2 May 2017
Company Announcements
Australian Securities Exchange
Level 420 Bridge Street
SYDNEY NSW 2000
Australia and New Zealand Banking Group Limited (ABN 11 005 357 522)(“ANZ”) - Half-Yearly Financial Report submission under the Disclosure andTransparency Rules of the United Kingdom Financial Conduct Authority (“UKDTR Submission”)
The attached UK DTR Submission will be lodged by ANZ with the London Stock Exchange
today, together with ANZ’s Half Year Results for the six month period ended 31 March2017. This UK DTR Submission has been prepared by ANZ in order to comply with theapplicable periodic reporting requirements of DTR 4 of the Disclosure and Transparency
Rules of the United Kingdom Financial Conduct Authority in connection with certain debt
securities issued by ANZ. For completeness, ANZ is lodging this UK DTR Submission with
the Australian Securities Exchange and the New Zealand Stock Exchange today.
Yours faithfully

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

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

DISCLOSURE AND TRANSPARENCY RULES – HALF-YEARLY FINANCIAL REPORTSUBMISSION
Australia and New Zealand Banking Group Limited (ANZ) – Half-yearly financial
report under the ‘Disclosure and Transparency Rules’ (DTR)
The following attached documents constitute ANZ’s 2017 half-yearly financial report forthe purposes of the disclosure requirements of DTR 4.2:


The Condensed Consolidated Financial Statements and Notes to the Condensed
Consolidated Financial Statements for the half year ended 31 March 2017, Directors’
Report (including matters included by reference) and Directors’ Declaration (as set
out on pages 74 to 102 of ANZ’s Half Year 31 March 2017 Consolidated Financial
Report Dividend Announcement and Appendix 4D);



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

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

ANZ’s Half Year 31 March 2017 Consolidated Financial Report Dividend
Announcement and Appendix 4D
Copy previously lodged with ASXAustralia and New Zealand Banking Group Limited

ABN 11 005 357 522

Principal risks and uncertainties for the remaining six months of the financial
year (DTR 4.2.7 (2))
PRINCIPAL RISKS AND UNCERTAINTIES
1. Introduction
The Group’s activities are subject to risks that can adversely impact its business,
operations and financial condition. The risks and uncertainties described below are notthe only ones that the Group may face. Additional risks and uncertainties that the Groupis unaware of, or that the Group currently deems to be immaterial, may also become
important factors that affect it. If any of the listed or unlisted risks actually occurs, theGroup’s business, operations, financial condition, or reputation could be materially andadversely affected, with the result that the trading price of the Group’s equity or debt
securities could decline, and investors could lose all or part of their investment.
2. Changes in political and general business and economic conditions, including
disruption in regional or global credit and capital markets, may adversely
affect the Group’s business, operations and financial condition
The Group’s financial performance is primarily influenced by the political and economic
conditions and the level of business activity in the major countries and regions in which
it operates or trades, i.e., Australia, New Zealand, Asia Pacific, Europe and the UnitedStates. The Group’s business, operations, and financial condition can be negatively
affected by changes in political and economic and business conditions in these markets.
The economic and business conditions that prevail in the Group’s major operating andtrading markets are affected by domestic and international economic events, politicalevents and natural disasters, and by movements and events that occur in global financial
markets.
For example, the global financial crisis that commenced in 2007 saw a sudden andprolonged dislocation in credit and equity capital markets, a contraction in global
economic activity and the emergence of many challenges for financial services
institutions worldwide that still persist to some extent in many regions. Sovereign risk
and its potential impact on financial institutions in Europe and globally subsequently
emerged as a significant risk (see risk factor 5 ‘Sovereign risk may destabilise global
financial markets adversely affecting all participants, including the Group’).
The impact of the global financial crisis and its aftermath continue to affect regional andglobal economic activity, confidence and capital markets. Prudential authorities have
implemented and continue to implement increased regulations to mitigate the risk ofsuch events recurring, although there can be no assurance that such regulations will beeffective. The global financial crisis has also had a lasting effect on consumer andbusiness behaviour in the advanced economies. Consumers have acted more cautiously,
while businesses have been reluctant to invest and inflation has remained low. Monetary
authorities responded by introducing zero and near-zero interest rates across mostcountries, while the major central banks have taken unconventional steps to support
growth and raise inflation. While some economic factors have recently improved andsome monetary authorities have begun to increase interest rates, lasting impacts fromthe global financial crisis and the potential for escalation in geopolitical risks suggest
ongoing vulnerability and potential adjustment of consumer and business behaviour. On
23 June 2016, the United Kingdom voted to leave the European Union in a referendum
and on 29 March 2017 gave notice under Article 50 of the Treaty on European Union tocommence the legal process to end the United Kingdom’s membership in the European
Union. The Group expects there will be an extended period of increased uncertainty andvolatility in the global financial markets while the details of the departure (known as
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

‘Brexit’) are negotiated. The United Kingdom’s decision to leave the European Union may
adversely affect the Group’s ability to raise medium or long term funding in theinternational capital markets. There is potential for further consequences of Brexit toadversely impact the financial markets. In addition, a series of elections in key Eurozone
countries during 2017, particularly in France and Germany, could heighten risk to theglobal business environment and increase market volatility.
Furthermore, since the start of his presidency in the United States in January 2017,
President Donald Trump has outlined a political and economic agenda that, in certain
ways, significantly differs from previous U.S. trade, tax, fiscal, regulatory and otherpolicies. The extent, implementation and outcome of policy changes resulting fromPresident Trump’s agenda, and the consequences for global trade, the broader global
economy and financial markets, are uncertain, and may negatively impact the Group.
Other current economic conditions impacting the Group and its customers include
changes in the commercial and residential real estate markets in Australia and New
Zealand (see risk factor 6 ‘Weakening of the real estate markets in Australia, New
Zealand or other markets where the Group does business may adversely affect its
business, operations and financial condition’). The demand for natural resources is also
an important economic influence given that sector is a significant contributor toAustralia’s economy and that sector’s significant exposure to Asia, particularly China andChina’s economic growth (see risk factor 21 ‘An increase in the failure of third parties tohonour their commitments in connection with the Group’s trading, lending, derivatives
and other activities may adversely affect its business, operations and financial
condition’).
Should difficult economic conditions in the Group’s markets eventuate, asset values in
the housing, commercial or rural property markets could decline, unemployment could
rise and corporate and personal incomes could suffer. Also, deterioration in global
markets, including equity, property, currency and other asset markets, could impact theGroup’s customers and the security the Group holds against loans and other credit
exposures, which may impact its ability to recover loans and other credit exposures.
All or any of the negative economic and business impacts described above could cause areduction in demand for the Group’s products and services and/or an increase in loan
and other credit defaults and bad debts, which could adversely affect the Group’sbusiness, operations, and financial condition.
The Group’s financial performance could also be adversely affected if the Group wereunable to adapt cost structures, products, pricing or activities in response to a drop in
demand or lower than expected revenues. Similarly, higher than expected costs(including credit and funding costs) could be incurred because of adverse changes in theeconomy, general business conditions or the operating environment in the countries inwhich the Group operates.
Geopolitical instability, such as threats of, potential for, or actual conflict, occurringaround the world, such as the ongoing unrest and conflicts in Ukraine, North Korea,
Syria, Egypt, Afghanistan, Iraq and elsewhere, as well as the current high threat ofterrorist activities, may also adversely affect global financial markets, general economic
and business conditions and the Group’s ability to continue operating or trading in acountry, which in turn may adversely affect the Group’s business, operations, andfinancial condition.
Natural and biological disasters such as, but not restricted to, cyclones, floods, droughts,
earthquakes and pandemics, and the economic and financial market implications of suchdisasters on domestic and global conditions can adversely impact the Group’s ability tocontinue operating or trading in the country or countries directly or indirectly affected,
which in turn may adversely affect the Group’s business, operations and financial
condition. In March 2017, certain of the Group’s customers were affected by Cyclone
Debbie in Queensland and New South Wales. For further discussion in relation to natural
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

and biological disasters, refer to risk factor 23 ‘The Group may be exposed to the impactof future climate change, geological events, plant, animal and human diseases, andother extrinsic events which may adversely affect its business, operations and financial
condition’.
Other economic and financial factors or events that may adversely affect the Group’s
performance, and give rise to operational and markets risk are covered in risk factors 13(‘The Group is exposed to market risk, which may adversely affect its business,
operations and financial condition’) and 14 (‘Changes in exchange rates may adversely
affect the Group’s business, operations and financial condition’).
3. Competition may adversely affect the Group’s business, operations andfinancial condition, in the markets in which the Group operates
The markets in which the Group operates are highly competitive and could become evenmore so. Factors that contribute to competition risk include industry regulation, mergers
and acquisitions, changes in customers’ needs and preferences, entry of newparticipants, development of new distribution and service methods and technologies,
increased diversification of products by competitors, and regulatory changes in the rules
governing the operations of banks and non-bank competitors. For example, changes in
the financial services sector in Australia and New Zealand have made it possible for nonbanks to offer products and services traditionally provided by banks, such as payments,
home loans, and credit cards. In addition, existing companies from outside of the
traditional financial services sector may seek to obtain banking licences to directlycompete with the Group by offering products and services traditionally provided bybanks. In addition, banks organised in jurisdictions outside Australia and New Zealandare subject to different levels of regulation and some may have lower cost structures.
Increasing competition for customers could also potentially lead to a compression in theGroup’s net interest margins or increased advertising and related expenses to attract
and retain customers.
Digital technologies and business models are changing customer behaviour and thecompetitive environment. Emerging competitors are increasingly utilising newtechnologies and seeking to disrupt existing business models in the financial services
sector.
The Group relies on bank deposits to fund a significant portion of its balance sheet.
Increased competition for deposits could increase the Group’s cost of funding. The Group
competes with banks and other financial services firms for such deposits. To the extent
that the Group is not able to successfully compete for deposits, the Group would beforced to rely more heavily on other, less stable or more expensive forms of funding, orto reduce lending. This could adversely affect the Group’s business, prospects, financial
performance or financial condition.
The impact on the Group of an increase in competitive market conditions or atechnological change that puts ANZ’s business platforms at a competitive disadvantage,
especially in the Group’s main markets and products, would potentially lead to a material
reduction in market share and margins, which would adversely affect the Group’s
financial performance and position.
4. Changes in monetary policies may adversely affect the Group’s business,
operations and financial condition
Central monetary authorities (including the RBA, the RBNZ, the United States Federal
Reserve, the Bank of England and the monetary authorities in the Asian jurisdictions inwhich the Group operates) set official interest rates or take other measures to affect thedemand for money and credit in their relevant jurisdictions. For instance, the U.S.
Federal Reserve increased interest rates in December 2016 and March 2017, though theAustralian Reserve Bank lowered interest rates in May 2016 and August 2016. In
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ABN 11 005 357 522

addition, in some jurisdictions, currency policy is also used to influence general businessconditions and the demand for money and credit. These policies can significantly affect
the Group’s cost of funds for lending and investing and the return that the Group will
earn on those loans and investments. These factors impact the Group’s net interest
margin and can affect the value of financial instruments it holds, such as debt securities
and hedging instruments. The measures and policies of the central monetary authorities
can also affect the Group’s borrowers, potentially increasing the risk that they may fail to
repay loans. Changes in interest rates and monetary policy are difficult to predict andmay adversely affect the Group’s business, operations and financial condition.
5. Sovereign risk may destabilise global financial markets adversely affecting
all participants, including the Group
Sovereign risk is the risk that foreign governments will default on their debt obligations,be unable to refinance their debts as and when they fall due or nationalise parts of theireconomy. Sovereign risk remains in many economies, including the United States,
United Kingdom, China, Europe and Australia. Should one sovereign default, there could
be a cascading effect to other markets and countries, the consequences of which, while
difficult to predict, may be similar to or worse than those experienced during the global
financial crisis and subsequent sovereign debt crises. Such events could destabilise
global financial markets, adversely affecting all participants, including adversely affecting
the Group’s liquidity, financial performance or financial condition.
6. Weakening of the real estate markets in Australia, New Zealand or othermarkets where the Group does business may adversely affect its business,
operations and financial condition
Residential and commercial property lending, together with real estate development andinvestment property finance, constitute important businesses to the Group. Major subsegments within the Group's lending portfolio include: Residential housing loans, owner occupier and investment; and Commercial real estate loans.
Declining asset prices could impact customers and counterparties and the value of the
security (including residential and commercial property) the Group holds against loans
which may impair the Group’s ability to recover amounts owing to the Group if
customers or counterparties were to default. Since 2009, the world’s major central banks
have embarked upon unprecedented monetary policy stimulus. The resulting weight offunds searching for yield continues to drive underlying property markets in the Group’s
core property jurisdictions (Australia, New Zealand, Singapore and Hong Kong). Values
for completed tenanted properties and residential house prices, particularly in metro east
coast Australian and New Zealand markets, have steadily risen.
A significant decrease in Australian and New Zealand housing valuations triggered by, forexample, an event or a series of events in the local or global economy or lack ofconfidence in market values, could adversely impact the Group’s home lending activities
because borrowers with loans in excess of their property value show a higher propensity
to default and, in the event of such defaults the Group’s security values would beeroded, causing the Group to incur higher credit losses, which could adversely affect theGroup’s financial performance and condition. The demand for the Group’s home lending
products may also decline due to buyer concerns about decreases in values or concerns
about rising interest rates, which could make the Group’s lending products less attractive
to potential homeowners and investors.
Recently, the Australian Bureau of Statistics reported that Australian housing prices rose
4.1% over the quarter ended December 31, 2016, the strongest quarterly growth inAustralian housing prices since the quarter ended June 30, 2015. Additionally, prompted
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

by Australian housing price appreciation and rising Australian household debt, APRA
introduced a new supervisory measure instructing Australian banks, including the Group,
to limit new residential interest-only mortgages to 30% of total new residential mortgage
lending. Should the Group’s regulators impose further supervisory measures impacting
the Group’s residential lending or if Australian housing price growth subsides or property
valuations decline, the demand for the Group’s home lending products may decrease
which may adversely affect the Group’s business, operations and financial condition.
A significant decrease in commercial property valuations or a significant slowdown inAustralia, New Zealand or other commercial real estate markets where the Group does
business could result in a decrease in the amount of new lending the Group is able towrite and/or increase the losses that the Group may experience from existing loans,which, in either case, could materially and adversely impact the Group’s financial
condition and operations. The Group's portfolio of commercial property interest only
loans, may be particularly susceptible to losses in the event of a decline in property
prices as a result of refinance risk and deteriorating security values. A material decline inresidential housing prices could also cause losses in the Group’s residential build to sellportfolio if customers who are pre-committed to purchase these dwellings are unable orunwilling to complete their contracts and the Group is forced to re-sell these dwellings at
a loss.
Although the Group reduced the leverage it generally provides for commercial property
developers and investors and tightened its general lending conditions during 2016, theGroup could still be adversely affected by the weakening of real estate markets inAustralia, New Zealand or other markets where the Group does business.
7. The Group is exposed to liquidity and funding risk, which may adversely
affect its business, operations and financial condition
Liquidity risk is the risk that the Group is unable to meet its payment obligations as theyfall due (including repaying depositors or maturing wholesale debt) or that the Group has
insufficient capacity to fund increases in assets. Liquidity risk is inherent in all banking
operations due to the timing mismatch between cash inflows and cash outflows.
Reduced liquidity could lead to an increase in the cost of the Group’s borrowings andconstrain the volume of new lending, which could adversely affect the Group’s
profitability. A deterioration in investor confidence in the Group could materially impact
the Group’s cost of borrowing, and the Group’s ongoing operations and funding.
The Group raises funding from a variety of sources, including customer deposits andwholesale funding in Australia and offshore markets to meet its funding obligations andto maintain or grow its business generally. In times of liquidity stress, if there is damage
to market confidence in the Group or if funding inside or outside of Australia is notavailable or constrained, the Group’s ability to access sources of funding and liquidity
may be constrained and it will be exposed to liquidity risk. In any such cases, the Groupmay be forced to seek alternative funding. The availability of such alternative funding,and the terms on which it may be available, will depend on a variety of factors, including
prevailing market conditions and the Group’s credit ratings (which are strongly
influenced by Australia’s sovereign credit rating). Even if available, the cost of thesefunding alternatives may be more expensive or on unfavourable terms, which could
adversely affect the Group’s financial performance, liquidity, capital resources andfinancial condition.
Since the advent of the global financial crisis in 2007, developments in major markets(including the United States, Europe and China) have adversely affected the liquidity inglobal capital markets and increased funding, for significant periods, costs comparedwith the period immediately preceding the global financial crisis.
More recently, the provision of significant amounts of liquidity by major central banks
globally has helped mitigate near term liquidity concerns, although no assurance can be
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

given that such liquidity concerns will not return, particularly when this liquidity is
incrementally withdrawn by central banks. Future deterioration in market conditions may
limit the Group’s ability to replace maturing liabilities and access funding in a timely andcost-effective manner necessary to fund and grow the Group’s businesses.
8. Regulatory changes or a failure to comply with regulatory standards, law orpolicies may adversely affect the Group’s business, operations or financial
condition
As a financial institution, the Group is subject to detailed laws and regulations in each of
the jurisdictions in which it operates or obtains funding, including Australia, New
Zealand, the United States, Europe and Asia Pacific. The Group is also supervised by anumber of different regulatory and supervisory authorities.
The Group is responsible for ensuring that it complies with all applicable legal andregulatory requirements (including accounting standards) and industry codes of practicein the jurisdictions in which it operates or obtains funding.
Compliance risk arises from these legal, regulatory and internal compliancerequirements. If the Group, or an employee of the Group, fails to comply, the Group may
be subject to fines, other penalties or restrictions on its ability to do business and it may
lose customer confidence and business, which could have a material adverse impact on
the Group. In Australia, an example of the broad administrative power available toregulatory authorities is the power available to APRA under the Banking Act in certain
circumstances to investigate the Group’s affairs and/or issue a direction to the Group(such as direction to comply with a prudential requirement, to conduct an audit, toremove a director, executive officer or employee or not to undertake a transaction).
Other regulators also have the power to investigate the Group. For further information
see Note 41 of ANZ’s 2016 Annual Financial Statements and Note 19 of the 2017 Half
Year Financial Statements.
Recent public scrutiny of banking culture has led to an inquiry by the Australian House ofRepresentatives Standing Committee on Economics into the four major Australian banks(including ANZ) focussed on consumer protection and transparency in the banking
sector. A first report of the Committee was issued in November 2016 and a second
report is expected. In addition, in April 2016, public scrutiny of banking culture led to a
proposal by the Australian Labor Party (the political party in opposition to thegovernment) to establish a Royal Commission to investigate Australian banks.
Regulatory investigations, fines, other penalties or regulator imposed conditions could
adversely affect the Group’s business, reputation, prospects, financial performance or
financial condition.
Similar to other financial services providers, the Group faces increasing supervision andregulation in most of the jurisdictions in which the Group operates or obtains funding. In
particular, the Group must comply with supervision and regulation in the areas offunding, liquidity, product design and pricing, capital adequacy, conduct and prudential
regulation, cyber-security, anti-bribery and corruption, anti-money laundering andcounter-terrorism financing and trade sanctions.
The Group has fully implemented the requirements of the Basel Committee on Banking
Supervision’s (’BCBS’) and APRA’s capital reform packages (and APRA’s implementation
thereof) aimed at implementing Basel 3 and strengthening the resilience of the banking
and insurance sectors. Details of these reforms are contained in APRA’s prudential
standards which implement the Basel 3 capital reforms, and which took effect from 1
January 2013.
In addition to the above, Basel 3 requirements include liquidity reforms. Consistent
therewith, APRA requires the Group to comply with the Liquidity Coverage Ratio (‘LCR’)requirements with effect from 1 January 2015 and the Group will also be required tocomply with the Net Stable Funding Ratio (‘NSFR‘) requirements, with effect from 1
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ABN 11 005 357 522

January 2018. Certain regulators in jurisdictions where the Group has a presence havealso either implemented or are in the process of implementing Basel 3 and equivalent
reforms.
In November 2014, the Financial Stability Board (‘FSB’) issued a consultative documentthat defined a global standard for minimum amounts of Total Loss-Absorbing Capacity(‘TLAC’) to be held by global systemically important banks (‘G-SIBs’), with the objectiveof ensuring that G-SIBs have the loss absorbing and recapitalization capacity so thatcritical functions continue without requiring taxpayer support or threatening financial
stability. While the Group is not currently subject to TLAC as it is not a G-SIB, should
APRA decide to impose TLAC or similar regulations on the Group, it could increase thelevel of regulatory capital that the Group is required to maintain and could adversely
affect the Group’s business, financial performance or financial condition.
Separately, since 2014, the BCBS has also released a number of consultation documents
as part of its reforms aimed at simplifying the measurement of risk-weighted assets andreducing their variability across banks and jurisdictions. Consultation and finalisation ofthese reforms are current and on-going. Any impacts on the Group resulting from thesereforms cannot be determined as final calibration is still to be finalised by the BCBS andthey are also subject to the form of these proposals that APRA will implement inAustralia.
In addition, there have also been a series of other regulatory releases from authorities inthe various jurisdictions in which the Group operates or obtains funding that propose
significant regulatory change for financial institutions. This includes proposals forchanges to financial regulations in the United States (including the Dodd-Frank Act andits Volker Rule) which are under review as a result of an executive order released in
February 2017, changes to senior executive accountability in Singapore and Hong Kong,
more data protection regulations in Europe, the Markets in Financial Instruments
Directive 2 in Europe and amendments to the United Kingdom’s Criminal Finances Bill
(which has extraterritorial reach). United Kingdom and European authorities may also
propose significant regulatory changes as a result of ‘Brexit’, however the scope andtiming of any such changes remains uncertain.
The Final Report of the Financial System Inquiry (‘FSI’) (released on 7 December 2014)
which concluded a comprehensive inquiry into Australia’s financial system established by
the Australian Government in late 2013, included a wide-ranging set ofrecommendations. The Government has authorised APRA to take forward a number of
the FSI’s recommendations, particularly as they related to the resilience of the financial
system. Key recommendations from the FSI Final Report that may have an impact onregulatory capital levels include: setting capital standards ensuring that capital ratios of ADI’s are ‘unquestionably
strong’; raising the average internal ratings-based (‘IRB’) mortgage risk weight to narrow
the difference between average mortgage risk weights for ADIs, which use IRB
models, and those that use standardised risk weights in order to increase
competition in mortgage lending; implementing a framework for minimum loss absorption and recapitalisation
capacity in line with emerging international practice; developing a common reporting template that improves the transparency andcomparability of capital ratios of ADIs; and introducing a leverage ratio that acts as a backstop to ADIs’ risk-based capitalrequirements, in line with Basel 3.
APRA supported the FSI’s recommendation that the capital ratios of ADIs should beunquestionably strong and, with effect from July 2016, increased the capitalrequirements for Australian residential mortgage exposures for ADIs accredited to use
the IRB approach to credit risk (including the Group). In March 2017, APRA announced
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that the main policy item for its 2017 agenda is to set the capital standards that will
result in capital ratios necessary for ADIs to meet the FSI’s ‘unquestionably strong’requirements.
Apart from the announcements mentioned above, APRA has not implemented any of theother key recommendations in the FSI Final Report to date. However, APRA is expected
to assess the impact of impending BCBS reforms (such as simplifying the measurementof risk-weighted assets) and to consider other measures relating to financial resilience,such as liquidity, funding, asset quality, and recovery and resolution planning relating to
the FSI’s recommendations. Accordingly, the final outcome of the FSI, including any
impacts and the timing of these impacts on the Group, remain uncertain. In addition,
there are several ongoing Government enquiries and proposals for new enquiries which
may affect the Group and its business, though the impact of the enquiries and proposals
for new enquiries cannot be determined at at this stage.
APRA is currently undertaking several open consultations, including those related
reporting requirements for the countercyclical capital buffer, liquidity measures andsecuritisation, as well as other areas of focus. Until these are finalised, the impact to theGroup is unknown. A new APRA prudential framework for ADI counterparty credit risk isalso expected to commence in January 2019 at the earliest.
Regulation is becoming increasingly extensive and complex. Some areas of potential
regulatory change involve multiple jurisdictions seeking to adopt a coordinatedapproach. This may result in conflicts with specific requirements of the jurisdictions inwhich the Group operates and, in addition, such changes may be inconsistently
introduced across jurisdictions. Changes may also occur in the oversight approach of
regulators. It is possible for example that governments in jurisdictions in which theGroup operates or obtains funding might revise their application of existing regulatory
policies that apply to, or impact, the Group’s business, including for reasons relating tonational interest and systemic stability.
Regulatory changes and the timing of their introduction continue to evolve. The natureand impact of future changes are not predictable and are beyond the Group’s control.
Regulatory change may impact the Group in a range of ways, such as by requiring theGroup to change its business mix, incur additional costs as a result of increased
management attention, raise additional amounts of higher-quality capital (such as
ordinary shares, Additional Tier 1 capital or Tier 2 capital instruments) or retain capital(through lower dividends), and hold significant levels of additional liquid assets andundertake further lengthening of the funding base. Further examples of ways in which
regulatory change may impact the Group include: limiting the types, amount andcomposition of financial services and products the Group can offer, limiting the fees andinterest that the Group may charge, increasing the ability of other banks or of non-banks
to offer competing financial services or products and changes to accounting standards,
taxation laws and prudential regulatory requirements. Regulatory change could
adversely affect one or more of the Group’s businesses, restrict its flexibility, require it
to incur substantial costs and impact the profitability of one or more business lines. Anysuch costs or restrictions could adversely affect the Group’s business, prospects,
financial performance or financial condition.
9. The Group is exposed to the risk of significant fines and sanctions in theevent of breaches of law or regulation and law relating to anti-money
laundering, counter-terrorism financing and sanctions
Anti-money laundering, counter-terrorist financing and sanctions compliance have been
the subject of significant regulatory change and enforcement in recent years. The
increasingly complicated environment in which the Group operates across the Asia Pacificregion has heightened these operational and compliance risks. Furthermore, the upward
trend in compliance breaches by global banks and the related fines and settlement sumsmeans that these risks continue to be an area of focus for the Group.
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The risk of non-compliance with anti-money laundering, counter-terrorist financing andsanction laws remains high given the scale and complexity of the Group. A failure tooperate a robust programme to combat money laundering, bribery and terrorist
financing or to ensure compliance with economic sanctions could have serious legal andreputational consequences for the Group and its employees. Consequences can include
fines, criminal and civil penalties, civil claims, reputational harm and limitations on doing
business in certain jurisdictions. The Group’s foreign operations may place the Group
under increased scrutiny by regulatory authorities, and may increase the risk of amember of the Group breaching applicable rules, regulations or laws.
10. The Group may experience challenges in managing its capital base, which
could give rise to greater volatility in capital ratios
The Group’s capital base is critical to the management of its businesses and access tofunding. Prudential regulators of the Group include, but are not limited to, APRA, RBNZ
and various regulators in the Asia Pacific, United States and United Kingdom. The Groupis required by its primary regulator, APRA, to maintain adequate regulatory capital.
Under current regulatory requirements, risk-weighted assets and expected loan losses
increase as a counterparty’s risk grade worsens. These additional regulatory capitalrequirements compound any reduction in capital resulting from lower profits in times ofstress. As a result, greater volatility in capital ratios may arise and may require theGroup to raise additional capital. There can be no certainty that any additional capitalrequired would be available or could be raised on reasonable terms.
The Group’s capital ratios may be affected by a number of factors, such as (i) lower
earnings (including lower dividends from its deconsolidated subsidiaries such as those in
the insurance and funds management businesses as well as from its investment inassociates), (ii) increased asset growth, (iii) changes in the value of the Australian dollar
against other currencies in which the Group operates (particularly the New Zealanddollar and United States dollar) that impact risk weighted assets or the foreign currencytranslation reserve and (iv) changes in business strategy (including acquisitions,divestments and investments or an increase in capital intensive businesses).
APRA’s Prudential Standards implementing Basel 3 are now in effect. Certain otherregulators have either implemented or are in the process of implementing regulations,
including Basel 3, which seek to strengthen, among other things, the liquidity and capitalrequirements of banks, funds management entities and insurance entities, though there
can be no assurance that these regulations will have their intended effect. Some of theseregulations, together with any risks arising from any regulatory changes (including thosearising from the requirements of the BCBS or the Australian Government’s response to
the FSI), are described in risk factor 8 ‘Regulatory changes or a failure to comply withregulatory standards, law or policies may adversely affect the Group’s business,
operations or financial condition’.
11. The Group is exposed to credit risk, which may adversely affect its
business, operations and financial condition
As a financial institution, the Group is exposed to the risks associated with extending
credit to other parties. Less favourable business or economic conditions, whether
generally or in a specific industry sector or geographic region, or natural disasters, could
cause customers or counterparties to fail to meet their obligations in accordance withagreed terms.
For example, the Group’s customers and counterparties in: the Australian natural resources sector which is particularly exposed to any
prolonged slowdown in the Chinese economy could be materially and adversely
impacted by a decline in natural resource prices;
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

 the Australian State governments have been successful in privatising government
owned assets such as electricity distribution networks, ports, road and rail
networks. The flight of capital towards these investments has driven the values ofthese assets to historically high levels relying on long range assumptions to justify
the investments. The value of the capital and profitability of these investments isvulnerable to interest rate and currency exchange rate movements. Long terminterest rate and currency hedges are provided by banks to manage these risks.
These long term hedge exposures have volatile mark to market characteristics
which are unsupported by collateralised security agreements for out of the money
positions. Counterparty insolvency has scope to expose the Bank to large
uncovered derivative liabilities; and the dairy industry in Australia and New Zealand, which is particularly exposed toexcess milk production from other developed countries being sold into traditional
markets, could be materially and adversely impacted by a decline in commodity
prices.
The Group’s customers and counterparties may also be adversely impacted by more
expensive imports due to the reduced strength of the Australian and New Zealand dollars
relative to other currencies.
In addition, in assessing whether to extend credit or enter into other transactions withcustomers and/or counterparties, the Group relies on information provided by or on
behalf of customers and/or counterparties, including financial statements and otherfinancial information. The Group may also rely on representations of customers andindependent consultants as to the accuracy and completeness of that information. The
Group’s financial performance could be negatively impacted to the extent that it relies on
information that is inaccurate or materially misleading.
The Group holds provisions for credit impairment. The amount of these provisions isdetermined by assessing the extent of impairment inherent within the current lending
portfolio, based on current information. This process, which is critical to the Group’s
financial condition and results, requires subjective and complex judgements, including
forecasts of how current and future economic conditions might impair the ability ofborrowers to repay their loans. However, if the information upon which the assessment
is made proves to be inaccurate or if the Group fails to analyse the information correctly,
the provisions made for credit impairment may be insufficient, which could have amaterial adverse effect on the Group’s business, operations and financial condition.
12. The Group is exposed to the risk that its credit ratings could change, which
could adversely affect its ability to raise capital and wholesale funding andconstrain the volume of new lending which may adversely affect theGroup’s business operations and financial condition
The Group’s credit ratings have a significant impact on both its access to, and cost of,capital and wholesale funding. Credit ratings may be withdrawn, qualified, revised orsuspended by credit rating agencies at any time. The methodologies by which they are
determined may also be revised in response to legal or regulatory changes, market
developments or for any other reason.
On 7 July 2016, the Group announced that Standard & Poor’s decision to revise theoutlook on the Commonwealth of Australia to ratings outlook negative, resulted in achange in the credit rating outlook of ANZ and its strategically important entities, alongwith other major Australian banks, from stable to negative. Standard & Poor’s outlook on
the major Australian banks has remained negative, citing increasing economic
imbalances, pressures on sovereign credit quality and potential weakening of sovereign
supportiveness.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

On 19 August 2016, the Group announced that Moody’s decision to revise Australia’s
macro profile resulted in a change in the outlook for major Australian banks, including
the Group, from stable to negative.
On 8 December 2016, Fitch’s outlook on Australia’s banking sector was revised fromstable to negative but, notwithstanding this revision, Fitch indicated that the ratings ofthe major Australian banks, including ANZ, remained on stable outlook. On 7 March
2017, Fitch affirmed the ratings of the major Australian banks, including ANZ, with astable outlook.
The Group’s credit ratings could be revised at any time in response to a change in thecredit rating of the Commonwealth of Australia.
Credit ratings are not a recommendation by the relevant rating agency to invest in
securities offered by the Group.
In addition, the ratings of individual securities (including, but not limited to, certain Tier
1 capital and Tier 2 capital securities and covered bonds) issued by the Group (and otherbanks globally) could be impacted from time to time by changes in the regulatory
requirements for those instruments as well as the ratings methodologies used by rating
agencies.
Any future downgrade or potential downgrade to the Group’s credit rating may reduce
access to capital and wholesale debt markets, which could lead to an increase in funding
costs, constraining the volume of new lending and affect the willingness ofcounterparties to transact with the Group, which may adversely affect the Group’sbusiness, operations and financial condition.
13. The Group is exposed to market risk, which may adversely affect its
business, operations and financial condition
Market risk is the risk of loss arising from adverse changes in interest rates, currency
exchange rates, credit spreads, or from fluctuations in bond, commodity or equity prices.
For purposes of financial risk management, the Group differentiates between traded andnon-traded market risks. Traded market risks principally arise from the Group’s trading
operations in interest rates, foreign exchange, commodities and securities. The nontraded market risk is predominantly interest rate risk in the banking book. Other nontraded markets risks include transactional and structural foreign exchange risk arisingfrom capital investments in offshore operations, market risk arising from the insurance
business, non-traded equity risk and lease residual value risk. For a further discussion ofmarket and related risks, see Note to the ANZ 2016 Annual Financial Statements.
14. Changes in exchange rates may adversely affect the Group’s business,
operations and financial condition
As the Group conducts business in several different currencies, its businesses may beaffected by a change in currency exchange rates. Additionally, as the Group’s annual andinterim reports are prepared and stated in Australian dollars, any appreciation in theAustralian dollar against other currencies in which the Group earns revenues (particularly
to the New Zealand dollar and United States dollar) may adversely affect the Group’sreported earnings.
The Group has put in place hedges to partially mitigate the impact of currency changes,
but there can be no assurance that the Group’s hedges will be sufficient or effective, andany further appreciation could have an adverse impact upon the Group’s earnings.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

15. The Group is exposed to operational risk, which may adversely affect its
business, operations and financial condition
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. This definition includes legal risk, and therisk of loss of reputation or damage arising from inadequate or failed internal processes,
people and systems, but excludes strategic risk.
Loss from operational risk events could adversely affect the Group’s financial results.
Such losses can include fines, penalties, loss or theft of funds or assets, legal costs,
customer compensation, loss of shareholder value, reputation loss, loss of life or injury
to people, and loss of property and/or information.
Operational risk is typically classified into the risk event type categories to measure andcompare risks on a consistent basis. Examples of operational risk events according tocategory are as follows: Internal Fraud: is associated with the Group’s employees acting outside theirnormal employment conditions/procedures to create a financial advantage forthemselves or others;
 External Fraud: fraudulent acts or attempts which originate from outside theGroup, more commonly associated with digital banking, lending, and cards
products. Specific threats include ATM skimming, malware and phishing attacks
and fraudulent applications and transactions, where financial advantage is
obtained;
 Employment Practices and Workplace Safety: employee relations, diversity anddiscrimination, and health and safety risks to the Group’s employees;
 Clients, Products and Business Practices: risk of market manipulation, productdefects, incorrect advice, money laundering and misuse or unauthorised disclosureof customer information;
 Technology: the risk of loss resulting from inadequate or failed information
technology;
 Business Disruption (including systems failures): risk that the Group’s banking
operating systems are disrupted or fail; Damage to Physical Assets: risk that a natural disaster or terrorist or vandalism
attack damages the Group’s buildings or property; and Execution, Delivery and Process Management: is associated with losses resulting
from, among other things, process errors made by the Group’s employees caused
by inadequate or poorly designed internal processes, or the poor execution ofstandard processes, vendor, supplier or outsource provider errors or failed
mandatory reporting errors.
Direct or indirect losses that occur as a result of operational failures, breakdowns,
omissions or unplanned events could adversely affect the Group’s financial results.
16. The Group is exposed to reputational risk, which may adversely affect its
business, operations and financial condition
Reputational risk may arise as a result of an external event or the Group’s own actions,and adversely affect perceptions about the Group held by the public (including theGroup’s customers), shareholders, investors, regulators or rating agencies. The impactof a risk event on the Group’s reputation may exceed any direct cost of the risk event
itself and may adversely impact the Group’s business, operations and financial condition.
Damage to the Group’s reputation may also have wide-ranging impacts, including
adverse effects on the Group’s profitability, capacity and cost of sourcing funding,increased regulatory scrutiny and availability of new business opportunities. The Group’s
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

ability to attract and retain customers could also be adversely affected if the Group’s
reputation is damaged, which could adversely affect the Group’s business, operations
and financial condition.
17. The Group may be exposed to conduct-related risks relating to the provisionof advice, recommendations or guidance about financial products andservices, or behaviours which do not appropriately consider the interests ofconsumers, the integrity of financial markets and the expectations of thecommunity, in the course of its business activities
Such risks can result from: the provision of unsuitable or inappropriate advice (e.g., advice that is notcommensurate with a customer’s needs and objectives or appetite for risk); the representation of, or disclosure about, a product or service which is inaccurate,or does not provide adequate information about risks and benefits to customers;
 a failure to deliver product features and benefits in accordance with terms,
disclosures, recommendations and/or advice; a failure to appropriately avoid or manage conflicts of interest;
 sales and/or promotion processes (including incentives and remuneration for staff
engaged in promotion, sales and/or the provision of advice); the provision of credit, outside of the Group’s policies and standards; and trading activities in financial markets, outside of the Group’s policies andstandards.
The Group is regulated under various legislative regimes in the countries in which it
operates that provide for customer protection in relation to advisory, marketing andsales practices. These may include, but are not limited to, appropriate management ofconflicts of interest, appropriate accreditation standards for staff authorised to provide
advice about financial products and services, disclosure standards, standards for
ensuring adequate assessment of client/product suitability, quality assurance activities,
adequate record keeping, and procedures for the management of complaints
and disputes. Since September 2014, the Australian Senate Economics References
Committee has been conducting an inquiry into aspects of the financial advice industry,including unethical or misleading financial advice and compensation processes for
consumers impacted by that advice. This inquiry is due to report 30 June 2017.
Inappropriate advice about financial products and services may result in material
litigation (and associated financial costs) and together with the failure to avoid ormanage conflicts of interest, may expose the Group to regulatory actions, restrictions orconditions on banking licences and/or reputational consequences.
18. Disruption of information technology systems or failure to successfully
implement new technology systems could significantly interrupt the Group’sbusiness, which may adversely affect its business, operations and financial
condition
The Group and its service offerings (including digital banking) are highly dependent on
information systems applications and technology. Therefore, there is a risk that theseinformation systems applications and technology, or the services the Group uses or isdependent upon, might fail, including because of unauthorised access or use.
Most of the Group’s daily operations are computer-based and information systems
applications and technology are essential to maintaining effective communications withcustomers. The Group is also conscious that threats to information systems applications
and technology are continuously evolving and that cyber threats and risk of attacks are
increasing. The Group may not be able to anticipate or implement effective measures toAustralia and New Zealand Banking Group Limited

ABN 11 005 357 522

prevent or minimise disruptions that may be caused by all cyber threats because thetechniques used can be highly sophisticated and those perpetuating the attacks may bewell resourced. The exposure to systems risks includes the complete or partial failure of
information technology systems or data centre infrastructure, the inadequacy of internal
and third-party information technology systems due to, among other things, failure tokeep pace with industry developments and the capacity of the existing systems toeffectively accommodate growth, prevent unauthorised access and integrate existing andfuture acquisitions and alliances.
To manage these risks, the Group has disaster recovery and information technology
governance in place. However, there can be no guarantee that the steps the Group is
taking in this regard will be effective and any failure of these systems could result inbusiness interruption, customer dissatisfaction, legal or regulatory breaches and liability
and ultimately loss of customers, financial compensation, damage to reputation and/or aweakening of the Group’s competitive position, which could adversely impact the Group’sbusiness and have a material adverse effect on the Group’s operations and financial
condition.
In addition, the Group has an ongoing need to update and implement new information
systems applications and technology, in part to assist it to satisfy regulatory demands,
ensure information security, enhance digital banking services for the Group’s customers
and integrate the various segments of its business. For example, the Group is
considering the release of voice biometrics for customer transactions on mobile devices.
The Group may not implement these projects effectively or execute them efficiently,
which could lead to increased project costs, delays in the ability to comply withregulatory requirements, failure of the Group’s information security controls or adecrease in the Group’s ability to service its customers. ANZ New Zealand relies on theGroup to provide a number of information technology systems, and any failure of theGroup’s systems could directly affect ANZ New Zealand.
19. The Group is exposed to risks associated with information security
including cyber-attacks, which may adversely affect its financial results
and reputation
Information security means protecting information and information systems fromunauthorised access, use, disclosure, disruption, modification, perusal, inspection,
recording or destruction. As a bank, the Group handles a considerable amount of
personal and confidential information about its customers and its own internal
operations, including in Australia, New Zealand and India. The Group operates in 33
countries and the risks to its systems are inherently higher in certain countries where,
for example, political threats or targeted cyber-attacks by terrorist or criminalorganisations are greater. The Group employs a team of information security experts
who are responsible for the development and implementation of the Group’s Information
Security Policy. The Group also uses third parties to process and manage information on
its behalf, and any failure by such third parties could adversely affect the Group’sbusiness. The Group is conscious that threats to information systems are continuously
evolving and that cyber threats, including but not limited to, cyber compromise,advanced persistent threats, distributed denial of service, malware and ransomware
attacks, and the risk of such attacks are increasing, and as such the Group may beunable to develop policies and procedures to adequately address or mitigate such risks.
Accordingly, information about the Group and/or its clients may be inadvertently
accessed, inappropriately distributed or illegally accessed or stolen. The Group may not
be able to anticipate or to implement effective measures to prevent or minimise damage
that may be caused by all information security threats because the techniques used canbe highly sophisticated and those perpetuating the attacks may be well resourced. Any
unauthorised access of the Group’s information systems or unauthorised use of its
confidential information could potentially result in disruption of the Group’s operations,
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

breaches of privacy laws, regulatory sanctions, legal action, and claims for compensation
or erosion to the Group’s competitive market position, which could adversely affect theGroup’s financial results and reputation.
20. Unexpected changes to the Group’s license to operate in any jurisdiction
may adversely affect its business, operations and financial condition
The Group is licensed to operate in various countries, states and territories. Unexpectedchanges in the conditions of the licences to operate by governments, administrations or
regulatory agencies which prohibit or restrict the Group from trading in a manner thatwas previously permitted may adversely impact the Group’s business, operations andfinancial condition.
21. An increase in the failure of third parties to honour their commitments inconnection with the Group’s trading, lending, derivatives and otheractivities may adversely affect its business, operations and financial
condition
The Group is exposed to the potential risk of credit-related losses that can occur as aresult of a counterparty being unable or unwilling to honour its contractual obligations.
As with any financial services organisation, the Group assumes counterparty risk inconnection with its lending, trading, derivatives, insurance and other businesses where it
relies on the ability of a third party (including reinsurers) to satisfy its financial
obligations to the Group on a timely basis. The Group is also subject to the risk that its
rights against third parties may not be enforceable in certain circumstances.
The risk of credit-related losses may also be increased by a number of factors, including
deterioration in the financial condition of the economy, a sustained high level of
unemployment, a deterioration of the financial condition of the Group’s counterparties, a
reduction in the value of assets the Group holds as collateral, and a reduction in themarket value of the counterparty instruments and obligations it holds.
The Group is directly and indirectly exposed to the natural resources sector, including
contractors and related industries. Lower commodity prices, mining activity, demand forresources, or corporate investment in the natural resources sector may adversely affectthe amount of new lending the Group is able to write, or lead to an increase in lending
losses from this sector. Lower oil prices over 2015 and 2016 have resulted in reduced
investment and increased asset write downs which have flow on effects in the energy
supply chain.
Upstream exploration and production firms and related services operators are currently
the most directly exposed if new project investment is wound back and operations arerationalised. Services to mining customers are also subject to heightened oversight given
the cautious outlook for the services sector. This industry-specific revenue decline maylead to a broader regional economic downturn with a long recovery period.
Credit losses can and have resulted in financial services organisations realising
significant losses and in some cases failing altogether. Should material unexpected credit
losses occur to the Group’s credit exposures, it could have an adverse effect on theGroup’s business, operations and financial condition.
22. The unexpected loss of key staff or inadequate management of humanresources may adversely affect the Group’s business, operations andfinancial condition
The Group’s ability to attract and retain suitably qualified and skilled employees is an
important factor in achieving its strategic objectives. The Chief Executive Officer and the
management team of the Chief Executive Officer have skills and reputation that are
critical to setting the strategic direction, successful management and growth of theAustralia and New Zealand Banking Group Limited

ABN 11 005 357 522

Group, and whose unexpected loss due to resignation, retirement, death or illness may
adversely affect the Group’s business, operations and financial condition. If the Group
had difficulty retaining or attracting highly qualified people for important roles,
particularly in times of strategic change, the Group’s business, operations and financial
condition could be adversely affected.
23. The Group may be exposed to the impact of future climate change,
geological events, plant, animal and human diseases, and other extrinsic
events which may adversely affect its business, operations andfinancial condition
The Group and its customers are exposed to climate related events, including climatechange. These events include severe storms, drought, fires, cyclones, hurricanes, floods
and rising sea levels. In March 2017, certain of the Group’s customers were affected by
Cyclone Debbie in Queensland and New South Wales. The Group and its customers may
also be exposed to other events such as geological events (including volcanic seismic
activity or tsunamis), plant, animal and human diseases or a pandemic.
Depending on their severity, events such as these may temporarily interrupt or restrict
the provision of some local or Group services, and may also adversely affect the Group’s
financial condition or collateral position in relation to credit facilities extended tocustomers, which may adversely affect the Group’s business operations and financial
condition.
24. The Group is exposed to insurance risk, which may adversely affect its
business, operations and financial condition
Insurance risk is the risk of loss due to unexpected changes in current and future
insurance claim rates. In the Group’s life insurance business, insurance risk arises
primarily through mortality (death) and morbidity (illness and injury) risks being greaterthan expected and, in the case of annuity business, should annuitants live longer than
expected. In August 2015, the Group ceased to issue home, car and travel insurance andbecame a distributor only of these products. Existing insurance policies were transferredto QBE Insurance Group Limited as they came up for renewal. The only generalinsurance risk insured now is a small amount of involuntary unemployment benefits aspart of consumer credit insurance sold in Australia. The Group has exposure to insurance
risk in both its life insurance and general insurance business, which may adversely affectits businesses, operations and financial condition.
25. The Group is exposed to increased compliance costs and the risk ofpenalties and regulatory scrutiny with respect to the significant obligations
imposed by global tax reporting regimes which are still evolving
The U.S. Foreign Account Tax Compliance Act (‘FATCA’) requires non U.S. financial
institutions to undertake specific customer due diligence and provide information on
account holders who are U.S. citizens or tax residents to the United States Federal tax
authority, the Internal Revenue Service (‘IRS’) either directly or via local tax authorities.
If the required customer due diligence and provision of account holder information is notundertaken and provided in a manner and form meeting the applicable requirements,
the Group and/or persons owning assets in accounts with Group members may besubjected to a 30 percent withholding tax on certain amounts. While such withholding
tax may currently apply only to certain payments derived from sources within the UnitedStates (and, beginning on 1 January 2019, certain gross proceeds from the disposition ofassets that can give rise to such U.S. source payments), no such withholding tax will be
imposed on any payments derived from sources outside the United States that are madeprior to 1 January 2019, at the earliest.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

 In addition to FATCA, the U.S. may require the Group in certain circumstances toprovide certain information to U.S. payers (withholding agents, custodians, etc.)
and the Group may face adverse consequences in case it does not provide suchinformation in compliance with the applicable rules and regulations.
 The OECD’s Common Reporting Standard (‘CRS’) provides for the automatic
exchange of (financial account) information (‘AEOI’) in tax matters. Over 100
jurisdictions have committed to implement the CRS. The CRS has alreadycommenced in a number of countries which the Group has operations including the
Cayman Islands, Hong Kong, India, Singapore, South Korea and the United.
Australia and New Zealand have legislated for the CRS to apply from 1 July 2017(with government to government exchange of information to take place bySeptember 2018). Australian and New Zealand financial institutions that do not
fully comply with all the requirements of the CRS will be subject to administrative
penalties. CRS requirements, though generally similar to FATCA, have significant
differences and a higher standard of compliance in many aspects, including
penalties for non-collection of prescribed customer information.
In line with other global financial institutions, the Group has made and is expected tomake significant investments in order to comply with, in all the countries that it operates
in, the extensive requirements of FATCA, the CRS and the various other in-country tax
reporting initiatives.
26. The Group may experience changes in the valuation of some of its assets
and liabilities that may have a material adverse effect on its earnings
and/or equity
Under AASs, the Group recognises the following instruments at fair value with changes infair value recognised in earnings or equity: derivative instruments, including in the case of fair value hedging, the fair value
adjustment on the underlying hedged exposure with changes in fair value
recognised in earnings with the exception of derivatives designated in qualifying
cash flow or net investment hedges where the change is recognised in equity andreleased to earnings together with the underlying hedged exposure; assets and liabilities held for trading; available-for-sale assets with changes in fair value recognised in equity unless theasset is impaired, in which case, the decline in fair value is recognised in earnings;
 assets classified as held-for-sale where fair value is less than the original carrying
amount; and assets and liabilities designated at fair value through profit and loss with changes
recognised in earnings with the exception of changes in fair value attributable tothe own credit component of liabilities that is recognised in equity.
Generally, in order to establish the fair value of these instruments, the Group relies onquoted market prices or, where the market for a financial instrument is not sufficiently
active, fair values are based on present value estimates or other accepted valuation
techniques which incorporate the impact of factors that would influence the fair value as
determined by a market participant. The fair value of these instruments is impacted bychanges in market prices or valuation inputs which could have a material adverse effecton the Group’s earnings.
In addition, the Group may be exposed to a reduction in the value of non-lending related
assets as a result of impairments loss which is recognised in earnings. The Group isrequired to assess the recoverability of the goodwill balances at least annually and othernon-financial assets including premises and equipment, investment in associates,
capitalised software and other intangible assets (including acquired portfolio of insurance

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

and investment business and deferred acquisition costs) where there are indicators of
impairment.
For the purpose of assessing the recoverability of the goodwill balances, the Group uses
either a discounted cash flow or a multiple of earnings calculation. Changes in theassumptions upon which the calculation is based, together with expected changes infuture cash flows, could materially impact this assessment, resulting in the potential
write-off of a part or all of the goodwill balances.
In respect of other non-financial assets, in the event that an asset is no longer in use, orthat the cash flows generated by the asset do not support the carrying value,
impairment may be recorded.
27. Changes to accounting policies may adversely affect the Group’s financial
position or performance
The accounting policies and methods that the Group applies are fundamental to how it
records and reports its financial position and results of operations. Management must
exercise judgement in selecting and applying many of these accounting policies andmethods so that they not only comply with generally accepted accounting principles but
they also reflect the most appropriate manner in which to record and report on theGroup’s financial position and results of operations. However, these accounting policies
may be applied inaccurately, resulting in a misstatement of the Group’s financial position
and results of operations. In addition, the application of new or revised generally
accepted accounting principles could have a material adverse effect on the Group’s
financial position and results of operations.
In some cases, management must select an accounting policy or method from two or
more alternatives, any of which might comply with the generally accepted accounting
principles applicable to the Group and be reasonable under the circumstances, yet might
result in reporting materially different outcomes than would have been reported underanother alternative.
28. Litigation and contingent liabilities may adversely affect the Group’sbusiness, operations and financial condition
From time to time, the Group may be subject to material litigation, regulatory actions,
legal or arbitration proceedings and other contingent liabilities which may adversely
affect the Group’s business, operations and financial condition.
The Group had contingent liabilities as at 31 March 2017 in respect of the matters
outlined in Note 19 to the 2017 Half Year Financial Statements.
Note 19 includes, among other things, descriptions of: bank fees litigation;
 benchmark/rate actions; regulatory reviews and customer exposures; and security recovery actions.
In recent years there have been significant increases in the nature and scale ofregulatory investigations and reviews, enforcement actions (whether by court action orotherwise) and the quantum of fines issued by regulators, particularly against financial
institutions both in Australia and globally. The nature of these investigations and reviews
can be wide ranging and, for example, currently include a range of matters including
responsible lending practices, product suitability, wealth advice, conduct in financial
markets and capital market transactions. During the year, the Group has received
various notices and requests for information from its regulators as part of both industrywide and Group-specific reviews. There may be exposures to customers which are
additional to any regulatory exposures. These could include class actions, individual
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

claims or customer remediation or compensation activities. The outcomes and total costs
associated with such reviews and possible exposures remain uncertain.
There is a risk that contingent liabilities may be larger than anticipated or that additional
litigation, regulatory actions, legal or arbitration proceedings or other contingent
liabilities may arise.
There are no governmental, legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which ANZ is aware) that have arisen
since 31 March 2017 up to the date of the 2017 Half Year Financial Statements which
may have a significant effect on the financial position or profitability of ANZ and its
subsidiaries taken as a whole.
29. The Group regularly considers acquisition and divestment opportunities,
and there is a risk that the Group may undertake an acquisition ordivestment that could result in a material adverse effect on its business,
operations and financial condition
The Group regularly examines a range of corporate opportunities, including material
acquisitions and disposals, with a view to determining whether those opportunities will
enhance the Group’s strategic position and financial performance.
Divestments by the Group in the first half of 2017 include entering into agreements to
sell:




majority of its Retail and Wealth businesses in Asia;
20% stake in Shanghai Rural Commercial Bank; andUDC Finance.

The Group is also considering sale of its life insurance, advice and superannuation andinvestments business in Australia.
There can be no assurance that any acquisition (or divestment) would have theanticipated positive results, including results relating to the total cost of integration (orseparation), the time required to complete the integration (or separation), the amount of
longer-term cost savings, the overall performance of the combined (or remaining) entity,or an improved price for the Group’s securities. The Group’s operating performance, risk
profile and capital structure may be affected by these corporate opportunities and there
is a risk that the Group’s credit ratings may be placed on credit watch or downgraded if
these opportunities are pursued.
Integration (or separation) of an acquired (or divested) business can be complex andcostly, sometimes including combining (or separating) relevant accounting and dataprocessing systems, and management controls, as well as managing relevant
relationships with employees, customers, regulators, counterparties, suppliers and otherbusiness partners. Integration (or separation) efforts could create inconsistencies instandards, controls, procedures and policies, as well as diverting management attention
and resources. This could adversely affect the Group’s ability to conduct its businesssuccessfully and impact the Group’s operations or results. Additionally, there can be noassurance that employees, customers, counterparties, suppliers and other business
partners of newly acquired (or retained) businesses will remain post-acquisition (or postdivestment), and the loss of employees, customers, counterparties, suppliers and otherbusiness partners could adversely affect the Group’s operations or results.
30. Disruption to electricity markets and gas markets may adversely affect theGroup’s business, operations and financial condition

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During 2016 and in the first quarter of 2017, there have been various events in Australia
that have affected retail, commercial and industrial electricity and gas users. These
events include the closure of the Hazelwood coal power station in Victoria, black-outs inSouth Australia, export demand for Queensland LNG gas and announcements relating toenergy policy and investment by the Australian federal government and the South
Australian state government.
Some of these events have resulted or are likely to result in higher electricity and gas
prices, as well as disruption to electricity and gas markets. The cost of sustained highprices may flow through to business and consumers. The potential inability of businessto pass through this cost increase to customers may lead to credit risk associated withbusiness customers. The impact of higher electricity cost for consumers could lead to
reduced consumption and indirectly impact the demand for goods and services,
contributing to lower business profitability. Higher electricity costs may also increase the
CPI and influence upward adjustments to interest rate settings.
These effects may adversely affect the Group’s customers or the Group’s collateralposition in relation to credit facilities extended to such customers, which may adversely
affect the Group’s business, operations and financial condition.

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Responsibility statement of the Directors in relation to ANZ’s half-yearlyfinancial statements made in accordance with DTR 4.2.10 (3)(b)The Directors of Australia and New Zealand Banking Group Limited confirm to the best of
their knowledge that:
The ANZ’s half-yearly financial report for the half year ended 31 March 2017 (as definedon page 1 of this DTR half-yearly financial report submission) includes a fair review of:(i)an indication of the important events that have occurred during the first six
months of the financial year, and their impact on the Condensed Consolidated
Financial Statements; and(ii)

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

Signed in accordance with a resolution of the Directors.

David M Gonski, AC
ChairmanShayne C Elliott
Director

1 May 2017

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522