ANZ BANK NEW ZEALAND LIMITEDANNUAL REPORT AND REGISTERED BANK DISCLOSURE STATEMENTFOR THE YEAR ENDED 30 SEPTEMBER 2023

CONTENTS
Annual Report and Glossary of terms

2

DISCLOSURE STATEMENT
Financial Statements
Consolidated financial statements
Notes to the financial statements

3
4
8
69

Assurance Report on the Financial Statements
Registered Bank Disclosures
Directors’ Statement
Assurance Reports on the Registered Bank Disclosures

74
110
111

ANNUAL REPORTFOR THE YEAR ENDED 30 SEPTEMBER 2023
Pursuant to section 211(3) of the Companies Act 1993, the shareholder of the Bank has agreed that the Annual Report of the Banking
Group need not comply with any of the paragraphs (a), and (e) to (j) of subsection (1) and subsection (2) of section 211.
Accordingly, there is no information to be provided in this Annual Report other than the financial statements for the year ended 30
September 2023 and the assurance report on those financial statements.
For and on behalf of the Board of Directors:

Rt Hon Sir John Key, GNZM AC
Chair
10 November 2023

Antonia Watson
Executive Director
10 November 2023

GLOSSARY OF TERMS
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Non-Bank Holding Company, ANZGHL means ANZ Group Holdings Limited.
ANZ Group means the worldwide operations of ANZGHL including its controlled entities.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of the Ultimate Parent Bank including its controlled entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if itwere conducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZBGL New Zealand means the New Zealand business of the Overseas Banking Group.
ANZ New Zealand means the New Zealand business of the ANZ Group.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address forservice.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by
the Order.
2

FINANCIAL
STATEMENTS
Financial statements
Income statement

4Statement of comprehensive income

4

Balance sheet

5

Cash flow statement

6

Statement of changes in equity

7

Notes to the financial statements
Basis of preparation
1. About our financial statements

Non-financial assets
8

Financial performance

19. Goodwill and other intangible assets

54

Non-financial liabilities

2. Operating income

11

3. Operating expenses

13

4. Income tax

14

Equity5. Dividends

15

21. Shareholders' equity

58

6. Segment reporting16

22. Capital management

60

Financial assets

20. Other provisions

57

Consolidation and presentation

7. Cash and cash equivalents

18

23. Controlled entities

61

8. Trading securities

19

24. Structured entities

62

9. Derivative financial instruments

20

25. Transfers of financial assets

64

10. Investment securities

25

11. Net loans and advances

26

Other disclosures

12. Allowance for expected credit losses

27

26. Related party disclosures

64

27. Commitments and contingent liabilities

66

28. Auditor fees

68

Financial liabilities
13. Deposits and other borrowings

33

14. Debt issuances

34

Financial instrument disclosures
15. Financial risk management36

16. Fair value of financial assets and financial liabilities

49

17. Assets charged as security for liabilities

52

and collateral accepted as security for assets
18. Offsetting

53

3

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTFINANCIAL STATEMENTS
INCOME STATEMENT

For the year ended 30 September

NoteInterest income
Interest expense

2023
NZ$m

2022
NZ$m

10,215(5,922)5,811(2,035)

Net interest income

2

4,293

3,776

Other operating income

2

619

1,087

4,912

4,863

(1,663)(1,653)

3,249

3,210

(183)

(39)

3,066

3,171

(849)

(882)

2,217

2,289

For the year ended 30 September

2023
NZ$m

2022
NZ$m

Profit after tax

2,217

2,289

7

10

Operating income
Operating expenses

3

Profit before credit impairment and income tax
Credit impairment charge

12

Profit before income tax
Income tax expense

4

Profit for the year

STATEMENT OF COMPREHENSIVE INCOME

Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gain on defined benefit schemes
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity

(181)

(3)

Realised gains transferred to the income statement

(16)

(28)

54

6

Other comprehensive income after tax

Income tax attributable to the above items

(136)

(15)

Total comprehensive income for the year

2,081

2,274

The notes appearing on pages 8 to 68 form an integral part of these financial statements

4

FINANCIAL STATEMENTS

BALANCE SHEETAs at 30 September
AssetsCash and cash equivalents

Note

2023
NZ$m

2022
NZ$m

7

13,094

12,575

Settlement balances receivable

401

785

Collateral paid

801

1,672

Trading securities

8

5,921

7,228

Derivative financial instruments

9

8,753

15,481

Investment securities

10

10,958

11,357Net loans and advances

11

149,321147,067

Deferred tax assets

4

397

362

Goodwill and other intangible assets

19

3,119

3,099

371

450

Premises and equipment

1,153

1,058

194,289

201,134

Settlement balances payable

2,920

4,933

Collateral received

1,500

1,962

Other assets
Total assets
Liabilities

Deposits and other borrowings

13

141,630

139,642

Derivative financial instruments

9

8,326

13,785Current tax liabilities
Payables and other liabilities
Employee entitlements

76

310

1,938

1,345

122

128

Other provisions

20

209

222

Debt issuances

14

19,14721,023

Total liabilities

175,868

183,350

Net assets

18,421

17,784

12,43812,438

Shareholders' equity
Share capital

21

Reserves

21

(93)

48

Retained earnings

21

6,076

5,298

Total shareholders' equity

21

18,421

17,784For and on behalf of the Board of Directors:

Rt Hon Sir John Key, GNZM AC
Chair
10 November 2023

Antonia Watson
Executive Director
10 November 2023

The notes appearing on pages 8 to 68 form an integral part of these financial statements

5

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTFINANCIAL STATEMENTS
CASH FLOW STATEMENT
For the year ended 30 September

2023
NZ$m

2022
NZ$m

Profit after income tax

2,217

2,289

Depreciation and amortisation

114

125

Loss/(gain) on sale and impairment of premises and equipment(7)

4

Net derivatives/foreign exchange adjustment

543

633

Other non-cash movements

(146)

(42)

Collateral paid

871

(1,135)

Trading securities

1,307

2,357

Net loans and advances(2,254)(6,311)

254

(988)

Adjustments to reconcile to net cash provided by/(used in) operating activities:

Net (increase)/decrease in operating assets:

Other assets

Net increase/(decrease) in operating liabilities:
Deposits and other borrowings (excluding items included in financing activities)

988

5,003

(2,013)

2,229

Collateral received

(462)

1,224

Other liabilities

366

(29)

(439)

3,070

1,778

5,359

Purchases(4,768)(3,898)Proceeds from sale or maturity

Settlement balances payable

Total adjustments
Net cash provided by operating activities

1

Cash flows from investing activities
Investment securities:
5,414

3,839

Other assets

(28)

(65)

Net cash provided by/(used in) investing activities

618

(124)

1,000

1,500

Issue proceeds

3,020

3,452

Redemptions(4,407)(4,028)-542

Cash flows from financing activities
Deposits and other borrowings2
Debt issuances:

3

Proceeds from issue of preference shares

(46)

(46)

Dividends paid

(1,444)(1,924)

Net cash used in financing activities(1,877)(504)

Repayment of lease liabilities

Net change in cash and cash equivalents

519

4,731

Cash and cash equivalents at beginning of year

12,575

7,844

Cash and cash equivalents at end of year

13,094

12,5751
2
3

Net cash provided by operating activities includes income taxes paid of NZ$1,064 million (2022: NZ$708 million).
Movement in deposits and other borrowings includes repurchase transactions entered into with RBNZ under the Funding for Lending Programme of NZ$1,000 million (2022: NZ$1,500
million).
Movement in debt issuances (Note 14 Debt issuances) also includes an NZ$574 million decrease (2022: NZ$1,631 million increase) from the effect of foreign exchange rates, an NZ$82
million increase (2022: NZ$1,550 million decrease) from changes in fair value hedging instruments and an NZ$3 million increase (2022: NZ$16 million increase) from other changes.

The notes appearing on pages 8 to 68 form an integral part of these financial statements

6

FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

Total
Retained shareholders'earnings
equity
NZ$m
NZ$m

Share
capitalNZ$m

Reserves
NZ$m

11,888
-

70
-

4,934
2,289

16,892
2,289

Other comprehensive income for the year

-

(22)

7

(15)

Total comprehensive income for the year

-

(22)

2,296

2,274

-

-

(1,915)(1,915)As at 1 October 2021
Profit for the year

Transactions with equity holders in their capacity as equity owners:
Ordinary dividends paid

550

-

(8)

542

Preference dividends paid

Preference shares issued (net of issue costs)

-

-

(9)

(9)

As at 30 September 2022

12,43848

5,298

17,784

Profit for the year

-

-

2,217

2,217

Other comprehensive income for the year

-

(141)

5

(136)

Total comprehensive income for the year

-

(141)

2,222

2,081

Ordinary dividends paid--

(1,400)(1,400)Preference dividends paid

-

-

(44)

(44)

As at 30 September 2023

12,438

(93)

6,076

18,421

Transactions with equity holders in their capacity as equity owners:

The notes appearing on pages 8 to 68 form an integral part of these financial statements

7

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
1.

ABOUT OUR FINANCIAL STATEMENTS

NEW ULTIMATE NON-BANK HOLDING COMPANY
On 3 January 2023, the Ultimate Parent Bank established by a scheme of arrangement, a non-operating holding company, ANZ Group Holdings
Limited, as the new listed parent holding company of the ANZ Group and implemented a restructure to separate the Overseas Banking Group’sbanking and certain non-banking businesses into the ANZ bank group and ANZ non-bank group. The ANZ bank group comprises the majority of thebusinesses and subsidiaries that were held in the Overseas Banking Group prior to the restructure. The ANZ non-bank group comprises bankingadjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacent services to its customers,
and a separate service company. The Ultimate Parent Bank is unchanged.
The restructure had no effect on these financial statements.

GENERAL INFORMATION
These are the financial statements for ANZ Bank New Zealand Limited (the Bank) and its controlled entities (together, the Banking Group) for the year
ended 30 September 2023. The Bank is incorporated and domiciled in New Zealand. The address of the Bank's registered office and its principal placeof business is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements.
Information in the financial statements is included only to the extent we consider it material and relevant to the understanding of the financial
statements. A disclosure is considered material and relevant if, for example:• the amount is significant in size (quantitative factor);• the information is significant by nature (qualitative factor);• the user cannot understand the Banking Group’s results without the specific disclosure (qualitative factor);• the information is critical to a user’s understanding of the impact of significant changes in the Banking Group’s business during the period – forexample, business acquisitions or disposals (qualitative factor);• the information relates to an aspect of the Banking Group’s operations that is important to its future performance (qualitative factor); and• the information is required under legislative or other regulatory requirements.
This section of the financial statements:• outlines the basis upon which the Banking Group’s financial statements have been prepared; and• discusses any new accounting standards or regulations that directly impact the financial statements.

BASIS OF PREPARATION
These financial statements are general purpose (Tier 1) financial statements prepared by a ‘for profit’ entity, in accordance with the requirements of
the Financial Markets Conduct Act 2013. These financial statements comply with:• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;• New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as
appropriate for publicly accountable for-profit entities; and• International Financial Reporting Standards (IFRS).
We present the financial statements of the Banking Group in New Zealand dollars, which is the Banking Group’s functional and presentation currency.
We have rounded values to the nearest million dollars (NZ$m), unless otherwise stated.

BASIS OF MEASUREMENT
We have prepared the financial information in accordance with the historical cost basis - except for the following assets and liabilities which we havestated at their fair value:• derivative financial instruments;• financial instruments held for trading;• financial assets and financial liabilities designated at fair value through profit or loss (FVTPL); and• financial assets at fair value through other comprehensive income (FVOCI).

BASIS OF CONSOLIDATIONThe consolidated financial statements of the Banking Group comprise the financial statements of the Bank and all its subsidiaries. An entity, including
a structured entity, is considered a subsidiary of the Banking Group when we determine that the Banking Group has control over the entity. Control
exists when the Banking Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. We assess power by examining existing rights that give the Banking Group the current ability to direct therelevant activities of the entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Banking Group.

FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At thereporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.

8

NOTES TO THE FINANCIAL STATEMENTS

1.

ABOUT OUR FINANCIAL STATEMENTS (continued)

FIDUCIARY ACTIVITIESThe Banking Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Banking Groupholding assets on behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If the Banking Group is not thebeneficial owner or does not control the assets, then we do not recognise these transactions in these financial statements, except when required byaccounting standards or another legislative requirement.

KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Banking Group’s accounting policies, management has made a number of judgements and applied estimatesand assumptions about past and future events. Further information on the key judgements and estimates that we consider material to thefinancial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, continuing geopoliticaltensions, and impacts from climate change, which contribute to an elevated level of estimation uncertainty involved in the preparation ofthese financial statements.
The Banking Group has made various accounting estimates in these financial statements based on forecasts of economic conditions whichreflect expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is aconsiderable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts andassociated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed further in the relevant notes of these financial
statements. Readers should consider these disclosures in light of the inherent uncertainties described above.

INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had awide-ranging impact for the Banking Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Banking
Group established a Benchmark Transition Programme (the programme) to manage the operational, market, legal, conduct and financial reporting
risks associated with IBOR transition.
As at 30 September 2023 the Banking Group’s programme is largely complete, and included the implementation of the required processes,
technology and product capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early
2021, IBOR rates including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD)
London Interbank Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Banking Group
exposure to IBOR reform was primarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to
the Banking Group’s risk management strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance withindustry and supervisory guidance. The transition activities had an immaterial impact to the Banking Group’s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue tobe published using an alternative ‘synthetic’ methodology.

9

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
1.

ABOUT OUR FINANCIAL STATEMENTS (continued)

ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.

ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Banking Group in preparing these financial statements. Further details ofthese are set out below.
GENERAL HEDGE ACCOUNTINGNZ IFRS 9 Financial Instruments (NZ IFRS 9) introduced new hedge accounting requirements which more closely align accounting with risk
management activities undertaken when hedging both financial and non-financial risks. NZ IFRS 9 provided the Banking Group with an accounting
policy choice to continue to apply the NZ IAS 39 Financial Instruments: Recognition and Measurement (NZ IAS 39) hedge accounting requirements
until the International Accounting Standards Board’s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The
Banking Group continues to apply the hedge accounting requirements of NZ IAS 39.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION

Amendments to New Zealand Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction amends NZ IAS
12 Income Taxes. It clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a liability and thatgive rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration obligations. This
amendment is effective for the Banking Group from 1 October 2023 and will not have a material impact on the Banking Group.
LEASE LIABILITY IN A SALE AND LEASEBACK

Amendments to New Zealand Accounting Standards – Lease Liability in a Sale and Leaseback amends NZ IFRS 16 Leases and specifies the accounting
for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 January 2024 and will not have amaterial impact on the Banking Group.

AMENDMENTS TO NEW ZEALAND ACCOUNTING STANDARDS - INTERNATIONAL TAX REFORM – PILLAR TWO MODEL RULESNew Zealand is expected to implement Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from the digitalisation of
the economy. Pillar Two is not yet law in New Zealand. Other jurisdictions in which the ANZ Group operates are also considering implementation of
the regime. The Banking Group is expected to be within the scope of associated legislation for Pillar Two. In anticipation of legislation being enacted,
the XRB issued Amendments to New Zealand Accounting Standards – International Tax Reform – Pillar Two Model Rules in June 2023. The Banking
Group has applied the exemption included para 4A of this standard and will apply the whole amending standard from 1 October 2023. This amending
standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to Pillar Two income taxes. The
Banking Group is monitoring progress of associated legislation. The amending standard is not expected to have a material impact on the financial
statements.

10

NOTES TO THE FINANCIAL STATEMENTS

2.

OPERATING INCOME

Net interest income
Interest income by type of financial asset
Financial assets at amortised cost
Trading securities
Investment securities
Financial assets at FVTPL
Interest income
Interest expense by type of financial liability
Financial liabilities at amortised cost
Financial liabilities designated at FVTPL
Interest expense
Net interest income
Other operating income
Fee and commission income
Lending fees
Non-lending fees
Commissions
Funds management income
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Net foreign exchange earnings and other financial instruments income1
Loss on sale of mortgages to the NZ Branch
Adjustment to gain on sale of UDC Finance Ltd
Adjustment to gain on sale of Paymark Ltd
Gain on sale of premises and equipment
Other
Other income
Other operating income
Operating income
1

2023
NZ$m

2022
NZ$m

9,645
246
304
20
10,215

5,489
149
173
5,811

(5,711)(211)(5,922)
4,293(1,927)(108)(2,035)
3,776

28
729
33
244
1,034
(530)
504

25
731
32
253
1,041
(502)
539

71
(1)
25
10
10
115
619

525
(2)
12
2
11
548
1,087

4,912

4,863

Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchangerisk, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at FVTPL.

11

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
2.

OPERATING INCOME (continued)
RECOGNITION AND MEASUREMENTNET INTEREST INCOME
Interest income and expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,assets measured at FVOCI, and assets and liabilities designated at FVTPL. We use the effective interest rate method to calculate the amortised costof assets held at amortised cost and to recognise interest income on financial assets measured at amortised cost and FVOCI. The effective interest rateis the rate that discounts the stream of estimated future cash receipts or payments over the expected life of the financial instrument or, whenappropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject to prepayment, we determine their
expected life on the basis of historical behaviour of the particular asset portfolio - taking into account contractual obligations and prepayment
experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using theeffective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
OTHER OPERATING INCOME
Fee and commission income
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is satisfied acrossmore than one reporting period or (b) at a point in time when the performance obligation is satisfied immediately or is satisfied within one reporting
period.
• lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee andcommitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct goodor service that are recognised separately from the underlying lending product.
• non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customertransactions such as international transaction fees. Where the Banking Group provides multiple goods or services to a customer under thesame contract, the Banking Group allocates the transaction price of the contract to distinct performance obligations based on the relative
stand-alone selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
• commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to provide
goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service to thecustomer. If the Banking Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission
retained as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
• funds management income represents fees earned from customers for providing financial advice and fees for asset management services.
Revenue is recognised either at the point the financial advice is provided or over the period in which the asset management services aredelivered.
Net foreign exchange earnings and other financial instruments income
We recognise the following as net foreign exchange earnings and other financial instruments income:• exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised;• fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges that we use to manageinterest rate and foreign exchange risk on funding instruments;• the ineffective portions of fair value hedges and cash flow hedges;• immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges andamounts accumulated in equity related to designated cash flow hedges;• fair value movements on financial assets and financial liabilities designated at FVTPL or held for trading;• amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and• the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.

12

NOTES TO THE FINANCIAL STATEMENTS

3.

OPERATING EXPENSES

Personnel
Salaries and related costs
Superannuation costs
Other
Personnel
PremisesRent
Depreciation
Other
Premises
Technology
Depreciation and amortisation
Subscription licences and outsourced services
Other
Technology
Other
Advertising and public relations
Professional fees
Freight, stationery, postage and communication
Charges from ANZ Group
Other
Other
Operating expenses

2023
NZ$m

2022
NZ$m

974
29
19
1,022

947
30
19
996

17
78
37
132

16
81
38
135

36
186
22
244

44
157
27
228

38
80
46
63
38
265
1,663

37
64
41
107
45
294
1,653

RECOGNITION AND MEASUREMENTOPERATING EXPENSES
Operating expenses are recognised as services are provided to the Banking Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS – ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave, and other employee entitlements expected to be paid or settled within twelve months of employees rendering
service are measured at their nominal amounts using remuneration rates that the Banking Group expects to pay when the liabilities are settled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff departures,leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market yields are determinedfrom a blended rate of government bonds with terms to maturity that closely match the estimated future cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Banking Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.

13

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
4. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:

Profit before income tax
Prima facie income tax expense at 28%
Tax effect of permanent differences:
Tax provisions no longer required
Non-assessable income and non-deductible expenditure
Income tax expense
Current tax expense
Adjustments recognised in the current year in relation to the current tax of prior years
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Income tax expense
Effective tax rate

2023
NZ$m
3,066
859

2022
NZ$m
3,171
888

(3)
(7)
849
857
(4)
(4)
849
27.7%

(3)
(3)
882
925
(64)
21
882
27.8%

2023
NZ$m

2022
NZ$m

222
18
52
24
146
27
489

187
23
51
37
182
18
498

21
21
510
(113)
397

498
(136)
362

2023
NZ$m

2022
NZ$m

83
3
27
113

86
4
36
126

113
(113)
-

10
10
136
(136)
-

DEFERRED TAX ASSETS AND LIABILITIESDeferred tax assets balances comprise temporary differences attributable to:Amounts recognised in the income statement:Collectively assessed allowances for expected credit losses
Individually assessed allowances for expected credit losses
Provision for employee entitlements
Other provisions
Software
Other
Total
Amounts recognised directly in other comprehensive income:Cash flow hedge reserve
Total
Total deferred tax assets (before set-off)
Set-off of deferred tax balances pursuant to set-off provisions
Net deferred tax assets

Deferred tax liabilities balances comprise temporary differences attributable to:Amounts recognised in the income statement:
Finance leases
Fixed assets
Other
Total
Amounts recognised directly in other comprehensive income:Cash flow hedge reserve
Total
Total deferred tax liabilities (before set-off)
Set-off of deferred tax balances pursuant to set-off provisions
Net deferred tax liabilities

14

NOTES TO THE FINANCIAL STATEMENTS

4.

INCOME TAX (continued)
RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the accounting andtax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when the tax relates to items
recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in equity or other comprehensive
income respectively.
CURRENT TAX EXPENSE
Current tax expense is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting
date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIESWe account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as thetaxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax asset, or liability,
on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset is realised, or the liability
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
We offset current and deferred tax assets and liabilities only to the extent that:• they relate to income taxes imposed by the same taxation authority;• there is a legal right and intention to settle on a net basis; and• it is allowed under the tax law of the relevant jurisdiction.

5.

DIVIDENDS

ORDINARY SHARE DIVIDENDS
Amountper share

Dividends
Financial Year 2022
Dividend paid in March 2022
Dividend paid in September 2022
Dividends paid during the year ended 30 September 2022
Financial Year 2023
Dividend paid in March 2023
Dividend paid in September 2023
Dividends paid during the year ended 30 September 2023

Total
dividend
NZ$m

14.2 cents
16.0 cents

900
1,015
1,915

14.2 cents
7.9 cents

900
500
1,400

IMPUTATION CREDIT ACCOUNT

Imputation credits available as at 30 September

Banking Group
2023
2022
NZ$m
NZ$m
8,106
8,872

Bank1,2
2023
NZ$m
1,396

2022
NZ$m
1,135

1 Imputation credits available to the Bank are shown separately as this is relevant for holders of perpetual preference shares (PPS, refer to Note 21 Shareholders’ equity) issued by the Bank.
2 The comparative amount for the Bank has been updated to reflect the impact of a legislative change that requires the Bank consolidated imputation group to recognise imputation credits fortax paid but not yet utilised prior to 1 October 2022. This was previously recognised by the New Zealand resident imputation group.

The imputation credit balance for the Banking Group includes the imputation credit balance in relation to the New Zealand resident imputationgroup, the Bank consolidated imputation group and other companies in the Banking Group that are not in either of these imputation groups. The
imputation credit balance available to the Banking Group includes imputation credits that will arise from the payment of the amount of provision forincome tax as at the reporting date.
The imputation credit balance for the Bank reflects the imputation credit balance of the Bank consolidated imputation group. The imputation credit
balance available to the Bank includes imputation credits that will arise from the payment of the amount of provision for income tax as at thereporting date.

15

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
6. SEGMENT REPORTINGDESCRIPTION OF SEGMENTS
The Banking Group is organised into three major business segments for segment reporting purposes - Personal, Business & Agri and Institutional.
Centralised back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief
operating decision maker, being the Bank’s Chief Executive Officer.
Segment reporting has been updated to reflect the transfer of certain larger business and property finance customers from Business & Agri to
Institutional, and other minor segmentation changes. The transfer aligns the customer needs with the right support and expertise delivering a better
customer experience. Comparative amounts have been adjusted to be consistent with the current period’s segment definitions. The change resulted
in the movement of NZ$11.9 billion of net loans and advances, NZ$3.5 billion of customer deposits and NZ$200 million of goodwill as at 30
September 2022.
Personal
Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services via
our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
Business & Agri (previously Business)
Business & Agri provides a full range of banking services through our digital, branch and contact centre channels, and traditional relationship banking
and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium and large enterprises, the agriculturalbusiness segment, government and government related entities.
Institutional
The Institutional division services governments, global institutional and corporate customers via the following business units:• Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,commodity financing as well as cash management solutions, deposits, payments and clearing.
• Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
• Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities and debt capital markets inaddition to managing the Banking Group’s interest rate exposure and high quality liquid asset portfolio.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

16

NOTES TO THE FINANCIAL STATEMENTS

6.

SEGMENT REPORTING (continued)

OPERATING SEGMENTS
Personal

Business & Agri

Institutional

Other

Total

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Year ended 30 September

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

NZ$m

Net interest income

2,386

2,206

1,014

889

701

629

192

52

4,293

3,776

7

7

1

1

20

17

-

-

28

25

- Non-lending fees

437

426

243

247

51

58

(2)

-

729

731

- Commissions

32

31

-

-

1

1

-

-

33

32

Net fee and commission income- Lending fees

- Funds management income

244

253

-

-

-

-

-

-

244

253

- Fee and commission expense

(341)

(306)

(189)

(196)

-

-

-

-

(530)

(502)

Net fee and commission income

379

411

55

52

72

76

(2)

-

504

539

1

3

-

-

271

184

(157)

361

115

548

380

414

55

52

343

260

(159)

361

619

1,087

Other income
Other operating income
Operating income

2,766

2,620

1,069

941

1,044

889

33

413

4,912

4,863

Operating expenses(1,160)(1,165)

(221)

(208)

(235)

(248)

(47)

(32)

(1,663)(1,653)

Profit before credit impairment
and income tax

1,606

1,455

848

733

809

641

(14)

381

3,249

3,210

(49)

(74)

(73)

25

(61)

10

-

-

(183)

(39)

Profit before income tax
Income tax expense

1,557

1,381

775

758

748

651

(14)

381

3,066

3,171

(436)

(387)

(217)

(213)

(210)

(182)

14

(100)

(849)

(882)

Profit after income tax

1,121

994

558

545

538

469

-

281

2,217

2,289

Financial position
Goodwill

1,042

1,042

695

695

1,269

1,269

-

-

3,006

3,006

106,138

102,709

24,42425,56018,75918,798--149,321147,067

88,08685,043

18,345

19,40726,09825,880--132,529

130,330

Credit impairment release /(charge)

Net loans and advances
Customer deposits

OTHER SEGMENTThe Other segment profit after income tax comprises:
For the year ended 30 September
Personal and Business & Agri central functions
Group Centre
Economic hedges
Total

2023
NZ$m

2022
NZ$m

3
119
(122)
-

22
47
212
281

17

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to the note disclosures that follow.

CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under NZ IFRS 9: amortised cost, FVTPL and FVOCI. Financial assets are classified into
these measurement classifications on the basis of two criteria:• the business model within which the financial asset is managed; and• the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments ofprincipal and interest).
The resultant financial asset classifications are as follows:• Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in abusiness model whose objective is to collect their cash flows;• FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a businessmodel whose objective is to collect their cash flows or to sell the assets; and• FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:• at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or• at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognised by an
acquirer in a business combination.

7.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk ofchanges in value and with remaining maturities of three months or less, including reverse repurchase agreements.

Coins, notes and cash at bankSecurities purchased under agreements to resell in less than 3 months
Balances with central banks
Settlement balances receivable within 3 months
Cash and cash equivalents

18

2023
NZ$m

2022
NZ$m

155
668
12,139132
13,094

154
1,248
9,980
1,193
12,575NOTES TO THE FINANCIAL STATEMENTS

8.

TRADING SECURITIES

Government securities
Corporate and financial institution securities
Trading securities

2023
NZ$m
5,249
672
5,921

2022
NZ$m
6,051
1,177
7,228

RECOGNITION AND MEASUREMENT
Trading securities are financial instruments we either:• acquire principally for the purpose of selling in the short-term; or• hold as part of a portfolio we manage for short-term profit making.
We recognise purchases and sales of trading securities on trade date:• initially, we measure them at fair value; and• subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as trading securities are subject to the general classification and measurement policy for financial assets outlined on page 18.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 16 Fair value of financial assets and financial liabilities for further details.

19

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
9. DERIVATIVE FINANCIAL INSTRUMENTS
Fair value
Derivative financial instruments - held for trading
Derivative financial instruments - designated in hedging relationships
Derivative financial instruments

Assets
2023
NZ$m
7,528
1,225
8,753

Liabilities
2023
NZ$m
(6,632)(1,694)(8,326)

Assets2022
NZ$m
14,117
1,364
15,481

Liabilities
2022
NZ$m
(11,948)(1,837)(13,785)

FEATURES
Derivative financial instruments are contracts:• whose value is derived from an underlying price index (or other variable) defined in the contract – sometimes the value is derived from morethan one variable;• that require little or no initial net investment; and• that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.

PURPOSEThe Banking Group’s derivative financial instruments have been categorised as follows:
Trading

Derivatives held in order to:• meet customer needs for managing their own risks.
• manage risks in the Banking Group that are not in a designated hedge accounting relationship (some elementsof balance sheet management).
• undertake market making and positioning activities to generate profits from short-term fluctuations in prices or
margins.

Designated in hedging
relationships

Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching
movements in underlying positions relating to:• hedges of the Banking Group’s exposures to interest rate risk and currency risk.
• hedges of other exposures relating to non-trading positions.

TYPES
The Banking Group offers or uses four different types of derivative financial instruments:
Forwards

A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional
principal amount at a future date.

Futures

An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on thetransaction date, with a net settlement in cash paid on the future date without physical delivery of the asset.

Swaps

A contract in which two parties exchange one series of cash flows for another.

Options

A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a ‘call option’)or to sell (known as a ‘put option’) an asset or instrument at a set price on a future date. The seller has thecorresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises theoption.

RISKS MANAGED
The Banking Group offers and uses the instruments described above to manage fluctuations in the following market factors:
Foreign exchange

Currencies at current or determined rates of exchange.

Interest rate

Fixed or variable interest rates applying to money lent, deposited or borrowed.

Commodity

Soft commodities (that is, agricultural products such as wheat, coffee, cocoa, and sugar) and hard commodities (thatis, mined products such as gold, oil and gas).

CreditRisk of default by customers or third parties.

20

NOTES TO THE FINANCIAL STATEMENTS

9.

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The Banking Group uses central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting ofcollateral exist with these exchanges:••

some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
other transactions are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative
instruments by the amount paid or received.

DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADINGThe majority of the Banking Group’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for
trading are:AssetsLiabilities
AssetsLiabilities
2023
2023
2022
2022
Fair value
NZ$m
NZ$m
NZ$m
NZ$m
Interest rate contracts
Forward rate agreements
6
(2)
1
(2)
109
(8)
Futures contracts
38
(2)
1,174
(1,038)
Swap agreements
1,522(1,640)(12)
Options
(10)
Total
1,561
(1,654)
1,289(1,060)Foreign exchange contracts
Spot and forward contracts
5,832(4,028)1,856(1,739)6,825(6,701)
Swap agreements
4,050(3,183)136(125)
Options
29(27)
12,793(10,854)
Total
5,935
(4,949)35(34)
Commodity contracts and credit default swaps
32(29)
14,117(11,948)
Derivative financial instruments - held for trading
7,528(6,632)DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPSAs set out in Note 1, under the accounting policy choice provided by NZ IFRS 9, the Banking Group has continued to apply the hedge accounting
requirements of NZ IAS 39.
The Banking Group uses two types of hedge accounting relationships:
Fair value hedge

Cash flow hedge

Objective of thishedgingarrangement

To hedge our exposure to changes to the fair value of arecognised asset or liability or unrecognised firm
commitment caused by interest rate or foreign currency
movements.

To hedge our exposure to variability in cash flows of arecognised asset or liability, a firm commitment or ahighly probable forecast transaction caused by interest
rate, foreign currency and other price movements.

Recognition ofeffective hedge
portionThe following are recognised in profit or loss at the sametime:
• all changes in the fair value of the underlying item
relating to the hedged risk; and• the change in the fair value of the derivatives.

We recognise the effective portion of changes in the fairvalue of derivatives designated as a cash flow hedge inthe cash flow hedge reserve.

Recognition of ineffective
hedge portion

Recognised immediately in other operating income.

If a hedging instrument
expires, or is sold,terminated, or exercised;or no longer qualifies forhedge accounting

When we recognise the hedged item in profit or loss, werecognise the related unamortised fair value adjustmentin profit or loss. This may occur over time if the hedged
item is amortised to profit or loss as part of the effective
yield over the period to maturity.

Only when we recognise the hedged item in profit orloss is the amount previously deferred in the cash flow
hedge reserve transferred to profit or loss.

Hedged item sold or
repaidWe recognise the unamortised fair value adjustment
immediately in profit or loss.

Amounts accumulated in equity are transferred
immediately to profit or loss.

21

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
9.

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The fair value of derivative financial instruments designated in hedging relationships are:
2023

2022
Liabilities
NZ$m

NominalamountNZ$mAssets
NZ$m

Liabilities
NZ$m

988

(1,285)29,725920(1,381)

36,022

237(409)

34,202444(456)

63,3501,225(1,694)

63,927

1,364(1,837)

Averageinterest
rate

Less than 3months
NZ$m

3 to 12months
NZ$m

1 to 5years
NZ$m

After 5
years
NZ$m

Total
NZ$m

1.76%

434

2,695

14,261

9,938

27,328

3.59%

4,747

9,389

19,462

2,424

36,022

1.53%

-

2,600

14,315

12,81029,725

2.26%

1,826

7,454

24,079843

34,202

Fair value hedges
Interest rate swap agreements
Cash flow hedges
Interest rate swap agreements
Derivative financial instruments - designated in
hedging relationships

NominalamountNZ$mAssetsNZ$m

27,328The maturity profile of the nominal amounts of our hedging instruments held is:Nominal amountAs at 30 September 2023
Fair value hedges
Interest rate
Cash flow hedges
Interest rate
As at 30 September 2022
Fair value hedges
Interest rate
Cash flow hedges
Interest rate

The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:IneffectivenessChange in valueof hedging
instrument2
2023
2022
NZ$m
NZ$m
Fair value hedges1
Interest rate
Cash flow hedges1
Interest rate
1
2
3
4

22

Change in valueof hedged item
2023
2022
NZ$m
NZ$m

Hedge ineffectivenessrecognised in profit
or loss3
2023
2022
NZ$m
NZ$m

Amount reclassified
from the cash flow
hedge reserve
to profit or loss4
2023
2022
NZ$m
NZ$m

(54)

(930)

77

929

23

(1)

-

(114)

22

114

(23)

(1)

(1)

1

.

All hedging instruments are classified as derivative financial instruments.
Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
Recognised in other operating income.
Recognised in net interest income and other operating income.

3

NOTES TO THE FINANCIAL STATEMENTS

9.

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The hedged items in relation to the Banking Group’s fair value hedges are:Carrying amount
AssetsLiabilities
NZ$m
NZ$m

Accumulated fair value
hedge adjustments on
the hedged item
AssetsLiabilities
NZ$m
NZ$m

Balance sheet
presentation

Hedged risk

As at 30 September 2023
Fixed rate debt issuance
Fixed rate investment securities at FVOCI1
Total

Debt issuances
Investment securities

Interest rate
Interest rate

9,395
9,395

(17,630)(17,630)

(837)
(837)

1,223
1,223

As at 30 September 2022
Fixed rate debt issuance
Fixed rate investment securities at FVOCI1
Total

Debt issuances
Investment securities

Interest rate
Interest rate

11,506
11,506(18,341)(18,341)

(976)
(976)

1,305
1,305

1

The carrying amount of debt instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.

There is no cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the balance sheet as at 30
September 2023 (2022: nil).
The hedged items in relation to the Banking Group’s cash flow hedges are:Floating rate loans and advances
Floating rate customer deposits

Hedged risk
Interest rate
Interest rate

Continuing
hedges
2023
2022
NZ$m
NZ$m
(437)
(358)
475
283

Discontinued
hedges
2023
2022
NZ$m
NZ$m
1
(1)

All cash flow hedges relate to hedges of interest rate risk and the movements in the cash flow hedge reserve are shown in the statement of changes
in equity on page 7.

23

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
9.

DERIVATIVE FINANCIAL INSTRUMENTS (continued)
RECOGNITION AND MEASUREMENT
Recognition

Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a derivative ispositive, then we carry it as an asset, but if its value is negative, then we carry it as a liability.
Valuation adjustments are integral in determining the fair value of derivatives. This includes:• a credit valuation adjustment (CVA) to reflect the counterparty risk and/or event of default; and• a funding valuation adjustment (FVA) to account for funding costs and benefits in the derivatives portfolio.

Derecognition ofassets and liabilities

We remove derivative assets from our balance sheet when the contracts expire or we have transferred
substantially all the risks and rewards of ownership. We remove derivative liabilities from our balance sheet
when the Banking Group’s contractual obligations are discharged, cancelled or expired.
With respect to derivatives cleared through a central clearing counterparty or exchange, derivative assets or
liabilities may be derecognised in accordance with the principle above when collateral is settled, depending on
the legal arrangements in place for each instrument.

Impact on theincome statement

The recognition of gains or losses on derivative financial instruments depends on whether the derivative is held
for trading or is designated into a hedge accounting relationship. For derivative financial instruments held for
trading, gains or losses from changes in the fair value are recognised in profit or loss.
For an instrument designated in a hedge accounting relationship, the recognition of gains or losses depends
on the nature of the item being hedged. Refer to the table on page 21 for details of the recognition approach
applied for each type of hedge accounting relationship.
Sources of hedge accounting ineffectiveness may arise from differences in the interest rate reference rate,
margins, or rate set differences and differences in discounting between the hedged items and the hedging
instruments.

Hedge effectivenessTo qualify for hedge accounting under NZ IAS 39, a hedge relationship is expected to be highly effective. A
hedge relationship is highly effective only if the following conditions are met:
• the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows
attributable to the hedged risk during the period for which the hedge is designated (prospective
effectiveness); and• the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).
The Banking Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selectionof valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 16
Fair value of financial assets and financial liabilities for further details.

24

NOTES TO THE FINANCIAL STATEMENTS

10. INVESTMENT SECURITIESInvestment securities measured at FVOCI
Debt securities
Equity securities
Total

2023
NZ$m

2022
NZ$m

10,9571
10,958

11,356
1
11,357The maturity profile of investment securities is as follows:

As at 30 September 2023
Government securities
Corporate and financial institution securities
Equity securities
Total

Less than 3months
NZ$m
492
29
521

3 to 12months
NZ$m
512
512

1 to 5 years
NZ$m
6,423
386
6,809

After
5 years
NZ$m
3,115
3,115

No
maturity
NZ$m
1
1

Total
NZ$m
10,542415
110,958As at 30 September 2022
Government securities
Corporate and financial institution securities
Equity securities
Total

115
3
118

1,430
69
1,499

7,103
362
7,465

2,274
2,274

1
1

10,922434
111,357

RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Banking Group’s
customer lending activities are classified as loans and advances (rather than investment securities) to better reflect the substance of thearrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is made, gains orlosses are not reclassified from other comprehensive income to profit or loss on disposal of the investment. However, gains or losses may bereclassified within equity.
Assets disclosed as investment securities are subject to the general classification and measurement policy for financial assets outlined on page 18.
Additionally, expected credit losses associated with ‘Investment securities - debt securities at FVOCI’ are recognised and measured in accordancewith the accounting policy outlined in Note 12 Allowance for expected credit losses, and the allowance for expected credit loss is recognised in the
FVOCI reserve in equity with a corresponding charge to profit or loss.

KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 16 Fair value of financial assets andfinancial liabilities for further details.

25

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
11. NET LOANS AND ADVANCES
The following table provides details of net loans and advances for the Banking Group:
Note
Overdrafts
Credit cards
Term loans - housing
Term loans - non-housing
Subtotal
Unearned income
Capitalised brokerage and other origination costs
Gross loans and advances
Allowance for expected credit losses
Net loans and advances

12

2023
NZ$m
973
1,262
107,040
40,345
149,620(28)459
150,051(730)
149,321

2022
NZ$m
968
1,238
103,872
41,234
147,312(32)
433
147,713(646)
147,067

27,922
121,399
149,32131,939115,128
147,067

Residual contractual maturity:
Within one year
More than one year
Net loans and advances

The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$306 million as at 30 September 2023 (2022: NZ$306 million).
These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are facilities
the Banking Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance, which areprimarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then measure loans andadvances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses.
The Banking Group enters into transactions in which it transfers financial assets that are recognised on its balance sheet. When the Banking Groupretains substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Banking Group’s balance sheet,however if substantially all the risks and rewards are transferred, the Banking Group derecognises the asset. If the risks and rewards are partiallyretained and control over the asset is lost, then the Banking Group derecognises the asset. If control over the asset is not lost, then the Banking
Group continues to recognise the asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as net loans and advances are subject to the general classification and measurement policy for financial assets outlined on page 18.
Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in accordance with theaccounting policy outlined in Note 12 Allowance for expected credit losses.

26

NOTES TO THE FINANCIAL STATEMENTS

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES
2023

Net loans and advances at amortised cost
Off-balance sheet commitments
Total

Collectively Individuallyassessedassessed
NZ$m
NZ$m
670
60
122
5
792
65

2022
Collectively Individuallyassessedassessed
NZ$m
NZ$m
569
77
100
5
669
82

Total
NZ$m
646
105
751

Stage 3
Collectively IndividuallyStage 2
assessedassessed
314
56
60
(10)
(3)
(5)
7
6
87
(33)
(37)
5
311
59
77
(19)
106
20
94
(22)
(86)
(3)
398
79
60

Total
585
126
(33)
(37)
5
646
195
(22)
(86)
(3)
730

Total
NZ$m
730
127
857

The following tables present the movement in the allowance for expected credit losses (ECL) for the year.
Net loans and advances
Allowance for ECL is included in net loans and advances.

As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written-off (excluding recoveries)
Discount unwind reversal
As at 30 September 2022
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written-off (excluding recoveries)
Discount unwind reversal
As at 30 September 2023

Stage 1
155
18
26
199
19
(25)
193

Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions.
As at 1 October 2021
Transfer between stages
New and increased provisions (net of releases)
As at 30 September 2022

64
7
(5)
66

39
(6)
(2)
31

4
(1)
3

15
(10)
5

122
(17)
105

Transfer between stages
New and increased provisions (net of releases)
As at 30 September 2023

2
12
80

(2)
10
39

3

5

22
127

The collectively assessed allowance for ECL increased by NZ$123 million attributable to: increases of NZ$62 million for downside risks associated withthe economic outlook, NZ$37 million due to portfolio credit risk profile changes reflecting the revised economic scenario weightings and enhanced
model methodology, NZ$7 million management temporary adjustments and NZ$17 million in large exposure, model risk and other adjustment
allowances.

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT

New and increased provisions- Collectively assessed- Individually assessed
Write-backs
Recoveries of amounts previously written-off
Total credit impairment charge

2023
NZ$m

2022
NZ$m

123
94
(22)
(12)
183

37
72
(33)
(37)
39

27

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENTEXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios andtakes into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit deterioration
since origination, according to the following three-stage approach:•••Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination,an allowance for ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next
12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are
estimated based on default events that are possible over the remaining time to maturity.
Stage 2: Where there has been a SICR since origination, an allowance for ECL is recognised reflecting expected credit losses resulting
from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period
such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification
with ECL measured accordingly.
Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.

Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis
when transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSSECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:•••

Probability of default (PD) – the estimate of the likelihood that a borrower will default over a given period;
Exposure at default (EAD) – the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; andLoss given default (LGD) – the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility’s EAD,
taking into account direct and indirect recovery costs.

These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Banking Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Banking Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities.
For non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Banking Group’s contractual right towithdraw a facility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour andevents that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor isunlikely to fully satisfy contractual credit obligations to the Banking Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the Banking
Group’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries ofamounts previously written-off are recorded as a release to the credit impairment charge in the income statement.
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial
reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered substantial. This
assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall instrument risk profile; forexample, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is considered non-substantial, theexisting financial asset is not derecognised and its date of origination continues to be used to determine SICR. Where a modification isconsidered substantial, the existing financial asset is derecognised and a new financial asset is recognised at its fair value on the modification
date, which also becomes the date of origination used to determine SICR for this new asset.

28

NOTES TO THE FINANCIAL STATEMENTS

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENTSIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Banking Group considers
both qualitative and quantitative information:i.

Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date to
the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates bothborrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least annually or
more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at thereporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime
probability of default may increase significantly if:
•
•

ii.

there has been a deterioration in the economic outlook, or an increase in economic uncertainty; orthere has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.

Backstop criteria
The Banking Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.

FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since originationand in our estimate of ECL. In applying forward-looking information for estimating ECL, the Banking Group considers four probabilityweighted forecast economic scenarios as follows:i.

Base case scenario
The base case scenario is our view of future macroeconomic conditions. It reflects management’s assumptions used for strategicplanning and budgeting, and also informs the Banking Group’s Internal Capital Adequacy Assessment Process (ICAAP) which is theprocess the Banking Group applies in strategic and capital planning over a 3-year time horizon;

ii.

Upside and iii. Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on theeconomic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) andpessimistic (in the case of the downside) economic events and uncertainty over long term horizons; andiv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Banking Group altered the severe downside
scenario in 2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used forstress testing.
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates,
Growth Domestic Product (GDP) growth rates, residential property price indices, commercial property price indices and consumer priceindices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base caseeconomic scenario, as well as specific portfolio considerations where required.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process.

29

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Banking Group makes judgements and assumptions in relation to:• the selection of an estimation technique or modelling methodology; and• the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between
those inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made within the context of the uncertainty as to how various factors might impact
the global economy and reflect historical experience and other factors that are considered to be relevant, including expectations of future
events that are believed to be reasonable under the circumstances. The Banking Group’s ECL estimates are inherently uncertain and, as aresult, actual results may differ from these estimates.
Judgement /assumption

Description

Considerations for the year ended
30 September 2023

Determining
when a SICR
has occurred orreversedIn the measurement of ECL, judgement is involved indetermining whether there has been a SICR sinceinitial recognition of a loan, which would result in it
moving from Stage 1 to Stage 2. This is a key area ofjudgement since transition from Stage 1 to Stage 2
increases the ECL from an allowance based on the PD
in the next 12 months, to an allowance for lifetime
expected credit losses. Subsequent decreases incredit risk resulting in transition from Stage 2 to Stage
1 may similarly result in significant changes in the ECL
allowance.
The setting of precise SICR trigger points requires
judgement which may have a material impact upon
the size of the ECL allowance. The Banking Group
monitors the effectiveness of SICR criteria on an
ongoing basis.

The determination of SICR has been appliedconsistent with prior periods.

Measuringboth 12-monthand lifetime
credit losses

The PD, LGD and EAD factors used in determining ECL
are point-in-time measures reflecting the relevant
forward-looking information determined bymanagement. Judgement is involved in determining
which forward-looking information is relevant forparticular lending portfolios and for determining eachportfolio’s point-in-time sensitivity.

The PD, LGD and EAD models are subject to the
Banking Group’s model risk policy that stipulates
periodic model monitoring and re-validation, anddefines approval procedures and authorities
according to model materiality.
There were no material changes to the policy.

In addition, judgement is required where behaviouralcharacteristics are applied in estimating the lifetime ofa facility which is used in measuring ECL.
Base caseeconomic
forecast

30

The Banking Group derives a forward-looking ‘basecase’ economic scenario which reflects our view of
future macroeconomic conditions.

There have been no changes to the types of forwardlooking variables (key economic drivers) used asmodel inputs.
As at 30 September 2023, the base case assumptions
have been updated to reflect a slowing economy andreduced levels of household consumption associatedwith continuing high interest rates and elevated levels
of inflation.
The expected outcomes of key economic drivers forthe base case scenario at 30 September 2023 aredescribed below under the heading ‘Base caseeconomic forecast assumptions’.

NOTES TO THE FINANCIAL STATEMENTS

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
Judgement /assumption

1

Description

Considerations for the year ended
30 September 2023

Probability
weighting ofeach economic
scenario (basecase, upside,
downside andseveredownsidescenarios)1

Probability weighting of each economic scenario is
determined by management considering the risks
and uncertainties surrounding the base caseeconomic scenario at each measurement date.
The assigned probability weightings are subject to ahigh degree of inherent uncertainty and therefore theactual outcomes may be significantly different tothose projected.

Probability weightings in the current period havebeen adjusted to reflect our assessment of thedownside risks from the impact of continued highinterest rates and inflation.
Weightings for current and prior periods are as
detailed in the section below under the heading on‘Probability weightings’.

Management
temporaryadjustments

Management temporary adjustments to the ECL
allowance are used in circumstances where it isjudged that our existing inputs, assumptions andmodel techniques do not capture all the risk factors
relevant to our lending portfolios. Emerging local or
global macroeconomic, microeconomic or politicalevents, natural disasters, and natural hazards that are
not incorporated into our current parameters, risk
ratings, or forward-looking information are examples
of such circumstances.

Management have continued to apply adjustments toaccommodate uncertainty associated with higher
inflation and interest rates.
In addition, management overlays have been madefor risks particular to mortgages, commercial property
and agri.
Management temporary adjustments total NZ$176
million (September 2022: NZ$169 million).
Management has considered and concluded no
temporary adjustment is required at 30 September
2023 to the ECL allowance in relation to climate- or
weather-related events during the year.

The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.

Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of the
ECL balance.
The economic drivers of the base case economic forecasts, reflective of our view of future macroeconomic conditions, used at 30 September
2023 are set out below. For the years following the near term forecasts below, the ECL models apply simplified assumptions for the economic
conditions to calculate lifetime loss.
New Zealand

2023

Forecast calendar year
2024

2025

GDP (annual % change)
Unemployment rate (annual average)
Residential property prices (annual % change)
Consumer price index (CPI) (annual % change)

0.7%
3.8%
-0.6%
6.0%

0.3%
4.8%
2.3%
3.8%

1.5%
5.1%
3.2%
2.2%

The base case economic forecasts are for a continuing slowdown in economic activity. Continued high inflation is expected to keep interest
rates high and dampen growth over the forecast period.

31

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base caseeconomic scenario including the uncertainties described above.
The base case weighting has increased to 50.0% (2022: 45.0%) as the downside and severe downside scenario weightings have been revised.
The downside case weighting has decreased to 37.5% (2022: 40.0%), and the severe downside case weighting has decreased to 12.5% (2022:
15.0%).
The assigned probability weightings are subject to a high degree of inherent uncertainty and therefore the actual outcomes may besignificantly different to those projected. The Banking Group considers these weightings to provide estimates of the possible loss outcomes
and taking into account short and long term inter-relationships within the Banking Group’s credit portfolios. The weightings applied are set
out below:

Base
UpsideDownside
Severe downside

2023

2022

50.0%
0.0%
37.5%
12.5%

45.0%
0.0%
40.0%
15.0%

ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future
periods, expected credit losses reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2023:
ECL
NZ$m

Impact on ECL
NZ$m

If 1% of Stage 1 facilities were included in Stage 2
If 1% of Stage 2 facilities were included in Stage 1

802
791

10
(1)

100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario

192
341
598
1,770

(600)
(451)
(194)
978

Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Banking Group makes judgements and assumptions in relation to expected repayments, therealisable value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process.
Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties describedabove and in Note 1 About our financial statements.

32

NOTES TO THE FINANCIAL STATEMENTS

FINANCIAL LIABILITIESOutlined below is a description of how we classify and measure financial liabilities relevant to the note disclosures that follow.

CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or FVTPL when they are held for trading. Additionally, financial liabilities can be designated at FVTPL
where:• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;• a group of financial liabilities are managed and their performance are evaluated on a fair value basis, in accordance with a documented risk
management strategy; or• the financial liability contains one or more embedded derivatives unless:a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; orb) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included inother comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.

13. DEPOSITS AND OTHER BORROWINGS
Note
Term deposits
On demand and short term deposits
Deposits not bearing interest
Total customer deposits
Certificates of deposit
Commercial paper
Securities sold under repurchase agreements
Deposits from Immediate Parent Company and NZ Branch
Deposits and other borrowings

26

2023
NZ$m
54,19860,673
17,658132,529
2,328
2,253
4,429
91
141,6302022
NZ$m
46,746
62,203
21,381
130,330
1,639
2,955
4,642
76
139,642

135,360
6,270
141,630

133,858
5,784
139,642

138,748
2,882
141,630

136,687
2,955
139,642

Residual contractual maturity:
Within one year
More than one year
Deposits and other borrowings

Carried on balance sheet at:
Amortised cost
Fair value through profit or loss (designated on initial recognition)
Deposits and other borrowings

RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:• are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the effective
interest rate method; and• are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them asmeasured at FVTPL.
Refer to Note 16 Fair value of financial assets and financial liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in the Banking
Group’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise directlyin profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since the risks
and rewards of ownership remain with the Banking Group. Over the life of the repurchase agreement, we recognise the difference between thesale price and the repurchase price and charge it to interest expense in profit or loss.
33

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
14. DEBT ISSUANCESThe Banking Group uses a variety of funding programmes to issue unsubordinated debt (including senior debt and covered bonds) and subordinateddebt. The difference between unsubordinated debt and subordinated debt is that holders of unsubordinated debt take priority over holders ofsubordinated debt owed by the relevant issuer and subordinated debt will be repaid by the relevant issuer only after the repayment of claims ofdepositors, other creditors and the unsubordinated debt holders.
2023
2022
NZ$m
NZ$m
Senior debt
13,577
13,466
Covered bonds
4,082
3,373
17,659Total unsubordinated debt
16,839Subordinated debt
- Additional tier 1 capital
1,941
938
- Tier 2 capital
1,370
1,423
Total subordinated debt
2,308
3,364
Total debt issued
19,14721,023

Residual contractual maturity:
Within one year
More than one year
Total debt issued

3,488
15,65919,147

4,464
16,55921,023TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Banking Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.

AUD Australian dollars
EUR Euro
NZD New Zealand dollars
CHF Swiss Francs
USD United States dollars
Total debt issued

2023
NZ$m
42
6,053
2,584
1,117
9,351
19,147

2022
NZ$m
44
6,668
3,735
1,083
9,493
21,023Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is nota member of the Banking Group.

SUBORDINATED DEBT
All subordinated debt is issued by the Bank and qualifies as regulatory capital for the Banking Group. Each subordinated debt instrument is classified
as either additional tier 1 (AT1) capital, in the case of the ANZ NZ Internal Capital Notes 2 (ANZ NZ ICN2), or tier 2 capital for RBNZ’s capital adequacy
purposes depending on the terms and conditions of the instruments. ANZ NZ Capital Notes 1 (ANZ NZ ICN), totalling NZ$1,003 million that wereclassified as AT1 capital, were redeemed on 24 March 2023.
In any liquidation event impacting the Bank, tier 2 capital instruments rank ahead of AT1 capital instruments. AT1 capital instruments rank equally witheach other and with the Bank’s preference shares and only rank ahead of ordinary shares.
AT1 capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. Holders of AT1 capital notes do not have any right to votein general meetings of the Bank.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank.
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions(including regulatory requirements).
ANZ NZ ICN2 provide the Bank with a redemption option on specified dates and a redemption or conversion option in certain other circumstances.
Redemption is subject to RBNZ’s prior written approval.

34

NOTES TO THE FINANCIAL STATEMENTS

14. DEBT ISSUANCES (continued)
ANZ NZ ICN2 will immediately convert into a variable number of ordinary shares of the Bank (based on the net assets per share in the Bank’s mostrecently published Disclosure Statement) if:••

the Banking Group’s common equity tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert
or write-off the notes.

The table below show the key details of the AT1 capital notes on issue at 30 September 2023:
ANZ NZ ICN2
15 June 2016
NZ$938 million
NZ$100Semi-annually in arrears
Floating rate: (New Zealand 6 month Bank Bill rate + 6.29%)
15 June 2026 and each 5th anniversary
n/a
Yes
Yes

Issue dateIssue and carrying amount
Face value
Interest frequency
Interest rate
Issuer's early redemption or conversion option
Mandatory conversion dateCommon equity capital trigger event
Non-viability trigger event
TIER 2 CAPITAL

Tier 2 capital notes are fully paid unsecured subordinated notes. Interest payments are subject to the Bank being solvent at the time of, andimmediately following, the payment. Unpaid interest accumulates, and will be paid at the earlier of when the Bank is solvent again or at maturity. The
Bank may repay the notes early on the dates specified below, or in certain other circumstances (such as a tax or regulatory event). Early repayment issubject to certain conditions, including approval from RBNZ.
The table below shows the tier 2 capital subordinated notes on issue at 30 September 2023 and 30 September 2022:
Currency Face value Issue date Maturity
NZD
600m
Sep 2021 Sep 2031
USD
500m
Aug 2022 Aug 2032
Total tier 2 capital1
1
2

Next optional call date subject to RBNZ's approvalSep 2026
Aug 2027

Interest
rate
2.999%
5.548%

Interest
reset date
Sep 2026
Aug 2027

Creditrating2
AA-

2023
NZ$m
596
774
1,370

2022
NZ$m
594
829
1,423

Carrying amounts are net of issuance costs and fair value hedging adjustments.
Credit rating assigned by S&P Global Ratings.

RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at FVTPL. Interest
expense on debt issuances is recognised using the effective interest rate method. Where the Banking Group enters into a fair value hedge
accounting relationship, the fair value attributable to the hedged risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are considered
to contain embedded derivatives that we account for separately at FVTPL. The embedded derivatives arise because the amount of shares issued onconversion following any of those trigger events is subject to the maximum conversion number, however they have no significant value as of thereporting date given the remote nature of those trigger events.

35

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENTRISK MANAGEMENT FRAMEWORK AND MODELINTRODUCTION
The use of financial instruments is fundamental to the Banking Group’s businesses of providing banking and other financial services to our customers.
The associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Banking Group’s key material risks.
This note details the Banking Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks:
Key material financial risks

Key sections applicable to this risk

Credit risk
The risk of financial loss resulting from:• a counterparty failing to fulfil its obligations; or• a decrease in credit quality of a counterparty resulting in a financial loss.

•
•
•
•
•

Credit risk overview, management and control responsibilities
Maximum exposure to credit risk
Credit quality
Concentrations of credit risk
Collateral management

Market risk
The risk to the Banking Group’s earnings arising from:• changes in interest rates, foreign exchange rates, credit spreads, volatility
and correlations; or• fluctuations in bond, commodity or equity prices.

•
•
•
•

Market risk overview, management and control responsibilities
Measurement of market risk
Traded and non-traded market risk
Foreign currency risk – structural exposure

Liquidity and funding risk
The risk that the Banking Group is unable to meet its payment obligations as
they fall due, including:• repaying depositors or maturing wholesale debt; or• the Banking Group having insufficient capacity to fund increases in
assets.

•••••Liquidity risk overview, management and control responsibilities
Key areas of measurement for liquidity risk
Liquidity portfolio management
Funding position
Residual contractual maturity analysis of the Banking Group’s
liabilities

Credit risk incorporates the risks associated with us lending to customers
who could be impacted by climate change, changes to laws, regulations, orother policies adopted by governments or regulatory authorities. Climatechange impacts include both physical risks (climate- or weather-related
events) and transition risks resulting from the adjustment to a low emissions
economy. Transition risks include resultant changes to laws, regulations andpolicies noted above.

OVERVIEWAN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORKThis overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under NZ IFRS
7 Financial Instruments: Disclosures.
The Board is responsible for establishing and overseeing the Banking Group’s Risk Management Framework (RMF). The Board has delegated authority
to the Bank’s Board Risk Committee (BRC) to develop and monitor compliance with the Banking Group’s risk management policies. The BRC reports
regularly to the Board on its activities.
The Board approves the strategic objectives of the Banking Group including:• the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that the Banking Group is prepared toaccept in pursuit of its strategic objectives and business plan; and• the Risk Management Strategy (RMS), which describes the Banking Group’s strategy for managing risks and the key elements of the RMF thatgive effect to this strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference
to the relevant policies, standards and procedures. It also includes information on how the Banking Group identifies, measures, evaluates,
monitors, reports and controls or mitigates material risks.
The Banking Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment
in which all employees understand their roles and obligations. At the Banking Group, risk is everyone’s responsibility.
The Banking Group has an independent risk management function, headed by the Chief Risk Officer who:
• is responsible for overseeing the risk profile and the risk management framework;• can effectively challenge activities and decisions that materially affect the Banking Group’s risk profile; and• has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.

36

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
Internal Audit Function
Internal Audit is a function independent of management whose role is to provide the Board and management with an effective and independent
appraisal of the internal controls established by management. Operating under a Board approved Charter, the reporting line for the outcomes of work
conducted by Internal Audit is direct to the Chair of the Audit Committee, with a direct communication line to the Chief Executive Officer and theexternal auditor. The Internal Audit Plan is developed using a risk based approach and is reviewed quarterly. The Audit Committee approves the plan.
All audit activities are conducted in accordance with international internal auditing standards, and the results of the activities are reported to the Audit
Committee and management. These results influence the performance assessment of business heads. Furthermore, Internal Audit monitors theremediation of audit issues and reports the current status of any outstanding audits.

CREDIT RISKCREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Banking Group’s major sources of income. As this activity is also a key material risk, the Banking
Group dedicates considerable resources to its management. The Banking Group assumes credit risk in a wide range of lending and other activities indiverse markets and in many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance andcapital markets activities.
Our credit risk management framework ensures we apply a consistent approach across the Banking Group when we measure, monitor and manage
the credit risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
• approves the credit risk appetite and credit strategies; and• approves policies and control frameworks for the management of the Banking Group’s credit risk.
The BRC delegates responsibility for day-to-day management of credit risk and compliance with credit risk policies to the Bank’s Credit Risk
Management Committee (CRMC).
We quantify credit risk through an internal credit rating system (Master Scale) to ensure consistency across exposure types and to provide a consistentframework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
Probability of Default (PD)Expressed by a Customer Credit Rating (CCR), reflecting the Banking Group’s assessment of a customer’sability to service and repay debt.

Exposure at Default (EAD)

The expected balance sheet exposure at default taking into account repayments of principal andinterest, expected additional drawdowns and accrued interest at the time of default.

Loss Given Default (LGD)

Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to thepercentage of loan covered by security which the Banking Group can realise if a customer defaults. The
A-G scale is supplemented by a range of other SIs which cover such factors as cash cover and sovereign
backing. For retail and some small business lending, we group exposures into large homogeneous
pools, and the LGD is assigned at the pool level.

Our specialist credit risk teams develop and validate the Banking Group’s PD and LGD rating models. The outputs from these models drive our day-today credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, internal capital allocation, and credit
provisioning.
All customers with whom the Banking Group has a credit relationship are assigned a CCR at origination via either of the following assessment
approaches:
Large and more complex lending

Retail and some small business lending

Rating models provide a consistent and structured assessment, withjudgement required around the use of out-of-model factors. We
handle credit approval on a dual approval basis, jointly with thebusiness writer and an independent credit officer.

Automated assessment of credit applications using a combination ofscoring (application and behavioural), policy rules and external credit
reporting information. If the application does not meet the automatedassessment criteria, then it is subject to manual assessment.

We use the Banking Group’s internal CCR to manage the credit quality of financial assets. To enable wider comparisons, the Banking Group’s CCRs are
mapped to external rating agency scales as follows:
Credit quality
description

Internal CCR

The Banking Group customer requirements

Moody’s
RatingS&P Global
Ratings

Strong

CCR 0+ to 4-

Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.

Aaa – Baa3

AAA – BBB-

Satisfactory

CCR 5+ to 6-

Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible tocyclical trends or variability in earnings.

Ba1 – B1

BB+ – B+Weak

CCR 7+ to 8=

Demonstrated some operational and financial instability, withvariability and uncertainty in profitability and liquidity projected tocontinue over the short and possibly medium term.

B2 – Caa

B - CCC

Defaulted

CCR 8- to 10

When doubt arises as to the collectability of a credit facility, thefinancial instrument (or ‘the facility’) is classified as defaulted.

n/a

n/a

37

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
MAXIMUM EXPOSURE TO CREDIT RISKFor financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, thesedifferences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject tomarket risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
Maximum exposure
Reported
Excluded1
to credit risk
2023
2022
2023
2022
2023
2022
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
On-balance sheet positions
Net loans and advances
147,067
147,067
149,321
149,321
Other financial assets:
12,575154
12,421
Cash and cash equivalents
13,094155
12,939Settlement balances receivable
785
785
401
401
Collateral paid
801
1,672
801
1,672
5,921
7,228
5,921
7,228
Trading securities
15,481
15,481
Derivative financial instruments
8,753
8,753
11,357
11,357
Investment securities
10,958
10,958Other financial assets2
955
955
995
995
50,053
154
49,899Total other financial assets
40,923
155
40,768
197,120
154
196,966
Subtotal
190,244155
190,089
Off-balance sheet positions
Undrawn and contingent facilities3
28,79730,187
28,79730,187
Total
219,041
227,307
155
154
218,886
227,153
1
2
3

38

Coins, notes and cash at bank within cash and cash equivalents were excluded as they do not have credit risk exposure.
Other financial assets mainly comprise accrued interest and acceptances.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expectedcredit losses.

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
CREDIT QUALITY
An analysis of the Banking Group’s credit risk exposure is presented in the following tables based on the Banking Group’s internal credit quality ratingby stage without taking account of the effects of any collateral or other credit enhancements.
Net loans and advances

As at 30 September 2023
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage and other origination costs
Net carrying amountAs at 30 September 2022
StrongSatisfactory
Weak
Defaulted
Subtotal
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Unearned income
Capitalised brokerage and other origination costs
Net carrying amountStage 3
Collectively Individuallyassessedassessed
NZ$m
NZ$m

Stage 1
NZ$m

Stage 2
NZ$m

Total
NZ$m

116,859
19,979504
137,342(193)
137,149
0.14%

3,646
5,025
2,430
11,101(398)
10,703
3.59%

890
890
(79)
811
8.88%

287
287
(60)
227
20.91%

120,505
25,004
2,934
1,177
149,620(730)
148,890
0.49%
(28)
459
149,321

123,097
16,327257
139,681(199)
139,482
0.14%

2,678
3,018
1,201
6,897
(311)
6,586
4.51%

588
588
(59)
529
10.03%

146
146
(77)
69
52.74%

125,775
19,345
1,458
734
147,312(646)
146,666
0.44%
(32)
433
147,067

2023
NZ$m
40,59852
118
40,7682022
NZ$m
49,83362
449,899Other financial assets

StrongSatisfactory
Weak
Defaulted
Total carrying amount39

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
Off-balance sheet commitments - undrawn and contingent facilities

As at 30 September 2023
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in other provisions (refer to Note 20)
Net undrawn and contingent facilities
Coverage ratio

Stage 1
NZ$m
24,4083,343
827,759(80)
27,6790.29%

As at 30 September 2022
StrongSatisfactory
Weak
Defaulted
Gross undrawn and contingent facilities
Allowance for ECL included in other provisions (refer to Note 20)
Net undrawn and contingent facilities
Coverage ratio

25,9013,368
8
29,277(66)
29,211
0.23%

40Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
202
701
234
15
13
1,137
15
13
(39)
(3)
(5)
1,098
12
8
3.43%
20.00%
38.46%

224
682
89
995
(31)
964
3.12%

14
14
(3)
11
21.43%

6
6(5)
1
83.33%

Total
NZ$m
24,6104,044
242
28
28,924(127)
28,7970.44%

26,1254,050
97
20
30,292(105)
30,187
0.35%

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Banking
Group monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Banking Group also applies single customer
counterparty limits to protect against unacceptably large exposures to one single customer.
Analysis of financial assets by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
OtherfinancialassetsLoans andadvances

Off-balance
sheet credit
related commitments

Total

2023
NZ$m

2022
NZ$m

2023
NZ$m

2022
NZ$m

2023
NZ$m

2022
NZ$m

2023
NZ$m

2022
NZ$m

15,400
549
181
2,486
659
904
1,572
2,944
1,155
972
37,67915,616
624
123
2,591
810
1,235
1,542
2,713
993
972
38,797

73
6
12
185
274
4
50
18
77
15,473
2,024

55
16
20
849
267
4
128
12
40
17,085
1,915

926
100
250
1,943
1,335
951
1,580
606
591
1,981
1,948

831
113
350
1,876
1,508
959
2,132
735
860
1,955
2,610

16,399
655
443
4,614
2,268
1,859
3,202
3,568
1,823
18,426
41,651

16,502
753
493
5,316
2,585
2,198
3,802
3,460
1,893
20,012
43,322

980

880

9

12

422

397

1,411

1,289

201
1,117
79,342
1,335

199
950
75,948
1,096

8,910
26
370
112

9,924
24
250
133

776
270
13,814
1,362

855
474
13,426
1,122

9,887
1,413
93,526
2,809

10,978
1,448
89,624
2,351

Subtotal
Overseas
Finance and insurance services
Households
All other non-residents

147,476

145,089

27,62330,73428,85530,203203,954

206,026

76
1,485
583

103
1,402
718

13,092
7
46

19,048
5
112

69
-

89
-

13,237
1,492
629

19,2401,407
830

Subtotal
Gross subtotal
Allowance for ECL
Subtotal
Unearned income
Capitalised brokerage and other origination
costs
Maximum exposure to credit risk

2,144
149,620(730)
148,890(28)

2,223
147,312(646)
146,666(32)

13,14540,76840,768-

19,16549,89949,899-69
28,924(127)
28,797-89
30,292(105)
30,187-

15,358219,312(857)
218,455(28)

21,477
227,503(751)
226,752
(32)

459

433

-

-

-

-

459

433

149,321147,067

40,76849,89928,79730,187

218,886

227,153

New Zealand residents
Agriculture
Forestry and fishing, agriculture services
MiningManufacturing
Electricity, gas, water and waste services
Construction
Wholesale trade
Retail trade and accommodation
Transport, postal and warehousing
Finance and insurance services
Rental, hiring & real estate services
Professional, scientific, technical,
administrative and support services
Public administration and safety
Health care and social assistance
Households
Other1

1

Other includes exposures to information media and telecommunications; education and training; arts and recreation services; and other services.

41

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there issufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers isfundamental to the product’s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables istypically repaid by the collection of those receivables. During the period there was no change in our collateral policies.
The nature of collateral or security held for the relevant classes of financial assets is as follows:
Net loans and advances
Loans – housing and personal

Housing loans are secured by mortgage(s) over property and additional security may take the form ofguarantees and deposits.
Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we takesecurity, then it is restricted to eligible vehicles, motor homes and other assets.

Loans – businessBusiness loans may be secured, partially secured or unsecured. Typically, we take security by way of amortgage over property and/or a charge over the business or other assets.
If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby lettersof credit or derivative protection.

Other financial assets
Trading securities, investment
securities, derivatives and otherfinancial assets

For trading securities, we do not seek collateral directly from the issuer or counterparty. However, thecollateral may be implicit in the terms of the instrument (for example, with an asset-backed security).
The terms of debt securities may include collateralisation.
For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis atmarket levels current at the time of a counterparty default under International Swaps and Derivatives
Association (ISDA) Master Agreements.
Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative
positions with the counterparty are aggregated and cash collateral (or other forms of eligible collateral)is exchanged daily. The collateral is provided by the counterparty when their position is out of themoney (or provided to the counterparty by the Banking Group when our position is out of the money).

Off-balance sheet positions
Undrawn and contingent facilities

Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically
performance bonds or guarantees. Undrawn facilities that are secured include housing loans securedby mortgages over residential property and business lending secured by commercial real estate and/or
charges over business assets.

The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:
Maximum exposure
to credit risk

Total value of collateral

Unsecured portion of
credit exposure

2023
NZ$m

2022
NZ$m

2023
NZ$m

2022
NZ$m

2023
NZ$m

2022
NZ$m

Net loans and advances
Other financial assets

149,321

141,874
3,232

139,154
4,453

7,447

40,768147,067
49,89937,536

7,913
45,446Off-balance sheet positions

28,79730,187

15,542

15,75813,255

14,429

Total

218,886

227,153

160,648

159,365

58,23867,78842

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISKMARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIESMarket risk stems from the Banking Group’s trading and balance sheet management activities and the impact of changes and correlations between
interest rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
The BRC delegates responsibility for day-to-day management of both market risk and compliance with market risk policies to the Bank’s Asset &Liability Management Committee (ALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Banking Group level. The Market & Treasury Risk team (a specialist risk management unit independent of the business) allocates market risk
limits at various levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposuresusing risk factors and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
Traded market risk

Non-traded market risk

Risk of loss from changes in the value of financial instruments due
to movements in price factors for both physical and derivative
trading positions. Principal risk categories monitored are:• Currency risk – potential loss arising from changes in foreignexchange rates or their implied volatilities.
• Interest rate risk – potential loss from changes in market
interest rates or their implied volatilities.
• Credit spread risk – potential loss arising from a movement
in margin or spread relative to a benchmark.
• Commodity risk – potential loss arising from changes incommodity prices or their implied volatilities.
• Equity risk – potential loss arising from changes in equity
prices.

Risk of loss associated with the management of non-traded interest rate risk,
liquidity risk and foreign exchange exposures. This includes interest rate riskin the banking book. This risk of loss arises from adverse changes in theoverall and relative level of interest rates for different tenors, differences in
the actual versus expected net interest margin, and the potential valuation
risk associated with embedded options in financial instruments and bankproducts.

MEASUREMENT OF MARKET RISKWe primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Banking Group’s possible daily loss based on historical market movements.
The Banking Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices andvolatilities over:• the previous 500 business days, to calculate standard VaR; and• a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using a one-day holding period. For stressed VaR we use a ten-day period. Back testing is used to ensure ourVaR models remain accurate.
The Banking Group measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant
holding period.

43

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:

As at
NZ$m
Traded value at risk 99% confidence
Foreign exchangeInterest rate
CreditDiversification benefit1
Total VaR
1

0.8
1.7
1.0
(1.8)
1.7

2023
High forLow for
year
year
NZ$m
NZ$m
1.6
6.2
1.1
n/a
6.7

0.5
1.1
0.4
n/a
1.2

Averagefor year
NZ$m

As at
NZ$m

0.9
2.0
0.7
(1.3)
2.3

1.0
3.1
0.9
(1.3)
3.7

2022
High forLow for
year
year
NZ$m
NZ$m
1.5
4.8
1.1
n/a
5.9

Averagefor year
NZ$m

0.2
1.2
0.4
n/a
1.3

0.7
2.5
0.7
(1.3)
2.6

The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for
the Banking Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Banking Group’s banking book, while ensuring the Banking Group
maintains sufficient liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Banking Group’s future net interest
income. This risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and theinvestment of capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on theimpact of a 1% rate shock). The table below shows VaR figures for non-traded interest rate risk for the Banking Group.
2023

Non-traded value at risk 99% confidence
Total VaR

2022

As at
NZ$m

High foryear
NZ$m

Low foryear
NZ$m

Averagefor year
NZ$m

As at
NZ$m

High foryear
NZ$m

Low foryear
NZ$m

Averagefor year
NZ$m

31.2

35.3

24.3

30.7

30.0

30.9

20.9

26.0

We undertake scenario analysis to stress test the impact of extreme events on the Banking Group’s market risk exposures. We model a 1% overnight
parallel positive shift in the yield curve to determine the potential impact on our net interest income over the next 12 months. This is a standard risk
measure which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported net
interest income.
Impact of 1% rate shock on the next 12 months' net interest income
As at period end

2023

2022

0.1%

-0.5%

Maximum exposure

1.4%

0.5%

Minimum exposure

-0.7%

-2.2%

Average exposure (in absolute terms)

0.2%

-0.7%

FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Where it is considered appropriate, the Banking Group takes out economic hedges against larger foreign exchange denominated expenditure streams(primarily Australian Dollar, US Dollar and US Dollar correlated). The primary objective of hedging these streams is to protect against a significant
decrease in shareholder value due to negative impacts of foreign exchange rate movements.

44

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISKLIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Banking Group:• is unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or• does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding is overseen by ALCO following delegation from the BRC. Within an overall framework established by the BRC,
Treasury and Market & Treasury Risk have responsibility for the control of funding and liquidity risk at the Banking Group level. Liquidity and funding
risks are governed by a set of principles approved by the Risk Committees of the Bank’s and Ultimate Parent Bank’s Boards and include:• maintaining the ability to meet all payment obligations in the immediate term;• ensuring that the Banking Group has the ability to meet ‘survival horizons’ under Banking Group specific and general market liquidity stressscenarios to meet cash flow obligations over the short to medium term;• maintaining strength in the Banking Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;• ensuring the liquidity management framework is compatible with local regulatory requirements;• preparing daily liquidity reports and scenario analysis to quantify the Banking Group’s positions;• targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;• holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and• establishing a detailed contingency plan to cover different liquidity crisis events.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY AND FUNDING RISKSupervision and regulation
RBNZ requires the Bank to have a comprehensive Board approved liquidity strategy defining: policy, systems and procedures for measuring, assessing,reporting and managing liquidity. This also includes a formal contingency plan for dealing with a liquidity crisis. The Banking Group is required to meet
one week and one month liquidity mismatch ratios and a one year core funding ratio each day.
Scenario modelling
A key component of the Banking Group’s liquidity management framework is scenario modelling of a range of regulatory and internal liquidity
metrics.
Potential severe liquidity crisis scenarios that model the behaviour of cash flows where there is a problem (real or perceived) may include, but are notlimited to, operational issues, doubts about the solvency of the Banking Group, or adverse credit rating changes. Under these scenarios the Banking
Group may have significant difficulty rolling over or replacing funding. The Banking Group’s liquidity policy requires sufficient high quality liquid assets
to be held to meet its liquidity needs for the following one month under the modelled scenarios.
As of 30 September 2023 the Banking Group was operating above the required minimums with the above scenarios.
Structural balance sheet metrics
The Banking Group’s liquidity management framework also encompasses structural balance sheet metrics such as the RBNZ’s core funding ratio. The
core funding ratio is designed to limit the amount of wholesale funding required to be rolled over within a one year timeframe and so interacts withthe modelled liquidity scenarios to maintain the Banking Group‘s liquidity position.
Wholesale funding
The Banking Group’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds that balances cost efficiency withtargeting diversification by markets, investors, currencies, maturities and funding structures. Short-term and long-term wholesale funding is managed
and executed by Treasury.
The Banking Group also uses maturity concentration limits under the wholesale funding and liquidity management framework. Maturity
concentration limits ensure that the Banking Group is not required to issue large volumes of new wholesale funding within a short time period toreplace maturing wholesale funding. Funding instruments used to meet the wholesale borrowing requirement must be on a pre-established list of
approved products.
Funding capacity and debt issuance planning
The Banking Group adopts a conservative approach to determine its funding capacity. Annually, a funding plan is approved by the Bank’s Board. The
plan is supplemented by regular updates and is linked to the Banking Group’s three-year strategic planning cycle.

45

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY PORTFOLIO MANAGEMENT
The Banking Group holds a diversified portfolio of cash and high quality liquid securities primarily to support liquidity risk management. The size of the
Banking Group’s liquidity portfolio is determined with consideration of the amount required to meet the requirements of its internal and regulatory
liquidity scenario metrics.
2023
NZ$m
6,739
1,190
318
8,193
16,44012,36228,802Central and local government bonds
Government treasury bills
Certificates of deposit
Other bonds
Securities eligible to be accepted as collateral in repurchase transactions
Cash and balances with central banks
Total liquidity portfolio

2022
NZ$m
8,316
829
656
8,372
18,173
10,26728,440Assets held in the Banking Group’s liquidity portfolio are all denominated in New Zealand dollars and include balances held with RBNZ and securities
issued by the New Zealand Government, supranational agencies, highly rated banks, state owned enterprises, local authorities (including through afunding authority) and highly rated corporates.
The Bank also held unencumbered internal residential mortgage backed securities (RMBS) which would be accepted as collateral by RBNZ in
repurchase transactions. These holdings would entitle the Bank to enter into repurchase transactions with RBNZ with a value of NZ$10,776 million at
30 September 2023 (2022: NZ$10,800 million).
RBNZ Term Lending Facility (TLF) and Funding for Lending Programme (FLP)• Between May 2020 and July 2021, RBNZ made funds available under the TLF to promote lending to businesses. The TLF is a five-year secured
funding facility for New Zealand banks at a fixed rate of 0.25%.
•

Between November 2020 and December 2022, RBNZ made funds available under the FLP to lower the cost of borrowing for New Zealandbusinesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official
Cash Rate (OCR).

As at 30 September 2023, the Bank had drawn NZ$300 million (2022: NZ$300 million) under the TLF and NZ$3,500 million (2022: NZ$2,500 million)
under the FLP. These amounts are included in securities sold under repurchase agreements in Note 13 Deposits and other borrowings.
Liquidity crisis contingency planning
The Banking Group maintains a liquidity crisis contingency plan to define an approach for analysing and responding to a liquidity-threatening event.
The framework includes:• the establishment of crisis severity/stress levels;• clearly assigned crisis roles and responsibilities;• early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;• action plans, and courses of action for altering asset and liability behaviour;• procedures for crisis management reporting, and covering cash-flow shortfalls; and• assigned responsibilities for internal and external communications.
FUNDING POSITION
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs funding metrics toensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longer-dated wholesale debt (withremaining term exceeding one year) and equity.
Note

2023
NZ$m

2022
NZ$m

13

132,529

130,330

Debt issuances

19,14721,023

Certificates of deposit and commercial paper

4,581

4,594

Other borrowings

4,520

4,718

Funding composition
Customer deposits

Wholesale funding

Total wholesale funding

28,24830,335

Total deposits and wholesale funding

160,777

160,66546

NOTES TO THE FINANCIAL STATEMENTS

15. FINANCIAL RISK MANAGEMENT (continued)
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.

Customer deposits by industry - New Zealand residents
Agriculture, forestry and fishing

2023
NZ$m

2022
NZ$m

4,535

4,843

204

257

Manufacturing

2,809

2,808

Construction

2,926

2,800

Wholesale trade

2,361

2,808

Retail trade and accommodation

2,124

2,197

MiningTransport, postal and warehousing

1,572

1,347

Financial and insurance services

13,89913,516

Rental, hiring and real estate services

3,498

3,851

Professional, scientific, technical, administrative and support services

6,377

6,741

Public administration and safety

1,515

1,258

Health care and social assistance

1,375

1,397

Arts, recreation and other services

2,502

2,120

Households

74,511

71,752All other New Zealand residents1

2,719

2,783

122,927

120,478

8,807

8,852

795

1,000

9,602

9,852

132,529

130,330

Subtotal
Customer deposits by industry - overseas
Households
All other non-NZ residents
Subtotal
Total customer deposits
Wholesale funding (financial and insurance services industry)
New Zealand

9,201

8,251

Overseas

19,04722,084

Total wholesale funding

28,24830,335

Total deposits and wholesale funding

160,777

160,665

132,128

128,729

Australia

1,220

1,563

United States

12,234

12,986

Europe8,379

10,389Concentrations of funding by geography
New Zealand

Other countries
Total deposits and wholesale funding
1

6,816

6,998

160,777

160,665

Other includes electricity, gas, water and waste services; information media and telecommunications; and education and training.

47

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
15. FINANCIAL RISK MANAGEMENT (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE BANKING GROUP’S FINANCIAL LIABILITIESThe tables below provide residual contractual maturity analysis of financial liabilities at 30 September 2023 and 30 September 2022 within relevant
maturity groupings. All outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts
represent principal and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
It should be noted that this is not how the Banking Group manages its liquidity risk. The management of this risk is detailed on page 45.

2023
Settlement balances payableOndemandNZ$mLess than
3 months
NZ$m

3 to 12months
NZ$m

1 to 5
years
NZ$m

After
5 years
NZ$m

Total
NZ$m

2,425

522

-

-

-

2,947

-

1,500

-

-

-

1,500

78,33625,82233,091

7,005-

144,254

Derivative financial liabilities (trading)

-

8,292

-

-

-

8,292

Debt issuances1

-

408

3,552

15,7902,261

22,011

Lease liabilities

-

14

40

149

17

220

Other financial liabilities

-

260

7

236

253

756

- gross inflows

-

2,434

4,443

8,366

935

16,178- gross outflows-(2,341)(4,375)(8,748)(942)(16,406)

Collateral received
Deposits and other borrowings

Derivative financial instruments(balance sheet management)

2022
Settlement balances payable
Collateral received

4,677
-

299
1,962

-

-

-

4,976
1,962

Deposits and other borrowings

83,58724,31826,8996,335-

141,139

Derivative financial liabilities (trading)-

13,494---

13,494

Debt issuances1

-

173

4,886

15,404

3,243

23,706

Lease liabilities

-

13

39

155

42

249

Other financial liabilities

-

148

8

273

215

644

- gross inflows

-

1,224

4,390

6,391

458

12,463- gross outflows-(1,229)(4,688)(6,482)(482)(12,881)

Derivative financial instruments(balance sheet management)

1

Any callable wholesale debt instruments have been included at their next call date. Refer to Note 14 Debt issuances for subordinated debt call dates.

At 30 September 2023, NZ$28,924 million (2022: NZ$30,292 million) of its credit related commitments and contingent liabilities mature in less than 1
year, based on the earliest date on which the Banking Group may be required to pay.

48

NOTES TO THE FINANCIAL STATEMENTS

16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESCLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESThe Banking Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial
instruments on the balance sheet at fair value.
Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The following tables set out the classification of financial assets and liabilities according to their measurement bases together with their carrying
amounts as recognised on the balance sheet.
2023
2022
At
At
amortised
At fair
amortised
At fair
cost
value
Total
cost
value
Total
Note
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
Financial assets
Cash and cash equivalents1
7
12,426668
13,094
12,575
12,575
401
401
785
785
Settlement balances receivable
1,672
1,672
Collateral paid801
801
Trading securities
8
7,228
7,228
5,921
5,921
Derivative financial instruments
915,481
15,481
8,753
8,753
11,357
11,357
Investment securities
10
10,958
10,958147,067
147,067
Net loans and advances
11
149,321
149,321
Other financial assets
995
995
955
955
Total
163,944
26,300190,244
163,054
34,066
197,120
Financial liabilities
Settlement balances payable
4,933
4,933
2,920
2,920
Collateral received
1,962
1,962
1,500
1,500
Deposits and other borrowings1
13
136,687
2,955
139,642
138,748
2,882
141,630
13,785
13,785Derivative financial instruments
9
8,326
8,326
21,02321,023
Debt issuances
14
19,147
19,147
Other financial liabilities
1,249
371
1,620
741
364
1,105
Total
163,564
11,579175,143
165,346
17,104
182,4501

During 2023, the Banking Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets
business. This resulted in the associated reverse repurchase and reverse repurchase agreements being recognised and measured at FVTPL.

FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Banking Group holds offsetting risk positions, then we use the portfolio exception in NZ IFRS 13 Fair Value Measurement (NZ IFRS 13) to measure
the fair value of such groups of financial assets and financial liabilities. We measure the portfolio based on the price that would be received to sell a net
long position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
We designate commercial paper (included in deposits and other borrowings) at FVTPL where they are managed on a fair value basis to align themeasurement with how the instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUESWe use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
Asset or liability

Fair value approach

Financial instruments classified as:- Derivative financial assets and financial liabilities(including trading and non-trading)- Reverse repurchase agreements < 90 days
- Net loans and advances- Deposits and other borrowings- Debt issuances

Discounted cash flow techniques are used whereby contractual future cash flows of the
instrument are discounted using wholesale market interest rates, or market borrowing rates
for debt or loans with similar maturities or yield curve appropriate for the remaining term tomaturity.

Financial instruments classified as:- Trading securities- Investment securities

Valuation techniques use comparable multiples (such as price-to-book ratios) or discounted
cashflow (DCF) techniques incorporating, to the extent possible, observable inputs from
instruments with similar characteristics.

49

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE HIERARCHYThe Banking Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with NZ IFRS 13 based on theobservability of inputs used to measure the fair value:• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
Fair value measurements
Quoted price in
active markets(Level 1)
2023
2022
NZ$m
NZ$m
AssetsCash and cash equivalents1
Trading securities2
Derivative financial instruments
Investment securities2
Total
Liabilities
Deposits and other borrowings1
Derivative financial instruments
Other financial liabilities
Total
1
2

Using observable inputs(Level 2)
2023
2022
NZ$m
NZ$m

Using unobservable
inputs (Level 3)
2023
2022
NZ$m
NZ$m

Total
2023
NZ$m

2022
NZ$m

3,989
38
7,796
11,823

5,565
109
10,895
16,569

668
1,932
8,715
3,161
14,476

1,663
15,372461
17,496

1
1

1
1

668
5,921
8,753
10,95826,3007,228
15,481
11,35734,066

2
367
369

8
364
372

2,882
8,314
4
11,2002,955
13,765
16,720

10
10

12
12

2,882
8,326
371
11,5792,955
13,785364
17,104

During 2023, the Banking Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets
business. This resulted in the associated reverse repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
During 2023, NZ$1,685 million of assets were transferred from Level 1 to Level 2 and $338 million of assets were transferred from Level 2 to Level 1 for the Banking Group due to a change ofthe observability of valuation inputs. There were no other material transfers between Level 1 and Level 2 during the year. Transfers into and out of levels are measured at the beginning of
the reporting period in which the transfer occurred.

FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed below are carried at amortised cost on the Banking Group’s balance sheet. While this is the value atwhich we expect the assets will be realised and the liabilities settled, the Banking Group provides an estimate of the fair value of the financial assets
and financial liabilities at balance date in the table below.
Fair values of financial assets and liabilities carried at amortised cost not included in the table below approximate their carrying values. These financial
assets and liabilities are either short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of thereporting period.

At amortised cost
2023
2022
NZ$m
NZ$m
Financial assets
Net loans and advances
Total
Financial liabilities
Deposits and otherborrowings
Debt issuances
Total

50

Categorised into fair value hierarchy
Quoted price in active Using observable
With significant nonmarkets
inputsobservable inputs(Level 1)(Level 2)(Level 3)
2023
2022
2023
2022
2023
2022
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m

Total fair value
2023
2022
NZ$m
NZ$m

149,321
149,321147,067
147,067

-

-

95
95

136
136

148,167
148,167

145,323
145,323

148,262
148,262

145,459
145,459

138,748

136,687--

138,647

136,493--

138,647

136,493

19,147
157,895

21,023
157,710

2,367
2,367

2,561
2,561

16,819155,466

18,391
154,884--

19,186
157,833

20,952
157,445

NOTES TO THE FINANCIAL STATEMENTS

16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The following table sets out the Banking Group’s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where thecarrying value is not typically a reasonable approximation of fair value.
Financial asset and liability

Fair value approach

Net loans and advances to banks

Discounted cash flows using prevailing market rates for loans with similar credit quality.

Net loans and advances to customers

Present value of future cash flows, discounted using a curve that incorporates changes inwholesale market rates, the Banking Group’s cost of wholesale funding and the customer margin,
as appropriate.

Deposit liability without a specified maturity or
at call

The amount payable on demand at the reporting date. We do not adjust the fair value for any
value we expect the Banking Group to derive from retaining the deposit for a future period.

Interest bearing fixed maturity deposits andother borrowings and acceptances withquoted market rates

Market borrowing rates of interest for debt with a similar maturity are used to discount contractual
cash flows to derive the fair value.

Debt issuances

Calculated based on quoted market prices or observable inputs as applicable. If quoted market
prices are not available, we use a discounted cash flow model using a yield curve appropriate forthe remaining term to maturity of the debt instrument. The fair value reflects adjustments to credit
spreads applicable to the Banking Group for that instrument.

KEY JUDGEMENTS AND ESTIMATES
A significant portion of financial instruments are carried on the Banking Group’s balance sheet at fair value. The Banking Group therefore regularly
evaluates the key valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within thefinancial statements, as this can involve a high degree of judgement and estimation in determining the carrying values at the balance sheet
date.
In determining the fair valuation of financial instruments, the Banking Group has considered the impact of related economic and market
conditions on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, aswell as the impact of these matters on the classification of financial instruments in the fair value hierarchy.
Most of the valuation models the Banking Group uses employ only observable market data as inputs. For certain financial instruments, we may
use data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement todetermine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable
inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair value ofa financial instrument using a valuation technique, the Banking Group also considers any required valuation adjustments in determining thefair value. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments – refer Note 9 Derivative
financial instruments) to reflect the Banking Group’s assessment of factors that market participants would consider in determining fair value ofa particular financial instrument.

51

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
17. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SECURITY FOR ASSETS
The following disclosure excludes the amounts presented as collateral paid and received in the balance sheet that relate to derivative liabilities andderivative assets respectively. The terms and conditions of those collateral agreements are included in the standard CSA that forms part of the ISDA
Master Agreement under which most of our derivatives are executed.
ASSETS CHARGED AS SECURITY FOR LIABILITIESAssets charged as security for liabilities include the following types of instruments:• securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;• specified residential mortgages provided as security for notes and bonds issued to investors as part of the Banking Group’s covered bondprogrammes;• collateral provided to RBNZ under the TLF and FLP; and• collateral provided to a clearing house.
The carrying amounts of assets pledged as security are as follows:

Securities sold under arrangements to repurchase1
Residential mortgages provided as security for repurchase agreements with RBNZ
Total assets of the ANZNZ Covered Bond Trust pledged as security for covered bonds
Other2
1

2

2023
NZ$m
626
4,844
10,926
300

2022
NZ$m
1,833
3,494
10,921
323

The amounts disclosed as securities sold under arrangements to repurchase include both:•
assets pledged as security which continue to be recognised on the Banking Group’s balance sheet; and•assets repledged, which are included in the disclosure below.
Comparative amounts have been adjusted to be consistent with the current period’s collateral securities.

COLLATERAL ACCEPTED AS SECURITY FOR ASSETS
The Banking Group has received collateral associated with various financial transactions. Under certain arrangements the Banking Group has the rightto sell, or to repledge, the collateral received. These arrangements are governed by standard industry agreements.
The fair value of collateral we have received and that which we have sold or repledged is as follows:

Fair value of assets which can be sold or repledged
Fair value of assets sold or repledged

52

2023
NZ$m
667
432

2022
NZ$m
1,233
959

NOTES TO THE FINANCIAL STATEMENTS

18. OFFSETTING
We offset financial assets and financial liabilities in the balance sheet (in accordance with NZ IAS 32 Financial Instruments: Presentation) when there is:• a current legally enforceable right to set off the recognised amounts in all circumstances; and• an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of overcollateralisation.
Amount subject to master netting agreement or similar
Total Amounts notamountssubject toFinancialrecognised master netting
collateralin the agreement or
Financial(received)/balance sheet
similar
Total
instruments
pledgedNet amount
2023
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
NZ$m
Derivative financial assets
8,753(1,532)
7,221(5,703)(538)
980
Reverse repurchase agreements1
668
668
(668)
Total financial assets
9,421(1,532)
7,889(5,703)(1,206)980
Derivative financial liabilities(8,326)
1,593(6,733)
5,703
223
(807)
Repurchase agreements2(4,429)(4,429)4,429
Total financial liabilities(12,755)
1,593(11,162)
5,703
4,652
(807)
2022
Derivative financial assets
Reverse repurchase agreements1
Total financial assets
Derivative financial liabilities
Repurchase agreements2
Total financial liabilities
1
2

15,481
1,248
16,729(13,785)(4,642)(18,427)(4,180)(4,180)
2,592
2,592

11,301
1,248
12,549(11,193)(4,642)(15,835)(9,817)(9,817)
9,817
9,817

(1,128)(1,248)(2,376)
562
4,642
5,204

356
356
(814)
(814)

Reverse repurchase agreements are presented in the balance sheet within cash and cash equivalents.
Repurchase agreements are presented in the balance sheet within deposits and other borrowings.

53

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
19. GOODWILL AND OTHER INTANGIBLE ASSETS
2023
NZ$m
3,006
37
76
3,119

Goodwill
SoftwareManagement rights
Goodwill and other intangible assets

2022
NZ$m
3,006
17
76
3,099

GOODWILL AND OTHER INTANGIBLE ASSETS ALLOCATED TO CASH-GENERATING UNITS (CGUs)
Goodwill arose on the acquisition of the NBNZ Holdings Limited group on 1 December 2003, and the carrying amount reflects amortisation
recognised before the application of NZ IFRS from 1 October 2004 and subsequent business disposals. Funds management rights, assessed as having
indefinite useful lives, arose on the acquisition of the ING Holdings (NZ) Limited (now ANZ New Zealand Investments Holdings Limited) group on 30
November 2009.
Goodwill and funds management rights are allocated to CGUs as follows. Comparative amounts for Business & Agri (previously Business) andInstitutional have been updated for the segment changes described in Note 6 Segment reporting.

Cash generating unit
Personal
Funds Management
Personal segment
Business & Agri (previously Business)
Institutional
Total

Goodwill
2023
2022
NZ$m
NZ$m
980
980
62
62
1,042
1,042
695
695
1,269
1,269
3,006
3,006

Management rights
2023
2022
NZ$m
NZ$m
76
76
76
76
76
76

Goodwill was assessed for indicators of impairment as at 30 September 2023, taking into account the results of the February 2023 impairment test andassociated sensitivity and scenario analysis performed and the forecast impact of recent economic events. There were no indicators of impairment
therefore, in accordance with NZ IAS 36 Impairment of Assets, no further impairment test was required.
The following information is for the annual goodwill impairment test, and reflects the CGUs and goodwill allocations as at 28 February 2023.
Annual goodwill impairment test
The annual impairment test is performed as at the end of February each year. Goodwill is considered to be impaired if the carrying amount of therelevant CGU exceeds its recoverable amount. The recoverable amount of a CGU is the higher of its fair value less costs of disposal (FVLCOD) and its
value-in use (VIU). We use a value-in-use approach to estimate the recoverable amount of the CGU to which each goodwill component is allocated.
Based on this assessment no impairment was identified for any CGU, and therefore a FVLCOD calculation was not required.

54

NOTES TO THE FINANCIAL STATEMENTS

19. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
VALUE-IN-USE
These calculations use cash flow projections based on a number of financial budgets within each CGU covering an initial forecast period. These
projections also incorporate economic assumptions including GDP, inflation, unemployment, residential and commercial property prices, and theimplementation of RBNZ’s increased capital requirements. Cash flows beyond the forecast period are extrapolated using the terminal growth rate.
These cash flow projections are discounted using a discount rate derived using a capital asset pricing model.
Future changes in the assumptions upon which the calculation is based may materially impact this assessment, resulting in the potential impairmentof part or all of the goodwill balances.
Input / assumption

Values applied in 28 February 2023 impairment test

Forecast period and projections

To 30 September 2028 - an extended forecast period was used to cover the implementation of RBNZ’s
increased capital requirements over the transition period ending on 1 July 2028.

Revenue growth over forecast
periodComprises impacts of net interest margin and volume growth, arising from planned responses to known
regulatory and economic forecasts. Average annual forecast revenue growth rates are shown below.

Credit impairment over forecast
periodVaries by CGU, based on ECL modelling for 2023 and 2024, before returning to long run experience levels
for 2025 to 2028. Long run experience levels are based on the Banking Group’s bad debts written off, net ofrecoveries, since 2004 of 0.14% of gross loans and advances. Credit impairment for each CGU as apercentage of forecast gross loans and advances for 2025 to 2028 is shown below.

Terminal growth rate

2.0% - based on 2026 forecast inflation from RBNZ’s February 2023 Monetary Policy Statement.

Discount rate

Post tax: 11.9% (February 2022: 10.7%).
The main variables in the calculation of the discount rate used are the risk free rate, beta and the market risk
premium. The risk-free rate was the traded 10-year New Zealand government bond yield as at 28 February
2023 of 4.6%. The market risk premium was estimated using observed historic rates of return for the New
Zealand stock exchange and 10-year government bonds. Beta was consistent with observable measuresapplied in the regional banking sector.

The values of the average revenue growth, credit impairment as a percentage of forecast gross loans and advances, and pre-tax discount rates
assumptions by CGU are shown in the table below. The implied pre-tax discount rates are significantly higher than the post-tax discount rate above
because regulatory capital retention over the forecast period is not tax effected. Comparative amounts for Business & Agri and Institutional have been
updated for the segment changes described in Note 6 Segment reporting.
Cash generating unit
Personal
Funds Management
Business & Agri
Institutional

Revenue growth
28 Feb 23 28 Feb 22
2.2%
5.6%
2.8%
1.8%

5.1%
6.4%
5.8%
3.8%

Credit impairment
28 Feb 23 28 Feb 22
0.07%
n/a
0.15%
0.17%

0.12%
n/a
0.22%
0.20%

Pre-tax discount rate
28 Feb 23 28 Feb 22
24.1%
21.5%
23.5%
23.3%

20.8%
18.6%
20.6%
20.9%

We performed stress tests for key sensitivities in each CGU. A change, considered to be reasonably possible by management, in key assumptions
would not cause the carrying amount of any CGU to exceed its recoverable amount.

55

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
19. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:

Definition

Goodwill

Software

Other intangibles

Excess amount the Banking
Group has paid in acquiring abusiness over the fair value ofthe identifiable assets andliabilities acquired.

Purchased software owned by the
Banking Group is capitalised.

Management fee rights arising fromacquisition of funds managementbusiness.

Internal and external costs incurredin building software and computer
systems costing greater than
NZ$20 million are capitalised asassets. Those less than NZ$20
million are expensed in the year inwhich the costs are incurred.
Costs incurred in planning or
evaluating software proposals or inmaintaining systems after
implementation are not capitalised.

Carrying value

Cost less any accumulated
impairment losses.
Allocated to the CGU to which
the acquisition relates.

Useful life

Indefinite.
Goodwill is reviewed for
impairment at least annually or
when there is an indication of
impairment.

Initially, measured at cost.
Subsequently, carried at cost lessaccumulated amortisation andimpairment losses.
Except for major core
infrastructure, amortised overperiods between 2-5 years;
however major core infrastructure
may be amortised over 7 years
subject to approval by the Audit
Committee.

Initially, measured at fair value atacquisition.
Subsequently, carried at cost lessaccumulated impairment losses.
Management fee rights with anindefinite life are reviewed for
impairment at least annually or
when there is an indication of
impairment.

Purchased software is amortisedover 2 years unless it is considered
integral to other assets with alonger useful life.
Amortisation
methodNot applicable.

Straight-line method.

Not applicable.

KEY JUDGEMENTS AND ESTIMATESManagement judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life ofan asset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:• the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Banking
Group’s revenue generating segments that benefit from relevant historical business combinations generating goodwill.
• determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
• assessment of the recoverable amount of each CGU used to determine whether the carrying amount of goodwill is supported isbased on judgements including the selection of the model and key assumptions used to calculate the recoverable amount.
The assessment of the recoverable amount of each CGU has been made within the context of the inherent uncertainty described in the
key judgements and estimates section on page 9.

56

NOTES TO THE FINANCIAL STATEMENTS

20. OTHER PROVISIONSECL allowance on undrawn and contingent facilities
Customer remediation
Restructuring costs
Leasehold make good
Other
Total other provisions

2023
NZ$m
127
36
10
21
15
209

2022
NZ$m
105
70
11
22
14
222

Customer Restructuring
Leaseholdremediation
costs make good
NZ$m
NZ$m
NZ$m
70
11
22
1
5
(29)
(5)
(1)
(6)
(1)
36
10
21

Other
NZ$m
14
1
15

Note
12

Movements in other provisions

Balance at 1 October 2022
New and increased provisions made during the year
Provisions used during the year
Unused amounts reversed during the year
Balance at 30 September 2023

Customer remediation
Customer remediation includes provisions for expected refunds to customers and other counterparties, remediation project costs and related
customer, counterparty and regulatory claims, penalties and litigation costs and outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Banking Group or themanner in which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for andare expensed as incurred.
Leasehold make good
Provisions associated with leased premises where, at the end of a lease, the Banking Group is required to remove any fixtures and fittings installed in
the leased property. This obligation arises immediately upon installation. Estimated make good costs are added to the right of use asset (withinpremises and equipment) upon installation and amortised over the lease term.
Other
Other provisions comprise various other provisions including losses arising from other legal action, operational issues, and warranties and indemnities
provided in connection with various disposals of businesses and assets.

RECOGNITION AND MEASUREMENT
The Banking Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources isprobable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using the estimated cash
flows required to settle the present obligation, its carrying amount is the present value of those cash flows.

KEY JUDGEMENTS AND ESTIMATES
The Banking Group holds provisions for various obligations including customer remediation, restructuring costs, leasehold make good andlitigation related claims. These provisions involve judgements regarding the timing and outcome of future events, including estimates of
expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice,provisions and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the costof settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number ofdifferent assumptions, including the number of impacted customers, the average refund per customer, the associated remediation project
costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is aheightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The
appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence
including expert legal advice and adjustments are made to the provisions where appropriate.

57

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
21. SHAREHOLDERS' EQUITYSHAREHOLDERS’ EQUITY

Share capital
Reserves
FVOCI reserve
Cash flow hedge reserve
Total reserves
Retained earnings
Total shareholders' equity

2023
NZ$m
12,4382022
NZ$m
12,438

(39)
(54)
(93)
6,076
18,421

22
26
48
5,298
17,784SHARE CAPITAL
The table below details the movement in issued shares and share capital for the period.

Ordinary shares
Preference shares
Preference shares at start of year
Preference shares issued during the year
Preference shares
Total share capital

Number of issued shares
2023
2022
6,345,755,498
6,345,755,498
850,000,000
850,000,000
7,195,755,498

300,000,000
550,000,000
850,000,000
7,195,755,498

NZ$ millions
2023
2022
11,588
11,588850
850
12,438300
550
850
12,438Preference shares
There are two classes of preference shares: preference shares issued in 2013 and perpetual preference shares issued in 2022.
As at 30 September 2023, the preference shares qualify as AT1 capital for RBNZ’s capital adequacy purposes.

2013 preference shares – NZD 300 million
The 2013 preference shares (PS) are issued to the Immediate Parent Company. The key terms of the PS are as follows:

PS dividends
PS dividends are payable at the discretion of the Directors of the Bank and are non-cumulative. The Bank must not resolve to pay any dividend or
make any other distribution on its ordinary shares until the next PS dividend payment date if a PS dividend is not paid.
Should the Bank elect to pay a PS dividend, the PS dividend is based on a floating rate equal to the aggregate of the New Zealand 6 month bank billrate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PS dividend is fully imputed), with PS dividend payments dueon 1 March and 1 September each year.
The Bank paid a dividend on the PS on 1 March and 1 September during the years ended 30 September 2023 and 30 September 2022, and aggregate
amounts are shown in the statement of changes in equity.

Redemption features
The PS are redeemable, subject to prior written approval of RBNZ. Under RBNZ’s new capital requirements, from 1 January 2022, the PS are subject to a
progressive reduction in their regulatory capital recognition. As a result, the Bank has determined that a regulatory event has occurred in respect of
the PS. The occurrence of a regulatory event means that the Bank may choose to redeem the PS at its discretion, subject to prior written approval of
RBNZ. As at 10 November 2023, no decision has been made on whether the Bank will redeem the PS.
The PS may be redeemed for nil consideration should a non-viability trigger event occur.

2022 preference shares – NZD 550 million
Perpetual preference shares (PPS) are issued to parties outside the ANZ Group. The key terms of the PPS are as follows:

PPS dividends
PPS dividends are payable at the discretion of the Directors of the Bank and are non-cumulative. The Bank must not authorise or pay a dividend on its
ordinary shares, acquire its ordinary shares or otherwise undertake a capital reduction in respect of its ordinary shares until the next PPS dividend
payment date if a PPS dividend is not paid.
Should the Bank elect to pay a PPS dividend, the PPS dividend is 6.95% per annum up until 18 July 2028 and thereafter a floating rate equal to theaggregate of the New Zealand 3 month bank bill rate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PPS
dividend is fully imputed), with PPS dividend payments scheduled to be paid on 18 January, 18 April, 18 July and 18 October each year.
The Bank paid a dividend on the PPS on 18 October 2022, 18 January 2023, 18 April 2023 and 18 July 2023 during the year ended 30 September 2023.
There were no PPS dividends due during the year ended 30 September 2022.

58

NOTES TO THE FINANCIAL STATEMENTS

21. SHAREHOLDERS' EQUITY (continued)
Redemption features
Holders of PPS have no right to require that the PPS be redeemed. The Bank may at its option redeem all of the PPS on an optional redemption date(each PPS dividend date from 18 July 2028); or at any time following the occurrence of a tax event or regulatory event, subject to prior written
approval of RBNZ and certain other conditions.

RECOGNITION AND MEASUREMENT
Ordinary shares

Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds available on winding
up of the Bank, in proportion to the number of fully paid ordinary shares held. They are recognised at theamount paid per ordinary share net of directly attributable costs. Every holder of fully paid ordinary sharespresent at a meeting in person, or by proxy, is entitled to:• on a show of hands, one vote; and• on a poll, one vote, for each share held.

Preference shares

Preference shares do not carry any voting rights. They are wholly classified as equity instruments as there is nocontractual obligation for the Bank to either deliver cash or another financial instrument or to exchange
financial instruments on a potentially unfavourable basis.
In the event of liquidation, holders of preference shares are entitled to available subscribed capital per share,pari passu with all holders of existing preference shares and AT1 capital instruments but in priority to all holdersof ordinary shares. They have no entitlement to participate in further distribution of profits or assets.

Reserves:

Cash flow hedge
reserve

Includes fair value gains and losses associated with the effective portion of designated cash flow hedging
instruments together with any tax effect.

FVOCI reserve

Includes the changes in fair value of investment securities together with any tax effect.
In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records accumulated changes
in fair value arising subsequent to initial recognition, except for those relating to allowance for ECL, interest
income and foreign currency exchange gains and losses which are recognised in profit or loss. As debt
securities at FVOCI are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowanceassociated with such assets. When a debt security measured at FVOCI is derecognised, the cumulative gain orloss recognised in the FVOCI reserve in respect of that security is reclassified to profit or loss and presented inother operating income.
In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records accumulatedchanges in fair value arising subsequent to initial recognition (including any related foreign exchange gains orlosses). When an equity security measured at FVOCI is derecognised, the cumulative gain or loss recognised in
the FVOCI reserve in respect of that security is not recycled to profit or loss.

59

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
22. CAPITAL MANAGEMENTCAPITAL MANAGEMENT STRATEGYThe Banking Group’s core capital objectives are to:• protect the interests of depositors, creditors and shareholders;• ensure the safety and soundness of the Banking Group’s capital position; and• ensure that the capital base supports the Banking Group’s risk appetite, and strategic business objectives, in an efficient and effective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting, monitoring and obtaining assurance for
the Banking Group’s Internal Capital Adequacy Assessment Process (ICAAP) policy and framework; standardised risk definitions for all material risks;materiality thresholds; capital adequacy targets; internal capital principles; and risk appetite.
The Banking Group has minimum and trigger levels for common equity tier 1, tier 1 and total capital that ensure sufficient capital is maintained to:• meet minimum prudential requirements imposed by regulators;• ensure consistency with the Banking Group’s overall risk profile and financial positions, taking into account its strategic focus and business plan;and• support the internal risk capital requirements of the business.
ALCO is responsible for developing, implementing and maintaining the Banking Group's ICAAP framework, including ongoing monitoring, reportingand compliance. The Banking Group’s ICAAP is subject to independent and periodic review.
Throughout the year, the Banking Group maintained compliance with RBNZ’s minimum capital ratios.

REGULATORY ENVIRONMENTAs the Bank is a registered bank in New Zealand, it is primarily regulated by RBNZ under the Banking (Prudential Supervision) Act 1989. The Bank mustcomply with the minimum regulatory capital requirements, capital ratios and specific reporting levels that RBNZ sets. RBNZ requirements are
summarised below:
Regulatory capital definition

Minimum capital ratios

Common equity tier 1 (CET1) capital

Comprises ordinary share capital, retained
earnings, and certain accounting reserves. Someamounts (e.g. the value of goodwill) must be
deducted to determine the final value of CET1
capital.

CET1 capital divided by total risk weighted assets
must be at least 4.5%.

Tier 1 capital

CET1 capital plus additional tier 1 instrumentsthat comprise high-quality capital and must:• provide a permanent and unrestrictedcommitment of funds;• be freely available to absorb losses; andprovide for fully discretionary capital
distributions.

Tier 1 capital divided by total risk weighted assets
must be at least 6.0%.

Total capital

Tier 1 plus tier 2 capital. Tier 2 instruments
include some subordinated instruments andaccounting reserves that are not included in tier1 capital. Some amounts are deducted indetermining the value of tier 2 instruments.

Total capital divided by total risk weighted assets
must be at least 8.0%.

Capital buffer

The Capital buffer is actual CET1 capital in excess
of any of the minimum capital requirements
imposed on the Bank.

Capital buffer divided by total risk weighted assets
should be at least 4.5%. (2022: 3.5%)

Reporting levels
Solo consolidated

The registered bank plus subsidiaries which are funded exclusively and wholly owned by theregistered bank.

Banking GroupThe registered bank’s consolidated group.

The Bank measures capital adequacy and reports to RBNZ on a Banking Group basis monthly, and measures capital adequacy on a Solo consolidated
basis quarterly. Banking Group and Solo consolidated capital ratios are reported publicly in six-monthly disclosure statements.

60

NOTES TO THE FINANCIAL STATEMENTS

22. CAPITAL MANAGEMENT (continued)
CAPITAL ADEQUACY
The following table provides details of the Banking Group’s capital adequacy ratios at 30 September:
Unaudited
Qualifying capital
Tier 1
Shareholder's equity
Prudential adjustments to shareholders' equity1
Gross common equity tier 1 capital
Deductions
Common equity tier 1 capital
Additional tier 1 capital
Tier 1 capital
Tier 2 capital
Total capital
Capital adequacy ratios
Common equity tier 1
Tier 1
Tier 2
Total
Prudential capital buffer ratio
Risk weighted assets
1

2023
NZ$m

2022
NZ$m

18,421(857)
17,564(3,682)
13,882
1,788
15,6701,546
17,216

17,784(857)
16,927(3,589)13,3382,791
16,1291,562
17,691

12.5%
14.1%
1.4%
15.5%
7.5%
111,327

12.4%
15.0%
1.4%
16.4%
7.9%
107,677

Includes preference shares and a deduction for dividends on AT1 capital instruments approved by the Bank’s board, but not yet paid as at 30 September 2023, as required by BPR110

Capital Definitions.

23. CONTROLLED ENTITIESThe following table lists the subsidiaries of the Banking Group. All subsidiaries are 100% owned and incorporated in New Zealand unless statedotherwise.
Nature of business
ANZ Bank New Zealand Limited
Registered bank
ANZ Custodial Services New Zealand Limited
Custodian and nominee
ANZ Investment Services (New Zealand) Limited
Funds management
ANZ National Staff Superannuation Limited
Staff superannuation scheme trustee
ANZ New Zealand (Int'l) Limited
Finance
ANZ New Zealand Investments Holdings Limited
Holding company
ANZ New Zealand Investments Limited
Funds management
ANZ New Zealand Investments Nominees Limited
Custodian and nominee
OneAnswer Nominees Limited
Wrap services provider
ANZNZ Covered Bond Trust1
Securitisation entity
Arawata Assets Limited
Property
Endeavour Finance Limited
Investment
Kingfisher NZ Trust 2008-11
Securitisation entity
1

The Banking Group does not own ANZNZ Covered Bond Trust and Kingfisher NZ Trust 2008-1. Control exists as the Banking Group retains substantially all the risks and rewards of theoperations. Details of the Banking Group’s interest in consolidated structured entities is included in Note 24 Structured entities.

RECOGNITION AND MEASUREMENT
The Banking Group subsidiaries are those entities it controls through:• being exposed to, or having rights to, variable returns from the entity; and• being able to affect those returns through its power over the entity.
The Banking Group assesses whether it has power over those entities by examining the Banking Group’s existing rights to direct the relevant
activities of the entity.

61

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
24. STRUCTURED ENTITIESA Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls
the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives.
SEs are classified as subsidiaries and consolidated when control exists. If the Banking Group does not control a SE, then it is not consolidated. This note
provides information on both consolidated and unconsolidated SEs.
The Banking Group’s involvement with SEs is as follows:Type

Details

Securitisation

The Banking Group uses the Kingfisher NZ Trust 2008-1 (the Kingfisher Trust) to securitise residential mortgages
that it has originated, in order to diversify sources of funding for liquidity management. The Kingfisher Trust is aninternal securitisation (bankruptcy remote) vehicle created for the purpose of structuring assets that are eligible for
repurchase under agreements with RBNZ (these are known as ‘Repo eligible’).
The Banking Group is exposed to variable returns from its involvement with the Kingfisher Trust and has the ability
to affect those returns through its power over the Kingfisher Trust’s activities. The Kingfisher Trust is therefore
consolidated.
As at 30 September 2023 and 30 September 2022, the Banking Group had entered into repurchase agreementswith RBNZ in relation to the TLF and FLP.
Additionally, the Banking Group may acquire interests in securitisation vehicles set up by third parties throughproviding lending facilities to, or holding securities issued by, such entities.

ANZNZ Covered Bond Trust(the Covered Bond Trust)

Substantially all of the assets of the Covered Bond Trust are made up of certain housing loans and related
securities originated by the Bank which are security for the guarantee by ANZNZ Covered Bond Trust Limited astrustee of the Covered Bond Trust of issuances of covered bonds by the Bank, or its wholly owned subsidiary ANZ
New Zealand (Int’l) Limited, from time to time. The assets of the Covered Bond Trust are not available to creditorsof the Bank, although the Bank (or its liquidator or statutory manager) may have a claim against the residual assetsof the Covered Bond Trust (if any) after all priority ranking creditors of the Covered Bond Trust have been satisfied.
The Banking Group is exposed to variable returns from its involvement with the Covered Bond Trust and has theability to affect those returns through its power over the Covered Bond Trust’s activities. The Covered Bond Trust istherefore consolidated.

Structured financearrangements

The Banking Group is involved with SEs established:• in connection with structured lending transactions to facilitate debt syndication and/or to ring-fencecollateral; and• to own assets that are leased to customers in structured leasing transactions.
The Banking Group may provide risk management products (derivatives) to the SE.
In all instances, the Banking Group does not control these SEs. Further, the Banking Group’s involvement does notestablish more than a passive interest in decisions about the relevant activities of the SE, and accordingly we do
not consider that interest disclosable.

Funds management activities The Banking Group is the scheme manager for a number of Managed Investment Schemes (MIS). These MIS
include the ANZ and OneAnswer branded KiwiSaver, retail and wholesale schemes and the Bonus Bonds Scheme.
These MIS are financed through the issue of units to investors and the Banking Group considers them to be SEs.
The Banking Group’s interests in these MIS are limited to receiving fees for services or providing risk management
products (derivatives). These interests do not create significant exposures to the MIS that would allow the Banking
Group to control the funds. Therefore, these MIS are not consolidated.

62

NOTES TO THE FINANCIAL STATEMENTS

24. STRUCTURED ENTITIES (continued)
CONSOLIDATED STRUCTURED ENTITIESFinancial or other support provided to consolidated SEs
The Bank provides lending facilities, derivatives and commitments to the Kingfisher Trust and the Covered Bond Trust and/or holds debt instrumentsthat they have issued. The Bank did not provide any non-contractual support to consolidated SEs during the year (2022: nil).
UNCONSOLIDATED STRUCTURED ENTITIESThe Banking Group’s interest in unconsolidated SEs
An ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Banking Group to variabilityof returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass onrisks specific to the performance of the SE; lending; loan commitments; financial guarantees; and fees from funds management activities.
For the purpose of disclosing interests in unconsolidated SEs:
• no disclosure is made if the Banking Group’s involvement is not more than a passive interest - for example: when the Banking Group’s
involvement constitutes a typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading
and investing activities are not considered disclosable interests - unless the design of the structured entity allows the Banking Group to
participate in decisions about the relevant activities (being those that significantly affect the entity’s returns).
• ‘interests’ do not include derivatives intended to expose the Banking Group to market risk (rather than performance risk specific to the SE) or
derivatives through which the Banking Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit
protection under a credit default swap).
The Banking Group earned funds management fees from its MIS of NZ$192 million (2022: NZ$196 million) during the year. As at 30 September 2023,
the Banking Group had total funds under management of NZ$37.1 billion (2022: NZ$34.3 billion) of which NZ$26.1 billion (2022: NZ$24.6 billion)
related to its MIS, with the largest individual fund being approximately NZ$4.4 billion (2022: NZ$3.8 billion).
The Banking Group did not provide any non-contractual support to unconsolidated SEs during the year (2022: nil): nor does it have any current
intention to provide financial or other support to unconsolidated SEs.
SPONSORED UNCONSOLIDATED STRUCTURED ENTITIESThe Banking Group may also sponsor unconsolidated SEs in which it has no disclosable interest.
For the purposes of this disclosure, the Banking Group considers itself the ‘sponsor’ of an unconsolidated SE if it is the primary party involved in thedesign and establishment of that SE and:• the Banking Group is the major user of that SE; or• the Banking Group’s name appears in the name of that SE, or on its products; or• the Banking Group provides implicit or explicit guarantees of that SE’s performance.
The Bank has sponsored the ANZ PIE Fund, which invests only in deposits with the Bank. The Banking Group does not provide any implicit or explicit
guarantees of the capital value or performance of investments in the ANZ PIE Fund. There was no income received from, nor assets transferred to, thisentity during the year.

KEY JUDGEMENTS AND ESTIMATES
Significant judgement is required in assessing whether the Banking Group has control over SEs. Judgement is required to determine theexistence of:• power over the relevant activities (being those that significantly affect the entity’s returns); and• exposure to variable returns of the entity.

63

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
25. TRANSFERS OF FINANCIAL ASSETSIn the normal course of business the Banking Group enters into transactions where it transfers financial assets directly to third parties. These transfers
may give rise to the Banking Group fully, or partially, derecognising those financial assets - depending on the Banking Group’s exposure to the risks
and rewards or control over the transferred assets. If the Banking Group retains substantially all of the risk and rewards of a transferred asset, thetransfer does not qualify for derecognition and the asset remains on the Banking Group’s balance sheet in its entirety.
Covered bonds
The Banking Group operates a covered bond programme to raise funding. Refer to Note 24 Structured entities for further details. The covered bonds
issued externally are included within debt issuances.
Repurchase agreements
When the Banking Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership,then those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.
The table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
Covered bonds
2023
2022
NZ$m
NZ$m
Current carrying amount of assets transferred
Carrying amount of associated liabilities

10,926
3,373

10,921
4,082

Repurchase agreements
2023
2022
NZ$m
NZ$m
5,470
4,429

5,327
4,642

26. RELATED PARTY DISCLOSURES
Key management personnel and their related parties
Key management personnel (KMP) are defined as directors and those executives having authority and responsibility for planning, directing andcontrolling the activities of the Banking Group. Executive roles included in KMP are the Bank’s Chief Executive Officer (CEO), all executives reporting
directly to the Bank’s CEO, and the CEO – NZ Branch.
2023
2022
Key management personnel compensation1
NZ$000
NZ$000
Salaries and short-term employee benefits
12,077
12,139Post-employment benefits
365
351
Other long-term benefits2
78
93
Termination benefits3
68
Share-based payments
3,589
2,887
15,490Total
16,1571
2
3Includes former disclosed KMPs until the end of their employment, and close family members of KMP employed by the Banking Group.
Comprises long service leave accrued during the year.
Includes payments for accrued annual leave, long service leave and pay in lieu of notice in accordance with contract, payable on cessation.

Transactions and balances with key management personnel and their related parties1
Secured loans and advances
Credit related commitments (undrawn loan facilities)
Interest income
Customer deposits
Payables and other liabilities (share-based payments liability)
1

2023
NZ$m
24
3
1
22
3

2022
NZ$m
28
3
1
17
3

Includes KMP, close family members of KMP and entities that are controlled or jointly controlled by KMP or their close family members, of the Banking Group and its parent companies.

Loans made to KMP and their related parties are made in the ordinary course of business on normal commercial terms and conditions no morefavourable than those given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts
have been written off or forgiven, or individually assessed allowances for expected credit losses raised in respect of these balances (2022: nil).
All other transactions with KMP and their related parties are made on terms and conditions no more favourable than those given to other employees
or customers. These transactions generally involve the provision of financial and investment services. In addition to the amounts above:• Aggregate amounts for each of unsecured loans and advances, interest expense, fee income, debt issuances and collectively assessed credit
impairment charge and allowance for expected credit losses were less than NZ$1 million for both years presented.
• KMP and their related parties also hold units in MIS managed by the Banking Group. Transactions and balances in respect of these MIS holdings
are not disclosed because those MIS are unconsolidated structured entities and not included in the financial statements of the Banking Group.
• Some KMP pay the Banking Group for the use of carparks in premises owned or leased by the Banking Group. These amounts were less than
NZ$0.1 million (2022: less than NZ$0.1 million).

64

NOTES TO THE FINANCIAL STATEMENTS

26. RELATED PARTY DISCLOSURES (continued)
Transactions with other members of the ANZ Group and associates
The Banking Group undertakes transactions with the Immediate Parent Company, the Ultimate Parent Bank, other members of the ANZ Group andassociates.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment services, technology andprocess support, and compensation for share based payments made to Banking Group employees. These transactions are conducted on an arm’s
length basis and on normal commercial terms.
2023
2022
Transactions
NZ$m
NZ$m
Immediate Parent Company
Interest expense
4
Dividends paid
1,417
1,924
Ultimate Parent Bank and other ANZ Group subsidiaries
Interest income
7
5
159
129
Interest expense
Loss on sale of mortgages to the NZ Branch(2)(1)
Other operating income
910107
Operating expenses
63
66
Mortgages sold to the NZ Branch
72
18
Mortgages repurchased from the NZ Branch
20
Associates
Operating expenses
3
3
Outstanding balances
Immediate Parent Company
Derivative financial instruments
Ultimate Parent Bank and other ANZ Group subsidiaries
Cash and cash equivalents
Collateral paid
Derivative financial instruments
Other assets
Total due from related parties
Immediate Parent Company
Deposits and other borrowings
Derivative financial instruments
Ultimate Parent Bank and other ANZ Group subsidiaries
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments
Payables and other liabilities
Debt issuances
Associates
Deposits and other borrowings
Total due to related parties

2023
NZ$m

2022
NZ$m

4

-

177
5,507
50
5,738

36
268
8,556
76
8,936

80
-

65
3

41
547
12
4,993
43
939

933
11
8,934
40
1,943

1
6,656

1
11,930

Balances due from / to other members of the ANZ Group and associates are unsecured. The Bank has provided guarantees and commitments to, andreceived guarantees from, these entities as follows:
2023
2022
NZ$m
NZ$m
Financial guarantees provided by the Ultimate Parent Bank and other ANZ Group subsidiaries
262
227
Financial guarantees provided to the Ultimate Parent Bank and other ANZ Group subsidiaries
89
69
Performance related contingent liabilities to the Ultimate Parent Bank
58
70
Undrawn facilities provided to the Immediate Parent Company
250
250
Undrawn facilities provided to associates
1165

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
27. COMMITMENTS AND CONTINGENT LIABILITIESCREDIT RELATED COMMITMENTS AND CONTINGENCIES

Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total

2023
NZ$m

2022
NZ$m

26,3051,029
1,590
28,92427,3101,225
1,757
30,292

UNDRAWN FACILITIESThe majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities
are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Banking Group may be required to pay, thefull amount of undrawn facilities mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
Guarantees, letters of credit and performance related contingencies relate to transactions that the Banking Group has entered into as principal –including: guarantees, standby letters of credit and documentary letters of credit.
Documentary letters of credit involve the Banking Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured
against an underlying shipment of goods or backed by a confirmatory letter of credit from another bank.
Performance related contingencies are liabilities that oblige the Banking Group to make payments to a third party if the customer fails to fulfil its nonmonetary obligations under the contract.
To reflect the risk associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that weapply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial
obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Basedon the earliest date on which the Banking Group may be required to pay, the full amount of guarantees and letters of credit and performance related
contingencies mature within 12 months.

66

NOTES TO THE FINANCIAL STATEMENTS

27. COMMITMENTS AND CONTINGENT LIABILITIES (continued)
OTHER CONTINGENT LIABILITIESThere are outstanding court proceedings, claims and possible claims for and against the Banking Group. Where relevant, expert legal advice has beenobtained and, in the light of such advice, provisions (refer to Note 20 Other provisions) and/or disclosures as deemed appropriate have been made. In
some instances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or becausesuch disclosure may prejudice seriously the interests of the Banking Group.
REGULATORY AND CUSTOMER EXPOSURESThe Banking Group regularly engages with its regulators in relation to regulatory investigations, surveillance and reviews, reportable situations, civil
enforcement actions (whether by court action or otherwise), formal and informal inquiries and regulatory supervisory activities both in New Zealandand globally. The Banking Group has received various notices and requests for information from its regulators as part of both industry-wide andBanking Group-specific reviews, and has also made disclosures to its regulators at its own instigation. The nature of these interactions can be wide
ranging and, for example, may include 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 andproduct disclosure documentation. There may be exposures to customers which are additional to any regulatory exposures. These could include classactions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with such reviews andpossible exposures remain uncertain.
LOAN INFORMATION LITIGATIONIn September 2021, a representative proceeding was brought against the Bank, alleging breaches of disclosure requirements under consumer credit
legislation in respect of variation letters sent to certain loan customers. The Bank is defending the allegations. The proceeding is still at an early stage.
The High Court has ruled that the plaintiffs may bring the proceeding as an opt-out representative action on behalf of a class, being customers whoentered into a home loan or personal loan with the Bank between 6 June 2015 and 28 May 2016 and requested a variation to that loan during that
period. Aspects of the decision are being appealed by both parties.
WARRANTIES AND INDEMNITIESThe Banking Group has provided warranties, indemnities and other commitments in favour of the purchaser in connection with various disposals of
businesses and assets and other transactions, covering a range of matters and risks. It is exposed to potential claims under those warranties,
indemnities and commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.

67

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS
28. AUDITOR FEESKPMG New ZealandAudit or review of financial statements1
Audit related services:
Prudential and regulatory services2
Offer documents assurance or review
Other assurance services3
Total audit related services
Total KPMG New Zealand fees relating to the Banking GroupFees related to certain managed funds not recharged4
Total KPMG New Zealand fees
KPMG Australia
Other assurance services - operational greenhouse gas emissions
Total auditor fees
1
2
3
4

2023
NZ$0002022
NZ$000

2,120

2,050

295
141
399
835
2,955

196
130
40
366
2,416

280
3,235

262
2,678

53
3,288

2,678

Includes fees for both the audit of annual financial statements and reviews of interim financial statements.
Includes fees for reviews and controls reports required by regulations.
Includes fees for other reviews and agreed upon procedures engagements.
Amounts relate to the ANZ PIE Fund, ANZ Investments Private Scheme and SIL Mutual Funds, and include fees for audits of annual financial statements, registry audits, supervisor reportingand other agreed upon procedures engagements.

The Banking Group’s Policy allows KPMG New Zealand or any of its related practices to provide assurance and other audit related services that, while
outside the scope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews requested
by regulators such as RBNZ. Any other services that are not audit or audit-related services are non-audit services. The Policy allows certain non-audit
services to be provided where the service would not contravene auditor independence requirements. KPMG New Zealand or any of its related
practices may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor independence. These
include consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the external
auditor may ultimately be required to express an opinion on its own work.

68

ASSURANCE REPORTINDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
AUDIT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the accompanying consolidated financial statements of ANZ Bank New Zealand Limited (the Bank) and its subsidiaries (theBanking Group) on pages 4 to 68 which comprise:•••the consolidated balance sheet as at 30 September 2023;
the consolidated income statement, statements of comprehensive income, changes in equity and cash flows for the year then ended; andnotes, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements:••

present fairly in all material respects the Banking Group’s financial position as at 30 September 2023 and its financial performance and cash
flows for the year ended on that date; andcomply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial ReportingStandards.

BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)). We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Banking Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Boardand the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated financial statements sectionof our report.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance or reviews, agreed upon procedures engagements and climate related assurance engagements. Subject to certain restrictions, partners andemployees of our firm may also deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the
Banking Group. These matters have not impaired our independence as auditor of the Banking Group. The firm has no other relationship with, orinterest in, the Banking Group.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that theshareholder as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context
of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete
opinions on separate elements of the consolidated financial statements.
ALLOWANCE FOR EXPECTED CREDIT LOSSES ($857 MILLION)

Refer to the critical accounting estimates, judgements and disclosures in relation to the allowance for expected credit losses in Note 12 to theConsolidated Financial Statements.
The key audit matter
Allowance for expected credit losses is a key audit matter due to the significance of the loans and advances balance to the consolidated financial
statements and the inherent complexity of the Banking Group’s Expected Credit Loss (ECL) models used to measure ECL allowances. These models arereliant on data and a number of estimates including impacts of multiple economic scenarios, and other assumptions such as defining a Significant
Increase in Credit Risk (SICR).
NZ IFRS 9 requires the Banking Group to measure ECL on a forward-looking basis reflecting a range of future economic conditions, of which GDP and
unemployment levels are considered key assumptions. Post-model adjustments to the ECL results are also made by the Banking Group to address
known ECL model limitations or emerging trends in the loan portfolios. We exercise significant judgement in challenging both the economic
scenarios used and the judgemental post-model adjustments that the Banking Group applies to the ECL results.
There is additional subjectivity and judgement in the Banking Group’s measurement of ECL due to the heightened uncertainty associated with theimpact of the economic outlook on the Banking Group’s customers, increasing our audit effort thereon.

69

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTASSURANCE REPORTThe Banking Group’s criteria selected to identify a SICR, such as a decrease in customer credit rating (CCR), are key areas of judgement within the
Banking Group’s ECL methodology as these criteria determine if a forward-looking 12 month or lifetime allowance is recorded.
Additionally, the determination of an allowance for individually assessed impairment on Business and Institutional (wholesale) loans requires
significant judgement in estimating the expected future cash repayments and proceeds from the value of the collateral held in respect of the loans.
How the matter was addressed in our audit
Our audit procedures for the allowance for ECL and disclosures included assessing the Banking Group’s significant accounting policies against therequirements of the accounting standard. KPMG Financial Risk Management and Economic specialists were used in ECL audit procedures as a core
part of our audit team.
We tested key controls in relation to:• the Banking Group’s ECL model governance and validation processes which involved assessment of model performance;• the Banking Group’s assessment and approval of the forward-looking macroeconomic assumptions and scenario weightings through challenge
applied by the Banking Group’s internal governance processes;• Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;• Counterparty risk grading for wholesale loans (larger customer exposures are monitored individually). We tested the approval of new lending
facilities against the Banking Group’s lending policies, and controls over the monitoring of counterparty credit quality; and• IT system controls which record retail loans lending arrears, group exposures into delinquency buckets and recalculate individual allowances.
We tested automated calculation and change management controls and evaluated the oversight of the portfolios, with a focus on controls overdelinquency monitoring.
We tested relevant General Information Technology Controls over the key IT applications used by the Banking Group in measuring ECL allowances, asdetailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:• Re-performing credit assessments for a sample of wholesale loans controlled by the Banking Group’s specialist workout and recovery team, who
assessed these as higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Banking Group as showing
signs of deterioration, or in areas of emerging risk (assessed against external market).
• For each loan sampled, we challenged the Banking Group’s CCR and Security Indicator, assessment of loan recoverability, valuation of security
and the impact on the credit allowance. To do this, we reviewed the information on the Banking Group’s loan file, understood the facts andcircumstances of the case with the relationship manager, and performed our own assessment of recoverability.
• Exercising our judgement, our procedures included using our understanding of relevant industries and the macroeconomic environment, andcomparing data and assumptions used by the Banking Group in recoverability assessments to externally sourced evidence, such as commodity
prices and external property sale information. Where relevant, we assessed the forecast timing of future cash flows in the context of underlying
valuations and approved business plans and challenged key assumptions in the valuations;• Obtaining an understanding of the Banking Group’s processes to determine ECL allowances, evaluating the Banking Group’s ECL model
methodologies against established market practices and criteria in the accounting standards;• Working with our KPMG Financial Risk Management specialists, we assessed the accuracy of the Banking Group’s ECL model estimates by reperforming, for a sample of loans, the ECL allowance using our independently driven calculation tools and comparing this to the amountrecorded by the Banking Group;• Working with our KPMG Economic specialists, we challenged the Banking Group’s forward-looking macroeconomic assumptions and scenarios
incorporated in the Banking Group’s ECL models. We compared the Banking Group’s forecast GDP and unemployment rates, to relevant publicly
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
identify contradictory indicators;• Testing the implementation of the Banking Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
consideration movements in the CCR from loan origination and comparing our expectation to actual staging applied on an individual accountlevel in the Banking Group’s ECL model; and• Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
source systems.
We also challenged key assumptions in the components of the Banking Group’s post-model adjustments. This included:• Assessing the requirement for post-model adjustments considering the Banking Group’s ECL model and data deficiencies identified by the
Banking Group’s ECL model validation processes, particularly in light of the extreme volatility in economic scenarios;• Comparing underlying data used in concentration risk and economic cycle allowances to underlying loan portfolio characteristics of recent loss
experience, current market conditions and specific risks inherent in the Banking Group’s loan portfolios;• Assessing certain post-model adjustments identified against internal and external information; and• Assessing the completeness of post-model adjustments by checking the consistency of risks we identified in the portfolios against the Banking
Group’s assessment.
We assessed the appropriateness of the Banking Group’s disclosures in the consolidated financial statements using our understanding obtained fromour testing and against the requirements of NZ IFRS.

70

ASSURANCE REPORTVALUATION OF FINANCIAL INSTRUMENTS
Fair value of Level 2 financial instruments in asset positions $14,476 million
Fair value of Level 2 financial instruments in liability positions $11,200 million

Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 16 to the Consolidated Financial Statements.
The key audit matter
The fair value of the Banking Group’s Level 2 financial instruments is determined by the Banking Group through the application of valuation
techniques which often involve the exercise of judgement and the use of assumption and estimates.
The valuation of Level 2 financial instruments held at fair value is a key audit matter due to the complexity associated with the valuation methodology
and models of certain more complex Level 2 financial instruments including fair value adjustments (FVAs) leading to an increase in subjectivity andestimation uncertainty. Level 2 financial instruments represent 55% of the Banking Group’s financial assets carried at fair value and 97% of the Banking
Group’s financial liabilities carried at fair value.
How the matter was addressed in our audit
Our audit procedures for the valuation of financial instruments held at fair value included:
Performing an assessment of the population of financial instruments held at fair value to identify portfolios that have a higher risk of misstatement
arising from significant judgment over valuation either due to unobservable inputs or complex models.
We tested the design and operating effectiveness of key controls relating specifically to these financial instruments, including:• Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;• model validation at inception and periodically, including assessment of model limitation and assumptions;• review and challenge of daily profit and loss by a control function;• collateral management process, including review of margin reconciliations with clearing houses; and• review and approval of FVAs, including exit price and portfolio level adjustments.
In relation to the valuation of Level 2 financial instruments, with the assistance of KPMG valuation specialists:• Assessing the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives;• Comparing the Banking Group’s valuation methodology to industry practice and the criteria in the accounting standards; and• Independently revaluing a selection of financial instruments and FVAs. This involved sourcing independent inputs from comparable data in themarket and available alternatives. We challenged and assessed any differences.
We assessed the Banking Group’s consolidated financial statement disclosures, including key judgements and assumptions using our understanding
obtained from our testing and against NZ IFRS.
IT SYSTEMS AND CONTROLSThe key audit matter
As a major New Zealand bank, the Banking Group’s businesses utilise a large number of complex, interdependent Information Technology (IT) systems
to process and record a high volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial
information and the preparation of a financial report which provides a true and fair view of the Banking Group’s financial position and performance.
The IT systems and controls, as they impact the financial recording and reporting of transactions, is a key audit matter and our audit approach could
significantly differ depending on the effective operation of the Banking Group’s IT controls.
How the matter was addressed in our audit
We tested the control environment for key IT applications used in processing significant transactions and recording balances in the general ledger. We
also tested automated controls embedded within these systems which support the effective operation of technology-enabled business processes.
KPMG IT specialists were used throughout the engagement as a core part of our audit team.
Our audit procedures included:• Assessing the governance and higher-level controls in place across the IT environment, including the approach to the Banking Group policy
design, review and awareness;• Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on-boarded,
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles andfunctions are managed across each IT application and the supporting infrastructure;• Design and operating effectiveness testing of controls in place over change management, including how changes are initiated, documented,
approved, tested and authorised prior to migration into the production environment of critical IT applications. We also assessed theappropriateness of users with access to make changes to IT applications across the Banking Group;• Design and operating effectiveness testing of controls used by the Banking Group’s technology teams to schedule system jobs and monitor
system integrity;• Design and operating effectiveness testing of controls related to significant IT application programs per the ANZ Delivery Framework; and• Design and operating effectiveness testing of automated business process controls including those that enforce segregation of duties between
conflicting roles within IT applications, configurations in place to perform calculations, mappings, and flagging of financial transactions,
automated reconciliation controls (both between systems, and intra-system) and data integrity of critical system reporting used by us in our
audit to select samples and analysis data used by management to generate financial reporting.

71

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTASSURANCE REPORTCARRYING VALUE OF GOODWILL ($3,006 MILLION)

Refer to the critical accounting estimates, judgements and disclosures in Note 19 to the Consolidated Financial Statements.
The key audit matter
Carrying value of goodwill is a key audit matter where there are a number of judgements required in the determination of the recoverable amount of
goodwill, and where the carrying value of goodwill is financially significant at the reporting date.
the Banking Group uses a value-in-use (VIU) approach to estimate the recoverable amount of each Cash Generating Unit (CGU) to which goodwill isallocated. The reasonableness of the recoverable amounts was assessed using an implied market-multiples approach.
The ongoing effects and uncertainties associated with the environment continue to increase the potential for impairment and our audit effort in thisarea remains elevated. There is increased judgement in forecasting cash flows and assumptions used in the discounted cash flow models and marketmultiples used in the reasonableness assessment.
We focused on the significant forward-looking assumptions the Banking Group applied as part of its annual impairment test as at 28 February 2023,
including:• Revenue growth rates, and terminal growth rates in the VIU model. Available headroom for some CGUs is sensitive to small changes in theseassumptions, reducing available headroom or indicating possible impairment. This drives additional audit effort specific to their feasibility andconsistency of application to the Banking Group’s strategy; and• Discount rates in the VIU model and the control premium in the market-multiples reasonableness assessment. These are complicated in natureand vary according to the conditions and environment the specific CGU is subject to from time to time.
How the matter was addressed in our audit
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
Working with our valuation specialists, our procedures included:• In accordance with accounting standards, assessing the reasonableness of the amounts allocated to the CGUs to which the Banking Group
allocated goodwill;• Considering the appropriateness of the valuation method applied by the Banking Group to perform their annual test for impairment against therequirements of the accounting standards;• Assessing the integrity of the VIU model used by the Banking Group, including the accuracy of the underlying calculation formulae;• Assessing the accuracy of previous Banking Group forecasts to inform our evaluation of forecasts incorporated in the VIU model;• For each CGU, assessing the Banking Group’s key assumptions used in the VIU model, including discount rates, revenue growth rates, andterminal growth rates by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice;• Stress testing key VIU assumptions to consider reasonably possible alternatives;• Comparing the forecast cash flows contained in the model to the revised Operational forecast, reflecting higher interest rate environment andthe increased regulatory minimum capital requirements;• Assessing key assumptions used in the market-multiples reasonableness assessment, which we assessed as being equivalent to a fair value lesscosts of disposal approach. These assumptions included future maintainable earnings, the control premium comparing the implied multiples
from comparable market transactions to the implied multiples used in the VIU model;• Determining whether there is sufficient appropriate evidence to support the Banking Group’s conclusion that there is no impairment ingoodwill associated with any CGU;
• Assessing the reasonableness of the Banking Group’s review for potential internal and external indicators of impairment. This review considered
the period from the annual impairment test as at 28 February 2023 up to financial year end; and• Assessing the disclosures in the financial statements against the requirements of the accounting standards.
OTHER INFORMATIONThe Directors, on behalf of the Banking Group, are responsible for the Banking Group’s general disclosures in section B1 (the Other Information)required to be included in the Banking Group’s Disclosure Statement in accordance with schedule 2 of the Registered Bank Disclosure Statements(New Zealand Incorporated Registered Banks) Order 2014.
Our opinion on the consolidated financial statements does not cover the Other Information, and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the Other Information and, in doing so, consider
whether the Other Information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
USE OF THIS INDEPENDENT AUDITOR’S REPORTThis independent auditor’s report is made solely to the shareholder of the Bank. Our work has been undertaken so that we might state to theshareholder those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the shareholder for our work, this independent auditor’s report, or
any of the opinions or conclusions we have formed.

72

ASSURANCE REPORTRESPONSIBILITIES OF DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors, on behalf of the Banking Group, are responsible for:• the preparation and fair presentation of the consolidated financial statements in accordance NZ IFRS and International Financial ReportingStandards;• implementing necessary internal control to enable the preparation of consolidated financial statements that are fairly presented and free frommaterial misstatement, whether due to fraud or error; and• assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objective is:• to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether
due to fraud or error; and• to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect amaterial misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of the consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (the XRB)
website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Jamie Munro.
For and on behalf of

KPMG
Auckland10 November 2023

73

REGISTERED BANKDISCLOSURESThis section contains the additional disclosures required by the Registered Bank Disclosure Statements(New Zealand Incorporated Registered Banks) Order 2014.

74

Section

Order reference

Page

B1.

General disclosures

Schedule 2

75

B2.

Additional financial disclosures

Schedule 4

86

B3.

Asset quality

Schedule 7

87

B4.

Capital adequacy under the internal models based approach,and regulatory liquidity ratios

Schedule 11

96

B5.

Concentration of credit exposures to individual counterparties

Schedule 13

101

B6.

Credit exposures to connected parties

Schedule 14

102

B7.

Insurance business, securitisation, funds management, other fiduciary activities,
and marketing and distribution of insurance products

Schedule 15

103

B8.

Risk management policies

Schedule 17

105

REGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED)
Details of ultimate parent bank and ultimate non-bank holding company
The ultimate parent bank of the Bank is Australia and New Zealand Banking Group Limited (Ultimate Parent Bank). The address for service of the
Ultimate Parent Bank is ANZ Centre, Melbourne, Level 9, 833 Collins Street, Docklands, Victoria 3008, Australia.
The ultimate non-bank holding company is ANZ Group Holdings Limited. The address for service is ANZ Centre, Melbourne, Level 9, 833 Collins Street,
Docklands, Victoria 3008, Australia.

Restrictions on the Ultimate Parent Bank’s ability to provide financial support
Effect of APRA’s Prudential Standards

The Banking Group is subject to extensive prudential regulation by APRA. APRA’s current or future requirements may have an adverse effect on the
Bank’s business, results of operations, liquidity, capital resources or financial condition.
APRA Prudential Standard APS 222 Associations with Related Entities (APS 222) sets minimum requirements for authorised deposit-taking institutions(ADIs) in Australia, including the Ultimate Parent Bank, in relation to the monitoring, management and control of risks which arise from associations
with related entities and also includes maximum limits on intra-group financial exposures.
Under APS 222, the Ultimate Parent Bank’s ability to provide financial support to the Bank is subject to the following restrictions:• the Ultimate Parent Bank should not undertake any third party dealings for the purpose of supporting the business of the Bank;• the Ultimate Parent Bank must not hold unlimited exposures (i.e. should be limited as to specified time or amount) in the Bank (e.g. not provide
a general guarantee covering any of the Bank’s obligations);• the Ultimate Parent Bank must not agree to cross-default clauses whereby a default by the Bank on an obligation (whether financial orotherwise) triggers or is deemed to trigger a default by the Ultimate Parent Bank on its obligations; and• the level of exposure, net of exposures deducted from capital, of the Ultimate Parent Bank’s level 1 tier 1 capital base to the Bank should notexceed: (A) 25% on an individual exposure basis; or (B) 75% in aggregate (being exposures to all similar regulated ADI equivalent entities related
to the Ultimate Parent Bank).
In addition, since 1 January 2021, no more than 5% of the Ultimate Parent Bank’s level 1 tier 1 capital base can comprise non-equity exposures to its
New Zealand operations (including its subsidiaries incorporated in New Zealand, such as the Banking Group and the New Zealand Branch) duringordinary times. This limit does not include holdings of capital instruments or eligible secured contingent funding support provided to the Bank during
times of financial stress.
APRA has also confirmed that contingent funding support by the Ultimate Parent Bank to the Bank during times of financial stress must be provided
on terms that are acceptable to APRA. At present, only covered bonds meet APRA’s criteria for contingent funding.

Effect of the level 3 framework

In addition, certain requirements of APRA’s level 3 framework relating to, among other things, group governance and risk exposures became effective
on 1 July 2017. This framework also requires that the Ultimate Parent Bank must limit its financial and operational exposures to subsidiaries (including
the Bank).
In determining the acceptable level of exposure to a subsidiary, the Board of the Ultimate Parent Bank should have regard to:• the exposures that would be approved for third parties of broadly equivalent credit status;• the potential impact on the Ultimate Parent Bank’s capital and liquidity positions; and• the Ultimate Parent Bank’s ability to continue operating in the event of a failure by the Bank.
These requirements are not expected to place additional restrictions on the Ultimate Parent Bank’s ability to provide financial or operational support
to the Bank.

Other APRA powers

The Ultimate Parent Bank may not provide financial support in breach of the Australian Banking Act 1959 (the Banking Act). Under the Banking Act:
• APRA must exercise its powers and functions for the protection of a bank’s depositors in Australia and for the promotion of financial systemstability in Australia; and• in the event of a bank becoming unable to meet its obligations or suspending payment, the assets of the bank in Australia are to be available tomeet that bank’s deposit liabilities in Australia in priority to all other liabilities of the bank.
The requirements of the Banking Act and the exercise by APRA of its powers have the potential to impact the management of the liquidity of the
Bank.
Interests in 5% or more of voting securities of the BankThe Immediate Parent Company holds 100% of the voting securities of the Bank. The Immediate Parent Company has the direct ability to appoint
100% of the Directors of the Bank, subject to RBNZ advising that it has no objection to the appointment in accordance with the Bank’s conditions ofregistration. RBNZ also has the power under section 113B of the Banking (Prudential Supervision) Act 1989, after obtaining the consent of the Ministerof Finance, to remove, replace, or appoint directors in certain circumstances.
Priority of creditors’ claims
In the event that the Bank was put into liquidation or ceased to trade, claims of secured creditors and those creditors set out in Schedule 7 of theCompanies Act 1993 would rank ahead of the claims of unsecured creditors. Customer deposits are unsecured and rank equally with other unsecured
liabilities of the Bank, and such liabilities rank ahead of any subordinated instruments issued by the Bank.

75

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Guarantees
The Bank has guaranteed the payment of interest and principal of covered bonds issued by its subsidiary ANZ New Zealand (Int’l) Limited. Thisobligation is guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ Covered
Bond Trust. The Covered Bond Guarantor’s address for service is Level 16, SAP Tower, 151 Queen Street, Auckland 1010, New Zealand. The Covered
Bond Guarantor is not a member of the Banking Group and has no credit ratings applicable to its long term senior unsecured obligations. The coveredbonds have been assigned a long term rating of Aaa and AAA by Moody’s Investors Service and Fitch Ratings respectively. Refer to page 34 for further
details, and to page 52 for the amount of assets of the ANZ Covered Bond Trust pledged as security for covered bonds.
No other material obligations of the Bank are guaranteed as at 10 November 2023.
Auditors
KPMG, 18 Viaduct Harbour Avenue, Auckland, New Zealand.
Directors
Any document or communication may be sent to any Director at the Registered Office. The document or communication should be marked for theattention of that Director.

Transactions with Directors
No Director has disclosed that he/she or any immediate relative or professional associate has any dealing with the Banking Group which has been
either entered into on terms other than those which would in the ordinary course of business be given to any other person of like circumstances ormeans or which could otherwise be reasonably likely to influence materially the exercise of the Director’s duties as a Director of the Bank.

Board Audit Committee
There is a Board Audit Committee which covers audit matters. The committee has five members. Each member is a non-executive Director, and eachsatisfy the criteria for independence.

Policy of the Board of Directors for avoiding or dealing with conflicts of interest
In order to ensure that members of the Board are reminded of their disclosure obligations under the Companies Act 1993, the Board has adopted a
protocol setting out the procedures for Directors to follow to disclose and manage conflicts of interest. This protocol will be reviewed annually. In
addition:• at least once in each year, Directors are requested to confirm and disclose, in terms of section 140(1) of the Companies Act 1993, any interests
which they have with the Bank itself. Directors are reminded at this time of their obligation under the Companies Act 1993 to disclose promptly
any transaction or proposed transaction with the Bank in which they have an interest.
• Directors are also requested to confirm and make a general disclosure of their interest in other entities in terms of section 140(2) of theCompanies Act 1993.
In addition to the disclosures referred to above, Directors disclose relevant interests which they have before discussion of particular business items.
Disclosures are entered into the Bank’s Interests Register. The Companies Act 1993 allows a Director with an interest in a transaction to participate indiscussions and to vote on all matters relating to that particular transaction. However, under the protocol the Board has adopted a guideline whereby
a Director with an interest in a transaction should not be present during any discussions, and should not vote, on any matter pertaining to thatparticular transaction.

Directors of the Bank as at 10 November 2023

Rt Hon Sir John Key, GNZM AC

Antonia Watson

Shayne Elliott

PositionIndependent Non-Executive Director
and ChairChief Executive Officer and Director

Non-Executive Director

Occupation

Company Director

Chief Executive Officer New Zealand andGroup Executive

ANZ Group Chief Executive Officer

Qualifications

BCom, DCom (Honoris Causa)

BCom (Hons), GAICD

BComResides

Auckland, New Zealand

Auckland, New Zealand

Melbourne, Australia

Other company ANZ Group Holdings Ltd, ANZ BH Pty Ltd, ANZ Holdings (New Zealand) Ltd,ANZ NBH Pty Ltd, Australia and New
Banking Ombudsman Scheme Ltd
directorships
Zealand Banking Group Ltd, Kyro CapitalLtd, Oritain Global Ltd, Palo Alto Networks
Inc, Sashimi Holdings Ltd, Sushi38 Ltd,Thirty Eight JK Ltd, Thirty Eight JK
Aviation Ltd

76

ANZ Group Holdings Ltd, ANZ BH Pty
Ltd, ANZ NBH Pty Ltd, Australia and New
Zealand Banking Group Ltd, Elliott No. 3
Pty Ltd, Financial Markets Foundation forChildrenREGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED) (continued)

Gerard Florian

Alison Gerry

Scott St John

Position

Non-Executive Director

Independent Non-Executive Director

Independent Non-Executive Director

Occupation

Group Executive, Technology & Group
Services, Australia and New Zealand
Banking Group Ltd

Company Director

Company Director

Qualifications

Electronic Engineering Certificate

BMS (Hons), MAppFin, CFInstD

BCom, Diploma of BusinessResides

Sydney, Australia

Queenstown, New Zealand

Auckland, New Zealand

Other company
directorships

Floco Industries Pty Ltd

Air New Zealand Ltd, Glendora
Avocados Ltd, Glendora Holdings Ltd,Infratil Ltd, On Being Bold Ltd,
Sharesies Ltd, Sharesies AU Group Ltd,
Sharesies Group Ltd, Sharesies
Investment Management Ltd,
Sharesies Nominee Ltd

Captain Cook Nominees Ltd, Fisher &Paykel Healthcare Corporation Ltd,
Fisher & Paykel Healthcare Employee
Share Purchase Trustee Ltd, Fonterra Cooperative Group Ltd, Hutton Wilson
Nominees Ltd, Mercury NZ Limited,
Te Awanga Terraces Ltd

Mark Tume

Joan Withers

PositionIndependent Non-Executive Director

Independent Non-Executive Director

Occupation

Company Director

Company Director

Qualifications

BBS, PGDipBank

MBA, CFInstD

Resides

Auckland, New Zealand

Auckland, New Zealand

Other company
directorships

Arc Innovations Ltd, Blink Pay Global
Group Ltd, Bluecurrent Holdings NZ Ltd,Bluecurrent Assets NZ Ltd, Bluecurrent
NZ Ltd, Bluecurrent No.2 NZ Ltd,Bluecurrent No.3 NZ Ltd, Bluecurrent
Services NZ Ltd, Bluecurrent Holdings(Australia) Pty Ltd, Bluecurrent Assets(Australia) Pty Ltd, Bluecurrent (Australia)
Pty Ltd, Bluecurrent No.2 (Australia) Pty
Ltd, Bluecurrent No.3 (Australia) Pty Ltd,
Booster Financial Services Ltd, Koau
Capital Partners Ltd, Long Board Ltd,
Precinct Properties New Zealand Ltd,
Precinct Properties Investments Ltd,Te Atiawa Iwi Holdings Management
Ltd, Te Atiawa (Taranaki) Holdings Ltd,
Welltest Ltd, Yeo Family Trustee Ltd

On Being Bold Ltd, Origin Energy Ltd,Sky Network Television Ltd,The Warehouse Group Ltd,The Warehouse Planit Trustees Ltd,The Warehouse Management Trustee
Company Ltd, The Warehouse
Management Trustee Company No.2 Ltd

77

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Conditions of registration
The following conditions of registration were applicable as at 30 September 2023, and have applied from 23 August 2023.
The registration of ANZ Bank New Zealand Limited (“the bank”) as a registered bank is subject to the following conditions:
1.

That—
(a)

the Total capital ratio of the banking group is not less than 8%;(b)

the Tier 1 capital ratio of the banking group is not less than 6%;(c)the Common Equity Tier 1 capital ratio of the banking group is not less than 4.5%;(d)the Total capital of the banking group is not less than $30 million.

For the purposes of this condition of registration, —“Total capital ratio”, “Tier 1 capital ratio”, and “Common Equity Tier 1 capital ratio” have the same meaning as in Subpart B2 of BPR100: Capital Adequacy, except thatin the formulae for calculating the ratios, —(a)the term “total capital requirement for operational risk” has the same meaning as in BPR150: Standardised Operational Risk; and(b)for the purpose of calculating the term “total RWA equivalents”, in calculating the component “total credit risk RWAs” under section C1.4 of BPR130: Credit
Risk RWAs Overview, the bank must add the sum of the following amounts to the term “total RWAs calculated using the IRB approach”:(i)the greater of:(A) 27.66 percent of the exposure-at-default (EAD) amount of non-defaulted standard residential mortgage loans less the risk-weighted asset amount(without scalar) calculated using the bank’s approved IRB models for non-defaulted standard residential mortgage loans; and(B) zero;and(ii) the greater of:(A) 75.47 percent of the exposure-at-default (EAD) amount of non-defaulted corporate farm lending exposures less the risk-weighted asset amount(without scalar) calculated using the bank’s approved IRB models for non-defaulted corporate farm lending exposures; and(B) zero;“standard residential mortgage loan” has the same meaning as in section C3.4 of BPR131: Standardised Credit Risk RWAs;“corporate farm lending exposures” has the same meaning as in section B1.9 of BPR133: IRB Credit Risk RWAs;“Total capital” has the same meaning as in BPR110: Capital Definitions.
1A.

That—
(a)

1B.

1C.

the bank has an internal capital adequacy assessment process (“ICAAP”) that accords with the requirements set out in Part D of BPR100: Capital Adequacy;(b)under its ICAAP the bank identifies and measures its “other material risks” defined in Part D of BPR100: Capital Adequacy; and(c)the bank determines an internal capital allocation for each identified and measured “other material risk”.

That the bank must—(a)comply with the minimum requirements for using the IRB approach set out in BPR134: IRB Minimum System Requirements;(b)comply with the minimum qualitative requirements for using the AMA approach for operational risk set out in subpart B1 of BPR151: AMA Operational Risk;(c)follow the process in Part E of BPR120: Capital Adequacy Process Requirements for obtaining Reserve Bank approval for any changes to any IRB credit risk
model;(d)maintain a compendium of approved models in accordance with the requirements of section E1.5 of BPR120: Capital Adequacy Process requirements.

That, if the Prudential Capital Buffer (PCB) ratio of the banking group is 4.5% or less, the bank must—
(a)

(b)

according to the following table, limit the aggregate distributions of the bank’s earnings, other than discretionary payments payable to holders of Additional
Tier 1 capital instruments, to the percentage limit on distributions that corresponds to the banking group’s PCB ratio; andBanking group's
PCB ratio

Percentage limit on
distributions of the
bank's earnings

Capital Buffer Response Framework
stage

0% - 0.5%

0%Stage 3>0.5 - 1%

30%

Stage 2

>1 - 2%

60%

Stage 1

>2 - 4.5%

100%

None

comply with the Capital Buffer Response Framework requirements as set out in Part D of BPR120: Capital Adequacy Process Requirements.

For the purposes of this condition of registration,—“prudential capital buffer ratio”, “distributions”, and “earnings” have the same meaning as in Subpart B2 of BPR100: Capital Adequacy, except that in the formula for
calculating the buffer ratio, the term “total capital requirement for operational risk” has the same meaning as in BPR150: Standardised Operational Risk;
an Additional Tier 1 capital instrument is an instrument that meets the requirements of B2.2(2)(a), (c) or (d) of BPR110: Capital Definitions.
1CA. That the bank must not make any distribution on a transitional AT1 capital instrument on or after the date on which on any conversion or write-off provision in theterms and conditions of the instrument is triggered due to either a loss absorption trigger event or a non-viability trigger event.
For the purposes of this condition of registration, “transitional AT1 capital instrument” has the meaning given in section A2.3 of BPR110: Capital Definitions and “lossabsorption trigger event” and “non-viability trigger event” have the meanings given in sub-section C2.2(3) of BPR120: Capital Adequacy Requirements.

78

REGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
1D. That:(a)the bank must not include the amount of an Additional Tier 1 capital instrument or Tier 2 capital instrument issued on or after 1 July 2021 in the calculation of
its capital ratios unless it has completed the notification requirements in Part B of BPR120: Capital Adequacy Process Requirements in respect of the
instrument; and(b)

the bank meets the requirements of Part C of BPR120: Capital Adequacy Process Requirements in respect of regulatory capital instruments.

For the purposes of this condition of registration,—
an Additional Tier 1 capital instrument is an instrument that meets the requirements of subsection B2.2(2)(a) or (c) of BPR110: Capital Definitions;a Tier 2 capital instrument is an instrument that meets the requirements of subsection B3.2(2)(a) or (c) of BPR110: Capital Definitions.
1E.

That for the purposes of LGD estimates for farm lending exposures covered by a Deed of Indemnity from the Crown under the North Island Weather Events Loan
Guarantee Scheme, the bank may choose to apply either the relevant minimum LGD in Table C3.2 of BPR133, or an LGD of 8.5%.
For the purposes of this condition of registration, “LGD” (loss given default) has the meaning given in BPR001: Glossary.

2.

That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total activities.
In this condition of registration, the meaning of “material” is based on generally accepted accounting practice.

3.

That the banking group’s insurance business is not greater than 1% of its total consolidated assets.
For the purposes of this condition of registration, the banking group’s insurance business is the sum of the following amounts for entities in the banking group:(a)

if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of another entity in the banking group whosebusiness predominantly consists of insurance business, the amount of the insurance business to sum is the total consolidated assets of the group headed by
the entity; and(b)

if the entity conducts insurance business and its business does not predominantly consist of insurance business and the entity is not a subsidiary of anotherentity in the banking group whose business predominantly consists of insurance business, the amount of the insurance business to sum is the total liabilities
relating to the entity’s insurance business plus the equity retained by the entity to meet the solvency or financial soundness needs of its insurance business.

In determining the total amount of the banking group’s insurance business—(a)

all amounts must relate to on balance sheet items only, and must comply with generally accepted accounting practice; and(b)

if products or assets of which an insurance business is comprised also contain a non-insurance component, the whole of such products or assets must be
considered part of the insurance business.

For the purposes of this condition of registration,—“insurance business” means the undertaking or assumption of liability as an insurer under a contract of insurance:“insurer” and “contract of insurance” have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential Supervision) Act 2010.
4.

That the aggregate credit exposures (of a non-capital nature and net of any allowances for impairment) of the banking group to all connected persons do not
exceed the rating-contingent limit outlined in the following matrix:
Credit rating of the bank1

1

Connected exposure limit(% of the banking group’s Tier 1
capital)AA/Aa2 and above

75

AA-/Aa3

70

A+/A1

60

A/A2

40

A-/A3

30

BBB+/Baa1 and below

15

This table uses the rating scales of Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. (Fitch Ratings’ scale is identical to Standard & Poor’s.)

Within the rating-contingent limit, credit exposures (of a non-capital nature and net of any allowances for impairment) to non-bank connected persons shall not
exceed 15% of the banking group’s Tier 1 capital.
For the purposes of this condition of registration, compliance with the rating-contingent connected exposure limit is determined in accordance with the Reserve
Bank of New Zealand document entitled “Connected Exposures Policy” (BS8) dated October 2021.
5.

That exposures to connected persons are not on more favourable terms (e.g. as relates to such matters as credit assessment, tenor, interest rates, amortisation
schedules and requirement for collateral) than corresponding exposures to non-connected persons.

79

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
6.

That the bank complies with the following corporate governance requirements:(a)the board of the bank must have at least five directors;(b) the majority of the board members must be non-executive directors;(c)at least half of the board members must be independent directors;(d) an alternate director,—(i)for a non-executive director must be non-executive; and(ii)

for an independent director must be independent;(e)

at least half of the independent directors of the bank must be ordinarily resident in New Zealand;(f)the chairperson of the board of the bank must be independent; and(g) the bank’s constitution must not include any provision permitting a director, when exercising powers or performing duties as a director, to act other than inwhat he or she believes is the best interests of the company (i.e. the bank).
For the purposes of this condition of registration, “non-executive” and “independent” have the same meaning as in the Reserve Bank of New Zealand document
entitled “Corporate Governance” (BS14) dated July 2014.
7.

That no appointment of any director, chief executive officer, or executive who reports or is accountable directly to the chief executive officer, is made in respect of
the bank unless:(a)the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and(b) the Reserve Bank has advised that it has no objection to that appointment.
8.

That a person must not be appointed as chairperson of the board of the bank unless:(a)the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and(b) the Reserve Bank has advised that it has no objection to that appointment.
9.

That the bank has a board audit committee, or other separate board committee covering audit matters, that meets the following requirements:(a)the mandate of the committee must include: ensuring the integrity of the bank’s financial controls, reporting systems and internal audit standards;(b) the committee must have at least three members;(c)every member of the committee must be a non-executive director of the bank;(d) the majority of the members of the committee must be independent; and(e)the chairperson of the committee must be independent and must not be the chairperson of the bank.

For the purposes of this condition of registration, “non-executive” and “independent” have the same meaning as in the Reserve Bank of New Zealand document
entitled “Corporate Governance” (BS14) dated July 2014.
10.

That a substantial proportion of the bank’s business is conducted in and from New Zealand.

11.

That the bank has legal and practical ability to control and execute any business, and any functions relating to any business,of the bank that are carried on by a person other than the bank, sufficient to achieve, under normal business conditions andin the event of stress or failure of the bank or of a service provider to the bank, the following outcomes:(a)that the bank’s clearing and settlement obligations due on a day can be met on that day;(b) that the bank’s financial risk positions on a day can be identified on that day;(c)that the bank’s financial risk positions can be monitored and managed on the day following any failure and on subsequent days; and(d) that the bank’s existing customers can be given access to payments facilities on the day following any failure and on subsequent days.
This condition ceases to apply in respect of an existing outsourcing arrangement on the earlier of either 1 October 2023 or when the existing outsourcing
arrangement becomes compliant with condition 21, from which point in time condition 21 will apply to that outsourcing arrangement.
For the purposes of this condition of registration:

12.

(a)

the term “legal and practical ability to control and execute” is explained in the Reserve Bank of New Zealand document entitled “Outsourcing Policy” (BS11)
dated January 2006; and(b)the term “existing outsourcing arrangement” is defined in the Reserve Bank of New Zealand document entitled “Outsourcing Policy (BS11)” dated September
2022.

That:
(a)

the business and affairs of the bank are managed by, or under the direction or supervision of, the board of the bank;(b) the employment contract of the chief executive officer of the bank or person in an equivalent position (together “CEO”) is with the bank, and the terms andconditions of the CEO’s employment agreement are determined by, and any decisions relating to the employment or termination of employment of the CEO
are made by, the board of the bank; and(c)80

all staff employed by the bank shall have their remuneration determined by (or under the delegated authority of) the board or the CEO of the bank and be
accountable (directly or indirectly) to the CEO of the bank.

REGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
13.

That the banking group complies with the following quantitative requirements for liquidity-risk management:(a)the one-week mismatch ratio of the banking group is not less than zero per cent at the end of each business day;(b) the one-month mismatch ratio of the banking group is not less than zero per cent at the end of each business day; and(c)the one-year core funding ratio of the banking group is not less than 75 per cent at the end of each business day.

For the purposes of this condition of registration, the ratios identified must be calculated in accordance with the Reserve Bank of New Zealand documents entitled“Liquidity Policy” (BS13) dated July 2022 and “Liquidity Policy Annex: Liquid Assets” (BS13A) dated July 2022.
14.

That the bank has an internal framework for liquidity risk management that is adequate in the bank’s view for managing the bank’s liquidity risk at a prudent level,
and that, in particular:(a)is clearly documented and communicated to all those in the organisation with responsibility for managing liquidity and liquidity risk;(b) identifies responsibility for approval, oversight and implementation of the framework and policies for liquidity risk management;(c)identifies the principal methods that the bank will use for measuring, monitoring and controlling liquidity risk; and(d) considers the material sources of stress that the bank might face, and prepares the bank to manage stress through a contingency funding plan.
15.

That no more than 10% of total assets may be beneficially owned by a SPV.
For the purposes of this condition,—“total assets” means all assets of the banking group plus any assets held by any SPV that are not included in the banking group’s assets:“SPV” means a person—(a)to whom any member of the banking group has sold, assigned, or otherwise transferred any asset;(b) who has granted, or may grant, a security interest in its assets for the benefit of any holder of any covered bond; and(c)

who carries on no other business except for that necessary or incidental to guarantee the obligations of any member of the banking group under a covered
bond:“covered bond” means a debt security issued by any member of the banking group, for which repayment to holders is guaranteed by a SPV, and investors retain an
unsecured claim on the issuer.
16.

That—
(a)

no member of the banking group may give effect to a qualifying acquisition or business combination that meets the notification threshold, and does notmeet the non-objection threshold, unless:(i)the bank has notified the Reserve Bank in writing of the intended acquisition or business combination and at least 10 working days have passed; and(ii)

at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the Reserve Bank with the information
required under the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December
2011; and(b) no member of the banking group may give effect to a qualifying acquisition or business combination that meets the non-objection threshold unless:(i)the bank has notified the Reserve Bank in writing of the intended acquisition or business combination;(ii)

at the time of notifying the Reserve Bank of the intended acquisition or business combination, the bank provided the Reserve Bank with the information
required under the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December
2011; and(iii)

the Reserve Bank has given the bank a notice of non-objection to the significant acquisition or business combination.

For the purposes of this condition of registration, “qualifying acquisition or business combination”, “notification threshold” and “non-objection threshold” have thesame meaning as in the Reserve Bank of New Zealand Banking Supervision Handbook document “Significant Acquisitions Policy” (BS15) dated December 2011.
17.

That the bank is pre-positioned for Open Bank Resolution and in accordance with a direction from the Reserve Bank, the bank can—(a)close promptly at any time of the day and on any day of the week and that effective upon the appointment of the statutory manager—(i)

all liabilities are frozen in full; and(ii)

no further access by customers and counterparties to their accounts (deposits, liabilities or other obligations) is possible;(b) apply a de minimis to relevant customer liability accounts;(c)apply a partial freeze to the customer liability account balances;(d) reopen by no later than 9am the next business day following the appointment of a statutory manager and provide customers access to their unfrozen funds;(e)maintain a full freeze on liabilities not pre-positioned for open bank resolution; and(f)reinstate customers’ access to some or all of their residual frozen funds.

For the purposes of this condition of registration, “de minimis”, “partial freeze”, “customer liability account”, and “frozen and unfrozen funds” have the same meaning
as in the Reserve Bank of New Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
18.

That the bank has an Implementation Plan that—(a)is up-to-date; and(b) demonstrates that the bank’s prepositioning for Open Bank Resolution meets the requirements set out in the Reserve Bank document: “Open Bank Resolution
Pre-positioning Requirements Policy” (BS17) dated June 2022.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New Zealand document “Open Bank
Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.

81

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
19.

That the bank has a compendium of liabilities that—(a)at the product-class level lists all liabilities, indicating which are—(i)pre-positioned for Open Bank Resolution; and(ii)

not pre-positioned for Open Bank Resolution;(b) is agreed to by the Reserve Bank; and(c)if the Reserve Bank’s agreement is conditional, meets the Reserve Bank’s conditions.

For the purposes of this condition of registration, “compendium of liabilities”, and “pre-positioned and non pre-positioned liabilities” have the same meaning as in
the Reserve Bank of New Zealand document “Open Bank Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.
20.

That on an annual basis the bank tests all the component parts of its Open Bank Resolution solution that demonstrates the bank’s prepositioning for Open Bank
Resolution as specified in the bank’s Implementation Plan.
For the purposes of this condition of registration, “Implementation Plan” has the same meaning as in the Reserve Bank of New Zealand document “Open Bank
Resolution (OBR) Pre-positioning Requirements Policy” (BS17) dated June 2022.

21.

That the bank must comply with the Reserve Bank of New Zealand document “Outsourcing Policy” (BS11) dated September 2022.

22.

That, for a loan-to-valuation measurement period ending on or after 31 August 2023, the total of the bank’s qualifying new mortgage lending amount in respect ofproperty-investment residential mortgage loans with a loan-to-valuation ratio of more than 65%, must not exceed 5% of the total of the qualifying new mortgage
lending amount in respect of property-investment residential mortgage loans arising in the loan-to-valuation measurement period.

23.

That, for a loan-to-valuation measurement period ending on or after 31 August 2023, the total of the bank’s qualifying new mortgage lending amount in respect of
non property-investment residential mortgage loans with a loan-to-valuation ratio of more than 80%, must not exceed 15% of the total of the qualifying new
mortgage lending amount in respect of non property-investment residential mortgage loans arising in the loan-to-valuation measurement period.

24.

That the bank must not make a residential mortgage loan unless the terms and conditions of the loan contract or the terms and conditions for an associatedmortgage require that a borrower obtain the registered bank’s agreement before the borrower can grant to another person a charge over the residential property
used as security for the loan.

In these conditions of registration,—“banking group” means ANZ Bank New Zealand Limited (as reporting entity) and all other entities included in the group as defined in section 6(1) of the Financial
Markets Conduct Act 2013 for the purposes of Part 7 of that Act.
“generally accepted accounting practice” has the same meaning as in section 8 of the Financial Reporting Act 2013.
In these conditions of registration, the version dates of the Reserve Bank of New Zealand Banking Prudential Requirement (BPR) documents that are referred to in thecapital adequacy conditions 1 to 1D, or are referred to in turn by those documents or by Banking Supervision Handbook (BS) documents, are—
BPR document

Version date

BPR100: Capital adequacy

1 October 2021

BPR110: Capital definitions

1 October 2021

BPR120: Capital adequacy process requirements

1 July 2021

BPR130: Credit risk RWAs overview

1 July 2021

BPR131: Standardised credit risk RWAs

1 October 2021

BPR132: Credit risk mitigation

1 October 2021

BPR133: IRB credit risk RWAs

1 October 2021

BPR134: IRB minimum system requirements

1 July 2021

BPR140: Market risk exposure

1 October 2021

BPR150: Standardised operational risk

1 July 2021

BPR151: AMA operational risk

1 July 2021

BPR160: Insurance, securitisation, and loan transfers

1 July 2021

BPR001: Glossary

1 July 2021

In conditions of registration 22 to 24,—“loan-to-valuation ratio”, “non property-investment residential mortgage loan”, “property-investment residential mortgage loan”, “qualifying new mortgage lending
amount in respect of property-investment residential mortgage loans”, “qualifying new mortgage lending amount in respect of non property-investment
residential mortgage loans”, and “residential mortgage loan” have the same meaning as in the Reserve Bank of New Zealand document entitled “Framework for
Restrictions on High-LVR Residential Mortgage Lending” (BS19) dated October 2021:“loan-to-valuation measurement period” means a period of three calendar months ending on the last day of the third calendar month.

82

REGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Changes to the Bank’s conditions of registration since the last disclosure statement (for the six months ended 31 March 2023)
The Bank’s conditions of registration have been amended to:• include changes to ease restrictions on high loan-to-valuation residential mortgage lending to owner occupiers and investors (effective 1 June2023);• implement an increase to the Domestically Systematically Important Banks (D-SIB) Buffer as part of the implementation of the capital review
decisions (effective 1 July 2023);• incorporate regulatory treatment of loans in the North Island Weather Events Loan Guarantee Scheme (effective 23 August 2023); and• incorporate changes regarding RBNZ’s review of the connected exposures policy (BS8) and refer to updated versions of BPR’s 001, 110, 120, 130,131, 132, 133 to implement changes to risk weights; and introduce a new capital instrument for mutual banks (effective 1 October 2023).

Other matters relevant to the conditions of registration
There are other matters currently under review where there may be more than one valid interpretation of the respective policy wording or
requirement. Where there may be some uncertainty about the interpretation the Bank has applied, where appropriate it has sought guidance from,and will be liaising with, RBNZ.
Other material matters

Climate Statements
The Bank is a climate reporting entity (CRE) and will be required to produce group climate statements under New Zealand’s mandatory climaterelated disclosure legislation. The Banking Group will issue its first mandatory climate statements under the Financial Markets Conduct Act 2013
(FMCA) and the Aotearoa New Zealand Climate Standards (NZ CS) for the financial year ending 30 September 2024.

Revised RBNZ capital requirements
RBNZ has revised its bank capital adequacy requirements applying to New Zealand locally incorporated registered banks, which are set out in RBNZ’s
Banking Prudential Requirements documents. The new capital adequacy requirements are being implemented in stages during a transition period
from October 2021 to July 2028. The key requirements still being implemented are:
• The Banking Group’s total capital requirement will increase to 18% of RWA, including tier 1 capital of at least 16% of RWA. Up to 2.5% of the tier 1
capital requirement can be made up of additional tier 1 (AT1) capital, with the remainder of the tier 1 requirement made up of common equity
tier 1 (CET1) capital. The increased capital ratio requirements are being progressively implemented until July 2028. AT1 capital must consist of
perpetual preference shares, which may be redeemable. The total capital requirement can also include tier 2 capital of up to 2% of RWA. Tier 2
capital must consist of long-term subordinated debt.
• The tier 1 capital requirement will include a CET1 prudential capital buffer of 9% of RWA. This will include: a 2% domestic systemically importantbank capital buffer; a 1.5% 'early-set' counter-cyclical capital buffer, which can be temporarily reduced to 0% following a financial crisis, or
temporarily increased, and a 5.5% capital conservation buffer.
• Contingent capital instruments will no longer be treated as eligible regulatory capital. As at 30 September 2023, the Bank had NZ$1,238 million
of AT1 instruments that will progressively lose eligible regulatory capital treatment over the transition period to 1 July 2028.
RBNZ’s reforms will result in a material increase in the level of capital that the Banking Group is required to hold. The reforms could have a material
impact on the Banking Group and its business, including on its capital allocation and business planning.

83

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Credit rating
The Bank has credit ratings that apply to its long-term senior unsecured obligations payable in New Zealand in New Zealand dollars.
As at 10 November 2023, the Bank’s credit ratings are:Rating agency
S&P Global Ratings
Fitch Ratings
Moody’s Investors Service

Credit rating
AAA+
A1

Qualification
Outlook Stable
Outlook Stable
Outlook Stable

The following table describes the credit rating grades available. The descriptions are from S&P Global Ratings. Credit ratings from S&P Global Ratingsand Fitch Ratings may be modified by the addition of "+" or "-" to show the relative standing within the “AA” to “B” categories. Moody's InvestorsService applies numerical modifiers 1, 2, and 3 to each of the “Aa” to “Caa” classifications, with 1 indicating the higher end and 3 the lower end of therating category.
S&P Global
Ratings

Moody's
Investors
Service

Fitch
Ratings

Extremely strong capacity to meet financial commitments. Highest rating.

AAA

Aaa

AAA

Very strong capacity to meet financial commitments.

AA

Aa

AA

Strong ability to meet financial commitments, but somewhat susceptible to adverse economic conditions andchanges in circumstances.

A

A

A

Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.

BBB

Baa

BBB

Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic
conditions.

BB

Ba

BB

More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meetfinancial commitments.

B

B

B

Currently vulnerable and dependent on favourable business, financial and economic conditions to meet financial
commitments.

CCC

Caa

CCC

Highly vulnerable; default has not yet occurred, but is expected to be a virtual certainty.

CC to CCa

CC to CDC

RD & D

Investment grade:Speculative grade:

Payment default on a financial commitment or breach of an imputed promise; also used when a bankruptcy petition
has been filed or similar action taken.

84

REGISTERED BANK DISCLOSURES

B1. GENERAL DISCLOSURES (UNAUDITED) (continued)
Historical summary of financial statements
Income statement
For the year ended 30 September
Interest income
Interest expense
Net interest income
Non-interest income
Operating income
Operating expenses
Credit impairment release / (charge)
Profit before income tax
Income tax expense
Profit after income tax

2023
NZ$m
10,215(5,922)
4,293
619
4,912
(1,663)
(183)
3,066
(849)
2,217

2022
NZ$m
5,811
(2,035)
3,776
1,087
4,863
(1,653)
(39)
3,171
(882)
2,289

2021
NZ$m
4,600
(1,176)
3,424
765
4,189
(1,621)
114
2,682
(743)
1,939

2020
NZ$m
5,568
(2,306)
3,262
807
4,069
(1,752)
(403)
1,914
(541)
1,373

2019
NZ$m
6,423
(3,179)
3,244
946
4,190
(1,608)
(101)
2,481
(662)
1,819

2023
NZ$m
194,289287
890
175,868
18,4212022
NZ$m
201,134
146
734
183,350
17,7842021
NZ$m
184,769
155
773
167,877
16,892

2020
NZ$m
179,744361
1,169
163,875
15,8692019
NZ$m
169,416285
729
154,986
14,430(1,444)550(1,924)

(908)

(9)

(411)

Balance sheet
As at 30 September
Total assets
Total individually impaired assets
Total impaired assets (i.e. Stage 3)
Total liabilities
EquityOther items included in Equity
Share capital issued
Dividends paid

The amounts included in this summary have been taken from the audited financial statements of the Banking Group.
Pending proceedings or arbitration
A description of any pending legal proceedings or arbitration concerning any member of the Banking Group that may have a material adverse effecton the Bank or the Banking Group is included in Note 27 Commitments and contingent liabilities.

85

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B2. ADDITIONAL FINANCIAL DISCLOSURES
Additional information on the balance sheet
2023
NZ$m
180,498
146,760

Total interest earning and discount bearing assets
Total interest and discount bearing liabilities

2022
NZ$m
179,748
145,687

Additional information on interest rate sensitivity
The following table represents the interest rate sensitivity of the Banking Group's assets, liabilities and off-balance sheet instruments by showing theperiods in which these instruments may reprice, that is, when interest rates applicable to each asset or liability can be changed.

2023
AssetsCash and cash equivalents
Settlement balances receivable
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Other financial assets
Total financial assets
Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Lease liabilities
Other financial liabilities
Total financial liabilities
Hedging instruments
Interest sensitivity gap
1

Total
NZ$m

Up to
3 months
NZ$m

Over 3 to
6 months
NZ$m

Over 6 to
12 months
NZ$m

Over 1 to
2 years
NZ$m

Over
2 years
NZ$m

Not bearing
interest1
NZ$m

13,094
401
801
5,921
8,753
10,958149,321995
190,244

12,829801
990
426
63,747
78,793173
364
15,307
15,844459
150
31,39332,002488
1,099
29,72831,315

3,811
8,918
9,815
22,544

265
401
8,753
1
(669)
995
9,746

2,920
1,500
141,630
8,326
19,147203
1,417
175,143
15,1011,567
1,500
89,4562,178
13371
95,085
9,469(6,823)15,0263,075
12
18,113
11,022
8,753

15,801
23
15,824(9,168)
7,010

2,096
2,379
44
4,519
(13,969)
12,827

1,593
11,515
111
13,2192,646
11,971

1,353
17,6588,326
1,046
28,383(18,637)

Note
11

NZ$m
107,040(1,309)105,731
9,602
115,333

Excludes non-coupon bearing discounted financial assets and financial liabilities which are shown as repricing on their maturity date.

Reconciliation of mortgage related amounts
As at 30 September 2023
Term loans - housing1
Less: housing loans made to corporate customers
On-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis)
Add: off-balance sheet residential mortgage exposures subject to the IRB approach (per asset quality and LVR analysis)
Total residential mortgage exposures subject to the IRB approach (per LVR analysis)
186Term loans – housing includes loans secured over residential property for owner-occupier, residential property investment and business purposes.

B3, B4B3, B4B4

REGISTERED BANK DISCLOSURES

B3. ASSET QUALITY
This section should be read in conjunction with the estimates, assumptions and judgements included in Note 1, Note 12 and Note 15 to the financial
statements.
Movements in components of loss allowance – total

Net loans and advances - total
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2023

Stage 1
NZ$m
199
19
(25)
(6)
193

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
311
59
77
(19)
106
20
94
(22)
(12)
87
20
60
(86)
12
(3)
398
79
60

Total
NZ$m
646
195
(22)
(12)
161
(86)
12
(3)
730

Off-balance sheet credit related commitments - total
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)
Credit impairment charge

66
2
12

31
(2)
10

3
-

5
-

105
22

14
80

8
39

3

5

22
127

Gross loans and advances - total
As at 1 October 2022
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2023
Loss allowance as at 30 September 2023

139,681
30,01330,013(5,270)(27,082)(32,352)
137,342
193

6,897
4,639
1,122
5,761
(1,557)(1,557)
11,101
398

588
413
78
491
(189)
(189)
890
79

146
218
103
321
(94)
(94)
(86)
287
60

147,3125,270
31,31636,586(5,270)(28,922)(34,192)(86)
149,620730

Off-balance sheet credit related commitments - total
As at 1 October 2022
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2023
Loss allowance as at 30 September 2023

29,277
6,228
6,228
(249)
(7,497)(7,746)27,759
80

995
237
298
535
(393)
(393)
1,137
39

14
8
3
11
(10)
(10)
15
3

6
4
17
21
(14)
(14)
13
5

30,292
249
6,546
6,795
(249)
(7,914)(8,163)28,924127

As at 30 September 2023
Impacts of changes in gross financial assets on loss allowances - total

Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances are 0.48% of gross balances as at 30 September 2023, up from 0.42% as at 30 September 2022. The NZ$106 million (14.1%)
increase in loss allowances was driven by an increase in the proportion of gross balances in Stage 2, partially offset by changes in the forward-looking
economic scenarios as described in Note 12 Allowance for expected credit losses.

87

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – total

Net loans and advances - total
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2022

Stage 1
NZ$m
155
18
26
44
199

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
314
56
60
(10)
(3)
(5)
7
6
87
(33)
(37)
(3)
3
12
(37)
37
5
311
59
77

Total
NZ$m
585
126
(33)
(37)
56
(37)
37
5
646

Off-balance sheet credit related commitments - total
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)

64
7
(5)

39
(6)
(2)

4
(1)
-

15
(10)

122
(17)

Credit impairment charge / (release)
As at 30 September 2022

2
66

(8)
31

(1)
3

(10)
5

(17)
105

Gross loans and advances - total
As at 1 October 2021
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2022
Loss allowance as at 30 September 2022

133,993
36,57736,577(1,251)(29,638)(30,889)
139,681
199

6,201
1,155
1,151
2,306
(2)
(1,608)(1,610)
6,897
311

618
113
88
201
(18)
(213)
(231)
588
59

155
5
146
151
(2)
(121)
(123)
(37)
146
77

140,967
1,273
37,962
39,235(1,273)(31,580)(32,853)(37)
147,312646

Off-balance sheet credit related commitments - total
As at 1 October 2021
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2022
Loss allowance as at 30 September 2022

28,818
110
6,815
6,925
(23)
(6,443)(6,466)29,277
66

1,279
21
79
100
(123)
(261)
(384)
995
31

32
4
2
6
(24)
(24)
14
3

23
11
(5)
6
(23)
(23)
6
5

30,152
146
6,891
7,037
(146)
(6,751)(6,897)30,292
105

Impacts of changes in gross financial assets on loss allowances - total

Explanation of how changes in the gross carrying amounts of gross loans and advances contributed to changes in loss allowance
Overall, loss allowances are 0.42% of gross balances as at 30 September 2022, up from 0.41% as at 30 September 2021. The NZ$44 million (6.2%)
increase in loss allowances was driven by an increase in the proportion of gross balances in Stage 2, and changes in the forward-looking economic
scenarios.

88

REGISTERED BANK DISCLOSURES

B3. ASSET QUALITY (continued)
Movements in components of loss allowance – residential mortgages

Net loans and advances - residential mortgages
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2023

Stage 1
NZ$m
63
13
(34)
(21)
42

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
81
32
10
(13)
63
16
8
(3)
50
16
5
(1)
131
48
14

Total
NZ$m
186
53
(3)
50
(1)
235

Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)

-

-

-

-

-

Credit impairment charge
As at 30 September 2023

-

-

-

-

-

Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2022
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2023
Loss allowance as at 30 September 2023

99,203
21,283
21,283(1,976)(17,931)(19,907)
100,579
42

2,963
1,623
444
2,067
(579)
(579)
4,451
131

392
326
29
355
(86)
(86)
661
48

15
27
11
38
(12)
(12)
(1)
40
14

102,573
1,976
21,767
23,743(1,976)(18,608)(20,584)(1)
105,731
235

Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2022
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2023
Loss allowance as at 30 September 2023

9,049
1,861
1,861
(18)
(1,364)(1,382)
9,528
-

58
18
9
27
(12)
(12)
73
-

1
1
-

-

9,108
18
1,870
1,888
(18)
(1,376)(1,394)
9,602-

Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$49 million (26.3%) increase in loss allowances on residential mortgage exposures is primarily driven by an increase in the proportion of grossbalances in Stage 2 and Stage 3. Overall loss allowances and individually impaired exposures remain low, reflecting that approximately 93% of onbalance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80% (refer to page 98).

89

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – residential mortgages

Net loans and advances - residential mortgages
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2022

Stage 1
NZ$m
23
5
35
40
63

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
53
17
9
(5)
33
15
3
(2)
28
15
1
81
32
10

Total
NZ$m
102
86
(2)
84
186

Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)

-

-

-

-

-

Credit impairment charge
As at 30 September 2022

-

-

-

-

-

Impacts of changes in gross financial assets on loss allowances - residential mortgages
Gross loans and advances - residential mortgages
As at 1 October 2021
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2022
Loss allowance as at 30 September 2022

94,85725,03925,039(994)(19,699)(20,693)
99,203
63

1,846
893
652
1,545
(428)
(428)
2,963
81

356
103
8
111
(75)
(75)
392
32

19
8
8
(2)
(10)
(12)
15
10

97,078996
25,707
26,703(996)(20,212)(21,208)
102,573
186

Off-balance sheet credit related commitments - residential mortgages
As at 1 October 2021
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2022
Loss allowance as at 30 September 2022

9,040
1,654
1,654
(21)
(1,624)(1,645)
9,049
-

40
21
12
33
(15)
(15)
58
-

1
1
-

-

9,081
21
1,666
1,687
(21)
(1,639)(1,660)9,108-Explanation of how changes in the gross carrying amounts of residential mortgages contributed to changes in loss allowance
The NZ$84 million (82.4%) increase in loss allowances on residential mortgage exposures is primarily driven by an increase in the proportion of grossbalances in Stage 2, and changes in the forward-looking economic scenarios. Overall loss allowances and individually impaired exposures remain low,
reflecting that approximately 94% of on-balance sheet residential mortgage exposures have loan to valuation ratios not exceeding 80%.

90

REGISTERED BANK DISCLOSURES

B3. ASSET QUALITY (continued)
Movements in components of loss allowance – other retail exposures

Net loans and advances - other retail exposures
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2023

Stage 1
NZ$m
10
3
(8)
(5)
5

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
43
17
5
(3)
(9)
2
33
(5)
(8)
(12)
2
20
(31)
8
31
19
2

Total
NZ$m
75
18
(5)
(8)
5
(31)
8
57

Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)

13
2
(2)

10
(2)
1

3
-

-

26
(1)

Credit impairment release
As at 30 September 2023

13

(1)
9

3

-

(1)
25

Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2022
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2023
Loss allowance as at 30 September 2023

2,194
455
455
(28)
(430)
(458)
2,191
5

111
15
18
33
(28)
(28)
116
31

31
12
3
15
(14)
(14)
32
19

8
1
36
37
(9)
(9)
(31)
5
2

2,344
28
512
540
(28)
(481)
(509)
(31)
2,344
57

Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2022
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2023
Loss allowance as at 30 September 2023

4,759
270
270
(13)
(411)
(424)
4,605
13

27
7
4
11
(10)
(10)
28
9

10
6
1
7
(8)
(8)
9
3

-

4,796
13
275
288
(13)
(429)
(442)
4,642
25

Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
The NZ$19 million (18.8%) decrease in loss allowances is driven by changes in the management temporary adjustments and forward-looking
economic scenarios as described in Note 12 Allowance for expected credit losses.

91

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – other retail exposures

Net loans and advances - other retail exposures
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2022

Stage 1
NZ$m
10
5
(5)
10

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
49
17
6
(5)
(1)
29
(4)
(11)
(6)
14
(26)
11
43
17
5

Total
NZ$m
82
23
(4)
(11)
8
(26)
11
75

Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)

15
3
(5)

12
(3)
1

3
-

-

30
(4)

Credit impairment release
As at 30 September 2022

(2)
13

(2)
10

3

-

(4)
26

Impacts of changes in gross financial assets on loss allowances - other retail exposures
Gross loans and advances - other retail exposures
As at 1 October 2021
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2022
Loss allowance as at 30 September 2022

2,271
420
420
(9)
(488)
(497)
2,194
10

132
24
24
(2)
(43)
(45)
111
43

34
10
3
13
(16)
(16)
31
17

9
1
30
31
(6)
(6)
(26)
8
5

2,446
11
477
488
(11)
(553)
(564)
(26)
2,344
75

Off-balance sheet credit related commitments - other retail exposures
As at 1 October 2021
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2022
Loss allowance as at 30 September 2022

5,091
203
203
(2)
(533)
(535)
4,759
13

38
3
3
(1)
(13)
(14)
27
10

13
3
2
5
(8)
(8)
10
3

-

5,142
3
208
211
(3)
(554)
(557)
4,796
26

Explanation of how changes in the gross carrying amounts of other retail exposures contributed to changes in loss allowance
The NZ$11 million (9.8%) decrease in loss allowances is driven by a decrease in overall gross balances, partially offset by the effect of changes in theforward-looking economic scenarios.

92

REGISTERED BANK DISCLOSURES

B3. ASSET QUALITY (continued)
Movements in components of loss allowance – corporate exposures1

Net loans and advances - corporate exposures
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2023

Stage 1
NZ$m
126
3
17
20
146

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
187
10
62
(3)
52
2
53
(14)
(4)
49
2
35
(54)
4
(3)
236
12
44

Total
NZ$m
385
124
(14)
(4)
106
(54)
4
(3)
438

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2022
Transfer between stages
New and increased provisions (net of collective provision releases)

53
14

21
9

-

5
-

79
23

Credit impairment charge
As at 30 September 2023

14
67

9
30

-

5

23
102

Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2022
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2023
Loss allowance as at 30 September 2023

38,2848,275
8,275(3,266)(8,721)(11,987)
34,572
146

3,823
3,001
660
3,661
(950)
(950)
6,534
236

165
75
46
121
(89)
(89)
197
12

123
190
56
246
(73)
(73)
(54)
242
44

42,395
3,266
9,037
12,303(3,266)(9,833)(13,099)(54)
41,545438

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2022
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2023
Loss allowance as at 30 September 2023

15,469
4,097
4,097
(218)
(5,722)(5,940)13,626
67

910
212
285
497
(371)
(371)
1,036
30

3
2
2
4
(2)
(2)
5
-

6
4
17
21
(14)
(14)
13
5

16,388
218
4,401
4,619
(218)
(6,109)(6,327)
14,680102

1

Also includes all other non-retail exposure classes in net loans and advances and off balance sheet credit related commitments to reconcile to the respective totals for the Banking Group.

Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$76 million (16.4%) increase in loss allowances is driven by an increase in the proportion of gross balances in Stage 2, partially offset by changes
in the forward-looking economic scenarios as described in Note 12 Allowance for expected credit losses.

93

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B3. ASSET QUALITY (continued)
Movements in components of loss allowance – corporate exposures1

Net loans and advances - corporate exposures
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)
Write-backs
Recoveries of amounts previously written off
Credit impairment charge / (release)
Bad debts written-off (excluding recoveries)
Add back recoveries of amounts previously written off
Discount unwind
As at 30 September 2022

Stage 1
NZ$m
122
8
(4)
4
126

Stage 3
Collectively IndividuallyStage 2
assessedassessed
NZ$m
NZ$m
NZ$m
212
22
45
(3)
(5)
(25)
(9)
55
(27)
(26)
(25)
(12)
(3)
(11)
26
5
187
10
62

Total
NZ$m
401
17
(27)
(26)
(36)
(11)
26
5
385

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2021
Transfer between stages
New and increased provisions (net of collective provision releases)

49
4
-

27
(3)
(3)

1
(1)
-

15
(10)

92
(13)

Credit impairment charge / (release)
As at 30 September 2022

4
53

(6)
21

(1)
-

(10)
5

(13)
79

Impacts of changes in gross financial assets on loss allowances - corporate exposures
Gross loans and advances - corporate exposures
As at 1 October 2021
Net transfers in to each stage
Amounts drawn from new or existing facilities
Additions
Net transfers out of each stage
Amounts repaid
Deletions
Amounts written off
As at 30 September 2022
Loss allowance as at 30 September 2022

36,865
11,118
11,118(248)(9,451)(9,699)38,284
126

4,223
262
475
737
(1,137)(1,137)
3,823
187

228
77
77
(18)
(122)
(140)
165
10

127
4
108
112
(105)
(105)
(11)
123
62

41,443266
11,77812,044(266)(10,815)(11,081)(11)
42,395385

Off-balance sheet credit related commitments - corporate exposures
As at 1 October 2021
Net transfers in to each stage
New and increased facilities and drawn amounts repaid
Additions
Net transfers out of each stage
Reduced facilities and amounts drawn
Deletions
As at 30 September 2022
Loss allowance as at 30 September 2022

14,687
110
4,958
5,068
(4,286)(4,286)
15,469
53

1,201
64
64
(122)
(233)
(355)
910
21

18
1
1
(16)
(16)
3
-

23
11
(5)
6
(23)
(23)
6
5

15,929
122
5,017
5,139
(122)
(4,558)(4,680)16,38879

1

Also includes all other non-retail exposure classes in net loans and advances and off balance sheet credit related commitments to reconcile to the respective totals for the Banking Group.

Explanation of how changes in the gross carrying amounts of corporate exposures contributed to changes in loss allowance
The NZ$29 million (5.9%) decrease in loss allowances is driven by a decrease in the amount and proportion of gross balances in Stage 2 and Stage 3,
partially offset by an increase in the amount of individually assessed loss allowances.

94

REGISTERED BANK DISCLOSURES

B3. ASSET QUALITY (continued)
Past due assets

Less than 30 days past due
At least 30 days but less than 60 days past due
At least 60 days but less than 90 days past due
At least 90 days past due
Total past due but not individually impaired
Other asset quality information
Undrawn facilities with impaired customers
Other assets under administration

Residential
mortgages
NZ$m
610
201
243
598
1,652

7

2023
Other
retail Non-retail
exposures exposures
NZ$m
NZ$m
81
603
13
115
7
194
21
39
122
951

1

13
-

Residential
Total mortgages
NZ$m
NZ$m
456
1,294
329
163
444
119
355
658
2,725
1,093

13
8

4

2022
Other
retail Non-retail
exposures exposures
NZ$m
NZ$m
81
322
10
168
6
14
20
77
117
581

1

6
-

Total
NZ$m
859
341
139
452
1,791

6
5

Asset quality for financial assets designated at fair value
The Banking Group does not have any loans and advances designated at fair value.

95

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORYLIQUIDITY RATIOS (UNAUDITED)RBNZ capital ratios

Common equity tier 1 capital
Tier 1 capital
Total capital
Prudential capital buffer ratio

RBNZ minimum
2023
2022

Banking Group
2023
2022

Bank
(Solo Consolidated)
2023
2022

4.5%
6.0%
8.0%
4.5%

12.5%
14.1%
15.5%
7.5%

12.3%
13.9%
15.2%
n/a

4.5%
6.0%
8.0%
3.5%

12.4%
15.0%
16.4%
7.9%

12.2%
14.8%
16.2%
n/a

Capital
As at 30 September 2023
Tier 1 capital

NZ$m

Common equity tier 1 (CET1) capital
Paid up ordinary shares issued by the Bank
Retained earnings (net of appropriations)1
Accumulated other comprehensive income and other disclosed reserves2

11,5886,069(93)

Less deductions from common equity tier 1 capital
Goodwill and intangible assets, net of associated deferred tax liabilities
Deferred tax assets less deferred tax liabilities relating to temporary differences
Cash flow hedge reserve
Defined benefit superannuation plan surplus
Expected losses to the extent greater than total eligible allowances for impairment
Common equity tier 1 capital(3,119)
(418)
54
(21)
(178)
13,882

Additional tier 1 (AT1) capital
NZD 550m preference shares3

550

Transitional AT1 capital instruments
NZD 300m preference shares3
NZD 938m ANZ New Zealand Internal Capital Notes (ANZ NZ ICN2)4
Additional tier 1 capital
Total tier 1 capital
Tier 2 capital
NZD 600m subordinated notes4
USD 500m subordinated notes4
Eligible impairment allowance in excess of expected loss
Tier 2 capital
Total capital
1
2
3
4

300
938
1,788
15,670
600
830
116
1,546
17,216

Includes a deduction for dividends on AT1 capital instruments approved by the Bank’s board, but not yet paid as at 30 September 2023, as required by BPR110 Capital Definitions. These
dividends are not recognised under NZ GAAP because the payment of the dividends remains at the Bank’s discretion until payment is made.
Includes the FVOCI reserve of NZ$(39) million and the cash flow hedging reserve of NZ$(54) million as at 30 September 2023.
Classified as equity on the balance sheet under NZ GAAP.
Classified as a liability on the balance sheet under NZ GAAP.

Transitional AT1 capital instruments
RBNZ has revised its capital adequacy requirements for New Zealand banks, which are being implemented from October 2021 to July 2028. Under therevised requirements, the AT1 capital notes and 2013 preference shares are subject to a progressive reduction in their regulatory capital recognition.
Fixing the base at the aggregate nominal amount of such instruments outstanding as at 30 September 2021 (NZ$2,741 million), their aggregate
recognition is capped at 75% from 1 January 2023; 62.5% from 1 January 2024; 50% from 1 January 2025; 37.5% from 1 January 2026; 25% from 1
January 2027; 12.5% from 1 January 2028; and from 1 July 2028 onwards these instruments will not be included in regulatory capital.

96

REGISTERED BANK DISCLOSURES

B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORYLIQUIDITY RATIOS (UNAUDITED) (continued)
Capital requirements of the Banking GroupAs at 30 September 2023
Exposures subject to the internal ratings based approach
Specialised lending exposures subject to the slotting approach
Exposures subject to the standardised approach
Credit risk supervisory adjustment
Total credit risk
Market risk
Operational risk, calculated using the standardised approach
Total

Total exposure
after credit risk
mitigation
NZ$m

Risk weighted
exposure or
implied risk
weighted
exposure
NZ$m

Total capitalrequirement
NZ$m

168,400
11,89737,549n/a
217,846
n/a
n/a
n/a

54,114
12,7594,825
22,384
94,082
5,491
11,754111,327

4,329
1,021
386
1,791
7,527
439
940
8,906

Credit risk subject to the Internal Ratings Based (IRB) approach

IRB credit exposures by exposure class and customer credit rating

As at 30 September 2023
Corporate
0-2
3-4
5
6
7-8
Default
Total corporate exposures1
Residential mortgages
0-3
4
5
6
7-8
Default
Total residential mortgage exposures2
Other retail
0-2
3-4
5
6
7-8
Default
Total other retail exposures
Total credit risk exposures subject to the IRB
approach3
1
2
3

Total value
NZ$m

Exposureat default
NZ$m

Exposureweighted
LGD used for Exposurethe capital weighted
calculation risk weight
%
%

0.05
0.31
0.99
2.32
15.70
100.001.52

71,18547,013
12,693
3,146
1,766
261
136,064

7,937
23,161
9,994
2,872
1,140
266
45,370

59
37
32
32
40
38
39

30
40
55
73
166
125
47

2,838
11,099
6,557
2,510
2,264
399
25,667

227
888
525
201
181
31
2,053

0.19
0.44
0.90
1.96
4.86
100.001.09

42,22846,63522,807
2,831
127
705
115,333

42,63046,75722,878
2,836
127
704
115,932

12
20
24
26
26
17
18

5
16
32
60
96
9
16

2,645
8,754
8,682
2,044
146
75
22,346

212
700
695
164
12
5
1,788

0.10
0.26
1.07
2.52
7.49
100.00
1.97

509
4,116
999
488
833
41
6,986

512
4,192
982
513
858
41
7,098

77
78
77
81
88
80
79

49
56
82
102
135
24
72

303
2,802
965
626
1,393
12
6,101

24
224
77
50
111
2
488

1.24

258,383

168,400

26

27

54,114

4,329

Probabilityof default%

Risk
Minimum
weighted
capitalassets requirement
NZ$m
NZ$m

The credit risk supervisory adjustment above includes NZ$6,410 million of RWA for corporate exposures. This increases the pre-scalar IRB exposure–weighted risk weight to 59% and theminimum capital requirement to NZ$2,566 million.
The credit risk supervisory adjustment above includes NZ$15,974 million of RWA for residential mortgage exposures. This increases the pre-scalar IRB exposure-weighted risk weight to 28%
and the minimum capital requirement to NZ$3,066 million.
The credit risk supervisory adjustment above totals NZ$22,384 million of RWA. This increases the pre-scalar IRB exposure-weighted risk weight to 38% and the related minimum capitalrequirement to NZ$6,120 million.

97

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORYLIQUIDITY RATIOS (UNAUDITED) (continued)
IRB credit exposures include the following undrawn commitments and other off-balance sheet contingent liabilities:

As at 30 September 2023
Undrawn commitments and other off-balance sheet contingent liabilities
Corporate
Residential mortgages
Other retailCounterparty credit risk on derivatives and securities financing transactions
Corporate
Total

Total value
NZ$m

Exposureat default
NZ$m

11,829
9,602
4,642

11,074
10,062
4,695

91,959118,032

1,689
27,520Additional mortgage information
As required by RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by the Banking Group's valuation of the
security property at origination of the exposure. Off-balance sheet exposures include undrawn and partially drawn residential mortgage loans as wellas commitments to lend. Commitments to lend are formal offers for housing lending which have been accepted by the customer.
On-balance Off-balance
sheet
sheet
NZ$m
NZ$m

As at 30 September 2023
LVR range
Does not exceed 60%
Exceeds 60% and not 70%
Exceeds 70% and not 80%
Does not exceed 80%
Exceeds 80% and not 90%
Exceeds 90%
Total

57,541
19,754
21,51098,805
5,229
1,697
105,731

7,159
1,047
1,078
9,284
126
192
9,602

Total
NZ$m
64,70020,801
22,588108,089
5,355
1,889
115,333

Specialised lending subject to the slotting approach

As at 30 September 2023
On-balance sheet exposures
StrongGood
Satisfactory
Weak
Default
Off-balance sheet exposures by average risk weight
Undrawn commitments and other off-balance sheet exposures
Total exposures subject to the slotting approach

Exposures
after
credit risk
mitigation
NZ$m

Risk
weight
%

5,367
3,868
1,004
646
214

70
90
115
250
-

4,508
4,178
1,385
1,936
-

361
334
111
155
-

798
11,89778
89752
12,759

60
1,021

Risk
Minimum
weighted
capitalassets requirement
NZ$m
NZ$m

The supervisory categories of specialised lending above are associated with specific risk-weights. These categories broadly correspond to thefollowing external credit assessments using S&P Global Ratings' rating scale, Strong: BBB- or better, Good: BB+ or BB, Satisfactory: BB- or B+ and Weak:
B to C-.

98

REGISTERED BANK DISCLOSURES

B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORYLIQUIDITY RATIOS (UNAUDITED) (continued)
Credit risk exposures subject to the standardised approach
Exposureor principal
amount
NZ$m

As at 30 September 2023
On-balance sheet exposures
Cash and gold bullion
Sovereign and central banks
Multilateral development banks and other international organisations
Public sector entities
Banks
Corporate
Past due assets
Other assets
Equity exposures
Unlisted equity holdings
Off-balance sheet exposures
Total off balance sheet exposures
2,036
Counterparty credit risk
Foreign exchange contracts
271,941
Interest rate contracts
972,370
Other
3,326
Credit valuation adjustmentn/aTotal exposures subject to the standardised approach

Averagecreditconversion
factor%Exposure
after credit
risk
mitigation
NZ$m

Averagerisk weight%155
20,564
5,152
1,518
1,551
76
1,259

20
42
111
100

304
656
84
1,259

24
52
7
101

1

400

6

-

57

1,161

49

564

45

n/a
n/a
n/a
n/a

4,136
1,616
360
n/a
37,549

20
10
34
n/a
13

820
163
123
846
4,825

66
13
10
68
386

Risk
Minimum
weighted
capitalexposure requirement
NZ$m
NZ$m

Credit valuation adjustment
The IRB and standardised tables above include an aggregate Credit Valuation Adjustment (CVA) capital charge of NZ$107 million, and aggregate
implied risk weighted exposures for the CVA of NZ$1,334 million.
Credit risk mitigation
As at 30 September 2023, under the IRB approach, the Banking Group had NZ$353 million of corporate exposures covered by guarantees where thepresence of the guarantees was judged to reduce the underlying credit risk of the exposures. Information on the value of other exposures covered byfinancial guarantees and eligible financial collateral is not disclosed, as the effect of these guarantees and collateral on the underlying credit risk
exposures is not considered to be material.
Effect of standardised floor on total risk-weighted exposures for credit risk
Risk weighted assets

As at 30 September 2023
Exposures subject to the IRB or slotting approaches1
Credit risk supervisory adjustment1
Subtotal1
Standardised floor at 85% of standardised RWA
IRB and slotting RWA with standardised floor applied
Exposures subject to the standardised approach
Total credit risk
1

Calculated forcompliancepurposes
NZ$m
66,87322,38489,257n/a
89,257
4,825
94,082

Calculated using
standardised
approach
NZ$m
98,055n/a
98,055
83,347
83,347

RWA calculated for compliance purposes includes a scalar of 1.2 as required by BPR 130 Credit Risk RWAs Overview.

In accordance with BPR 130 Credit Risk RWAs Overview, IRB and slotting RWA with standardised floor applied is calculated as the greater of RWA forcompliance purposes, and 85% of the total RWA for such exposures calculated using the standardised approach.

99

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B4. CAPITAL ADEQUACY UNDER THE INTERNAL MODELS BASED APPROACH, AND REGULATORYLIQUIDITY RATIOS (UNAUDITED) (continued)
Market risk
The aggregate market risk exposures below have been calculated in accordance with BPR140: Market Risk. The peak end-of-day market risk exposures
are for the six months ended 30 September 2023.
Implied risk weighted
exposure
Aggregate capital charge
Period end
Peak Period end
Peak
As at 30 September 2023
NZ$m
NZ$m
NZ$m
NZ$m
Interest rate risk
5,465
6,215
437
497
Foreign currency risk
25
110
2
9
Equity risk
1
1Capital for other material risks
The Banking Group has an Internal Capital Adequacy Assessment Process (ICAAP) which complies with the requirements of the Bank's Conditions ofRegistration. The Banking Group's ICAAP identifies and measures all "other material risks", which are those material risks that are not explicitly captured
in the calculation of the Banking Group's tier 1 and total capital ratios. Other material risks identified by the Banking Group include fixed asset risk anddeferred acquisition cost risk. The Banking Group's internal capital allocation for these other material risks is NZ$270 million (2022: NZ$296 million).
Information about Ultimate Parent Bank and Overseas Banking Group
APRA Basel III capital ratios
Ultimate Parent Bank
Overseas Banking Group (Extended Licensed Entity)
2023
2022
2023
2022
Common equity tier 1 capital
Tier 1 capital
Total capital

13.3%
15.2%
21.0%

12.3%
14.0%
18.2%

13.2%
15.5%
22.2%

12.0%
14.0%
18.9%

The Ultimate Parent Bank and the Overseas Banking Group are required to hold minimum capital as determined by APRA’s capital framework, which is
at least equal to that specified under the internationally agreed Basel III framework.
APRA has authorised the Ultimate Parent Bank and the Overseas Banking Group to use:
• the Internal Ratings Based (IRB) methodology for calculation of credit risk weighted assets. Where the Overseas Banking Group is not accredited
to use the IRB methodology the Overseas Banking Group applies the standardised approach.
• the Standardised Measurement Approach (SMA) for the operational risk weighted asset equivalent.
The Overseas Banking Group exceeded the minimum capital requirements set by APRA as at 30 September 2023 and for the comparative priorperiods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2023. The Overseas Banking Group’s Pillar
3 disclosure document for the quarter ended 30 September 2023, in accordance with APS 330: Public Disclosure of Prudential Information, discloses
capital adequacy ratios and other prudential information. This document can be accessed at the website anz.com.
Regulatory liquidity ratios
RBNZ requires banks to hold minimum amounts of liquid assets to help ensure that they are effectively managing their liquidity risks. The mismatch
ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows during a 1-month or 1-week period of stress. It is expressed
as a ratio over the bank’s total funding. The Banking Group must maintain its 1-month and 1-week mismatch ratios above zero on a daily basis. The 1month and 1-week mismatch ratios are averaged over the quarter.
RBNZ requires banks to get a minimum amount of funding from stable sources called core funding. The minimum amount of core funding is 75% of abank’s total loans. The Banking Group must maintain its core funding ratio above the regulatory minimum on a daily basis. This measure of the corefunding ratio is averaged over the quarter.
For the three months ended
Quarterly average 1-week mismatch ratio
Quarterly average 1-month mismatch ratio
Quarterly average core funding ratio

100

30 Sep 23
9.0%
7.8%
90.8%

30 Jun 23
8.0%
7.0%
89.9%

REGISTERED BANK DISCLOSURES

B5. CONCENTRATION OF CREDIT EXPOSURES TO INDIVIDUAL COUNTERPARTIESThe Banking Group measures its concentration of credit exposures to individual counterparties at the reporting date on the basis of actual exposures.
Peak end-of-day aggregate credit exposures are measured on the basis of internal limits that were not materially exceeded between the reporting
date for the previous disclosure statement and the reporting date for the Disclosure Statement.
The exposure information in the table below excludes exposures to:• connected persons (i.e. other members of the Overseas Banking Group and Directors of the Bank);• the central government or central bank of any country with a long-term credit rating of A- or A3 or above, or its equivalent; and• any supranational or quasi-sovereign agency with a long-term credit rating of A- or A3 or above, or its equivalent.

Exposures to banks
Total number of exposures to banks that are greater than 10% of CET1 capitalwith a long-term credit rating of A- or A3 or above, or its equivalent
with a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent
Exposures to non-banks
Total number of exposures to non-banks that are greater than 10% of CET1 capitalwith a long-term credit rating of A- or A3 or above, or its equivalent- 10% to less than 15% of CET1 capitalwith a long-term credit rating of at least BBB- or Baa3, or its equivalent, and at most BBB+ or Baa1, or its equivalent

As at
30 Sep 23

Peak end of
day over 6
months to
30 Sep 23

-

-

1
1
1
-

2
2
2
-

101

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B6. CREDIT EXPOSURES TO CONNECTED PERSONSConnected persons
Amount% of tier 1
NZ$m
capital
As at 30 September 2023
Gross amount, before netting
Amount netted
Aggregate credit exposure (on partial bilateral net basis)
Peak end-of day aggregate credit exposure over the year ended 30 September 2023
Gross amount, before netting
Amount netted
Aggregate credit exposure (on partial bilateral net basis)Non-bank connected
persons
Amount% of tier 1
NZ$m
capital13,275
8,464
4,811

84.7%
54.0%
30.7%

<$1m
<$1m

0.0%
0.0%
0.0%

14,915
9,595
5,320

95.2%
61.2%
34.0%

<$1m
<$1m

0.0%
0.0%
0.0%

Credit exposures to connected persons
The information on credit exposure to connected persons has been derived in accordance with the RBNZ Banking Supervision Handbook document
Connected Exposures Policy (BS8), is net of individual credit impairment allowances and excludes advances to connected persons of a capital nature.
Peak end-of-day aggregate exposure
Peak end-of-day aggregate credit exposure to connected persons as a ratio to tier 1 capital for the full year accounting period is derived bydetermining the maximum end-of-day aggregate amount of credit exposure over the accounting period and then dividing that amount by the
Banking Group’s tier 1 capital as at the reporting date.
Rating contingent limit
The rating-contingent limit that applied to the Banking Group as at 30 September 2023 was 60%. No limit changes have occurred over the year to 30
September 2023. Within the overall rating-contingent limit, there is a sub-limit of 15% of tier 1 capital that applies to the aggregate credit exposure tonon-bank connected persons.
Additional requirements for aggregate credit exposure to connected persons
Aggregate credit exposure to connected persons has been calculated on a partial bilateral net basis. The gross amounts and amounts netted off
under a bilateral netting agreement are included in the table above. There is a limit of 125% of the Banking Group’s tier 1 capital in respect of the grossamount of aggregate credit exposure to connected persons that can be netted off in determining the net exposure.
Aggregate amount of contingent exposures arising from risk lay-off arrangements
NZ$227 million of contingent exposures of the Banking Group to connected persons arose from risk lay-off arrangements in respect of credit
exposures to counterparties (excluding counterparties that are connected persons) as at 30 September 2023.
Loss allowance for credit-impaired credit exposures to connected persons
There were no loss allowances provided against credit exposures to connected persons as at 30 September 2023.

102

REGISTERED BANK DISCLOSURES

B7. INSURANCE BUSINESS, SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIESAND MARKETING AND DISTRIBUTION OF INSURANCE PRODUCTS
Insurance business
The Banking Group does not conduct any insurance business.
Banking Group’s involvement in securitisation, funds management, other fiduciary activities, and marketing and distribution of insurance
productsa)Banking Group’s involvement in the establishment, marketing, or sponsorship of trust, custodial, funds management, and other fiduciary activities

Activity

Details

Custodial

The Banking Group operates two custodians as at 30 September 2023:• ANZ Custodial Services New Zealand Limited, which is the appointed custodian for private banking’s (ANZ Private)
Discretionary Investment Management Service, Wholesale Investment Services and Trading Service; and• ANZ New Zealand Investments Nominees Limited, which is the appointed custodian for direct holdings of securities by
various wholesale customer portfolios managed by ANZ New Zealand Investments Limited (ANZ Investments).

Funds
management

The Banking Group provides the following funds management services:• Managed Investment Schemes (MIS): The Banking Group’s subsidiaries ANZ Investments and ANZ Investment Services(New Zealand) Limited (ANZIS) act as manager for a number of managed investment schemes. ANZ Investments holds an
MIS Manager licence, with ANZIS being an authorised body under that licence. ANZ Investments is the issuer andmanager of ANZ and OneAnswer-branded KiwiSaver, retail and wholesale schemes. ANZIS is the issuer and manager ofthe Bonus Bonds Scheme and the ANZ PIE Fund. ANZ National Staff Superannuation Limited, also a subsidiary of the
Banking Group, is the trustee and manager of the ANZ National Retirement Scheme, which is a restricted workplacesavings scheme.
• Discretionary Investment Management Service (DIMS): The Bank is a licensed DIMS provider. This service is offered to ANZ
Private customers.
• Other investment portfolios: ANZ Investments also manages investment portfolios for a number of schemes where thescheme manager or trustee has outsourced investment management services to ANZ Investments. These schemes are
typically corporate superannuation schemes.

Other fiduciary
activities

ANZ Investments, through its subsidiary OneAnswer Nominees Limited, offers the OneAnswer Portfolio Service. The associatedadministration and custody services are provided by FNZ Limited and FNZ Custodians Limited respectively (together FNZ).
FNZ is not a member or related party of the Banking Group.

b)

Banking Group’s involvement in the origination of securitised assets, and the marketing or servicing of securitisation schemes

The Banking Group originates securitised assets in the form of residential mortgage backed securities held for potential repurchase transactions with
RBNZ, and covered bonds. Refer to Note 24 Structured entities for further details about these programmes. Other than these activities, the Banking
Group is not involved in the marketing or servicing of securitisation schemes.

c)Banking Group’s involvement in marketing and distribution of insurance products

The Banking Group markets and distributes life insurance, other personal and business insurance products provided by or arranged through a numberof insurance partners. None of these insurance partners are affiliated insurance entities or affiliated insurance groups. Our insurance partners are:
• Vero Insurance New Zealand Limited for home, contents, motor vehicle, boat and lifestyle block insurance;• AWP Services New Zealand Limited, trading as Allianz Partners, for premium card travel insurance. Policies are underwritten by The Hollard
Insurance Company Pty Limited (incorporated in Australia);• Chubb Life Insurance New Zealand Limited (formerly known as Cigna Life Insurance New Zealand Limited) for life & living insurance; and• Crombie Lockwood (NZ) Limited is our business insurance broker.
Arrangements to ensure no adverse impacts arising from the above activities
Arrangements have been put in place to ensure that difficulties arising from the activities in a), b) and c) above would not impact adversely on the
Banking Group. The policies and procedures in place include comprehensive and prominent disclosure of information regarding products, and formal
and regular review of operations and policies by management.

103

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B7. INSURANCE BUSINESS, SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIESAND MARKETING AND DISTRIBUTION OF INSURANCE PRODUCTS (continued)
Amounts represented by funds management and securitisation activities

Funds under management:
KiwiSaver1
Bonus Bonds Scheme2,6
Other managed funds1
ANZ PIE Fund2
DIMS3
Other investment portfolios4
Total funds under management
Funds under custodial arrangements
Other funds held or managed subject to fiduciary responsibilities5
Outstanding securitised assets originated by the Banking Group - carrying amount of covered bonds
1
2
3
4
5
6

2023
NZ$m

2022
NZ$m

18,957
3,286
3,741
7,259
3,865
37,108
7,277
1,820
3,373

17,076
3,353
2,292
7,490
4,102
34,313
7,519
1,710
4,082

Managed by ANZ Investments.
Managed by ANZIS and wholly invested in deposits of the Bank.
Managed by the Bank.
Comprises portfolios managed by ANZ Investments, and the ANZ National Retirement Scheme managed by ANZ National Staff Superannuation Limited.
Not included in funds under management.
Funds under management for the Bonus Bonds Scheme is net of NZ$58 million (2022: NZ$65 million) of distributions payable to bondholders. Further information about the wind-up of theBonus Bonds Scheme is available at the website bonusbonds.co.nz.

Financial services provided to entities conducting the above activities
Financial services provided by any member of the Banking Group to entities that conduct the activities in a) or b) above are provided on arm’s length
terms and conditions and at fair value.
Assets purchased from entities conducting the above activities
Over the year ended 30 September 2023, any assets purchased by any member of the Banking Group from entities that conduct the activities in a), b)or c) above have been purchased on arm’s length terms and conditions and at fair value.
Funding provided to entities in aggregate and individually
The peak end-of day aggregate amount of funding provided to entities that provide services relating to the Banking Group’s involvement in the above
activities over the year ended 30 September 2023 was NZ$0.2 million (2022: NZ$0.3 million) which was 0.0% (2022: 0.0%) of the Banking Group’s tier 1
capital and 0.1% (2022: 0.1%) of the total assets of the individual entity.
Method for deriving peak end-of-day amount of funding in aggregate and individually
The peak end-of-day aggregate amount of funding is the maximum end-of-day aggregate amount of funding over the full year accounting period,
divided by the Banking Group’s tier 1 capital as at the balance date, and the total assets as at the balance date of the individual entity to which the
Banking Group has provided funding. Where financial statements for the individual entity are not publicly available, total assets from the publicly
available financial statements of the group of which the entity is a member have been used.

104

REGISTERED BANK DISCLOSURES

B8. RISK MANAGEMENT POLICIESInformation about risk
2023 has seen an elevation of geopolitical tensions and continuing uncertainty in the macroeconomic environment. These continue to posechallenges to operating conditions. We recognise that our customers are similarly affected by these, as well as by additional challenges such as
adverse weather events. Our Risk Management Framework (RMF) and practices have continued to evolve to meet such challenges.
The Board is ultimately responsible for establishing and overseeing the Banking Group’s RMF, which is supported by the Banking Group’s
underlying systems, structures, policies, procedures, processes and people. The Board has delegated authority to the Bank’s Board Risk
Committee (BRC) to develop and monitor compliance with the Banking Group’s risk management policies. The Committee reports regularly
to the Board on its activities. The key pillars of the Banking Group’s RMF include:• The Risk Management Strategy (RMS), which describes the approach for managing risks arising from the Banking Group’s purpose
and strategy. The RMS includes: how the risk function is structured to support the Banking Group’s purpose and strategy; the values,
attitudes and behaviours required of employees in delivering on strategic priorities; a description of each material risk; and an
overview of how the RMF addresses each material risk, with reference to the relevant policies, standards and procedures. It also
includes information on how the Banking Group identifies, measures, evaluates, monitors, reports and then either controls or
mitigates material risks and the oversight mechanism and/or committees in place.
• The Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding - for each material risk - the maximum level ofrisk the Banking Group is willing to accept in pursuing its strategic objectives and its operating plans considering its stakeholders’,
depositors’ and customers’ interests.
• Risk Culture is an intrinsic part of the Banking Group’s RMF and underpins the values, attitudes and behaviours of our employees which
drive the risk decisions we make.

Key material risks
The key material risks facing the Banking Group per our RMS, and how these risks are managed, are summarised below.
Our RMS acknowledges that climate change risk may manifest through our key material risks, most notably through financial risks such as credit risk.
The Banking Group’s most material climate change risk results from its lending to business, agri and retail customers, including credit-related losses
incurred through a customer being unable or unwilling to repay debt, or impacts to the value and liquidity of collateral. It may also result in additional
market, operational or other risks. Climate-related impacts are managed in accordance with the risk management strategies associated with theapplicable key material risks. The Banking Group is currently reviewing the classification of climate-related risk within our RMS and we expect todisclose the outcome of this review in 2024.
Each key material risk has an associated RAS component, and where applicable, is measured by appropriate metric(s) and associated tolerance(s)representing the maximum level of risk appropriate to execute the Banking Group’s strategic agenda. Metrics are prepared and reviewed at least
monthly. A risk appetite dashboard is prepared and reviewed by senior management monthly, and presented to the BRC at each meeting.
Risk type

Description

Managing the risk

Strategic
risk

Risks that affect or are created by an organisation’s businessstrategy and strategic objectives. A possible source of loss
might arise from the pursuit of an unsuccessful businessplan. For example, Strategic risk might arise from making
poor strategic business decisions, from the sub-standard
execution of decisions, from inadequate resource
allocation, or from a failure to respond well to changes in abusiness environment.

Strategic risks are discussed and managed through our strategicplanning and strategic execution monitoring processes, managed by
the Executive Committee and approved by the Board. Where thestrategy leads to an increase in other Key Material Risks (e.g. Credit
risk, Market risk, Operational risk) the risk management strategies
associated with these risks form the primary controls.

Capitaladequacyrisk

The risk of loss arising from the Banking Group failing tomaintain the level of capital required by prudential
regulators and other key stakeholders (shareholders, debt
investors, depositors, rating agencies, etc.) to support the
Banking Group’s consolidated operations and risk appetite.

We pursue an active approach to Capital Management, which isdesigned to protect the interests of depositors, creditors andstakeholders through ongoing review, and Board approval, of thelevel and composition of our capital base against key policy
objectives. The ICAAP also operates as part of the management
framework for this risk.

Credit risk

The risk of financial loss resulting from:• a counterparty failing to fulfil its obligations; or• a decrease in credit quality of a counterparty resulting
in a loss.
Credit risk incorporates the risks associated with ourlending to business, agri and retail customers who could be
impacted by climate change or by changes to laws,
regulations, or other policies adopted by governments or
regulatory authorities, including carbon pricing and climatechange adaptation or mitigation policies.
Includes:• concentrations of credit risk;• intra-day credit risk;• credit risk to bank counterparties; and• related party credit risk.

Our Credit risk framework is top down, being defined by credit
principles and policies. Credit policies, requirements and procedures
cover all aspects of the credit life cycle from initial approval and risk
grading, through ongoing management and problem debt
management.
The effectiveness of the Credit risk framework is assessed throughvarious compliance and monitoring processes. These, together withportfolio selection, define and guide the credit process, organisationand staff.

105

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B8. RISK MANAGEMENT POLICIES (continued)
Risk type

Description

Managing the risk

Liquidity
andfundingrisk

The risk that the Banking Group is unable to meet its
payment obligations as they fall due, including:• repaying depositors or maturing wholesale debt; or• the Banking Group having insufficient capacity to fundincreases in assets.

Key principles in managing our Liquidity and funding risk include:• the Banking Group’s short term liquidity scenario modelling
stresses cash flow projections against multiple survival horizons’over which the Banking Group is required to remain cash flow
positive; and• longer-term scenarios are in place that measure the structuralliquidity position of the balance sheet.

Operational
Risk

The risk of loss and/or non-compliance with laws resulting
from inadequate or failed internal processes, people and/or
systems, or from external events. This definition includes
legal risk, and the risk of reputation loss or damage arisingfrom inadequate or failed internal processes, people andsystems, but excludes strategic risk.

We manage Compliance and Operational risk in the best interests ofour customers and the community and to meet expectations of theregulators. The Compliance and Operational Risk Principles establish
the fundamental requirements at the Banking Group which inform
policies, processes, and procedure development of the Banking
Group’s management of Compliance and Operational risk, throughtimely and appropriate identification, action and monitoring. It is partof the the Banking Group’s RMF and the Banking Group’s I.AM
(Identify, Act, Monitor) Framework. We take a risk-based approach tothe management of operational risk and obligations. This enables
the Banking Group to be consistent in proactively identifying,assessing, managing, reporting and escalating operational riskrelated risk exposures.
Day-to-day management of operational risk is the responsibility ofbusiness unit line management and staff. Risk management is
supported by a strong Risk culture, which seeks to ensure all staff
manage risk on a daily basis – “Risk is Everyone’s Responsibility”.

Compliance risk

Key features of how we manage Compliance risk as part of our I.AM
Framework include:• centralised management of key obligations;• an emphasis on identification of changing regulations and thebusiness environment, to enable proactive assessment ofemerging compliance risk; and• recognition of incident management as a separate element toenhance the Banking Group’s ability to identify, manage andreport on incidents/breaches in a timely manner.

Conduct risk

Our approach to managing Conduct risk is to seek to ensure thatrisks to customers, community and market integrity are identified,assessed, measured, evaluated, treated, monitored and reported withappropriate governance and oversight.

The risk of failure to act in accordance with laws,
regulations, industry standards and codes, internal policies
and procedures and principles of good governance asapplicable to the Banking Group’s businesses.

The risk of loss or damage arising from the failure of the
Banking Group, its employees or agents to appropriately
consider the interests of customers, the integrity of thefinancial markets and the expectations of the community inconducting its business activities.

Technology risk

The risk of loss and/or non-compliance with laws frominadequate or failed internal processes, people or systems
that deliver technology assets and services to customers
and staff. This risk includes technology assets and services
delivered or managed by third parties, and external events.
The risk specifically includes information security and cybersecurity and how information held by the Banking Groupneeds to be protected from inappropriate modification,
loss, disclosure and unavailability.

106

The articulation of Conduct risk as a Risk Theme under the NonFinancial Risk (NFR) model will help manage Conduct Risk as a key
material risk for the Banking Group. To support the NFR model, theBanking Group developed a Conduct Risk Framework and Conduct
Risk taxonomy which facilitate a clear and consistent way ofmanaging and monitoring the risk, and the risk is managed inconjunction with the Compliance and Operational risk policy.
Our approach to managing Technology risk is to manage ouroperational risks caused by the use of technology, including risks
associated with cyber security and third party providers, in a mannerthat seeks to ensure customer information is secure and service
disruption is within acceptable levels.

REGISTERED BANK DISCLOSURES

B8. RISK MANAGEMENT POLICIES (continued)
Risk type

Description

Managing the risk

Marketrisk

The risk stems from our trading and balance sheet activities
and is the risk to the Banking Group’s earnings arising from:• changes in any interest rates, foreign exchange rates,
credit spreads, volatility, and correlations; orfluctuations in bond, commodity or equity prices.

We have a detailed market risk management and control framework
to support our trading and balance sheet activities, which
incorporates an independent risk measurement approach toquantify the magnitude of market risk within the trading and balance
sheet portfolios. This approach, along with related analysis, identifies
the range of possible outcomes, that can be expected over a given
period of time, and establishes the likelihood of those outcomes andallocates an appropriate amount of capital to support these activities.
The Banking Group’s key tools to measure and manage Market Risk
on a daily basis include value at risk, earnings at risk, interest ratesensitivities, market value loss limits and stress testing.

Financial
crime
risk

Financial crime risk covers the following risks at the Banking
Group:• Money Laundering (ML) risk – the risk that we may
reasonably face from our products and/or services
being misused to facilitate the processing of theproceeds of crime to conceal their illegal origins andmake them appear legitimate.
• Terrorism Financing (TF) risk – the risk that we may
reasonably face from our products and/or services
being misused to facilitate the provision or collection offunds with the intention or knowledge that they may
be used to carry out acts associated in support ofterrorists or terrorist organisations.
• Sanctions risk – the risk of failing to comply with laws
and regulations relating to sanctions imposed bygovernments and multinational bodies as a result ofour products and services being misused to facilitateprohibited sanctions activities.
• Fraud risk – the risk that we may reasonably face fromour products and/or services being misused to facilitate
intentional acts by one or more individuals, involving
the use of deception to obtain an unjust or illegal
advantage arising from internal or external sources.

Financial crime risk at the Banking Group is managed using a riskbased approach in conjunction with the Compliance andOperational Risk Framework (I.AM) and a three lines of defence
model. However, for Sanctions, in addition to a risk-based approach
to risk management, there is a rules-based lens to ensure compliancewith Sanctions legislation. For the Business to identify and manage
Financial crime risk, it must identify its regulatory obligations andimpacted business activities and maintain and monitor key controls.

Refer to Note 15 Financial risk management for the disclosures required under NZ IFRS 7 Financial Instruments: Disclosures.

Other material risks
Other material risks do not require the same degree of active or transactional management as the Key material risks and are managed and monitored
as part of the Banking Group’s business, strategic and capital management process. The maximum level of risk is set as part of the Banking Group’s
ICAAP. Refer to Note 22 Capital management for more information about the Banking Group’s ICAAP, and the section ‘Capital for other material risks’in Note B4 for the capital held for these risks.
PensionRisk

The risk of the value of investments in a defined benefit pension fund being insufficient to meet liabilities, resulting in additional
funds being required to match pension liabilities.

Strategic
Equity Risk

The risk of financial loss arising from the unexpected reduction in value of the Banking Group equity investments not held in the
trading book, including the Banking Group’s joint ventures and associates.

Fixed Asset
Risk

The risk of financial loss arising from the negative revaluation of fixed assets owned and leased by the Banking Group, caused byadverse changes in business and/or economic conditions. Residual Value Risk is included in the definition of Fixed Assets, which is
the risk that the market value of the underlying assets of operating leases may fall below the anticipated residual value.

Deferred
Acquisition
Costs Risk

The risk of loss arising from the failure of the benefits associated with the acquisition of interest earning assets to arise due toimpairment, transfer, or prepayment.

SoftwareRisk

The risk of financial loss arising from the unexpected accelerated write down of capitalised software expenditure due todiminished future economic benefits caused by adverse business or economic conditions.

Goodwill
Risk

The risk of financial loss caused by the reduction in the net carrying value of acquired business resulting from lower than expected
future economic benefits due to adverse business and economic conditions.

107

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTREGISTERED BANK DISCLOSURES
B8. RISK MANAGEMENT POLICIES (continued)
Capital adequacy
Refer to Note 22 Capital management for the disclosures required under NZ IAS 1 Presentation of financial statements.
Reviews of the Banking Group’s risk management systems
Refer to Note 15 Financial risk management for details of the Internal Audit Function’s reviews of the Banking Group’s RMF. These reviews are notconducted by a party external to the Banking Group or the Ultimate Parent Bank.
Internal Audit Function of the Banking Group
The Banking Group has an Internal Audit Function, refer to Note 15 Financial risk management for details.
The nature and scope of the responsibilities of the Audit Committee, to which Internal Audit reports, are to assist the Board of Directors by providing
oversight and review of:• the Banking Group's financial reporting principles and policies, controls, systems and procedures;• the effectiveness of the Banking Group’s internal control and risk management framework;• the work and internal audit standards of Internal Audit which reports directly and solely to the Chair of the Audit Committee;• the integrity of the Banking Group's financial statements and the independent audit thereof, and the Banking Group’s compliance with legal
and regulatory requirements in relation thereto;• any due diligence procedures;• prudential supervision procedures and other regulatory requirements to the extent relating to financial reporting; and• any other matters referred to it by the Board.
The Audit Committee is also responsible for:• the appointment, annual evaluation and oversight of the external auditor;• annual review of the independence, fitness and propriety, and qualifications of the external auditor;• compensation of the external auditor; and• where deemed appropriate, replacement of the external auditor.
In carrying out its responsibilities and duties, the Audit Committee will aim to seek fair customer outcomes and financial market integrity in its
deliberations.
Measurement of impaired assets
Refer to Note 12 Allowance for expected credit losses and Note 15 Financial risk management for details of the Banking Group’s approach tomeasurement of impaired assets. Further to this, impairment is assessed monthly, with individual allowances for credit impairment also updated
monthly and collective allowances for credit impairment updated quarterly.
Credit risk mitigation
Refer to Note 18 Offsetting for the policies and processes for, and extent of, on-balance sheet netting. The same policies and processes apply to offbalance sheet credit related commitments. No off-balance sheet credit related commitments or guarantees meet the criteria for netting.
As an IRB bank, the Banking Group uses the comprehensive method to measure the mitigating effects of collateral.
The Banking Group assesses the integrity and ability of counterparties to meet their contractual financial obligations for repayment. The Banking
Group generally takes collateral security in the form of real property or a security interest in personal property, except for major government, bank andcorporate counterparties of strong financial standing. Longer term consumer finance, in the form of housing loans, is generally secured against realestate while short term revolving consumer credit is generally unsecured.

108

REGISTERED BANK DISCLOSURES

B8. RISK MANAGEMENT POLICIES (continued)
Additional information about credit risk

Implementation of the advanced internal ratings based approach to credit risk measurement
The Banking Group adheres to the standards of risk grading and risk quantification as set out for IRB banks in the RBNZ Banking Prudential
Requirements (BPRs). Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers andexposures, by way of the primary components of:•••

Probability of Default (PD): An estimate of the level of risk of borrower default graded by way of rating models used both at loan origination andfor ongoing monitoring.
Exposure at Default (EAD): The expected facility exposure at default.
Loss Given Default (LGD): An estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default andexpressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn LGDs according toloan to value (LVR) bands as set out in BPR133: IRB Credit Risk RWAs. For farm lending exposures the Banking Group is required to adopt RBNZ
prescribed downturn LVR based LGDs, along with a minimum maturity of 2.5 years and the removal of the firm-size adjustment as set out in
BPR133: IRB Credit Risk RWAs.

For exposures classified under Specialised Lending, the Banking Group uses slotting tables approved by RBNZ rather than internal estimates.
The exceptions to IRB treatment are Sovereign, Bank, Equity, Other, Qualifying Central Counterparty (QCCP) and two minor corporate exposure types
where, due to systems constraints, determining these IRB risk estimates is not currently feasible or appropriate. Risk weights for these exposures arecalculated under a separate treatment as set out in the RBNZ document BPR131: Standardised Credit Risk RWAs.

Internal ratings based approach
IRB Asset Class

Borrower Type

Rating Approach

Corporate

Corporation, partnerships or proprietorships that do not fit any other asset classification

IRB - Advanced

Corporate Small to Medium Enterprises (SME) with turnover of less than NZ$50 million

IRB - Advanced

Retail Mortgages

Individuals' borrowings against residential property

IRB - Advanced

Other Retail

Other lending to individuals (including credit cards)

IRB - Advanced

SME business borrowers

IRB - Advanced

Project finance

IRB - Slotting

Income producing real estate

IRB - Slotting

Corporate sub-class- Specialised lendingStandardised approach
Exposure Class

Exposure Type

Reason for Standardised Approach

Future Treatment

Sovereign

Crown

Required by BPRs

Standardised

RBNZ

Required by BPRs

Standardised

Any other sovereign and its central bankRequired by BPRs

StandardisedBank

Required by BPRs

Standardised

EquityRequired by BPRs

Standardised

Other

All other assets not falling within any of the above classes

Required by BPRs

Standardised

Corporate

QCCP

Required by BPRs

Standardised

Merchant card prepayment exposures

System constraints

Move to IRB

Corporate credit cards

System constraints

Move to IRB

Controls surrounding credit risk rating systems
The term “Rating Systems” covers all of the methods, processes, controls, data collection and technology that support the assessment of credit risk, theassignment of internal credit risk ratings and the quantification of associated default and loss estimates.
All material aspects of the Rating Systems and risk estimate processes are governed by the BRC. Risk grades are an integral part of reporting to senior
management and executives. Management and staff of credit risk functions, in conjunction with the relevant Retail and Wholesale Risk committees,
regularly assess the performance of the rating systems, identify any areas for improvement and monitor progress on previously identified
development work needed.
The Banking Group's Rating Systems are governed by a comprehensive framework of controls that operate at the business unit and support centres,
and through central audit and validation processes. All policies, model designs, model reviews, methodologies, validations, responsibilities, systems
and processes supporting the ratings systems are fully documented.
The Banking Group's Retail and Wholesale ratings functions work closely with the Ultimate Parent Bank's risk ratings functions, are independent ofoperational lending activities and are responsible for the ratings strategies and ongoing management of credit risk models within New Zealand. The
annual review of models used across the Banking Group is a function undertaken by the ANZ Credit Model Validation Unit, which is also independentof credit risk operational functions and is responsible for overseeing the design, implementation and performance of all rating models in the Banking
Group.
The target approach to modelling for the Banking Group is to deploy the model most suitable for the environment. At present this involves anapproach to modelling that combines models developed in New Zealand and models developed by the Ultimate Parent Bank, tested and validated
for use in New Zealand, as appropriate.

109

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTDIRECTORS' STATEMENT
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:•

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014; and•The Disclosure Statement is not false or misleading.

Over the year ended 30 September 2023, after due enquiry, each Director believes that:•

ANZ Bank New Zealand Limited has complied in all material respects with each condition of registration that applied during that period1;•

Credit exposures to connected persons were not contrary to the interests of the Banking Group; and•ANZ Bank New Zealand Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that thosesystems were being properly applied.

1

In accordance with the Order, ANZ Bank New Zealand Limited has complied in all material respects with each of its conditions of registration that applied during the period if RBNZ has not
published any information about a breach on its website, and has not notified ANZ Bank New Zealand Limited of any material breach.

This Disclosure Statement is dated, and has been signed by all Directors of the Bank on, 10 November 2023.

Shayne Elliott

Gerard Florian

Alison GerryRt Hon Sir John Key, GNZM AC

Scott St JohnMark Tume

Antonia Watson

Joan Withers

110ASSURANCE REPORTS

INDEPENDENT AUDITOR’S REPORTS ON THE REGISTERED BANK DISCLOSURESTO THE SHAREHOLDER OF ANZ BANK NEW ZEALAND LIMITED
AUDIT REPORT ON THE REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5, B6, B7 AND B8OPINION
We have audited the accompanying registered bank disclosures of ANZ Bank New Zealand Limited (the Bank) and its subsidiaries (the Banking
Group) in sections B2, B3, B5, B6, B7 and B8 on pages 86 to 95 and 101 to 109. These comprise the information that is required to be disclosed inaccordance with schedules 4, 7, 13, 14, 15 and 17 of the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks)
Order 2014 (the Order).
In our opinion, the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8:• present fairly, in all material respects, the matters to which they relate; and• are disclosed, in all material respects, in accordance with schedules 4, 7, 13, 14, 15 and 17 of the Order.

BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)). We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Banking Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance
Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Boardand the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code.
Our responsibilities under ISA’s (NZ) are further described in the auditor’s responsibilities for the audit of the registered bank disclosures in sections B2,
B3, B5, B6, B7 and B8 section of our report.
Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance or reviews and agreed upon procedures engagements. Subject to certain restrictions, partners and employees of our firm may also deal
with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These matters have not
impaired our independence as auditor of the Banking Group. The firm has no other relationship with, or interest in, the Banking Group.
OTHER INFORMATIONThe Directors, on behalf of the Banking Group, are responsible for the Banking Group’s general disclosures in section B1 (the Other Information)required to be included in the Banking Group’s Disclosure Statement in accordance with Schedule 2 of the Order.
Our opinion on the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 does not cover the Other Information, and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 our responsibility is to read the Other Information
and, in doing so, consider whether the Other Information is materially inconsistent with the registered bank disclosures in sections B2, B3, B5, B6, B7
and B8 or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that
there is a material misstatement of the Other Information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR THE REGISTERED BANK DISCLOSURES IN SECTIONS B1, B2, B3, B5, B6,
B7 AND B8
The Directors, on behalf of the Banking Group, are responsible for:• the preparation and fair presentation of the registered bank disclosures in accordance with schedules 2, 4, 7, 13, 14, 15 and 17 of the Order; and• implementing necessary internal control to enable the preparation of registered bank disclosures that are free from material misstatement,
whether due to fraud or error.

111

ANZ BANK NEW ZEALAND LIMITED 2023 ANNUAL REPORTASSURANCE REPORTS
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE REGISTERED BANK DISCLOSURES IN SECTIONS B2, B3, B5,
B6, B7 AND B8
Our objective is:••

to obtain reasonable assurance about whether the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8, prepared in accordance withschedules 4, 7, 13, 14, 15 and 17 of the Order as a whole are free from material misstatement, whether due to fraud or error; andto issue an independent auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always detect amaterial misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8.
A further description of our responsibilities for the audit of the registered bank disclosures in sections B2, B3, B5, B6, B7 and B8 is located at the External
Reporting Board (the XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.

KPMG
Auckland10 November 2023

LIMITED ASSURANCE REPORT ON THE CAPITAL ADEQUACY AND REGULATORY LIQUIDITY RATIOS DISCLOSURESIN SECTION B4
CONCLUSION
We have reviewed the capital adequacy and regulatory liquidity ratios disclosures in section B4 on pages 96 to 100 (the Capital Adequacy and
Liquidity Disclosures), which comprise the information that is required to be disclosed in accordance with schedule 11 of the Order.
Based on our limited assurance conclusion, which is not a reasonable assurance engagement or audit, nothing has come to our attention thatwould lead us to believe that the Capital Adequacy and Liquidity Disclosures are not, in all material respects disclosed in accordance withschedule 11 of the Order.
STANDARDS WE FOLLOWED
We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (New Zealand) 3000
(Revised) Assurance Engagements other than audits or reviews of historical financial information and Standard on Assurance Engagements 3100
(Revised) Assurance Engagements on Compliance. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our conclusion. In accordance with those standards we:• used our professional judgement to plan and perform the engagement to obtain limited assurance that the Capital Adequacy and Liquidity
Disclosures are free from material misstatement and non-compliance, whether due to fraud or error;• considered relevant internal controls when designing our assurance procedures, however we do not express a conclusion on the effectiveness ofthese controls; and• ensured that the engagement team possess the appropriate knowledge, skills and professional competencies.
HOW TO INTERPRET LIMITED ASSURANCE AND MATERIAL MISSTATEMENT AND NON-COMPLIANCE
In a limited assurance engagement, the assurance practitioner performs procedures, primarily consisting of discussion and enquiries ofmanagement and others within the entity, as appropriate, and observation and walk-throughs, and evaluates the evidence obtained. The
procedures selected depend on our judgement, including identifying areas where the risk of material misstatement and non-compliance withschedule 11 of the Order is likely to arise.
The procedures performed in a limited assurance engagement vary in nature and timing from and are less in extent than for a reasonable assurance
engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would
have been obtained had a reasonable assurance engagement been performed.
Misstatements, including omissions, within the Capital Adequacy and Liquidity Disclosures and non-compliance are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the relevant decisions of the intended users taken on the basis of
the Capital Adequacy and Liquidity Disclosures.

112

ASSURANCE REPORTS

INHERENT LIMITATIONS
Because of the inherent limitations of an assurance engagement, together with the internal control structure it is possible that fraud, error or noncompliance with compliance requirements may occur and not be detected.
USE OF THIS INDEPENDENT LIMITED ASSURANCE REPORTThis independent limited assurance report is made solely to the Bank’s shareholder. Our assurance work has been undertaken so that we might state
to the shareholder those matters we are required to state to them in the assurance report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume any responsibility to anyone other than the shareholder for our assurance work, for this independent limited
assurance report, and/or for any of the conclusions we have reached.
DIRECTOR’S RESPONSIBILITY FOR THE CAPITAL ADEQUACY AND LIQUIDITY DISCLOSURESThe Directors are responsible for the preparation of the Capital Adequacy and Liquidity Disclosures that are required to be disclosed in accordancewith schedule 11 of the Order, which the Directors have determined to meet the needs of the recipients. This responsibility includes such internal
control as the Directors determine is necessary to enable the preparation of the Capital Adequacy and Liquidity Disclosures that are free frommaterial misstatement and non-compliance whether due to fraud or error.
OUR RESPONSIBILITY FOR THE CAPITAL ADEQUACY AND LIQUIDITY DISCLOSURESOur responsibility is to express a conclusion on whether anything has come to our attention that the Capital Adequacy and Liquidity Disclosures
have not, in all material respects, been disclosed in accordance with schedule 11 of the Order for the six-month period ended 30 September 2023.
OUR INDEPENDENCE AND QUALITY CONTROL
We have complied with the independence and other ethical requirements of Professional and Ethical Standard 1 International Code of Ethics for
Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and AssuranceStandards Board, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality andprofessional behaviour.
The firm applies Professional and Ethical Standard 3 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements and accordingly maintains a comprehensive system of quality control including documented policies
and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Our firm has also provided other services to the Banking Group in relation to review of regulatory returns, internal controls reports, prospectus
assurance, agreed upon procedures and other assurance engagements. Subject to certain restrictions, partners and employees of our firm may also
deal with the Banking Group on normal terms within the ordinary course of trading activities of the business of the Banking Group. These mattershave not impaired our independence as assurance providers of the Banking Group for this engagement. The firm has no other relationship with, orinterest in, the Banking Group.

KPMG
Auckland10 November 2023

113