2018 §165(d) Reduced Resolution Plan - Public Section

 

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Australia and New Zealand Banking Group Limited

2018 §165(d) Reduced Resolution Plan

PUBLIC SECTION
2018 §165(d) Reduced Resolution Plan - Public Section

 

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(i) Public Section Executive Summary

Requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act

Section 165(d) of the Dodd-Frank Act (“DFA”) and its implementing rules require, among other things, 

that any company covered by section 165 (d) is required to produce a resolution plan to provide for 

such company’s rapid and orderly resolution in the event of material financial distress or failure. This 

is the Public Section of the 2016 Reduced Resolution Plan (the “Resolution Plan”) for Australia and 

New Zealand Banking Group Limited (“ANZBGL”). The implementing rules (collectively, the “Rule”) 

were jointly issued by the Federal Reserve Board (the “Board”), codified at 12 C.F.R. Part 243, and 

the Federal Deposit Insurance Corporation (the “FDIC” and together with the Board, the “Agencies”), 

codified at 12 C.F.R. Part 381, on November 1, 2011. In the United States, ANZBGL is regulated by 

the Office of the Comptroller of Currency (OCC) as a Foreign Banking Organization, and is supervised 

by the Board as a Financial Holding Company. Because ANZBGL’s total consolidated global assets 

exceed $50 billion, it is a “covered company” under Regulation QQ and must submit a resolution plan 

that covers its U.S. operations.

Under the requirements of the Rule, Covered companies are required to assess their U.S. banking 

operations for the presence of “Material entities”, “Critical operations”, and “Core business lines”. 

ANZBGL performed this assessment and determined that were no “Material Entities”, “Critical 

operations” or “Core business lines”, each term as defined in the Rule. Therefore, the focus of this 

Resolution Plan is the orderly resolution of the New York Branch (“ANZ NYB”) as an extension of the 

covered company, ANZBGL, in the U.S. 

ANZBGL met the criteria for, and filed, tailored resolution plans in 2013, 2014, and 2015 using the 

model template pursuant to exemptions granted by the Board and the FDIC. In 2016, ANZBGL 

qualified to file a Reduced Resolution Plan pursuant to conditions established by the Board and the 

FDIC, including the following: (i) ANZBGL’s total U.S. assets are below $50 billion, and (ii) ANZBGL 

has not experienced a “Material Event” as specified in 12 C.F.R. section 234.3(b)(2). By letter dated 

September 28, 2017, ANZBGL was notified by the Board and the FDIC that the 2017 filing date was 

extended to December 2018.1

Description of ANZBGL

ANZBGL is a public company limited by shares, incorporated in Australia. Its principal ordinary share 

listing and quotation is on the Australian Securities Exchange (“ASX”) and its ordinary shares are 

quoted on the New Zealand Stock Exchange (“NZX”). ANZBGL’s registered office, and head office, is 

located in Melbourne, Australia. ANZGBL also operates through its subsidiaries and branches in a 

number of other countries, including the United Kingdom and the United States of America and across 

Asia.

ANZBGL reported its annual results for fiscal year end on September 30, 2018. The Statement of 

Consolidated Financial Position at September 30, 2018 is set forth in the Annex below. ANZBGL’s 

long-term credit ratings are as follows: Moody's Investor Service, Aa3, Standard & Poor's, AA-, and 

Fitch Ratings, AA-.

 1 As the letter explains, this extension “will align the cycle for the Covered Company’s next filing with that of other resolution plan filers”.
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Overview of the New York Branch

ANZ NYB has no retail customers and its deposits are not insured by the Federal Deposit Insurance 

Corporation. ANZ NYB’s business lines include: 

Global Loans: provides lending facilities to institutional customers (e.g. multinational corporate clients, 

financial institutions and governments).

Global Markets: provides a full range of integrated specialist services including risk management in 

foreign exchange, currency options, credit and interest rate derivatives and fixed-income capital 

funding to corporate and institutional customers. It accepts wholesale deposits that are used to fund 

lending by the other business units. It also has a Balance Sheet Management function to manage 

liquidity and interest rate risk for the Branch.

Transaction Banking: provides trade finance products including trade loans, standby letters of credit, 

and other trade related guarantee products for customers trading in commodity flows in and out of the 

Americas and the Asia-Pacific region, as well as exports to and from Australia and New Zealand. 

ANZ NYB’s team supports trade and investment flows between clients in the United States with 

Australia, New Zealand and Asia. Through ANZ NYB, clients receive access and expertise in the key 

global financial markets. 

(ii) Consolidated or segment financial information regarding assets, liabilities, capital and 

major funding sources

The ANZ group Statement of Consolidated Financial Position in AUD at September 30, 2018, its 

fiscal year end, is set forth in the Annex. 

(iii) A description of derivative activities and hedging activities

Derivatives are not a material component of ANZ NYB’s balance sheet. In the case of collateralized 

derivatives positions, the collateral is pledged pursuant to ISDA Credit Support Annex (CSA) 

agreements with swap counterparties. Collateral is managed by ANZBGL in Melbourne with secondary 

management in London.

(iv) A list of memberships in material payment, clearing and settlement systems

ANZ NYB is not a member of any material payment, clearing or settlement system other than Swift.

(v) A description of foreign operations

ANZBGL has no foreign operations that would be material to the resolution of ANZ NYB. 

(vi) The identities of material supervisory authorities

ANZ NYB is supervised by the following authorities:

(1) OCC; and
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(2) Federal Reserve Bank of New York.

In Australia, ANZBGL is supervised by 

(1) The Australian Prudential Regulatory Authority (“APRA”), the statutory authority overseeing 

banks, credit unions, building societies, and parts of the insurance industry; and

(2) The Reserve Bank of Australia.

(vii) The identities of the principal officers of ANZ NYB

(1) Grant Knuckey, Chief Executive Officer

(2) Alexander Karpukhin, Chief Financial Officer

(3) Michael Clarke, Head of Operations

(4) Andrew Heathwood, Chief Risk and Compliance Officer

(viii) A description of the corporate governance structure and processes related to 

resolution planning

The 2018 Resolution Plan was subject to review by senior management at ANZ NYB and ANZBGL

and then endorsed for review and approval by the ANZBGL Credit and Markets Risk Committee, the 

senior body with delegated authority for this purpose from the ANZBGL Board Risk Committee. The 

delegation of authority by the ANZBGL Board Risk Management Committee is consistent with its role 

as advisor to the Board of Directors with respect to business, market, credit, equity and other 

investment, financial, operational, liquidity and reputational risk management and for the management 

of ANZBGL compliance obligations. 

(ix) A description of material management information systems

ANZ NYB uses several material management information systems to process and record ANZBGL’s 

transactions; process Swift payments; capture and report derivatives trades as well as related risk 

management; manage client and country risk limits and exposures; and calculate counterparty credit 

risk for customers and accounts. 

(x) A description, at a high level, of the covered company’s resolution strategy, covering 

such items as the range of potential purchasers of the covered company, its Material 

entities and Core business lines. 

The resolution of ANZ NYB will, on the basis of a ‘jump to default’ assumption, be a relatively 

straightforward receivership whereby assets will be liquidated and distributions made to creditors. 

Upon determination and issuance of a declaration of insolvency, the OCC will appoint a receiver to 

take possession of all U.S. assets of ANZBGL, including those not owned by ANZ NYB. The 

commencement of a receivership will not affect the rights of parties to secured transactions, who will 

retain the right to liquidate collateral in which they have a secured interest. Any balances remaining 

after satisfaction of their claims must be transferred to the receiver. 
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After taking possession, the receiver is responsible for the orderly liquidation of ANZBGL’s assets

within the United States financial system. In connection with this liquidation, notice must be sent to 

those that may have a claim against ANZ NYB. Claims may be proven to the OCC’s satisfaction, or 

where parties disagree, adjudicated in a court of competent jurisdiction. Either way, the validity and 

credibility of claims would be assessed as if ANZ NYB were a separate entity apart from the foreign 

parent. The receiver must then make pro rata distributions, respecting the general principles of 

debtor/creditor law, to parties determined to have valid claims against ANZ NYB. After all claims are 

satisfied, excess proceeds are returned to ANZBGL’s home office for treatment under Australia’s 

resolution framework. One of the potential challenges of the receivership may be liquidating assets 

due to the potential for competing claims arising from the cross-border nature of ANZBGL’s business.
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Annex: Australia and New Zealand Banking Group Limited, Consolidated Statement of 

Financial Position at September 30, 2018

AUD’m

Assets

Cash 84,636

Settlement balances owed to ANZ 2,319

Collateral paid 11,043

Trading securities 37,722

Derivative financial instruments 68,423

Available-for-sale assets 74,284

Net loans and advances 603,938

Regulatory deposits 882

Assets held for sale 45,248

Investments in associates 2,553

Current tax assets 268

Deferred tax assets 900

Goodwill and other intangible assets 4,930

Premises and equipment 1,833

Other assets 3,645

Total assets 942,624

Liabilities

Settlement balances owed by ANZ 11,810

Collateral received 6,542

Deposits and other borrowings 618,150

Derivative financial instruments 69,676

Current tax liabilities 300

Deferred tax liabilities 59

Liabilities held for sale 47,159

Payables and other liabilities 6,788

Employee entitlements 540

Other provisions 1,038

Debt issuances 121,179

Total liabilities 883,241

Net assets 59,383

Shareholders' equity

Ordinary share capital 27,205

Reserves 323

Retained earnings 31,715

Share capital and reserves attributable to shareholders of the Company 59,243

Non-controlling interests 140

Total shareholders' equity 59,383