ANZ Basel II Pillar 3 disclosure

December 2010

2010

BASEL IIPILLAR 3 DISCLOSURE

IN ACCORDANCE WITH APS 330
QUARTER ENDED 31 DECEMBER 2010

ANZ Basel II Pillar 3 disclosure

December 2010

Important noticeThis document has been prepared by Australia and New Zealand Banking Group Ltd (ANZ, or theGroup) to meet its disclosure obligations under the Australian Prudential Regulation Authority (APRA)APS 330 Capital Adequacy: Public Disclosure of Prudential Information.
This quarterly disclosure was prepared as at 31 December 2010. ANZ has a continuous disclosure
policy, under which ANZ will immediately notify the market of any material price sensitive information
concerning the Group, in accordance with legislative and regulatory disclosure requirements.

ANZ Basel II Pillar 3 disclosure

December 2010

Table 16: Capital adequacy – Capital ratios and Risk Weighted Assets 1
Dec-10$M

Sep-10$M

Mar-10$M

Corporate

99,984

101,940

100,945

Sovereign

2,827

2,720

2,470

Bank

5,838

6,135

5,108

Residential Mortgage

39,55838,70837,423

Subject to Advanced Internal Rating Based (IRB) approach

Qualifying Revolving Retail

7,229

7,2057,238

Other Retail

18,22017,89917,942

173,656

174,607

171,126

27,21526,60524,965

Corporate

20,65021,281

16,330

Sovereign---

Bank--

-

570

567

399

Qualifying Revolving Retail

1,826

1,841

4

Other Retail

1,773

1,113

560

24,81924,802

17,293Credit risk weighted assets relating to securitisation exposures

1,846

2,091

1,975

Credit risk weighted assets relating to equity exposures

1,622

1,577

1,639

Other assets

3,906

3,835

3,377

233,064

233,517220,375

Credit risk weighted assets subject to Advanced IRB approach
Credit Risk Specialised Lending exposu res subject to slotting criteria
Subject to Standardised approach

Residential Mortgage

Credit risk weighted assets subject to Standardised approach

Total credit risk weighted assets
Market risk weighted assets

3,260

5,652

3,969

Operational risk weighted assets

17,265

17,383

16,481

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

8,509

7,690

8,136

262,098

264,242

248,961

Level 2 Total capital ratio

11.9%

11.9%

13.0%

Level 2 Tier 1 capital ratio

10.3%

10.1%

10.7%TOTAL RISK WEIGHTED ASSETS
Capital ratios (%)

Risk Weighted Assets (RWA)
Total RWA decreased by $2.1 billion (0.8%) in the December 2010 quarter, mainly due to a decreasein Market Risk RWA of $2.4 billion.

Credit Risk Weighted Assets
The key drivers for the small movement in Credit RWA were portfolio growth in Specialised Lending
and Advanced IRB Residential Mortgages, offset by a decrease in the Advanced IRB Corporate due toexchange rate impacts and some improvement in credit quality.

Market Risk, Operational Risk and IRRBB Risk Weighted Assets
Market Risk RWA peaked in September 2010 due to an increase in the risk held over that quarter
relative to other periods. During this period the most significant market risk exposure was toAustralian short term interest rates. This risk has mostly been reduced since September and the RWA
for December was back to the long run average. It is expected that such short term increases inmarket risk will occasionally occur over 2011. Whilst Operational Risk RWA remained relatively stable
over the quarter, the increase in IRRBB was due to an increase in repricing and yield curve risk.

1
Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing andrepayment is from the asset being financed, and includes specified commercial property development/investment
lending, project finance and object finance.

1

ANZ Basel II Pillar 3 disclosure

December 2010

Table 17: Credit risk exposures 2 3 4Table 17(a) (i): Regulatory credit exposures by asset class

Dec-10$M

Sep-10$M

Mar-10$M

Average for thequarter ended
Dec-10$M

Corporate

156,771

158,224

155,116

157,498

Sovereign38,911

35,09934,78637,005Bank

32,41332,681

27,95232,547
222,836

Advanced IRB

Residential Mortgag e

225,618

220,055

208,508

Qualifying Revolving Retail

20,917

20,764

20,396

20,841Other Retail28,57028,282

28,25028,426

Total Advanced IRB

503,200

495,105

475,008

499,153

Specialised Lendin g (subject to slotting criteria)

29,374

27,835

26,86228,605

Standardised
Corporate

20,654

21,282

16,331

20,968

Sovereign----

Bank----

1,381

1,479

1,135

1,430

Qualifying Revolving Retail

1,826

1,841

4

1,834Other Retail

1,772

1,112

560

1,442

Total Standardised

25,63325,714

18,03025,674

Total Exposure

558,207548,654519,900

553,431Mar-10$M

Average for thequarter ended
Dec-10$M

Residential Mortgag e

Table 17(a) (ii): Regulatory credit exposure by facility type 5

Facility Type

Dec-10$M

Accep tances

Sep-10$M

624

11,495

12,5 10

6,060

Cash and liquid assets

14,802

11,353

13,5 21

13,078Contingents, commitments, other off balance sheet

110,510

110,437

103,8 68

110,473

5796

41

77

21,88021,92914,1 51

21,904Creditors an d other liab ilities
Derivatives
Due from other financial institutions

7,406

4,806

6,3 53

6,106

Investment securities

17,831

19,501

16,3 81

18,666Loans and advances

368,087

346,177

330,9 63

357,131

1,330

1,485

5 82

1,408

155

2 34

28

Trading securities

15,67921,32021,2 96

18,500Total Exposures558,207548,654519,900

553,431

Other assets
Total deposits and other borrowings

2In accordance with APS 330, regulatory credit exposure in Table 17(a)(i) and (ii) includes Advanced IRB,
Specialised Lending and Standardised exposures, however does not include Securitisation, Equities or Other Assets
exposures.
3Regulatory credit exposure in Table 17(a)(i) and (ii) is net of credit risk mitigation such as guarantees, credit
derivatives, netting and financial collateral.
4

The period averages in Table 17(a)(i) and (ii) are calculated as the simple average of the last two quarters’ closingbalance.

5The reduction in Acceptances and in Trading securities reflects ANZ's decision to move away from re-discounting
Commercial Bills. Such exposures are now recorded within Loans and advances, as they are no longer held for
trading purposes.

2ANZ Basel II Pillar 3 disclosure

December 2010

Table 17(b): Impaired assets, Past due loans, Provisions and Write-offs by Industry sector 6 7 8 9Impaired
Derivatives$M

Individual
provisionbalance$M

Past dueloans ≥ 90days
$M

ImpairedLoans / Facilities$M

Individual
provision
charge$M

Write-offs$M

Dec-10

Sep-10Mar-10Dec-10

Sep-10Mar-10Dec-10

Sep-10Mar-10Dec-10

Sep-10Mar-10ThreemonthsendingDec-10SixmonthsendingSep-10Sixmonthsending
Mar-10ThreemonthsendingDec-10SixmonthsendingSep-10SixmonthsendingMar-10

Corporate
Specialised Lending
SovereignBank
Residential Mortgage
Qualifying Revolving Retail
Other Retail

13
17-

33
18-

47
20-

3,162
1,511
86
544
344

3,331
1,509
97
574
362

3,524
1,801
123
511
344

220
108
973
81
143

233
65
881
84
139

258
80
849
78
141

649
265
19
198
209

751
214
28
215
225

797
219
33
234
202

98
57
(7)
10
58
61

227
155
(5)
65
109
140

474
151
(18)
97
107
162

191
2
22
68
63

197
144
65
134
156

440
136
8
52128
174Total Advanced IRB approach

30

51

67

5,647

5,873

6,303

1,525

1,402

1,406

1,340

1,433

1,485

277

691

973

346

695

938

Corporate
SovereignBank
Residential Mortgage
Qualifying Revolving Retail
Other Retail-

--

353
21
103
198

298
21
106
212

144
17
30

99
1
1340

97
3
13
40

94
419

174
7103
169

156
6106
174

77
526

61
1
9

14
4(3)
38

28
2
23

3
13

1
7
27

124

Total Standardised approach

---

675

637

191

153

153

117

453

442

108

1753

53

16

35

25

Total

30

51

67

6,322

6,510

6,494

1,678

1,555

1,523

1,793

1,875

1,593

294

744

1,026

362

730

963

Portfolios subject to Advanced
IRB approach

Portfolios subject toStandardised approach

6
Impaired derivatives include a Credit Valuation Adjustment (CVA) of $85 million, being a market value based assessment of the credit risk of the relevant counterparties (September 2010: $77million; March 2010: $61 million).
7
Impaired loans / facilities include restructured items of $697 million for customer facilities in which the original terms have been modified to provide for concessions of interest, or principal, orother payments due, or for an extension in maturity for a non-commercial period for reasons related to the financial difficulties of a customer (September 2010: $141 million; March 2010: $560million).
8Past due loans ≥ 90 days includes $1,581 million well secured loans (September 2010: $1,416 million; March 2010: $1,370 million).

9The Individual provision charge relates to Loans and advances, and does not include impairment on Available-For-Sale assets (December 2010: Nil; September 2010: $1 million; March 2010: $20million).

3ANZ Basel II Pillar 3 disclosure

December 2010

Table 17(c): Specific Provision balance and General Reserve for Credit Losses 10Dec-10$MGeneralSpeci fic Reserve for
Provision
Creditbalance
LossesSep-10$M

Total

GeneralSpecific Reserve for
CreditProvision
LossesbalanceMar-10$M

Total

GeneralSpecific Reserve for
Provision
Creditbalance
LossesTotal

Collective Provision

234

2,902

3,136

233

2,920

3,153

260

2,777

3,037

Indivi dual Provision

1,793

-

1,793

1,875-

1,875

1,593-

1,593

Total Provision for Credit Impairment

4,929105,028

4,630

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

4ANZ Basel II Pillar 3 disclosureDecember 2010

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ANZ Basel II Pillar 3 disclosure

December 20096