory changes or a failure to comply with laws, regulations or policies may
adversely affect the Group’s Position” and risk factor 17 “Litigation and contingent
liabilities may adversely affect the Group’s Position”.
29.

Disruption of information technology systems or failure to successfully
implement new technology systems could significantly interrupt the Group’s

26

business, which may adversely affect the Group’s Position
The Group’s day-to-day activities and its service offerings (including digital banking) arehighly dependent on information technology (“IT”) systems. Disruption of IT systems, orthe services the Group uses or is dependent upon, may result in the Group failing tomeet its compliance obligations and customers’ banking needs. In a digital world,
customer’s expectations of “always on” “24/7” banking services necessitates highly
available and resilient IT systems.
The Group has an ongoing obligation to maintain its IT systems and to identify, assess
and respond to risk exposures associated with these systems, including IT asset
lifecycle, IT asset project delivery, technology resilience, technology security, use ofthird parties, data retention and restoration and business rules and automation.
Inadequate responses to these risk exposures could lead to unstable or insecuresystems, which could adversely impact customers, increase the Group’s costs, and resultin non-compliance with regulatory requirements, any of which may adversely affect theGroup’s Position.
The Group has incident response, disaster recovery and business continuity measures inplace designed to ensure that critical IT systems will continue to operate during both
short-term and prolonged disruption events for all businesses across the Group’s
network, including ANZ Bank New Zealand Limited and international branches, which relyon the Group to provide a number of IT systems. A failure of the Group’s systems may
affect the Group’s network, which may in turn, adversely affect the Group’s Position. The
COVID-19 pandemic has highlighted that these arrangements must cater for vast andimprobable events and ensure critical IT systems can be supported and accessed
remotely by a large number of technologists and business users for extended periods. If
such measures cannot be effectively implemented, this may adversely affect the Group’s
Position.
The Group must implement and integrate new IT systems, most notably cloud, data andautomation technologies, into the existing technology landscape to ensure that theGroup’s technology environment is cost-effective and can support evolving customer
requirements. Inadequate implementation and integration of these systems, or improper
operation and management, including of their vendors and the supply chain, may
adversely affect the Group’s Position.
This risk factor should be read in conjunction with risk factor 30 “Risks associated withinformation security, including cyber-attacks, may adversely affect the Group’s Position”
as information security breaches and cyber-attacks have the potential to result in the
disruption of IT systems.
30.

Risks associated with information security, including cyber-attacks, may
adversely affect the Group’s Position
The digital world is constantly evolving, with both positive innovation and new threats.
As a result, the Group recognises that the risk of a cyber event or data loss remains asignificant concern for its businesses. Cyber threats continue to increase insophistication, persistence, scale, frequency and impact. Threats include but are notlimited to: business email compromise, ransomware, distributed denial of service, data
breaches and third-party exposures. Cyber-attacks have the potential to cause financial
system instability and could result in serious disruption to customer banking services orcompromise customer data privacy. As both the scale and complexity of such attacks are
increasing, there is always a risk that countermeasures and layers of defence toadequately mitigate risks may not be sufficient and that sensitive information may be
inadvertently exposed.
The Group has noted increased external occurrences of ransomware and third-party data
breaches, ongoing volatility in the global political landscape and the security implicationsof wide-spread adoption of AI. Intense public response to cyber-attacks has led toincreased political focus with the potential for future significant increases in penalties forprivacy breaches. Should the Group be the target of such an attack, then in addition to therisks discussed above, there is a risk of reputational damage in light of the public response
to such an attack and/or penalties imposed by a regulator, which may materially adversely
affect the Group’s operations. The regulatory landscape is also evolving with additional

27

local and international regulator focus on information security, including the release of the2023-2030 Australian Cyber Security Strategy and subsequent discussions andconsultation on legislative reforms.
A focus on information security is key to protecting the confidentiality, integrity oravailability of systems and data. The Group as part of its global banking
operations handles and stores a considerable amount of personal and confidential
information about its customers and its own internal processes, across the multiple
geographies in which the Group operates. This information is processed and stored on
both internal and third-party hosted environments. As such, weaknesses in key security
policies or controls operated by the Group or third parties engaged by the Group could
result in the loss of data or other personal or sensitive information and adversely affect
the Group’s business by resulting in financial losses (including costs relating to notifying
and compensating customers), regulatory investigations, sanctions or reputational harm,thus affecting the Group’s Position.
31.

Data management risks may adversely affect the Group’s Position
Data management refers to a set of processes and procedures used to manage data,
including sensitive data, such as customer data, employee data and the Group’s
proprietary data. Specifically, the development, execution and oversight of plans, policies
and practices that deliver, control, protect and enhance the value of the Group’s data andinformation assets through their lifecycles. Data management risk is the risk of failing toachieve these objectives.
Deficiencies in data management can be attributed to: data captured, produced orprocessed does not meet data quality requirements, is unavailable or is not fit for purpose;
data ownership accountabilities are not adequately executed upon; data integrity is notpreserved throughout the data lifecycle; context and meaning of the data are notsufficiently understood, because the data is not clearly articulated, categorized and/orclassified; critical data has inadequate controls in place, has not been adequately
identified, or does not meet data quality and data lineage requirements; and data quality
issues are not detected and responded to in a timely manner.
Deficiencies in data management can result in ineffective risk management practices andinaccurate risk reporting. In addition, failure to comply with data management
obligations, including regulatory obligations may cause the Group to incur losses or
result in regulatory action, which may adversely impact the Group’s Position.

32.

Modelling risks may adversely affect the Group’s Position
The Group relies on a number of models for material business decision making including
but not limited to lending decisions, calculating capital requirements, provision levels,
customer compensation payments and stressing exposures. If the models prove to beinadequately designed, implemented, used or maintained or if they are based onincorrect assumptions or inputs, this may adversely impact the Group’s Position.

28

Responsibility statement of the Directors of ANZBGL in accordance with DTR
4.2.10 R (3)(b) of the Disclosure and Transparency Rules of the United
Kingdom Financial Conduct Authority
The Directors of ANZBGL confirm to the best of their knowledge that:ANZBGL’s 2024 Half-Yearly Financial Report (as defined on page 1 of this DTR half-yearlyfinancial report submission) includes a fair review of:(i)an indication of the important events that have occurred during the first six monthsof the financial year, and their impact on the Condensed Consolidated Financial
Statements; and(ii)

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

Signed in accordance with a resolution of the Directors.

Paul D O’Sullivan
ChairmanShayne C ElliottManaging Director

6 May 202429