Australia and New Zealand Banking Group Limited- ANZ New Zealand
Registered Bank Disclosure Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2015 | NUMBER 28 ISSUED DECEMBER 2015

Australia and New Zealand Banking Group Limited - ANZ New Zealand

Registered Bank Disclosure Statement
For the year ended 30 September 2015

Contents
Glossary of Terms

2

Consolidated Financial Statements
Income Statement
Statement of Comprehensive Income
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity

3
3
4
5
6

Notes to the Financial Statements
Basis of Preparation
1. Significant Accounting Policies
2. Critical Estimates and Judgements Used in
Applying Accounting Policies
Financial Performance
3. Income4. Expenses
5. Income Tax
6. Segment Analysis
7. Notes to the Cash Flow Statements
Financial Assets
8. Cash
9. Trading Securities
10. Derivative Financial Instruments
11. Available-for-sale Assets
12. Net Loans and Advances
13. Provision for Credit Impairment
Financial Liabilities
14. Deposits and Other Borrowings
15. Debt Issuances
16. Subordinated Debt
Financial instrument disclosures
17. Financial Risk Management
18. Classification of Financial Instruments and Fair
Measurements
19. Maturity Analysis of Assets and Liabilities
20. Assets Charged as Security and CollateralAccepted as Security for Assets
21. Offsetting
22. Credit Related Commitments, Guarantees andContingent Liabilities

7
12

14
15
16
17
19

19
20
20
22
22
23

24
24
25

27
41
43
44
45
46

Non-financial Assets
23. Other Assets
24. Goodwill and Other Intangible Assets

47
47

Non-financial Liabilities
25. Payables and Other Liabilities
26. Provisions

47
47

Equity27. Share Capital
28. Capital Adequacy

48
49

Consolidation and Presentation
29. Subsidiaries
30. Structured Entities, Transferred Financial Assets,
Fiduciary Activities and Insurance
Other Disclosures
31. Related Party Transactions
32. Capital Expenditure and Operating Lease
Commitments
33. Compensation of Auditors
34. Concentrations of Credit Risk to IndividualCounterparties
35. Risk Management Framework
36. NZ Branch and Overseas Banking Group
Information

51
52

54
55
56
56
57
58

Other Registered Bank Disclosures
Historical Summary of Financial Statements
General Disclosures
Conditions of Registration
Directorate and Auditor

59
60
62
64

Directors’ and New Zealand Chief Executive Officer’s

66

Statement
Independent Auditor’s Report67Australia and New Zealand Banking Group Limited - ANZ New Zealand

2

Other Registered Bank Disclosures
Other disclosures as required by the Order are set out on pages 59 to 66, including, on page 61, recent developments in APRA's
requirements related to non-equity and contingent funding provided by the Ultimate Parent Bank to ANZ New Zealand.

Glossary of Terms
In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:(a) Bank means ANZ Bank New Zealand Limited;(b) Banking Group means the Bank and all its controlled entities;(c) Immediate Parent Company means ANZ Funds Pty Limited, which is the immediate parent company of ANZ Holdings (New
Zealand) Limited;(d) Ultimate Parent Bank means Australia and New Zealand Banking Group Limited;(e) Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its
controlled entities;(f) New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treatedas if it were conducted by a company formed and registered in New Zealand;(g) NZ Branch means the New Zealand business of the Ultimate Parent Bank;(h) ANZ New Zealand means the New Zealand business of the Overseas Banking Group;(i) Registered Office is Level 10, 171 Featherston Street, Wellington, New Zealand, which is also ANZ New Zealand’s address forservice;(j) RBNZ means the Reserve Bank of New Zealand;(k) APRA means the Australian Prudential Regulation Authority;(l) the Order means the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014; and(m) Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in orprescribed by the Order.

Australia and New Zealand Banking Group Limited - ANZ New Zealand3

Income Statement
NZ$ millions

Note

Year toYear to30/09/2015

30/09/2014

Interest income

3

7,417

6,799

Interest expense

4

4,537

4,034

Net interest income

2,880

2,765

Net trading gains

3

262

210

Net funds management and insurance income

3

385

325

Other operating income

3

505

525

5

3

Share of associates' profit
Operating income
Operating expenses

4

Profit before credit impairment and income tax
Credit impairment charge / (release)

13

Profit before income tax
Income tax expense
Profit after income tax

5

4,037

3,828

1,513

1,490

2,524

2,338

76

(9)

2,448

2,347

677

636

1,771

1,711

Statement of Comprehensive Income
NZ$ millions

Profit after income tax

Year toYear to30/09/2015

30/09/2014

1,771

1,711

Items that will not be reclassified to profit or loss
Actuarial gain / (loss) on defined benefit schemes
Income tax credit / (expense) relating to items not reclassified
Total items that will not be reclassified to profit or loss

(33)

35

9

(10)

(24)

25

Items that may be reclassified subsequently to profit or loss
Unrealised gains / (losses) recognised directly in equity

12

(2)

Realised gains transferred to the income statement

(16)

(41)

Income tax credit relating to items that may be reclassified

1

12

Total items that may be reclassified subsequently to profit or loss

(3)

(31)

1,744

1,705

Total comprehensive income for the year

The notes to the financial statements form part of and should be read in conjunction with these financial statements.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

4

Balance Sheet
NZ$ millions

Note

30/09/2015

30/09/2014

8

2,435

2,248

309

855

AssetsCash
Settlement balances receivable
Collateral paid
Trading securities

9

Investments backing insurance contract liabilities

1,929

783

12,13911,750151

190
11,421

Derivative financial instruments

10

17,587Available-for-sale assets

11

1,428

772

Net loans and advances

12

114,376

105,485

Other assets

23

740

632

552

470

Life insurance contract assets
Investments in associates

488

Premises and equipment

388

380

Goodwill and other intangible assets

3,492

3,454

Total assets

155,530

138,528

Interest earning and discount bearing assets

132,869

121,539

Settlement balances payable

1,469

1,992

Collateral received

1,687

800

24

Liabilities

Deposits and other borrowings

14

99,736

94,527

Derivative financial instruments

10

17,76910,961

81

68

Current tax liabilities
Deferred tax liabilities

5

124

59

Payables and other liabilities

25

1,527

1,352

Provisions

26

191

204

Debt issuances

15

19,403

17,042

Subordinated debt

16

2,683

1,442

Total liabilities (excluding head office account)

144,670

128,447

Net assets (excluding head office account)

10,86010,081

8,058

7,393

(10)

(7)

EquityShare capital and initial head office account27

Reserves
Retained earnings

2,812

2,695

Total equity & head office account

10,86010,081

Interest and discount bearing liabilities

118,026

108,614

For and on behalf of the Board of Directors:

David Gonski, AC
ChairmanAustralia and New Zealand Banking Group Limited
15 December 2015

Michael Smith, OBE
Executive Director
Australia and New Zealand Banking Group Limited
15 December 2015

The notes to the financial statements form part of and should be read in conjunction with these financial statements.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

5

Cash Flow Statement
Year toYear to30/09/2015

30/09/2014

Interest received

7,357

6,724

Dividends received

89

4

Net funds management & insurance income

303

261

Fees and other income received

566

682

Interest paid

(4,482)(3,945)

Operating expenses paid

(1,390)(1,431)

NZ$ millions

Note

Cash flows from operating activities

Income taxes paid

(589)

(464)

Cash flows from operating profits before changes in operating assets and liabilities

1,854

1,831

4

167

Net changes in operating assets and liabilities:
Change in settlements receivable
Change in collateral paid

(1,146)219

Change in trading securities(208)(1,025)

Change in derivative financial instruments

2,559

(676)

Change in available-for-sale assets

(634)

188

Change in insurance investment assets

39

(18)

Change in loans and advances(8,875)(5,396)

Change in settlements payable

293

34

Change in collateral received

887

362

5,205

5,851

Change in deposits and other borrowings
Net changes in operating assets and liabilities(1,876)

(294)

(22)

1,537

Proceeds from sale of shares in associates and jointly controlled entities-

9

Proceeds from sale of premises and equipment

-

9

(73)

(43)

Net cash flows provided by / (used in) operating activities

7

Cash flows from investing activities

Purchase of intangible assets
Purchase of premises and equipment

(59)

(77)

Net cash flows used in investing activities

(132)

(102)

Proceeds from issue of debt issuances

4,212

4,431

Proceeds from issue of subordinated debt

1,482

-

Cash flows from financing activities

Proceeds from issue of preference shares

675

969

(4,008)(4,589)

Redemptions of subordinated debt

(297)

-

Redemptions of preference shares

(10)

-

(1,630)(2,335)(1,524)

Redemptions of debt issuances

Dividends paid
Net cash flows provided by / (used in) financing activities

424

Net increase / (decrease) in cash and cash equivalents

270

(89)

Cash and cash equivalents at beginning of the year

2,256

2,345

2,526

2,256

Cash and cash equivalents at end of the year

The notes to the financial statements form part of and should be read in conjunction with these financial statements.

7

Australia and New Zealand Banking Group Limited - ANZ New Zealand

6

Statement of Changes in Equity
Share capitaland initial head
Note office account

Availablefor-salerevaluation
reserve

Cash flow
hedging
reserve

As at 1 October 2013

6,424

(2)

26

3,294

9,742

Profit after income tax

-

-

-

1,711

1,711

Unrealised gains / (losses) recognised directly in equity

-

3

(5)

-

(2)

Realised gains transferred to the income statement

-

-

(41)

-

(41)

Actuarial gain on defined benefit schemes

-

-

-

35

35

Income tax credit / (expense) on items recognised directly in equity

-

(1)

13

(10)

2
1,705

NZ$ millions

Total comprehensive income for the year

Retainedearnings

Total equity

-

2

(33)

1,736

Preference shares issued

27

969

-

-

-

969

Ordinary dividend paid

27

-

-

-

(2,335)(2,335)As at 30 September 2014

7,393

-

(7)

2,695

10,081

Profit after income tax

-

-

-

1,771

1,771

Unrealised gains recognised directly in equity

-

-

12

-

12

Realised gains transferred to the income statement

-

-

(16)

-

(16)

Actuarial loss on defined benefit schemes

-

-

-

(33)

(33)

Income tax credit on items recognised directly in equity

-

-

1

9

10

Total comprehensive income for the year

-

-

(3)

1,747

1,744
675

Preference shares issued

27

675

-

-

-

Preference shares redeemed

27

(10)

-

-

-

(10)

Ordinary dividend paid

27

-

-

-

(1,630)(1,630)

8,058

-

(10)

2,812

10,860As at 30 September 2015

The notes to the financial statements form part of and should be read in conjunction with these financial statements.

Australia and New Zealand Banking Group Limited - ANZ New Zealand7

Notes to the Financial Statements
1.

Significant Accounting Policies(a)Basis of preparation(i)

ANZ New Zealand when it is determined that control overthe entity exists. Control is deemed to exist when ANZ
New Zealand is exposed, or has rights, to variable returns
from its involvement with the entity and has the ability toaffect those returns through its power over the entity.
Power is assessed by examining existing rights that give
ANZ New Zealand the current ability to direct the relevant
activities of the entity.

Statement of compliance

These financial statements have been prepared inaccordance with the requirements of the Companies Act
1993, the Financial Markets Conduct Act 2013 and theOrder. The financial statements are for the Overseas
Banking Group’s consolidated New Zealand business,
which includes its subsidiaries and associates.

At times, the determination of control can be
judgemental. Further detail on the judgements involvedin assessing control has been provided in note 2.

These financial statements comply with
New Zealand Generally Accepted Accounting
Practice, 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 forpublicly accountable profit-oriented entities; andInternational Financial Reporting Standards (IFRS).

The effect of all transactions between entities in ANZ New
Zealand is eliminated.
Associates
ANZ New Zealand applies the equity method of
accounting for associates.
(viii)

Functional and presentation currency

The principal accounting policies adopted in the
preparation of these financial statements are set out
below.
(ii)

Foreign currency translation

Items included in the financial statements of each of ANZ
New Zealand’s entities are measured using the currency ofthe primary economic environment in which the entity
operates (the functional currency).

Use of estimates and assumptions

The preparation of these financial statements requires theuse of management judgements, estimates andassumptions that affect reported amounts and theapplication of policies.

ANZ New Zealand’s financial statements are presented in
New Zealand dollars, which is ANZ New Zealand’sfunctional and presentation currency.

Discussion of the critical accounting estimates, which
include complex or subjective decisions or assessments,
are covered in note 2. Such estimates are reviewed on an
ongoing basis.

Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing at
the dates of the transactions.

(iii)

Changes in accounting policies and application of
new accounting standards

The accounting policies are consistent with those of theprevious financial year.
(v)

Rounding

The amounts in the financial statements have beenrounded to the nearest million dollars, except whereotherwise stated.
(vii)

Monetary assets and liabilities resulting from foreign
currency transactions are subsequently translated at the
spot rate at reporting date.

Basis of measurement

The financial information has been prepared inaccordance with the historical cost basis except that thefollowing assets and liabilities are stated at their fair value:
derivative financial instruments;
available-for sale financial assets;financial instruments held for trading;financial instruments designated at fair value
through profit and loss.
(iv)

Foreign currency transactions

Principles of consolidation

Subsidiaries
The consolidated financial statements of ANZ New
Zealand comprise the financial statements of the NZ
Branch and all the New Zealand businesses of all thesubsidiaries of the Ultimate Parent Bank. An entity,
including a structured entity, is considered a subsidiary of

Exchange differences arising on the settlement ofmonetary items or on translating monetary items at rates
different to those at which they were initially recognised
or included in a previous financial report, are recognised in
the income statement in the period in which they arise.
(b)

Income recognition(i)Interest income

Interest income is recognised as it accrues, using theeffective interest method.
The effective interest method calculates the amortised
cost of a financial asset or financial liability and allocatesthe interest income or interest expense, including any feesand directly related transaction costs that are an integral
part of the effective interest rate, over the expected life of
the financial asset or liability so as to achieve a constantyield on the financial asset or liability.
For assets subject to prepayment, expected life isdetermined on the basis of the historical behaviour of theparticular asset portfolio, taking into account contractual
obligations and prepayment experience. This is assessedon a regular basis.

Australia and New Zealand Banking Group Limited - ANZ New Zealand8

Notes to the Financial Statements(ii)

liabilities for financial reporting purposes and their tax
base.

Fee and commission income

Fees and commissions received that are integral to theeffective interest rate of a financial asset are recognised
using the effective interest method. For example, loan
commitment fees, together with related direct costs, aredeferred and recognised as an adjustment to the effective
interest rate on a loan once drawn.

Deferred tax assets, including those related to the tax
effects of income tax losses and credits available to be
carried forward, are recognised only to the extent that it isprobable that future taxable profits will be available
against which the deductible temporary differences orunused tax losses and credit can be utilised.

Fees and commissions that relate to the execution of asignificant act (for example, advisory or arrangement
services, placement fees and underwriting fees) arerecognised when the significant act has been completed.

Deferred tax liabilities are recognised for all taxable
temporary differences, other than those relating totaxable temporary differences.

Fees charged for providing ongoing services (for example,
maintaining and administering existing facilities) arerecognised as income over the period the service isprovided.
(c)Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when theasset and liability giving rise to them are realised or
settled, based on tax rates and tax laws that have beenenacted or substantively enacted by the reporting date.
The measurement reflects the tax consequences thatwould follow from the manner in which ANZ New
Zealand, at the reporting date, recovers or settles the
carrying amount of its assets and liabilities.

Expense recognition(i)Interest expense

Interest expense on financial liabilities measured atamortised cost is recognised in the income statement as it
accrues using the effective interest method.
(ii)

Loan origination expenses

Certain loan origination expenses are an integral part ofthe effective interest rate of a financial asset measured atamortised cost. These loan origination expenses include:
fees and commissions payable to brokers andcertain customer incentive payments in respect oforiginating lending business; andother expenses of originating lending business, suchas external legal costs and valuation fees, provided
these are direct and incremental costs related to theissue of a financial asset.
Such loan origination expenses are initially recognised aspart of the cost of acquiring the financial asset andamortised as part of the effective yield of the financial
asset over its expected life using the effective interest
method.
(d)Income tax(i)Income tax expense

Income tax on earnings for the year comprises current anddeferred tax and is based on the applicable tax law. It is
recognised in the income statement as tax expense,
except when it relates to items credited directly to equity,in which case it is recorded in equity.
(ii)

Current tax

Current tax is the expected tax payable on taxable income
for the year, based on tax rates (and tax laws) which areenacted or substantively enacted by the reporting dateand including any adjustment for tax payable in previous
periods. Current tax for current and prior periods isrecognised as a liability (or asset) to the extent that it isunpaid (or refundable).
(iii)

(iv)

Deferred tax

Deferred tax is accounted for using the comprehensive tax
balance sheet method. It is generated by temporary
differences between the carrying amounts of assets andOffsetting

Current and deferred tax assets and liabilities are offset
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.
(e)AssetsFinancial assets(i)Financial assets and liabilities at fair value throughprofit or loss

Trading securities are financial instruments acquired
principally for the purpose of selling in the short-term or
which are a part of a portfolio which is managed for shortterm profit-taking. Trading securities are initiallyrecognised and subsequently measured in the balance
sheet at their fair value.
Derivatives that are not effective accounting hedging
instruments are carried at fair value through profit or loss.
In addition, certain financial assets and liabilities aredesignated and measured at fair value through profit orloss where the following applies:the asset represents investments backing insurance
policy liabilities;
doing so eliminates or significantly reduces ameasurement or recognition inconsistency thatwould otherwise arise from measuring assets andliabilities, or recognising the gains or losses thereon,on different bases;a group of financial assets or financial liabilities orboth is managed and its performance evaluated ona fair value basis; or
the financial instrument contains an embedded
derivative, unless the embedded derivative does not
significantly modify the cash flows or it is clear, withlittle or no analysis, that it would not be separately
recorded.

Australia and New Zealand Banking Group Limited - ANZ New Zealand9Notes to the Financial Statements
Changes in the fair value (gains or losses) of these financial
instruments are recognised in the income statement in
the period in which they occur.
Purchases and sales of trading securities are recognised on
trade date.
(ii)

Derivative financial instruments

Derivative financial instruments are contracts whose value
is derived from one or more underlying price index orother variables. They include swaps, forward rateagreements, futures, options and combinations of these
instruments.
Derivative financial instruments are entered into for
trading purposes (including customer-related reasons) orfor hedging purposes (where the derivative instruments
are used to hedge ANZ New Zealand’s exposures tointerest rate risk, currency risk, price risk, credit risk andother exposures relating to non-trading positions).
Derivative financial instruments are recognised initially atfair value with gains or losses from subsequent
measurement at fair value being recognised in the income
statement. Valuation adjustments are integral indetermining the fair value of derivatives. This includes acredit valuation adjustment (CVA) to reflect the credit
worthiness of the counterparty and funding valuation
adjustment (FVA) to account for the funding cost inherent
in the portfolio.
Where the derivative is effective as a hedging instrument
and designated as such, the timing of the recognition of
any resultant gain or loss in the income statement isdependent on the hedging designation. These hedging
designations and associated accounting are as follows:
Fair value hedge
Where ANZ New Zealand hedges the fair value of arecognised asset or liability or firm commitment, changes
in the fair value of the derivative designated as a fair value
hedge are recognised in the income statement. Changes
in the fair value of the hedged item attributable to thehedged risk are reflected in adjustments to the carrying
value of the hedged item, which are also recognised in theincome statement.
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercised or nolonger qualifies for hedge accounting. The resulting
adjustment to the carrying amount of the hedged item
arising from the hedged risk is amortised to the income
statement over the period to maturity of the hedged item.
If the hedged item is sold or repaid, the unamortised fairvalue adjustment is recognised immediately in the income
statement.
Cash flow hedge
ANZ New Zealand designates derivatives as cash flow
hedges where the instrument hedges the variability incash flows of a recognised asset or liability, a foreignexchange component of a firm commitment, or a highly
probable forecast transaction. For qualifying cash flow
hedges, the fair value gain or loss associated with theeffective portion of the cash flow hedges is recognised

initially in other comprehensive income and then recycled
to the income statement in the periods when the hedged
item will affect profit or loss. Any ineffective portion isrecognised immediately in the income statement. Whenthe hedging instrument expires, is sold, terminated,
exercised, or no longer qualifies for hedge accounting, thecumulative amount deferred in equity remains in thehedging reserve, and is subsequently transferred to theincome statement when the hedged item is recognised in
the income statement.
When a forecast hedged transaction is no longer expected
to occur, the amount deferred in equity is recognised
immediately in the income statement.
Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value ofderivatives that are not designated in a hedging
relationship but are entered into to manage the interest
rate and foreign exchange risk of ANZ New Zealand arerecognised in the income statement. Under certain
circumstances, the component of the fair value change inthe derivative which relates to current period realised andaccrued interest is included in net interest income. The
remainder of the fair value movement is included in otherincome.
(iii)

Available-for-sale assets

Available-for-sale assets comprise non-derivative financial
assets which ANZ New Zealand designates as availablefor-sale but which are not deemed to be held principallyfor trading purposes, and include equity investments anddebt securities.
They are initially recognised at fair value plus transaction
costs. Subsequent gains or losses arising from changes infair value are included as a separate component of equity
in the available-for-sale revaluation reserve. When theasset is sold, the cumulative gain or loss relating to theasset is transferred to the income statement.
Purchases and sales of available-for-sale financial assets
are recognised on trade date, being the date on which
ANZ New Zealand commits to purchase or sell the asset.
(iv)

Net loans and advances

Loans and advances are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when ANZ New Zealandprovides money to a debtor with no intention of trading
the loans and advances. The loans and advances are
initially recognised at fair value plus transaction costs thatare directly attributable to the issue of the loan oradvance. They are subsequently measured at amortised
cost using the effective interest method, unless specificallydesignated on initial recognition at fair value throughprofit or loss.
All loans are graded according to the level of credit risk.
Net loans and advances include direct finance provided tocustomers such as bank overdrafts, credit cards, termloans and finance lease receivables.

Australia and New Zealand Banking Group Limited - ANZ New Zealand10Notes to the Financial Statements
Impairment of loans and advances(v)

Loans and advances are reviewed at least at eachreporting date for impairment.

Contracts to lease assets and hire purchase agreements
are classified as finance leases if they transfer substantially
all the risks and rewards of ownership of the asset to thecustomer or an unrelated third party. All other lease
contracts are classified as operating leases.

Credit impairment provisions are raised for exposures thatare known to be impaired. Exposures are impaired andimpairment losses are recorded if, and only if, there is
objective evidence of impairment as a result of one ormore loss events, that occurred after the initial recognitionof the loan and prior to the reporting date, and that loss
event, or events, has had an impact on the estimatedfuture cash flows of the individual loan or the collective
portfolio of loans that can be reliably estimated.
Impairment is assessed for assets that are individuallysignificant (or on a portfolio basis for small value loans)and then on a collective basis for those exposures notindividually known to be impaired.
Exposures that are assessed collectively are placed inpools of similar assets with similar risk characteristics. The
required provision is estimated on the basis of historicalloss experience for assets with credit risk characteristics
similar to those in the collective pool. The historical loss
experience is adjusted based on current observable datasuch as changed economic conditions. The provision also
takes account of the impact of inherent risk of large
concentrated losses within the portfolio and anassessment of the economic cycle.
The estimated impairment losses are measured as thedifference between the asset’s carrying amount and theestimated future cash flows discounted to their present
value. As this discount unwinds during the period
between recognition of impairment and recovery of the
cash flow, it is recognised in interest income.
Impairment of capitalised acquisition expenses is assessed
through comparing the actual behaviour of the portfolio
against initial expected life assumptions.
The provision for impairment loss (individual andcollective) is deducted from loans and advances in thebalance sheet and the movement for the reporting period
is reflected in the income statement.
When a loan is uncollectible, either partially or in full, it is
written off against the related provision for loan
impairment. Unsecured facilities are normally written-off
when they become 180 days past due or earlier in theevent of the customer's bankruptcy or similar legal releasefrom the obligation. However, a certain level of recoveries
is expected after the write-off, which is reflected in theamount of the provision for credit losses. In the case of
secured facilities, remaining balances are written-off after
proceeds from the realisation of collateral have been
received, if there is a shortfall.
Where impairment losses recognised in previous periods
have subsequently decreased or no longer exist, such
impairment losses are reversed in the income statement.
A provision is also raised for off-balance sheet items suchas commitments that are considered to be onerous.

(vi)

Lease receivables

Repurchase agreements

Securities sold under repurchase agreements are retainedin the financial statements where substantially all the risks
and rewards of ownership remain with ANZ New Zealand,
and a counterparty liability is disclosed under deposits
and other borrowings. The difference between the saleprice and the repurchase price is accrued over the life of
the repurchase agreement and charged to interest
expense in the income statement.
Securities purchased under agreements to resell, where
ANZ New Zealand does not acquire the risks and rewardsof ownership, are recorded as cash or net loans andadvances if original maturity is greater than 90 days. The
security is not included in the balance sheet. Interest
income is accrued on the underlying loan amount.
Securities borrowed are not recognised in the balance
sheet, unless these are sold to third parties, at which point
the obligation to repurchase is recorded as a financial
liability at fair value with fair value movements included in
the income statement.
(vii) Derecognition
ANZ New Zealand enters into transactions where it
transfers financial assets recognised on its balance sheet
yet retains either all or a portion of the risks and rewards ofthe transferred assets. If all, or substantially all, the risks
and rewards are retained, the transferred assets are notderecognised from the balance sheet.
In transactions where substantially all the risks andrewards of ownership of a financial asset are neither
retained nor transferred, ANZ New Zealand derecognises
the asset if control over the asset is lost. In transfers wherecontrol over the asset is retained, ANZ New Zealandcontinues to recognise the asset to the extent of its
continuing involvement, determined by the extent towhich it is exposed to changes in the value of thetransferred asset. The rights and obligations retained or
created in the transfer are recognised separately as assets
and liabilities as appropriate.
Non-financial assets(viii) Goodwill
Goodwill represents the excess of the purchaseconsideration over the fair value of the identifiable net
assets of a controlled entity at the date of gaining control.
Goodwill is recognised as an asset and not amortised, but
is assessed for impairment at least annually or more
frequently if there is an indication that the goodwill may
be impaired. This involves using the discounted cash flows
methodology to determine the expected future benefitsof the cash-generating units to which the goodwill relates.
Where the assessment results in the goodwill balanceexceeding the value of expected future benefits, theAustralia and New Zealand Banking Group Limited - ANZ New Zealand11

Notes to the Financial Statements
difference is charged to the income statement. Any
impairment of goodwill is not subsequently reversed.
(f)Cash flow hedging reserve
This reserve includes the fair value gains and losses
associated with the effective portion of designated cash
flow hedging instruments. The cumulative deferred gainor loss on the hedge is recognised in the income
statement when the hedged transaction impacts theincome statement.

Liabilities
Financial liabilities(i)

Deposits and other borrowings

Deposits and other borrowings include certificates ofdeposit, interest bearing deposits, UDC secured
investments, commercial paper and other related interest
and non-interest bearing financial instruments. Deposits
and other borrowings, excluding commercial paper, areinitially recognised at fair value plus transaction costs andsubsequently measured at amortised cost. The interest
expense is recognised using the effective interest method.
Commercial paper is designated at fair value throughprofit or loss, with fair value movements recorded directlyin the income statement, which reflects the basis on which
it is managed.
(ii)

Debt issuances and subordinated debt

Debt issuances and subordinated debt are accounted forin the same way as deposits and other borrowings.
(iii)

Financial guarantee contracts

Financial guarantee contracts are contracts that require
the issuer to make specified payments to reimburse theholder for a loss it incurs because a specified debtor fails
to make payments when due. Financial guarantees areissued in the ordinary course of business, consisting ofletters of credit, guarantees and acceptances. Financial
guarantees are initially recognised in the financial
statements at fair value on the date the guarantee wasgiven; typically this is the premium received. Subsequent
to initial recognition, ANZ New Zealand's liabilities undersuch guarantees are measured at the higher of theiramortised amount and the best estimate of theexpenditure required to settle any financial obligation
arising at the balance sheet date. These estimates are
determined based on experience of similar transactions
and history of past losses.
(iv)

Derecognition

Financial liabilities are derecognised when the obligation
specified in the contract is discharged, cancelled or
expires.
(g)

Equity(i)

SharesIssued shares are recognised at the amount paid per share
net of directly attributable issue costs.
(ii)

Reserves

Available-for-sale revaluation reserve
This reserve includes changes in the fair value of availablefor-sale financial assets, net of tax. These changes aretransferred to the income statement (in other operating
income) when the asset is derecognised. Where the asset
is impaired, the changes are transferred to the impairment
expense line in the income statement for debt
instruments and in the case of equity instruments to noninterest income.

(h)Presentation(i)

Offsetting of income and expenses

Income and expenses are not offset unless required or
permitted by an accounting standard. This generally arisesin the following circumstances:
where transaction costs form an integral part of theeffective interest rate of a financial instrument
which is measured at amortised cost, these areoffset against the interest income generated by thefinancial instrument;where gains and losses relating to fair value hedges
are assessed as being effective; orwhere gains and losses arise from a group of similartransactions, such as foreign exchange gains andlosses.
(ii)

Offsetting of financial assets and liabilities

Assets and liabilities are offset and the net amountreported in the balance sheet only where there is:a current enforceable legal right to offset the asset
and liability; andan intention to settle on a net basis, or to realise theasset and settle the liability simultaneously.
(iii)

Statement of cash flows

For cash flow statement presentation purposes, cash andcash equivalents includes cash and nostro balances
included in settlement balances receivable and settlementbalances payable.
(iv)

Goods and services tax

Income, expenses and assets are recognised net of theamount of goods and services tax (GST) except where theamount of GST incurred is not recoverable from the Inland
Revenue Department (IRD). In these circumstances, theGST is recognised as part of the cost of acquisition of theasset or as part of the expense.
Receivables and payables are stated with the amount of
GST included. The net amount of GST recoverable from, orpayable to, the IRD is included as other assets or otherliabilities in the balance sheet.
Cash flows are included in the cash flow statement on a
net basis. The GST components of cash flows arising frominvesting and financing activities, which are recoverable
from, or payable to, the IRD are classified as operating
cash flows.
(v)

Segment reporting

Operating segments are distinguishable components of
ANZ New Zealand that provide products or services thatare subject to risks and rewards that are different to thoseof other operating segments. ANZ New Zealand operates
predominately in the banking industry within New

Australia and New Zealand Banking Group Limited - ANZ New Zealand

12

Notes to the Financial Statements
Zealand. ANZ New Zealand has very limited exposure torisk associated with operating in different economic
environments or political conditions. On this basis nogeographical segment information is provided.
(i)

Other
(i)

Contingent liabilities

Contingent liabilities are not recognised in the balance
sheet but disclosed in note 22 unless it is consideredremote that ANZ New Zealand will be liable to settle thepossible obligation.
(ii)

Accounting Standards not early adopted

The following standard was available for early adoption
but has not been applied in these financial statements.
Standards and amendments effective for periods
commencing after 1 January 2018
NZ IFRS 9 Financial Instruments
The External Reporting Board issued the final version of NZ
IFRS 9 Financial Instruments in September 2014. When
operative, this standard will replace NZ IAS 39 Financial
Instruments: Recognition and Measurement. NZ IFRS 9
addresses recognition and measurement requirements forfinancial assets and financial liabilities, impairment
requirements that introduce an expected credit loss
impairment model and general hedge accounting
requirements which more closely align with risk
management activities undertaken when hedging
financial and non-financial risks. NZ IFRS 9 is notmandatorily effective for the Banking Group until 1
October 2018. The Banking Group is in the process ofassessing the impact of application of NZ IFRS 9 and is not
yet able to reasonably estimate the impact on its financial
statements.

2.

Critical Estimates and Judgements Used in
Applying Accounting Policies

The collective provision is estimated on the basis of historicalloss experience for assets with credit characteristics similar to
those in the collective pool. The historical loss experience isadjusted based on current observable data and events and anassessment of the impact of model risk. The provision also takes
into account the impact of large concentrated losses within theportfolio and the economic cycle.
The use of such judgements and reasonable estimates is
considered by management to be an essential part of theprocess and does not impact on the reliability of the provision.
Individual and collective provisioning involves the use ofassumptions for estimating the amounts and timing of
expected future cash flows. The process of estimating theamount and timing of cash flows involves considerable
management judgement. These judgements are revised
regularly to reduce any differences between loss estimates andactual loss experience.
Refer to note 13 for details of credit impairment provisions.
Critical judgements in applying ANZ New Zealand’s
accounting policies
Financial instruments at fair value
ANZ New Zealand’s financial instruments measured at fair value
are stated in note 1(a)(iii). In estimating fair value ANZ New
Zealand uses, wherever possible, quoted market prices in an
active market for the financial instrument.
In the event that there is no active market for the instrument,
fair value is based on present value estimates or other market
accepted valuation techniques. The valuation models
incorporate the impact of bid/ask spread, counterparty credit
spreads and other factors that would influence the fair value
determined by a market participant. The selection of
appropriate valuation techniques, methodology and inputs
requires judgement. These are reviewed and updated as market
practice evolves.
Derivatives and hedging

There are a number of critical accounting treatments which
include complex or subjective judgements and estimates that
may affect the reported amounts of assets and liabilities in thefinancial statements. Estimates and judgements are continually
evaluated and are based on historical experience and otherfactors, including expectations of future events that are
believed to be reasonable under the circumstances.
An explanation of the judgements and estimates made by ANZ
New Zealand, in the process of applying its accounting policies,that have the most significant effect on the amounts recognisedin the financial statements is set out below.
Critical accounting estimates and assumptions
Credit provisioning
The accounting policy relating to measuring the impairment ofloans and advances requires ANZ New Zealand to assess
impairment at least at each reporting date. The credit provisions
raised (collective and individual) represent management's best
estimate of the losses incurred in the loan portfolio at balancedate based on their experienced judgement.

ANZ New Zealand buys and sells derivatives as part of its
trading operations and to hedge its interest rate risk, currency
risk, price risk, credit risk and other exposures relating to nontrading positions.
A hedging instrument is a designated derivative whose fairvalue or cash flows are expected to offset changes in the fairvalue or cash flows of a designated hedged item. A hedged item
is an asset, liability, firm commitment or highly probable
forecast transaction that: (a) exposes ANZ New Zealand to therisk of changes in fair value or future cash flows; and (b) isdesignated as being hedged.
Judgement is required in selecting and designating hedging
relationships and assessing hedge effectiveness. NZ IAS 39
Financial Instruments: Recognition and Measurement does not
specify a single method for assessing hedge effectivenessprospectively or retrospectively. ANZ New Zealand adopts the
hypothetical derivative approach to determine hedge
effectiveness in line with current risk management strategies.
Hedge ineffectiveness can arise for a number of reasons andwhilst a hedge may pass the effectiveness tests above it may
not be perfectly effective, leaving some volatility in the income
statement.

Australia and New Zealand Banking Group Limited - ANZ New Zealand13

Notes to the Financial Statements
The majority of outstanding derivative positions are transacted
over-the-counter and therefore need to be valued using
valuation techniques. Included in the determination of the fairvalue of derivatives is a credit valuation adjustment (CVA) toreflect the creditworthiness of the counterparty. This is
influenced by the mark-to-market of the derivative trades andby the movement in the market cost of credit. Further
adjustments are made to account for the funding costs inherent
in the derivative. Judgment is required to determine theappropriate cost of funding and the future expected cashflows
used in this funding valuation adjustment (FVA).
Structured entities
A structured entity is an entity in which voting or similar rights
are not the dominant factor in deciding who controls the entity,
such as when voting rights relate to administrative tasks only
and the relevant activities are directed by means of contractual
arrangements. Structured entities are generally created toachieve a narrow and well defined objective with restrictions
around their ongoing activities and are often thinly capitalisedwith a reliance on debt financing for support.
ANZ New Zealand assesses, at inception and periodically,
whether a structured entity should be consolidated based on
the accounting policy outlined in note 1. Such assessments are
predominantly securitisation activities and involvement withmanaged funds. When assessing whether ANZ New Zealandcontrols (and therefore consolidates) a structured entity,
judgement is required about whether ANZ New Zealand has
power over the relevant activities as well as exposure to variable
returns of the structured entity. All involvement, rights andexposure to returns are considered when assessing if control
exists.
ANZ New Zealand is deemed to have power over a managed
fund when it performs the function of Manager of thatmanaged fund. Whether ANZ New Zealand controls the
managed fund depends on whether it holds that power as
principal, or as an agent for other investors. ANZ New Zealand isconsidered the principal, and thus controls the managed fund,when it cannot be easily removed from the position of Manager
by other investors and has variable returns through significant
aggregate economic interest in that managed fund. In all othercases ANZ New Zealand is considered to be acting in an agency
capacity and does not control the managed fund.
Structured entities are consolidated when control exists. In
other cases ANZ New Zealand may simply have an interest in or
may sponsor a structured entity but not consolidate it.
ANZ New Zealand considers itself the sponsor of an
unconsolidated structured entity where it is the primary party
involved in the design and establishment of that structured
entity and:

where ANZ New Zealand is the major user of thatstructured entity; or
ANZ New Zealand’s name appears in the name of thatstructured entity or on its products; or
ANZ New Zealand provides implicit or explicit guaranteesof that entity’s performance.

Goodwill
Refer to note 24 for details of goodwill held by ANZ New
Zealand.
The carrying value of goodwill is subject to an impairment test
to ensure that the current carrying value does not exceed its
recoverable value at the balance sheet date. Any excess ofcarrying value over recoverable amount is taken to the income
statement as an impairment write down.
Goodwill has been allocated for impairment purposes to the
cash generating units at which the goodwill is monitored forinternal reporting purposes. Impairment testing of purchased
goodwill is performed by comparing the recoverable value ofeach cash generating unit with the current carrying amount of
its net assets, including goodwill. Judgement is required in
identifying the cash-generating units to which goodwill andother assets are allocated for the purpose of impairment testing.
The recoverable amount is based on value-in-use calculations.
These calculations use cash flow projections based on a numberof financial budgets within each segment approved bymanagement covering a three year period. Cash flow
projections are based on a range of readily available economic
assumptions including GDP and CPI. Cash flows beyond thethree year period are extrapolated using a 3% growth rate.
These cash flow projections are discounted using a capital asset
pricing model. As at 28 February 2015 when the last valuation
was prepared, a discount rate of 10.05% was applied to eachcash generating unit. The main variables in the calculation of
the discount rate used are the risk free rate, the beta rate andthe market risk premium. The risk free rate is based on the 10
year Government Bond Rate. The beta rate and the market risk
premium are consistent with observable and comparative
market rates applied in the regional banking sector. Market
observable information is not readily available at the segmentlevel therefore management performed stress tests for key
sensitivities in each segment.
Management believes any reasonable possible change in the
key assumptions on which the recoverable amount is based
would not cause ANZ New Zealand’s carrying amount to exceed
its recoverable amount.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

14

Notes to the Financial Statements
3.

IncomeYear toYear to30/09/2015

30/09/2014

488

474

Cash

102

72

Available-for-sale assets

37

33

Net loans and advances

6,760

6,204

30

16

NZ$ millions

Interest income
Financial assets at fair value through profit or loss
Trading securities
Financial assets not at fair value through profit or loss

Other

6,929

6,325

7,417

6,799

201

157

Net gain on trading securities

384

57

Net loss on trading derivatives

(323)

(4)

Net trading gains

262

210

Net funds management income

165

139

Net insurance income

220

186

Total funds management and insurance income

385

325

Lending and credit facility fee income

54

55

Other fee income

591

543

Total fee income

645

598

Direct fee expense

(264)

(216)

Net fee income

381

382

(1)

-

Total interest income
Net trading gains
Net gain on foreign exchange trading

Net funds management and insurance income

Other operating income

Net loss on financial liabilities designated at fair value
Net ineffectiveness on qualifying fair value hedges

7

14

Net gain / (loss) on derivatives not qualifying for hedge accounting

48

(40)

Net cash flow hedge gain transferred to income statement

16

41

-

91

Other income

54

37

Total other operating income

505

525

Insurance settlement proceeds

Australia and New Zealand Banking Group Limited - ANZ New Zealand15

Notes to the Financial Statements
4.

Expenses

NZ$ millions

Year toYear to30/09/2015

30/09/2014

280

229

Interest expense
Financial liabilities at fair value through profit or loss
Commercial paper
Financial liabilities not at fair value through profit or loss
3,248

2,906

Debt issuances

855

799

Subordinated debt

122

73

Other

32

27

4,257

3,805

4,537

4,034

Deposits and other borrowings

Total interest expense
Operating expenses
Personnel costs

733

716

Employee entitlements

88

69

Superannuation costs

31

38

Share-based payments expense

22

22

Building occupancy costs

42

41

Depreciation of premises and equipment

50

55

Leasing and rental costs

80

78

Technology expenses

151

137

Amortisation of software and other intangible assets

35

30

Administrative expenses

162

170

Charges from Ultimate Parent Bank

64

81

Other costs

55

53

1,513

1,490

Total operating expenses

Australia and New Zealand Banking Group Limited - ANZ New Zealand16

Notes to the Financial Statements
5.

Income Tax
Year toYear to30/09/2015

30/09/2014

2,448

2,347

685

657

(3)

(3)

Change in tax provisions

-

(10)

Non assessable income and non deductible expenditure

(5)

(9)

Income tax under provided in prior years

-

1

677

636

27.7%

27.1%

Current tax

602

532

Deferred tax

75

104

Total income tax expense recognised in the income statement

677

636

2,989

2,341

NZ$ millions

Reconciliation of the prima facie income tax payable on profit
Profit before income tax
Prima facie income tax at 28%
Imputed and non-assessable dividends

Total income tax expense
Effective tax rate (%)
Amounts recognised in the income statement

Imputation credits available

A number of companies within ANZ New Zealand are members of an imputation group. The imputation credit balance for ANZ New
Zealand includes the imputation credit balance in relation to both the imputation group and other companies within ANZ New
Zealand that are not in the imputation group. The imputation credit balance available includes imputation credits that will arise
from the payment of the amount of provision for income tax as at the reporting date.

NZ$ millions

30/09/2015

30/09/2014

176

193

Deferred tax assets / (liabilities) comprise the following temporary differences:
Provision for credit impairment
Premises and equipment, software and intangibles(8)2Provisions and accruals

60

61

Insurance policy assets

(146)

(127)

Financial instruments

43

Carried forward losses

-

9

(203)

(191)

Lease finance
Other deferred tax assets and liabilities (including tax provisions)
Net deferred tax liabilities1
1

(7)

(9)

(124)

(59)

Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same income tax authority on either the same taxable entity or different
taxable entities within the same taxable group.

Australia and New Zealand Banking Group Limited - ANZ New Zealand17

Notes to the Financial Statements
6.

Segment Analysis

ANZ New Zealand is organised into four major business segments for segment reporting purposes - Retail, Commercial, Wealth andInstitutional. Centralised back office and corporate functions support these segments. These segments are consistent with internalreporting provided to the chief operating decision maker, being the Bank’s Chief Executive Officer.
During the year ended 30 September 2015, Business Banking was integrated with Retail, having been included in Commercial
previously. Segment reporting has been updated to reflect this change and other minor changes to ANZ New Zealand’s structure.
Comparative data has been adjusted to be consistent with the current year’s segment definitions.
RetailRetail provides products and services to Retail and Business Banking customers via the branch network, mortgage specialists,business managers, the contact centre and a variety of self service channels (internet banking, phone banking, ATMs, website andmobile phone banking). Retail customers have personal banking requirements and Business Banking customers consist primarily ofsmall enterprises with annual revenues of less than NZ$5 million. Core products include current and savings accounts, unsecured
lending (credit cards, personal and business loans and overdrafts) and home and business loans secured by mortgages overproperty. The Retail segment distributes insurance and investment products on behalf of the Wealth segment.
Commercial
Commercial provides services to Commercial & Agri (CommAgri) and UDC customers. CommAgri customers consist of primarily
privately owned medium to large enterprises. Commercial’s relationship with these businesses ranges from simple banking
requirements with revenue from deposit and transactional facilities, and cash flow lending, to more complex funding arrangementswith revenue sourced from a wider range of products. UDC is principally involved in the financing and leasing of plant, vehicles andequipment, mainly for small and medium sized businesses, as well as investment products.
WealthWealth comprises the Private Wealth, Funds Management and Insurance businesses, which provide private banking, investment,
superannuation and insurance products and services.
Institutional
Institutional provides financial services through a number of specialised units to large multi-banked corporations, often global,
which require sophisticated product and risk management solutions. Those financial services include loan structuring, foreignexchange, wholesale money market services and transaction banking.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

Australia and New Zealand Banking Group Limited - ANZ New Zealand18

Notes to the Financial Statements
Business segment analysis1
NZ$ millions

Wealth2

RetailCommercial

Institutional

Other

Total

External interest income

3,856

2,441

112

989

19

7,417

External interest expense(1,697)

(388)

(208)

(498)

(1,746)(4,537)

Net intersegment interest(585)(1,149)

164

(184)

1,754

-

Net interest income

1,574

904

68

307

27

2,880

380

17

255

360

140

1,152

3

-

-

-

2

5

1,957

921

323

667

169

4,037

880

257

144

189

43

1,513

1,077

664

179

478

126

2,524

30/09/2015

Other external operating income
Share of associates' profit
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge

58

-

-

18

-

76

Profit before income tax

1,019

664

179

460

126

2,448

Income tax expense

285

186

43

127

36

677

Profit after income tax

734

478

136

333

90

1,771

Other information
Depreciation and amortisation

15

-

5

-

65

85

Goodwill

929

1,052

180

1,072

-

3,233

Other intangible assets

13

-

125

-

121

259

Investment in associates

4

-

-

-

-

4

Total external assets

66,79640,561

2,887

43,772

1,514

155,530

Total external liabilities

53,736

12,3905,866

37,00235,676

144,670

External interest income

3,490

2,230

99

968

12

6,799

External interest expense(1,430)

(327)

(206)

(475)

(1,596)(4,034)

Net intersegment interest(561)(1,045)

165

(163)

1,604

-

Net interest income

1,499

858

58

330

20

2,765

369

18

318

298

57

1,060

30/09/2014

Other external operating income
Share of associates' profit

1

-

-

-

2

3

Operating income

1,869

876

376

628

79

3,828

Operating expenses

871

252

136

182

49

1,490

Profit before credit impairment and income tax

998

624

240

446

30

2,338

Credit impairment charge / (release)

63

(72)

(1)

1

-

(9)

Profit before income tax

935

696

241

445

30

2,347

Income tax expense

262

195

60

123

(4)

636

Profit after income tax

673

501

181

322

34

1,711

Other information
Depreciation and amortisation

17

2

5

-

61

85

Goodwill

929

1,052

180

1,072

-

3,233

Other intangible assets

22

-

126

-

73

221

Investment in associates

3

-

-

-

85

88

Total external assets

61,57937,7852,531

34,745

1,888

138,528

Total external liabilities

47,09010,936

5,316

28,90036,205

128,447

1
2

Intersegment transfers are accounted for and determined on an arm's length or cost recovery basis.
Wealth other external operating income for the year ended 30 September 2014 includes the NZ$91 million insurance settlement relating to the Bank’s former
involvement in the ING Diversified Yield Fund and the ING Regular Income Fund.

Australia and New Zealand Banking Group Limited - ANZ New Zealand19

Notes to the Financial Statements
7.

Notes to the Cash Flow Statement
Year toYear to30/09/2015

30/09/2014

1,771

1,711

Depreciation and amortisation

85

85

Provision for credit impairment

76

(9)

Deferred fee revenue and expenses

(3)

(4)

Amortisation of capitalised brokerage / mortgage origination fees

131

75

Amortisation of premiums and discounts

60

152

(323)

(225)

1

16

NZ$ millions

Reconciliation of profit after income tax to net cash flows provided by / (used in) operating activities
Profit after income tax
Non-cash items:

Fair value gains and losses
Loss on disposal and impairment of premises and equipment and intangibles
Deferrals or accruals of past or future operating cash receipts or payments:
Change in net operating assets less liabilities(1,876)(294)

Change in interest receivable

2

(53)

Change in interest payable

(20)

20

Change in accrued expenses

14

(25)

Change in provisions

(13)

(25)

Change in life insurance policy assets

(79)

(67)

Change in other receivables and payables

(20)

7

Change in net income tax assets / liabilities

88

172

Dividends from associates in excess of share of profits84

1

Net cash flows provided by / (used in) operating activities

(22)

1,537

30/09/2015

30/09/2014

2,435

2,248

NZ$ millions

Reconciliation of cash and cash equivalents to the balance sheet
CashAmounts included in settlement balances receivable / (payable):
Nostro accounts

108

38

Overdrawn nostro accounts

(17)

(30)

Total cash and cash equivalents

2,526

2,256

30/09/2015

30/09/2014

8.

Cash

NZ$ millions

Coins, notes and cash at bank

250

630

Balances with central banks

1,847

1,309

Securities purchased under agreements to resell
Total cash

338

309

2,435

2,248

Australia and New Zealand Banking Group Limited - ANZ New Zealand20

Notes to the Financial Statements
9.

Trading Securities

NZ$ millions

Government, local body stock and bonds

30/09/2015

30/09/2014

6,355

6,607

Certificates of deposit

190

378

Promissory notes

259

91

Reserve Bank bills

200-

Other bank bonds

5,077

4,630

58

44

12,13911,750

Other
Total trading securities

10. Derivative Financial Instruments
The use of derivatives and their sale to customers as risk management products is an integral part of ANZ New Zealand’s trading
activities. Derivatives are also used to manage ANZ New Zealand’s own exposure to fluctuations in exchange and interest rates aspart of its own asset and liability management activities.
Derivatives are subject to the same types of credit and market risk as other financial instruments and ANZ New Zealand manages
these risks in a consistent manner.
Derivatives, except for those that are specifically designated as effective hedging instruments, are classified as held for trading.
Derivatives held for trading
The held for trading classification includes two categories of derivative instruments: those held as trading positions and those used
for ANZ New Zealand’s balance sheet risk management.
Trading positions
Trading positions consist of both sales to customers and market making activities. Sales to customers include the structuring andmarketing of derivative products to customers which enable them to take or mitigate risks. Market making activities consist ofderivatives entered into principally for the purpose of generating profits from short-term fluctuations in price or margins. Positions
may be traded actively or held over a period of time to benefit from expected changes in market rates.
Balance sheet risk management
ANZ New Zealand designates certain balance sheet risk management derivatives into hedging relationships in order to minimise
income statement volatility. This volatility is created by differences in the timing of recognition of gains and losses between thederivative and the hedged item. Hedge accounting is not applied to all balance sheet risk management positions as some balance
sheet risk management derivatives are classified as held for trading.

Australia and New Zealand Banking Group Limited - ANZ New Zealand21

Notes to the Financial Statements
30/09/2015

30/09/2014

Notional
principal
amountFair values
AssetsSpot and forward contracts

75,930

NZ$ millions

Liabilities

Notional
principal
amountFair values
Assets

1,625

1,333

63,800

1,454

1,234
5,718

Liabilities

Derivatives held for trading
Foreign exchange derivatives
Swap agreements

130,093

2,898

4,118

155,303

5,420

Options purchased

1,870

79

3

2,528

47

1

Options sold

1,820

2

46

2,381

1

36

209,713

4,604

5,500

224,012

6,922

6,989

Interest rate derivatives
Forward rate agreements

24,633

2

12

8,899

2

1

Swap agreements

1,130,414

12,338

11,395680,503

4,132

3,750

Futures contracts

45,40712

18

17,930

2

4

Options purchased

1,218

5

-

1,607

2

-

827

1

2

840

1

3

1,202,499

12,358

11,427

709,779

4,139

3,758

235

29

29

346

22

21

1,412,447

16,991

16,956934,137

11,083

10,768

-

-

-

17

-

-

33,136230446

25,494242

85

33,136230

446

25,511242

85Interest rate swap agreements

21,715366

367

18,86696

108

Total derivatives in hedging relationships

54,851596

813

44,377338

193

1,467,298

17,587

17,769978,514

11,421

10,961

Options soldCommodity derivatives
Total derivatives held for trading
Derivatives in hedging relationships
Fair value hedges
Foreign exchange swap agreements
Interest rate swap agreements
Cash flow hedges

Total derivative financial instruments

Derivatives in hedging relationships
Fair value hedges
ANZ New Zealand’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fairvalue of fixed-rate long-term financial instruments due to movements in market interest rates.
Gain / (loss) on fair value hedges attributable to the hedged risk
30/09/2015

30/09/2014- hedged item

189

(51)

- hedging instrument

(182)

65

7

14

NZ$ millions

Gain / (loss) arising from fair value hedges:

Net ineffectiveness on qualifying fair value hedges

Cash flow hedges
ANZ New Zealand’s cash flow hedges comprise interest rate swaps that are used to protect against exposures to variability in futureinterest cash flows on non-trading assets and liabilities which bear interest at variable rates or which are expected to be refunded or
reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected
for each portfolio of financial assets and liabilities on the basis of their forecast repricing profile. This forms the basis for identifying
gains and losses on the effective portions of derivatives designated as cash flow hedges.
Analysis of the cash flow hedging reserve30/09/2015

30/09/2014

Variable rate loan assets

187

(29)

Short term re-issuances of fixed rate customer and wholesale deposit liabilities

(197)

22

Total cash flow hedging reserve

(10)

(7)

NZ$ millions

Deferred gain / (loss) attributable to hedges of:

All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur, which isanticipated to take place over the next ten years (30/09/2014 ten years).

Australia and New Zealand Banking Group Limited - ANZ New Zealand22

Notes to the Financial Statements
11. Available-for-sale Assets
NZ$ millions

30/09/2015

30/09/2014

Government, local body stock and bonds

270

522

Reserve Bank bills

599-

Other debt securities

557

248

Equity securities

2

2

1,428

772

30/09/2015

30/09/2014

Overdrafts

1,638

1,744

Credit card outstandings

1,688

1,580

Term loans - housing

67,456

61,918Term loans - non-housing

Total available-for-sale assets

12. Net Loans and Advances
NZ$ millions

Note

42,88039,622

Lease receivables

236

277

Hire purchase

946

837

Other
Total gross loans and advances
Less: Provision for credit impairment-

125

114,844

106,103

(629)

(688)

Less: Unearned income

(214)

(212)

Add: Capitalised brokerage/mortgage origination fees

323

215

Add: Customer liability for acceptances

52

67

114,376

105,485

Total net loans and advances

13Australia and New Zealand Banking Group Limited - ANZ New Zealand23

Notes to the Financial Statements
13. Provision for Credit Impairment
Credit impairment charge / (release)
30/09/2014

30/09/2015
Retailmortgages

Other retail
exposures

New and increased provisions

45

107

76

Write-backs

(48)

(19)

(59)

Recoveries of amounts written off previously

(1)

(20)

(8)

Individual credit impairment charge / (release)

(4)

68

9

Collective credit impairment charge / (release)(4)9Credit impairment charge / (release)

(8)

77

Retailmortgages

Other retail
exposures

91

118

NZ$ millions

Non-retail
exposures

Retailmortgages

Other retail
exposures

228

68

120

111

299

(126)

(54)

(21)

(112)

(187)

(29)

(2)

(20)

(7)

(29)

73

12

79

(8)

83

(2)

3

(24)

1

(69)

(92)

7

76

(12)

80

(77)

(9)

Non-retail
exposures

Total

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

255

464

115

117

324

556

Total

Non-retail
exposures

Total

Movement in provision for credit impairment
30/09/2014

30/09/2015
NZ$ millions

Collective provision
Balance at beginning of the year
Charge / (release) to income statement

(4)

9

(2)

3

(24)

1

(69)

(92)

Balance at end of the year

87

127

253

467

91

118

255

464

Individual provision
Balance at beginning of the year

81

15

128

224

83

22

188

293

New and increased provisions net of write-backs

(3)

88

17

102

14

99

(1)

112

Bad debts written off

(10)

(94)

(54)

(158)

(10)

(106)

(67)

(183)

Discount unwind reversal / (discount unwind)1

(6)

-

-

(6)

(6)

-

8

2

Balance at end of the year

62

9

91

162

81

15

128

224

Total provision for credit impairment

149

136

344

629

172

133

383

688

1

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cash flows discounted to its
present value using the original effective interest rate for the asset. This discount unwinds as interest income over the period the asset is held.

Impaired assets
30/09/2014

30/09/2015
NZ$ millions

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

Balance at beginning of the year

223

35

410

668

214

49

673

936

Transfers from productive

121

126

155

402

218

138

299

655

Transfers to productive

(80)

(7)

(46)

(133)

(51)

(4)

(153)

(208)

Assets realised or loans repaid

(135)

(28)

(212)

(375)

(148)

(42)

(342)

(532)

Write offs

(10)

(94)

(54)

(158)

(10)

(106)

(67)

(183)

Total impaired assets

119

32

253

404

223

35

410

668

1

-

14

15

1

-

38

39

Undrawn facilities with impaired customers

Australia and New Zealand Banking Group Limited - ANZ New Zealand24

Notes to the Financial Statements
14. Deposits and Other Borrowings
NZ$ millions

Note

Certificates of deposit

30/09/2015

30/09/2014

745

1,376

Term deposits

34,982

34,758Other deposits bearing interest and other borrowings

41,43634,027

Deposits not bearing interest

6,716

6,001

Deposits from banks

47

226

Commercial paper

4,964

6,057

UDC secured investments

20

1,736

1,569

Borrowings from Ultimate Parent Bank and Immediate Parent Company

31

9,110

10,51399,736

94,527

Total deposits and other borrowings

Deposits from customers are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand. In the unlikely eventthat the Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in the Seventh Schedule of
the Companies Act 1993 would rank ahead of the claims of unsecured creditors.

15. Debt Issuances
30/09/2015

30/09/2014

Domestic bonds

3,525

3,250

U.S. medium term notes1

6,831

4,934

Euro medium term notes1

3,598

4,774

5,335

3,928

35

35

NZ$ millions

Covered bonds1
Index linked notes

Note

20, 3019,324

16,921

Fair value hedge adjustment

175

129

Less debt issuances held by the Bank

(96)

(8)

19,403

17,042

Total debt issuances

Total debt issuances

Debt issuances, other than covered bonds, are unsecured and rank equally with other unsecured liabilities of ANZ New Zealand.
1

These debt issuances are issued by ANZ New Zealand (Int’l) Limited and are guaranteed by the Bank.

Australia and New Zealand Banking Group Limited - ANZ New Zealand25

Notes to the Financial Statements
16. Subordinated Debt
NZ$ millions

30/09/2015

30/09/2014

1,052

-

494

-

ANZ Capital Notes1
AUD 970m ANZ Capital Notes 3 (ANZ CN3)2
NZD 500m ANZ New Zealand Capital Notes (ANZ NZ CN)3
Perpetual subordinated debt
NZD 835m perpetual subordinated bond3

835

835

AUD 266m perpetual subordinated floating rate loan4-298

AUD 10m perpetual subordinated floating rate loan

11

11

291

298

2,683

1,442

Dated subordinated debt
AUD 265m subordinated floating rate loan
Total subordinated debt
1
2
3

4

These instruments qualify as additional tier 1 capital of the Overseas Banking Group.
These instruments are listed on the Australian Stock Exchange.
These instruments are listed on the New Zealand Debt Market (NZDX). The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirements ofListing Rules 10.3 (relating to the provision of preliminary announcements of half yearly and annual results to the NZX) and 10.4 (relating to preparing and providing a
copy of half yearly and annual reports to the NZX).
This loan was repaid on 16 March 2015. Interest was payable semi-annually in arrears based on a floating rate equal to the aggregate of the Australian 6 month bank billrate plus a 95 basis point margin.

Subordinated debt is subordinated in right of payment in theevent of liquidation or wind up to the claims of depositors
and all creditors of the relevant issuer or drawer of the debt.
ANZ Capital Notes


On 5 March 2015, the NZ Branch issued 9.7 million
convertible notes (ANZ CN3) at A$100 each, raising
A$970 million before issue costs.
On 31 March 2015, the Bank issued 500 million
convertible notes (ANZ NZ CN) at NZ$1 each, raising
NZ$500 million before issue costs.

ANZ Capital Notes (the notes) are fully paid mandatorily
convertible non-cumulative perpetual subordinated notes.
As at 30 September 2015 ANZ NZ CN carried a BBB- credit
rating from Standard and Poor’s.
The notes are classified as debt given there are circumstances
beyond ANZ New Zealand’s control where the principal isconverted into a variable number of shares of the Ultimate
Parent Bank.
Distributions and interest
Distributions on ANZ CN3 and interest on ANZ NZ CN arerecorded as interest expense in the statement ofcomprehensive income. Distributions and interest on thenotes are non-cumulative and payable as follows:

ANZ CN3: payable semi-annually in arrears in March and
September in each year and will be franked in line withthe franking applied to ordinary shares of the Ultimate
Parent Bank. The distributions are based on a floating
rate equal to the aggregate of the Australian 6 monthbank bill rate plus a 360 basis point margin, multipliedby one minus the Australian company tax rate. Should
the distribution not be fully-franked, the terms of thenotes provide for a cash gross-up for the amount of thefranking benefit not provided.
ANZ NZ CN: payable quarterly in arrears in February,
May, August and November in each year. The interest
rate is fixed at 7.2% per annum until 25 May 2020, andthereafter will be based on a floating rate equal to theaggregate of the New Zealand 3 month bank bill rateplus a 350 basis point margin.
Distributions and interest payments are subject to the
Ultimate Parent Bank’s (ANZ CN3) and the Bank’s (ANZ NZCN) absolute discretion and certain payment conditions
being satisfied (including APRA and RBNZ (ANZ NZ CN only)
requirements). If distributions or interest are not paid on thenotes, the Ultimate Parent Bank (ANZ CN3) or the Bank (ANZNZ CN) may not, except in limited circumstances, pay
dividends or undertake a share buy-back or other capital
reduction on its ordinary shares until the distributions orinterest are next paid.
Conversion features
On 24 March 2025 (ANZ CN3) or 25 May 2022 (ANZ NZ CN) or
an earlier date under certain circumstances, the relevant
notes will mandatorily convert into a variable number ofordinary shares of the Ultimate Parent Bank based on the
average market price of the Ultimate Parent Bank’s ordinary
shares over a specified period prior to conversion less a 1%
discount, subject to a maximum conversion number.
The mandatory conversion will be deferred for a specified
period if the conversion tests are not met.
If a common equity capital trigger event, an APRA nonviability trigger event or an RBNZ non-viability trigger event(as defined in the RBNZ document Capital Adequacy
Framework (Internal Models Based Approach) (BS2B)) (ANZNZ CN only) occurs, some or all of the notes will be required
to be immediately converted into ordinary shares of the
Ultimate Parent Bank, subject to a maximum conversion
number.
A common equity capital trigger event occurs if the:Overseas Banking Group’s Level 1 (ANZ CN3 only) orLevel 2 common equity tier 1 capital ratio is equal to orless than 5.125%; orAustralia and New Zealand Banking Group Limited - ANZ New Zealand

26

Notes to the Financial Statements
Banking Group’s common equity tier 1 capital ratio is
equal to or less than 5.125% (ANZ CN only).

NZD 835,000,000 bondThis bond was issued by the Bank on 18 April 2008.

An APRA non-viability trigger event occurs if APRA notifies
the Ultimate Parent Bank that, without the conversion or
write-off of certain securities or a public sector injection ofcapital (or equivalent support), it considers that the Ultimate
Parent Bank would become non-viable. An RBNZ nonviability trigger event occurs if the RBNZ directs the Bank toconvert or write off the notes or a statutory manager isappointed to the Bank and decides the Bank must convert or
write off the notes.

The Bank may elect to redeem the bond on 18 April 2018 (theCall Date) or any interest payment date subsequent to 18
April 2018. Interest is payable semi-annually in arrears on 18
April and 18 October each year, up to and including the Call
Date and then quarterly thereafter. Should the bond not becalled at the Call Date, the Coupon Rate from the Call Dateonwards will be based on a floating rate equal to theaggregate of the 3 month bank bill rate plus a 300 basis point
margin.

On 25 May 2020 the Bank has the right, subject to satisfying
certain conditions, to redeem (subject to receiving RBNZ’sand APRA’s prior approval), or to convert into ordinary sharesof the Ultimate Parent Bank, all or some of the ANZ NZ CN at
its discretion on similar terms as mandatory conversion.

As at 30 September 2015, this bond carried a BBB+ rating byStandard and Poor's and an A3 rating by Moody’s.

On 24 March 2023 the Ultimate Parent Bank has the right,
subject to receiving APRA’s prior approval and satisfying
certain conditions, to redeem, or to convert into ordinary
shares of the Ultimate Parent Bank, all or some of the ANZ
CN3 at its discretion on similar terms as mandatory
conversion.

AUD 10,000,000 loan

Rights of holders in event of liquidation

Coupon interest is based on a floating rate equal to theaggregate of the Australian 6 month bank bill rate plus a 240
basis point margin, increasing to the Australian 6 monthbank bill rate plus a 440 basis point margin from 15
September 2018.

In a liquidation of the Ultimate Parent Bank, ANZ CN3 rank
equally with other additional tier 1 capital instruments issued
by the Ultimate Parent Bank. In a liquidation of the Bank, ANZ
NZ CN rank equally with the Bank’s other additional tier 1
capital instruments, including preference shares, and lower
than the Bank’s perpetual subordinated debt. Holders of thenotes do not have any right to vote in general meetings of
the Ultimate Parent Bank or the Bank.
Perpetual subordinated debt
Perpetual subordinated debt instruments are classified as
debt reflecting an assessment of the key terms andconditions of the instruments, and an assessment of theability, and likelihood of interest payments being deferred.
Certain of these instruments have interrelationships thathave been considered in this assessment.

The coupon interest on the bond is 5.28% per annum until 18
April 2018.

This loan was drawn down by the Bank on 27 March 2013and has no fixed maturity. Interest is payable semi-annuallyin arrears on 15 March and 15 September each year. The Bank
may repay the loan on any interest payment date after the
NZD 835,000,000 bond has been repaid in full.

Dated subordinated debt
AUD 265,017,668 loan
This loan was drawn down by ANZ Holdings (New Zealand)
Limited on 25 September 2013. The loan matures on 1
September 2023, but ANZ Holdings (New Zealand) Limited
may elect to repay the loan on any interest payment datefrom 1 September 2018. Interest is payable semi-annually inarrears on 1 March and 1 September in each year and isbased on a floating rate equal to the aggregate of theAustralian 6 month bank bill rate plus a 260 basis point
margin.

Australia and New Zealand Banking Group Limited - ANZ New Zealand27

Notes to the Financial Statements
17. Financial Risk Management

quality reporting, and development of credit standards andpolicies.

Strategy in using financial instruments

The credit risk management framework is top down. The
framework is defined by ANZ New Zealand's credit principles
and policies. The effectiveness of the credit risk management
framework is validated through the compliance andmonitoring processes.

Financial instruments are fundamental to ANZ New Zealand’s
business, constituting the core element of its operations.
Accordingly, the risks associated with financial instruments
are a significant component of the risks faced by ANZ New
Zealand. Financial instruments create, modify or reduce thecredit, market and liquidity risks of ANZ New Zealand’sbalance sheet. ANZ New Zealand’s overall risk management
programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on
the financial performance of ANZ New Zealand.
The risk management and policy control framework
applicable to the entities comprising ANZ New Zealand has
been set by the Board and Risk Committee of the Bank or the
Ultimate Parent Bank, as appropriate. Likewise oversight andmonitoring of material risk exposures of ANZ New Zealand isundertaken by the Risk Management functions of the Bankand also the Ultimate Parent Bank. Throughout thisdocument, references to the Risk Management of theoperations within the entities comprising ANZ New Zealand,
implicitly involves oversight by both related entities.

Credit risk
Credit risk is the risk of financial loss from counterparties
being unable to fulfil their contractual obligations. ANZ New
Zealand assumes credit risk in a wide range of lending andother activities in diverse markets and many jurisdictions.
Credit risks arise not only from traditional lending tocustomers, but also from inter-bank, treasury, international
trade and capital market activities around the world.
ANZ New Zealand has an overall lending objective of soundgrowth for appropriate returns. The credit risk objectives of
ANZ New Zealand are set by each Board and are
implemented and monitored within a tiered structure ofdelegated authority, designed to oversee multiple facets ofcredit risk, including business writing strategies, credit
policies/controls, single exposures, portfolio monitoring andrisk concentrations.
Credit risk management
A credit risk management framework is in place across ANZ
New Zealand with the aim of ensuring a structured anddisciplined approach is maintained in achieving theobjectives set by each Board. The framework focuses onpolicies, people, skills, controls, risk concentrations andportfolio balance. It is supported by portfolio analysis andbusiness-writing strategies, which guide lending decisions
and identify segments of the portfolio requiring attention.
The effectiveness of the framework is monitored through aseries of compliance and reporting processes.
An independent Risk Management function is staffed by risk
specialists. In regard to credit risk management, the objective
is for Risk Management to provide robust credit policies, tomake independent credit decisions, and to provide strong
support to front line staff in the application of sound credit
practices. In addition to providing independent credit
assessment on lending decisions, Risk Management also
performs key roles in portfolio management by development
and validation of credit risk measurement systems, loan asset

Risk Management's responsibilities for credit risk policy andmanagement are executed through dedicated departments,
which support the business units. All major business unit
credit decisions require approval from both business writers
and independent risk personnel.
Credit risk is controlled through a combination of approvals,
limits, reviews and monitoring procedures that are carriedout on a regular basis, the frequency of which is dependent
upon the level of risk. For the key operating entities within
ANZ New Zealand, credit risk policy and management is
executed through the Chief Risk Officer, who is responsible
for various dedicated areas within the Risk Management
division. A formal outsourcing agreement provides for credit
risk functions to be provided to a number of ANZ New
Zealand entities by staff of the Bank.
The credit risk review function within Global Internal Audit
also provides a further independent check mechanism toensure the quality of credit decisions. This includes providing
independent periodic checks on asset quality andcompliance with the agreed standards and policies across
ANZ New Zealand.
Country risk management
Some customer credit risks involve country risk, whereby
actions or events at a national or international level could
disrupt servicing of commitments. Country risk arises when
payment or discharge of an obligation will, or could, involvethe flow of funds from one country to another or involve
transactions in a currency other than the domestic currencyof the relevant country.
Country ratings are assigned to each country where ANZ
New Zealand incurs country risk and have a direct bearing on
ANZ New Zealand's risk appetite for each country. The
country rating is determined through a defined
methodology based around external ratings agencies’ ratingsand internal specialist opinion. It is also a key risk
consideration in ANZ New Zealand's capital pricing model forcross border flows.
The recording of country limits provides ANZ New Zealandwith a means to identify and control country risk. Country
limits ensure that there is a country-by-country ceiling on
exposures that involve country risk. They are recorded bytime to maturity and purpose of exposure, e.g., trade,markets and project finance. Country limits are managed
centrally by the Ultimate Parent Bank, through a global
country risk exposure management system managed by aspecialist unit within Institutional Risk.
Portfolio stress testing
Stress testing is integral to strengthening the predictive
approach to Risk Management and is a key component tomanaging risk appetite and business writing strategies. It
creates greater understanding of impacts on financial

Australia and New Zealand Banking Group Limited - ANZ New Zealand28

Notes to the Financial Statements
performance through modelling relationships andsensitivities between geographic, industry and business unit
exposures under a range of macro economic scenarios.
The Ultimate Parent Bank has a dedicated stress testing teamthat assists business and risk executives in ANZ New Zealand
to model and report periodically to management and theBoard Risk Committee on a range of scenarios and stresstests.
Portfolio analysis and reporting
Credit portfolios are actively monitored at each layer of therisk structure to ensure credit deterioration is quickly
detected and mitigated through the implementation ofremediation strategies.
Businesses incurring credit risk undertake regular andcomprehensive analysis of their credit portfolios. Issue
identification and adherence to performance benchmarks
are reported to Risk Management and business executives
through a series of reports including monthly ‘asset quality’
reporting. This process is undertaken by or overseen by Risk
Management ensuring an efficient and independent conduit
exists to identify and communicate emerging credit issues to
ANZ New Zealand executives and each Board.
Collateral management
ANZ New Zealand credit principles specify lending only what
the counterparty has the capacity and ability to repay and
ANZ New Zealand sets limits on the acceptable level of credit
risk. Acceptance of credit risk is firstly based on the
counterparty’s assessed capacity to meet contractual
obligations (i.e., interest and capital repayments). Obtaining
collateral is only used to mitigate credit risk. Procedures aredesigned to ensure collateral is managed, legally
enforceable, conservatively valued and adequately insured
where appropriate. ANZ New Zealand policy sets out thetypes of acceptable collateral, including:

Cash;

Mortgages over property;Charges over business assets, e.g., premises, stock anddebtors;Charges over financial instruments, e.g., debt securities
and equities in support of trading facilities; andFinancial guarantees.
In the event of customer default, any loan security is usually
held as mortgagee in possession while action is taken to
realise it. Therefore ANZ New Zealand does not usually hold

any real estate or other assets acquired through theenforcement of security.
ANZ New Zealand uses ISDA Master Agreements to
document derivatives' activities to limit exposure to credit
losses. The credit risk is reduced by a master agreement to
the extent that, if an event of default occurs, all contracts
with the counterparty are terminated and settled on a net
basis. Further, it is ANZ New Zealand's preferred practice toinclude all products covered by the ISDA in the Credit
Support Annex (CSA) in order to achieve further credit
exposure reduction. Under a CSA, collateral is passed
between the parties, depending on the aggregate mark-tomarket (positive or negative) of derivative trades between
the two entities, to mitigate the market contingent
counterparty risk inherent in the outstanding positions.
Concentrations of credit risk
Concentrations of credit risk arise when a number ofcustomers are engaged in similar business activities or
activities within the same geographic region, or when they
have similar risk characteristics that would cause their ability
to meet contractual obligations to be similarly affected bychanges in economic or other conditions.
ANZ New Zealand monitors its portfolios to identify andassess risk concentrations. Concentration limits are used toguard against large single customer or correlated credit risks.
Risk Management, Business Unit executives and senior
management monitor large exposure concentrations
through a monthly list of ANZ New Zealand's top corporate
exposures. The ANZ Credit and Market Risk Committee and
Board Risk Committee regularly review a comprehensive listof single customer concentration limits and customers’
adherence to these limits.
Analyses of financial assets by industry sector are based on
Australian and New Zealand Standard Industrial Classification(ANZSIC) codes. Notes on the following tables:
1 Government and local authority includes exposures togovernment administration and defence, education andhealth and community services.
2 Other includes exposures to electricity, gas and water,
communications and personal services.
3 Net loans and advances exclude individual andcollective provisions for credit impairment held inrespect of credit related commitments.
4 Credit related commitments comprise undrawn
facilities, customer contingent liabilities and letters ofoffer.

Australia and New Zealand Banking Group Limited - ANZ New Zealand29

Notes to the Financial Statements
30/09/2015
NZ$ millions

Cash,
Tradingsettlements securities andreceivable and available-forcollateral paid
sale assets

Derivative
financial
instruments

Net loans andadvances 3

Otherfinancial Credit related
assets commitments 4

Total

Industry
Agriculture

-

-

23

18,38373

1,238

Forestry, fishing and mining

-

-

44

931

4

1,035

19,717
2,014

Business and property services

-

1

23

10,81843

2,798

13,683

Construction

-

-

12

1,344

5

811

2,172

Entertainment, leisure and tourism

-

-

47

1,069

4

268

1,388

Finance and insurance

2,631

6,956

15,069

1,246

335

1,067

27,304Government and local authority1

12,230

1,847

6,475

1,338

1,157

5

1,408

Manufacturing

-

31

417

3,471

14

1,993

5,926

Personal lending

-

-

-

69,390245

19,33888,973Retail trade

-

-

18

2,010

8

1,012

3,048

Transport and storage

-

6

60

1,638

7

759

2,470

Wholesale trade

-

-

17

1,468

6

1,248

2,739

Other2

-

98

519

1,971

8

1,672

4,268

4,478
-

13,567-

17,587-

114,896
(531)

757
-

34,647(98)

185,932(629)

Less: Unearned income

-

-

-

(214)

-

-

(214)

Add: Capitalised brokerage/mortgage
origination fees

-

-

-

323

-

-

323

Total financial assets

4,478

13,567

17,587

114,474757

34,549185,412

Geography
New Zealand

2,582

8,673

3,585

111,991748

34,366

161,945

Overseas

1,896

4,894

14,002

2,483

9

183

23,467

Total financial assets

4,478

13,567

17,587

114,474757

34,549185,412

18,811

Less: Provision for credit impairment

30/09/2014

Industry
Agriculture

-

-

9

17,36276

1,364

Forestry, fishing and mining

-

-

8

1,122

5

914

2,049

Business and property services

-

-

16

9,507

42

2,499

12,064

Construction

-

-

-

1,217

5

935

2,157

Entertainment, leisure and tourism

-

-

25

1,028

5

238

1,296

Finance and insurance

2,373

5,526

10,078

972

306

1,214

20,469Government and local authority1

1,309

6,857

630

1,256

6

1,305

11,363

Manufacturing

-

25

177

3,031

13

2,067

5,313

Personal lending

-

-

-

63,940241

15,106

79,287Retail trade

-

-

20

2,031

9

968

3,028

Transport and storage

-

12

31

1,484

7

730

2,264

Wholesale trade

-

-

15

1,384

6

1,290

2,695

Other2

-

102

412

1,836

8

1,736

4,094

3,682
-

12,522-

11,421-

106,170
(583)

729
-

30,366(105)

164,890(688)

Less: Unearned income

-

-

-

(212)

-

-

(212)

Add: Capitalised brokerage / mortgage
origination fees

-

-

-

215

-

-

215

Total financial assets

3,682

12,522

11,421

105,590729

30,261

164,205

Geography
New Zealand

2,992

8,339

2,630

103,165719

30,081

147,926

690

4,183

8,791

2,425

10

180

16,2793,682

12,522

11,421

105,590729

30,261

164,205

Less: Provision for credit impairment

Overseas
Total financial assets
1

Government and local authority includes exposures to government administration and defence, education and health and community services.
Other includes exposures to electricity, gas and water, communications and personal services.
Excludes individual and collective provisions for credit impairment held in respect of credit related commitments.
4
Credit related commitments comprise undrawn facilities, customer contingent liabilities and letters of offer.
2
3

Australia and New Zealand Banking Group Limited - ANZ New Zealand30

Notes to the Financial Statements
Maximum exposure to credit risk
The following table presents the maximum exposure to credit risk for on and off balance sheet financial instruments before taking
account of the financial effect of any collateral held or other credit enhancements, unless such collateral meets the offsetting criteria
in NZ IAS 32 Financial Instruments: Presentation.
The table also provides a quantification of the value of the financial charges ANZ New Zealand holds over a borrower’s specific asset(or assets) where ANZ New Zealand is able to enforce the collateral in satisfying a debt in the event of the borrower failing to meet its
contractual obligations. For the purposes of this disclosure, where the collateral held is valued at more than the corresponding credit
exposure, the financial effect is capped at the value of the credit exposure. In respect of derivative financial instruments, the assessedcollateral is the amount of cash collateral received and does not include the effect of any netting arrangements under ISDAs.
The most common types of collateral include:Security over real estate including residential, commercial, industrial and rural property;
Cash deposits; and
Other security over business assets including specific plant and equipment, inventory and accounts receivables.
ANZ New Zealand also manages its credit risk by accepting other types of collateral such as guarantees and security interests over
the assets of a customer’s business. The assignable value of such credit mitigants is less certain and their financial effect has not been
quantified for disclosure purposes. Credit exposures shown as not fully secured may benefit from such credit mitigants.

NZ$ millions

Maximum
exposure tocredit risk

30/09/2015
Financial
Unsecuredeffect of portion of credit
collateralexposure

Maximum
exposure tocredit risk

30/09/2014
UnsecuredFinancialeffect of portion of credit
collateralexposure

On and off-balance sheet positions
Cash

2,240

338

1,902

2,044

309

1,735

309

134

175

855

746

109

Collateral paid

1,929

-

1,929

783

-

783

Trading securities

12,139-12,13911,750-11,750Derivative financial instruments

17,587

1,687

15,90011,421800

10,621

Available-for-sale assets

1,428

-

1,428

772

-

772

Net loans and advances

114,474

103,482

10,992

105,590

95,066

10,524

757

382

375

729

380

349

Settlement balances receivable

Other financial assets
Credit related commitments

34,54920,10814,44130,261

15,373

14,888

Total exposure to credit risk

185,412

126,131

59,281

164,205

112,674

51,531Credit quality
A core component of ANZ New Zealand’s credit risk
management capability is the risk grading framework used
across all major business units. A set of risk grading principles
and policies is supported by a complementary risk grading
methodology. Pronouncements by the International BaselCommittee on Banking Supervision have been encapsulated
in these principles and policies, including governance,
validation and modelling requirements.
ANZ New Zealand’s risk grade profile changes dynamicallythrough new counterparty lending and existing counterparty
movements in either risk or volume. All counterparty risk
grades are subject to frequent review, including statisticaland behavioural reviews in consumer and small businesssegments, and individual counterparty reviews in segmentswith larger single name borrowers.
Impairment and provisioning of financial assets
ANZ New Zealand's policy relating to the recognition andmeasurement of impaired assets conforms to the RBNZ'sguidelines.
Loans are classified as either performing or impaired.
Impaired assets are credit exposures where: there is doubt as

to whether the full contractual amount (including interest)
will be received; a material credit obligation is 90 days past
due but not well secured; they are portfolio managed andcan be held for up to 180 days past due; or concessionalterms have been provided due to the financial difficulties of
the customer.
An exposure is classified as past due but not impaired (lessthan 90 days) where the value of collateral is sufficient to
repay both the principal debt and all other potential interestor there is no concern as to the creditworthiness of thecounterparty in question.
The past due but not impaired (over 90 days) classification
applies where contractual payments are past due by 90 daysor more, or where the facility remains outside of contractual
arrangements for 90 or more consecutive days, but ANZ New
Zealand believes that impairment is not appropriate on thebasis of the level of security/collateral available, or the facility
is portfolio managed.
The provision for credit impairment represents
management’s best estimate of the losses incurred in theloan portfolio at balance date based on its experienced
judgement.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

31

Notes to the Financial Statements
Distribution of gross loans and advances assets by credit quality
The credit quality of the portfolio of loans and advances is assessed by reference to ANZ New Zealand’s risk grading principles andpolicies supported by a complementary risk grading methodology.
30/09/2015

30/09/2014

Retailmortgages

Other retail
exposures

Non-retail
exposures

Total

Retailmortgages

Strong risk rating

55,837

1,285

23,05180,17349,092

1,428

21,83672,356

Satisfactory risk rating

7,661

3,021

19,192

29,874

8,777

2,721

17,04028,538

NZ$ millions

Substandard but not past due or impaired

Other retail
exposures

Non-retail
exposures

Total

649

382

1,430

2,461

709

313

1,254

2,276

64,147

4,688

43,673

112,508

58,578

4,462

40,130103,170

1 to 5 days

311

110

454

875

361

121

580

1,062

6 to 29 days

258

92

99

449

275

91

190

556

1 to 29 days

569

202

553

1,324

636

212

770

1,618

30 to 59 days

134

37

88

259

176

31

116

323

60 to 89 days

98

18

11

127

84

16

52

152

90 days and over

128

32

62

222

110

30

32

172

Total past due but not impaired

929

289

714

1,932

1,006

289

970

2,265

Total impaired assets

119

32

253

404

223

35

410

668

65,1955,009

44,640114,844

59,807

4,786

41,510106,103

Total neither past due nor impaired
Past due but not impaired:

Gross loans and advances

Credit quality of gross loans and advances neither past due
nor impaired
The credit quality of financial assets is assessed by ANZ New
Zealand using internal ratings which aim to reflect therelative ability of counterparties to fulfil, on time, their creditrelated obligations, and is based on their current probabilityof default.
Internal ratings
Strong risk rating - Corporate customers demonstratingsuperior stability in their operating and financial
performance over the long-term, and whose debt servicing
capacity is not significantly vulnerable to foreseeable events.
Retail customers with low expected loss. This rating bandbroadly corresponds to ratings “Aaa” to “Ba1” and “AAA” to“BB+” of Moody's Investors Service and Standard & Poor's
respectively.
Satisfactory risk rating - Corporate customers consistently
demonstrating sound operational and financial stability overthe medium to long term, even though some may besusceptible to cyclical trends or variability in earnings. Retailcustomers with moderate expected loss. This rating bandbroadly corresponds to ratings “Ba2” to “B1” and “BB” to “B+”of Moody's Investors Service and Standard & Poor's
respectively.
Substandard but not past due or impaired - Corporate
customers demonstrating some operational and financial
instability, with variability and uncertainty in profitability andliquidity projected to continue over the short and possibly
medium term. Retail customers with higher expected loss.
This rating band broadly corresponds to ratings “B2” to “Caa”
and “B” to “CCC” of Moody's Investors Service and Standard &Poor's respectively.

Movements in the rating categories between balance dates
are due to both changes in the underlying internal ratings
applied to customers and to new loans written or loans
rolling off.
Credit quality of financial assets that are past due but not
impairedAgeing analysis of past due loans is used by ANZ New
Zealand to measure and manage credit quality. Financial
assets that are past due but not impaired include those:Assessed, approved and managed on a portfolio basis
within a centralised environment (for example, credit
cards and personal loans);
Held on a productive basis until they are 180 days pastdue; and
Managed on an individual basis.
A large portion of retail credit exposures, such as residential
mortgages, are generally well secured. That is, the fair valueof associated security is sufficient to ensure that ANZ New
Zealand will recover the entire amount owing over the life of
the facility and there is reasonable assurance that collection
efforts will result in payment of the amounts due in a timely
manner.

Australia and New Zealand Banking Group Limited - ANZ New Zealand32

Notes to the Financial Statements
Traded market risk

Market riska.

Market risk is the risk to ANZ New Zealand’s earnings arisingfrom changes in interest rates, currency exchange rates,
credit spreads, or from fluctuations in bond, commodity or
equity prices. Market risk is generated through both trading
activities and the interest rate risk inherent in the banking
book.

This is the risk of loss from changes in the value of financial
instruments due to movements in price factors for both
physical and derivative trading positions. They arise in
trading transactions where ANZ New Zealand acts as
principal with clients or with the market. The principal risk
categories monitored are:

ANZ New Zealand conducts trading operations in interest
rates, foreign exchange, commodities and debt securities.
ANZ New Zealand has a detailed risk management andcontrol framework to support its trading and balance sheet
management activities. The framework incorporates a risk
measurement approach to quantify the magnitude of market
risk within trading and balance sheet portfolios. Thisapproach, and related analysis, identifies the range ofpossible outcomes that can be expected over a given periodof time, establishes the relative likelihood of those outcomes
and allocates an appropriate amount of capital to support
these activities.
Market risk management and control responsibilities
The Board Risk Committee has delegated responsibility forthe oversight of market risk to the Asset & Liability
Committee (ALCO), chaired by the Chief Financial Officer ofthe Bank. ALCO are required to ensure that market risk
exposure across Traded and Non-Traded portfolios remains
within the risk appetite specified by the Board Risk
Committee. ALCO receive regular reporting on a range of
trading and balance sheet market risk exposures.
The Risk Management division of ANZ New Zealand, throughthe Chief Risk Officer, is responsible for the day-to-day
oversight of market risk. This includes the implementation of
a comprehensive limit and policy framework to control theamount of risk that the Banking Group will accept. Market
risk limits are allocated at various levels and are reported andmonitored on a daily basis. The detailed limit framework
allocates individual limits to manage and control asset
classes (e.g., interest rates, foreign exchange), risk factors(e.g., interest rates, volatilities) and profit and loss limits (tomonitor and manage the performance of the trading
portfolios).
Additional oversight and monitoring of material risk
exposures of ANZ New Zealand is undertaken by the Risk
Management functions of the Ultimate Parent Bank.
Within overall strategies and policies, the control of market
risk is the joint responsibility of business units and Risk
Management, with the delegation of market risk limits fromthe Board Risk Committee to both Risk Management and thebusiness units.
These risks are monitored daily against a comprehensive limit
framework that includes Value at Risk, aggregate market
position and sensitivity, product and geographic thresholds.
To facilitate the management, control, measurements andreporting of market risk, ANZ New Zealand has grouped
market risk into two broad categories:

Currency risk is the potential loss arising from thedecline in the value of a financial instrument due tochanges in foreign exchange rates or their implied
volatilities.

Interest rate risk is the potential loss arising from thechange in the value of a financial instrument due tochanges in market interest rates or their implied
volatilities.

Credit spread risk is the potential loss arising from achange in value of an instrument due to a movement of
its margin or spread relative to a bench mark.

b.

Non-traded market risk (or balance sheet risk)This comprises the management of non-traded interest raterisk, liquidity, and the risk to capital and earnings as a resultof movements in market rates.
Some instruments do not fall into either category but also
expose ANZ New Zealand to market risk. These include
equity securities classified as available-for-sale. Regularreviews are performed to substantiate the valuation of thesetypes of instruments.
In all trading areas ANZ New Zealand has implemented
models that calculate Value at Risk (“VaR”) exposures,monitor risk exposures against defined limits on a daily basis,and “stress test” trading portfolios.
VaR measure
A key measure of market risk is VaR. VaR is a statisticalestimate of the likely daily loss and is based on historicalmarket movements.
The confidence level is such that there is a 99% probability
that the loss will not exceed the VaR estimate on any givenday. Conversely there is 1% probability of the decrease inmarket value exceeding the VaR estimate on any given day.
ANZ New Zealand’s standard VaR approach for both tradedand non-traded risk is historical simulation. ANZ New
Zealand calculates VaR using historical changes in market
rates and prices over the previous 500 business days. Tradedand Non-Traded VaR is calculated using a one-day holding
period.
It should be noted that because VaR is driven by actual
historical observations, it is not an estimate of the maximum
loss that ANZ New Zealand could experience from an
extreme market event. As a result of this limitation, ANZ New
Zealand utilises a number of other risk measures (e.g. stresstesting) and associated detailed control limits to measureand manage market risk.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

33

Notes to the Financial Statements
Traded market risks
30/09/2015

NZ$ millions

30/09/2014

Value at risk at 99% confidenceHigh forLow for
Period end
year
year

Average for
year

Value at risk at 99% confidenceHigh forLow for
Period end
year
year

Average foryear

Foreign exchange risk

0.6

1.1

-

0.3

0.3

1.1

-

0.4

Interest rate risk

2.4

5.1

1.0

2.1

1.5

3.1

0.9

1.8

Credit spread risk

0.7

0.7

0.2

0.4

0.3

0.6

0.1

0.3

Diversification benefit

(2.0)

n/a

n/a

(0.7)

(0.6)

n/a

n/a

(0.7)

Total VaR

1.7

4.9

1.0

2.1

1.5

3.3

0.9

1.8

Traded market risk VaR is calculated separately for foreign exchange and for interest rate/debt markets businesses as well as for ANZ
New Zealand. The diversification benefit reflects the historical correlation between foreign exchange, interest rate and debt markets.
To supplement the VaR methodology, ANZ New Zealand applies a wide range of stress tests, both on individual portfolios and at
ANZ New Zealand level. ANZ New Zealand's stress-testing regime provides senior management with an assessment of the financial
impact of identified extreme events on market risk exposures of ANZ New Zealand.
Non-traded market risk (or balance sheet risk)
The principal objectives of balance sheet management are to manage net interest income sensitivity while maintaining acceptablelevels of interest rate and liquidity risk and to manage the market value of ANZ New Zealand’s capital. Liquidity risk is dealt with in
the next section.
Interest rate risk
The objective of balance sheet interest rate risk management is to mitigate the negative impact of movements in wholesale interest
rates on the earnings of ANZ New Zealand's banking book. Non-traded interest rate risk relates to the potential adverse impact toearnings from changes in market interest rates. This risk arises from two principal sources: mismatches between the repricing dates
of interest bearing assets and liabilities; and the investment of capital and other non-interest bearing liabilities in interest bearing
assets.
As part of normal business activity ANZ New Zealand has additional risks from fixed rate mortgage prepayments and basis risk:
Prepayment risk is the potential risk to earnings or market value from when a customer prepays all or part of a fixed rate
mortgage and where any customer fee charged is not sufficient to offset the loss in value to ANZ New Zealand of this financial
asset due to movements in interest rates and other pricing factors. As far as possible the true economic cost is passed throughto customers in line with their terms and conditions and relevant legislation.
Basis risk is the potential risk to earnings or market value from differences between customer pricing and wholesale market
pricing. This is managed through active review of product margins.
Non-traded interest rate risk is managed to both value and earnings at risk limits. Interest rate risk is reported using three measures:
VaR; scenario analysis (to a 1% shock); and interest rate sensitivity gap. This treatment excludes the effect of prepayment and basis
risk.
a.

Non-traded interest rate risk VaR

NZ$ millions

Period end

High foryear

Low foryear

Average for
year

7.4

12.4

7.3

10.1

10.7

10.7

8.0

8.9

30/09/2015

Value at risk at 99% confidence
30/09/2014

Value at risk at 99% confidence

Australia and New Zealand Banking Group Limited - ANZ New Zealand

34

Notes to the Financial Statementsb.

Scenario analysis – a 1% shock on the next 12 months’ net interest income

A 1% overnight parallel positive shift in the yield curve is modelled to determine the potential impact on net interest income overthe succeeding 12 months. This is a standard risk quantification tool.
The figures in the table below indicate the outcome of this risk measure for the current and comparative periods – expressed as apercentage of reported net interest income. The sign indicates the nature of the rate sensitivity with a positive number signifyingthat a rate increase is positive for net interest income over the next 12 months. Conversely, a negative number signifies that a rateincrease is negative for the next 12 months’ net interest income.
30/09/2015

30/09/2014

Impact of 1% rate shock
Period end

1.0%

1.1%

Maximum exposure

2.3%

1.8%

Minimum exposure

-0.2%

0.7%

Average exposure (in absolute terms)

1.1%

1.3%

The extent of mismatching between the repricing characteristics and timing of interest bearing assets and liabilities at any point has
implications for future net interest income.
Interest rate sensitivity gap
The interest rate sensitivity gap analysis provides information about ANZ New Zealand's exposure to interest rate risk.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding.
These mismatches are managed within policy guidelines for mismatch positions.
The following tables represent the interest rate sensitivity of ANZ New Zealand's assets, liabilities and off balance sheet instruments
by showing the periods in which these instruments may reprice (that is, when interest rates applicable to each asset or liability canbe changed).
The repricing gaps are based upon contractual repricing.

NZ$ millions

Total

Up to
3 months

Over 3 to
6 months

2,435

2,240

-

309

141

-

Over 6 to
12 months

Over 1 to
2 yearsOver
2 years

Not bearing
interest

-

-

-

195

-

-

-

168

30/09/2015

AssetsCash
Settlement balances receivable
Collateral paid

1,929

1,929

-

-

-

-

-

Trading securities

12,139

1,280

731

789

863

8,476

17,587

Derivative financial instruments

17,587

-

-

-

-

-

Available-for-sale assets

1,428

1,178

-

-

-

248

2

Net loans and advances

114,376

60,366

7,117

17,03521,984

8,341

(467)

Other financial assets

757

-

113

33

-

5

606

Total financial assets

150,960

67,134

7,961

17,857

22,847

17,07018,091

Liabilities
Settlement balances payable

1,469

871

-

-

-

-

598

Collateral received

1,687

1,687

-

-

-

-

-

Deposits and other borrowings

99,73670,249

9,586

9,507

2,103

1,575

6,716

Derivative financial instruments

17,769

-

-

-

-

-

17,769Debt issuances

19,403

6,001

1,587

-

2,498

9,317

-

Subordinated debt

2,683

-

1,354

-

-

1,329

-

Other financial liabilities

997

100

-

-

6

256

635

Total financial liabilities

143,744

78,90812,527

9,507

4,607

12,47725,718

Hedging instruments-

39,841(22,090)(3,027)(13,420)(1,304)-

Interest sensitivity gap

7,216

28,067(26,656)

5,323

4,820

3,289

(7,627)

Australia and New Zealand Banking Group Limited - ANZ New Zealand

35

Notes to the Financial Statements
NZ$ millions

Total

Up to
3 months

Over 3 to
6 months

Over 6 to
12 months

Over 1 to
2 yearsOver
2 years

Not bearing
interest

2,248

2,044

-

-

-

-

204

855

53

-

-

-

-

802
-

30/09/2014

AssetsCash
Settlement balances receivable
Collateral paid

783

783

-

-

-

-

Trading securities

11,750

1,388

304

1,631

418

8,009

-

Derivative financial instruments

11,421

-

-

-

-

-

11,421

Available-for-sale assets

772

262

10

250

-

248

2

Net loans and advances

105,485

58,147

7,135

12,263

18,525

9,879

(464)

Other financial assets

729

137

35

18

-

-

539

Total financial assets

134,043

62,814

7,484

14,162

18,943

18,136

12,504

1,992

512

-

-

-

-

1,480

800

800

-

-

-

-

-

94,527

66,29010,852

7,566

2,371

1,447

6,001

Liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial instruments

10,961

-

-

-

-

-

10,961

Debt issuances

17,042

5,149

267

1,971

2,811

6,844

-

Subordinated debt

1,442

-

607

-

-

835

-

884

130

-

10

6

146

592

127,648

72,881

11,726

9,547

5,188

9,272

19,034

Hedging instruments-

12,610

2,333

1,746

(13,269)(3,420)-Interest sensitivity gap

6,395

2,543

(1,909)

6,361

486

5,444

(6,530)

Payables and other liabilities
Total financial liabilities

Equity price risk
The portfolio of financial assets classified as available-for-sale contains equity investment holdings held for longer term strategic
intentions. These equity investments are also subject to market risk which is not captured by the VaR measures for traded and nontraded market risks. The fair value of these securities as at 30 September 2015 was $2 million (30/09/2014 $2 million). A 10 per centreduction in the value of the available-for-sale equity securities would not be material.
Foreign currency related risksThis risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes in foreignexchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk arising fromindividual funding and other transactions is actively managed. The total amounts of unmatched foreign currency assets andliabilities, and consequent foreign currency exposures arising from each class of financial asset and liability, whether recognised or
unrecognised, within each currency are not material.
The net open position in each foreign currency represents the net on-balance sheet assets and liabilities in that foreign currency
aggregated with the net expected future cash flows from off-balance sheet purchases and sales from foreign exchange transactionsin that foreign currency. The amounts are stated in New Zealand dollar equivalents translated using the spot exchange rates as atbalance sheet date.
NZ$ millions

30/09/2015

30/09/2014

Net open position
Australian dollar

(1)

1

Euro

(13)

37

Japanese yen(4)9

US dollar

34

(14)

Swiss franc

-

(37)

Other

6

1

Total net open position

22

(3)

Australia and New Zealand Banking Group Limited - ANZ New Zealand

36

Notes to the Financial Statements
Liquidity risk

Scenario Modelling

Liquidity risk is the risk that ANZ New Zealand is unable tomeet its payment obligations as they fall due. The timing
mismatch of cash flows and the related liquidity risk isinherent in all banking operations and is closely monitored
by ANZ New Zealand.

A key component of ANZ New Zealand’s liquidity
management framework is scenario modelling. Liquidity isassessed under different scenarios, including normal
conditions, name crisis and funding market disruption.

ANZ New Zealand’s liquidity and funding risks are governedby a detailed policy framework which is approved by the Risk
Committees of the Bank’s and Ultimate Parent Bank’s Boards.
The core objective of ANZ New Zealand’s framework is to
manage liquidity to meet obligations as they fall due,
without incurring unacceptable losses.
Central to ANZ New Zealand’s liquidity risk management
approach is the establishment of a liquidity risk appetite
framework to which ANZ New Zealand must conform at all
times. The risk appetite for liquidity has been set as low, andthis objective is achieved by ANZ New Zealand managing
liquidity risks within the boundaries of the following
requirements and principles:
Maintaining the ability to meet all payment obligationsin the immediate term.
Ensuring the ability to meet “survival horizons” under
ANZ New Zealand specific and general market liquidity
stress scenarios.

Maintaining strength in ANZ New Zealand’s balance
sheet structure to ensure long term resilience in ANZ
New Zealand’s liquidity and funding risk profile.
Limiting the potential earnings at risk associated with
unexpected increases in funding costs or theliquidation of assets under stress.
Ensuring the liquidity management framework is
compatible with regulatory requirements.

Daily liquidity reporting and scenario analysis,
quantifying ANZ New Zealand’s positions.

Targeting a diversified funding base, avoiding undue
concentrations by investor type, maturity, market
source and currency.
Holding a portfolio of high quality liquid assets toprotect against adverse funding conditions and tosupport day-to-day operations.

Establishing detailed contingency plans to coverdifferent liquidity crisis events.

Normal conditions: reflects the normal behaviour of cash
flows in the ordinary course of business. ANZ New Zealandmust manage its short and long term wholesale funding toensure there are no undue maturity concentrations within
the wholesale funding profile over the following threemonths. Limits are applied within the three month period
based on a combination of ANZ New Zealand’s
demonstrated and assumed wholesale funding capacity.
Name-crisis: refers to a potential severe name-specificliquidity crisis scenario which models the behaviour of cash
flows where there is a problem (real or perceived) which may
include, but is not limited to, operational issues, doubts
about the solvency of ANZ New Zealand, or adverse ratingchanges. Under this scenario ANZ New Zealand may havesignificant difficulty rolling over or replacing funding. Under
the liquidity policy ANZ New Zealand must have sufficienthigh quality liquid assets to meet its liquidity needs for thefollowing 30 calendar days under this scenario.
Funding market disruption: The global financial crisis
highlighted the importance of differentiating between aname specific crisis and the different behaviour thatdomestic and offshore funding markets can exhibit duringmarket disruption events. Under the liquidity policy, ANZ
New Zealand must be able to meet its wholesale maturities
under a scenario of protracted stress in domestic andoffshore wholesale funding markets over a period of six
months.
As of 30 September 2015 ANZ New Zealand was incompliance with the above scenarios.
Wholesale funding

Supervision and Regulation

ANZ New Zealand’s wholesale funding strategy is designed
to deliver a sustainable portfolio of wholesale funds thatbalances cost efficiency while targeting diversification bymarkets, investors, currencies, maturities and funding
structures. Short-term wholesale funding requirements, witha contractual maturity of less than one year, are managed
through the Treasury and Markets operations. Long-term
wholesale funding is managed and executed throughTreasury operations.

The RBNZ requires the Bank to have a comprehensive Board
approved liquidity strategy defining: policy, systems andprocedures for measuring, assessing, reporting andmanaging domestic and foreign currency liquidity. This also
includes a formal contingency plan for dealing with aliquidity 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.

ANZ New Zealand also uses maturity concentration limits
under the wholesale funding and liquidity management
framework. Maturity concentration limits ensure that ANZ
New Zealand does not become reliant on issuing large
volumes of new wholesale funding within a short time
period. Funding instruments used to meet the wholesaleborrowing requirement must be on a pre-established list of
approved products.

Management of liquidity and funding risks are overseen by
ALCO.

Australia and New Zealand Banking Group Limited - ANZ New Zealand37

Notes to the Financial Statements
Funding capacity and debt issuance planning
ANZ New Zealand 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 ANZ New Zealand’s three year strategic planning cycle.
Funding Composition
ANZ New Zealand actively uses balance sheet disciplines to prudently manage the funding mix. ANZ New Zealand employs funding
metrics to ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longerdated wholesale debt (with remaining term exceeding one year) and equity. This approach recognises that long-term wholesale
debt and other sticky liabilities have favourable liquidity characteristics.
Analysis of funding liabilities by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC)
codes.

Funding composition
NZ$ millions

30/09/2015

30/09/2014

75,40867,759Customer deposits1
New ZealandOverseas

9,462

8,596

Total customer deposits

84,87076,355

Debt issuances

19,403

17,042

Subordinated debt

2,683

1,442

Certificates of deposit

745

1,376

Commercial paper

4,964

6,057

Other borrowings

9,157

10,739Total wholesale funding

36,95236,656

Total funding

121,822

113,011

2,871

2,996

Wholesale funding

Concentrations of funding by industry
Agriculture
Forestry, fishing and mining

656

544

Business and property services

6,304

5,576

Construction

1,283

1,044

Entertainment, leisure and tourism

1,021

922

Finance and insurance

44,72846,133Government and local authority

2,910

2,434

Manufacturing

1,913

1,458

Households

55,23947,600Retail trade

1,064

994

745

772

Wholesale trade

1,312

1,029

Other2

1,776

1,509

121,822

113,011

New Zealand

80,56472,964Australia

11,472

12,041

United States

12,332

11,518Europe10,388

10,464

Transport and storage

Total funding
Concentrations of funding by geography

Other countries

7,066

6,024

Total funding

121,822

113,0111
2

Represents term deposits, other deposits bearing interest, deposits not bearing interest and UDC secured investments.
Other includes exposures to electricity, gas and water, communications and personal services.

Australia and New Zealand Banking Group Limited - ANZ New Zealand38

Notes to the Financial Statements
Liquidity portfolio management
ANZ New Zealand holds a diversified portfolio of cash and high-quality highly-liquid securities to support liquidity risk management.
The size of ANZ New Zealand’s liquidity portfolio is based on the amount required to meet its internal and regulatory liquidity
scenario metrics.
Total liquidity portfolio
NZ$ millions

Cash and balances with central banks
Certificates of deposit

30/09/2015

30/09/2014

2,069

1,309

468

159

Government, local body stock and bonds

5,063

6,318

Government treasury bills

1,155

380

Reserve Bank bills

799-

Other bonds

5,930

5,135

Total liquidity portfolio

15,484

13,301

Assets held for managing liquidity risk include short term cash held with the RBNZ, New Zealand Government securities, securities
issued by supranational agencies, securities issued by highly rated banks and securities issued by State Owned Enterprises, Local
Authorities and highly rated NZ domestic corporates. These assets would be accepted as collateral by the RBNZ in repurchasetransactions. At 30 September 2015 ANZ New Zealand would be eligible to enter into repurchase transactions with a value of
NZ$12,837 million. The Banking Group also held unencumbered internal residential mortgage backed securities (“RMBS”) which
would entitle ANZ New Zealand to enter into repurchase transactions with a value of NZ$6,046 million at 30 September 2015.
Liquidity crisis contingency planning
ANZ New Zealand maintains liquidity crisis contingency plans defining an approach for analysing and responding to a liquiditythreatening event on a group wide basis. 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;
outlined action plans, and courses of action for altering asset and liability behaviour;procedures for crisis management reporting, and covering cash-flow shortfalls;
guidelines determining the priority of customer relationships in the event of liquidity problems; andassigned responsibilities for internal and external communications.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

39

Notes to the Financial Statements
Contractual maturity analysis of financial assets and liabilities
The following tables present ANZ New Zealand's financial assets and liabilities within relevant contractual maturity groupings, basedon the earliest date on which the NZ Branch or ANZ New Zealand may be required to realise an asset or settle a liability. The amounts
disclosed in the tables represent undiscounted future principal and interest cash flows, except for derivatives held for trading where
the full mark-to-market amount has been included in the less than three months category. As a result, the amounts in the tables
below may differ to the amounts reported on the balance sheet.
The contractual maturity analysis for off-balance sheet commitments and contingent liabilities has been prepared using the earliest
date at which ANZ New Zealand or the NZ Branch can be called upon to pay. The liquidity risk of credit related commitments andcontingent liabilities may be less than the contract amount, and does not necessarily represent future cash requirements as many ofthese facilities are expected to be only partially used or to expire unused.
ANZ New Zealand does not manage its liquidity risk on this basis.

30/09/2015

Up to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specifiedTotal

At call

2,435

2,041

394

-

-

-

-

309

140

169

-

-

-

-

Collateral paid

1,929

-

1,929

-

-

-

-

Trading securities

13,180

-

516

1,929

9,710

1,025

-

Derivative financial assets (trading)

16,430-16,430----Available-for-sale assets

1,454

-

1,078

11

363

-

2

Net loans and advances

NZ$ millions

Financial assets
Cash
Settlement balances receivable

153,787

252

15,716

16,98952,704

68,126-

Other financial assets

331

-

180

146

5

-

-

Total financial assets

189,855

2,433

36,412

19,07562,782

69,151

2

Settlement balances payable

1,427

1,188

239

-

-

-

-

Collateral received

1,687

-

1,687

-

-

-

-

Deposits and other borrowings

101,835

48,42919,41024,470

9,526

-

-

Derivative financial liabilities (trading)

14,635-

14,635----

Debt issuances

20,315

-

2,217

3,207

13,498

1,393-

Subordinated debt

3,274

-

15

44

747

1,622

846

Financial liabilities

Other financial liabilities

583

-

212

9

107

255

-

Total financial liabilities

143,756

49,61738,41527,73023,8783,270

846

Derivative financial instruments used for balance sheet management- gross inflows

23,581

-

2,488

4,434

14,714

1,945-- gross outflows(25,247)-(2,629)(4,889)(15,730)(1,999)-Net financial assets / (liabilities) after balance
sheet management

44,433(47,184)(2,144)(9,110)37,88865,827(844)

Contractual maturity of off-balance sheet commitments and contingent liabilities
Less than
1 yearBeyond1 year

514

59

455

32,19332,193-Total

Non-credit related commitments
Credit related commitments
Contingent liabilities

2,454

2,454

-

Total

35,161

34,706455

Australia and New Zealand Banking Group Limited - ANZ New Zealand40

Notes to the Financial Statements
30/09/2014
NZ$ millions

Total

At callUp to
3 months

Over 3 to
12 months

Over 1 to
5 yearsOver
5 years

No maturity
specifiedFinancial assets
Cash

2,250

1,513

737

-

-

-

-

Settlement balances receivable

855

514

341

-

-

-

-

Collateral paid

783

-

783

-

-

-

-

Trading securities

13,325

-

818

2,491

8,172

1,844

-

Derivative financial assets (trading)

10,727-

10,727---2

Available-for-sale assets

826

-

163

279

382

-

Net loans and advances

151,304350

15,922

16,62249,452

68,958-Other financial assets

301

-

259

42

-

-

-

Total financial assets

180,371

2,377

29,75019,43458,00670,802

2

1,992

999

993

-

-

-

-

800

-

800

-

-

-

-

96,80240,271

21,07624,473

10,982--Financial liabilities
Settlement balances payable
Collateral received
Deposits and other borrowings
Derivative financial liabilities (trading)

9,355

-

9,355

-

-

-

-

Debt issuances

17,935

-

1,014

3,184

13,116621-

Subordinated debt

1,144

2,202

-

18

54

304

682

Other financial liabilities

448

-

215

17

61

155

-

Total financial liabilities

129,534

41,27033,471

27,72824,463

1,458

1,144

Derivative financial instruments used for balance sheet management- gross inflows

24,463

-

3,205

4,418

15,956884-- gross outflows(25,365)-(3,261)(4,591)(16,613)(900)-

Net financial assets / (liabilities) after balance
sheet management

49,935(38,893)(3,777)(8,467)32,88669,328(1,142)Contractual maturity of off-balance sheet commitments and contingent liabilities
Less than
1 yearBeyond1 year

483

102

381

27,93027,930-Total

Non-credit related commitments
Credit related commitments
Contingent liabilities

2,436

2,436

-

Total

30,84930,468381

Australia and New Zealand Banking Group Limited - ANZ New Zealand41

Notes to the Financial Statements
18. Classification of Financial Instruments and Fair Value Measurements
At amortisedcost

At fair value through profit or loss
Designated on
initialrecognition Held for trading

NZ$ millions

Hedging

Available-forsale assets

Total
carrying
amountFair value

30/09/2015
CashSettlement balances receivable
Collateral paid

2,435

-

-

-

-

2,435

2,435

309

-

-

-

-

309

309

1,929

-

-

-

-

1,929

1,929

Trading securities--

12,139--12,13912,139Derivative financial instruments1--

16,991596-

17,587

17,587Available-for-sale assets

-

-

-

-

1,428

1,428

1,428

Net loans and advances2

114,376

-

-

-

-

114,376

114,899

Other financial assets

606

151

-

-

-

757

757

Total financial assets

119,655

151

29,130596

1,428

150,960

151,483
1,469

Settlement balances payable

1,469

-

-

-

-

1,469

Collateral received

1,687

-

-

-

-

1,687

1,687

Deposits and other borrowings

94,772

4,964

-

-

-

99,73699,947

Derivative financial instruments1--

16,956813-

17,76917,769Debt issuances2

19,403----

19,403

19,516

Subordinated debt

2,640

2,683

-

-

-

-

2,683

Other financial liabilities

688

-

309

-

-

997

997

Total financial liabilities

120,702

4,964

17,265813-

143,744

144,025

30/09/2014
Cash

2,248

-

-

-

-

2,248

2,248

Settlement balances receivable

855

-

-

-

-

855

855

Collateral paid

783

-

-

-

-

783

783

Trading securities--

11,750--11,75011,75011,421

Derivative financial instruments1--

11,083338-

11,421

Available-for-sale assets

-

-

-

-

772

772

772

Net loans and advances2

105,485

-

-

-

-

105,485

105,600

Other financial assets

539

190

-

-

-

729

729

Total financial assets

109,910190

22,833338

772

134,043

134,158

1,992

-

-

-

-

1,992

1,992

800

-

-

-

-

800

800

Deposits and other borrowings

88,470

6,057

-

-

-

94,527

94,550Derivative financial instruments1--

10,768193-

10,961

10,961

Settlement balances payable
Collateral received

Debt issuances2

17,042----

17,042

17,225

1,442

-

-

-

-

1,442

1,443

Other financial liabilities

658

-

226

-

-

884

884

Total financial liabilities

110,404

6,057

10,994

193-

127,648

127,855

Subordinated debt

1
2

Derivative financial instruments classified as held for trading include derivatives entered into as economic hedges which are not designated as accounting hedges.
Fair value hedging is applied to certain financial assets within loans and advances and certain financial liabilities within debt issuances. The resulting fair value
adjustment means that the carrying value differs from the amortised cost.

Australia and New Zealand Banking Group Limited - ANZ New Zealand42

Notes to the Financial Statements
Measurement of fair value
Valuation methodologies
ANZ New Zealand has an established control framework that ensures fair value is either determined or validated by a function
independent of the party that undertakes the transaction. The control framework ensures that all models are calibrated periodicallyto test that outputs reflect prices from observable current market transactions in the same instrument or other available observable
market data.
Where quoted market prices are used, prices are independently verified from other sources. For fair values determined using avaluation model, the control framework may include, as applicable, independent development or validation of valuation models,
any inputs to those models, any adjustments required outside of the valuation model and, where possible, independent validationof model outputs. In this way, continued appropriateness of the valuations is ensured.
In instances where ANZ New Zealand holds offsetting risk positions, ANZ New Zealand uses the portfolio exemption in NZ IFRS 13
Fair Value Measurement to measure the fair value of such groups of financial assets and financial liabilities on the basis of the pricethat would be received to sell a net long position (that is, an asset) for a particular risk exposure or to transfer a net short position(that is, a liability) for a particular risk exposure.
The Group categorises its fair value measurements on the basis of inputs used in measuring fair value using the fair value hierarchy
below:


Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices in active markets for identicalfinancial instruments. This category includes financial instruments valued using quoted yields where available for specific debt
securities.



Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted
prices within Level 1 that are observable for a similar financial asset or liability, either directly or indirectly.

Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are
not based on observable market data (unobservable inputs).

Valuation techniques and inputs used
In the event that there is no quoted market price for the instrument, fair value is based on valuation techniques. The valuation
models incorporate the impact of bid/ask spreads, counterparty credit spreads, funding costs and other factors that would influence
the fair value determined by market participants.
The majority of valuation techniques employ only observable market data. However, for certain financial instruments the valuation
technique may employ some data (valuation inputs or components) which is not readily observable in the current market. In thesecases valuation inputs (or components of the overall value) are derived and extrapolated from other relevant market data and tested
against historic transactions and observed market trends. To the extent that valuation is based on models or inputs that are notobservable in the market, the determination of fair value can be more subjective, dependent on the significance of the unobservable
input to the overall valuation.
The following valuation techniques have been applied to determine the fair values of financial instruments where there is no quoted
price (level1) for the instrument:

For instruments classified as trading securities and securities short sold, derivative financial assets and liabilities, available-forsale assets, and investments backing insurance contract liabilities, fair value measurements are derived by using modelledvaluations techniques (including discounted cash flow models) that incorporate market prices / yields for securities with similar
credit risk, maturity and yield characteristics; and/or current market yields for similar instruments.

For net loans and advances, deposits and other borrowings and debt issuances, discounted cash flow techniques are used
where contractual future cash flows of the instrument are discounted using discount rates incorporating wholesale market
rates or market borrowing rates of debt with similar maturities or a yield curve appropriate for the remaining term to maturity.



ANZ New Zealand holds units in an unlisted fund, included in available-for sale assets which does not trade in an active market.
The fair value of these units is based on the estimated cashflows from the realisation of the underlying assets.

There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during theyear.

Australia and New Zealand Banking Group Limited - ANZ New Zealand43

Notes to the Financial Statements
Valuation hierarchy for financial assets and financial liabilities measured at fair value
30/09/2015
NZ$ millions

Level 1

30/09/2014

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Financial assets
11,880259-

12,13911,65991-

11,750Derivative financial instruments

Trading securities

12

17,575-

17,5872

11,419-11,421

Available-for-sale assets1

900

526

2

1,428

712

58

2

772

2

149

-

151

129

61

-

190

12,79418,5092

31,305

12,502

11,6292

24,133

Investments backing insurance contract
liabilities1
Total
Financial liabilities
Deposits and other borrowings

-

4,964

-

4,964

-

6,057

-

6,057

Derivative financial instruments

18

17,751-

17,7694

10,957-

10,961Other financial liabilities

309

-

-

309

226

-

-

226

Total

327

22,715-23,042

230

17,014-

17,244

Valuation hierarchy for financial assets and financial liabilities not measured at fair value2
30/09/2015
NZ$ millions

30/09/2014

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total-

110,9903,909

114,899-

101,696

3,904

105,600

Financial assets
Net loans and advances
Financial liabilities
Deposits and other borrowings-

94,983-

94,983-88,493-88,493638

18,878-19,516-

17,225-

17,225Subordinated debt

2,333

307

-

2,640

828

615

-

1,443

Total

2,971

114,168-

117,139828

106,333-

107,161

Debt issuances1

2

During the period, available-for-sale assets of NZ$159 million and Investments backing insurance contract liabilities of NZ$126 million werereclassified from Level 1 to Level 2 following a reassessment of available pricing information. Transfers into and out of Level 1 and Level 2 aredeemed to have occurred as of the beginning of the reporting period in which the transfer occurred.
Fair values, where the carrying amount is not considered a close approximation of fair value.

19. Maturity Analysis of Assets and Liabilities
The following is an analysis of asset and liability line items in the balance sheet that combine amounts expected to be realised or due
to be settled within one year and after more than one year.

NZ$ millions

30/09/2015
within one
after more
year than one year

Total

30/09/2014
within one
after more
year than one year

Total

AssetsInvestment backing insurance contract liabilities

146

5

151

190

-

190

Available-for-sale assets

1,071

357

1,428

437

335

772

Net loans and advances

27,442

86,934

114,376

26,93278,553

105,485

657

83

740

572

60

632

90,915

8,821

99,736

84,390

10,137

94,527

1,527

1,293

59

1,352

Other assets
Liabilities
Deposits and other borrowings
Payables and other liabilities
Provisions
Debt issuances

1,419

108

95

96

191

117

87

204

5,237

14,166

19,403

3,944

13,09817,042

Australia and New Zealand Banking Group Limited - ANZ New Zealand44

Notes to the Financial Statements
20. Assets Charged as Security for Liabilities and Collateral Accepted as Security for Assets
Assets charged as security for liabilities1
The carrying amounts of assets pledged as security are as follows:
Carrying Amount
NZ$ millions

Securities sold under agreements to repurchase

30/09/2015

Related Liability

30/09/2014

30/09/2015

30/09/2014

47

47

47

47

Residential mortgages pledged as security for covered bonds

7,547

7,283

5,335

3,928

Assets pledged as collateral for UDC secured investments

2,441

2,354

1,736

1,569

UDC secured investments are constituted and secured by a trust deed between UDC Finance Limited and its independent trustee,
Trustees Executors Limited. UDC Finance Limited has granted a charge over all its assets and undertaking, primarily net loans andadvances, in favour of the Trustee.

Collateral accepted as security for assets1
ANZ New Zealand has received collateral in relation to reverse repurchase agreements. These transactions are governed by standard
industry agreements.
The fair value of collateral received and sold or repledged is as follows:
NZ$ millions

30/09/2015

30/09/2014

Collateral received on standard reverse repurchase agreements
Fair value of assets which can be sold

339

308

Fair value of assets sold or repledged

269

216

1

Excludes the amounts disclosed as collateral paid and received in the balance sheet that relate to derivative liabilities and derivative assets respectively. The terms andconditions of the collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association Master
Agreement.

Australia and New Zealand Banking Group Limited - ANZ New Zealand45

Notes to the Financial Statements
21. Offsetting
The following information relates to financial assets and liabilities which have not been set off in the balance sheet but for which
ANZ New Zealand has enforceable master netting agreements in place with counterparties. No financial assets and liabilities havebeen set off in the balance sheet.
Gross amounts
presented in thebalance sheet

NZ$ millions

Related amounts not offset 1
Financial
instruments

Cash collateral

Net amounts-(1,112)27

30/09/2015

Financial assets
Collateral paid
Trading securities

1,139
2

Derivative financial instruments

47

(47)

-

-

6,923

(6,194)

(704)

25
256

Financial liabilities
Collateral received

960

-

(704)

Securities sold under agreements to repurchase 3

47

(47)

-

-

7,342

(6,194)(1,112)36

78

Derivative financial instruments
30/09/2014

Financial assets
Collateral paid

284

-

(206)

Trading securities 2

47

(47)

-

-

8,448

(7,572)

(716)

160
37

Derivative financial instruments
Financial liabilities
Collateral received

753

-

(716)

Securities sold under agreements to repurchase 3

47

(47)

-

-

7,848

(7,572)(206)

70

Derivative financial instruments
1

ANZ New Zealand enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard
master netting agreements. ANZ New Zealand holds and provides cash and securities collateral in respective of derivative transactions covered by these agreements.
The right to set off balances under these master netting agreements or to set off cash and securities collateral only arises in the event of non payment or default and, as aresult, these arrangements do not qualify for offsetting under NZ IAS 32 Financial Instruments: Presentation.
2
This is the amount of trading securities encumbered through repurchase agreements, see financial assets pledged as collateral table in this note.
3
Included in deposits from banks, see note 14.

Australia and New Zealand Banking Group Limited - ANZ New Zealand46

Notes to the Financial Statements
22. Credit Related Commitments, Guarantees and Contingent Liabilities
Face or contract value
NZ$ millions

30/09/2015

30/09/2014

Commitments with certain drawdown due within one year

1,130

764

Commitments to provide financial services

31,06327,166

Total credit related commitments

32,19327,930Financial guarantees

920

925

Standby letters of credit

82

79

1,385

1,321

Credit related commitments

Guarantees and contingent liabilities

Transaction related contingent items
Trade related contingent liabilities
Total guarantees and contingent liabilities

67

111

2,454

2,436

ANZ New Zealand guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties,
including its Ultimate Parent Bank. The risk involved is essentially the same as the credit risk involved in extending loan facilities tocustomers, therefore these transactions are subjected to the same credit origination, portfolio management and collateralrequirements for customers applying for loans. As the facilities may expire without being drawn upon, the notional amounts do notnecessarily reflect future cash requirements.
Other contingent liabilities
On 11 March 2013, litigation funder Litigation Lending Services (NZ) Limited announced plans for a representative action againstbanks in New Zealand for certain fees charged to New Zealand customers over the past six years. Proceedings were filed against the
Bank on 25 June 2013. The potential outcome of this litigation cannot be determined with any certainty at this stage.
ANZ New Zealand has other contingent liabilities in respect of actual and possible claims and court proceedings.
An assessment of ANZ New Zealand’s likely loss in respect of these matters has been made on a case-by-case basis and provision
made where deemed necessary.

Australia and New Zealand Banking Group Limited - ANZ New Zealand47

Notes to the Financial Statements
23. Other Assets
30/09/2015

30/09/2014

Accrued interest and prepaid discounts

426

428

Accrued commission

22

19

Share-based payments asset

8360

Prepaid expenses

24

15

Other assets

185

110

Total other assets

740

632

30/09/2015

30/09/2014

Goodwill

3,233

3,233

Software139

96

NZ$ millions

24. Goodwill and Other Intangible Assets
NZ$ millions

120

125

3,492

3,454

30/09/2015

30/09/2014

Creditors

121

58

Accrued interest and unearned discounts

514

534

Defined benefit schemes deficit

43

20

Share-based payments liability

65

39

Accrued charges

243

229

Security settlements and short sales

309

226

Life insurance contract liabilities - reinsurance

107

104

Liability for acceptances

52

67

Other liabilities

73

75

1,527

1,352

30/09/2015

30/09/2014

129

114

Other intangibles
Total goodwill and other intangible assets

25. Payables and Other Liabilities
NZ$ millions

Total payables and other liabilities

26. Provisions
NZ$ millions

Employee annual and long service leave
1

Other

62

90

Total provisions

191

204

1

Includes provisions for surplus leased space, make-good of leased premises, seismic obligations, and restructuring costs.

Australia and New Zealand Banking Group Limited - ANZ New Zealand48

Notes to the Financial Statements
27. Share Capital and Initial Head Office AccountNumber of issued shares

NZ$ millions

30/09/2015

30/09/2014

30/09/2015

30/09/2014

381,655,112

381,655,112

1,453

1,453

At beginning of the year

4,903,692,932

4,005,295,229

5,929

4,960

Issued during the year

611,191,597

898,397,703

675

969

Redeemed during the year

(10,000,000)

-

(10)

-

Redeemable preference shares at end of the year

5,504,884,529

4,903,692,932

6,594

5,929

Paid in share capital
NZ Branch initial head office account5,886,539,641-

5,285,348,044
-

8,047
11

7,382
11

Total ANZ New Zealand share capital & initial head office account5,886,539,641

5,285,348,044

8,058

7,393

Ordinary shares
At beginning and end of the year
Redeemable preference shares

Ordinary shares
All ordinary shares share equally in dividends and any proceeds available to ordinary shareholders on winding up. On a show ofhands every member who is present at a meeting in person or by proxy or by representative is entitled to one vote, and upon a poll
every member shall have one vote for each share held.
During the year ended 30 September 2015 ANZ Holdings (New Zealand) Limited (ANZH) paid ordinary dividends of NZ$1,630 million(30/09/2014 NZ$2,335 million) to the Immediate Parent Company (equivalent to NZ$4.31 (30/09/2014 NZ$6.17) per share).
Redeemable preference shares
All redeemable preference shares (RPS) were issued by ANZH to members of the Overseas Banking Group. RPS carry no voting rights
and are redeemable by ANZH providing notice in writing to holders of the RPS. Dividends are payable at the discretion of thedirectors of ANZH and are non-cumulative.
There are seven classes of RPS, relating to issues in 1988, 2005, 2007, 2008, 2009, 2014 and 2015. ANZH did not pay any dividends on
RPS during the years ended 30 September 2015 and 30 September 2014.
In the event of liquidation, holders of RPS are entitled to available subscribed capital per share, pari passu with all holders of existing
RPS but in priority to all holders of ordinary shares. They have no entitlement to participate in further distribution of profits or assets.
Head office account
The NZ Branch capital comprises the initial head office account only. The head office account is the funds provided by the Ultimate
Parent Bank on the creation of the NZ Branch. It is non-interest bearing and there is no fixed date of repayment.

Australia and New Zealand Banking Group Limited - ANZ New Zealand49

Notes to the Financial Statements
28. Capital Adequacy
Capital management policies
ANZ New Zealand’s core capital objectives are to:Protect the interests of depositors, creditors and shareholders;
Ensure the safety and soundness of ANZ New Zealand’s capital position; and
Ensure that the capital base supports ANZ New Zealand’s risk appetite, and strategic business objectives, in an efficient andeffective manner.
The Board holds ultimate responsibility for ensuring that capital adequacy is maintained. This includes: setting, monitoring andobtaining assurance for ANZ New Zealand’s Internal Capital Adequacy Assessment Process (“ICAAP”) policy and framework;
standardised risk definitions for all material risks; materiality thresholds; capital adequacy targets; internal economic risk capital
principles; and risk appetite.
ANZ New Zealand has minimum and trigger levels for common equity tier 1, tier 1 and total capital that ensure sufficient capital ismaintained to:Meet minimum prudential requirements imposed by regulators;Ensure consistency with ANZ New Zealand’s overall risk profile and financial positions, taking into account its strategic focus
and business plan; andSupport the economic risk capital requirements of the business.
ANZ New Zealand’s Asset & Liability Committee and its related Capital Management Forum are responsible for developing,
implementing and maintaining ANZ New Zealand's ICAAP framework, including ongoing monitoring, reporting and compliance.
ANZ New Zealand’s ICAAP is subject to independent and periodic review conducted by Internal Audit.
ANZ New Zealand has complied with all externally imposed capital requirements to which it is subject during the current andcomparative periods.

Basel III capital ratios

Ultimate Parent Bank
(Extended Licensed Entity)

Overseas Banking Group
30/09/2015

30/09/2014

30/09/2015

30/09/2014

Unaudited

Common equity tier 1 capital

9.6%

8.8%

9.6%

9.1%

Tier 1 capital

11.3%

10.7%

11.6%

11.3%

Total capital

13.3%

12.7%

13.7%

13.4%

For calculation of minimum capital requirements under Pillar 1 (Capital Requirements) of the Basel Accord, APRA has accredited theOverseas Banking Group to use the Advanced Internal Ratings Based (AIRB) methodology for calculation of credit risk weighted
assets and the Advanced Measurement Approach (AMA) for the operational risk weighted asset equivalent.
Under prudential regulations, the Overseas Banking Group is required to maintain a Prudential Capital Ratio (PCR) as determined by
APRA. The Overseas Banking Group exceeded the PCR set by APRA as at 30 September 2015 and for the comparative prior periods.
The Overseas Banking Group is required to publicly disclose Pillar 3 financial information as at 30 September 2015. The Overseas
Banking Group’s Pillar 3 disclosure document for the quarter ended 30 September 2015, in accordance with APS 330: Public
Disclosure of Prudential Information, discloses capital adequacy ratios and other prudential information. This document can beaccessed at the website anz.com.
Market risk
ANZ New Zealand’s aggregate market risk exposures below have been calculated in accordance with the RBNZ document BS2B. The
peak end-of-day market risk exposures are for the half-year ended 30 September 2015.
Implied risk weighted exposure
NZ$ millions

Notional capital charge

Peak

Period end

Peak

Period end

Peakoccurred on

Unaudited 30/09/2015

Interest rate risk

6,134

10,112491

809

6/07/2015

Foreign currency risk

41

132

3

11

20/04/2015

Equity risk

2

2

-

-

30/09/2015

6,177

494

Australia and New Zealand Banking Group Limited - ANZ New Zealand50

Notes to the Financial Statements
Residential mortgages by loan-to-valuation ratio
As required by the RBNZ, LVRs are calculated as the current exposure secured by a residential mortgage divided by ANZ New
Zealand's valuation of the security property at origination of the exposure. Off balance sheet exposures include undrawn andpartially drawn residential mortgage loans as well as commitments to lend. Commitments to lend are formal offers for housing
lending which have been accepted by the customer.

30/09/2015
UnauditedOn-balancesheet

Off-balance
sheet

Total

Does not exceed 60%

24,5184,155

28,673

Exceeds 60% and not 70%

12,622

1,379

14,001

Exceeds 70% and not 80%

19,893

1,934

21,827

Does not exceed 80%

57,033

7,468

64,501

Exceeds 80% and not 90%

5,602

232

5,834

NZ$ millions

LVR range

Exceeds 90%

2,560

256

2,816

Total

65,195

7,956

73,151Note

30/09/2015

12

67,456

Reconciliation of mortgage related amounts
Unaudited
NZ$ millions

Term loans - housing
Less: fair value hedging adjustment(201)

Add: short-term housing loans classified as overdrafts

476

Less: housing loans made to corporate customers
Gross retail mortgage loans / On-balance sheet retail mortgage exposures(2,536)17

65,195

Add: off-balance sheet retail mortgage exposures

7,956

Total retail mortgage exposures as per LVR analysis

73,151

Australia and New Zealand Banking Group Limited - ANZ New ZealandNotes to the Financial Statements
29. Subsidiaries
The following table lists the principal subsidiaries of ANZ New Zealand. Principal subsidiaries are those that have transactions orbalances with parties outside ANZ New Zealand. All subsidiaries are 100% owned and incorporated in New Zealand unless statedotherwise.
Principal subsidiaries

Nature of business

Members of the Banking GroupANZ Bank New Zealand Limited

Registered bank

ANZ Investment Services (New Zealand) Limited

Funds management

ANZ New Zealand (Int'l) Limited

Finance

ANZ New Zealand Investments Limited

Funds management

ANZ New Zealand Securities Limited

On-line share broker

ANZNZ Covered Bond Trust1

Securitisation entity

Arawata Assets Limited

Property

Arawata Finance Limited

Investment

AUT Investments Limited

Investment

Karapiro Investments Limited

Investment

Kingfisher NZ Trust 2008-11

Securitisation entity

OnePath Life (NZ) Limited

Insurance

UDC Finance Limited

Asset finance

Other operating members of ANZ New Zealand (together with the NZ Branch, the "Relevant Members")
ANZ Capel Court Limited (New Zealand Branch)2

Securitisation services

ANZ Holdings (New Zealand) Limited

Holding company

ANZ Securities (NZ) Limited

Nominee1

2

ANZ New Zealand does not own ANZNZ Covered Bond Trust and Kingfisher NZ Trust 2008-1. Control exists as ANZ New Zealand retains substantially all the risks andrewards of the operations. Details of ANZ New Zealand’s interest in consolidated structured entities is included in note 30.
Incorporated in Australia and registered in New Zealand as an Overseas ASIC Company.

51

Australia and New Zealand Banking Group Limited - ANZ New Zealand52

Notes to the Financial Statements
30. Structured Entities, Transferred Financial Assets, Fiduciary Activities and Insurance
Structured entities
ANZ New Zealand’s involvement with structured entities is mainly through securitisations and its funds management activities,
which are outlined further below. ANZ New Zealand has involvement with structured entities that may be established either by ANZ
New Zealand or by a third party.
Consolidated structured entities
Kingfisher NZ Trust 2008-1 (the Kingfisher Trust)
ANZ New Zealand has established the Kingfisher Trust as an in-house residential mortgage backed securities facility that can issue
securities meeting the RBNZ criteria to use as collateral in repurchase transactions with the RBNZ.
These assets do not qualify for derecognition as the Bank retains substantially all of the risks and rewards of the transferred assets.
As at 30 September 2015 and 30 September 2014 ANZ New Zealand had not entered into any repurchase agreements with the RBNZ
for residential mortgage backed securities and therefore no collateral had been accepted by the RBNZ under this facility.
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 as trustee 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 creditors of the Bank, although the Bank (or its liquidator or statutory manager)
may have a claim against the residual assets of the Covered Bond Trust (if any) after all prior ranking creditors of the Covered Bond
Trust have been satisfied.
ANZ New Zealand continues to recognise the assets of the Covered Bond Trust on its balance sheet as, although they are pledged as
security for covered bonds, the Bank retains substantially all the risks and rewards of ownership.
Unconsolidated securitisations
ANZ New Zealand also has an interest in unconsolidated securitisation entities through the provision of funding facilities or holding
bonds or notes issued by such entities. ANZ New Zealand’s exposure to these entities is not material.
Transferred financial assets
Assets transferred to the Kingfisher Trust and the Covered Bond Trust
The Bank has purchased securities issued by both the Kingfisher Trust and the Covered Bond Trust in exchange for the transfer of therights to the cash flows associated with the identified residential mortgages. As at 30 September 2015, NZ$16,071 million of assets
were held in the Kingfisher Trust and the Covered Bond Trust (30/09/2014 NZ$15,270 million).
Repurchase transactions
Securities sold subject to repurchase agreements are not derecognised when substantially all the risks and rewards of ownership
remain with the Bank. See note 20 for details of securities sold under agreements to repurchase. The amount of trading securities
encumbered through repurchase agreements is shown in note 21. The carrying amount of the associated liabilities is not materiallydifferent to the amount of trading securities subject to the repurchase agreement.

Australia and New Zealand Banking Group Limited - ANZ New Zealand53

Notes to the Financial Statements
Funds management and other fiduciary activities
Funds management
Certain entities that form part of ANZ New Zealand act as trustee and/or manager for a number of unit trusts and investment andsuperannuation funds. ANZ New Zealand provides private banking services to a number of clients, including investment advice andportfolio management. ANZ New Zealand is not responsible for any decline in performance of the underlying assets of the investors
due to market forces.
As funds under management are not controlled by ANZ New Zealand, they are not included in these financial statements. ANZ New
Zealand derives fee and commission income from the sale and management of investment funds and superannuation schemes, unit
trusts and the provision of private banking services to customers. ANZ New Zealand derives commission income from the sale ofthird party funds management products.
Some funds under management are invested in products owned or securities issued by ANZ New Zealand and are recorded asliabilities in the balance sheet. At 30 September 2015, NZ$3,100 million of funds under management were invested in ANZ New
Zealand's own products or securities (30/09/2014 NZ$2,928 million).
Custodial services
ANZ New Zealand provides custodial services to customers in respect of assets that are beneficially owned by those customers.
NZ$ millions

30/09/2015

30/09/2014

Kiwisaver and other managed funds

9,147

7,205

The Bonus Bonds Trust

3,277

3,196

ANZ PIE Fund1

794

715

Other investment portfolios2

9,522

8,807

Total funds under management

22,74019,923Funds held in custody or as nominee on behalf of customers

8,082

7,427

137

110

Funds management fee income from structured entities
1

ANZ New Zealand established, and is considered to be the sponsor of, the ANZ PIE Fund. The ANZ PIE Fund invests only in deposits with the Bank. ANZ New Zealanddoes not receive a management fee from, and does not have an interest in, the ANZ PIE Fund.
2
These funds are not structured entities as they are investment portfolios managed on behalf of customers.

Insurance business
ANZ New Zealand conducts insurance business through its subsidiary OnePath Life (NZ) Limited (OnePath Life). OnePath Insurance
Services (NZ) Limited, which was a subsidiary of OnePath Life, also conducted insurance business until it amalgamated with OnePath
Life on 30 November 2014.
OnePath Life provides a range of risk transfer insurance products, including life lump sum trauma/disablement, income protection
and medical cover. In addition, other entities within the Banking Group market and distribute a range of insurance products which
are underwritten by OnePath Life, or by third party insurance companies.
ANZ New Zealand’s aggregate amount of insurance business comprises the total consolidated assets of OnePath Life of NZ$884
million (30/09/2014 NZ$850 million), which is 0.6% (30/09/2014 0.6%) of the total consolidated assets of ANZ New Zealand.
Risk management
The Bank and entities that form part of ANZ New Zealand participating in the activities identified above have in place policies andprocedures to ensure that those activities are conducted in an appropriate manner. Should adverse conditions arise, it is consideredthat these policies and procedures will minimise the possibility that these conditions will adversely impact the Bank or ANZ New
Zealand. The policies and procedures include comprehensive and prominent disclosure of information regarding products, andformal and regular review of operations and policies by management.

Australia and New Zealand Banking Group Limited - ANZ New Zealand54

Notes to the Financial Statements
31. Related Party Disclosures
Key management personnel
Key management personnel are defined as the Directors and senior management of ANZ New Zealand - those persons having theauthority and responsibility for planning, directing and controlling the activities of the entity. The information below includes
transactions with those individuals, their close family members and their subsidiaries.
Loans made to and deposits held by key management personnel are made in the course of ordinary business on normal commercial
terms and conditions no more favourable than those given to other employees or customers, including the term of the loan, security
required and the interest rate.
NZ$ thousands

Year toYear to30/09/2015

30/09/2014

12,69812,402220

387

Key management personnel compensation
Salaries and short-term employee benefits
Post-employment benefits
Other long-term benefits

77

130

Share-based payments expense

5,076

5,400

Total compensation of key management personnel

18,071

18,319Loans to key management personnel

12,693

14,956

Deposits from key management personnel

6,945

5,035

Loans to and deposits held by key management personnel

Transactions with other related parties
The NZ Branch and ANZ New Zealand undertake transactions with the Immediate Parent Company, the Ultimate Parent Bank, othermembers of the Overseas Banking Group and associates.
These transactions principally consist of funding and hedging transactions, the provision of other financial and investment services,
technology and process support, and compensation for share based payments made to ANZ New Zealand employees. Transactions
with related parties outside of ANZ New Zealand are conducted on an arm’s length basis and on normal commercial terms.
In addition the Bank undertakes similar transactions with subsidiaries, which are eliminated in the consolidated ANZ New Zealandfinancial statements. Included within the Bank’s transactions with subsidiaries is the provision of administrative functions to somesubsidiaries for which no payments have been made.
Transactions with related parties
NZ$ millions

Year toYear to30/09/2015

30/09/2014

Ultimate Parent Bank and subsidiaries not part of ANZ New ZealandInterest income

123Interest expense

426

484

Other operating income

35

116

Operating expenses

64

81

Preference shares redeemed

(10)

-

Immediate Parent Company
Interest expense

74

66

Preference shares issued

675

969

Interest expense

3

3

Share of associates' profit

5

3

Associates

Australia and New Zealand Banking Group Limited - ANZ New Zealand55

Notes to the Financial Statements
Balances with related parties
NZ$ millions

30/09/2015

30/09/2014

Cash

55

487

Settlement balances receivable

86

12

Ultimate Parent Bank and subsidiaries not part of ANZ New ZealandCollateral paid

-

125

3,937

3,764

97

63

4

88

4,179

4,539

Settlement balances payable

98

120

Collateral received

688-

Deposits and other borrowings

7,344

8,928

Derivative financial instruments

3,843

4,576

Payables and other liabilities

47

49

Subordinated debt

302

607

1,766

1,766

5

6

Derivative financial instruments
Other assets
Associates
Investments in associates
Total due from related parties
Ultimate Parent Bank and subsidiaries not part of ANZ New Zealand

Immediate Parent Company
Deposits and other borrowings
Payables and other liabilities
Associates
Deposits and other borrowings
Total due to related parties-

85

14,093

16,137

Balances due from / to related parties are unsecured other than that ANZ New Zealand and the Bank have provided guarantees andcommitments to related parties as follows:

NZ$ millions

Financial guarantees provided to the Ultimate Parent Bank

30/09/2015

30/09/2014

183

180

30/09/2015

30/09/2014

1215

32. Capital Expenditure and Operating Lease Commitments
NZ$ millions

Contracts for outstanding capital expenditure
Not later than 1 year
Future minimum lease payments under non-cancellable operating leases
Not later than 1 year

47

87

Later than 1 year but not later than 5 years

258

203

Later than 5 years

197

178

Total operating lease commitments

502

468

Total commitments

514

483

Australia and New Zealand Banking Group Limited - ANZ New Zealand56

Notes to the Financial Statements
33.

Compensation of Auditors

NZ$ thousands

Year toYear to30/09/2015

30/09/2014

2,246

2,308

40

96

Compensation of auditors (KPMG New Zealand)
Audit or review of financial statements1
Other services:
Review of regulatory returns
Offer documents assurance or review

155

249

Other assurance services2

187

151

Total other services
Total compensation of auditors relating to ANZ New ZealandFees paid on behalf of related entities and not recharged3
Total compensation of auditors
1
2
3

382

496

2,628

2,804

121

147

2,749

2,951

Includes fees for both the audit of the annual financial statements and reviews of interim financial statements.
Includes fees for controls reports, comfort letters and other agreed upon procedures engagements.
Amounts relate to the ANZ PIE Fund and The Bonus Bonds Trust and include fees for audits of annual financial statements and audits of summary financial statements
for inclusion in offer documents, comfort letters and other agreed upon procedures engagements.

It is ANZ New Zealand’s policy that, subject to the approval of the Ultimate Parent Bank’s Audit Committee, KPMG can provide
assurance and other audit-related services that, while outside the scope of the statutory audit, are consistent with the role of auditor.
KPMG may not provide services that are perceived to be in conflict with the role of auditor. Services that are perceived to be inconflict with the role of auditor include consulting advice and subcontracting of operational activities normally undertaken bymanagement, and engagements where the auditor may ultimately be required to express an opinion on its own work.

34. Concentrations of Credit Risk to Individual Counterparties
ANZ New Zealand measures its concentration of credit risk in respect to bank counterparties on the basis of approved exposures andin respect to non bank counterparties on the basis of limits.
For the year ended 30 September 2015 there were no individual counterparties (excluding connected parties, governments andbanks with long term credit ratings of A- or above) where ANZ New Zealand’s period end or peak end-of-day credit exposure
equalled or exceeded 10% of the Overseas Banking Group’s equity (as at the end of the period).
This credit exposure information does not include exposures to counterparties if they are booked outside New Zealand.

Australia and New Zealand Banking Group Limited - ANZ New Zealand57

Notes to the Financial Statements
35. Risk Management Framework
ANZ New Zealand recognises the importance of effective risk
management to its business success. Management iscommitted to achieving strong control and a distinctive risk
management capability that enables ANZ New Zealandbusiness units to meet their performance objectives.
ANZ New Zealand approaches risk through managing thevarious elements of the system as a whole rather thanviewing them as independent and unrelated parts. The risk
management division (Risk Management) is independent of
the business, with clear delegations from the Board of the
Ultimate Parent Bank and operates within a comprehensive
framework comprising:
The Boards of the entities making up ANZ New Zealand(the Boards) providing leadership, setting risk
appetite/strategy and monitoring progress;
A strong framework for development and maintenanceof ANZ New Zealand-wide risk management policies,
procedures and systems, overseen by an independent
team of risk professionals;

The use of sophisticated risk tools, applications andprocesses to execute the global risk management
strategy as it is deemed to apply to each entity across
ANZ New Zealand;
Business unit level accountability, as the “first line ofdefence”, for the management of risks in alignment
with ANZ New Zealand’s strategy; andIndependent oversight to ensure business unit levelcompliance with policies, regulations and laws, and toprovide regular risk evaluation and reporting.
ANZ New Zealand manages risk through an approval,delegation and limits structure. Regular reviews of thepolicies, systems and risk reports, including the effectivenessof the risk management systems, discussions covering ANZ
New Zealand’s response to emerging risk issues and trends,
and that the requisite culture and practices are in placeacross ANZ New Zealand, are conducted within ANZ New
Zealand and also by the Ultimate Parent Bank. The Boards
have responsibility for reviewing all aspects of risk
management.
The Boards have ultimate responsibility for overseeing theeffective deployment of risk management frameworks,
policies and processes within New Zealand. The Bank’s Risk
Committee assists the Boards in this function. The role of the
Risk Committee is to assist the Boards in the effective
discharge of its responsibilities for business, market, credit,
operational, compliance, liquidity, product and reputationalrisk management, and to liaise and consult with the Ultimate
Parent Bank Risk Committee as required. Risk Management,
via the Chief Risk Officer, coordinates risk management
activities directly between Business Unit risk functions andUltimate Parent Bank Group Risk Management functions.
ANZ New Zealand’s risk management policies are essentiallythe same as the Ultimate Parent Bank, but are tailored whererequired to suit the local New Zealand regulatory andbusiness environment.
The Bank’s Audit Committee, which is a sub-committee of theBoard of the Bank, has responsibility for reviewing for
ensuring the integrity of ANZ New Zealand's financial
controls, reporting systems and internal audit standards. It

meets at least four times a year and reports directly to theBoard of the Bank. All members of the Bank’s Audit
Committee are non-executive directors.
Financial risk management
Refer to note 17 for detailed disclosures on ANZ New
Zealand's financial risk management policies.
Operational Risk
Operational risk is the risk arising from day to day operational
activities which may result in direct or indirect loss. These
losses may result from failure to comply with policies,
procedures, laws and regulations, from fraud or forgery, froma breakdown in the availability or integrity of services,
systems and information, or damage to ANZ New Zealand’s
reputation.
Examples include failure to comply with policy andlegislation, human error, natural disasters, fraud and othermalicious acts. Where appropriate, risks are mitigated byinsurance.
Risk Management is responsible for establishing ANZ New
Zealand’s operational risk framework and associated ANZ
New Zealand-wide policies. Business units are responsible forthe identification, analysis, assessment and treatment ofoperational risks on a day-to-day basis.
Business units have primary responsibility for theidentification and management of operational risk withexecutive oversight provided through business unit Risk
Forums. The Bank’s Operational Risk Executive Committee(OREC) undertakes the governance function through the bimonthly monitoring of operational risk performance across
ANZ New Zealand. The Boards and Risk Management
conduct effective oversight through the approval of
operational risk policies and frameworks and monitoring key
operational risk metrics.
Compliance
ANZ New Zealand conducts its business in accordance withall relevant compliance requirements. In order to assist ANZ
New Zealand identify, manage, monitor and measure its
compliance obligations, ANZ New Zealand has acomprehensive compliance framework in place, which
addresses both external (regulatory) and internal
compliance.
Risk Management, in conjunction with business unit staff
ensure ANZ New Zealand operates within a complianceinfrastructure and framework that incorporates new andchanging business obligations and processes.
The compliance policies and their supporting framework
seek to minimise material risks to ANZ New Zealand’s
reputation and value that could arise from non-compliancewith laws, regulations, industry codes and internal standards
and policies. Business units have primary responsibility forthe identification and management of compliance. Risk
Management provides policy and framework, measurement,
monitoring and reporting, as well as leadership in areas suchas anti-money laundering procedures and matters ofprudential compliance. The Board and the Risk Committee ofthe Ultimate Parent Bank Board conduct Board and Executive
oversight.

Australia and New Zealand Banking Group Limited - ANZ New Zealand58

Notes to the Financial Statements
Global Internal Audit
Global Internal Audit is a function independent ofmanagement whose role is to provide the Board andmanagement with an effective and independent appraisal of
the internal controls established by management. Operating
under a Board approved Charter, the reporting line for theoutcomes of work conducted by Global Internal Audit isdirect to the Chair of the Bank’s Audit Committee, with adirect communication line to the Chief Executive Officer ofthe Bank and the external auditor.
The Global Internal Audit Plan is developed utilising a risk
based approach and is refreshed on a quarterly basis. The

Bank’s Audit Committee approves the plan, the associatedbudget and any changes.
All audit activities are conducted in accordance with local
and international auditing standards, and the results of theactivities are reported to the Audit Committees of the
Ultimate Parent Bank and the Bank as appropriate, Risk
Committee and management. These results influence theperformance assessment of business heads.
Furthermore, Global Internal Audit monitors the remediationof audit issues and highlights the current status of any
outstanding audits.

36. NZ Branch and Overseas Banking Group Information
NZ Branch Funding
NZ$ millions

Total liabilities of the NZ Branch less amounts due to related parties

30/09/2015

1,100

Overseas Banking Group Profitability and Size
AUD millions

30/09/2015

Profit for the year ended 30/09/20151

7,507

Net profit after tax for the year to 30/09/2015 as a percentage of average total assets

0.86%

Total assets

889,900

Percentage change in total assets in the year to 30/09/2015

15.26%

1

Net profit after tax for the year includes AUD 14 million of profit attributable to non-controlling interests.

Overseas Banking Group asset quality
AUD millions

Gross impaired assets

30/09/2015

2,719

Gross impaired assets as a percentage of total assets

0.3%

Individual provision

1,061

Individual provision as a percentage of gross impaired assets

39.0%Collective provision

2,956

Australia and New Zealand Banking Group Limited - ANZ New Zealand

59

Historical Summary of Financial Statements
Year toYear toYear toYear toYear to30/09/2015

30/09/2014

30/09/2013

30/09/2012

30/09/2011

Interest income

7,417

6,799

6,461

6,568

6,757

Interest expense

4,537

4,034

3,820

3,859

4,157

Net interest income

2,880

2,765

2,641

2,709

2,600

Non-interest income

1,157

1,063

795

905

809

Operating income

4,037

3,828

3,436

3,614

3,409

Operating expenses

1,513

1,490

1,513

1,743

1,688

76

(9)

66

202

190
1,531

NZ$ millions

Credit impairment charge / (release)

2,448

2,347

1,857

1,669

Income tax expense

677

636

488

404

446

Profit after income tax

1,771

1,711

1,369

1,265

1,085

Dividends paid

(1,630)(2,335)

(720)

(485)

(421)

665

969

-

-

-

Profit before income tax

Share capital issued

NZ$ millions

Total impaired assets

As at

As at

As at

As at

As at

30/09/2015

30/09/2014

30/09/2013

30/09/2012

30/09/2011

404

668

936

1,405

1,792

Total assets

155,530

138,528

129,853

130,983

131,511

Total liabilities

144,670

128,447

120,111

121,827

123,046

Equity & head office account

10,86010,081

9,742

9,156

8,465

The amounts included in this summary have been taken from the audited financial statements of ANZ New Zealand.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

60

General Disclosures
General Matters
The Disclosure Statement has been issued in accordance with
the Order.
The address for service for the Ultimate Parent Bank is ANZCentre Melbourne, Level 9, 833 Collins Street, Docklands,
Victoria 3008, Australia.
Financial Statements of the Ultimate Parent Bank andOverseas Banking Group
Copies of the most recent publicly available financial statementsof the Ultimate Parent Bank and Overseas Banking Group will be
provided immediately, free of charge, to any person requestinga copy where request is made at the Registered Office. The mostrecent publicly available financial statements for the Ultimate
Parent Bank and Overseas Banking Group can also be accessedat the internet address anz.com.

nature of remuneration and expenses) of being in control of the
ADI's business, or of having an administrator in control of the
ADI's business, are a debt due to APRA and have priority in awinding-up of the ADI over all other unsecured debts.
Section 86 of the Reserve Bank Act 1959 of the Commonwealthof Australia provides that notwithstanding anything containedin any law relating to the winding-up of companies, but subject
to section 13A(3) of the Banking Act, debts due to the Reserve
Bank of Australia by any ADI shall, in a winding-up, have priority
over all other debts.
Section 13A(3) of the Banking Act affects all of the unsecured
liabilities of the NZ Branch, which as at 30 September 2015,
amounted to $nil (30/09/2014 $nil).

Requirement to hold excess assets over deposit
liabilities

Specifically, pursuant to section 13A(3) of the Banking Act of theCommonwealth of Australia (the Banking Act), if an Authorised
Deposit-Taking Institution (ADI) (which includes the Ultimate
Parent Bank) becomes unable to meet its obligations orsuspends payment, the assets of the ADI in Australia are
available to meet the ADI's liabilities in the following order:

Section 13A(4) of the Banking Act states that it is an offence for
an ADI not to hold assets (excluding goodwill and any assets orother amount excluded by the prudential standards for the
purposes of that subsection) in Australia of a value that is equal
to or greater than the total amount of its deposit liabilities inAustralia, unless APRA has authorised the ADI to hold assets of alesser value. During the year ended 30 September 2015, theUltimate Parent Bank has at all times held assets (excluding
goodwill and any assets or other amounts prescribed by APRA)
in Australia of not less than the value of the Ultimate Parent
Bank's total deposit liabilities in Australia.

(a) first, the ADI's liabilities (if any) to APRA because of therights APRA has against the ADI because of section 16AI of
the Banking Act;

Section 13E of the Banking Act states that APRA may give the
Ultimate Parent Bank a direction that requires it to increase its
level of capital in the circumstances specified in that section.

(b) second, the ADI's debts (if any) to APRA under section
16AO of the Banking Act;The requirements of the Banking Act have the potential toimpact the management of the liquidity of ANZ New Zealand.

Ranking of local creditors in liquidation
Certain creditors of the Ultimate Parent Bank are given a
statutory priority under Australian law. Unsecured creditors of
the NZ Branch could be expected to rank behind such claims.

(c) third, the ADI's liabilities (if any) in Australia in relation toprotected accounts that account-holders keep with the
ADI. Broadly, this includes, among other things, certain
deposit accounts with the Ultimate Parent Bank that aresituated in Australia and recorded in Australian dollars;(d) fourth, the ADI’s debts (if any) to the Reserve Bank ofAustralia;(e) fifth, the ADI’s liabilities (if any) under an industry support
contract that is certified by APRA under section 11CB of
the Banking Act; and(f)sixth, the ADI's other liabilities in the order of their priority(apart from section 13A(3)).

Unsecured creditors of the NZ Branch could be expected to rank
as a creditor pursuant to the sixth paragraph, together withother unsecured creditors of the Ultimate Parent Bank that do
not otherwise have a priority claim under preceding
paragraphs.
Under section 13A(1) of the Banking Act, in certain
circumstances APRA may appoint a person to investigate theaffairs of an ADI, take control of an ADI’s business or appoint an
administrator to take control of the ADI’s business. Section 16(1)and (2) of the Banking Act provide that, despite anything
contained in any law relating to the winding-up of companies,
but subject to section 13A(3) of the Banking Act, the debts of an
ADI to APRA in respect of APRA's costs (including costs in the

Guarantors
No material obligations of the NZ Branch are guaranteed as at
15 December 2015.
ANZNZ Covered Bond Trust
Certain debt securities (Covered Bonds) issued by the Bank’s
wholly owned subsidiary, ANZ New Zealand (Int’l) Limited, areguaranteed by ANZNZ Covered Bond Trust Limited (theCovered Bond Guarantor), solely in its capacity as trustee of
ANZNZ Covered Bond Trust. The Covered Bond Guarantor has
guaranteed the payment of interest and principal of Covered
Bonds with a carrying value as at 30 September 2015 of
NZ$5,335 million, pursuant to a guarantee which is secured overa pool of assets. The Covered Bond Guarantor’s address forservice is Level 9, 34 Shortland Street, Auckland, 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 payable in New Zealand dollars.
The Covered Bonds have been assigned a long term rating of
Aaa and AAA by Moody’s Investors Service and Fitch Ratings
respectively. Details of the pool of assets that secure thisguarantee are provided in note 30.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

61

General Disclosures
Other Matters

Credit Rating Information

APRA has reviewed the level of exposures that can be provided
to the respective New Zealand banking subsidiaries andbranches (New Zealand operations) of the four Australianparent banks, including the Ultimate Parent Bank.

As at 15 December 2015 the Ultimate Parent Bank has threecredit ratings, which are applicable to its long-term seniorunsecured obligations which are payable in New Zealand in
New Zealand dollars.

APRA has confirmed that by 1 January 2021 no more than 5% of
the Ultimate Parent Bank’s Level 1 Tier 1 capital can comprisenon-equity exposures to its New Zealand operations duringordinary times. Exposures in excess of this limit must be reducedin equal percentages over the five year transition period andmay not increase above the exposures as at 30 June 2015. This
limit does not include holdings of capital instruments or eligible
secured contingent funding support provided to the Bank
during times of financial stress.

The Ultimate Parent Bank’s Credit Ratings, which have notchanged in the last two years, are:

The Ultimate Parent Bank established a New Zealand branchwhich was registered on 5 January 2009. The Bank sells, fromtime-to-time, residential loans and mortgages into the NZ
Branch to provide funding for the Bank’s business. As at 30
September 2015, the NZ Branch held approximately NZ$8
billion of residential loans. To satisfy APRA’s requirements
described above, the Bank intends to repay this funding at
approximately NZ$1.6 billion per annum over the next five
years.

The following table describes the credit rating grades
available:

APRA has also clarified that contingent funding support by the
Ultimate Parent Bank to the Bank during times of financial stressmust be provided on terms that are acceptable to APRA and, inaggregate with all other exposures to its New Zealandoperations, must not exceed 50% of the Ultimate Parent Bank’s
Level 1 Tier 1 capital. At present, only covered bonds meet
APRA’s criteria for contingent funding. On this basis, we believethat the Ultimate Parent Bank will continue to be able toprovide financial support to the Bank.

Current Credit
RatingAA-

Qualification
Outlook Stable

Moody’s Investors Service

Aa2

Outlook Stable

Fitch Ratings

AA-

Outlook Stable

Rating Agency
Standard & Poor’sStandard &Poor'sMoody's
Investors
Service

Fitch Ratings

The following grades display investment grade characteristics:
Ability to repay principal and
AAA
Aaa
AAA
interest is extremely strong. Thisis the highest investment
category.
Very strong ability to repayAA
AaAA
principal and interest.
Strong ability to repay principal
AAA
and interest althoughsomewhat susceptible toadverse changes in economic,
business or financial conditions.
Adequate ability to repay
BBB
Baa
BBB
principal and interest. Morevulnerable to adverse changes.
The following grades have predominantly speculative
characteristics:
Significant uncertainties exist
BB
Ba
BB
which could affect the paymentof principal and interest on atimely basis.
Greater vulnerability andB
B
B
therefore greater likelihood of
default.
Likelihood of default now
CCC
Caa
CCC
considered high. Timely
repayment of principal andinterest is dependent on
favourable financial conditions.
CC to CCa to CCC to C
Highest risk of default.
D
RD & D
Obligations currently in default.
Credit ratings from Standard & Poor's and Fitch Ratings may be modified by theaddition of "+" or "-" to show the relative standing within the “AA” to “B”
categories. Moody's Investors Service applies numerical modifiers 1, 2, and 3 toeach of the “Aa” to “Caa” classifications, with 1 indicating the higher end and 3 thelower end of the rating category.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

62

Conditions of Registration
Conditions of Registration, applicable as at 30 September
2015. These Conditions of Registration have applied from 30
March 2014.

4.

The registration of Australia and New Zealand Banking Group
Limited (the registered bank) in New Zealand is subject to thefollowing conditions:1.

That the banking group does not conduct any nonfinancial 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.

2.

In determining the total amount of the banking group’s
insurance businessa)b)

all amounts must relate to on balance sheet items
only, and must comply with generally accepted
accounting practice; andif products or assets of which an insurance
business is comprised also contain a noninsurance component, the whole of suchproducts or assets must be considered part of theinsurance business.

For the purposes of this condition of registration,“insurance business” means the undertaking orassumption of liability as an insurer under a contractof insurance:“insurer” and “contract of insurance” have the same
meaning as provided in sections 6 and 7 of the
Insurance (Prudential Supervision) Act 2010.
3.

That the business of the registered bank in New Zealanddoes not constitute a predominant proportion of the totalbusiness of the registered bank.

b)

the Reserve Bank has advised that it has no objection
to that appointment.

6.

That Australia and New Zealand Banking Group Limited
complies with the following minimum capital adequacy
requirements, as administered by the Australian Prudential
Regulation Authority:

If the business of an entity predominately consists of
insurance business and the entity is not a subsidiary of
another entity in the banking group whose businesspredominantly consists of insurance business, theamount of the insurance business to sum is the total
consolidated assets of the group headed by the entity;
andIf 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 businesspredominantly consists of insurance business, theamount of the insurance business to sum is the total
liabilities relating to the entity’s insurance businessplus the equity retained by the entity to meet thesolvency or financial soundness needs of its insurance
business.

the Reserve Bank has been supplied with a copy of thecurriculum vitae of the proposed appointee; andThat Australia and New Zealand Banking Group Limited
complies with the requirements imposed on it by theAustralian Prudential Regulation Authority.

For the purposes of this condition of registration, thebanking group’s insurance business is the sum of thefollowing amounts for entities in the banking group:

b)

a)

5.

That the banking group’s insurance business is not greaterthan 1% of its total consolidated assets.

a)That no appointment to the position of the New Zealandchief executive officer of the registered bank shall be madeunless:7.

a)Common Equity Tier 1 capital of the Australia and New
Zealand Banking Group Limited is not less than 4.5
percent of risk weighted exposures;b)

Tier 1 capital of the Australia and New Zealand
Banking Group Limited is not less than 6 percent ofrisk weighted exposures;c)

Total capital of Australia and New Zealand Banking
Group Limited is not less than 8 percent of risk
weighted exposures.

That the business of the registered bank in New Zealand isrestricted to:a)acquiring for fair value, and holding, mortgages
originated by ANZ Bank New Zealand Limited; andb)

any other business for which the prior written
approval of the Reserve Bank of New Zealand has
been obtained; andc)activities that are necessarily incidental to the businessspecified in paragraphs (a) and (b).

8.

That the value of the mortgages held by the registeredbank in New Zealand must not exceed $15 billion inaggregate.

9.

That the registered bank in New Zealand does not incur
any liabilities except:a)to the government of New Zealand in respect oftaxation and other charges;b)

to other branches or the head office of the registered
bank;

c)

to trade creditors and staff;d)to ANZ Bank New Zealand Bank Limited in respect ofactivities, other than borrowing, that are necessarily
incidental to the business specified in paragraphs (a)and (b) of condition 7; ande)any other liabilities for which the prior written
approval of the Reserve Bank has been obtained.

In these conditions of registration:“banking group”a)means the New Zealand business of the registeredbank and its subsidiaries as required to be reported inAustralia and New Zealand Banking Group Limited - ANZ New Zealand

63

Conditions of Registrationgroup financial statements for the group’s New
Zealand business under section 461B(2) of the
Financial Markets Conduct Act 2013 (unless paragraph(b) applies); orb)

if the Financial Reporting Act 1993 applies to theregistered bank, means the means the New Zealandbusiness of the registered bank and its subsidiaries as
required to be reported in group financial statements
for the group's New Zealand business under section
9(2) of the Financial Reporting Act 1993:

461B(2) of the Financial Markets Conduct Act 2013
(unless paragraph (b) applies); orb)“generally accepted accounting practice”a)has the same meaning as in section 8 of the Financial
Reporting Act 2013 (unless paragraph (b) applies); orb)means generally accepted accounting practice within
the meaning of section 3 of the Financial ReportingAct 1993 if the registered bank is required to prepare
financial statements in accordance with that practice.

“business of the registered bank in New Zealand” a)means the New Zealand business of the registeredbank as defined in the requirement for financial
statements for New Zealand business in section

if the Financial Reporting Act 1993 applies to theregistered bank, means the New Zealand business of
the registered bank as required to be reported in thefinancial statements under section 8(2) of the Financial
Reporting Act 1993:

Australia and New Zealand Banking Group Limited - ANZ New Zealand64

Directorate and Auditor
Any document or communication may be sent to any
Director or the Chief Executive Officer – NZ Branch at theRegistered Office. The document or communication should
be marked for the attention of that Director or the Chief
Executive Officer.
Directors’ Interests
The Board of the Ultimate Parent Bank has adopted
procedures to ensure that conflicts and potential conflicts ofinterest between a Director’s duties to the Ultimate Parent
Bank and their own interests are avoided or dealt with.
Pursuant to these procedures:a.

b.

each Director should disclose to all Directors any
material personal interest they have in any matter which
relates to the affairs of the Ultimate Parent Bank and anyother interest which the Director believes is appropriate
to disclose in order to avoid an actual conflict of interestor the perception of a conflict of interest. This disclosure
should be made as soon as practicable after the Director
becomes aware of their interest or the need to make adisclosure; anda Director who has an interest of the type referred to ina. above in a matter that is to be considered at a
Directors' meeting, must not vote on the matter nor bepresent while the matter is considered at the meeting,unless a majority of Directors who do not have such aninterest in the matter agree that the interest should notdisqualify such Director from being present while thematter is being considered and from voting on thematter. The minutes of the meeting should record thedecision taken by the Directors who do not have aninterest in the matter.

In addition, Standing Notices about Interests are maintainedfor each Director. If the Director's interests change, theDirector shall disclose the change as soon as practicable andan updated Standing Notice shall be tabled at the next Board
meeting and recorded in the minutes of that meeting.
Transactions with Directors and the Chief Executive Officer,
NZ Branch
There are no transactions entered into by any Director, theChief Executive Officer – NZ Branch, or any immediate
relative or close business associate of any Director or the
Chief Executive Officer – NZ Branch, with any part of ANZ
New Zealand which has been either entered into on terms
other than those which would in the ordinary course ofbusiness be given to any other person of like circumstancesor means or which could otherwise be reasonably likely to
influence materially the exercise of the Directors' or Chief
Executive Officer – NZ Branch duties in respect of the NZ
Branch and ANZ New Zealand.

Board Members as at 15 December 2015
The names, qualifications, occupation, country of residence
and material external directorships of each director of the
Ultimate Parent Bank as at the date this Disclosure Statement
was signed were:

ChairmanDavid Michael Gonski, AC
BCom, LLB, FAICD(LIFE), FCPA
Company Director
Sydney, Australia
Mr Gonski is an ex-officio member of all Board Committees,
including Chair of the Governance Committee.
Chairman: Coca-Cola Amatil Limited, The University of New
South Wales Foundation Limited, and Sydney Theatre
Company Ltd
Director/Member: ASIC External Advisory Panel and Lowy
Institute for International Policy
Chancellor: University of New South Wales Council

Chief Executive Officer – Australia and New Zealand
Banking Group Limited
Michael Roger Pearson Smith, OBE
BSc (Hons) (City Lond), Hon LLD (Monash), Hon DSc City
Lond., SF Fin
Chief Executive Officer and Executive Director
Melbourne, Australia
External Directorships
Director: ANZ Bank New Zealand Limited, the Financial
Markets Foundation for Children, Financial Literacy Australia
Limited and the Institute of International FinanceMember: Australian Bankers’ Association Incorporated, Asia
Business Council, Australian Government Financial Literacy
Advisory Board, Shanghai International Financial Advisory
Council, and the Business Council of Australia, Chongqing
Mayor’s International Economic Advisory Council andMonash Industry Council of Advisers
Fellow: The Hong Kong Management Association

Non-Executive Directors
Ilana Rachel Atlas
BJuris (Hons), LLB (Hons), LLM
Company Director
Sydney, Australia
External Directorships
Chairman: The Bell Shakespeare Company Limited
Director: Oakridge Wines Pty Limited, Coca-Cola Amatil
Limited, Human Rights Law Centre Ltd, Treasury Corporationof New South Wales, Jawun, Westfield Corporation Limited
Member: Australian Institute of Company Directors’
Corporate Governance Committee
Fellow: Senate of the University of Sydney

Australia and New Zealand Banking Group Limited - ANZ New Zealand65

Directorate and Auditor
Paula Jane Dwyer

Ian John Macfarlane, AC

BCom, FCA, SF Fin, FAICD
Company Director
Melbourne, Australia

BEc (Hons), MEc, Hon DSc (Syd), Hon DSc (UNSW), Hon DCom
(Melb), Hon DLitt (Macq), Hon LLD (Monash)
Company Director
Sydney, Australia

Ms Dwyer is Chair of the Audit Committee and a member ofthe Risk Committee and Human Resources Committee.
External Directorships
Chairman: Healthscope Limited, Tabcorp Holdings Limited
and Kin Group Advisory Board
Director: Lion Pty Ltd
Member: Kirin International Advisory Board, and ASIC
External Advisory Panel

Mr Macfarlane is Chair of the Risk Committee and a memberof the Governance Committee and Audit Committee.
External Directorships
Director: the Lowy Institute for International Policy
Member: International Advisory Board of Goldman Sachs, andInternational Advisory Board of CHAMP Private Equity
John Thomas Macfarlane

Lee Hsien Yang
MSc, BA
Company Director
Singapore
Mr Lee is Chair of the Technology Committee and a memberof the Risk Committee and Human Resources Committee.
External Directorships
Chairman: Civil Aviation Authority of Singapore, The Islamic
Bank of Asia Limited, and General Atlantic Singapore Fund
Pte Ltd
Director: Rolls-Royce Holdings plc, General Atlantic
Singapore Fund FII Pte Ltd, Singapore Exchange Limited,
Caldecott Inc., and Cluny Lodge Pte Ltd
Member: Governing Board of Lee Kuan Yew School of Public
PolicySpecial Advisor: General Atlantic
Consultant: Capital International Inc Advisory Board
President: INSEAD South East Asia Council

BCom, MCom (Hons)
Company Director
Melbourne, Australia
Mr Macfarlane is a member of the Audit Committee, Risk
Committee and Technology Committee.
External Directorships
Chairman: AGInvest Holdings Limited (MyFarm Limited)
Director: Craigs Investment Partners Limited, Colmac GroupPty Ltd and St. Vincent’s Institute of Medical Research

Chief Executive Officer, Australia and New Zealand
Banking Group – New Zealand Branch
Anthony John Bradshaw
BCA, CA
Chief Executive Officer– NZ Branch
Wellington, New Zealand

Graeme Richard Liebelt
BEc (Hons), FAICD, FTSE, FAIM
Company Director
Melbourne, Australia
Mr Liebelt is Chair of the Human Resources Committee, and amember of the Risk Committee, Governance Committee andTechnology Committee
External Directorships
Chairman: Amcor Limited
Director: The Australian Foundation Investment Company
Limited, and Carey Baptist Grammar School

Auditor
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandAustraliaA
and N
New Zealand Banking Group Limited - A
ANZ New Zeaaland

666

DirectorsDs' and Ne
ew Zeala
and Chieef Executive Offiicer's StaatementtAs
A at the date oon which this Disclosure Statement is signedd, after due enq
quiry, each Direector of the Ultiimate Parent Bank and the
ChiefC
Executive Officer – NZ Brranch believes that:(i)

The Disclo
osure Statemennt contains all thet informationn that is required by the Registered Bank Dissclosure Statem
ments (Overseaas
Incorporaated Registeredd Banks) Order 2014; and(ii)

The Disclo
osure Statemen
nt is not false oro misleading.

OverOthe year ennded 30 Septem
mber 2015, after due enquiryy, each Directorr of the Ultimate Parent Bank aand the Chief Executive
E
Officer– NZ Branch bellieves that:(i)

The Ultimaate Parent Bankk has compliedd with all Condiitions of Registtration that app
plied during thaat period;(ii)

The NZ Braanch and the BankB
had system
ms in place to m
monitor and co
ontrol adequate
ely the materiaal risks of Relevant Members ofo
ANZ New Z
Zealand includ
ding credit risk, concentrationn of credit risk, interest rate risk, currency riskk, equity risk, liq
quidity risk anddother business risks, and that those systtems were beinng properly applied.

This
T Disclosure
e Statement is datedd
15 Deceember 2015, annd has been sig
gned by the Ch
hairman of thee Ultimate Pareent Bank, onbehalfbof all Dirrectors, and byy the Chief Exeecutive Officer – NZ Branch.

DavidD
Gonski, A
ACChairman,Cono behalf of thee Directors:
Ilana Atlas
Paula
P
Dwyer
Lee
L Hsien Yangg
GraemeG
LiebelttIaan Macfarlane,, ACJo
ohn Macfarlan
neMichaelM
Smith, OBE

Antho
ony Bradshaw
Chief Executive Offiicer – NZ Brancch

Australia and New Zealand Banking Group Limited - ANZ New Zealand

67

Independent auditor’s report
To the Directors of Australia and New Zealand Banking Group Limited
Report on the ANZ New Zealand Disclosure Statement
We have audited the accompanying financial statements and supplementary information of Australia and New Zealand Banking
Group Limited – New Zealand Branch and its related entities (“ANZ New Zealand”) on pages 3 to 58 of the Disclosure Statement. The
financial statements comprise the balance sheet as at 30 September 2015, the statements of income, comprehensive income,changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information of ANZ New Zealand. The supplementary information comprises the information that is required to be disclosed inaccordance with the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014 (the Order).
This report is made solely to the Directors as a body. Our audit work has been undertaken so that we might state to the Directors ofAustralia and New Zealand Banking Group Limited those matters we are required to state to them in the auditor's report and for noother purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Directorsof Australia and New Zealand Banking Group Limited as a body, for our audit work, this report or any of the opinions we haveformed.
Directors' responsibility for the disclosure statement
The Directors are responsible on behalf of ANZ New Zealand for the preparation of ANZ New Zealand Disclosure Statement,
including financial statements prepared in accordance with Clause 25 of the Order, generally accepted accounting practice in New
Zealand and International Financial Reporting Standards that give a true and fair view of the matters to which they relate. The
Directors are also responsible for such internal controls as they determine are necessary to enable the preparation of the ANZ New
Zealand financial statements that are free from material misstatement whether due to fraud or error.
The directors are responsible for the preparation and fair presentation of supplementary information, in accordance with Schedules
2, 4, 7, 10, 11 and 13 of the Order.
Auditor’s responsibility
Our responsibility is to express an opinion on the disclosure statement, including the financial statements prepared in accordancewith Clause 25 of the Order and the supplementary information disclosed in accordance with Schedules 4, 7, 10, 11 and 13 of theOrder. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether ANZ New
Zealand financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in ANZ New Zealand financial
statements (excluding the supplementary information relating to Capital Adequacy). The procedures selected depend on theauditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal controls relevant to ANZ New Zealand’s preparationof the financial statements that gives a true and fair view of the matters to which they relate in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of ANZ New Zealand’sinternal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates, as well as evaluating the presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion on the Disclosure Statement
In our opinion the Disclosure Statement of ANZ New Zealand on pages 3 to 58 (excluding the supplementary information):a.

complies with generally accepted accounting practice in New Zealand;b.

complies with International Financial Reporting Standards; andc.

presents fairly, in all material respects, the financial position as at 30 September 2015 and of their financial performance andcash flows for the year ended on that date.

Australia and New Zealand Banking Group Limited - ANZ New Zealand

68

Opinion on supplementary information
In our opinion, the supplementary information (excluding supplementary information relating to Capital Adequacy) that is required
to be disclosed in accordance with Schedules 4, 7, 10, 11 and 13 of the Order, and is included within notes 13, 28, 17, 30 and 36 of theDisclosure Statement:a.

has been prepared, in all material respects, in accordance with the guidelines issued pursuant to section 78(3) of the Reserve
Bank of New Zealand Act 1989 and any conditions of registration;b.

is in accordance with the books and records of ANZ New Zealand in all material respects; andc.

fairly states the matters to which it relates in accordance with those Schedules.

Report on the supplementary information relating to Credit and Market Risk Exposures and Capital Adequacy
We have reviewed the supplementary information relating to Credit and Market Risk Exposures and Capital Adequacy information,
as disclosed in note 28 of the Disclosure Statement for the year ended 30 September 2015.
Directors’ responsibility for the supplementary information relating to Credit and Market Risk Exposures and Capital Adequacy
The Directors are responsible for the preparation of supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy that is required to be disclosed under Schedule 9 of the Order and prepared in accordance with the Capital
Adequacy Framework (Standardised Approach) (BS2A) and described in note 28 of the Disclosure Statement.
Auditor’s responsibility
Our responsibility is to express an opinion on the supplementary information relating to Credit and Market Risk Exposures andCapital Adequacy based on our review. We conducted our review in accordance with NZ SRE 2410 Review of Financial Statements
Performed by the Independent Auditor of the Entity issued by the New Zealand External Board. As the auditor of ANZ New Zealand, NZ
SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements and planand perform the review to obtain limited assurance about whether the supplementary information relating to Credit and Market Risk
Exposures and Capital Adequacy information is, in all material respects:a.

prepared in accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A); andb.

disclosed in accordance with Schedule 9 of the Order.

A review is limited primarily to enquiries of ANZ New Zealand personnel and analytical review procedures applied to the financial
data, and thus provides less assurance than an audit. We have not performed an audit in respect of the Credit and Market Risk
Exposures and Capital Adequacy disclosures, and accordingly, we do not express an audit opinion on these disclosures.
A review of the capital adequacy information in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor
performs procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with
International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on the supplementary
information relating to capital adequacy disclosures.
Review opinion on the supplementary information relating to Credit and Market Risk Exposures and Capital Adequacy
Based on our review, nothing has come to our attention that causes us to believe that the supplementary information relating tocredit and market risk exposures and capital adequacy, and disclosed in note 28 of the Disclosure Statement, is not, in all material
respects:a.

prepared in accordance with the Capital Adequacy Framework (Standardised Approach) (BS2A); andb.

disclosed in accordance with Schedule 9 of the Order.

Independence
Our firm has provided other services to ANZ New Zealand 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 ANZ New Zealand on normal terms within the ordinary course of trading activities of the businessof ANZ New Zealand. There are, however, certain restrictions on dealings which the partners and employees of our firm can havewith ANZ New Zealand. These matters have not impaired our independence as auditors of ANZ New Zealand. The firm has no otherrelationship with, or interest in, ANZ New Zealand.

Wellington
15 December 2015