Company: WEBNF
Filing Date: 2025-11-04
Form Type: 20-F
Source: 0001104659-25-105894
Chunk: 155

Company: WESTPAC BANKING CORP
Filing Date: 2025-11-04
Form: 20-F
Item: Item 14
Chunk 155
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 the provision for ECL was $4,978 million for the Company at 30 September 2025. The Company uses models that estimate ECL using three main components: probability of default (PD), loss given default (LGD) and exposure at default (EAD). The Company applies forward-looking economic scenarios and associated probability weights to its models when determining an ECL estimate.
We identified the assessment of the provision for ECL as a critical audit matter. A high degree of audit effort, including specialised skills and knowledge, was required because of the significant measurement uncertainty involved in the Company’s estimation of ECL. Subjective and complex auditor judgement was required to assess the following:

●   the Company’s modelled estimations of ECL due to the inherently judgmental and complex nature of the models, namely those used to derive the PD, LGD and EAD, and key associated model assumptions. Certain models and model assumptions are the key drivers of complexity and measurement uncertainty, and minor changes to the model assumptions could have a significant effect on the Company’s calculation of the provision for ECL; and
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●   the Company’s economic judgements, including the severity of the forward-looking downside economic scenario and the probability weightings used in the models.
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The following are the primary procedures we performed to address this critical audit matter:

●   We evaluated the design and tested the operating effectiveness of certain internal controls related to the ECL estimation process. This included certain controls relating to:
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‒   model validation and monitoring;
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‒   credit reviews that determine customer risk grades (CRGs); and
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‒   the selection of the downside economic scenario and probability weightings.
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●   We involved our credit risk professionals with specialised skills and knowledge who assisted in evaluating the Company’s models and associated model assumptions as follows:
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‒   evaluating the Company’s methodology used in the models to derive the PD, LGD and EAD and associated model assumptions against criteria in the accounting standards and industry practice;
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‒   inspecting model code for the calculation of certain model components to assess its consistency with the Company’s modelling methodology;
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‒   reperforming the model output for a selection of models using the Company’s documented methodology and comparing our output with the Company’s outputs; and
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‒   reperforming model monitoring for a selection of the current models to evaluate the