APS 330 Pillar 3 Disclosure at 30 September 2023
Australia and New Zealand Banking Group Limited ABN 11 005 357 522
ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008
13
th
November 2023
Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000
APS 330 Pillar 3 Disclosure at 30 September 2023
Australia and New Zealand Banking Group Limited (ANZ) today releases its APS 330
Pillar 3 Disclosure as at 30 September 2023.
This has been approved for distribution by ANZ’s Continuous Disclosure Committee.
Yours faithfully
Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited
AS AT 30 SEPTEMBER 2023
APS 330: PUBLIC DISCLOSURE
202
3
BASEL III
PILLAR 3
DISCLOSURE
ANZ Basel III Pillar 3 Disclosure September 2023
1
Important notice
This
document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meet its
disclosure
obligations under the Australian P r u d e n t i a l Regulation Authority (APRA) ADI Prudential Standard
(APS) 330: Public Disclosure.
ANZ Basel III Pillar 3 Disclosure September 2023
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Table of Contents
1
Chapter 1 – Introduction ............................................................................................................................... 3
Purpose of this document .................................................................................................................. 3
Chapter 2 - Risk appetite and governance ...................................................................................................... 5
Risk types ...................................................................................................................................... 5
Risk appetite framework ................................................................................................................... 6
Risk management governance ........................................................................................................... 6
Chapter 3 – Capital reporting and measurement ............................................................................................. 10
Chapter 4 – Capital and capital adequacy ....................................................................................................... 11
Table 1 Capital disclosure template ............................................................................................... 11
Table 2 Main features of capital instruments .................................................................................. 21
Table 6 Capital adequacy ............................................................................................................. 21
Chapter 5 – Credit risk ................................................................................................................................. 25
Table 7 Credit risk – General disclosures ....................................................................................... 25
Table 8 Credit risk – Disclosures for portfolios subject to the Standardised approach and
supervisory risk weights in the IRB approach ...................................................................... 42
Table 9 Credit risk – Disclosures for portfolios subject to Advanced IRB approaches ............................ 43
Table 10 Credit risk mitigation disclosures ....................................................................................... 55
Table 11 General disclosures for derivative and counterparty credit risk ............................................. 61
Chapter 6 – Securitisation ........................................................................................................................... 65
Table 12 Banking Book - Securitisation disclosures ........................................................................... 68
Trading Book - Securitisation disclosures ............................................................................ 75
Chapter 7 – Market risk ................................................................................................................................ 76
Table 13 Market risk – Standard approach ....................................................................................... 76
Table 14 Market risk – Internal models approach.............................................................................. 77
Chapter 8 - Operational risk .......................................................................................................................... 81
Table 15 Operational risk .............................................................................................................. 81
Chapter 9 – Equities ................................................................................................................................... 84
Table 16 Equities – Disclosures for banking book positions ................................................................ 84
Chapter 10 – Interest Rate Risk in the Banking Book ....................................................................................... 86
Table 17 Interest Rate Risk in the Banking Book .............................................................................. 86
Chapter 11 – Leverage and Liquidity Coverage Ratio ........................................................................................ 89
Table 18 Leverage Ratio ................................................................................................................ 89
Table 19 Summary comparison of accounting assets vs. leverage ratio exposure measure .................... 90
Table 20 Liquidity Coverage Ratio disclosure template ...................................................................... 91
Table 21 NSFR disclosure template ................................................................................................. 92
Glossary ..................................................................................................................................................... 94
1
Each table reference adopted in this document aligns to those required by APS 330 to be disclosed at full year.
ANZ Basel III Pillar 3 Disclosure September 2023
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Chapter 1 – Introduction
Purpose of this document
This document has been prepared in accordance with the Australian Prudential Regulation Authority (APRA) ADI
Prudential Standard (APS) 330: Public Disclosure.
APS 330 Public Disclosure Prudential Standard requires locally-incorporated authorised deposit-taking institutions (ADIs)
to meet minimum requirements for the public disclosure of key information on their capital, risk exposures, remuneration
practices and, where applicable, leverage ratio, liquidity coverage ratio, net stable funding ratio and indicators for the
identification of potential global systemically important banks, so as to contribute to the transparency of financial markets
and to enhance market discipline.
This document is prepared for ANZ BH Pty Ltd (ANZ Bank HoldCo) in accordance with Board policy and the APS 330
reporting standard requirements. It presents information on the Group’s Capital Adequacy and Risk Weighted Assets
calculations for credit risk, securitisation, traded market risk, interest rate risk in the banking book and operational risk.
Establishment of a new group organisational structure
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of
arrangement a non-operating holding company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding
company of the ANZ Group and implemented a restructure to separate ANZ’s banking and certain non-banking
businesses into the ANZ Bank Group and ANZ Non-Bank Group (Restructure). The ANZ Bank Group comprises ANZBGL
and the majority of its businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-
Bank Group comprises banking-adjacent businesses developed or acquired by the ANZ Group, to focus on bringing new
technology and banking-adjacent services to the ANZ Group’s customers, and a separate service company.
The APS 330 disclosure has been prepared on the level 2 basis being ANZ Bank HoldCo as the head of ANZ’s Level 2
banking group following the Restructure (formerly Australia and New Zealand Banking Group Limited for prior years).
Basel in ANZ
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are
set out in APRA’s Banking Prudential Standard documents. ANZ has implemented these new requirements from 1 January
2023. The new capital adequacy key requirements include changes to APS 110 Capital Adequacy (APS 110), APS 112
Capital Adequacy: Standardised Approach to Credit Risk (APS 112) and APS 113 Capital Adequacy: Internal Ratings-
based Approach to Credit Risk (APS 113) with key features of the reforms including:
• improving the flexibility of the capital framework, through larger capital buffers that can be used by banks to
support lending during periods of stress;
• changes to risk weighted assets (RWA) through more risk-sensitive risk weights increasing capital requirements
for higher risk lending and decreasing it for lower risks;
• changes to loss given default rates (LGD) including approved use of an internal ratings-based (IRB) approved
LGD model for mortgage portfolios;
• an increase in the IRB scaling factor (from 1.06x to 1.1x);
• requirement that IRB ADIs calculate and disclose RWA under the standardised approach and the introduction
of a capital floor at 72.5% of standardised RWA; and
• use of prescribed New Zealand authority’s equivalent prudential rules for the purpose of calculating the Level 2
regulatory capital requirement.
In addition, operational RWA is now calculated under APS 115 Capital Adequacy: Standardised Measurement Approach
to Operational Risk (APS 115) which replaced the previous advanced methodology from December 2022.
The revisions to the prudential standards resulted in changes to capital treatments, calculations, and the format of the
disclosures from the 31 March 2023 period. Comparative periods reported before March 2023 in this document remain
based on the pre 1 January 2023 prudential standards and have not been restated.
The application of APRA Capital Reform in January 2023 reduced RWA by $34.5 billion, equivalent to a 100 bps CET1
ratio benefit. This was partially offset by APRA’s expectations that ADIs operate a higher capital ratio to maintain an
unquestionably strong level.
ANZ Basel III Pillar 3 Disclosure September 2023
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Verification of disclosures
These Pillar 3 disclosures have been verified in accordance with Board-approved policy, including ensuring consistency
with information contained in ANZ’s Financial Report and in Pillar 1 returns provided to APRA. In addition, ANZ’s external
auditor has performed an agreed upon procedure engagement with respect to these disclosures.
Comparison to ANZ’s Financial Reporting
These disclosures have been produced in accordance with regulatory capital adequacy concepts and rules, rather than
with accounting policies adopted in ANZ’s financial reports. As such, there are different areas of focus and measures in
some common areas of these disclosures. These differences are most pronounced in the credit risk disclosures, for
instance:
The principal method for measuring the amount at risk is Exposure at Default (EAD), which is the estimated exposure
owed on a credit obligation at the time of default. Under the Internal Ratings Based (IRB) approach in APS 113
Capital Adequacy: Internal Ratings-based Approach to Credit Risk, banks are accredited to provide their own
estimates of EAD or use supervisory estimates for all exposures (drawn, commitments or contingents) reflecting
the current balance as well as the likelihood of additional drawings prior to default. Note APS 113 no longer permits
the use of own estimates (internally modelled credit conversion factors (CCFs)) for committed non-retail exposures
and non-revolving retail, therefore ANZ apply supervisory CCFs as detailed in APS 112.
Loss Given Default (LGD) is an estimate of the loss expected in the event of default. LGD is essentially calculated
as the amount at risk (EAD) less expected net recoveries from realisation of collateral as well as any post default
repayments of principal and interest.
Most credit risk disclosures split ANZ’s portfolio into regulatory asset classes, which span different areas of ANZ’s
internal divisional and business unit organisational structure.
Unless otherwise stated, all amounts are rounded to AUD millions.
Suncorp Bank Acquisition
On 18 July 2022, the ANZ Group announced an agreement to purchase 100% of the shares in SBGH Limited, the
immediate non-operating holding company of Suncorp Bank. The acquisition was subject to Australian Competition and
Consumer Commission (ACCC) authorisation or approval. The ACCC declined to grant authorisation for this acquisition
in August 2023 and this decision is currently subject to review by the Australian Competition Tribunal. In addition, the
acquisition remains subject to satisfaction of certain conditions, including Federal Treasurer approval and certain
amendments to the State Financial Institution and Metway Merger Act 1996 (QLD). ANZBGL will also have a termination
right under the Suncorp Bank Sale Agreement if APRA issues a written communication to ANZBGL under or in connection
with APS 222 Associations with Related Entities to the effect that ANZBGL must not proceed with completion of the
acquisition. Assuming the conditions are satisfied, and merger approval is granted, it is expected to occur in mid-calendar
year 2024.
ANZ Basel III Pillar 3 Disclosure September 2023
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Chapter 2 – Risk appetite and governance
Risk types: ANZ is exposed to a broad range of inter-related business risks.
Capital Adequacy risk is the risk of loss arising from ANZ failing to maintain the level of capital required by
prudential regulators and other key stakeholders (shareholders, debt investors, depositors, rating agencies etc.) to
support ANZ's consolidated operations and risk appetite. Losses include those arising from diminished reputation, a
reduction in investor/counter-party confidence, regulatory non-compliance (e.g. fines and banking licence
restrictions) and an inability for ANZ to continue to do business. ANZ pursues an active approach to capital
management, which is designed to protect the interests of depositors, creditors, and shareholders.
Compliance risk is the risk of failure to act in accordance with laws, regulations, industry standards and codes,
internal policies and procedures and principles of good governance as applicable to ANZ’s businesses.
Conduct Risk is the risk of loss or damage arising from the failure of ANZ, its employees or agents to appropriately
consider the interests of customers, the integrity of the financial markets and the expectations of the community in
conducting its business activities.
Credit risk is the risk of financial loss resulting from a counterparty failing to fulfil its credit obligations or from a
decrease in credit quality of a counterparty resulting in a loss of value.
Financial Crime Risk covers the following risks at ANZ:
o Money Laundering (ML) Risk – the risk that ANZ may reasonably face from its products and/or services being
misused to facilitate the processing of the proceeds of crime to conceal their illegal origins and make them
appear legitimate;
o Terrorism Financing (TF) Risk – the risk that ANZ may reasonably face from its products and/or services being
misused to facilitate the provision or collection of funds with the intention or knowledge that they be used to
carry out acts associated in support of terrorists or terrorist organisations;
o Sanctions Risk – the risk of failing to comply with laws and regulations relating to sanctions imposed by
governments and multinational bodies as a result of ANZ’s products and services being misused to facilitate
prohibited sanctioned activities; and
o Fraud Risk – the risk that ANZ may reasonably face from its products and/or services being misused to facilitate
intentional acts by one or more individuals, involving the use of deception to obtain an unjust or illegal
advantage arising from internal or external sources.
Market risk stems from ANZ’s trading and balance sheet activities and is the risk to ANZ’s earnings arising from
changes in interest rates, foreign exchange rates, credit spreads, volatility, correlations or from fluctuations in bond,
commodity or equity prices.
Liquidity and Funding risk is the risk that the Group is unable to meet its payment obligations as they fall due,
including repaying depositors or maturing wholesale debt, or that the Group has insufficient capacity to fund
increases in assets.
Operational risk is the risk of loss and/or non-compliance with laws resulting from inadequate or failed internal
processes, people and/or systems, or from external events. This definition includes legal risk, and the risk of
reputation loss or damage arising from inadequate or failed internal processes, people and systems, but excludes
strategic risk.
Strategic risk is risks that affect or are created by an organisation’s business strategy and strategic objectives. A
possible source of loss might arise from the pursuit of an unsuccessful business plan. For example, strategic risk
might arise from making poor strategic business decisions, from the substandard execution of decisions, from
inadequate resource allocation, or from a failure to respond well to changes in the business environment.
Technology risk covers the risk of loss and/or non-compliance with laws from inadequate or failed internal
processes, people and systems or systems that deliver Technology assets and services to customers and staff. This
includes Technology assets and services delivered or managed by third parties, and external events. An Information
Technology (IT) asset is any instance of software or hardware (including cloud computing) that is either owned by
ANZ or licensed to ANZ by an external entity and used in the delivery of services to customers and staff. The risk
specifically includes business continuity management, privacy obligations and Information Security and Cyber
Security and how information held by ANZ needs to be protected from inappropriate modification, loss, disclosure,
and unavailability. The compromise of confidentiality, integrity or availability of information assets could severely
impact ANZ customers, constitute a breach of the law and regulations, lead to financial loss or additional remediation
costs, and negatively impact our reputation. The scope of this risk includes IT assets that are managed and/or
supported by a dedicated technology function within ANZ, IT assets managed outside of the dedicated technology
function by business divisions and third-party service providers used by ANZ to deliver technology services or
products.
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Risk Appetite Framework
ANZ's Board is ultimately responsible for ANZ’s risk management framework, which includes the Group Risk Appetite
Statement (RAS). The Group RAS is the document which sets out the Board’s expectations regarding the degree of risk
that ANZ is prepared to accept in pursuit of its strategic objectives and plans.
The articulation of risk appetite and risk tolerances is central to the risk appetite statement. ANZ’s Group RAS conveys
the following:
The degree of risk (risk appetite) that ANZ is prepared to accept in pursuit of its strategic objectives and plans
considering its shareholders’, depositors’ and customers’ interests.
For each key material risk, ANZ sets the maximum level of risk that it is willing to operate within, expressed as a
risk tolerance, where appropriate. Risk tolerances translate risk appetite into operational limits for the day-to-day
management of material risks, where possible;
The approach for setting risk tolerances at an appropriate level;
The process for monitoring compliance with each risk tolerance and for taking appropriate action if it is breached;
The timing and process for reviewing of the risk appetite and risk tolerances; and
The cascading and application of Group RAS to Divisions and Business Units.
Risk Management Governance
The Board is principally responsible for overseeing the establishment by Management of a sound risk management
culture with an operational structure and the necessary resources to facilitate effective risk management throughout
ANZ, and which in turn supports the ability of ANZ to operate consistently within its risk appetite and approves the risk
appetite within which management is expected to operate and including ANZ’s risk appetite statement and risk
management strategy.
The following lists the Board Committees, in accordance with ANZ Accountability Map under the Banking Executive
Accountability Regime (BEAR). From time to time, other ad hoc committees of the Board may be formed.
ANZ Board - is responsible for:
Charting and monitoring the long-term implementation of ANZ’s strategies, financial objectives and organisational
and risk cultural direction (including ANZ’s purpose, values and expected behaviours);
Monitoring compliance with regulatory requirements, ethical standards and external commitments, and the
implementation of related policies;
Approving the operating plan for ANZ and endorsing ANZ’s strategic direction.
Approving the remuneration policy; significant changes to organisational structure; the acquisition, establishment,
disposal, or cessation of any significant business of ANZ;
Approving the issue of any shares, options, equity instruments or other equity securities in ANZ;
Appointing and reviewing the performance (including remuneration and incentives) and succession of, the ANZ CEO
and certain senior executive appointees of the Board (Board Appointees);
Approving any matters in excess of any discretions that it may have delegated from time to time to the CEO and
senior management, including in relation to credit transactions, market risk limits and expenditure;
Overseeing and assessing management’s performance in achieving any strategies and budgets approved by the
Board and in monitoring and managing risk;
Approving where practicable, the substance of any announcements to the Australian Securities Exchange in relation
to matters that have been the subject of a decision by the Board or any public statements which reflect significant
issues of ANZ policy or strategy;
Fulfilling its function and duties under ANZ’s Fit and Proper Policy;
Overseeing the effectiveness of workplace health and safety in the Group;
Meeting with APRA on request;
Reviewing reports from management on progress in relation to actions in ANZ’s Self-Assessment roadmap;
Reviewing ANZ’s approach to the management of key customer matters, including customer remediation and
customer complaints; and
Approving and overseeing management’s performance in establishing ANZ’s organisational and risk cultural direction,
including ANZ’s purpose, values and expected behaviours.
Risk Committee - assists the Board of Directors in:
Effective discharge of its responsibilities for business, market, credit, equity, and other investment (not including
strategic investments), financial, operational, compliance, liquidity, and reputational risk management and for the
management of the Group’s compliance obligations;
Providing an objective non-executive oversight of the implementation by management of ANZ's risk management
framework and its related operation and by enabling an institution-wide view of ANZ’s current and future risk
position relative to its risk appetite and capital strength;
Advising the Board on ANZ's overall current and future risk appetite and risk management strategy;
Overseeing management's implementation of the risk management strategy and ongoing effectiveness in seeking
to ensure that ANZ remains appropriately within its risk appetite;
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Reviewing reports from management concerning the Group’s risk management and compliance frameworks,
principles and policies, strategies, processes, and controls including the discretions conferred on executive
management and executive management committees, in order to oversee the effectiveness of them and, if thought
fit, approve or vary them;
Reviewing reports from management concerning key material risks (including credit, market, operational risk and
compliance) in order to oversee these risks, assess their effect on capital levels and, in all material respects, attest
to the adherence to APRA Prudential Standard CPS220 Risk Management;
Reviewing reports from management concerning credit transactions, equity and other investments beyond the
approval discretion of the CRO and other executive management, in order to consider and, if thought fit, approve
them;
Overseeing risk associated with individual high risk and non-accrual accounts (and associated provisioning);
Reviewing reports from management concerning changes anticipated for the economic, business and regulatory
environment and other factors considered relevant to future strategy and capital requirements, in order to monitor
them in the context of ANZ’s projected business performance and capital adequacy;
Reviewing reports from management concerning the risk implications of new and emerging risks, legislative or
regulatory initiatives and changes, organisational change, and major initiatives, in order to monitor them;
Constructively challenging management’s proposals and decisions on all aspects of risk management arising from
ANZ’s activities;
Reviewing the performance and setting the objectives of ANZ’s CRO and seeking to ensure the CRO has unfettered
access to the Board and the Risk Committee;
Reviewing reports from management concerning resolution of significant risk exposures and risk events (including
significant breaches), in order to monitor them and, if thought fit, approve them;
Overseeing compliance by ANZ with applicable external obligations and significant internal polices relating to the
operation of its business;
Reviewing reports from management concerning the Group’s insurance strategy, including the coverage and limits
of the insurance policies managed at a Group level, in order to monitor them and, if thought fit, approve or vary
them;
Reviewing reports from management concerning Anti Money Laundering/Counter Terrorism Financing and Sanction
external obligations and internal policies, in order to monitor them and, if thought fit, approve them;
Reviewing reports from management concerning ANZ's approach to risk and governance culture in order to oversee
scope and expected impact on organisational behaviour;
Overseeing APRA risk reporting requirements (as appropriate); and
Meeting with APRA on request.
Audit Committee - assists the Board of Directors in:
Overseeing and reviewing ANZ's financial reporting principles and policies, controls and procedures;
Overseeing and reviewing the effectiveness of ANZ’s internal control and risk management framework;
Overseeing and reviewing the work of Internal Audit which reports directly and solely to the Chairman of the Audit
Committee. The internal management reporting line for the Group General Manager, Internal Audit is to the CEO;
Overseeing and reviewing the integrity of ANZ's financial statements and the independent audit thereof, and ANZ’s
compliance with legal and regulatory requirements in relation thereto;
Overseeing and reviewing any due diligence procedures;
Overseeing and reviewing prudential supervision procedures and other regulatory requirements to the extent
relating to financial reporting; and
With respect to the external auditors
:
o the appointment, annual evaluation and oversight of the external auditors;
o
annual review of the independence, fitness and propriety, and qualifications of the external auditors;
o compensation of the external auditors; and
o where deemed appropriate, replacement of the external auditors.
Digital Business and Technology Committee – assists the Board of Directors in:
Monitoring and providing guidance as appropriate on matters relating to ANZ's digital transformation, technology,
technology-related innovation and information/cyber security strategies;
Monitoring the delivery of the key programs that form part of ANZ's digital transformation, technology, technology-
related innovation and information/cyber security strategies;
Recommending to the Board and monitoring the delivery of material digital transformation and technology
investments; and
Reviewing health and relevance of ANZ’s technology suite, to seek to ensure secure, stable and reliable services.
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Human Resource Committee - assists the Board of Directors in:
Reviewing and making recommendations to the Board, where appropriate on remuneration (including variable
remuneration arrangements) for ANZ Board Appointees and individual ANZ Material Risk Takers;
Reviewing and making recommendations to the Board, where appropriate, in respect of the design and funding of
the ANZ Incentive Plan, and remuneration structures for senior executives and others specifically covered by the
ANZBGL Performance and Remuneration Policy and ANZ New Zealand (NZ) Performance and Remuneration Policy;
Reviewing and making recommendations to the Board, where appropriate, for amending the ANZBGL Remuneration
Policy and the ANZ NZ Remuneration Policy;
Considering and approving appointments and terminations for all ANZ Board Appointees, and reviewing succession
plans for enterprise business critical roles, and making recommendations to the Board on such matters relating to
the CEO;
Obtaining external advice, either independently or via management, as appropriate, on remuneration, risk and any
other related matter to supplement members’ knowledge and expertise; and
Obtaining all information necessary to enable the committee to perform its function.
Ethics, Environment, Social and Governance Committee - assists the Board of Directors in:
Reviewing and approving the proposed corporate sustainability objectives for ANZ, and reviewing progress in
achieving them;
Reviewing and approving the disclosures relating to ANZ’s Sustainability Framework, objectives and related
performance as set out in the suite of annual reporting documents;
Discussing, questioning, and providing advice to management on past, current, and emerging ethical,
environmental, social and governance risks and opportunities relevant to the bank’s ability to operate as a fair,
responsible and sustainable business;
Receiving reports on past, current, and emerging ethical, environmental, social and governance matters;
Providing oversight of ANZ’s Ethics and Responsible Business Committee, including receiving the minutes of that
body and discussing material matters referred to the committee from that body;
Referring to the Board the resolution of any significant ethical or environmental, social and governance matters
where applicable;
Reviewing the development of and approving applicable corporate governance policies and principles;
Reviewing ANZ’s Corporate Governance Statement; and
In relation to whistleblowing:
o Reviewing the effectiveness of management’s process for informing employees of the existence of the
Whistleblower Policy and ANZ Code of Conduct and Ethics;
o Seeking to ensure procedures for the receipt, retention and treatment of information submitted confidentially
by employees and third parties under such policies are established and maintained by management;
o Receiving reports from management regarding any material incidents reported under the Whistleblower Policy;
and
o Referring any relevant matters to the Audit Committee.
Nomination and Board Operations Committee - supports the Board of Directors in:
All matters to do with reviewing Board composition;
Reviewing and approving the processes in place for evaluating the performance of (i) the Board, (ii) each Standing
Committees and (iii) each Director including the Chairman of the Board but excluding ANZ CEO; and
All other matters to do with the effective and efficient operation of the Board and its Standing Committees.
The above Committees are exclusively comprised of Non-Executive directors. Members, including the Chair of each
committee, are appointed by the Board and serve at the discretion of the Board and for such term or terms as the
Board determines. Under ANZ’s BEAR arrangements, the chair and members of each committee are accountable
persons with prescribed responsibility for oversight of the ANZ, as a member of the Board.
Processes and procedures relating to the operation of each of the board committees are documented in the committee
charters and in the Board Committees’ Standing Rules which are on the ANZ corporate governance website:
http://shareholder.anz.com/our-company/corporate-governance.
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Executive Management Committees are responsible for co-ordination of risk matters for each of the areas of risk
management. The following lists ANZ’s key management committees and states their primary purpose, in accordance
with ANZ’s accountability map under BEAR, and related sub-committees:
Group Executive Committee (ExCo) - headed by the CEO is ANZ’s leadership team whose role is to support the
CEO in delivering ANZ’s purpose, to shape a world where people and communities thrive. It does this by focusing on:
All Key stakeholders;
ANZ’s Culture and Capabilities; and
Prioritising efforts and allocating resources in line with ANZ’s strategic pillars.
Group Performance and Execution Committee (GPEC) - is charged with the oversight of the Group’s overall
operational performance and position and the execution of the operating plan.
Enterprise Accountability Group – reports to Board Human Resources Committee and is responsible for:
overseeing the ongoing effectiveness of an enterprise-wide accountability and consequence management
framework and being cognisant of its impact on the culture of ANZ;
reviewing and approving the release of, or exercise of the downward adjustment or further deferral discretions in
relation to, deferred remuneration; and
reviewing and monitoring the consequences applied to staff who are considered either directly or indirectly
accountable for material risk (financial or non-financial) and compliance events and/ or material internal audit
issues.
Group Asset and Liability Committee (GALCO)
- is responsible for the oversight and strategic management of the
Group’s balance sheet activities including balance sheet structure, liquidity, funding, capital management, non-traded
interest rate risk and non-traded FX risk. The committee is accountable to the Board Risk Committee in the effective
discharge of its responsibilities.
Credit and Market Risk Committee (CMRC) - is the senior executive management forum responsible for the
oversight and control of credit, market, insurance, and other material financial risks across the ANZ Group. The
committee is accountable to the Board Risk Committee in the effective discharge of its responsibilities.
Operational Risk Executive Committee (OREC)- is the primary senior executive management forum responsible
for oversight of Operational Risk and Compliance Risk, expected and unexpected risk profile and the related control
environment. The purpose of OREC is to assist the Board Risk Committee in the effective discharge of its responsibilities
for operational risk management and the management of the compliance obligations of ANZ and its controlled entities.
Ethics and Responsible Business Committee (ERBC) - is a leadership and decision making body that exists to
advance ANZ’s purpose, namely to shape a world where people and communities thrive.
The committee seeks to ensure ANZ operates responsibly and achieves fair, ethical and balanced stakeholder
outcomes. The committee considers the social and environmental impacts of the industries, customers, and
communities that ANZ serves. It also considers ANZ’s products and services and how they are provided, as well as
stakeholder and community expectations. The committee is also accountable to the Board’s Ethics, Environment, Social
and Governance Committee in the effective discharge of its responsibilities.
Credit Ratings System Oversight Committee (CRSOC) - is a sub-committee of CMRC,
the senior management
forum responsible for the oversight and control of the Internal Ratings System for credit risk including credit model
approvals and performance monitoring.
Capital and Stress Testing Oversight Committee (CSTOC) - is a sub-committee of GALCO, with responsibility for
the oversight and control of the Group’s stress testing framework, modelling, processes and outcomes; economic profit
methodology and framework; operational risk capital measurement framework, modelling, processes and outcomes;
capital allocation framework and other capital management (apart from Group ICAAP) and portfolio measurement
related recommendations.
Investment Committee - is to carry out the responsibilities delegated by the CEO of ANZ, regarding the funding and
delivery of value from ANZ’s investments in change initiatives. The committee acts as the governance, oversight and
advisory board for funding provided to the Divisions and enterprise priorities.
Risk Governance Oversight Committee (RGOC) - is a leadership and decision making body that exists to oversee
ANZ’s response to the self-assessment of governance, culture and accountability, provided to APRA in November 2018.
The Committee is accountable to the Board in the effective discharge of its responsibilities.
Group Executive People Committee (GEPC) - is a leadership and decision making body charged with advancing
ANZ’s people strategy and priorities in line with the ANZ’s purpose, strategy and aspirational culture.
Financial Crime OREC Sub-Committee (FCOSC) - is the primary senior executive management forum responsible
for oversight of the Financial Crime risk profile and the related Control Environment. The purpose of FCOSC is to assist
OREC in the effective discharge of its responsibilities for financial crime obligations of ANZBGL and its controlled entities.
Processes and procedures relating to the operation of each of the Executive Management Committees are documented
in the committee charters which are available on Max: Management committee registers (anz.com).
ANZ Basel III Pillar 3 Disclosure September 2023
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Chapter 3 – Capital reporting and measurement
Capital reporting and measurement
To ensure that an Authorised Deposit-taking Institution (ADI) is adequately capitalised on both a standalone and group
basis, APRA adopts a tiered approach to the measurement of an ADI’s capital adequacy by assessing the ADI’s financial
strength at three levels:
Level 1 - being the ADI i.e., ANZBGL, consolidated with APRA-approved subsidiaries, to form the ADI’s Extended
Licensed Entity (ELE).
Level 2 - being the consolidated ANZBGL group for financial reporting purposes adjusted to exclude associates’
activities and certain subsidiaries referenced under APS 001: Definitions that undertake the following business
activities:
Insurance businesses (including friendly societies and health funds).
Acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds
management.
Non-financial (commercial) operations.
Securitisation special purpose vehicles to which assets have been transferred in accordance with APRA's
requirements as set out in APS 120: Securitisation.
Level 3 – the consolidated ANZGHL group for financial reporting purposes.
ANZ measures capital adequacy monthly and reports for prudential purposes on a Level 1 and Level 2 basis. This Pillar
3 report is based on the Level 2 prudential structure.
Following the implementation of the Non-operating holding company structure in January 2023, APRA’s authority for
ANZGHL to be a non-operating holding company (NOHC) of an ADI includes five conditions for ANZ’s capital management
framework. Two of these are quantitative requirements being:
ANZGHL must always ensure that the quality and quantity of the total capital of the Level 3 group is equivalent to,
or greater than, the quality and quantity of the sum of the total capital of the consolidated ANZ Bank Group and the
consolidated ANZ Non-Bank Group.
ANZGHL must calculate and manage capital for the ANZ Non-Bank Group in accordance with an Economic Capital
Model (ECM), which requires the amount of capital held, in the form of Common Equity Tier 1 (CET1), to be equal
to or greater than the capital requirement as calculated under the ECM.
For further details on Level 3 Capital, refer to Note 25 Capital Management of ANZGHL’s 2023 Annual Report.
For a list of all material subsidiaries and a brief description of their key activities, refer to Note 25 Controlled Entities of
ANZBGL’s 2023 Annual Report.
ANZ Basel III Pillar 3 Disclosure September 2023
11
Chapter 4 – Capital and Capital Adequacy
Table 1 Capital Disclosure template
The head of the Level 2 Group to which this prudential standard applies is ANZ BH Pty Ltd (ANZ Bank HoldCo).
Table 1 of this chapter consists of a Common Disclosure template that assists users in understanding the differences
between the application of the Basel III reforms in Australia and those rules as detailed in the document, Finalised
Basel III post-crisis reforms issued by the Bank for International Settlements. The capital disclosure template in this
chapter is the post January 2018 version as ANZ is fully applying the Basel III regulatory adjustments, as implemented
by APRA.
The information in the lines of the template has been mapped to ANZ’s Level 2 balance sheet, which adjusts for non-
consolidated subsidiaries as required under APS 001: Definitions. Where this information cannot be mapped on a one-
to-one basis, it is provided in an explanatory table. ANZ’s material non-consolidated subsidiaries are also listed in this
chapter.
Restrictions on Transfers of Capital within ANZ
ANZ operates branches and locally incorporated subsidiaries in many countries. These operations are capitalised at an
appropriate level to cover the risks in the business and to meet local prudential requirements. This level of capitalisation
may be enhanced to meet local taxation and operational requirements. Any repatriation of capital from subsidiaries or
branches is subject to meeting the requirements of the local prudential regulator and/or the local central bank. Apart
from ANZ’s operations in New Zealand, local country capital requirements do not impose any material call on ANZ’s
capital base.
ANZ undertakes banking activities in New Zealand principally through its wholly owned subsidiary, ANZ Bank New
Zealand Limited (ANZ New Zealand), which is subject to minimum capital requirements as set by the Reserve Bank of
New Zealand (RBNZ). ANZ New Zealand maintains a buffer above the minimum capital base required by the RBNZ. This
capital buffer has been calculated via the ICAAP undertaken for ANZ New Zealand, to ensure ANZ New Zealand is
appropriately capitalised under stressed economic scenarios.
ANZ Basel III Pillar 3 Disclosure September 2023
12
Table 1 Capital disclosure template
Sep-23 Reconciliation
Table
$M Reference
Common Equity Tier 1 Capital: instruments and reserves
1 Directly issued qualifying ordinary shares (and equivalent for mutually owned entities) capital 28,779 Table A
2 Retained earnings 41,130
3 Accumulated other comprehensive income (and other reserves) (1,652) Table B
4 Directly issued capital subject to phase out from CET1 (only applicable to mutually owned
companies)
-
5 Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in
group CET1)
2 Table C
6 Common Equity Tier 1 capital before regulatory adjustments 68,259
Common Equity Tier 1 capital: regulatory adjustments
7 Prudential valuation adjustments -
8 Goodwill (net of related tax liability) 2,977
9 Other intangibles other than mortgage servicing rights (net of related tax liability) 984 Table D
10 Deferred tax assets that rely on future profitability excluding those arising from temporary
differences (net of related tax liability)
- Table H
11 Cash-flow hedge reserve (1,872)
12 Shortfall of provisions to expected losses 272 Table E
13 Securitisation gain on sale -
14 Gains and losses due to changes in own credit risk on fair valued liabilities 208
15 Defined benefit superannuation fund net assets 128 Table F
16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) -
17 Reciprocal cross-holdings in common equity -
18 Investments in the capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital (amount above 10% threshold)
-
19 Significant investments in the ordinary shares of banking, financial and insurance entities that
are outside the scope of regulatory consolidation, net of eligible short positions (amount above
10% threshold)
- Table G
20 Mortgage service rights (amount above 10% threshold) n/a
21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of
related tax liability)
-
22 Amount exceeding the 15% threshold -
23 of which: significant investments in the ordinary shares of financial entities -
24 of which: mortgage servicing rights n/a
25 of which: deferred tax assets arising from temporary differences -
26 National specific regulatory adjustments (sum of rows 26a - 26j) 7,768
26a of which: treasury shares -
26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the
extent to that the dividends are used to purchase new ordinary shares issued by the ADI
-
26c of which: deferred fee income (430)
26d of which: equity investment in financial institutions not reported in rows 18, 19 and 23 3,515 Table G
26e of which: deferred tax assets not reported in rows 10, 21 and 25 2,579 Table H
26f of which: capitalised expenses 2,099 Table I
26g of which: investments in commercial (non-financial) entities that are deducted under APRA
rules
2 Table J
26h of which: covered bonds in excess of asset cover in pools -
26i of which: undercapitalisation of a non-consolidated subsidiary -
26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i 3
27 Regulatory adjustments applied to CET1 due to insufficient Additional Tier 1 and Tier 2 to
cover deductions
-
28 Total regulatory adjustments to CET1 10,465
29 Common Equity Tier 1 capital (CET1) 57,794
ANZ Basel III Pillar 3 Disclosure September 2023
13
Table 1 Capital disclosure template
Sep-23 Reconciliation
Table
$M Reference
Additional Tier 1 Capital: instruments
30 Directly issued qualifying Additional Tier 1 instruments 8,409 Table K
31 of which: classified as equity under applicable accounting standards -
32 of which: classified as liabilities under applicable accounting standards 8,409 Table K
33 Directly issued capital instruments subject to phase out from Additional Tier 1 - Table K
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by
subsidiaries and held by third parties (amount allowed in group AT1)
- Table K
35 of which: instruments issued by subsidiaries subject to phase out n/a
36 Additional Tier 1 capital before regulatory adjustments 8,409 Table K
Additional Tier 1 Capital: regulatory adjustments
37 Investments in own Additional Tier 1 instruments -
38 Reciprocal cross-holdings in Additional Tier 1 instruments -
39 Investments in the capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital (amount above 10% threshold)
-
40 Significant investments in the capital of banking, financial and insurance entities that are
outside the scope of regulatory consolidation, (net of eligible short positions)
155 Table K
41 National specific regulatory adjustments (sum of rows 41a - 41c) 22
41a of which: holdings of capital instruments in group members by other group members on
behalf of third parties
-
41b of which: investments in the capital of financial institutions that are outside the scope of
regulatory consolidations not reported in rows 39 and 40
22 Table K
41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b - Table K
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 cover deductions -
43 Total regulatory adjustments to Additional Tier 1 capital 177
44 Additional Tier 1 capital (AT1) 8,232 Table K
45 Tier 1 Capital (T1=CET1+AT1) 66,026
Tier 2 Capital: instruments and provisions
46 Directly issued qualifying Tier 2 instruments 23,504
47 Directly issued capital instruments subject to phase out from Tier 2 -
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by
subsidiaries and held by third parties (amount allowed in group T2)
- Table L
49 of which: instruments issued by subsidiaries subject to phase out -
50 Provisions 1,776 Table L
51 Tier 2 capital before regulatory adjustments 25,280 Table L
Tier 2 Capital: regulatory adjustments
52 Investments in own Tier 2 instruments 50 Table L
53 Reciprocal cross-holdings in Tier 2 instruments -
54 Investments in the Tier 2 capital of banking, financial and insurance entities that are outside
the scope of regulatory consolidation, net of eligible short positions, where the ADI does not
own more than 10% of the issued share capital (amount above 10%
-
55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that
are outside the scope of regulatory consolidation, net of eligible short positions
85 Table L
56 National specific regulatory adjustments (sums of rows 56a - 56c) 186 Table L
56a of which: holdings of capital instruments in group members by other group members on
behalf of third parties
-
56b of which: investments in the capital of financial institutions that are outside the scope of
regulatory consolidation not reported in rows 54 and 55
131
56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b 55
57 Total regulatory adjustment to Tier 2 capital 321
58 Tier 2 capital (T2) 24,959 Table L
59 Total capital (TC=T1+T2) 90,985
60 Total risk-weighted assets based on APRA standards 433,327
ANZ Basel III Pillar 3 Disclosure September 2023
14
Table 1 Capital disclosure template
2
Reconciliation
Table
Reference
Capital ratios and buffers
61 Common Equity Tier 1 (as a percentage of risk-weighted assets) 13.3%
62 Tier 1 (as a percentage of risk-weighted assets) 15.2%
63 Total capital (as a percentage of risk-weighted assets) 21.0%
64 Institution specific buffer requirement (minimum CET1 requirement plus capital conservation
buffer plus countercyclical buffer requirements plus G-SIBs buffer requirement, expressed as a
percentage of risk-weighted assets)
9.9083%
65 of which: capital conservation buffer requirement
2
4.75%
66 of which: ADI-specific countercyclical buffer requirements 0.6583%
67 of which: G-SIB buffer requirement (not applicable) n/a
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 8.8%
National minima (if different from Basel III)
69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) n/a
70 National Tier 1 minimum ratio (if different from Basel III minimum) n/a
71 National total capital minimum ratio (if different from Basel III minimum) n/a
Amount below thresholds for deductions (not risk-weighted)
72 Non-significant investments in the capital of other financial entities 230
73 Significant investments in the ordinary shares of financial entities 3,439 Table G
74 Mortgage servicing rights (net of related tax liability) n/a
75 Deferred tax assets arising from temporary differences (net of related tax liability) 2,579 Table H
Applicable caps on the inclusion of provisions in Tier 2
76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised
approach (prior to application of cap)
131 Table E
77 Cap on inclusion of provisions in Tier 2 under standardised approach 193
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-
based approach (prior to application of cap)
1,645
79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 1,987
Capital instruments subject to phase-out arrangements (only application between
1 January 2018 to 1 January 2022)
80 Current cap on CET1 instruments subject to phase out arrangements n/a
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) n/a
82 Current cap on AT1 instruments subject to phase out arrangements n/a
83 Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and
maturities
)
n/a
84 Current cap on T2 instruments subject to phase out arrangements n/a
85 Amount excluded from T2 due to cap (excess over cap after redemption and maturities) n/a
Counter Cyclical Capital Buffer
RWA for all private
sector exposures
Jurisdictional Buffer
Countercyclical buffer
requirement
Country $M % %
Hong Kong 3,936 1.000 0.0122
Luxembourg 617 0.500 0.0010
Norway 317 2.500 0.0025
Sweden 178 2.000 0.0011
United Kingdom 5,271 2.000 0.0328
Australia 192,532 1.000 0.5990
Germany 1,776 0.750 0.0041
France 1,890 0.500 0.0029
Netherlands 861 1.000 0.0027
Other 114,040 n/a n/a
Total 321,418 0.6583
2
Includes 1.0% buffer applied by APRA to ADIs deemed as domestic systemically important.
ANZ Basel III Pillar 3 Disclosure September 2023
15
The following table shows ANZ's consolidated balance sheet, and the adjustments required to derive the Level 2
Balance Sheet. The adjustments remove the external assets and liabilities of the entities deconsolidated for prudential
purposes and reinstate any intragroup assets and liabilities, treating them as external to the Level 2 Group.
Balance
Sheet as in
published
financial
statements
Adjustments Balance
sheet under
scope of
regulatory
consolidation
Template and
Reconciliation
Table
Reference
Assets $M $M $M
Cash and Cash Equivalents 168,154 168,154
Settlement Balances owed to ANZ 9,349 9,349
Collateral Paid 8,558 8,558
Trading securities 37,004 37,004
of which: Financial Institutions capital instruments 85 Table L
Derivative financial instruments 60,406 60,406
Investment Securities 96,969 (320) 96,649
of which: significant investment in financial institutions equity
instruments
848 Table G
of which: non-significant investment in financial institutions equity
instruments
76 Table G
of which: Other entities equity investments 2 Table J
of which: collectively assessed provision (35) Table E
Net loans and advances 707,694 (891) 706,803
of which: deferred fee income (430) Row 26c
of which: collectively assessed provision (3,180) Table E
of which: individual provisions (366) Table E
of which: capitalised brokerage & Loan/Lease origination
fees
3,475 Table I
of which: CET1 margin lending adjustment -
of which: AT1 margin lending adjustment -
Regulatory deposits 646 646
Due from controlled entities - 91 91
of which: Significant investments in the Tier 2 "capital of
banking, financial and insurance entities" that are outside the
scope of regulatory consolidation
85 Table L
Shares in controlled entities-- - 497 497
of which: Investment in deconsolidated financial subsidiaries 341 Table G
of which: AT1 significant investment in banking, financial and
insurance entities that are outside the scope of regulatory
consolidation
155 Table K
Investments in associates 2,321 2,321
of which: Financial Institutions 2,321 Table G
Current tax assets 37 37
Deferred tax assets 3,386 (1) 3,385 Table H
Goodwill and other intangible assets 3,961 (71) 3,890
of which: Goodwill 2,977 Row 8
of which: Software 913 Table D
Premises and equipment 2,360 2,360
Other assets 5,196 (153) 5,043
of which: Defined benefit superannuation fund net assets 176 Table F
Total Assets 1,106,041 (848) 1,105,193
ANZ Basel III Pillar 3 Disclosure September 2023
16
Balance
Sheet as in
published
financial
statements
Adjustments Balance
sheet under
scope of
regulatory
consolidation
Template and
Reconciliation
Table
Reference
Liabilities $M $M $M
Settlement Balances owed by ANZ 19,267 19,267
Collateral Received 10,382 10,382
Deposits and other borrowings 815,203 32 815,235
Derivative financial instruments 57,482 57,482
Due to controlled entities - 668 668
Current tax liabilities 305 (71) 234
Deferred tax liabilities 60 60 Table H
of which: related to intangible assets - Table D
of which: related to capitalised expenses 5 Table I
of which: related to defined benefit superannuation fund
assets
48 Table F
Payables and other liabilities 15,932 (344) 15,588
Employee Entitlements 568 568
Provisions
3
1,714 1,714
of which: collectively assessed provision
3
817 Table E
of which: individually assessed provision
3
10 Table E
Debt Issuances 116,014 (878) 115,136
of which: Directly issued qualifying Additional Tier 1 instruments 8,232 Table K
of which: Additional Tier 1 Instruments - Table K
of which: Directly issued qualifying Tier 2 instruments 23,707 Table L
Total Liabilities
1,036,927 (593) 1,036,334
Net Assets
69,114 (255) 68,859
Balance
Sheet as in
published
financial
statements
Adjustments Balance
sheet under
scope of
regulatory
consolidation
Template and
Reconciliation
Table
Reference
Shareholders' equity $M $M $M
Ordinary Share Capital
29,082 (77) 29,005 Table A
of which: Share reserve
226 Tables A & B
Reserves
(1,796) (1,796) Table B
of which: Cash flow hedging reserves
(1,872) Row 11
Retained earnings
41,306 (176) 41,130 Row 2
Share capital and reserves attributable to shareholders
of the com
pany
68,592 (253) 68,339
Non-controlling interests
522 (2) 520 Table C
Total Shareholders' Equity
69,114 (255) 68,859
3
Provisions are on undrawn and contingent facilities.
ANZ Basel III Pillar 3 Disclosure September 2023
17
The following reconciliation tables provide additional information on the difference between Table 1 Capital Disclosure
Template and the Level 2 Balance Sheet.
Sep 23 Table 1
Table A $M Reference
Issued capital
29,005
Less Reclassification to Reserves
(226) Table B
Regulatory Directly Issued qualifying ordinary shares
28,779 Row 1
Sep 23 Table 1
Table B
$M Reference
Reserves
(1,796)
Add Reclassification from Issued Capital
226 Table A
Less Non qualifying reserves
(82)
Reserves for Regulatory capital purposes (amount allowed in group CET1)
(1,652) Row 3
Sep 23
$M
Table 1
Table C
Reference
Non-controlling interests
522
Less Ineligible Non-controlling Interests
(512)
Less Surplus capital attributable to minority shareholders
(8)
Ordinary share capital issued by subsidiaries and held by third parties
2 Row 5
Sep 23 Table 1
Table D
$M Reference
Software
913
Add Other intangible assets
-
Less Associated deferred tax liabilities
-
Add Regulatory reclassification from significant investments in the ordinary shares of banking,
financial and insurance entities outside the scope of regulatory consolidation
71 Table G
Other intangibles other than mortgage servicing rights (net of related tax liability)
984 Row 9
Sep 23 Table 1
Table E $M Reference
Qualifying collective provision
Collectively assessed provision on Loans and advances
(3,180)
Collectively assessed provision on Investment Securities
(35)
Collectively assessed provision on Undrawn commitments
(817)
Less Non-qualifying collectively assessed provision
354
Less Standardised collectively assessed provision
131 Row 76
Less Non-defaulted expected loss
1,902
Non-Defaulted: Expected Loss - Eligible Provision Shortfall
-
Qualifying individual provision
Individually assessed provision on Loans and advances
(366)
Individually assessed provision on Undrawn and contingent facilities
(10)
Add Additional individually assessed provision for partial write offs
(181)
Less Standardised individually assessed provision
31
Add Collectively assessed provision on advanced defaulted
(339)
Less Defaulted expected loss
1,137
Defaulted: Expected Loss - Eligible Provision Shortfall
272
Gross deduction
272 Row 12
ANZ Basel III Pillar 3 Disclosure September 2023
18
Sep 23 Table 1
Table F $M Reference
Defined benefit superannuation fund net assets
176
Less Associated deferred tax liabilities
(48)
Defined benefit superannuation fund net assets
128
Row 15
Sep 23 Table 1
Table G $M Reference
Investment in deconsolidated financial subsidiaries
341
Less Regulatory reclassification to Retained Earnings and Other Intangible Assets
(71) Table D
Add Investment in financial associates
2,321
Add Investment in financial institutions Investment Securities
848
Less Amount below 10% threshold of CET1
(3,439) Row 73
Significant investments in the ordinary shares of banking, financial and insurance entities that
are outside the scope of regulatory consolidation, net of eligible short positions (amount above
10% threshold)
- Row 19
Add Deduction amount below the 10% threshold of CET 1
3,439 Row 73
Add Investments in the capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions, where the ADI does not own
more than 10% of the issued share capital - Investment Securities
76
Equity investment in financial institutions not reported in rows 18, 19 and 23
3,515 Row 26d
Deduction for equity holdings in financial institutions - APRA regulations
3,515
Sep 23 Table 1
Table H $M Reference
Deferred tax assets
3,385
Add
Deferred tax liabilities (60)
Deferred tax asset less deferred tax liabilities 3,325
Less Deferred tax assets that rely on future profitability
- Row 10
Less Net Deferred tax assets associated with reserves ineligible for inclusion in regulatory capital
(805)
Add Deferred tax liabilities on intangible assets, capitalised expenses and defined benefit
superannuation fund assets
37
Add Impact of calculating the deduction on a jurisdictional basis
22
Deferred tax assets not reported in rows 10, 21 and 25 of the Common Disclosure
Template
2,579 Row 26e
Sep 23 Table 1
Table I $M Reference
Capitalised brokerage & loan/lease origination fees
3,475
Capitalised debt and capital disposal & issuance expenses
86
Other Capitalised Expenses
(1,457)
Less Associated deferred tax liabilities
(5)
Capitalised expenses
2,099 Row 26f
Sep 23 Table 1
Table J
Investments in non-financial Investment Securities equities
2
Investments in non-financial associates
-
Non-financial equity exposures (loans)
-
Equity exposures to non-financial entities
2 Row 26g
ANZ Basel III Pillar 3 Disclosure September 2023
19
Sep 23 Table 1
Table K $M Reference
Directly issued qualifying Additional Tier 1 Capital Instruments classified as liabilities
8,232
Add Issue costs
(1)
Add Fair value adjustment
178
Directly issued qualifying Additional Tier 1 Capital Instruments classified as liabilities
8,409
Row 30
Additional Tier 1 instruments issued by subsidiaries held by third parties
-
Add Issue costs
-
Less Surplus capital attributable to third party holders
-
Add AT1 Instruments issued by subsidiaries and held by third parties (amounts allowed in Group
AT1)
-
Row 34
Additional Tier 1 capital before regulatory adjustments
8,409
Row 36
Less Significant investments in the capital of banking, financial and insurance entities that are
outside the scope of regulatory consolidation
(155) Row 40
Less Investments in the capital of financial institutions that are outside the scope of regulatory
consolidations not re
ported in rows 39 and 40
(22) Row 41b
Less Other national specific regulatory adjustments not reported - Row 41c
Additional Tier 1 capital 8,232 Row 44
Sep 23 Table 1
Table L $M Reference
Add Surplus capital attributable to third party holders
- Row 48
Add Directly issued qualifying Tier 2 instruments
23,707
Less Tier 2 instruments subject to amortisation
4
(2,000)
Add Issue costs
26
Add Fair value adjustment
1,771
Add Provisions
1,776 Row 50
Tier 2 capital before regulatory adjustments
25,280
Row 51
Less Investments in own Tier 2 instruments (trading limit)
(50) Row 52
Less Significant investments in the Tier 2 capital of banking, financial and insurance entities that are
outside the sco
pe of regulatory consolidation, net of eligible short positions
(85) Row 55
Less Investments in the capital of financial institutions that are outside the scope of regulatory
consolidation not re
ported in rows 54 and 55
(186) Row 56
Tier 2 capital
24,959 Row 58
4
APRA requires these instruments to be amortised by 20% of the original amount during each of the last five years to maturity.
ANZ Basel III Pillar 3 Disclosure September 2023
20
The following table provides details of entities included within the accounting scope of consolidation but excluded from
regulatory consolidation.
Total Assets Total Liabilities
Entity Activity $M $M
ACN 008 647 185 Pty Ltd Holding Company - -
ANZ ILP Pty Ltd Incorporated Legal Practice 3 -
ANZ Investment Services
(New Zealand) Limited Funds Management 16 -
ANZ Lenders Mort
gage Insurance Pty. Limited Mortgage insurance 814 413
ANZ Pensions (UK) Limited Trustee/Nominee - -
ANZ New Zealand Investments Limited Funds Management 122 32
ANZ New Zealand Investments Nominees Limited Nominee - -
ANZ Cover Insurance Private Ltd Ca
ptive-Insurance 242 200
Kin
gfisher Trust 2016-1 Securitisation Trust 382 382
Kingfisher Trust 2019-1 Securitisation Trust 504 504
Shout for Good Pty. Ltd. Corporate 1 1
ANZ Basel III Pillar 3 Disclosure September 2023
21
Table 2 Main features of capital instruments
As the main features of ANZ’s capital instruments are updated on an ongoing basis, ANZ has provided this information
separately in the Regulatory Disclosures section of its website.
Table 3 Capital adequacy, Table 4 Credit risk, Table 5 Securitisation
The above tables are produced at the quarters ending 30 June and 31 December.
Table 6 Capital adequacy
Capital management
ANZ pursues an active approach to capital management, which is designed to protect the interests of depositors,
creditors and shareholders. This involves the on-going review and Board approval of the level and composition of ANZ’s
capital base, assessed against the following key policy objectives:
Regulatory compliance such that capital levels exceed APRA’s, ANZ’s primary prudential supervisor, minimum
Prudential Capital Ratios (PCRs) both at Level 1 (the Company and specified subsidiaries) and Level 2 (ANZ
consolidated under Australian prudential standards), along with US Federal Reserve’s minimum Level 2 requirements
under ANZ’s Foreign Holding Company Licence in the United States of America;
Capital levels are aligned with the risks in the business and to meet strategic and business development; and
An appropriate balance between maximising shareholder returns and prudent capital management principles.
ANZ achieves these objectives through an Internal Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts
detailed strategic and capital planning over a medium-term time horizon. The Capital Plan is maintained and updated
through a monthly review of forecast financial performance, economic conditions and development of business initiatives
and strategies. The Board and senior management are provided with monthly updates of ANZ’s capital position. Any
actions required to ensure ongoing prudent capital management are submitted to the Board for approval. ANZ annually
conducts a detailed strategic planning process over a three-year time horizon, the outcomes of which are embodied in
the Strategic Plan. This process involves forecasting key economic variables which Divisions use to determine key
financial data for their existing business. New strategic initiatives to be undertaken over the planning period and their
financial impact are then determined. These processes are used for the following:
Review capital ratios, targets, and levels of different classes of capital against ANZ’s risk profile and risk appetite
outlined in the Strategic Plan. ANZ’s capital targets reflect the key policy objectives above, and the desire that under
specific stressed economic scenarios that capital levels have sufficient capital to remain above PCR requirements;
Stress tests are performed under different economic conditions to provide a comprehensive review of ANZ’s capital
position both before and after mitigating actions. The stress tests determine the level of additional capital (i.e., the
‘stress capital buffer’) needed to absorb losses that may be experienced during an economic downturn; and
Stress testing is integral to strengthening the predictive approach to risk management and is a key component in
managing risks, asset writing strategies and business strategies. It creates greater understanding of the impacts on
financial performance through modelling relationships and sensitivities between geographic, industry and Divisional
exposures under a range of macro-economic scenarios. ANZ has a dedicated stress testing team within Risk that
models and reports to management and the Board Risk Committee on a range of scenarios and stress tests.
Results are subsequently used to:
Recalibrate ANZ’s management targets for minimum and operating ranges for its respective classes of capital such
that ANZ will have sufficient capital to remain above regulatory requirements; and
Identify the level of organic capital generation and hence determine current and future capital issuance requirements
for Level 1 and Level 2.
From these processes, a Capital Plan is developed and approved by the Board which identifies the capital issuance
requirements, capital securities maturity profile, and options around capital products, timing and markets to execute
the Capital Plan under differing market and economic conditions.
The Capital Plan is maintained and updated through a monthly review of forecast financial performance, economic
conditions and development of business initiatives and strategies. The Board and senior management are provided with
monthly updates of ANZ’s capital position. Any actions required to ensure ongoing prudent capital management are
submitted to the Board for approval.
ANZ Basel III Pillar 3 Disclosure September 2023
22
Regulatory environment
ANZ’s regulatory capital calculation is governed by APRA’s Prudential Standards which adopt a risk-based capital
assessment framework based on the Basel III capital measurement standards. This risk-based approach requires eligible
capital to be divided by total risk weighted assets (RWA), with the resultant ratio being used as a measure of an
Authorised Deposit-taking Institution’s (ADI’s) capital adequacy. APRA determines PCRs for Common Equity Tier 1
(CET1), Tier 1 and Total Capital, with capital as the numerator and RWAs as the denominator.
Regulatory capital is divided into Tier 1, carrying the highest capital elements, and Tier 2, which has lower capital
elements, but still adds to the overall strength of the ADI.
Tier 1 capital is comprised of Common Equity Tier 1 capital less deductions and Additional Tier 1 capital instruments.
Common Equity Tier 1 capital comprises shareholders’ equity adjusted for items which APRA does not allow as regulatory
capital or classifies as lower forms of regulatory capital. Common Equity Tier 1 capital includes the following significant
adjustments:
Reserves exclude the hedging reserve and reserves of insurance and funds management subsidiaries;
Retained and current year earnings excluding those of insurance and funds management subsidiaries, but includes
capitalised deferred fees forming part of loan yields that meet the criteria set out in the prudential standard;
Additional Tier 1 capital instruments are high quality components of capital that provide a permanent and unrestricted
commitment of funds, are available to absorb losses, are subordinated to the claims of depositors and senior creditors
in the event of the winding up of the issuer and provide for fully discretionary capital distributions.
Deductions from the capital base comprise mainly deductions to the Common Equity Tier 1 component. These deductions
are largely intangible assets, investments in insurance entities and associates, capitalised expenses (including loan and
origination fees), and net deferred tax assets.
Tier 2 capital mainly comprises perpetual subordinated debt instruments and dated subordinated debt instruments which
have a minimum term of five years at issue date.
Total Capital is the sum of Tier 1 capital and Tier 2 capital.
In addition to the prudential capital oversight that APRA conducts over the Company and the Group, the Company’s
branch operations and major banking subsidiary operations are overseen by local regulators such as the Reserve Bank
of New Zealand, the US Federal Reserve, the UK Prudential Regulation Authority, the Monetary Authority of Singapore,
the Hong Kong Monetary Authority and the China Banking and Insurance Regulatory Commission who may impose
minimum capitalisation rates on those operations.
Throughout the financial year, the Company and the Group maintained compliance with the minimum Common Equity
Tier 1, Tier 1 and Total Capital ratios set by APRA and the US Federal Reserve (as applicable) as well as applicable
capitalisation rates set by regulators in countries where the Company operates branches and subsidiaries.
Regulatory developments
There are a number of matters currently outstanding that may have an impact on ANZ’s regulatory capital in the future.
Details of these matters are available in ANZ’s 2023 Full Year Results Announcement Group Results section, page 50,
available on ANZ’s website: shareholder.anz.com/pages/results-announcement.
ANZ Basel III Pillar 3 Disclosure September 2023
23
Table 6 Capital adequacy - Capital Ratio and Risk Weighted Assets
5
6
7
8 (Hide)
Under the revised prudential standard requirements that apply from 1 January 2023 a number of new asset classes
have been introduced with one asset class (Banks) has been retired. The retired asset classes will continue to show
data from prior periods.
The following table provides the composition of capital used for regulatory purposes and capital adequacy ratios.
Sep 23 Mar 23 Sep 22
Risk weighted assets $M $M $M
Subject to Advanced Internal Rating Based (IRB) approach
Corporate 62,668 62,680 146,069
Sovereign n/a n/a 10,955
Bank n/a n/a 12,071
Residential Mortgage
5
96,290 86,726 113,590
Retail SME 9,684 10,065 n/a
Qualifying Revolving Retail 3,243 3,325 3,272
Other Retail 1,644 1,709 17,029
Credit risk weighted assets subject to Advanced IRB approach 173,529 164,505 302,986
Subject to Foundation IRB approach
Corporate 34,819 38,808 n/a
Sovereign 10,252 11,199 n/a
Financial Institutions 30,875 32,832 n/a
Credit risk weighted assets subject to Foundation IRB approach 75,946 82,839 n/a
Credit risk Specialised Lending exposures subject to slotting approach
6
3,369 3,577 39,792
Subject to Standardised approach
Corporate 5,611 4,911 6,235
Sovereign 165 88 29
Residential Mortgage 2,065 1,809 224
Other Retail 44 32 11
Other Assets 3,255 4,138 n/a
Credit risk weighted assets subject to Standardised approach 11,140 10,978 6,499
Credit Valuation Adjustment and Qualifying Central Counterparties 4,000 3,449 3,865
Credit risk weighted assets relating to securitisation exposures 2,395 2,229 2,424
Other assets n/a n/a 3,876
Exposures of New Zealand banking subsidiaries
7
78,662 77,717 n/a
Total credit risk weighted assets 349,041 345,294 359,442
Market risk weighted assets 10,264 11,737 9,282
Operational risk weighted assets
8
42,319 42,319 47,931
Interest rate risk in the banking book (IRRBB) risk weighted assets 31,703 31,887 38,063
RWA adjustment for the IRB capital floor - 4,277 n/a
Total risk weighted assets 433,327 435,514 454,718
5
While APRA approved ANZ’s Australian Mortgages LGD model for regulatory capital purposes, a $9.6 billion RWA overlay has been
applied pending recalibration of the model.
6
Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing and repayment is from the
asset being financed and is considered project finance.
7
Includes $20.0 billion credit RWA in supervisory overlays resulting from risk weight floors required by RBNZ. Refer to September 2023
ANZ NZ Disclosure Statement for details.
8
Includes a $6.25 billion operational risk RWA overlay ($500 million capital), subject to APRA’s acceptance of ANZ’s satisfactory
remediation of matters identified through the Self-Assessments into Governance, Culture and Accountability.
ANZ Basel III Pillar 3 Disclosure September 2023
24
Table 6 Capital adequacy - Capital Ratio and Risk Weighted Assets
9
(Hide)
Sep 23 Mar 23 Sep 22
Capital Floor $M $M $M
Risk weighted assets under the standardised approach
Credit Risk
9
544,739 546,653 n/a
Market risk weighted assets 10,264 11,737 n/a
Operational risk weighted assets 42,319 42,319 n/a
Interest rate risk in the banking book (IRRBB) risk weighted assets n/a n/a n/a
Total Risk Weighted Assets 597,322 600,709 n/a
Risk weighted assets prior to application of floor
Credit Risk 349,041 345,294 n/a
Market risk weighted assets 10,264 11,737 n/a
Operational risk weighted assets 42,319 42,319 n/a
Interest rate risk in the banking book (IRRBB) risk weighted assets 31,703 31,887 n/a
Total Risk Weighted Assets 433,327 431,238 n/a
Capital floor at 72.5% 433,058 435,514 n/a
Capital floor adjustment - 4,277 n/a
Capital ratios (%)
Sep 23 Mar 23 Sep 22
Level 2 Common Equity Tier 1 capital ratio 13.3% 13.2% 12.3%
Level 2 Tier 1 capital ratio 15.2% 15.1% 14.0%
Level 2 Total capital ratio 21.0% 20.6% 18.2%
Level 1: Extended licensed Common Equity Tier 1 capital ratio 13.2% 12.9% 12.0%
Level 1: Extended licensed entity Tier 1 capital ratio 15.5% 15.2% 14.0%
Level 1: Extended licensed entity Total capital ratio 22.2% 21.6% 18.9%
Other significant Authorised Deposit-taking Institution (ADI) or overseas bank
subsidiary:
ANZ Bank New Zealand Limited – Common Equity Tier 1 capital ratio 12.5% 12.2% 12.4%
ANZ Bank New Zealand Limited - Tier 1 capital ratio 14.1% 13.8% 15.0%
ANZ Bank New Zealand Limited - Total capital ratio 15.5% 15.2% 16.4%
Basel III APRA level 2 CET1 Sep 23 Mar 23 Sep 22
Common Equity Tier 1 Capital 57,794 57,380 55,872
Total Risk Weighted Assets 433,327 435,514 454,718
Common Equity Tier 1 capital ratio 13.3% 13.2% 12.3%
Basel III APRA level 1 Extended licensed entity CET1 Sep 23 Mar 23 Sep 22
Common Equity Tier 1 Capital 48,417 47,803 47,091
Total Risk Weighted Assets 367,093 370,395 392,018
Common Equity Tier 1 capital ratio 13.2% 12.9% 12.0%
Credit Risk Weighted Assets (CRWA):
Credit RWA increased $3.7 billion in the half to $349 billion. This includes:
Volume growth (+$0.2 billion) with an increase in Australia Mortgage EAD of $13 billion driving a $3 billion RWA increase, offset by
reductions in Institutional Corporate and Financial exposures.
Portfolio Risk (+ $3.7 billion) driven by moderate increases in delinquency and loss given default profile in Mortgage portfolios in
Australia and New Zealand.
Data, models and methodology (-$1.2 billion), with reductions in Institutional (-$4.9 billion) partially offset by an increase of
approximately $3.5 billion in Australia Mortgages. The Mortgages increase is largely an artifact of the current PD model’s response
to changes in product packages sold to ANZ customers. A new model which addresses this has been submitted for Regulatory
approval.
Foreign exchange and other movements (+$1.0 billion).
Market Risk, Operational Risk and IRRBB RWA
Traded Market Risk RWA decreased by $1.5 billion over the half, mainly driven by decrease in Stressed VaR.
IRRBB RWA decreased primarily as a result of the reduction in Embedded Losses.
ANZ continues to use the Standardised Measurement Approach (SMA) for calculation of Operational Risk capital as per APS 115 Capital
Adequacy: Standardised Measurement Approach to Operational Risk. Year-on-year operational risk RWA decreased by $5.6 billion, with
a $6.0 billion reduction from ANZ’s adoption of the SMA in December 2022 under APRA Capital Reforms partially offset by foreign
exchange-driven movements of $0.4 billion.
9
RWA for residential mortgages for the Group excluding New Zealand banking subsidiaries exposures measured under the IRB approach
is $125.2 billion when calculated under the standardised approach.
ANZ Basel III Pillar 3 Disclosure September 2023
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Chapter 5 – Credit risk
Table 7 Credit risk – General disclosures
Definition of credit risk
Credit risk is the risk of financial loss resulting from a counterparty failing to fulfil its obligations or a decrease in credit
quality of a counterparty resulting in a financial loss.
Portfolios with approval to use the Internal Ratings based (IRB) approach
ANZ has APRA approval to use the four approaches under the Internal Ratings based approach to credit risk, under APS
113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk.
As an IRB bank, ANZ’s internal models generate the inputs into regulatory capital adequacy under the four approaches
(see below), to determine the risk weighted exposure calculations for both on and off-balance sheet exposures, including
undrawn portions of credit facilities, committed and contingent exposures and expected loss (EL) calculations.
ANZ’s internal models are used to generate three key risk components that serve as inputs to the IRB approach to credit
risk:
Probability of Default (PD) is an estimate of the level of the risk of borrower default over a 12-month horizon;
Exposure at Default (EAD) represents the expected outstanding at the time of default, including an estimate of
additional drawings prior to default (based on supervisory credit conversion factors), plus post-default drawings
that were legally committed to prior to default; and
Loss Given Default (LGD) is an estimate of the potential economic loss on a credit exposure, incurred as a
consequence of obligor default, expressed as a percentage of the facility’s EAD.
Effective maturity (M) is also calculated as an input to the risk weighted exposure calculation for wholesale asset
classes.
Internal Rating Based Approaches:
Foundation IRB (FIRB) - ANZ provide its own estimates of PD and M, and use APRA supervisory estimates for LGD
and EAD;
Advanced IRB (AIRB) - ANZ use its own estimates of PD, LGD (excluding senior unsecured and subordinated
corporate exposures) and M, and use APRA supervisory estimates for EAD;
Retail IRB approach - ANZ use its own estimates of PD, LGD and EAD (excluding non-revolving retail exposures for
which ANZ use APRA supervisory EAD estimates); and
Supervisory slotting approach - ANZ use its own mapping of credit exposures to the supervisory slotting categories,
and APRA supervisory risk weights and APRA supervisory estimates for EAD.
Portfolios subject to Standardised Approach to Credit Risk
Exposures are either prescribed the standardised approach, such as Non-standard mortgages, Margin lending and Fixed
Assets, or are subject to the standardised approach on the basis ANZ is not approved to use the IRB approach to credit
risk.
Where ANZ does not have APRA approval to apply the IRB approach to specific portfolios, ANZ applies the Standardised
approach to credit risk, under APS 112 Capital Adequacy: Standardised Approach to Credit Risk. This relates to portfolios
where available data does not enable development of advanced internal models for PD, LGD and EAD estimates.
Under the Standardised approach, exposures are mapped to regulatory risk weights, mainly based on the type of
counterparty such as: Sovereign, Bank, Corporate and its external rating where the borrower is externally rated.
For these counterparties, external ratings by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are used
as inputs into the RWA calculation. As described in the section on the ANZ rating system, ANZ has mapped its master
scale to the grading of these three External Credit Assessment Institutions (ECAIs).
Exposures secured by property, risk weights are generally driven by Loan to Value Ratios (LVR) after accounting for
dependency on property-related cash flow.
ANZ also applies the above approach to meeting the new requirement that IRB ADIs calculate and disclose RWA under
the standardised approach.
ANZ applies its full normal risk measurement and management framework to these segments for internal management
purposes. Standardised segments will be migrated to IRB (AIRB or FIRB) if they reach a volume that generates sufficient
data for development of advanced internal models.
ANZ Basel III Pillar 3 Disclosure September 2023
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Credit risk management framework and policies
ANZ has a comprehensive framework to manage Credit Risk. The framework is top-down, being defined by credit
principles and policies. Credit policies, requirements and procedures cover all aspects of the credit life cycle such as
transaction structuring, risk grading, initial approval, ongoing management and problem debt management, as well as
specialist policy topics.
The effectiveness of the credit risk management framework is assessed through various compliance and monitoring
processes. These, together with portfolio selection and risk appetite setting, define and guide the credit process,
organisation and staff.
Organisation
The Credit and Market Risk Committee (CMRC) is a senior executive level committee responsible for the oversight and
control of credit, market, insurance and material financial risks across the ANZ Group. The Credit Rating System
Oversight Committee (CRSOC) supports the CMRC, by providing oversight and control of the internal ratings system for
credit risk in the wholesale and retail sectors, including credit model approvals and performance monitoring.
The primary responsibility for prudent and profitable management of credit risk assets and customer relationships rests
with the business units. An independent credit risk management function is staffed by risk specialists. Independence is
achieved by having all credit risk staff ultimately report to the Chief Risk Officer (CRO), even where they are embedded
in business units. Risk provides independent credit assessment and approval on lending decisions and performs key
roles in portfolio management such as approving sector and customer appetite, development and validation of credit
risk measurement systems, loan asset quality reporting, sensitivity analysis and stress testing in response to economic
scenarios and development of the overall governance framework including credit policies and requirements, and
adherence to regulations.
The authority to make credit decisions is delegated by the Board to the CEO who in turn delegates authority to the CRO.
The CRO in turn delegates some of their credit discretion to individuals as part of a ‘cascade’ of authority from senior to
the most junior credit officers via the Credit Approval Discretion (CAD) Framework. Within ANZ’s wholesale business,
credit approval for material judgemental lending is made on a ‘dual approval’ basis, jointly by the business writer in the
business unit and the respective independent credit risk officer. Individuals must be suitably skilled and accredited in
order to be granted and retain credit discretion. Credit discretions are reviewed on an annual basis and may be varied
based on the holder’s performance. Credit decisions are subject to Division level hind sighting using a risk-based
approach, with material approvals oversighted by the Group CRO, CRO Institutional and the Board Risk Committee.
Programmed credit assessment typically covers Retail and some small business lending and refers to the automated
assessment of credit applications using a combination of scoring (application and behavioural), policy rules and external
credit reporting information. Where an application does not meet the automated assessment criteria it will be referred
out for manual assessment.
Portfolio direction and performance
The credit risk management framework contains several portfolio direction and performance tools which enable Risk to
play a fundamental role in monitoring the direction and performance of the portfolio. These include:
Group and divisional level risk appetite strategies, business writing strategies and Sector and Product Transaction
Guidelines which are prepared by the businesses and set out appetite, planned portfolio growth, capital usage and
risk/return profile, and also identify areas that may require attention to mitigate and improve risk management. In
all cases, Risk plays an active role for the review and challenge of appetite settings, industry deep dives and stress
testing reports;
Wholesale portfolio Red/Amber/Green (RAG) ratings for industries and portfolio reviews are re-assessed on a
quarterly basis ensuring our view of risks and potential impacts dynamically respond to changing external market
conditions; and
Exposure concentration limits, covering single customers, and customer groups with economic interdependence,
industries and cross border risk, to maintain a diversified portfolio.
ANZ uses portfolio monitoring and analysis tools, technologies and techniques to assist with portfolio risk assessment
and management. These assist in:
Monitoring, analysing and reporting ANZ’s credit risk profile and progress in meeting portfolio objectives;
Calculating and reporting ANZ’s collective provision, economic loss, regulatory risk weighted assets (RWA) and
regulatory expected loss;
Assessing impact of emerging issues, and conducting ad-hoc investigations and deep dive portfolio reviews;
Validating rating/scoring tools and credit estimates; and
Ongoing review and refinement of ANZ's credit risk measurement and policy framework.
ANZ Basel III Pillar 3 Disclosure September 2023
27
Credit Risk Reporting
Credit risk management information systems, reporting and analysis are managed centrally and at the divisional and
business unit level.
Periodic reporting provides confirmation of the effectiveness of processes, highlights emerging issues, and allows
monitoring of portfolio trends by all levels of management and the Board.
Examples of reports include EAD, portfolio mix, risk grade profiles and migrations, RWAs, large exposure reporting, credit
early alerts, watch and control lists, policy or appetite exceptions, impaired assets and provisions.
Exposure at Default (EAD)
EAD represents the expected outstandings at the time of default, including an estimate of additional drawings prior to
default (based on supervisory credit conversion factors), plus post-default drawings that were legally committed to prior
to default. Unless otherwise stated, throughout this disclosure EAD is net of offsets for credit risk mitigation such as
netting and financial collateral.
Past due facilities
Facilities where a contractual payment has not been met or the customer is outside of contractual arrangements for a
material length of time are deemed past due. Past due facilities include those operating in excess of approved
arrangements or where scheduled repayments are outstanding, but do not include impaired assets.
Impaired assets
10
A facility for which there is doubt about timely payment of principal, interest and fees being achieved and / or a material
credit obligation is 90 days or more past due and is not well secured. It includes all problem assets, off-balance sheet
exposures (including derivatives) and assets brought to ANZ’s balance sheet through the enforcement of security.
Impaired derivatives have a credit valuation adjustment, which is a market assessment of the credit risk of the relevant
counterparties.
Collectively Assessed Provisions for Credit Impairment
Collectively assessed provisions for credit impairment represent the Expected Credit Loss (ECL) calculated in accordance
with AASB 9 Financial Instruments (AASB 9) which was applicable to ANZ from 1 October 2018. These incorporate forward
looking information and do not require an actual loss event to have occurred for an impairment provision to be recognised.
Under AASB 9, ECL is either measured over 12 months or the expected lifetime of the financial asset, depending on the
credit deterioration since origination, according to the following three-stage approach:
Stage 1: At the origination of a financial asset, and where there has not been a significant increase in credit risk
since origination, a provision equivalent to 12 months ECL is recognised. For instruments with a remaining maturity
of less than 12 months, a provision calculated on the remaining term of the maturity is recognised.
Stage 2: Where there has been a significant increase in credit risk (SICR) since origination, a provision equivalent
to lifetime ECL is recognised.
Stage 3: Where there is objective evidence of default or impairment, a provision equivalent to lifetime ECL is
recognised.
In determining what constitutes a SICR, ANZ considers both qualitative and quantitative information, including probability
of default at origination and at the reporting date.
For wholesale asset classes ECL is calculated as the product of PD, LGD and EAD at a facility level, discounted for
incorporating the effect of time value of money. For retail asset classes, ECL is calculated as the product of PNPL, LGNPL
and EANPL, where non-performing loans (NPL) are equivalent to impaired assets. These credit risk factors are adjusted
for current and forward looking information through the use of macro-economic variables in the model.
To determine ECL under IFRS 9, a range of plausible scenarios are considered which are probability weighted. ANZ’s
economic scenario and probability weighting framework considers 4 economic scenarios: Base Case, Downside, Upside,
and Severe to determine a probability weighted ECL outcome. Probability weightings are determined via an expert
judgement process that considers:
ANZ Research’s Base Case;
ANZ Base Case comparisons to historical trends and consensus range; and
Risks or uncertainties to the Base Case.
10
The definition of Impaired Assets for accounting purposes is a default occurs when there are indicators that a debtor is unlikely to fully
satisfy contractual credit obligations to the Group, or the exposure is 90 days past due. Financial assets, including those that are well
secured, are considered credit impaired for financial reporting purposes when they are in default.
ANZ Basel III Pillar 3 Disclosure September 2023
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Individually Assessed Provisions for Credit Impairment
Individually assessed provisions for credit impairment are calculated in accordance with AASB 9. They are assessed on a
case-by-case basis for all individually managed impaired assets taking into consideration factors such as the realisable
value of security (or other credit mitigants), the likely return available upon liquidation or bankruptcy, legal uncertainties,
estimated costs involved in recovery, the market price of the exposure in secondary markets and the amount and timing
of expected receipts and recoveries.
Write-offs
Facilities are written off against the related provision for impairment when they are assessed as partially or fully
uncollectable, and after proceeds from the realisation of any collateral have been received. Where individually assessed
provisions recognised in previous periods have subsequently decreased or are no longer required, such impairment losses
are reversed in the current period income statement.
Definition of default
ANZ uses the following definition of default:
ANZ considers that the customer is unlikely to pay its credit obligations in full, without recourse to actions such as
realising security, or
the customer is greater than or equal to 90 days past due on a credit obligation, or
the customer’s overdraft or other revolving facility(ies) have been continuously outside approved limits for 90 or more
consecutive days.
Non-performing facilities
An exposure that is in default.
Specific Provision and provision held against performing exposures
Due to definitional differences, there is a difference in the split between ANZ’s individually assessed provision and
collectively assessed provision for accounting purposes, and the specific provision and provision held against performing
exposures for regulatory purposes. This does not impact total provisions, and essentially relates to the classification of
collectively assessed provisions on defaulted accounts. The disclosures in this document from 1 January 2023 present
the specific provision balance and charge per the requirements of APS 330, and the individual provision balance and
charge for ease of comparison with other published results.
ANZ Basel III Pillar 3 Disclosure September 2023
29
Exposure at Default in Table 7 represents credit exposure net of offsets for credit risk mitigation such as netting and
financial collateral. It includes Advanced IRB, Specialised Lending and Standardised exposures, and excludes
Securitisation, Equities or Other Assets exposures.
From 1 January 2022 ANZ adopted APRA’s revised requirements under APS 220: Credit Risk Management. The revised
standard no longer includes requirements in relation to impaired assets, specific provisions or the General Reserve for
Credit Losses (GRCL). ANZ continued to disclose these items until 1 January 2023 when APS 330 requirements were
changed to align to the revised APS 220 standard.
Table 7(b) part (i): Period end and average Exposure at Default
11
Sep 23
Risk
Weighted
Assets
Exposure
at Default
Average
Exposure
at Default
for half
year
Individual
provision
charge for
half
year
Write-offs
for half
year
Subject to Advanced IRB approach $M $M $M $M $M
Corporate 62,668 140,016 136,576 7 10
Residential Mortgage 96,290 337,478 331,073 10 12
Retail SME 9,684 16,510 16,754 25 48
Qualifying Revolving Retail 3,243 12,817 12,957 26 43
Other Retail 1,644 1,557 1,588 11 34
Total Advanced IRB approach 173,529 508,378 498,948 79 147
Subject to Foundation IRB approach
Corporate 34,819 93,349 97,242 17 -
Sovereign 10,252 229,463 250,808 - -
Financial Institution 30,875 108,478 108,886 (1) -
Total Foundation IRB approach 75,946 431,290 456,936 16 -
Specialised Lending Exposures
Subject to Supervisory Slotting
3,369 4,019 4,169 - -
Subject to Standardised approach
Corporate 5,611 6,428 5,978 (10) 4
Sovereign 165 165 126 - -
Residential Mortgage 2,065 2,269 2,140 1 2
Other Retail 44 32 28 2 6
Other Assets 3,255 5,920 6,900 - -
Total Standardised approach 11,140 14,814 15,172 (7) 12
Credit Valuation Adjustment and
Qualifying Central Counterparties
4,000 7,035 6,624 - -
Exposures of New Zealand banking
subsidiaries
78,662 197,204 196,249 35 65
Total 346,646 1,162,740 1,178,098 123 224
11
Average Exposure at Default for half year is calculated as the simple average of the balances at the start and the end of each six month
period.
ANZ Basel III Pillar 3 Disclosure September 2023
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Table 7(b) part (i): Period end and average Exposure at Default (continued)
Mar 23
Risk
Weighted
Assets
Exposure
at Default
Average
Exposure
at Default
for half year
Individual
provision
charge for
half year
Write-offs
for half
year
Advanced IRB approach $M $M $M $M $M
Corporate 62,680 133,136 - 40 24
Residential Mortgage 86,726 324,670 - - 12
Retail SME 10,065 16,997 - 8 43
Qualifying Revolving Retail 3,325 13,097 - 23 42
Other Retail 1,709 1,618 - 7 23
Total Advanced IRB approach 164,505 489,518 - 78 144
Foundation IRB approach
Corporate 38,808 101,134 - (123) 7
Sovereign 11,199 272,154 - - -
Financial Institution 32,832 109,294 - (1) -
Total Foundation IRB approach 82,839 482,582 - (124) 7
Specialised Lending Exposures
Sub
ject to Supervisory Slotting
3,577 4,318 - - -
Standardised approach
Corporate 4,911 5,526 - (3) 20
Sovereign 88 88 - - -
Residential Mortgage 1,809 2,011 - - -
Other Retail 32 24 - (2) -
Other Assets 4,138 7,879 - - -
Total Standardised approach 10,978 15,528 - (5) 20
Credit Valuation Adjustment and
Qualifying Central Counterparties
3,449 6,212 - - -
Exposures of New Zealand banking
subsidiaries
77,712 195,293 - 21 14
Total 343,060 1,193,451 - (30) 185
ANZ Basel III Pillar 3 Disclosure September 2023
31
Table 7(b) part (i): Period end and average Exposure at Default (continued)
Sep 22
Risk
Weighted
Assets
Exposure
at Default
Average
Exposure
at Default
for half year
Individual
provision
charge for
half year
Write-offs
for half
year
Advanced IRB approach $M $M $M $M $M
Corporate 146,069 327,238 313,041 (12) 36
Sovereign 10,955 266,845 260,006 - -
Bank 12,071 40,479 38,263 - -
Residential Mort
gage 113,590 414,125 412,877 (12) 14
Qualifying Revolving Retail 3,272 13,309 13,410 12 45
Other Retail 17,029 27,088 27,877
(2) 106
Total Advanced IRB approach 302,986 1,089,084 1,065,474 (14) 201
Specialised Lending 39,792 48,742 47,980 (1) -
Standardised approach
Cor
porate 6,235 5,976 6,039 7 4
Sovereign 29 146 162 - -
Residential Mort
gage 224 435 426 1 1
Other Retail 11 10 11 (1) -
Total Standardised a
pproach 6,499 6,567 6,638 7 5
Credit Valuation Adjustment and
Qualifying Central Counterparties 3,865 7,916 7,354 - -
Total 353,142 1,152,309 1,127,446 (8) 206
Table 7(b) part (ii): Exposure at Default by portfolio type
12
Sep 23 Mar 23 Sep 22 Average
for
half year
Se
p 23
Portfolio Type $M $M $M $M
Cash 137,316 176,681 152,042 156,999
Contingent liabilities, commitments, and other off-balance sheet
ex
posures
171,361 172,166 183,411 171,764
Derivatives 46,577 44,695 53,875 45,636
Settlement Balances 15 12 34 14
Investment Securities 93,560 89,381 81,198 91,471
Net Loans, Advances & Acceptances 684,917 674,528 653,303 679,723
Other assets 9,589 13,199 9,163 11,394
Trading Securities 19,405 22,789 19,283 21,097
Total exposures 1,162,740 1,193,451 1,152,309 1,178,098
12
Average for half year is calculated as the simple average of the balances at the start and the end of each six month period.
ANZ Basel III Pillar 3 Disclosure September 2023
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Table 7(c): Geographic distribution of Exposure at Default
Sep 23
Australia New Zealand Asia Pacific,
Europe and
Americas
Total
Portfolio Type $M $M $M $M
Corporate 167,329 - 72,464 239,793
Sovereign 113,504 - 116,124 229,628
Financial Institution 38,004 - 70,474 108,478
Residential Mortgage 339,042 286 419 339,747
Retail SME 16,509 1 - 16,510
Qualifying Revolving Retail 12,817 - - 12,817
Other Retail 1,580 - 9 1,589
Qualifying Central Counterparties 1,251 - 5,784 7,035
Specialised Lending 3,391 - 628 4,019
Other assets 5,470 - 450 5,920
Exposures of New Zealand banking
subsidiaries
- 197,204 - 197,204
Total exposures 698,897 197,491 266,352 1,162,740
Mar 23
Australia New Zealand Asia Pacific,
Europe and
Americas
Total
Portfolio Type $M $M $M $M
Corporate 164,403 - 75,393 239,796
Sovereign 148,495 - 123,747 272,242
Financial Institution 39,256 - 70,038 109,294
Residential Mortgage 326,023 251 407 326,681
Retail SME 16,997 - - 16,997
Qualifying Revolving Retail 13,097 - - 13,097
Other Retail 1,632 - 10 1,642
Qualifying Central Counterparties 836 - 5,376 6,212
Specialised Lending 3,632 - 686 4,318
Other assets 7,373 - 506 7,879
Exposures of New Zealand banking
subsidiaries
- 195,293 - 195,293
Total exposures 721,744 195,544 276,163 1,193,451
Sep 22
Australia New Zealand Asia Pacific,
Europe and
Americas
Total
Portfolio Type $M $M $M $M
Corporate 165,339 40,234 127,641 333,214
Sovereign 126,677 25,114 115,200 266,991
Bank 17,359 3,082 20,038 40,479
Residential Mortgage 316,163 97,962 435 414,560
Qualifying Revolving Retail 13,309 - - 13,309
Other Retail 19,409 7,679 10 27,098
Qualifying Central Counterparties 924 399 6,593 7,916
Specialised Lending 36,118 12,352 272 48,742
Total exposures 695,298 186,822 270,189 1,152,309
ANZ Basel III Pillar 3 disclosure
September 2023
33
Table 7(d): Industry distribution of Exposure at Default
13
Sep 23
Agriculture,
Forestry,
Fishing &
Minin
g
Business
&
Property
Services
Construction Electricity,
Gas &
Water
Supply
Entertainment,
Leisure &
Tourism
Financial,
Investment
&
Insurance
Government
and Official
Institutions
Manufacturing Personal Commercial
Property
Wholesale
Trade
Retail
Trade
Transport
&
Storage
Other Total
Portfolio Type
$M $M
$M
$M
$M
$M
$M
$M $M
$M
$M $M
$M $M
$M
Corporate 27,647 13,780 4,922 11,591 13,021 5,
716
15
43,340
40
52,986
19,783 13,151
15,475 18,326
239,793
Sovereign 366 1 31 594 - 163,230 61,768 2,514 - 226 1 - 768 129
229,628
Financial Institutions
268 112
78
15
94 106,880
-
478
-
102 268 61
54 68
108,478
Residential Mortgage
- -
-
-
-
-
-
- 339,747
-
- -
- -
339,747
Retail SME
1,022
2,360
2,245
38
1,26
7
428
9
1,076
261
167
863 2,293
719 3,762
16,510
Qualifying Revolving Retail
-
-
-
-
-
-
-
-
12,817
-
-
-
-
-
12,817
Other Retail
- -
-
-
-
-
-
- 1,589
-
- -
- -
1,589
Other Assets
- - - -
- 522 -
- - 20 - - - 5,378
5,920
Qualifying Central Counterparties
-
-
-
-
-
7,035
-
-
-
-
-
-
-
-
7,035
Specialised Lending subject to supervisory slotting
1,651
-
-
1,582
224
-
-
-
-
-
-
-
501
61
4,019
Exposures of New Zealand banking subsidiaries
16,239 2,859
1,384 1,942
1,831
23,668 9,527 3,964 113,580
11,825
2,850 1,854
1,461 4,220
197,204
Total exposures
47,193 19,112
8,660
15,762
16,437
307,479
71,319
51,372 468,034
65,326
23,765 17,359
18,978 31,944 1,162,740
% of Total
4.1% 1.6%
0.7% 1.4%
1.4% 26.4% 6.1%
4.4% 40.3% 5.6% 2.0% 1.5% 1.6% 2.7% 100.0%
13
Other industry includes Health & Community Services, Educat
ion, Communication Services and Personal & Other Services.
ANZ Basel III Pillar 3 disclosure
September 2023
34
Table 7(d): Industry distribution of Exposure at Default (continued)
Mar 23
Agriculture,
Forestry,
Fishing &
Mining
Business
&
Property
Services
Construction Electricity,
Gas &
Water
Supply
Entertainment,
Leisure &
Tourism
Financial,
Investment
&
Insurance
Government
and Official
Institutions
Manufacturing Personal Commercial
Property
Wholesale
Trade
Retail
Trade
Transport
&
Storage
Other Total
Portfolio Type
$M
$M
$M
$M
$M
$M
$M
$M $M
$M
$M $M
$M $M
$M
Corporate
25,678 14,281
4,849
13,304
12,562
5,376
16
42,109
32
52,325
22,605 13,167
14,692 18,800
239,796
Sovereign 389 - 30 465 - 205,300 62,183 2,299 - 1,014 12 - 411 139
272,242
Financial Institutions
299 136
84
15
92 107,605
-
461
-
115 277 66
61 83
109,294
Residential Mortgage
- -
-
-
-
-
-
- 326,681
-
- -
- -
326,681
Retail SME
1,092
2,386
2,302
43
1,305
43
8 9 1,120 260 167 876 2,372 779 3,848
16,997
Qualifying Revolving Retail
- -
-
-
-
-
-
- 13,097
-
- -
- -
13,097
Other Retail
- -
-
-
-
-
-
- 1,642
-
- -
- -
1,642
Other Assets
4
12
4
24
-
125
-
1
1
1
1
3
2
7,701
7,879
Qualifying Central Counterparties
- -
-
-
- 6,212
-
- -
-
- -
- -
6,212
Specialised Lending subject to supervisory slotting
1,808 -
- 1,677
263
-
-
- -
- - - 513 57
4,318
Exposures of New Zealand banking subsidiaries
16,520 2,847
1,575 2,153
1,830 11,782 20,172
4,200 111,449
12,609
3,015 1,718
1,518 3,905
195,293
Total exposures
45,790 19,662
8,844
17,681
16,052
336,838
82,380
50,190 453,162
66,231
26,786 17,326
17,976 34,533 1,193,451
% of Total
3.8% 1.6%
0.7% 1.5%
1.3% 28.2%
6.9%
4.2%
38.0%
5.5%
2.2% 1.5%
1.5% 2.9% 100.0%
Sep 22
Agriculture,
Forestry,
Fishing &
Mining
Business
&
Property
Services
Construction Electricity,
Gas &
Water
Supply
Entertainment,
Leisure &
Tourism
Financial,
Investment
&
Insurance
Government
and Official
Institutions
Manufacturing Personal Commercial
Property
Wholesale
Trade
Retail
Trade
Transport
&
Storage
Other Total
Portfolio Type
$M
$M
$M
$M
$M
$M
$M
$M $M
$M
$M $M
$M $M
$M
Corporate
43,976 18,494
5,715
15,257
14,548
86,832
19
46,254
189
19,938
27,442 13,963
17,732 22,855
333,214
Sovereign 422 - 16 519 1 197,670 65,070 1,908 - 825 15 - 421 124
266,991
Bank
- -
-
-
- 40,234
-
237 -
-
1 4
1 2
40,479
Residential Mortgage
- -
-
-
-
-
-
- 414,560
-
- -
- -
414,560
Qualifying Revolving Retail
- -
-
-
-
-
-
- 13,309
-
- -
- -
13,309
Other Retail
1,766
2,729
2,800
58
1,538
49
3 8 1,326 7,246 257 970 2,794 972 4,141
27,098
Qualifying Central Counterparties
- -
-
-
- 7,916
-
- -
-
- -
- -
7,916
Specialised Lending
1,407
5
311
1,486
262
1
-
-
-
44,513
-
-
540
217
48,742
Total exposures
47,571 21,227
8,842
17,320
16,349
333,146
65,097
49,725 435,304
65,534
28,428 16,761
19,666 27,339 1,152,309
% of Total
4.1% 1.8%
0.8% 1.5%
1.4% 28.9%
5.6%
4.3%
37.8%
5.7%
2.5% 1.5%
1.7% 2.4% 100.0%
ANZ Basel III Pillar 3 disclosure September 2023
35
Table 7(e): Residual contractual maturity of Exposure at Default
14
Sep 23
Portfolio Type < 12 mths
$M
1 - 5 years
$M
> 5 years
$M
No Maturity
Specified
$M
Total
$M
Corporate 99,796 125,414 14,581 2 239,793
Sovereign 162,735 26,914 39,979 - 229,628
Financial Institution 68,717 38,555 1,206 - 108,478
Residential Mortgage 190 229 329,100 10,228 339,747
Retail SME 3,526 2,179 10,805 - 16,510
Qualifying Revolving Retail - - - 12,817 12,817
Other Retail 317 11 1,261 - 1,589
Other Assets - - - 5,920 5,920
QCCP 4,639 1,138 644 614 7,035
Specialised Lending subject to
supervisory slotting
660 2,220 1,139 - 4,019
Exposures of New Zealand
banking subsidiaries
43,651 39,771 102,965 10,817 197,204
Total exposures 384,231 236,431 501,680 40,398 1,162,740
Mar 23
Portfolio Type < 12 mths
$M
1 - 5 years
$M
> 5 years
$M
No Maturity
Specified
$M
Total
$M
Corporate 91,527 130,379 17,888 2 239,796
Sovereign 148,456 91,708 32,078 - 272,242
Financial Institution 64,590 42,876 1,828 - 109,294
Residential Mortgage 196 210 312,614 13,661 326,681
Retail SME 3,586 2,356 11,055 - 16,997
Qualifying Revolving Retail - - - 13,097 13,097
Other Retail 325 24 1,293 - 1,642
Other Assets - - - 7,879 7,879
QCCP 4,069 1,108 474 561 6,212
Specialised Lending subject to
supervisory slotting
444 2,595 1,279 - 4,318
Exposures of New Zealand
banking subsidiaries
44,478 38,473 101,692 10,650 195,293
Total exposures
357,671 309,729 480,201 45,850 1,193,451
Sep 22
Portfolio Type < 12 mths
$M
1 - 5 years
$M
> 5 years
$M
No Maturity
Specified
$M
Total
$M
Corporate 148,707 167,246 17,215 46 333,214
Sovereign 195,060 41,464 30,467 - 266,991
Bank 30,456 9,641 382 - 40,479
Residential Mortgage 222 852 391,648 21,838 414,560
Qualifying Revolving Retail - - - 13,309 13,309
Other Retail 10,181 2,957 13,960 - 27,098
Qualifying Central Counterparties 5,689 1,077 722 428 7,916
Specialised Lending 18,624 28,259 1,847 12 48,742
Total exposures 408,939 251,496 456,241 35,633 1,152,309
14
No Maturity Specified predominately includes credit cards and residential mortgage equity manager accounts.
ANZ Basel III Pillar 3 disclosure September 2023
36
Table 7(f) part (i): Non-performing facilities, Provisions and Write-offs by Industry sector
Sep-23
Non-performing facilities Individual provisioned facilities
Exposure Specific
provision
balance
Specific
provision
charge for
half year
Exposure Individual
provision
Balance
Individual
provision
charge for
half year
Write-offs
for half
year
Industry Sector $M $M $M $M $M $M $M
Agriculture, Forestry, Fishing & Mining 342 65 8 92 44 9 5
Business & Property Services 99 32 1 34 19 4 7
Commercial Property 345 33 22 232 19 14 38
Construction 128 47 (2) 43 29 - 7
Electricity, gas & water supply 5 2 - 2 1 - -
Entertainment Leisure & Tourism 185 33 - 56 18 10 13
Financial, Investment & Insurance 16 6 - 7 4 - 11
Government & Official Institutions - - - - - - -
Manufacturing 109 32 7 41 22 6 6
Personal 3,099 310 40 197 92 59 113
Retail Trade 176 60 27 79 40 23 10
Transport & Storage 53 17 (7) 26 13 (1) 6
Wholesale Trade 70 30 (3) 35 24 (3) 3
Other 394 63 - 240 51 2 5
Total 5,021 730 93 1,084 376 123 224
ANZ Basel III Pillar 3 disclosure September 2023
37
Table 7(f) part (i): Non-performing facilities, Provisions and Write-offs by Industry sector (continued)
Mar 23
Non-performing facilities
Individual provisioned facilities
Exposure Specific
provision
balance
Specific
provision
charge for
half year
Exposure Individual
provision
Balance
Individual
provision
charge for
half year
Write-offs
for half
year
Industry Sector $M $M $M $M $M $M $M
Agriculture, Forestry, Fishing & Mining 294 56 (12)
90 33 (2) 1
Business & Property Services 130 49 3
41 24 3 5
Commercial Property 170 48 7
57 41 11 1
Construction 185 58 2
56 37 2 11
Electricity, gas & water supply 5 3 -
2 2 - -
Entertainment Leisure & Tourism 220 47 (7)
39 22 (3) 14
Financial, Investment & Insurance 37 15 (26)
18 13 (24) 8
Government & Official Institutions - - -
- - - -
Manufacturing 85 28 (1)
34 19 - 11
Personal 2,473 339 61
191 101 38 88
Retail Trade 137 41 (1)
46 25 3 12
Transport & Storage 88 32 1
33 22 1 1
Wholesale Trade 90 31 (109)
42 26 (103) 1
Other 385 58 44
179 56 44 32
Total 4,299 805 (38) 828 421 (30) 185
Sep 22
Industry Sector Impaired
derivatives
$M
Impaired
loans/
facilities
$M
Past due
loans ≥ 90
days
$M
Individual
provision
balance
$M
Individual
provision
charge for
half year
$M
Write-offs
for half
year
$M
Agriculture, Forestry, Fishing & Mining - 129 137 32 (28) 23
Business Services - 41 28 25 (1) 6
Construction - 63 48 40 11 7
Electricity, gas & water supply - 2 - 2 (6) 1
Entertainment Leisure & Tourism 7 180 56 44 11 14
Financial, Investment & Insurance - 33 38 25 6 11
Government & Official Institutions - - - - - -
Manufacturing - 44 22 29 7 6
Personal - 498 1,726 113 (3) 105
Property Services - 69 89 33 (5) 3
Retail Trade - 49 58 32 1 8
Transport & Storage - 72 14 18 (2) 7
Wholesale Trade - 270 48 120 (1) 7
Other - 33 93 29 2 8
Total 7 1,483 2,357 542 (8) 206
ANZ Basel III Pillar 3 disclosure September 2023
38
Table 7(f) part (ii): Non-Performing Facilities, Provisions and Write-offs
15
Sep 23
Non-performing exposures
Individually provisioned exposures
Exposure Specific
provision
balance
Specific
provision
charge for
half year
BLANK
Exposure Individual
provision
balance
Individual
provision
charge for
half year
Write-offs
for half
year
Advanced IRB approach $M $M $M
$M $M $M $M
Corporate
640 161 4 281 101 7 10
Residential Mortgage
2,363 160 (7)
119 43 10 12
Retail SME
385 102 20
95 61 25 48
Qualifying Revolving Retail
34 27 26
- - 26 43
Other Retail
41 38 10 22 20 11 34
Total Advanced IRB approach
3,463 488 53
517 225 79 147
Foundation IRB approach
BLANK
Corporate
242 50 17
232 50 17 -
Sovereign - - -
- - - -
Financial Institution 4 1 (2)
2 1 (1) -
Total Foundation IRB approach 246 51 15
BLANK
234 51 16 -
Specialised Lending Subject to
Supervisory Slotting
- - -
BLANK
- - - -
Standardised approach
Corporate
127 43 (21)
41 30 (10) 4
Residential Mortgage
81 11 2
15 9 1 2
Other Retail
6 1 2
6 1 2 6
Total Standardised approach
214 55
(17) 62 40 (7) 12
Exposures of New Zealand banking
subsidiaries
1,098 136 42 271 60 35 65
Total
5,021 730 93
BLANK
1,084 376 123 224
15
ANZ may recognise IPRE under the Specialised Lending asset class as eligible collateral where:
Losses from lower risk IPRE lending are less than 0.3% of total IPRE exposures in each of the past three years
Losses from total IPRE lending are less than 0.5% of total IPRE exposures in each of the past three years
Low Risk IPRE Total IPRE
Sep-21 Sep-22 Sep-23 Sep-21 Sep-22 Sep-23
Individual provision charge
(losses)
$0.0m $0.0m $0.0m $0.0m $14.8m $25.0m
As % of total IPRE Exposure 0.0% 0.0% 0.0% 0.0%
0.03% 0.05%
ANZ Basel III Pillar 3 disclosure September 2023
39
Table 7(f) part (ii): Non-Performing Facilities, Provisions and Write-offs (continued)
Mar 23
Non-performing exposures
Individually provisioned exposures
Exposure Specific
provision
balance
Specific
provision
charge for
half year
BLANK
Exposure Individual
provision
balance
Individual
provision
charge for
half year
Write-offs
for half
year
Advanced IRB approach $M $M $M
$M $M $M $M
Corporate
663 160 28 288 99 40 24
Residential Mortgage
2,065 181 2
129 47 - 12
Retail SME
414 123 -
120 77 8 43
Qualifying Revolving Retail
34 27 25
- - 23 42
Other Retail
54 46 11 30 27 7 23
Total Advanced IRB approach
3,230 537 66
567 250 78 144
Foundation IRB approach
BLANK
Corporate
29 27 (123)
26 27 (123) 7
Sovereign - - -
- - - -
Financial Institution 29 11 (1)
15 10 (1) -
Total Foundation IRB approach 58 38 (124)
BLANK
41 37 (124) 7
Specialised Lending Subject to
Supervisory Slotting
- - -
- - - -
Standardised approach
Corporate
194 66
(8)
68 40 (3) 20
Residential Mortgage
69 8
(1)
10 6 - -
Other Retail
8 1
(2)
8 1 (2) -
Total Standardised approach
271 75 (11) 86 47 (5) 20
Exposures of New Zealand banking
subsidiaries
740 155 31 134 87 21 14
Total
4,299 805 (38)
828 421 (30) 185
Sep 22
Impaired
derivatives
$M
Impaired
loans/
facilities
$M
Past due
loans ≥
90 days
$M
Individual
provision
balance
$M
Individual
provision
charge for
half year
$M
Write-offs
for half
year
$M
Portfolios subject to Advanced IRB approach
Corporate 7 568 272 251 (12) 36
Sovereign - - - - - -
Bank - - - - - -
Residential Mortgage - 371 1,759 63 (12) 14
Qualifying Revolving Retail - 29 - - 12 45
Other Retail - 225 247 133 (2) 106
Total Advanced IRB approach 7 1,193 2,278 447 (14) 201
Specialised Lending - 51 15 29 (1) -
Portfolios subject to Standardised approach
Corporate - 200 55 57 7 4
Residential Mortgage - 31 9 6 1 1
Other Retail - 8 - 3 (1) -
Total Standardised approach - 239 64 66 7 5
Qualifying Central Counterparties - - - - - -
Total 7 1,483 2,357 542 (8) 206
ANZ Basel III Pillar 3 disclosure September 2023
40
Table 7(g): Non-performing and Provisions
16
by Geography
Sep 23
Geographic region Non-Performing
facilities
$M
Individual
provision balance
$M
Collective
provision balance
$M
Australia 3,739 259 2,693
New Zealand 1,101 60 738
Asia Pacific, Europe and America 181 57 601
Total 5,021 376 4,032
Mar 23
Geographic region Non-Performing
facilities
$M
Individual
provision balance
$M
Collective
provision balance
$M
Australia 3,298 267 2,681
New Zealand 749 87 719
Asia Pacific, Europe and America 252 67 640
Total 4,299 421 4,040
Sep 22
Geographic region
Impaired
derivatives
$M
Impaired
loans/
facilities
$M
Past due
loans
≥ 90 days
$M
Individual
provision
balance
$M
Collective
provision
balance
$M
Australia 7 1,075 1,901 379 2,617
New Zealand - 143 391 72 590
Asia Pacific, Europe and America - 265 65 91 646
Total 7 1,483 2,357 542 3,853
16
Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective Provision for accounting
purposes and the Specific Provision and Provisions held against performing exposures for regulatory purposes. This does not impact total
provisions, and essentially relates to the classification of collectively assessed provisions on defaulted accounts. The disclosures in this
document are based on Individual Provision and Collective Provision, for ease of comparison with other published results.
ANZ Basel III Pillar 3 disclosure September 2023
41
Table 7(h): Provision for Credit Impairment
Half year
Sep 23
Half year
Mar 23
Half year
Sep 22
Collectively Assessed Provision $M $M $M
Balance at start of period 4,040 3,853 3,757
Charge/(Release) to Income Statement (11) 163 60
Adjustment for exchange rate fluctuations and transfers 3 24 36
Total Collectively Assessed Provision 4,032 4,040 3,853
Individually Assessed Provision
Balance at start of period 421 542 636
New and increased provisions 239 237 219
Write-backs (50) (166) (118)
Adjustment for exchange rate fluctuations and transfers - (1) 18
Discount unwind (10) (6) (7)
Bad debts written off (224) (185) (206)
Total Individually Assessed Provision 376 421 542
Total Provisions for Credit Impairment 4,408 4,461 4,395
Table 7(j): Specific Provision Balance and Provisions held against performing exposures
17
S
Sep 23
Specific Provision
Balance
$M
Provisions held
against performing
exposures
$M
Total
$M
Collectively Assessed Provision 354 3,678 4,032
Individually Assessed Provision 376 - 376
Total Provision for Credit Impairment 730 3,678 4,408
Mar 23
Specific Provision
Balance
$M
Provisions held
against performing
exposures
$M
Total
$M
Collectively Assessed Provision 384 3,656 4,040
Individually Assessed Provision 421 - 421
Total Provision for Credit Impairment 805 3,656 4,461
Sep 22
Specific Provision
Balance
$M
General Reserve for
Credit Losses
$M
Total
$M
Collectively Assessed Provision 389 3,464 3,853
Individually Assessed Provision 542 - 542
Total Provision for Credit Impairment 931 3,464 4,395
17
Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective Provision for accounting
purposes and the Specific Provision and Provisions held against performing exposures for regulatory purposes. This does not impact total
provisions, and essentially relates to the classification of collectively assessed provisions on defaulted accounts. The disclosures in this
document are based on Individual Provision and Collective Provision, for ease of comparison with other published results.
ANZ Basel III Pillar 3 disclosure September 2023
42
Table 8 Credit risk – Disclosures for portfolios subject to the Standardised approach and supervisory
risk weights in the IRB approach
Table 8(b): Exposure at Default by risk bucket
18
Sep 23 Mar 23 Sep 22
Standardised approach exposures $M $M $M
0% - - 1
20% 213 95 145
30% 73 71 -
35% - - 178
50% 288 230 319
60% 352 299 -
70% 1,460 808 -
75% - - -
85% 1,138 1,041 -
90% 21 13 -
100% 5,074 4,759 5,562
110% 76 53 -
150% 199 280 348
>150% - - 14
Ca
pital deductions - - -
Total 8,894 7,649 6,567
Other Asset exposures
0% 2,739 3,299 -
20% - 766 641
35% - - -
50% - - -
75% - - -
100% 3,119 3,782 3,650
150% 20 24 -
>150% 42 8 39
Capital deductions - - -
Total 5,920 7,879 4,330
Specialised Lending exposures
0% - - 122
70% 2,128 2,195 27,159
90% 1,254 1,546 18,038
110% 286 293 2,971
115% 327 284 -
250% 24 - 452
Total 4,019 4,318 48,742
18
Table 8(b) shows exposure at default after credit risk mitigation in each risk category.
ANZ Basel III Pillar 3 disclosure September 2023
43
Table 9 Credit risk – Disclosures for portfolios subject to IRB approaches
Portfolios subject to the Advanced IRB (AIRB) and Foundation IRB (FIRB) approach
The following table summarises the types of borrowers and the rating approach adopted within each of ANZ’s AIRB
portfolios:
IRB Asset Class Borrower Type
Rating Approach
Pre-Jan 2023
Rating Approach
Post-Jan 2023
Remains post-January 2023
Corporate
Corporations, partnerships or proprietorships
that do not fit into any other asset class
Income Producing Real Estate (from January
2023)
Securities firms, insurance companies and
leveraged funds (pre-January 2023)
AIRB
AIRB or
FIRB where annual
revenue > $750m
Sovereign Central governments
Central banks
Certain multilateral development banks
AIRB FIRB
Residential Mortgages Exposures secured by residential property AIRB AIRB
Qualifying Revolving
Retail
Australian consumer credit cards <$100,000
limit
AIRB AIRB
Other Retail
Small business lending (moved to Retail SME
from January 2023)
Other lending to consumers
AIRB AIRB
Specialised Lending
subject to supervisory
slotting
Income Producing Real Estate
Pre 1 January 2023.
IRB – Supervisory
Slotting
N/A
Project finance
Object finance
IRB – Supervisory
Slotting
IRB – Supervisory
Slotting
Other Assets
All other assets not falling into the above classes
e.g. margin lending, fixed assets
AIRB – fixed risk
weights
Standardised
Retired January 2023
Bank Banks
Other authorised deposit taking institutions
(ADI) incorporated in Australia
AIRB
New from January 2023
Retail SME Small business lending AIRB
Financial Institutions
Banks, securities firms, insurance companies
and leveraged funds
FIRB
Exposures of New
Zealand banking
subsidiaries
Includes all exposures in all asset classes for
New Zealand banking subsidiaries
Reported within all pre-January 2023 asset
classes as per APS 113.
AIRB and
Supervisory
Slotting
In addition, where ANZ is not accredited to use the IRB based approach to credit risk, ANZ applies the Standardised
approach to credit risk as detailed on page 26.
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The ANZ rating system
As an IRB bank, ANZ’s internal models generate the inputs into regulatory capital adequacy to determine the risk
weighted exposure calculations for both on- and off-balance sheet exposures, including undrawn portions of credit
facilities, committed and contingent exposures and expected loss (EL) calculations. ANZ’s internal models are used to
generate the three key risk components that serve as inputs to the IRB approach to credit risk:
PD is an estimate of the level of the risk of borrower default over a 12-month horizon. Borrower ratings are derived
by way of rating models used both at loan origination and for ongoing monitoring.
EAD represents the expected outstanding at the time of default, including an estimate of additional drawings prior
to default (based on supervisory credit conversion factors), plus post-default drawings that were legally committed
to prior to default.
LGD is an estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default,
expressed as a percentage of the facility’s EAD.
Effective maturity (M) is also calculated as an input to the risk weighted exposure calculation for Financial Institution,
Sovereign and Corporate IRB asset classes.
For wholesale asset classes, ANZ’s rating system has two separate and distinct dimensions that:
Measure the PD, which is expressed by the Customer Credit Rating (CCR), reflecting the ability to service and repay
debt.
Measure the LGD as expressed by the Security Indicator (SI) ranging from A to G. The SI is calculated by reference
to the percentage of a loan covered by security which can be realised in the event of default. This calculation uses
standard ratios to adjust the current market value of collateral items to allow for historical realisation outcomes. The
security-related SIs are supplemented with a range of other SIs which cover such factors as Cash cover (K),
Subordinated debt (M), intra-group guarantees (I) and Sovereign (S). ANZ’s LGD also includes recognition of the
different legal and insolvency regimes in different countries, where this has been shown to influence recovery
outcomes.
ANZ’s corporate PD master scale is APRA approved and is made up of 27 rating grades. Each level/grade is separately
defined and has a range of default probabilities attached to it. The PD master scale enables ANZ’s rating system to be
mapped to the grading’s of external rating agencies, using the PD as a common element after ensuring that default
definitions and other key attributes are aligned.
The following table demonstrates this alignment (for one-year PDs):
ANZ CCR Moody’s Standard & Poor’s PD Range
0+ to 1- Aaa to Aa3 AAA to AA- 0.0000 - 0.0346%
2+ to 3+ A1 to Baa1 A+ to BBB+ 0.0347 - 0.1636%
3= to 4+ Baa2 to Baa3 BBB to BBB- 0.1637 - 0.4004%
4= to 6= Ba1 to B1 BB+ to B+ 0.4005 – 2.7550%
6- to 7= B2 to B3 B to B-
2.7551 – 9.7980%
7- to 8+ Caa1 to Caa3 CCC+ to CCC- 9.7981 – 27.1109%
8= Ca to C CC to C
27.1110 – 99.9999%
8-, 9 and 10 Default Default
100%
In the retail asset classes, most facilities utilise credit rating scores. The scores are calibrated to PDs, and used to
allocate exposures to homogenous pools, along with LGD and EAD.
Use of internal estimates other than for regulatory capital purposes
ANZ’s rating system is a fundamental part of credit management and plays a key role in:
Lending discretions,
Minimum origination standards,
Concentration limits,
Portfolio reporting,
Customer profitability measurement,
Collectively assessed provision measurement,
Management of deteriorating customers (where certain CCR/SI combinations trigger increasing scrutiny),
and
Pricing decisions.
ANZ Basel III Pillar 3 disclosure September 2023
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For the wholesale asset class, PD, LGD, M and EAD are used in the calculation of capital and in the collectively assessed
provisioning process. For the retail asset class, PD, LGD and EAD are used in the calculation of capital, and PNPL, EANPL
and LGNPL are used in the collectively assessed provisioning process. Regulatory and internal expected loss are
calculated from the same data sources and starting from the same basis, however there are some differences between
the factors used because several aspects of ANZ’s rating system are adjusted in accordance with APRA requirements
for regulatory capital purposes. The most significant of these adjustments are the use for regulatory capital purposes
of downturn LGDs; the application of regulatory prescribed scalars such as the mortgages scalars of 1.4, 1.7 and 2.5
and the mandatory use of the supervisory slotting approach for project finance.
Controls surrounding the ratings system
ANZ’s rating system and credit risk estimates are governed by the Board Risk Committee and several executive
management committees and are underpinned by a comprehensive framework of controls that operate throughout ANZ.
All policies, methodologies, model designs, model reviews, validations, responsibilities, systems and processes
supporting the ratings systems are documented, and subject to review by Internal Audit.
The design, build and implementation of credit rating models resides with a specialist Group-level team. Credit rating
models are owned by central Risk teams. The use (including overrides) and performance of credit rating models is
monitored by the relevant business and their counterparts in Risk and validated regularly by a separate specialist Group-
level function. This cycle of design, build, implementation, monitoring and validation is overseen by the CRSOC, and
informs the need for new models or recalibration of existing models.
Internal Audit provides third line independent credit-related assurance activities, including providing an independent
assessment of both the asset quality in the portfolio and the quality of credit decision making. It also assesses
management controls from a “top down” portfolio oversight perspective as well as credit risk processes from a “bottom
up” perspective based on individual customer file reviews.
Risk grades are an integral part of reporting to the Board and executives.
In addition, the use of the rating system’s outputs in key business unit performance measures in processes such as
provisioning and the allocation of capital ensure that the rating system receives robust input from the business units,
not just the specialist modelling teams.
Rating process by asset class
Building reliable and accurate rating tools requires balancing of many factors including data availability (external data
may be used in some circumstances, where it is relevant), the size of the segment (the more customers within the
segment, the more likely that statistically reliable models can be built), and the need to be able to validate the model.
Rating tool approaches include:
Statistical models producing a PD or an LGD, which are developed from internal or external data on defaults.
Statistical models producing an internal rating, which involve calibrating ANZ’s models to external rating data where
data on defaults is insufficient for statistical purposes (such as Banks).
Hybrid statistical and expert models producing an internal rating, which use a mixture of default data and expert
input.
Expert models/processes that produce an internal rating, including external rating agency replication models.
Ongoing data collection and testing processes ensure enhanced or new models are introduced as required to
maintain and improve the accuracy and reliability of rating processes.
ANZ Basel III Pillar 3 disclosure September 2023
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Regardless of what credit risk rating tool is used, lending staff rating a customer are required to review the model-
generated PD (or CCR) and take into account any out-of-model factors or policy overlays to decide whether or not to
override the model rating. Overrides of a rating model to a better rating require approval from the independent credit
risk function. The significance of the model for risk grading varies with the customer segment: models will dominate risk
grading of homogenous, simple and data-rich segments such as in Retail, however for complex, specialised business
segments expert knowledge and the highly customised nature of transactions will influence the rating outcome.
The table on page 44 summarises the types of borrowers and the rating approach adopted within each of ANZ’s IRB
portfolios.
Estimation of LGD and EAD
ANZ’s LGD modelling takes into account data on secured recovery, unsecured recovery rates and debt seniority,
geography and internal management costs from several major data sources. Internal data is used as the basis for LGD
estimation in the retail asset class and is supplemented by external data for the corporate asset class.
EAD represents the expected outstanding at the time of default, including an estimate of additional drawings prior to
default (based on supervisory credit conversion factors), plus post-default drawings that were legally committed to
prior to default.
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Table 9(d): Non Retail Exposure at Default subject to Internal Ratings Based (IRB) approach
19
20
21
Sep 23
AAA
to AA-
A+
to BBB+
BBB
to BBB-
BB+
to B+
B
to B-
CCC+
to C
Default Total
$M $M $M $M $M $M $M $M
Exposure at Default
Corporate - 80,271 81,756 61,423 8,057 752 1,106 233,365
Sovereign 196,607 26,807 2,440 1,475 2,120 14 - 229,463
Financial Institutions - 94,070 11,348 2,540 491 25 4 108,478
New Zealand 3,383 6,932 17,245 19,362 3,957 897 447 52,223
Total 199,990 208,080 112,789 84,800 14,625 1,688 1,557 623,529
% of Total 32.1% 33.4% 18.1% 13.6% 2.3% 0.3% 0.2% 100.0%
Undrawn commitments
(included in above)
Corporate - 22,186 18,228 8,525 692 61 53 49,745
Sovereign 982 384 44 77 3 - - 1,490
Financial Institutions - 12,692 1,109 240 49 1 - 14,091
New Zealand 423 2,859 3,771 2,072 239 43 9 9,416
Total 1,405 38,121 23,152 10,914 983 105 62 74,742
Average Exposure at
Default
Corporate - 18.293 3.962 1.233 0.678 0.201 0.960 2.547
Sovereign 243.627 252.899 16.377 16.031 18.120 0.729 - 177.878
Financial Institutions - 5.921 5.313 1.910 0.703 0.105 0.215 5.342
New Zealand 7.942 2.732 1.221 0.862 0.844 0.397 1.271 1.115
Exposure-weighted average
Loss Given Default
(%)
Corporate - 45.6% 35.5% 24.1% 22.4% 32.0% 34.6% 35.5%
Sovereign 6.8% 25.4% 50.0% 49.9% 49.9% 50.0% - 10.1%
Financial Institutions - 49.2% 48.9% 45.2% 39.8% 39.0% 35.9% 49.0%
New Zealand 65.0% 43.2% 35.5% 27.2% 25.1% 33.8% 34.0% 34.5%
Exposure-weighted average
risk weight (%)
Corporate - 26.5% 42.9% 53.8% 72.3% 210.4% 64.1% 41.8%
Sovereign 1.2% 6.7% 46.5% 99.8% 159.5% 277.8% - 4.5%
Financial Institutions - 22.9% 56.6% 88.5% 114.3% 256.4% - 28.5%
New Zealand 30.7% 45.2% 68.5% 74.9% 112.5% 216.3% 75.8% 71.3%
19
In accordance with APS 330, EAD in Table 9(d) includes IRB (Advanced and Foundation) exposures and excludes Specialised Lending
subject to supervisory slotting, Standardised, Securitisation and Equities.
20
Average EAD is calculated as total EAD post risk mitigants divided by the total number of credit risk generating exposures.
21
Exposure-weighted average risk weight (%) is calculated as CRWA divided by EAD.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 9(d): Non Retail Exposure at Default subject to Internal Ratings Based (IRB) approach (continued)
Mar 23
AAA
< A+
$M
A+
< BBB
$M
BBB
< BB+
$M
BB+
< B+
$M
B+
< CCC
$M
CCC
$M
Default
$M
Total
$M
Exposure at Default
Corporate - 82,658 84,251 58,927 6,608 978 848 234,270
Sovereign 240,067 25,678 2,362 1,541 2,481 25 - 272,154
Financial Institutions - 94,417 11,399 2,944 478 27 29 109,294
New Zealand 3,249 6,731 18,175 20,468 3,533 654 230 53,040
Total 243,316 209,484 116,187 83,880 13,100 1,684 1,107 668,758
% of Total 36.4% 31.3% 17.4% 12.5% 2.0% 0.3% 0.2% 100.0%
Undrawn commitments
(included in above)
Corporate - 22,834 20,281 7,590 539 62 25 51,331
Sovereign 1,367 220 68 28 1 1 - 1,685
Financial Institutions - 12,338 1,288 253 47 17 - 13,943
New Zealand 407 2,780 4,057 2,387 182 31 5 9,849
Total 1,774 38,172 25,694 10,258 769 111 30 76,808
Average Exposure at
Default
Corporate - 19.961 4.118 1.170 0.602 0.232 0.862 2.569
Sovereign 288.196 302.100 15.633 16.398 206.714 1.144 - 227.363
Financial Institutions - 8.145 6.165 2.237 0.732 0.111 0.941 6.967
New Zealand 6.988 2.504 1.169 0.869 0.766 0.570 0.866 1.098
Exposure-weighted average
Loss Given Default (%)
Corporate - 46.2% 36.3% 24.8% 24.2% 31.3% 37.8% 36.5%
Sovereign 6.4% 25.2% 50.0% 50.0% 50.0% 50.0% - 9.2%
Financial Institutions - 49.5% 49.1% 45.0% 38.4% 46.9% 33.6% 49.2%
New Zealand 64.8% 44.7% 34.3% 27.3% 25.5% 37.6% 41.1% 34.2%
Exposure-weighted average risk
wei
ght (%)
Corporate - 27.9% 43.7% 52.1% 71.1% 204.2% 84.3% 43.1%
Sovereign 1.1% 6.6% 48.4% 108.7% 164.2% 254.1% - 4.1%
Financial Institutions - 24.8% 60.4% 89.2% 116.0% 307.6% - 30.0%
New Zealand 32.0% 30.1% 47.1% 67.8% 113.0% 241.2% 79.5% 58.9%
ANZ Basel III Pillar 3 disclosure September 2023
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Sep 22
AAA
< A+
$M
A+
< BBB
$M
BBB
< BB+
$M
BB+
< B+
$M
B+
< CCC
$M
CCC
$M
Default
$M
Total
$M
Exposure at Default
Corporate 40,661 122,256 97,488 57,079 7,082 1,258 1,414 327,238
Sovereign 236,858 21,519 3,997 1,635 2,745 91 - 266,845
Bank 12,738 22,289 4,127 1,287 34 4 - 40,479
Total 290,257 166,064 105,612 60,001 9,861 1,353 1,414 634,562
% of Total 45.7% 26.2% 16.6% 9.5% 1.6% 0.2% 0.2% 100.0%
Undrawn commitments
(included in above)
Corporate 10,602 37,838 25,836 8,466 789 124 61 83,716
Sovereign 1,062 960 467 37 14 8 - 2,548
Bank 52 635 13 - - - - 700
Total 11,716 39,433 26,316 8,503 803 132 61 86,964
Average Exposure at
Default
Corporate 19.446 13.276 2.885 0.852 0.479 0.249 0.979 2.449
Sovereign 171.387 182.365 22.329 19.013 68.633 5.374 - 146.217
Bank 4.718 4.398 6.732 9.974 1.378 0.186 - 4.730
Exposure-weighted average
Loss Given Default
(%)
Corporate 58.9% 58.1% 45.1% 32.0% 28.5% 38.5% 43.8% 49.0%
Sovereign 5.8% 16.0% 37.4% 41.4% 56.3% 45.1% - 7.9%
Bank 58.9% 59.5% 67.0% 67.7% 71.1% 64.0% - 60.4%
Exposure-weighted average risk
weight (%)
Corporate 18.1% 33.7% 53.3% 62.0% 82.3% 205.0% 125.6% 44.6%
Sovereign 1.0% 4.6% 34.2% 82.2% 174.1% 230.3% - 4.1%
Bank 15.5% 24.8% 71.5% 119.2% 178.3% 390.0% - 29.8%
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Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade
Sep 23
0.00%
<0.11%
$M
0.11%
<0.30%
$M
0.30%
<0.51%
$M
0.51%
<3.49%
$M
3.49%
<10.09%
$M
10.09%
<100.00%
$M
Default
$M
Total
$M
Exposure at Default
Residential Mortgage 83,971 60,151 36,181 143,396 9,820 1,575 2,384 337,478
Retail SME 40 344 610 9,237 4,831 1,053 395 16,510
Qualifying Revolving Retail 3,499 4,106 1,436 2,852 654 236 34 12,817
Other Retail 72 32 35 1,159 129 84 46 1,557
New Zealand 3,528 39,421 31,786 38,183 780 136 694 114,528
Total 91,110 104,054 70,048 194,827 16,214 3,084 3,553 482,890
% of Total 18.9% 21.5% 14.5% 40.3% 3.4% 0.6% 0.7% 100.0%
Undrawn commitments (included in above)
Residential Mortgage 20,168 4,140 1,531 8,831 43 10 6 34,729
Retail SME 33 219 285 1,551 370 63 13 2,534
Qualifying Revolving Retail 2,482 3,014 946 1,151 126 34 2 7,755
Other Retail 67 29 31 148 22 4 - 301
New Zealand 2,959 5,897 1,310 3,368 193 7 4 13,738
Total 25,709 13,299 4,103 15,049 754 118 25 59,057
Average Exposure at Default
Residential Mortgage 0.290 0.363 0.380 0.421 0.373 0.351 0.367 0.364
Retail SME 0.081 0.068 0.054 0.065 0.109 0.030 0.070 0.068
Qualifying Revolving Retail 0.009 0.009 0.008 0.010 0.008 0.007 0.008 0.009
Other Retail 0.002 0.001 0.001 0.004 0.002 0.004 0.004 0.003
New Zealand 0.039 0.071 0.140 0.105 0.006 0.002 0.063 0.078
Exposure-weighted average Loss Given Default (%)
Residential Mortgage 12.3% 13.5% 13.7% 15.1% 14.6% 14.2% 26.3% 14.0%
Retail SME 13.3% 19.5% 26.8% 28.3% 31.9% 50.3% 37.1% 30.7%
Qualifying Revolving Retail 72.5% 75.8% 75.4% 78.9% 82.2% 80.8% 75.7% 76.0%
Other Retail 73.8% 79.7% 76.1% 76.0% 76.9% 78.3% 75.7% 76.2%
New Zealand 19.7% 16.8% 19.9% 25.8% 79.8% 82.6% 20.3% 21.3%
Exposure-weighted average risk weight (%)
Residential Mortgage 6.3% 10.1% 18.4% 41.9% 91.9% 156.2% 284.0% 28.5%
Retail SME 3.4% 9.5% 20.5% 43.7% 65.7% 130.2% 237.1% 58.7%
Qualifying Revolving Retail 4.2% 7.9% 16.1% 45.2% 108.2% 211.2% 135.6% 25.3%
Other Retail 16.4% 36.5% 53.6% 101.9% 129.6% 204.4% 179.2% 105.6%
New Zealand
33.7% 32.4% 31.2% 33.4% 126.2% 175.6% 10.5% 33.1%
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Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade
(continued)
Mar 23
0.00%
<0.11%
$M
0.11%
<0.30%
$M
0.30%
<0.51%
$M
0.51%
<3.49%
$M
3.49%
<10.09%
$M
10.09%
<100.00%
$M
Default
$M
Total
$M
Exposure at Default
Residential Mortgage 84,494 59,576 35,867 132,676 8,463 1,475 2,119 324,670
Retail SME 43 373 655 9,468 4,887 1,157 414 16,997
Qualifying Revolving Retail 3,566 4,202 1,468 2,901 682 245 33 13,097
Other Retail 75 33 35 1,189 141 90 55 1,618
New Zealand 3,484 39,772 30,947 36,870 656 128 549 112,406
Total 91,662 103,956 68,972 183,104 14,829 3,095 3,170 468,788
% of Total 19.6% 22.2% 14.7% 39.1% 3.2% 0.7% 0.7% 100.0%
Undrawn commitments (included in above)
Residential Mortgage 19,861 3,048 889 6,860 33 8 2 30,701
Retail SME 37 234 320 1,736 446 81 15 2,869
Qualifying Revolving Retail 2,541 3,100 972 1,182 132 34 2 7,963
Other Retail 69 29 31 148 22 4 - 303
New Zealand 2,911 5,920 1,297 3,242 190 6 4 13,570
Total 25,419 12,331 3,509 13,168 823 133 23 55,406
Average Exposure at Default
Residential Mortgage 0.282 0.347 0.362 0.405 0.353 0.337 0.356 0.348
Retail SME 0.081 0.070 0.055 0.064 0.106 0.032 0.067 0.067
Qualifying Revolving Retail 0.009 0.009 0.008 0.010 0.008 0.007 0.008 0.009
Other Retail 0.002 0.001 0.001 0.004 0.002 0.003 0.004 0.003
New Zealand 0.039 0.071 0.137 0.098 0.005 0.002 0.052 0.077
Exposure-weighted average Loss Given Default (%)
Residential Mortgage 11.9% 13.0% 13.2% 14.6% 13.2% 13.9% 25.8% 13.5%
Retail SME 11.0% 16.5% 24.4% 25.6% 48.1% 31.2% 37.0% 28.7%
Qualifying Revolving Retail 72.3% 75.8% 75.3% 78.7% 80.8% 82.2% 75.7% 75.9%
Other Retail 73.7% 79.6% 76.1% 76.0% 78.2% 76.1% 74.3% 76.0%
New Zealand 10.8% 12.3% 18.4% 23.0% 31.3% 25.8% 15.4% 17.5%
Exposure-weighted average risk weight (%)
Residential Mortgage 6.4% 9.9% 17.9% 40.6% 87.8% 151.1% 258.0% 26.7%
Retail SME 2.8% 7.9% 18.6% 38.9% 65.1% 130.0% 213.1% 59.2%
Qualifying Revolving Retail 4.2% 8.0% 16.0% 44.9% 108.3% 212.1% 136.9% 25.4%
Other Retail 16.3% 36.6% 53.5% 101.5% 127.8% 204.8% 170.7% 105.6%
New Zealand
33.7% 32.4% 31.2% 33.9% 121.3% 178.3% 9.1% 33.2%
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Table 9(d): Retail Exposure at Default subject to Internal Ratings Based (IRB) approach by risk grade
(continued)
Sep 22
0.00%
<0.11%
$M
0.11%
<0.30%
$M
0.30%
<0.51%
$M
0.51%
<3.49%
$M
3.49%
<10.09%
$M
10.09%
<100.00%
$M
Default
$M
Total
$M
Exposure at Default
Residential Mortgage 88,300 93,052 65,417 156,131 7,338 1,568 2,319 414,125
Qualifying Revolving Retail 3,615 4,245 1,480 2,965 714 260 30 13,309
Other Retail 762 3,654 1,639 13,269 5,715 1,428 621 27,088
Total 92,677 100,951 68,536 172,365 13,767 3,256 2,970 454,522
% of Total 20.4% 22.2% 15.1% 37.9% 3.0% 0.7% 0.7% 100.0%
Undrawn commitments (included in above)
Residential Mortgage 22,694 5,865 1,486 9,840 27 11 4 39,927
Qualifying Revolving Retail 2,574 3,145 999 1,280 149 39 2 8,188
Other Retail 687 2,837 844 2,674 634 100 19 7,795
Total 25,955 11,847 3,329 13,794 810 150 25 55,910
Average Exposure at Default
Residential Mortgage 0.264 0.222 0.301 0.356 0.338 0.334 0.298 0.287
Qualifying Revolving Retail 0.008 0.009 0.008 0.010 0.008 0.007 0.008 0.009
Other Retail 0.008 0.010 0.010 0.019 0.024 0.010 0.026 0.016
Exposure-weighted average Loss Given Default (%)
Residential Mortgage 19.7% 17.2% 19.4% 20.6% 20.1% 20.0% 19.0% 19.4%
Qualifying Revolving Retail 72.1% 75.8% 75.2% 78.5% 82.1% 80.8% 75.7% 75.7%
Other Retail 57.4% 61.7% 45.3% 39.0% 39.4% 53.1% 43.3% 43.9%
Exposure-weighted average risk weight (%)
Residential Mortgage 4.5% 11.7% 22.9% 45.2% 97.7% 145.1% 165.3% 27.4%
Qualifying Revolving Retail 3.7% 7.6% 15.4% 42.9% 104.0% 204.7% 130.4% 24.6%
Other Retail 34.4% 43.4% 35.7% 52.0% 75.5% 138.2% 226.4% 62.9%
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Table 9(e): Actual Losses by portfolio type
Half year Sep 23
Basel Asset Class Individual provision charge
$M
Net Write-offs
$M
Corporate 24 10
Sovereign - -
Financial Institutions (1) -
Residential Mortgage 10 12
Retail SME 25 48
Qualifying Revolving Retail 26 43
Other Retail 11 34
Total IRB 95 147
Specialised Lending subject to supervisory slotting - -
Standardised approach (7) 12
Exposures of New Zealand banking subsidiaries 35 65
Total 123 224
Half year Mar 23
Basel Asset Class Individual provision charge
$M
Write-offs
$M
Corporate (83) 31
Sovereign - -
Financial Institutions (1) -
Residential Mortgage - 12
Retail SME 8 43
Qualifying Revolving Retail 23 42
Other Retail 7 23
Total IRB (46) 151
Specialised Lending subject to supervisory slotting - -
Standardised approach (5) 20
Exposures of New Zealand banking subsidiaries 21 14
Total (30) 185
Half year Sep 22
Basel Asset Class Individual provision charge
$M
Write-offs
$M
Corporate (12) 36
Sovereign - -
Bank - -
Residential Mortgage (12) 14
Qualifying Revolving Retail 12 45
Other Retail (2) 106
Total Advanced IRB (14) 201
Specialised Lending (1) -
Standardised approach 7 5
Total (8) 206
Factors impacting the loss experience
The individually assessed credit impairment charge increased $153 million driven by the Corporate Asset class due to
impairment of several single name exposures and higher write-backs in the March 2023 half, combined with lower write-
backs in the SME Banking portfolio, and the Home Loans portfolio driving the increases in the Retail Asset classes.
Write offs have increased $39 million due to a single named exposure in New Zealand.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 9(f): Average estimated vs. actual PD, EAD and LGD – IRB
Sep 23
Portfolio Type Average
Estimated
PD
%
Average
Actual PD
%
Average
estimated to
actual EAD
ratio
Average
Estimated
LGD
%
Average
Actual LGD
%
Corporate 1.87 1.63 1.17 38.81 32.37
Sovereign 0.76 - n/a n/a n/a
Financial Institutions
0.54 0.32 1.26 37.43 23.50
Specialised Lending
n/a 0.58 1.09 n/a 31.00
Residential Mortgage
0.93 0.77 1.01 18.69 1.40
Qualifying Revolving Retail
1.62 1.19 1.15 80.48 63.37
Retail SME
4.76 3.80 1.04 39.96 22.39
Other Retail 3.88 2.99 1.06 66.23 57.51
New Zealand Wholesale 1.44 0.57 1.11 42.10 20.95
New Zealand Retail 2.19 1.04 1.03 31.92 9.51
APS 330 Table 9(f) compares internal credit risk estimates used in calculating regulatory capital with realised outcomes
by portfolio types. It covers the PD, EAD and LGD estimates for the IRB portfolios.
Estimated PD and LGD for Specialised Lending exposures have not been provided, since APRA requires the use of
supervisory slotting for Regulatory EL calculations. Actual PD, EAD ratio, Estimated LGD and Actual LGD for Sovereign
exposures have not been provided, since there were no Sovereign defaults observed in ANZ Sovereign exposures for
the observation period.
Wholesale Portfolios
The Prudential Standard changes from 1 January 2023 have introduced a number of new asset classes. Changes have
been made in the historical time series used to determine wholesale portfolio averages.
New Zealand wholesale obligors previously included in the Corporate, Sovereign, Bank and Specialised Lending
portfolios are now reported under ‘Exposures of New Zealand banking subsidiaries’ asset class and hence moved
into the New Zealand Wholesale portfolio;
Income Producing Real Estate obligors formerly included in Specialised Lending have moved into the Corporate
portfolio; and
Non-bank Financial Institutions were moved into the new Financial Institutions portfolio, along with existing Bank
obligors from prior periods.
The estimated PD is based on the average of the internally estimated long-run PDs for obligors that are not in default
at the beginning of each financial year over the period of observation being 2009 to 2022. The actual PD is based on the
number of defaulted obligors up to August 2023 compared to the total number of obligors measured.
The EAD ratio compares internally estimated EAD prior to default to realised EAD for defaulted obligors over the 14
years of observation being 2009 to August 2023. A ratio greater than 1.0 signifies that on average, the actual defaulted
exposures are lower than the estimated exposures at the time of default.
The estimated LGD is the downturn LGD for accounts that defaulted at the beginning of each year during the observation
period being 2009 to September 2021. The actual LGD is based on the average realised losses captured over the period
for the accounts observed at the beginning and defaulted during the observation period. For non-retail portfolios, the
estimated and actual LGDs are based on accounts that defaulted up to September 2021. Defaults occurring after
September 2021 have been excluded from the analysis to allow sufficient time for workout period. Actual LGD for defaults
where workouts were not finalised have been estimated to approximate the final actual loss. Defaults where no loss data
has been captured are excluded from the LGD calculation.
A review of historical LGD data is currently being undertaken and may result in changes to Average Actual LGD numbers
detailed above.
Retail Portfolios
The estimated PD is based on the average of the internally estimated long-run PDs for obligors that are not in default
at September of each year over the period of observation being 2018 to 2022. The actual PD is based on the number of
defaulted obligors up to September 2023 compared to the total number of obligors measured.
The EAD ratio compares internally estimated EAD prior to default to realised EAD for defaulted obligors over the period
of observation being 2018 to 2023. A ratio greater than 1.0 signifies that on average, the actual defaulted exposures
are lower than the estimated exposures at the time of default.
The estimated LGD is the downturn LGD for accounts that defaulted at September of each year during the observation
period being 2017 to 2021. The actual LGD is based on the average realised losses over the period for the accounts
observed at the beginning and defaulted during the observation period. Defaults occurring after September 2022 have
been excluded from the analysis to allow sufficient time for workout period.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 10 Credit risk mitigation disclosures
Main types of collateral taken by ANZ
Collateral is used to mitigate credit risk, as the secondary source of repayment in case the counterparty cannot meet
its contractual repayment obligations.
22
Types of collateral typically taken by ANZ include:
Charges over residential, commercial, industrial, or rural property;
Charges over business assets;
Charges over specific plant and equipment;
Charges over listed shares, bonds, or securities;
Charges over cash deposits;
Guarantees and pledges; and
Cash and securities under Credit Support Annex (CSA) and Global Master Repurchase Agreement (GMRA) for
Counterparty credit risk in derivative and repo transactions.
In some cases, such as where the customer risk profile is considered very sound or by the nature of the product, a
transaction may not be supported by collateral.
Our credit policy, requirements and processes set out the acceptable types of collateral, as well as a process by which
additional instruments and/or asset types can be considered for approval.
For derivative transactions, APRA’s CPS 226 “Margining and risk mitigation for non-centrally cleared derivatives” has
mandated Variation Margin and Initial Margin arrangements between covered entities, subject to trading volume
thresholds. The operation of collateral agreements falls under a policy which establishes the control framework designed
to ensure a robust and globally consistent approach to the management of collateralised exposures, as well as
compliance with CPS 226 obligations.
For non-derivative and repo transactions, ANZ’s credit risk modelling teams use historical internal loss data and other
relevant external data to assist in determining the discount that each type of collateral would be expected to incur in a
forced sale. The discounted value is used in the determination of the SI and LGD. For derivative and repo transactions,
ANZ haircuts the value of cash and securities collateral under CSA or GMRA to calculate the regulatory EAD, as per
APRA’s APS 112 and APS 180.
Policies and processes for collateral valuation and management
ANZ has well established policies, requirements and processes around collateral valuation and management that are
reviewed regularly. The concepts of legal enforceability, certainty and current valuation are central to collateral
management.
In order to achieve legal enforceability and certainty, ANZ uses standard collateral instruments or has specific
documentation drawn up by external legal advisers, and where applicable, security interests are registered. The use of
collateral management systems also provides certainty that the collateral has been properly taken, registered and
stored.
In order to rely on the valuation of collateral assets, ANZ has developed comprehensive rules around acceptable types
of valuations (including who may value an asset), frequency of revaluations and standard extension ratios for typical
asset types. Upon receipt of a new valuation, the information is used to recalculate the SI (or to reassess the adequacy
of the provision, in the case of an impaired asset), thereby ensuring that the exposure has an updated LGD attached
to it for risk quantification purposes.
Guarantee support
Within wholesale lending, guarantee support for lending proposals is a common component in transaction structuring
for ANZ. The guarantee of a financially stronger party can help improve the PD of a transaction through its explicit
support of the weaker rated borrower.
Guarantees that are recognised for risk rating purposes may be provided by parties that include associated entities,
banks, sovereigns or individuals. Credit requirements provide threshold parameters to determine acceptable
counterparties in achieving risk grade enhancement of the transaction.
The suitability of the guarantor is determined by risk rating that guarantor. Not all guarantees or guarantors are
recognised for risk grade enhancement purposes.
22
For some products, the collateral provided is fundamental to its structuring so is not strictly the secondary source of repayment. For
example, lending secured by trade receivables is typically repaid by the collection of those receivables.
ANZ Basel III Pillar 3 disclosure September 2023
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Use of credit derivatives for risk mitigation
ANZ may use purchased credit derivatives to mitigate credit risk by lowering exposures to reference entities that
generate high concentration risk exposures or to improve risk return performance. Only certain credit derivatives such
as credit default swaps (CDS) are recognised for risk mitigation purposes in the determination of regulatory capital.
Standard, legally enforceable documentation applies.
For regulatory capital purposes, ANZ only recognises protection using credit derivatives where they meet several policy
and regulatory requirements around the strength of the protection offered such as being irrevocable.
A CDS may only be transacted with banks and non-bank financial institutions that have been credit assessed and
approved by a designated specialist credit officer. All parties must meet minimum credit standards and be allocated a
related credit limit. In the event that the creditworthiness of a credit protection provider falls below the minimum
required to provide effective protection, the protection is no longer recognised as an effective risk mitigant for regulatory
purposes.
Additionally, ANZ uses market instruments, mainly interest rate and foreign exchange derivatives, as well as CDS
Indices to hedge the Credit value adjustment (CVA) mark to market volatility of the markets derivative portfolio.
The use of netting
Netting is a form of credit risk mitigation in that it reduces EAD, by offsetting a customer’s positive and negative
balances with ANZ.
In order to apply on-balance sheet netting, the arrangement must be specifically documented with the customer and
meet a number of legally enforceable requirements.
Netting is also used where the credit exposure arises from off-balance sheet market related transactions. For close-out
netting to be utilised with counterparties, a legally enforceable eligible netting agreement in an acceptable jurisdiction
must be in place. This means that each transaction is aggregated into a single net amount and transactions are netted
to arrive at a single overall sum.
Transaction structuring to mitigate credit risk
Besides collateral, guarantee support and derivatives described above, credit risk mitigation can also be furthered by
prudent transaction structuring. For example, the risk in project finance lending can be mitigated by lending covenants,
loan syndication and political risk insurance.
Concentrations of credit risk mitigation
Taking collateral raises the possibility that ANZ may inadvertently increase its risk by becoming exposed to collateral
concentrations. For example, in the same way that an over-exposure to a particular industry may mean that a bank is
more sensitive to the performance of that industry, an over-exposure to a particular collateral asset type may make ANZ
more sensitive to the performance of that asset type.
ANZ does not believe that it has any material concentrations of collateral types, given the well diversified nature of its
portfolio and diverse range of pledged collateral, and well embedded collateral review processes.
Additional credit risk mitigation for markets derivatives
Right to break clauses are used in master agreement or in trade confirmation to reduce the term of long dated derivative
trades. Additional termination triggers (close out of exposure) such as credit rating downgrade clauses and change in
ownership clauses included in documentation are used to reduce credit exposure under specific credit events. ANZ uses
central clearing houses to clear certain derivative transactions and reduce bilateral exposure. Settlement through
Continuous Linked Settlement (CLS) is used to eliminate settlement risk for foreign exchange transactions with CLS
members. In addition to the exchange of Variation margin and Initial Margin, APRA’s CPS 226 also requires the following
risk mitigation practices to be established for un-cleared derivatives between covered counterparties: trading relationship
documentation; trade confirmation; portfolio reconciliation; portfolio compression; valuation processes; and dispute
resolution processes.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 10(b): Credit risk mitigation on Standardised approach portfolios – collateral
23
24
Sep 23
Exposure
$M
Eligible Financial
Collateral
$M
Other Eligible
Collateral
$M
% Coverage
Standardised approach
Corporate 6,428 62 - 1.0%
Sovereign 165 - - -
Residential Mortgage 2,269 - - -
Other Retail 32 - 23 41.9%
Other assets 5,920 903 - 13.2%
Total 14,814 965 23 6.3%
Exposure
$M
Eligible Financial
Collateral
$M
Other Eligible
Collateral
$M
% Coverage
Foundation IRB approach
Corporate 93,349 - 540 0.6%
Sovereign 229,463 - 5,585 2.4%
Financial Institution 108,478 - 26 -
Total 431,290 - 6,150 1.4%
Mar 23
Exposure
$M
Eligible Financial
Collateral
$M
Other Eligible
Collateral
$M
% Coverage
Standardised approach
Corporate 5,526 205 796 15.3%
Sovereign 88 270 203 84.3%
Residential Mortgage 2,011 - - -
Other Retail 24 - 14 36.8%
Other assets 7,879 1,225 - 13.5%
Total 15,528 1,700 1,013 14.9%
Exposure
$M
Eligible Financial
Collateral
$M
Other Eligible
Collateral
$M
% Coverage
Foundation IRB approach
Corporate 101,134 - 970 1.0%
Sovereign 272,154 - 5,498 2.0%
Financial Institution 109,294 - 2 -
Total 482,582 - 6,470 1.3%
Sep 22
Exposure
$M
Eligible Financial
Collateral
$M
Other Eligible
Collateral
$M
% Coverage
Standardised approach
Corporate 5,976 713 - 10.5%
Sovereign 146 1,635 - 91.8%
Residential Mortgage 435 - - -
Other Retail 10 - - -
Total 6,567 2,348 - 26.1%
23
Eligible Collateral could include cash collateral (cash, certificates deposits and bank bills issued by the lending ADI), gold bullion and
highly rated debt securities.
24
Exposure at Default represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 10(c): Credit risk mitigation – guarantees and credit derivatives
25
Sep 23
Exposure at
default
$M
Exposures
covered by
Guarantees
$M
Exposures
covered by
Credit
Derivatives
$M % Covera
ge
Advanced IRB
Corporate (incl. Specialised Lending) 144,035 4,144 - 2.9%
Sovereign
-
-
-
-
Bank
-
-
- -
Residential Mortgage
337,478
-
-
-
Retail SME
16,510
-
- -
Qualifying Revolving Retail
12,817
-
-
-
Other Retail
1,557
-
-
-
Total
512,397
4,144 - 0.8%
Foundation IRB
Corporate
93,349 2,785
- 3.0%
Sovereign
229,463 4,907
- 2.1%
Financial Institutions
108,478 424
1,310 1.6%
Total
431,290 8,116
1,310 2.2%
Standardised approach
Corporate
6,428 234
- 3.6%
Sovereign
165 -
- -
Residential Mortgage
2,269 -
- -
Other Retail
32 -
- -
Other Assets
5,920 -
- -
Total
14,814 234
- 1.6%
Exposures of New Zealand banking
subsidiaries
197,204 265
- 0.1%
Qualifying Central Counterparties 7,035 - - -
25
Exposure at Default represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 10(c): Credit risk mitigation – guarantees and credit derivatives
26
(continued)
Mar 23
Exposure at
default
$M
Exposures
covered by
Guarantees
$M
Exposures
covered by
Credit
Derivatives
$M % Covera
ge
Advanced IRB
Corporate (incl. Specialised Lending) 137,454 9,265 - 6.7%
Sovereign - - -
-
Bank - - -
-
Residential Mortgage 324,670 - - -
Retail SME 16,997 - -
-
Qualifying Revolving Retail 13,097 - - -
Other Retail 1,618 - -
-
Total 493,836 9,265 - 1.9%
Foundation IRB
Corporate 101,134 8,114 - 8.0%
Sovereign 272,154 5,232 - 1.9%
Financial Institutions 109,294 194 1,305 1.4%
Total 482,582 13,540 1,305 3.1%
Standardised approach
Corporate 5,526 471 - 8.5%
Sovereign 88 9 - 10.6%
Residential Mortgage 2,011 - - -
Other Retail 24 - - -
Other Assets 7,879 - - -
Total 15,528 480 - 3.1%
Exposures of New Zealand banking
subsidiaries
195,293 330 - 0.2%
Qualifying Central Counterparties 6,212 - - -
26
Exposure at Default represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting
and financial collateral.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 10(c): Credit risk mitigation – guarantees and credit derivatives (continued)
Sep 22
Exposure at
Default
$M
Exposures
covered by
Guarantees
$M
Exposures
covered by
Credit Derivatives
$M
% Coverage
Advanced IRB
Corporate (incl. Specialised Lending) 375,980 1,342 868 0.6%
Sovereign 266,845 4,972 - 1.9%
Bank 40,479 - 38 0.1%
Residential Mortgage 414,125 - - -
Qualifying Revolving Retail 13,309 - - -
Other Retail 27,088 - - -
Total 1,137,826 6,314 906 0.6%
Standardised approach
Corporate 5,976 9 - 0.2%
Sovereign 146 - - -
Residential Mortgage 435 - - -
Other Retail 10 - - -
Total 6,567 9 - 0.1%
Qualifying Central Counterparties 7,916 - - -
ANZ Basel III Pillar 3 disclosure September 2023
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Table 11 General disclosures for derivatives and counterparty credit risk
Definition of Counterparty Credit Risk
Counterparty credit risk in derivative transactions arises from the risk of counterparty default before settlement date of
derivative contracts and the counterparty is unable to fulfil present and future contractual payment obligations. The
amount at risk may change over time as a function of the underlying market parameters up to the positive value of the
contract in favor of ANZ.
Counterparty credit risk is present in market instruments (derivatives and forward contracts), and comprises:
Settlement risk, which arises where one party makes payment or delivers value in the expectation but without
certainty that the counterparty will perform the corresponding obligation in a bilateral contract at settlement date.
Market replacement risk (pre-settlement risk), which is the risk that a counterparty will default during the life of a
derivative contract and that a loss will be incurred in covering the position.
ANZ transacts market instruments with the following counterparties:
End users – would typically use Over the Counter (OTC) derivative instruments provided by ANZ to manage price
movement risk associated with their core business activity.
Professional counterparties – ANZ may hedge price movement risks by entering into transactions with professional
counterparties that conduct two-way (buy and sell) business.
Counterparty credit risk requires a different method to calculate exposure at default because actual and potential market
movements impact ANZ’s exposure or replacement cost over the life of derivative contracts. The markets covered by
this treatment include the derivative activities associated with interest rate, foreign exchange, CDS, equity, commodity
and repurchase agreement (repo) products.
Counterparty credit risk governance
ANZ’s counterparty credit risk management is governed by its credit principles, policies and procedures. The Markets
Risk function is responsible for determining the counterparty credit risk exposure methodology applied to market
instruments, in the framework for counterparty credit limit management, measurement and reporting.
The counterparty credit risk associated with derivative transactions is governed by credit limit setting consistent with all
credit exposures to the ANZ Group. Counterparty credit limits are approved by the appropriate credit delegation holders.
Counterparty credit risk measurement and reporting
The approach to measure counterparty credit risk exposure is based on internal models. These measures are referred to
as potential credit risk exposure (PCRE) and potential future exposure (PFE) and measure the worse case credit exposure
of derivative transactions at future time points to ANZ. PFE is measured at the 97.5th percentile at future pre-described
time points, and PCRE is a 97.5th percentile averaged over time points.
PCRE and PFE factors recognise that prices may change over the remaining period to maturity, and that risk decreases
as the contract’s remaining term to maturity decreases. In general terms PCRE is calculated by applying a risk weighting
or volatility factor to the face value of the notional principal of individual trades. PFE simulates relevant risk factors in a
portfolio by taking into account the relevant volatilities and correlations calibrated to historical market data. To measure
counterparty credit risk exposure, PCRE and PFE take into account legal document in force, as well as credit risk
mitigation tools like margin or Right-to-break clauses.
Exposure at default for regulatory capital
For regulatory capital the Exposure at Default captures the expected positive mark-to-market of a portfolio in the event
of a counterparty default across a one-year time horizon at a 99% confidence level, taking into account any legal
documents in force. It is calculated following Standardised Approach for Counterparty Credit Risk (SA-CCR) under APRA’s
APS180: Capital Adequacy: Counterparty Credit Risk.
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Credit valuation adjustment (CVA)
ANZ uses a model to adjust the fair value of the CVA held which takes into account the impact of counterparty credit
quality. The methodology calculates the present value of the expected losses over the life of a derivative as a function
of Probability of Default (PD), Loss Given Default (LGD), and expected exposure profile.
As the CVA changes over the life of a derivative due to changes in credit spreads, ANZ uses CDS Indices to hedge the
mark to market impacts. Other market risks are also hedged with interest rate and foreign exchange derivatives.
APRA requires banks, including ANZ, to hold additional risk-based capital to cover the risk of CVA mark-to-market losses
associated with deterioration in counterparty credit worthiness when entering into derivative transactions.
Wrong way risk
ANZ’s management of counterparty credit risk also considers the possibility of wrong way risk, which emerges when PD
is adversely correlated with counterparty credit risk exposures.
Counterparty credit risk mitigation and credit enhancements
ANZ’s primary tools to mitigate counterparty credit risk include:
A bilateral netting master agreement (e.g., by International Swaps and Derivatives Association – (ISDA)) allowing
close-out netting of exposures in a portfolio with offsetting contracts, with a single net payment with the same legal
counterparty.
Use of collateral agreements in some transactions based on standard market documentation (i.e., ISDA master
agreement with credit support annex or CSA
for derivatives and Global Master Repurchase Agreement or GMRA for
repo) that governs the amount of collateral required to be posted or received by ANZ throughout the life of the
contract. Reasons for requiring collateral include:
o Variation Margin – reflects the current mark-to-market exposure.
o Initial Margin – in addition to the variation margin, covers the future potential exposure that could arise from
future changes in market value over a defined period of risk.
o Since March 2017, APRA’s CPS 226 “Margining and risk mitigation for non-centrally cleared derivatives” has
mandated Variation Margin and Initial Margin arrangements between covered entities, subject to trading volume
thresholds. The operation of collateral agreements falls under a policy which establishes the control framework
designed to ensure a robust and globally consistent approach to the management of collateralised exposures,
as well as compliance with CPS 226 obligations.
o APRA’s CPS 226 also requires ADIs to apply risk mitigation practices for un-cleared derivatives between covered
counterparties in the areas of trading relationship documentation, trade confirmation, portfolio reconciliation,
portfolio compression, valuation processes and dispute resolution processes.
Use of right-to-break clauses in master agreements or in trade confirmation to reduce the term of long dated
derivative trades.
Independent limit setting, credit exposure control, monitoring and reporting of excesses against approved credit
limits.
Additional termination triggers (close out of exposure) such as credit rating downgrade clauses and change in
ownership clauses included in documentation to reduce credit exposure under specific credit events.
Linking covenants and events of default in existing loan facility agreements to master agreements.
Use of credit derivatives to hedge CVA mart-to-market volatility.
Settlement through Continuous Linked Settlement (CLS) to eliminate settlement risk for foreign exchange
transactions with CLS members.
Clearing certain derivative transactions through central counterparties clearing houses.
A specific risk appetite for Credit Valuation Adjustment (CVA) exposures, approved by the Board.
Design and implementation of limit framework and monitoring of CVA exposures, to ensure CVA exposure is within
Risk appetite.
In the event of a downgrading of ANZ’s rating by one notch from AA- to A+, as at 30 September 2023, ANZ would not
be required to lodge additional collateral with its counterparties.
The terms of legal agreements with some of ANZ central clearing counterparties central clearer have been amended to
give effect to” settled-to-market” legal settlement. As a result of this change, collateral paid and received by the Group
under these agreements is no longer separately recognised, instead settling the Group’s outstanding derivative
exposures and reducing the associated carrying values of the derivative asset and liability balances.
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Table 11(b): Counterparty credit risk – net derivative credit exposure
Sep 23 Mar 23 Sep 22
$M $M $M
Gross positive fair value of contracts 60,406 45,614 90,174
Netting benefits (38,070) (29,634) (57,277)
Netted current credit exposure 22,336 15,980 32,897
Collateral held (13,049) (6,309) (16,342)
Net derivatives credit exposure 9,287 9,671 16,555
Counterparty credit risk exposure - by portfolio type
Sep 23 Mar 23 Sep 22
Portfolio Type $M $M $M
Corporate 9,716 8,797 24,956
Sovereign 3,595 3,161 4,354
Bank 25,109 25,414 16,506
Qualifying Central Counterparties 8,110 7,229 7,916
Specialised Lending 47 94 143
Total exposures 46,577 44,695 53,875
Notional Value of Credit Derivative Hedges
Sep 23 Mar 23 Sep 22
Product Type $M $M $M
Credit Default Swaps - - -
Interest Rate Swaps - - -
Currency Swaps - - -
Other - - -
Total exposures - - -
ANZ Basel III Pillar 3 disclosure September 2023
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Table 11(c): Counterparty credit risk exposure – credit derivative transactions
Sep 23
Protection
Bought
$M
Protection
Sold
$M
Total
$M
Credit derivative products used for own credit portfolio
Credit default swaps 10,862 8,503 19,365
Total notional value 10,862 8,503 19,365
Credit derivative products used for intermediation
Credit default swaps - - -
Total return swaps - - -
Total notional value - - -
Total credit derivative notional value 10,862 8,503 19,365
Mar 23
Protection
Bought
$M
Protection
Sold
$M
Total
$M
Credit derivative products used for own credit portfolio
Credit default swaps 12,664 9,789 22,453
Total notional value 12,664 9,789 22,453
Credit derivative products used for intermediation
Credit default swaps - - -
Total return swaps - - -
Total notional value - - -
Total credit derivative notional value 12,664 9,789 22,453
Sep 22
Protection
Bought
$M
Protection
Sold
$M
Total
$M
Credit derivative products used for own credit portfolio
Credit default swaps 13,599 10,823 24,422
Total notional value 13,599 10,823 24,422
Credit derivative products used for intermediation
Credit default swaps - - -
Total return swaps - - -
Total notional value - - -
Total credit derivative notional value 13,599 10,823 24,422
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Chapter 6 – Securitisation
Table 12 Securitisation disclosures
Definition of securitisation
A securitisation is a financial structure where the cash flow from a pool of assets is used to service obligations to at least
two different tranches or classes of creditors, typically holders of debt securities, with each class or tranche reflecting a
different degree of credit risk. This stratification of credit risk means that one class of creditors is entitled to receive
payments from the pool before another class.
Securitisations may be categorised as:
Traditional securitisations, where legal ownership of the underlying asset pool is transferred to investors, with principal
and interest paid from realisation of or regular cash flows from the assets. The Special Purpose Vehicle (SPV) assets
are insulated from bankruptcy of the seller or servicer.
Synthetic securitisations, where credit risk is transferred to a third party but legal ownership of the underlying assets
remain with the originator e.g., by using credit derivatives or guarantees.
Securitisation of ANZ-originated assets
ANZ adopts securitisation as a funding, capital and liquidity management tool using assets it has originated. This may
involve the transfer of credit risk and thereby provide regulatory capital relief. ANZ also operates a self-securitisation
program, backed by a pool of residential mortgages, which forms part of the Bank’s liquidity arrangements by providing
access to government sponsored facilities including the Term Funding Facility.
For these securitisation programs, ANZ will undertake roles including as the originator, sponsor, servicer and trust
manager. ANZ may retain an exposure to these securitisation programs (including as facility provider and swap provider),
consistent with the roles described below in ‘Third Party Securitisation Activities’ and facilities provided as described below
in ‘Risk Management’.
Covered bond transactions, whereby bonds issued by ANZ are secured by assets held in a special purpose vehicle, are
not securitisation exposures.
Third-Party Securitisation Activities
ANZ’s involvement with securitisation of third-party originated assets, including residential mortgages, auto and
equipment loans and trade receivables, comprises of:
Provision of facilities – this may include providing facilities to securitisation vehicles in the form of funding facility
provider and interest rate swap provider. Funding may be provided via an ANZ-sponsored securitisation vehicle which
is consolidated in the Bank’s financial statements, to certain clients wishing to access securitisation.
Services to securitisation programs may include structuring and arranging services and distributing securities.
Investment in securities – ANZ may purchase notes issued by securitisation programs.
For any assets ANZ has securitised or for SPVs that ANZ sponsors, any role provided by ANZ or its subsidiaries is subject
to market based terms and conditions, and ANZ’s normal approval and review processes. Further, any securitisation
exposures retained by ANZ or its affiliated entities are subject to ANZ’s normal approval and review processes as well as
satisfying the requirements under APS 120: Securitisation.
Governance and Risk Management
Similar to other exposures, securitisation exposures are subject to credit, market, operational liquidity and compliance
risks. Governance of securitisation activities is managed in accordance with ANZ’s established risk management
framework, including the credit risk and market risk frameworks described in Chapters 5 and 7. Roles and responsibilities
are clearly outlined in the Bank’s policies and procedures, including:
Appropriate risk management systems to identify, measure, monitor and manage the risks arising from its
involvement in securitisation exposures;
Impact of ANZ’s involvement in securitisation exposures on its risk profile; and
How ANZ ensures that it does not provide any implicit support to securitisations with ANZ originated assets.
ANZ Basel III Pillar 3 disclosure September 2023
66
Funding third-party originated exposures and investment in securities are via balance sheet funded arrangements where
such arrangements satisfy ANZ’s credit, due diligence and other business requirements.
Many functions within ANZ are involved in securitisation activities given the range of activities undertaken and risks that
need to be managed. For origination and structuring of securitisation transactions, ANZ has a specialist securitisation
team with independent Risk personnel overseeing operations. Credit decisions require joint approval by the business unit
and respective independent credit risk officer. The securitisation team must be involved in all non-trading securitisation
transactions across ANZ, which ensures consistent expert treatment. Where ANZ invests in instruments issued by
securitisation programs, oversight of these exposures by securitisation specialists continue until the securitisation
exposures are repaid in full or sold.
All facilities provided to our investments in securitisation programs (across both the banking and trading books) undergo
initial and ongoing due diligence in line with requirements outlined by APRA. This includes analysing the risk characteristics
of the securitisation exposure, structure of the transaction and monitoring performance of the underlying assets of the
transaction. In addition, such securitisation exposures are formally reviewed at least annually with credit discretions
being exercised.
Risk reporting of securitisation exposures
Credit risk management information systems, reporting and analysis are managed centrally for all securitisation
exposures. In addition to the formal credit review process for ANZ’s securitisation exposures, internal reporting to the
appropriate Risk and management functions provides oversight at the portfolio level. These reports include securitisation
program performance, EAD, portfolio mix, and RWA.
The use and treatment of Credit Risk Mitigation (CRM) techniques with respect to securitisation exposures is assessed on
a case-by-case basis in a manner consistent with the bank-wide CRM methodology
27
.
Regulatory capital approaches
For securitisation exposures held in ANZ’s banking book
28
, ANZ adopts a Standardised approach (as outlined in APS 120:
Securitisation) to determine the credit risk regulatory capital charge
via a hierarchy of approaches.
The primary rating approach is the External Ratings Based Approach (ERBA). For externally rated securitisation exposures
that satisfy the operational requirements for external credit assessments, ANZ calculates credit risk regulatory capital
based upon the ratings assigned by Standard & Poor’s, Moody’s Investor Services and/or Fitch Ratings as appropriate,
seniority of the securitisation exposure and the tenor of the securitisation exposure.
If ERBA is not applicable, ANZ adopts the Supervisory Formula Approach (SFA)
for securitisation exposures. In this case,
the credit risk regulatory capital calculation takes into account the type and performance of the underlying assets of the
securitisation and the credit support provided to the securitisation exposure.
Under APRA’s new capital framework, ANZ’s New Zealand banking subsidiaries regulated by the Reserve Bank of New
Zealand (RBNZ) are required to calculate capital requirements for any securitisation exposures held using the RBNZ’s
prudential framework rather than APRA’s framework. These exposures are included in the exposures of New Zealand
banking subsidiaries in Table 6 rather than in Table 12.
In relation to securitisation of ANZ originated assets, where:
the significant credit risk transfer requirements have been satisfied under APS 120, ANZ is not required to hold
credit risk regulatory capital for the underlying assets of the securitisation, however credit risk regulatory capital is
calculated for the facilities provided to the securitisation;
in absence of significant credit risk transfer being satisfied under APS 120, ANZ holds credit risk regulatory capital
for the underlying assets of the securitisation however the credit risk regulatory capital for facilities provided to the
securitisation is not required to be calculated.
27
For example, various types of analysis including quantitative analysis of credit enhancements are performed for non-externally rated
transactions. Factors such as geography, facility/transaction type and ANZ’s role will determine the applicable CRM techniques to apply.
28
Exposures are classified into either the trading book or the banking book. In general terms, the trading book consists of positions in
financial instruments and commodities held with trading intent or in order to hedge other elements of the trading book, and the banking
book contains all other exposures. Banking book exposures are typically held to maturity, in contrast to the shorter term, trading
nature of the trading book.
ANZ Basel III Pillar 3 disclosure September 2023
67
Chapter 7 outlines regulatory capital treatment for securitisation exposures held in ANZ’s trading book. In addition, the
operational requirements for the recognition of external credit assessments outlined in APS 120 also apply to these
exposures.
Accounting policies
A key consideration in determining the treatment of transactions involving ANZ assets is whether the securitisation special
purpose vehicles (SPVs) should be consolidated under AASB 10: Consolidated Financial Statements. If these SPVs meet
the criteria for consolidation, the assets remain on the balance sheet of ANZ’s consolidated financial statements and are
classified and valued in accordance with AASB 9: Financial Instruments. Currently, transfers to securitisation SPVs are
treated as financing transactions in the separate financial statements of ANZBGL because it retains substantially all of
the risks and rewards of assets transferred to the SPVs.
Securitisation services based on customer’s generated assets include warehouse and term fund facilities which are treated
as loans.
For synthetic securitisations of ANZ-originated assets, any transferred credit exposure is recognised through the fair value
measurement of the credit derivative established within the structure.
Full details of the principal accounting policies governing ANZ’s securitisation activities are outlined in ANZBGL’s 2023
Annual Report, Notes to the Financial Statements. These include the valuation, derecognition, consolidation and income
recognition principles outlined in the accounting policies and key judgements and estimates disclosures in each relevant
note. Note 27 – Structured Entities and Note 28 – Transfers of Financial Assets also provides details about the nature of
ANZ’s securitisation activities and certain accounting policies as they specifically apply to these activities. There have
been no changes to the application of accounting policies in relation to securitisation activities since the prior year.
To the extent that ANZ has exposures intended to be securitised, they could reside in either the banking or trading book.
To the extent that ANZ has entered into contractual arrangements that could require it to provide financial support for
securitised assets e.g. liquidity facilities, these are recognised in accordance with the accounting policies set out in
ANZBGL’s 2023 Annual Report.
ANZ Basel III Pillar 3 disclosure September 2023
68
Banking Book
Table 12(g): Banking Book: Traditional and synthetic securitisation exposures
Sep 23
Traditional securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 865 68,901 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 865 68,901 -
Synthetic securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage - - -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total - - -
Aggregate of traditional and synthetic
securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 865 68,901 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 865 68,901 -
ANZ Basel III Pillar 3 disclosure September 2023
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Table 12(g): Banking Book: Traditional and synthetic securitisation exposures (continued)
Mar 23
Traditional securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 970 68,635 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 970 68,635 -
Synthetic securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage - - -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total - - -
Aggregate of traditional and synthetic
securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 970 68,635 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 970 68,635 -
Sep 22
Traditional securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 1,094 85,858 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 1,094 85,858 -
Synthetic securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage - - -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total - - -
Aggregate of traditional and synthetic
securitisations
Underlying asset ANZ Originated
$M
ANZ Self Securitised
$M
ANZ Sponsored
$M
Residential mortgage 1,094 85,858 -
Credit cards and other personal loans - - -
Auto and equipment finance - - -
Commercial loans - - -
Other - - -
Total 1,094 85,858 -
ANZ Basel III Pillar 3 disclosure September 2023
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Table 12(h): Banking Book: Impaired and Past due loans relating to ANZ originated securitisations
Sep 23
Underlying asset ANZ
originated
$M
ANZ Self
Securitised
$M
Non-
performing
$M
Losses
recognised
for the six
months
ended
$M
Residential mortgage 865 68,901 21 -
Credit cards and other personal loans - - - -
Auto and equipment finance - - - -
Commercial loans - - - -
Other - - - -
Total 865 68,901 21 -
Mar 23
Underlying asset ANZ
originated
$M
ANZ Self
Securitised
$M
Non-
performing
$M
Losses
recognised
for the six
months
ended
$M
Residential mortgage 970 68,635 12 -
Credit cards and other personal loans - - - -
Auto and equipment finance - - - -
Commercial loans - - - -
Other - - - -
Total 970 68,635 12 -
Sep 22
Underlying asset ANZ
originated
$M
ANZ Self
Securitised
$M
Impaired
$M
Past due
$M
Losses
recognised
for the six
months
ended
$M
Residential mortgage 1,094 85,858 - 48 -
Credit cards and other personal loans - - - - -
Auto and equipment finance - - - - -
Commercial loans - - - - -
Other - - - - -
Total 1,094 85,858 - 48 -
Table 12(i): Banking Book: Total amount of outstanding exposures intended to be securitised
No assets from ANZ's Banking Book were intended to be securitised as at the reporting date.
ANZ Basel III Pillar 3 disclosure September 2023
71
Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset type
and facility
29
Sep 23
Original value securitised
Securitisation activity by underlying asset
type
ANZ Originated
$M
ANZ Self
Securitised
$M
ANZ Sponsored
$M
Recognised
gain
or loss on sale
$M
Residential mortgage (105) 266 - -
Credit cards and other personal loans - - - -
Auto and equipment finance - - - -
Commercial loans - - - -
Other - - - -
Total (105) 266 - -
Securitisation activity by facility provided Notional
amount
$M
Liquidity facilities -
Funding facilities 1,000
Underwriting facilities -
Lending facilities -
Credit enhancements -
Holdings of securities (excluding trading book) (629)
Other 1
Total 372
Mar 23
Original value securitised
Securitisation activity by underlying asset
type
ANZ Originated
$M
ANZ Self
Securitised
$M
ANZ Sponsored
$M
Recognised
gain
or loss on sale
$M
Residential mortgage (124) 44 - -
Credit cards and other personal loans - - - -
Auto and equipment finance - - - -
Commercial loans - - - -
Other - - - -
Total (124) 44 - -
Securitisation activity by facility provided Notional
amount
$M
Liquidity facilities -
Funding facilities 74
Underwriting facilities -
Lending facilities -
Credit enhancements -
Holdings of securities (excluding trading book) (654)
Other 1
Total (579)
29
Activity represents net movement in outstandings.
ANZ Basel III Pillar 3 disclosure September 2023
72
Table 12(j): Banking Book: Securitisation - Summary of current period’s activity by underlying asset type
and facility (continued)
Sep 22
Original value securitised
Securitisation activity by underlying asset
type
ANZ Originated
$M
ANZ Self
Securitised
$M
ANZ Sponsored
$M
Recognised
gain
or loss on sale
$M
Residential mortgage (149) 2,306 - -
Credit cards and other personal loans - - - -
Auto and equipment finance - - - -
Commercial loans - - - -
Other - - - -
Total (149) 2,306 - -
Securitisation activity by facility provided Notional
amount
$M
Liquidity facilities -
Funding facilities 1,486
Underwriting facilities -
Lending facilities -
Credit enhancements -
Holdings of securities (excluding trading book) 112
Other 1
Total 1,599
ANZ Basel III Pillar 3 disclosure September 2023
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Table 12(k): Banking Book: Securitisation - Regulatory credit exposures by exposure type
Sep 23 Mar 23 Sep 22
Securitisation exposure type - On balance sheet $M $M $M
Liquidity facilities - - -
Funding facilities 9,886 8,976 9,433
Underwriting facilities - - -
Lending facilities - - -
Credit enhancements - - -
Holdings of securities (excluding trading book) 2,070 2,698 3,352
Protection provided - - -
Other 92 116 55
Total 12,048 11,790 12,840
Sep 23 Mar 23 Sep 22
Securitisation exposure type - Off Balance
Sheet
$M $M $M
Liquidity facilities 10 11 12
Funding facilities 3,191 2,191 2,128
Underwriting facilities - - -
Lending facilities - - -
Credit enhancements - - -
Holdings of securities (excluding trading book) - - -
Protection provided - - -
Other - - -
Total 3,201 2,202 2,140
Sep 23 Mar 23 Sep 22
Total Securitisation exposure type $M $M $M
Liquidity facilities 10 11 12
Funding facilities 13,077 11,167 11,561
Underwriting facilities - - -
Lending facilities - - -
Credit enhancements - - -
Holdings of securities (excluding trading book) 2,070 2,698 3,352
Protection provided - - -
Other 92 116 55
Total 15,249 13,992 14,980
ANZ Basel III Pillar 3 disclosure September 2023
74
Table 12(l) part (i): Banking Book: Securitisation - Regulatory credit exposures by risk weight band
Sep 23 Mar 23 Sep 22
Securitisation risk
weights
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
≤ 25% 15,249 2,406 13,992 2,229 14,980 2,424
>25 ≤ 35% - - - - - -
>35 ≤ 50% - - - - - -
>50 ≤ 75% - - - - - -
>75 ≤ 100% - - - - - -
>100 ≤ 650% - - - - - -
1250% (Deduction) - - - - - -
Total 15,249 2,406 13,992 2,229 14,980 2,424
Sep 23 Mar 23 Sep 22
Resecuritisation risk
weights
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
≤ 25% - - - - - -
>25 ≤ 35% - - - - - -
>35 ≤ 50% - - - - - -
>50 ≤ 75% - - - - - -
>75 ≤ 100% - - - - - -
>100 ≤ 650% - - - - - -
1250% (Deduction) - - - - - -
Total - - - - - -
Sep 23 Mar 23 Sep 22
Total Securitisation risk
weights
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
Regulatory
credit
exposure
$M
Risk
weighted
assets
$M
≤ 25% 15,249 2,406 13,992 2,229 14,980 2,424
>25 ≤ 35% - - - - - -
>35 ≤ 50% - - - - - -
>50 ≤ 75% - - - - - -
>75 ≤ 100% - - - - - -
>100 ≤ 650% - - - - - -
1250% (Deduction) - - - - - -
Total 15,249 2,406 13,992 2,229 14,980 2,424
Table 12(l) part (ii): Banking Book: Securitisation - Aggregate securitisation exposures deducted from
Capital
No longer required under Basel III; defaulted exposures are given a risk weight of 1250% and no longer deducted
from Capital.
Table 12(m): Banking Book: Securitisations subject to early amortisation treatment
ANZ does not have any Securitisations subject to early amortisation treatment or using Standardised approach.
Table 12(n): Banking Book: Resecuritisation - Aggregate amount of resecuritisation exposures retained or
purchased
ANZ does not have any retained or purchased Resecuritisation exposures.
ANZ Basel III Pillar 3 disclosure September 2023
75
Trading Book
Table 12(o): Trading Book: Traditional and synthetic securitisation exposures
No assets from ANZ's Trading Book were securitised during the reporting period.
Table 12(p): Trading Book: Total amount of outstanding exposures intended to be securitised
No assets from ANZ's Trading Book were intended to be securitised as at the reporting date.
Table 12(q): Trading Book: Securitisation - Summary of current year's activity by underlying asset type
and facility
No assets from ANZ's Trading Book were securitised during the reporting period.
Table 12(r): Trading Book: Traditional and synthetic securitisation exposures
No assets from ANZ's Trading Book were securitised during the reporting period.
Table 12(s): Trading Book: Securitisation – Regulatory credit exposures by exposure type
ANZ does not have any Regulatory credit exposures by exposure type.
Table 12(t)(i) & Table 12(u)(i): Trading Book: Aggregate securitisation exposures subject to Internal
Models Approach (IMA) and the associated Capital requirements
ANZ does not have any Securitisation exposures subject to Internal Models Approach.
Table 12(t)(ii) & Table 12(u)(ii): Trading Book: Aggregate securitisation exposures subject to APS 120
and the associated Capital requirements
ANZ does not have any aggregate Securitisation exposures subject to APS120 and the associated Capital requirements.
Table 12(u)(iii): Trading Book: Securitisation - Aggregate securitisation exposures deducted from Capital
ANZ does not have any Securitisation exposures deducted from Capital.
Table 12(v): Trading Book: Securitisations subject to early amortisation treatment
ANZ does not have any Securitisation exposures subject to early amortisation or using Standardised approach.
Table 12(w): Trading Book: Resecuritisation - Aggregate amount of resecuritisation exposures retained or
purchased
ANZ does not have any retained or purchased Resecuritisation exposures.
ANZ Basel III Pillar 3 disclosure September 2023
76
Chapter 7 – Market risk
Table 13 Market risk – Standard approach
ANZ uses the standard model approach to measure market risk capital for specific risk
30
(APRA does not currently permit
Australian banks to use an internal model approach for this).
Table 13(b): Market risk – Standard approach
31
Sep 23 Mar 23 Sep 22
$M $M $M
Interest rate risk 114 132 113
Equity position risk - - -
Foreign exchange risk - - -
Commodity risk - - -
Total 114 132 113
Risk Weighted Assets equivalent 1,425 1,650 1,413
30
Specific risk is the risk that the value of a security will change due to issuer-specific factors. It applies to interest rate and equity
positions related to a specific issuer.
31
RWA equivalent is the capital requirement multiplied by 12.5 in accordance with APS 110.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 14 Market risk – Internal models approach
Definition and scope of market risk
Market Risk stems from ANZ’s trading and balance sheet activities and is the risk to ANZ’s earnings or economic value
arising from changes in interest rates, foreign exchange rates, credit spreads, volatility, correlations or from fluctuations
in bond, commodity or equity prices.
Market risk management of IRRBB is described in Chapter 10 and is excluded from this Chapter.
Regulatory approval to use the Internal Models Approach
ANZ has been approved by APRA to use the Internal Models Approach (IMA) under APS 116 Capital Adequacy: Market
Risk for general market risk and under APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced
ADIs) for interest rate risk in the banking book (IRRBB).
Governance of market risk
The Board Risk Committee supervision of market risk is supported by the Credit and Market Risk Committee (CMRC).
CMRC is responsible for the oversight and control of credit, market, insurance and material financial risks across the ANZ
Group and meets at least monthly.
The Market Risk function is a specialist risk management unit independent of the business that is responsible for:
Designing and implementing policies and procedures to ensure market risk exposures are managed within the appetite
and limit framework set by the Board.
Measuring and monitoring market risk exposures and approving counterparty and associated risks.
The ongoing effectiveness and appropriateness of the risk management framework.
Traded Market Risk
Traded Market Risk 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. Trading positions arise from transactions where ANZ acts as principal
with customers, financial exchanges or inter-bank counterparties.
The Traded, Foreign Exchange and Commodity Market Risk Policy and accompanying procedures (together the “TFC
Framework”) governs the management of traded market risk and its key components include:
A clear definition of the trading book.
A comprehensive set of requirements that promote the proactive identification and communication of risk.
A robust Value at Risk (VaR) quantification approach supplemented by comprehensive stress testing.
A comprehensive limit framework that controls all material market risks.
An independent Market Risk function with specific responsibilities.
Regular and effective reporting of market risk to executive management and the Board.
Non-Traded Market Risk
Non-Traded Market Risk is the market risk associated with the management of non-traded interest rate risk, liquidity risk
and foreign exchange exposures from the Group’s foreign currency capital and earnings.
Included in Non-Traded Market risk is Interest Rate Risk in the Banking Book (IRRBB). This is the risk of loss arising from
adverse changes in the overall and relative level of interest rates for different tenors, differences in the actual versus
expected net interest margin, and the potential valuation risk associated with embedded options in financial instruments
and bank products.
In quantifying risk, all material market risk factors need to be identified and reflected within the risk measurement
approach. Non-traded market risk (or balance sheet risk) comprises the management of non-traded interest rate risk,
liquidity risk, and foreign exchange exposures from the Group’s foreign currency capital and earnings.
ANZ Basel III Pillar 3 disclosure September 2023
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ANZ has a detailed market risk management and control framework, to support its balance sheet activities, which
incorporates an independent risk measurement approach to quantify the magnitude of market risk within the trading and
balance sheet portfolios. This approach, along with related analysis, identifies the range of possible outcomes that can
be expected over a given period of time, and establishes the likelihood of those outcomes and allocates an appropriate
amount of capital to support these activities.
Markets Risk is a specialist risk management unit independent of the business that is responsible for measuring and
monitoring market risk. Markets Risk has implemented policies and procedures to keep ANZ’s market risk exposures
managed within the appetite and limit framework set by the Board.
Measurement of Traded Market Risk
ANZ’s traded market risk management framework incorporates a risk measurement approach to quantify the magnitude
of market risk within trading books. This approach and related analysis identify the range of possible outcomes that can
be expected over a given period of time and establishes the relative likelihood of those outcomes.
ANZ’s key tools to measure and manage traded market risk on a daily basis are VaR, sensitivity measures and stress
tests. VaR is calculated using a historical simulation with a 500-day observation period for standard VaR, and a one-year
stressed period for stressed VaR. Traded VaR is calculated at a 99% confidence level for one and ten-day holding periods
for Standard VaR, and a ten-day holding period for stressed VaR. All material market risk factors and all trading portfolios
are captured within the VaR model, with the exception of specific risk for interest rates, equity trading, for which capital
is calculated using the Standardised approach.
ANZ also undertakes a wide range of stress tests on the Group trading portfolio and to individual trading portfolios.
Standard stress tests are applied daily measuring the potential loss that could arise from the largest market movements
observed since 2008 over specific holding periods. Holding periods used to calculate stress parameters differ and reflect
the relative liquidity of each product type. Results from stress testing on plausible severe scenarios are also calculated
daily.
VaR and stress tests are supplemented by loss limits and detailed control limits. Loss limits are designed to ensure that
in the event of continued losses from a trading activity, the trading activity is stopped and senior management reviews
before trading resumed. Where necessary, detailed control limits such as sensitivity or position limits are also in place to
ensure appropriate control is exercised over a specific risk or product.
Comparison of VaR estimates to gains/losses
Back testing involves comparing VaR calculations with corresponding profit and loss to identify how often trading losses
exceed the calculated VaR. For APRA back testing purposes, VaR is calculated at the 99% confidence interval with a one-
day holding period.
Back testing is conducted daily, and outliers are analysed to determine whether they are the result of trading decisions,
systemic changes in market conditions or issues related to the VaR model (historical data or model calibration).
ANZ uses actual and hypothetical profit and loss data. Hypothetical data is designed to remove the impacts of intraday
trading and sales margins. It is calculated as the difference between the value of the prior day portfolio at prior day
closing rates and the value at current day closing rates. Markets Finance calculates actual profit and loss while Market
Risk calculates hypothetical profit and loss.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 14(f): Value at Risk (VaR) and stressed VaR over the reporting period
32
Six months ended Sep 23
99% 1 Day Value at Risk (VaR) Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 3.3 6.2 2.1 2.8
Interest Rate 8.5 15.3 5.0 6.6
Credit 5.0 7.7 3.2 5.9
Commodity 2.9 4.9 1.8 4.0
Equity - - - -
Six months ended Mar 23
99% 1 Day Value at Risk (VaR) Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 2.6 3.9 1.6 3.9
Interest Rate 8.4 17.6 5.3 5.8
Credit 4.1 5.9 2.5 3.9
Commodity 3.1 6.6 2.0 2.6
Equity - - - -
Six months ended Sep 22
99% 1 Day Value at Risk (VaR) Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 2.0 4.0 1.1 1.8
Interest Rate 7.1 10.1 5.0 7.6
Credit 2.3 3.0 1.6 2.6
Commodity 2.3 4.9 1.4 4.3
Equity - - - -
Six months ended Sep 23
99% 10 Day Stressed VaR Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 27.3 77.4 9.7 15.1
Interest Rate 82.1 157.8 36.7 38.8
Credit 28.8 37.8 19.4 32.2
Commodity 23.9 37.0 11.8 37.0
Equity - - - -
Six months ended Mar 23
99% 10 Day Stressed VaR Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 44.6 82.3 21.2 57.0
Interest Rate 86.4 125.6 59.0 103.8
Credit 26.3 39.5 14.3 21.1
Commodity 27.4 41.6 20.7 22.3
Equity - - - -
Six months ended Sep 22
99% 10 Day Stressed VaR Mean
$M
Maximum
$M
Minimum
$M
Period end
$M
Foreign Exchange 25.1 62.0 11.7 34.2
Interest Rate 67.2 127.5 35.5 86.8
Credit 18.7 26.1 11.4 13.8
Commodity 22.3 35.9 15.5 27.3
Equity - - - -
32
The Foreign exchange VaR excludes foreign exchange translation exposures outside of the trading book.
ANZ Basel III Pillar 3 disclosure September 2023
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Comparison of VaR estimates with actual gains/losses experienced
Reporting of Traded Market Risk
Market Risk reports the result of daily VaR and stress testing results to senior management in Market Risk and the Markets
business. Market Risk will escalate details of any limit breach to the appropriate discretion holder within Market Risk and
to Group Risk, and reports to the CMRC each month.
Market Risk monitors and analyses back testing results daily and reports results to the CMRC quarterly.
As highlighted in the chart above, when using actual profit and loss data, back-testing exceptions for the Trading Book
have been as expected over the past year. Given the extreme market volatility, there have been a larger number of
exceptions when using hypothetical profit and loss data and this has required the addition of a plus factor for market risk
capital purposes.
Mitigation of market risk
The Market Risk team’s responsibilities, including the reporting and escalation processes described above, are
fundamental to how market risk is managed. Market Risk has a presence in all the major dealing operations centres in
Australia, New Zealand, Asia, Europe and America.
Commodities risk
Commodity price risk arises as a result of movement in prices or the implied volatilities of various commodities. All
exposures are transferred to the trading book centrally managed by the Markets business and monitored by Market Risk
in accordance with the TFC framework.
Foreign exchange risk
Foreign exchange risk arises as a result of movements in values or the implied volatilities of exchange rates.
Exposures from ANZ’s normal operating business and trading activities are recorded in core multi-currency systems and
managed within the trading book in accordance with the TFC framework.
Structural exposures from foreign investments and capital management activities are managed in accordance with
policies approved by the Board Risk Committee, with the main objective of ensuring that ANZ’s capital ratio is largely
protected from changes in foreign exchange. As at 30 September 2023, ANZ’s investment in ANZ Bank New Zealand
Limited is the main source of the structural foreign exchange exposure.
‐15
‐10
‐5
0
5
10
15
051015
Actual
PnL
Millions
VaR
Millions
Traded Risk: Actual PnL vs VaR
03 Apr 2023 to 29 Sep 2023
ANZ Basel III Pillar 3 disclosure September 2023
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Chapter 8 – Operational risk
Table 15 Operational risk
Definition of operational risk
Operational Risk is the risk of loss and/or non-compliance with laws resulting from inadequate or failed internal
processes, people and/or systems, or from external events. This definition includes legal risk, and the risk of reputation
loss, but excludes strategic risk. At ANZ, Operational Risk is managed in close partnership with compliance risk, which
is the risk of failure to act in accordance with laws, regulations, industry standards and codes, internal policies and
procedures and principles of good governance as applicable to ANZ’s businesses.
ANZ’s I.AM (Identify, Act, Monitor) - Compliance and Operational Risk Framework (I.AM Framework), taking into
consideration the internal and external environment in which ANZ operates at any point in time, allows for targeted
focus on particular areas of operational risk. Currently, ANZ has identified Compliance Risk, Conduct Risk, Financial
Crime Risk and Technology Risk as separate Key Material Risks, which are managed in accordance with the I.AM
Framework. ANZ is in the process of adopting the 16 Operational Risk Themes provided under the Operational Risk
Exchange (ORX) Taxonomy, which is a simplified and industry standard approach to the classification of Operational
Risk.
ANZ uses the Standardised Measurement Approach (SMA) for calculation of Operational Risk capital requirements under
APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk. This methodology applies across
all of ANZ. For the purposes of RBNZ capital adequacy, ANZ Bank New Zealand Ltd uses Reserve Bank of New Zealand
standardised approach to Operational Risk capital calculation.
Operational risk governance and structure
The primary responsibilities for operational risk are vested by the ANZ Group Risk Management Strategy, in the Board
Risk Committee and Operational Risk Executive Committee. Each of the duties of these committees stated in Chapter
2 – Risk appetite and governance, applies to their responsibilities for Compliance and Operational Risk.
Risk management framework
ANZ operates the three lines of defence model for the management of Operational Risk. Each line of defence has clearly
defined roles, responsibilities and escalation paths to support effective two-way communication and management of
Operational Risk at ANZ. There are also on-going review mechanisms in place to ensure the I.AM Framework continues
to meet organisational needs and regulatory requirements.
First line
The Business has first line of defence responsibility for managing Compliance and Operational Risk including obligations
for:
identification, measurement and management of key risks, obligations and the related control environment across
the business.
Second line
Compliance and Operational Risk functions (Divisional/Functional and Group) form the second line of defence.
Divisional/Functional Compliance and Operational Risk is accountable for:
undertaking appropriate oversight and independent review & challenge and assurance over business activities
including consistent implementation of the I.AM Framework, across the division/function.
Group Compliance and Operational Risk is accountable for:
developing and maintaining the I.AM Framework and relevant policies and procedures;
providing subject matter expertise on the I.AM Framework and relevant policies and procedures to enable consistent
implementation; and
supporting the establishment of, and monitoring compliance with, the Group Operational Risk, Risk Appetite
Statements (RAS).
Third line
Internal Audit forms the third line of defence and is accountable for:
providing independent and objective assurance to management and the ANZ Board regarding the adequacy and
compliance with policy and regulatory requirements;
ANZ Basel III Pillar 3 disclosure September 2023
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performing objective assessments across all geographies, divisions, lines of business and processes, and
undertaking independent review of the adequacy of the I.AM Framework.
Collectively Internal Audit, Compliance and Operational Risk functions and the Business are responsible for monitoring
and reporting to Executive Management, the Board, Regulators and others on all matters related to the measurement
and management of Compliance and Operational Risk.
Operational Risk Framework
ANZ’s I.AM Framework is delivered through:
Level 1 Compliance and Operational Risk Policy (the Policy) – approved by the Board Risk Committee, outlines the
core standards, outlining roles and responsibilities and minimum requirements of the way in which operational risks
and obligations are identified, acted on and monitored across ANZ, sets the approach for governing the overall
measurement and management of Compliance and Operational Risk across ANZ.
Level 2A Operational Risk Procedures (the Requirements, and Lifecycle, Roles and Responsibilities) – owned by Group
Compliance and Operational Risk, provide the procedures to support the consistent application of Level 1 Policy
across ANZ. The procedures are further augmented by tools, templates, systems and on-going training.
Operational risk mitigation
In line with industry practice, ANZ obtains insurance to cover those Operational Risks where cost-effective premiums can
be obtained. In conducting their business, Business Units are advised to act as if uninsured and not to use insurance as
a guaranteed mitigant for operational risk.
ANZ has business continuity, recovery and crisis management plans. The intention of the business continuity and recovery
plans is to ensure critical business functions can be maintained, or restored in a timely fashion, in the event of material
disruptions arising from internal or external events.
Crisis management planning at Group and country levels supplement business continuity plans in the event of a broader
group or country crisis. Crisis management plans include crisis team structures, roles, responsibilities and contact lists,
and are subject to testing.
Operational risk reporting
ANZ’s I.AM Framework includes a global governance risk and compliance (‘GRC’) platform within ANZ that operates as
the source of truth and provides greater transparency of Risk, Controls, Obligations and Events information across ANZ.
This information is used for internal and external reporting including regulatory reporting.
The Operational Risk Executive Committee (‘OREC’) monitors and oversees at an enterprise level the state of Compliance
and Operational Risk management (including via the standardised ‘Non-Financial Risk Dashboard’) and instigate any
necessary corrective actions. Divisional and Business Unit level Risk Management committees also operate to ensure
matters of relevance are escalated to OREC accordingly.
Operational risk management
The objective of ANZ’s approach to Operational and Compliance Risk is to ensure that risks are identified, assessed,
measured, evaluated, treated, monitored and reported in a structured environment with appropriate governance
oversight. Further, that a control environment is in place to not only manage those risks but ensure traceability through
to our obligations. ANZ manages Compliance and Operational Risk in the best interests of its customers and the
community and to meet the expectations of the regulators.
The Compliance and Operational Risk Policy (Level 1) establishes the fundamental requirements at ANZ which inform
policies, processes, and procedure development of ANZ’s management of Compliance and Operational Risk, through
timely and appropriate identification, action and monitoring. It is part of ANZ’s Risk Management Framework and ANZ’s
I.AM (Identify, Act, Monitor) Framework (Level 2). ANZ takes a risk-based approach to the management of operational
risks and obligations, which means it assigns enhanced resource and oversight to those Risks and obligations that may
cause the Bank and its Customers greater harm. This enables ANZ to be consistent in proactively identifying, assessing,
managing, reporting and escalating Operational Risk related risk exposures, while respecting the specific obligations of
each jurisdiction in which ANZ operates.
Day-to-day management of Operational Risk is the responsibility of the 1st Line Business. Risk management, supported
by a strong Risk Culture, ensures all staff are thinking about and managing risk on a continuous basis – “Risk is
Everyone’s Responsibility”, and Senior Management maintain oversight of those risks that if materialised, would
adversely affect ANZ.
ANZ Basel III Pillar 3 disclosure September 2023
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ANZ’s approach to Operational Risk Capital Adequacy
Group Finance is responsible for the Operational Risk calculation under SMA, whilst Group Compliance and Operational
Risk is accountable for the measurement and allocation of Operational Risk Regulatory Capital within ANZ.
Operational Risk Capital is held to protect depositors and shareholders from rare and severe unexpected losses. ANZ
maintains and calculates Operational Risk Capital on an annual basis, per APS 115 Capital Adequacy: Standardised
Measurement Approach to Operational Risk.
Once calculated, the capital is allocated to divisions based on contribution to Group operational risk capital and the historic
loss experience. Accordingly, capital allocations are structured to encourage businesses to effectively manage their
operational risk exposures e.g., improve controls, reduce losses etc.
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Chapter 9 – Equities
Table 16 Equities – Disclosures for banking book positions
Definition and categorisation of equity investments held in the banking book
Equity risk is the risk of financial loss arising from the unexpected reduction in value of equity investments not held in
the trading book including those of the Group’s joint ventures and associates. ANZ’s equity exposures in the banking
book are primarily categorised as follows:
Equity investments that are taken for strategic reasons - These transactions represent strategic business initiatives
and include ANZ’s investments in partnership arrangements with financial institutions in Asia. These investments are
undertaken after extensive analysis and due diligence by Group Strategy, internal specialists and external advisors,
where appropriate. Board approval is required prior to committing to any investments over delegated authorities, and
all regulatory notification requirements are met. Performance of these investments is monitored by both the owning
business unit and where appropriate, either Group Strategy or a dedicated investment oversight group to ensure that
it is within expectations.
Equity investments made as the result of a work out of a problem exposure - From time to time, ANZ will take an
equity stake in a customer as part of a work out arrangement for problem exposures. These investments are made
only where there is no other viable option available and form an immaterial part of ANZ’s equity exposures.
Valuation of and accounting for equity investments in the banking book
In line with Group Accounting Policy the accounting treatment of equity investments depends on whether ANZ has
significant influence over the investee or not.
Investments in associates
Where significant influence exists, the investment is classified as an Investment in Associate in the financial statements.
ANZ adopts the equity method of accounting for associates. ANZ’s share of the profit or loss of associates is included in
the consolidated income statement. The associate investments are recognised at cost plus ANZ’s share of post-
acquisition increase or decrease in net assets less accumulated impairment. Interests in associates are reviewed semi-
annually for impairment. If an indicator of impairment is identified, their recoverable amount is determined being the
higher of their fair value less costs of disposal (market value for listed entities) or a discounted cash flow methodology
to assess value in-use (VIU). If the recoverable amount is less than the carrying value of the investment, an impairment
is recorded. As at 30 September 2023 the carrying values of the Group’s investments in AMMB Holdings Berhad
(Ambank) and PT Bank Pan Indonesia (PT Panin) were supported by their market value or VIU.
Equity instruments held at Fair Value
Where ANZ does not have significant influence over the investee, the instrument is categorised as an investment security
and classified as fair value through profit and loss, with changes in fair value recognised in the income statement, unless
designated irrevocably on acquisition as fair value through other comprehensive income (FVOCI). If this election is made,
gains or losses are recorded in other comprehensive income and are not reclassified from other comprehensive income
to profit or loss on disposal of the investment. However, gains or losses may be reclassified within equity.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 16(b) and 16(c): Equities – Types and nature of Banking Book investments
Sep 23
Equity investments $M
Balance sheet value Fair value
Value of listed (publicly traded) equities 3,179 2,900
Value of unlisted (privately held) equities 98 98
Total 3,277 2,998
Mar 23
Equity investments $M
Balance sheet value Fair value
Value of listed (publicly traded) equities 3,122 3,146
Value of unlisted (privately held) equities 97 97
Total 3,219 3,243
Sep 22
Equity investments $M
Balance sheet value Fair value
Value of listed (publicly traded) equities 2,970 3,807
Value of unlisted (privately held) equities 619 619
Total 3,589 4,426
Table 16(d) and 16(e): Equities – gains (losses)
33
Half Year Half Year Half Year
Sep-23 Mar 23 Sep 22
Realised gains (losses) on equity investments $M $M $M
Cumulative realised gains (losses) from disposals
and liquidations in the reporting period
(3) - -
Cumulative realised losses from impairment and write-downs in
the reporting period
- - -
(3) - -
Half Year Half Year Half Year
Unrealised gains (losses) on equity investments Sep-23 Mar-23 Sep-22
Total unrealised gains (losses) (44) 9 (95)
Reversal of prior period unrealised gains (losses) from disposals
and liquidations in the reporting period
- - -
Total unrealised gains (losses) included in Common
Equity Tier 1, Tier 1 and/or Tier 2 capital
(44) 9 (95)
Table 16(f): Equities Risk Weighted Assets
From 1 January 2013 all banking book equity exposures are deducted from Common Equity Tier 1 capital.
33
Table 16(d) and Table 16 (e) are reported on an after-tax basis
ANZ Basel III Pillar 3 disclosure September 2023
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Chapter 10 – Interest Rate Risk in the Banking Book
Table 17 Interest Rate Risk in the Banking Book
Definition of Interest Rate Risk in the Banking Book (IRRBB)
Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates
on ANZ’s future earnings or economic value. The risk generally arises from:
Repricing and yield curve risk - the risk to earnings or economic value as a result of changes in the overall level
of interest rates and/or the relativity of these rates across the yield curve.
Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking
book items.
Optionality risk – the risk to earnings or market value arising from the existence of stand-alone or embedded
options in banking book items.
Regulatory capital approach
ANZ has received approval from APRA to use the Internal Model Approach (IMA) for the calculation of regulatory capital
for IRRBB, under APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (Advanced ADIs).
Governance
The Board Risk Committee has established a risk appetite for IRRBB and delegated authority to the Group Asset and
Liability Committee (GALCO) to manage the strategic position (capital investment term) and oversee the interest rate
risk arising from the repricing of asset and liabilities (mismatch risk) in the banking book. GALCO has delegated the
management of this mismatch risk to the Markets business.
Market Risk is the independent function responsible for:
Designing and implementing policies and procedures to ensure that IRRBB exposure is managed within the limit
framework set by the Board Risk Committee.
Monitoring and measuring IRRBB market risk exposure, compliance with limits and policies.
Ensuring ongoing effectiveness and appropriateness of the risk management framework.
Risk Management framework
IRRBB is managed under a comprehensive measurement and reporting framework, supported by an independent Market
Risk function. Key components of the framework include:
A comprehensive set of policies that promote proactive risk identification and communication.
Funds Transfer Pricing framework to transfer interest rate risk from business units so it can be managed by the
Markets business and monitored by Market Risk.
Quantifying the magnitude of risks and controlling the potential impact that changes in market interest rates can have
on the net interest income and balance sheet market value of ANZ.
Regular and effective reporting of IRRBB to executive management and the Board.
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Measurement of interest rate risk in the banking book
ANZ uses the following principal techniques to quantify and monitor IRRBB:
Interest Rate Sensitivity - this is an estimate of the change in economic value of the banking book due to a 1 basis
point move in a specific part of the yield curve.
Earnings at risk (EaR) - this is an estimate of the amount of income that is at risk from interest rate movements over
a given holding period, expressed to a 97.5% level of statistical confidence.
Value at risk (VaR) - this is an estimate of the impact of interest rate changes on the banking book’s market value,
expressed to a 99% level of statistical confidence for a given holding period.
Market Value loss limits - this mitigates the potential for embedded losses within the banking book.
Stress testing - standard extraordinary forward looking and repricing term assumptions tests are used to highlight
potential risk which may not be captured by VaR, and how the portfolio might behave under extraordinary
circumstances.
The calculations used to quantify IRRBB require assumptions to be made about the repricing term of exposures that do
not have a contractually defined repricing date, such as deposits with no set maturity dates, and prepayments. Changes
to these assumptions require GALCO approval.
Basis and optionality risks are measured using Monte Carlo simulation techniques, to generate a theoretical worst
outcome at a specified confidence level (typically no less than at a 99% level of statistical confidence) less the average
outcome.
Reporting of interest rate risk in the banking book
Market Risk analyses the output of ANZ’s VaR, EaR and Stress Testing calculations daily. Compliance with the risk appetite
and limit framework is reported to CMRC, GALCO and the Board Risk Committee.
ANZ’s interest rate risk in the banking book capital requirement
The IRRBB regulatory capital requirements includes a value for repricing and yield curve risk, basis and optionality risks
based on a 99% confidence interval, one year holding period and a six-year historical data set.
Embedded losses also make up the capital requirement and are calculated as the difference between the book value and
the current economic value of banking book items
accounted for on an actual basis.
Results of standard shock scenario
The Basel II framework sets out a standard shock scenario of a 200 basis point parallel shift change in interest rates, in
order to establish a comparable test across banks.
Table 17(b) that follows shows the results of this shock by currency of ANZ’s banking book exposures.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 17(b): Interest Rate Risk in the Banking Book
Change in Economic Value
Standard Shock Scenario Stress Testing: Sep 23 Mar 23 Sep 22
Interest rate shock applied $M $M $M
AUD
200 basis point parallel increase (478) (460) (729)
200 basis point parallel decrease 473 452 751
NZD
200 basis point parallel increase (118) (37) (140)
200 basis point parallel decrease 105 15 124
USD
200 basis point parallel increase 13 16 109
200 basis point parallel decrease (17) (21) (116)
Other
200 basis point parallel increase (54) (77) (70)
200 basis point parallel decrease 62 92 85
IRRBB regulatory capital 2,536 2,551 3,045
IRRBB regulatory RWA 31,703 31,887 38,063
IRRBB stress testing methodology
Stress tests within ANZ include standard and extraordinary tests. These tests are used to highlight potential risk which
may not be captured by VaR, and how the portfolio might behave under extraordinary circumstances. Standard stress
tests include statistically derived scenarios based on historical yield curve movements. These combine parallel shocks
with twists and bends in the curve to produce a wide range of hypothetical scenarios at high statistical confidence levels,
with the single worst scenario identified and reported. Extraordinary stress tests include interest rate moves from
historical periods of stress and potential future scenarios, including behavioural characteristics as well as stresses to
assumptions made about the repricing term of exposures. The rate move scenarios include changes over the stressed
periods and the worst theoretical losses over the selected period are reported. Stresses of the repricing term assumptions
investigate scenarios where actual repricing terms are significantly different to those modelled.
ANZ Basel III Pillar 3 disclosure September 2023
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Chapter 11 – Leverage and Liquidity Coverage Ratio
Leverage Ratio
The Leverage Ratio requirements are part of the Basel Committee on Banking Supervision (BCBS) Basel III capital
framework. It is a simple, non-risk based supplement or backstop to the current risk based capital requirements and is
intended to restrict the build-up of excessive leverage in the banking system.
Consistent with the BCBS definition, APRA’s Leverage Ratio compares Tier 1 Capital to the Exposure Measure (expressed
as a percentage) as defined by APS 110: Capital Adequacy. APRA requires ADIs authorised to use the internal ratings
based approach to credit risk to maintain a minimum leverage ratio of 3.5% from January 2023.
At 30 September 2023, the Group’s Leverage Ratio of 5.4% was above the 3.5% minimum requirement. Table 18 below
shows the Group’s Leverage Ratio calculation as at 30 September 2023 and Table 19 summarises the reconciliation of
accounting assets and leverage ratio exposure measure at 30 September 2023.
Table 18 Leverage Ratio
Sep 23 Mar 23 Sep 22
$M $M $M
On-balance sheet exposures
1 On-balance sheet items (excluding derivatives and SFTs, but including collateral) 996,947 1,025,480 966,226
2 (Asset amounts deducted in determining Basel III Tier 1 capital) (12,284) (11,965) (12,138)
3 Total on-balance sheet exposures (excluding derivatives and SFTs) 984,663 1,013,515 954,088
Derivative exposures
4 Replacement cost associated with all derivatives transactions (i.e. net of eligible
cash variation margin)
19,984 13,959 19,606
5 Add-on amounts for PFE associated with all derivatives transactions 31,992 33,127 38,739
6 Gross-up for derivatives collateral provided where deducted from the balance sheet
assets pursuant to the operative accounting framework
4,683 2,777 3,058
7 (Deductions of receivables assets for cash variation margin provided in derivatives
transactions
)
(6,253) (5,370) (9,714)
8 (Exempted CCP leg of client-cleared trade exposures) - - -
9 Adjusted effective notional amount of written credit derivatives 9,740 10,154 10,823
10 (Adjusted effective notional offsets and add-on deductions for written credit
derivatives)
(9,138) (10,035) (10,712)
11 Total derivative exposures 51,008 44,612 51,800
Securities financing transaction exposures
12 Gross SFT assets (with no recognition of netting), after adjusting for sale
accounting transactions
47,840 39,647 29,502
13 (Netted amounts of cash payables and cash receivables of gross SFT assets) (2,159) (2,495) (899)
14 CCR exposure for SFT assets 5,066 6,604 6,967
15 Agent transaction exposures - - -
16 Total securities financing transaction exposures 50,747 43,756 35,570
Other off-balance sheet exposures
17 Off-balance sheet exposure at gross notional amount 297,020 297,629 285,816
18 (Adjustments for conversion to credit equivalent amounts) (158,719) (156,630) (158,963)
19 Off-balance sheet items 138,301 140,999 126,853
Capital and Total Exposures
20 Tier 1 capital 66,026 65,564 63,558
21 Total exposures 1,224,719 1,242,882 1,168,311
Leverage ratio
22 Basel III leverage ratio 5.4% 5.3% 5.4%
ANZ Basel III Pillar 3 disclosure September 2023
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Table 19 Summary comparison of accounting assets vs. leverage ratio exposure measure
Sep 23 Mar 23 Sep 22
$M $M $M
1 Total consolidated assets as per published financial statements 1,106,041 1,111,605 1,085,729
2 Adjustment for investments in banking, financial, insurance or commercial
entities that are consolidated for accounting purposes but outside the scope of
regulatory consolidation.
(848) (864) 173
3 Adjustment for assets held on the balance sheet in a fiduciary capacity pursuant
to the Australian Accounting Standards but excluded from the leverage ratio
exposure measure
- - -
4 Adjustments for derivative financial instruments. (9,398) (1,002) (38,375)
5 Adjustment for SFTs (i.e. repos and similar secured lending) 2,907 4,109 6,069
6 Adjustment for off-balance sheet exposures (i.e. conversion to credit equivalent
amounts of off-balance sheet exposures)
138,301 140,999 126,853
7 Other adjustments (12,284) (11,965) (12,138)
Leverage ratio exposure 1,224,719 1,242,882 1,168,311
ANZ Basel III Pillar 3 disclosure September 2023
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Table 20 Liquidity Coverage Ratio disclosure template
Sep 23 Jun 23
Total
Unweighted
Value
$M
Total
Weighted
Value
$M
Total
Unweighted
Value
$M
Total
Weighted
Value
$M
Liquid assets, of which:
1 High-quality liquid assets (HQLA)
265,713
271,021
2 Alternative liquid assets (ALA) -
-
3 Reserve Bank of New Zealand (RBNZ) securities 2,192
2,615
Cash outflows
4 Retail deposits and deposits from small business
customers
263,220 25,517 260,584 24,842
5 of which: stable deposits 117,575 5,879 117,072 5,854
6 of which: less stable deposits 145,645 19,638 143,512 18,988
7 Unsecured wholesale funding 281,002 146,698 297,473 159,085
8 of which: operational deposits (all
counterparties) and deposits in networks for
cooperative banks
93,536 22,553 95,428 23,001
9 of which: non-operational deposits (all
counterparties)
174,870 111,549 185,373 119,412
10 of which: unsecured debt 12,596 12,596 16,672 16,672
11 Secured wholesale funding 5,405 1,874
12 Additional requirements 195,559 70,639 184,517 62,063
13 of which: outflows related to derivatives
exposures and other collateral requirements
48,206 48,206 40,701 40,701
14 of which: outflows related to loss of funding on
debt products
- - - -
15 of which: credit and liquidity facilities 147,353 22,433 143,816 21,362
16 Other contractual funding obligations 7,764 - 8,515 -
17 Other contingent funding obligations 118,609 8,024 120,339 8,012
18 Total cash outflows 256,283 255,876
Cash inflows
19 Secured lending (e.g. reverse repos) 28,360 1,549 25,679 1,682
20 Inflows from fully performing exposures 24,954 17,190 26,350 17,835
21 Other cash inflows 36,016 36,016 28,577 28,577
22 Total cash inflows 89,330 54,755 80,606 48,094
23 Total liquid assets 267,905 273,636
24 Total net cash outflows 201,528 207,782
25 Liquidity Coverage Ratio (%) 132.9% 131.7%
Number of data points used (simple average) 65 655655
Liquidity Coverage Ratio (LCR)
ANZ’s average LCR for the 3 months to 30 September 2023 was 132.9% with total liquid assets exceeding net outflows
by an average of $66.4 billion.
The main contributors to net cash outflows were modelled outflows associated with the bank’s corporate and retail
deposit portfolios, offset by inflows from maturing loans. While cash outflows associated with derivatives are material,
these are effectively offset by derivative cash inflows.
ANZ has a well-diversified deposit and funding base avoiding undue concentrations by investor type, maturity, market
source and currency.
ANZ monitors and manages its liquidity risk on a daily basis including LCR by geography and currency, ensuring ongoing
compliance across the network.
ANZ Basel III Pillar 3 disclosure September 2023
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Table 21 NSFR disclosure template
Sep 23
Unweighted value by residual maturity
BLANK
No
maturity
< 6
months
6
months
to <
1yr
≥ 1yr Weighted
value
Available Stable Funding (ASF) Item $M $M $M $M $M
1 Capital 68,690 - - 30,927 99,617
2 of which: regulatory capital 68,690 - - 30,927 99,617
3 of which: other capital instruments - - - - -
4 Retail deposits and deposits from small business customers 241,825 85,575 - - 301,317
5 of which: stable deposits 115,399 17,765 - - 126,505
6 of which: less stable deposits 126,426 67,810 - - 174,812
7 Wholesale funding 167,556 304,014 43,996 70,841 220,467
8 of which: operational deposits 93,077 - - - 46,538
9 of which: other wholesale funding 74,479 304,014 43,996 70,841 173,929
10 Liabilities with matching interdependent assets - - - - -
11 Other liabilities 19,620 14,158 358 3,705 3,884
12 of which: NSFR derivative liabilities 14,158 - - -
13 of which: All other liabilities and equity not included in the
above cate
gories
19,620 - 358 3,705 3,884
14 Total ASF 625,285
Required Stable Funding (RSF) Item
15a Total NSFR (HQLA) 8,439
15b ALA 809
15c RBNZ securities 919
16 Deposits held at other financial institutions for operational
purposes
- - - - -
17 Performing loans and securities 14,209 120,422 48,444 547,055 485,212
18 of which: Performing loans to financial institutions secured by
Level 1 HQLA
- 41,378 - - 4,138
19 of which: Performing loans to financial institutions secured by
non-Level 1 HQLA and unsecured performing loans to financial
institutions
955 25,760 12,911 39,713 50,988
20 of which: Performing loans to non- financial corporate clients,
loans to retail and small business customers, and loans to
sovereigns, central banks and public sector entities (PSEs)
12,023 47,317 30,381 130,652 157,135
21 of which: With a risk weight of less than or equal to 35%
under APS 112
- 402 374 14,942 10,100
22 of which: Performing residential mortgages - 5,025 4,809 368,444 264,121
23 of which: Standard loans to individuals with an LVR of 80%
or below
- 4,116 3,936 297,201 202,674
24 of which: Securities that are not in default and do not qualify
as HQLA, including exchange-traded equities
1,231 916 294 8,445 8,830
25 Assets with matching interdependent liabilities - - - - -
26 Other assets: 29,915 40,216 853 3,300 33,428
27 of which: Physical traded commodities, including gold 2,472 2,101
28 of which: Assets posted as initial margin for derivative
contracts and contributions to default funds of central
counterparties (CCPs)
3,958 - - 3,364
29 of which: NSFR derivative assets 15,036 - - 877
30 of which: NSFR derivative liabilities before deduction of
variation margin posted
20,481 - - 4,096
31 of which: All other assets not included in the above categories 27,444 741 853 3,300 22,989
32 Off-balance sheet items - - 201,679 8,623
33 Total RSF 537,430
34 Net Stable Funding Ratio (%) 116.35%
ANZ's NSFR as at 30 September 2023 was 116.3%, down 1.6% in the quarter since June 2023.
The main sources of Available Stable Funding (ASF) at September 2023 were deposits from Retail and SME customers,
at 48%, with other wholesale funding (including Term Funding Facilities) at 28% and capital at 16% of the total ASF.
The majority of ANZ's Required Stable Funding (RSF) at September 2023 was driven by mortgages at 49% and other
lending to non-FI customers at 29% of the total RSF.
ANZ Basel III Pillar 3 disclosure September 2023
93
Table 21 NSFR disclosure template (continued)
Jun 23
Unweighted value by residual maturity
BLANK
No
maturity
< 6
months
6
months
to <
1
yr
≥ 1yr Weighted
value
Available Stable Funding (ASF) Item $M $M $M $M $M
1 Capital 68,938 - - 32,445 101,383
2 of which: regulatory capital 68,938 - - 32,445 101,383
3 of which: other capital instruments - - - - -
4 Retail deposits and deposits from small business customers 238,212 80,182 - - 293,062
5 of which: stable deposits 113,352 16,813 - - 123,657
6 of which: less stable deposits 124,860 63,369 - - 169,405
7 Wholesale funding 168,770 309,107 47,554 62,913 213,740
8 of which: operational deposits 98,874 - - - 49,437
9 of which: other wholesale funding 69,896 309,107 47,554 62,913 164,303
10 Liabilities with matching interdependent assets - - - - -
11 Other liabilities 12,865 13,404 150 3,047 3,122
12 of which: NSFR derivative liabilities 13,404 - -
13 of which: All other liabilities and equity not included in the
above categories
12,865 - 150 3,047 3,122
14 Total ASF
611,307
Required Stable Funding (RSF) Item
15(a) Total NSFR (HQLA) 8,053
15(b) ALA 2,009
15(c) RBNZ securities 924
16 Deposits held at other financial institutions for operational
purposes
- - - - -
17 Performing loans and securities 13,435 117,988 41,861 528,798 465,554
18 of which: Performing loans to financial institutions secured by
Level 1 HQLA
- 40,008 - - 4,001
19 of which: Performing loans to financial institutions secured by
non-Level 1 HQLA and unsecured performing loans to
financial institutions
566 24,437 9,862 22,559 31,721
20
of which: Performing loans to non- financial corporate clients,
loans to retail and small business customers, and loans to
sovereigns, central banks and public sector entities (PSEs)
11,606 47,796 26,814 150,394 171,938
21 of which with a risk weight of less than or equal to 35%
under APS 112
- 480 398 15,335 10,408
22 of which: Performing residential mortgages: - 5,218 4,749 347,684 249,401
23 of which: Standard loans to individuals with an LVR of 80%
or below
- 4,371 3,959 281,277 192,136
24 of which: Securities that are not in default and do not qualify
as HQLA, including exchange-traded equities
1,263 529 436 8,161 8,493
25 Assets with matching interdependent liabilities - - - - -
26 Other assets: 27,596 39,334 1,474 2,570 33,046
27 of which: Physical traded commodities, including gold 2,514 2,137
28
of which: Assets posted as initial margin for derivative
contracts and contributions to default funds of central
counterparties (CCPs)
3,720 - - 3,162
29 of which: NSFR derivative assets 13,837 - - 433
30
of which: NSFR derivative liabilities before deduction of
variation margin posted
21,333 - - 4,267
31 of which: All other assets not included in the above categories 25,083 445 1,474 2,570 23,048
32 Off-balance sheet items - - 205,773 8,747
33 Total RSF
518,333
34 Net Stable Funding Ratio (%)
117.94%
ANZ Basel III Pillar 3 disclosure September 2023
94
Glossary
ADI Authorised Deposit-taking Institution.
Basel III Credit Valuation
adjustment (CVA) capital
charge
CVA charge is an additional capital requirement under Basel III for bilateral
derivative exposures. Derivatives not cleared through a central
exchange/counterparty are subject to this additional capital charge and
also receive normal CRWA treatment under Basel II principles.
Collectively Assessed
Provision for Credit
Impairment
Collectively assessed provisions for credit impairment represent the
Expected Credit Loss (ECL) calculated in accordance with AASB 9 Financial
Instruments (AASB 9). These incorporate forward looking information and
do not require an actual loss event to have occurred for an impairment
provision to be recognised.
Credit exposure The aggregate of all claims, commitments and contingent liabilities arising
from on- and off-balance sheet transactions (in the banking book and
trading book) with the counterparty or group of related counterparties.
Credit risk The risk of financial loss resulting from a counterparty failing to fulfil its
obligations, or from a decrease in credit quality of a counterparty resulting
in a loss in value.
Credit Valuation Adjustment
(CVA)
Over the life of a derivative instrument, ANZ uses a CVA model to adjust
fair value to take into account the impact of counterparty credit quality.
The methodology calculates the present value of expected losses over the
life of the financial instrument as a function of probability of default, loss
given default, expected credit risk exposure and an asset correlation factor.
Impaired derivatives are also subject to a CVA.
Days past due
The number of days a credit obligation is overdue, commencing on the date
that the arrears or excess occurs and accruing for each completed calendar
day thereafter.
Exposure at Default (EAD) Exposure At Default is defined as the expected facility exposure at the date
of default.
Impaired assets (IA) Facilities are classified as impaired when there is doubt as to whether the
contractual amounts due, including interest and other payments, will be
met in a timely manner. Impaired assets include impaired facilities, and
impaired derivatives. Impaired derivatives have a credit valuation
adjustment (CVA), which is a market assessment of the credit risk of the
relevant counterparties.
Impaired loans (IL) Impaired loans comprise of drawn facilities where the customer’s status is
defined as impaired.
Individual provision charge
(IPC)
Individual provision charge is the amount of expected credit losses on
financial instruments assessed for impairment on an individual basis (as
opposed to on a collective basis). It takes into account expected cash flows
over the lives of those financial instruments.
Individually Assessed
Provisions for Credit
Impairment
Individually assessed provisions for credit impairment are calculated in
accordance with AASB 9 Financial Instruments (AASB 9). They are
assessed on a case-by-case basis for all individually managed impaired
assets taking into consideration factors such as the realisable value of
security (or other credit mitigants), the likely return available upon
liquidation or bankruptcy, legal uncertainties, estimated costs involved in
recovery, the market price of the exposure in secondary markets and the
amount and timing of expected receipts and recoveries.
ANZ Basel III Pillar 3 disclosure September 2021
95
Internationally Comparable
Basel III Capital Ratio
The Internationally Comparable Basel III CET1 ratios are ANZ’s
interpretation of the regulations documented in the Basel Committee
publications; “Basel 3: A global regulatory framework for more resilient
banks and banking systems” (June 2011) and “International Convergence
of Capital Measurement and Capital Standards” (June 2006). They also
include differences identified in APRA’s information paper entitled
International Capital Comparison Study (13 July 2015).
Market risk The risk to ANZ’s earnings arising from changes in interest rates, foreign
exchange rates, credit spreads, volatility, correlations or from fluctuations
in bond, commodity or equity prices. ANZ has grouped market risk into two
broad categories to facilitate the measurement, reporting and control of
market risk:
Traded market risk - 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. Trading positions arise from transactions
where ANZ acts as principal with customers, financial exchanges or inter-
bank counterparties.
Non-traded market risk (or balance sheet risk) - comprises interest rate
risk in the banking book and the risk to the AUD denominated value of
ANZ’s capital and earnings due to foreign exchange rate movements.
Operational risk The risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events including legal risk but
excluding reputation risk.
Past due facilities Facilities where a contractual payment has not been met or the customer
is outside of contractual arrangements are deemed past due. Past due
facilities include those operating in excess of approved arrangements or
where scheduled repayments are outstanding but do not include impaired
assets.
Qualifying Central
Counterparties (QCCP)
QCCP is a central counterparty which is an entity that interposes itself
between counterparties to derivative contracts. Trades with QCCP attract
a more favorable risk weight calculation.
Recoveries Payments received and taken to profit for the current period for the
amounts written off in prior financial periods.
Restructured items Restructured items comprise facilities in which the original contractual
terms have been modified for reasons related to the financial difficulties of
the customer. Restructuring may consist of reduction of interest, principal
or other payments legally due, or an extension in maturity materially
beyond those typically offered to new facilities with similar risk.
Risk Weighted Assets (RWA) Assets (both on and off-balance sheet) are risk weighted according to each
asset’s inherent potential for default and what the likely losses would be in
the case of default. In the case of non-asset backed risks (i.e., market and
operational risk), RWA is determined by multiplying the capital
requirements for those risks by 12.5.
Securitisation risk The risk of credit related losses greater than expected due to a
securitisation failing to operate as anticipated, or of the values and risks
accepted or transferred, not emerging as expected.
Write-Offs Facilities are written off against the related provision for impairment when
they are assessed as partially or fully uncollectable, and after proceeds
from the realisation of any collateral have been received. Where individual
provisions recognised in previous periods have subsequently decreased or
are no longer required, such impairment losses are reversed in the current
period income statement.
ANZ Basel III Pillar 3 Disclosure September 2023
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