APS330: Capital Adequacy and Risk Management Disclosure - 2008

BASEL II PILLAR 3
APS 330: CAPITAL ADEQUACY & RISKMANAGEMENT IN ANZDecember 2008

1APS 330: Capital Adequacy and Risk Management Disclosure – December 2008

Important NoticeThis document has been prepared by Australia & New Zealand Banking Group Ltd (ANZ, or the Group) to meet its
quarterly disclosure obligations under the Australian Prudential Regulation Authority (APRA) APS 330 Capital Adequacy:
Public Disclosure of Prudential Information.
This quarterly disclosure was prepared as at 31 December 2008. ANZ has a continuous disclosure policy, under which
ANZ will immediately notify the market of any material price sensitive information concerning the Group, in accordancewith legislative and regulatory disclosure requirements.

2APS 330: Capital Adequacy and Risk Management Disclosure – December 2008
Table 16: Capital Adequacy1 2 3Risk Weighted Assets
December 2008$m

September 2008$m

Corporate

135,553

127,365

Sovereign

1,255

2,079

Bank

11,20912,624

Residential Mortgage

35,27633,727

Qualifying revolving retail

8,752

8,703

Other retail

14,331

14,218206,377

198,716

28,71930,250

Corporate

16,71013,348

Sovereign

00Bank921

Subject to Advanced IRB approach

Credit risk weighted assets subject to Advanced approach
Credit Risk Specialised lending (SL) exposures subject to slotting criteria
Subject to Standardised approach

Residential Mortgage

488

344

17,207

13,713Credit risk weighted assets relating to securitisation exposures

3,800

4,271

Credit risk weighted assets relating to equity exposures

1,970

1,146

Other assets

2,601

2,654

Credit risk weighted assets subject to standardised approach

Market risk weighted assets

3,1262,609

Operational risk weighted assets

17,55118,017

0

4,058

281,351

275,434

Level 2 Total capital ratio

11.1%

11.1%

Level 2 Tier 1 capital ratio

8.3%

7.7%

Interest rate risk weighted assets in the banking book
TOTAL RISK WEIGHTED ASSETS
Capital ratios (%)

Total Risk Weighted Assets increased by $5,917m (+2.1%) in the December 2008 quarter. Movement in RWA waslargely a result of volume growth, exchange rate impacts and some deterioration in credit quality, notably in theCorporate Asset Class.
Total interest rate risk weighted assets reduced to zero due to the increase in embedded gains on Investment Term of
Capital providing an offset to repricing and yield curve risk as measured by VaR.
Standardised risk weighted assets increased by 25.0% due to exchange rate impacts and continued expansion in Asia.
Credit risk weighted assets relating to securitisation exposures decreased by 11.0% impacted by the movement ofexposures from securitisation to the Corporate Asset Class (-$0.7bn RWA).
Credit risk Specialised lending exposures subject to slotting criteria decreased by 5.0% due to a large exposure
downgrade to default, carrying an increase in Regulatory Expected Loss rather than being included in RWA.
Corporate risk weighted assets increased due to some mark-to-market increases in derivatives and exchange rate
impacts on a small number of lower quality counterparties. A few additional counterparty downgrades led to someoverall deterioration in the portfolio.
Sovereign risk weighted assets decreased due to a reduction in exposures to relatively higher risk counterparties.
Bank risk weighted assets reduced by 11.2%, largely driven by a continued relative improvement in the profile.

1

Other assets category is in line with the definition of other assets per APS 113 attachment E paragraphs 5, 9, 10 & 13.

2

Margin Lending Exposure is disclosed under the standardised approach.

3

Specialised Lending subject to slotting criteria exposure is where the main servicing and repayment is from the asset
being financed. It includes specified commercial property development and investment lending, project finance andobject finance.
3

APS 330: Capital Adequacy and Risk Management Disclosure – December 2008
Table 17a: Regulatory Credit Exposure
Regulatory Credit Exposure
December 2008$m

September 2008$m

Average for the quarter
ended 31 Dec 2008$m

Corporate

226,026

225,169

225,597

Sovereign

20,371

9,350

14,861

Bank

57,21950,79954,009Residential Mortgage

193,012186,287

189,649

Advanced IRB

Qualifying revolving retail23,55923,45823,509Other retail26,723

26,70826,715546,910

521,771534,340

December 2008$m

September 2008$m

Average for the quarter
ended 31 Dec 2008$m

Corporate

17,797

14,827

16,312

Sovereign

000Bank

292829Total Advanced IRB

StandardisedResidential Mortgage

1,388

976

1,182

Total Standardised

19,214

15,831

17,523566,124537,602551,863

Total Exposures

Total Credit Risk Exposure increased by $28,522m (+5.3%) in the December 2008 quarter.
Corporate exposures increased due to exchange rate impacts and mark-to-market on derivatives, partially offset by areduction in undrawn limits.
Sovereign exposures growth of $11,021m was mainly due to increased deposits with the Federal Reserve (which carries
a very small RWA impact).
Increase in Bank exposure was largely driven by derivative mark-to-market changes and exchange rate impacts, withimproved portfolio quality reducing the RWA impact.
Standardised growth of $3,383m resulted from continued expansion in Asia and exchange rate movements.
Table 17b: Impaired Assets and Provisioning
Impaired
Derivatives 4$m

ImpairedLoans /Facilities$m

Past dueloans ≥ 90days$mIndividual
provisionbalance$m

Charges forindividual
provision$m

Write-offs$mCorporate

243

2,690

272

583

362

168

Sovereign000000Bank03602900

Residential Mortgage

0192

725

77224Qualifying revolving retail006905664

Other retail

0287

1581889381243

3,205

1,224877

533

317

Past dueloans ≥ 90days$mIndividual
provisionbalance$m

Charges forindividual
provision$m

40

241080000

Advanced IRB

Total Advanced IRB

Corporate0

ImpairedLoans /Facilities$m62

Sovereign

00Standardised

Impaired
Derivatives 4$m

Write-offs
$m

Bank

000000Residential Mortgage

000000Total Standardised

062

4024108243

3,267

1,264901

543325

Total
General reserve for credit losses Balance

2,826

Deteriorating economic conditions continue to impact credit quality for the quarter ending 31 December 2008.
Impaired loans increased $594m largely from the Institutional Division, with an increase in the Australia Division mainlyin Esanda.
90 days past due increased by $204m in the December quarter, primarily from Australia Division’s Mortgages portfoliowith increased financial pressure and reduced exit options.
Individual provision balance increased by $226m, reflecting the deteriorating credit environment.
mainly in Australia’s Consumer Finance and Esanda and the broader Institutional Division.

Write-offs wereGeneral reserve for credit losses (collective provision) balance remained flat. Higher collective provision charges in theInstitutional Division were broadly offset by some customers being downgraded to impaired and the subsequent raisingof individual provisions.4

4
Value reported includes a credit valuation adjustment, being a market assessment of the of credit risk of the relevant
counterparties, of $79m.

4