11 November 2022

DISCLOSURE AND TRANSPARENCY RULES – ANNUAL FINANCIAL REPORT SUBMISSION

Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) ("ANZBGL") together with its subsidiaries ("ANZ" or the "Group") – Annual Financial Report submission under the Disclosure and Transparency Rules ("DTR") of the United Kingdom Financial Conduct Authority

The following attached documents constitute ANZ's 2022 Annual Financial Report for the purposes of the disclosure requirements of DTR 4.1:

The Group's 2022 Annual Report for the year ended 30 September 2022;
A description of the principal risks and uncertainties for the Group provided in accordance with DTR 4.1.8 (2); and
A responsibility statement of the Directors of ANZBGL provided in accordance with DTR 4.1.12 (3)(b).

ANZ 2022 ANNUAL REPORT

WE’RE CONTINUING TO SHAPE A WORLD WHERE PEOPLE AND COMMUNITIES THRIVE

	Page
Overview	2
Our 2022 reporting suite	2
2022 performance snapshot	3
Chairman’s message	4
CEO’s message	6
How we create value	8
What matters most to our stakeholders	10
Our operating environment	11
About our business	12
Achieving our strategy	13
Our approach to societal challenges	14
Our approach to climate change	16
Our divisions	18
Governance	26
Risk management	36
Performance overview	44
Remuneration report	62
Directors’ report	104
Financial report	107
KPMG assurance	234
Shareholder information	244
Glossary	253

ANZ 2022 Annual Report

employees and the community through the COVID-19 pandemic and strengthening our approach to climate change and human rights.

Annual Report structure

The various elements of the Directors’ Report, including the Operating and Financial Review, are covered on pages 1 to 60. Commentary on our performance overview contained on pages 44 to 60 references information reported in the Financial Report pages 107 to 233. The Remuneration Report on pages 62 to 103 and the Financial Report on pages 107 to 247 have been audited by KPMG. KPMG also provides limited assurance over Environment, Social and Governance (ESG) content within this Annual Report. A copy of KPMG’s limited assurance report over the ESG content is on pages 242–243.

This report covers all ANZ operations worldwide over which, unless otherwise stated, we had control for the nancial year 1 October 2021 to 30 September 2022. Monetary amounts in this document are reported in Australian dollars, unless otherwise stated.

Additional information

We produce a suite of reports to meet the needs and requirements of a wide range of stakeholders. Our 2022 Corporate Governance Statement discloses how we have complied with the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations – 4th edition’ and is available at anz.com/corporategovernance. This year is our rst reporting against the 4th edition. We will release our 2022 Climate-related Financial Disclosures report prior to our Annual General Meeting. Our ESG Supplement provides stakeholders with detailed ESG disclosures, including performance against our ESG targets.

The following documents are available at anz.com/shareholder/centre:

News Release
Consolidated Financial Report, Dividend Announcement & Appendix 4E
Results Presentation and Investor Discussion Pack
Annual Review ²
Principal Risks and Uncertainties Disclosure
APS 330 Pillar III Disclosure

We are continually seeking to improve our reporting suite and welcome feedback on this report. Please address any questions, comments or suggestions to [email protected].

Our 2022 reporting suite

DISCLAIMER & IMPORTANT NOTICE: The material in the Annual Report contains general background information about the Bank’s activities current as at 26 October 2022. It is information given in summary form and does not purport to be complete. It is not intended to be and should not be relied upon as advice to investors or potential investors and does not take into account the investment objectives, nancial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate.

The Annual Report may contain forward-looking statements or opinions including statements regarding our intent, belief or current expectations with respect to ANZ’s business operations, market conditions, results of operations and nancial condition, capital adequacy, specic provisions and risk management practices. When used in the Annual Report, the words ‘forecast’, ‘estimate’, ‘project’, ‘intend’, ‘anticipate’, ‘believe’, ‘expect’, ‘may’, ‘probability’, ‘risk’, ‘will’, ‘seek’, ‘would’, ‘could’, ‘should’ and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements or opinions. Those statements:

are usually predictive in character; or
may be aected by inaccurate assumptions or unknown risks and uncertainties; or
may dier materially from results ultimately achieved.

As such, these statements should not be relied upon when making investment decisions. These statements only speak as at the date of publication and no representation is made as to their correctness on or after this date. Forward-looking statements constitute ‘forward-looking statements’ for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reect events or circumstances after the date hereof to reect the occurrence of unanticipated events.

Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the nancial year (together, the Group).
The 2022 Annual Review is comprised of pages 1 to 60, 248 to 249 and 257 to 258 of this Annual Report and a Remuneration Overview.

Integrated reporting

This report includes information on Australia and New Zealand Banking Group Limited’s¹ nancial and non-nancial performance. In preparing pages 1 to 60, we have drawn on aspects of the International Integrated Reporting Framework to describe how our business model, strategy, governance and risk management processes help us manage risks and opportunities in our operating environment and deliver value for stakeholders. We outline our response to external social and environmental challenges, including how we are continuing to support our customers,

2022 Annual Report
anz.com/annualreport

2022 ESG Supplement
anz.com/annualreport

2022 Climate-related Financial Disclosures
anz.com/annualreport

2022 Corporate Governance Statement
anz.com/corporategovernance

ANZ 2022 Annual Report | 2

Since 1835, ANZ has been building a better bank, increasingly enabling customers to thrive. And more than ever, we continue to deliver our purpose creating even greater opportunities through:

Propositions our customers love that make it easier to develop and grow in a sustainable way
Platforms that are exible and resilient and leverage the kind of innovative technology that really makes a dierence in our lives
Partnerships that unlock new value with a great foundation and network to help our customers prosper
People that are great at what they do and care about our customers and the value we create

By giving individuals and businesses alike the tools to grow, we help them achieve a whole new level of nancial wellbeing.

Many paths. One Purpose.

ANZ 2022 ANNUAL REPORT

On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.
Includes individuals who have participated in more than one program (for example, people who have participated in MoneyMinded as part of Saver Plus are counted twice as they are included in both the MoneyMinded and Saver Plus totals).
Equals total shareholders’ equity less total non-controlling interests, goodwill and other intangible assets divided by the number of ordinary shares.
APRA Level 2.
Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave status but not contractors (who are included in Full Time Equivalents (FTE)).
On average, across Australia and New Zealand.
In Australia and New Zealand.

	2022
Total Dividend for 2022 per share	146c
Cash prot¹	$6.5B
employee engagement	84%
participants in our nancial education programs²	More than 58K
Net tangible assets per share³	$20.75
Earnings per share (Basic)	228.8c
Common equity Tier 1 Capital⁶	12.3%
women in leadership⁵	35.9%
Cash return on equity⁴	10.4%
funded and facilitated in sustainable solutions since 2019	$40.04B
Supported nearly 1.5M customers in saving regularly⁸
$4.4B funded and facilitated to deliver more aordable, accessible and sustainable homes to buy and rent since 2018⁹	Over $4.4B

2022 performance snapshot

Overview	How we create value	Performance overview	Remuneration report	Directors’ report	Financial report	Shareholder information
3

Chairman’s message

Paul O’Sullivan
Chairman

During a period of significant global uncertainty, all our divisions contributed to a full-year statutory profit of $7.12 billion, up 16% on the prior year, driven by strong revenue growth as well as disciplined cost management. As a result, we were pleased to pay a Total Dividend of 146c, which was up 4c on 2021, and meant more than $4.2 billion was returned to you, our shareholders. With the bank in good shape, we are also prepared for a period of global uncertainty. A key measure of strength, our Common Equity Tier 1 Ratio of 12.3%⁴ is well above the Australian Prudential Regulation Authority’s “Unquestionably Strong” benchmark of 10.5%.# We have maintained prudent reserves to help weather any external shocks with a collective provision balance of $3.9 billion, while materially improving the shape and composition of our lending book. An example of this is how our investment grade lending has increased by 50% since 2016. We also made good progress on the continued digitisation of the bank with the launch of ANZ Plus, where we have effectively built a new retail banking platform that will be the future foundation of ANZ in Australia. Another highlight for the year was the agreement announced in July to acquire Suncorp Bank. While still subject to various Government and regulatory approvals, this will provide ANZ with a platform for growth for the coming decades, particularly in the fast-growing Queensland market. We believe this acquisition will help ANZ compete more effectively in Queensland and ultimately provide better services to customers across Australia. The associated $3.5 billion capital raising was well received despite volatile market conditions. It was the world’s largest equity raise this calendar year for a Mergers and Acquisitions (M&A) transaction, structured in a way to ensure all ANZ shareholders were treated equally, and I’d like to thank shareholders for their support. The annual report also sets out our approach to climate change and we know this is important to all our shareholders. We want to be the leading Australia and New Zealand-based bank in supporting customers’ transition to net zero emissions by 2050. We also recognise we can have the most impact by working with our customers to reduce their emissions. Our policy is to support customers through the transition, backing their plans by providing more finance for less emissions. We have high expectations, particularly for our customers in the energy sector. We expect our energy customers’ plans to be net-zero aligned, public and specific. We acknowledge some stakeholders have suggested that ANZ immediately cease lending to companies in carbon-intensive sectors like energy. This approach may reduce ANZ’s exposures or ‘financed emissions’. However, it does not reduce emissions in the ‘real world’ if the company receives funding from an alternate source. We are also then precluded from actively supporting the development of their net-zero aligned transition plans.

Non-Operating Holding Company

Our core business is banking and that won’t change. However, to help us better compete in the future we are introducing a new corporate structure, known as a Non-Operating Holding Company. This will be subject to a shareholder vote in December. Like other traditional banking businesses, ANZ faces significant disruption, largely from non-banking businesses competing in financial services. Understandably, these businesses are not regulated in the same way as banks like ANZ. The proposed structure will allow our non-banking businesses to operate on a more level playing field with non-banking companies, while maintaining an appropriate regulatory environment for the bank as a whole. These structures are not new and are common for many financial institutions around the world, including Barclays, Lloyds Bank, DBS, Citigroup and HSBC as well as Australian financial institutions Macquarie and Suncorp. This will help make our banking business more efficient, providing us with greater strategic and operational flexibility and, importantly, allowing us to better meet our customers’ needs. All of your Directors intend to vote all the ANZ shares they own or control in favour of the Scheme. I would encourage you to look at the detailed scheme booklet, located at anz.com/schememeeting, which sets out in more detail the benefits and the costs of implementation of this proposal.

Board Renewal

I’d like to acknowledge the enormous contribution of Graeme Liebelt who is retiring from the Board at the upcoming Annual General Meeting. Graeme has given tireless service over the last nine years, particularly in his roles chairing the Human Resources and Risk committees. I will personally miss his wise counsel, strategic insight and experience. It has been an honour to serve on the Board with him and on behalf of all shareholders I wish him well with his future endeavours. I am also pleased to formally welcome Jeff Smith who joined the Board in August and will stand for election at the upcoming AGM. Jeff is an experienced global business and technology executive having been Chief Information Officer at several organisations – including IBM, Suncorp and Telstra – and has already made a significant contribution for shareholders. Finally, I’d like to also thank my fellow shareholders for their support in what has been a transformational year and acknowledge the more than 39,000 people who work tirelessly each day for their customers.

Paul O’Sullivan
Chairman

5 Overview

How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

CEO’s message

We go into the new year with solid momentum and cash profit before provisions excluding large/notable items growing at 20% in the second half, which is the fastest half-on-half growth we have recorded in more than a decade. We also did what we said we would do. We restored momentum in Australian home loans with application approval times back in line with industry peers. This was assisted by our decision to bring Australia Retail and Digital Transformation together as one division. We continued the re-platforming of Australia Retail onto ANZ Plus, which is our new digital bank, with deposits growing at a rate faster than any new digital bank in Australia. Around a third of those customers joined ANZ for the first time. In New Zealand, we maintained an industry leading position across our key segments while also reaching the final stages of BS11. This was one of the largest regulatory programs implemented in New Zealand banking history. It now means we are well positioned to focus on the future and further build the franchise. Institutional continues to benefit from our multi-year transformation as rising rates across the globe create favourable conditions for the business. The expansion of our platforms strategy, where we lead the market in providing banking services for other financial institutions, resulted in the volume of payments processed using ANZ’s infrastructure growing by 85%. We also continued to innovate in our approach to digital assets, executing the first ever Australian bank-issued Australian dollar stablecoin. Australia Commercial delivered a strong first-up result as a stand-alone division and is already benefiting from increased focus and a refreshed strategy. A highlight was the commencement of the ANZ Worldline joint venture that will allow us to provide business customers with world-leading point-of-sale and online payment technology. We’ve achieved all this while also preparing the bank for the future. We agreed the acquisition of Suncorp Bank which, if approved by government and regulators, will provide an important platform for growth, particularly in the fast-growing and rapidly diversifying Queensland economy. Suncorp Bank is a well-run business that will see more than one million new retail customers join ANZ, sharing in the benefits of a wider range of products and services. It also means the Suncorp Group is able to focus on its core mission of being the best insurance company in Australia and New Zealand. The ‘non-operating holding company’ structure, which shareholders will have the opportunity to vote on in December, is another important step that will help us further strengthen and grow our core business.

We are a safer bank

We continued the systematic de-risking of the bank, highlighted by the sale of our margin lending business and the formal separation of our Wealth businesses to Insignia, formerly known as IOOF, and Zurich last month. Combined with the exit of Financial Planning & Advice, as well as all the associated remediation being at the very final stage, we are the only major bank in Australia to have removed the risks associated with wealth management for shareholders. We further strengthened our loan portfolio, particularly in Commercial and Institutional banking, where we have deliberately exited high-risk portfolios while increasing our focus on investment grade lending. During the year we invested significantly to help prevent customers falling victim to fraud as well as continually improving our cyber defences. A good example of this is the behavioural biometrics capability we implemented which has detected approximately 3,600 fraudulent applications, preventing nearly $40 million of identity fraud. While preventing cybercrime remains a challenge for all businesses, we take our role seriously and maintain a sophisticated, 24/7 internal Security Operations Centre, analysing millions of events daily. As you would expect, our team works closely with other banks and government agencies around the world to protect against the ever-evolving cyber security threats.

ANZ Plus

As mentioned earlier, we launched this year our new retail banking platform in Australia, ANZ Plus. ANZ Plus is effectively a new retail bank; one that is focused on improving the financial wellbeing of our customers. This is good for customers and the early signs are promising with solid deposit growth, particularly with customers new to the bank. A key feature of ANZ Plus is the ability to easily save for multiple goals without the need to open a new account. This is important because we know a savings habit is core to financial wellbeing.# ANZ 2022 Annual Report

Shayne Elliott Chief Executive Officer

This has been a transformational year during which we delivered a strong financial result with all our divisions making a material contribution, demonstrating the benefits of a well-managed and diversified portfolio. During the year we formed a strategic partnership with Pollination, a market-leading global climate change investment and advisory firm, that will focus on the transition needs of ANZ’s customers globally in the areas of Sustainable Finance, Project & Export Finance, Carbon Markets and Corporate Advisory, including mergers and acquisitions. An example is the partnership we announced in Australia with INPEX Corporation and Qantas to explore a carbon farming and renewable biofuels project in the Wheatbelt region of Western Australia. This is an exciting opportunity with two important customers that has the potential to develop a domestic, sustainable aviation fuel industry in Australia. In New Zealand, we launched our Good Energy Home Loan which allows customers to borrow up to $80,000 at a 3-year fixed rate of 1% to make their homes more energy efficient. We also introduced a similar initiative for business and corporate customers, allowing them to access up to $3 million at a special floating interest rate for up to five years to be used on environmental initiatives. There are economic risks ahead, but we are entering 2023 in great shape and with positive momentum. We have a balanced portfolio of businesses, leadership in intermediating trade and capital flows, particularly aligned to sustainability and a strong balance sheet which means ANZ is better positioned than most for the opportunities ahead. Finally, I want to thank the entire team at ANZ for their ongoing commitment to our customers and the community. Our culture is strong, we have industry leading employee engagement and we have an embedded sense of purpose – to shape a world where people and communities thrive.

Shayne Elliott
Chief Executive Officer

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

To embrace the opportunities, address the risks presented by the external environment and realise our vision, we are pursuing four strategic imperatives to: create a simpler, better capitalised, better balanced bank; build a superior experience for our people and customers in order to compete in the digital age; focus our efforts on attractive areas where we can carve out a winning position; and drive a purpose- and values-led transformation of the bank.

How we create value

Value drivers

Our strategy and business model:

Products and services: Loans, transaction banking services, deposits and other financial products developed for our customers.
Finance: Access to capital through customer deposits, debt and equity investors, and wholesale markets to support our operations and execution of our strategy.
People: Engaged workforce with the skills required to reinvent banking, in line with our purpose and culture.
Technology, data and risk management: Flexible, digital-ready infrastructure to provide a great customer experience, with systems and processes that are less complex, less prone to error and more secure.
Social: Trusted relationships with our customers, business partners and the community to strengthen our brand and reputation.
Environment: Minimising the impact of our operations, including through:
- The customers we choose to bank
- How we design and distribute our products
- Collaboration with partners

Better financial outcomes for shareholders and staff

Better access to capital and talent, driving greater capacity to invest well

Better customer propositions that are purposeful, engaging, efficient and safe

Better financial wellbeing and sustainability outcomes for customers and the community

Better reputation among customers and the community, and higher workforce engagement

Better customer engagement, and greater use of our products and services

Better data, insights, risk decisions and pricing

Better acquisition and retention rates, and higher share of target customers

Our customers will have relatively better financial wellbeing, more sustainable practices and generate higher average lifetime value

ANZ 2022 Annual Report

...creating value for our stakeholders

Shareholder value

We generate stronger long-term financial results (in terms of sustainable economic profits) enabling shareholders to meet their goals.

Customer value

Our customers are financially better off over their lifetime and implement more sustainable business practices than others.

Employee value

Our diverse teams are engaged and optimised for success.

228.8C cash earnings per share (Basic)²
10.4% cash return on equity²
Proposed final dividend per share of 74 C and interim dividend per share of 72 cents
$374B home loan portfolio, increase of $6 billion in 2022 (Australia and New Zealand)
Business lending balance³ $93B (Australia and New Zealand)
$357B Retail & Business customer deposit balances (Australia & New Zealand) and $259 billion of Institutional deposits
84% employee engagement
35.9% Women in leadership
$5.3B in employee salaries and benefits

Community value

Our practices and services provide more opportunity for the community and we have supported and improved positive economic development and transition.

Funded and facilitated over $4.4B to deliver more affordable, accessible and sustainable homes to buy and rent since 2018⁴
$3.4B in taxes paid to government⁵
More than 58K people reached through our financial literacy programs MoneyMinded and Saver Plus⁶
$40.04B Funded and facilitated in sustainable solutions since 2019
All figures below relate to the period 1 October 2021 – 30 September 2022 unless otherwise stated.
On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.
Includes Private Bank.
In Australia and New Zealand.
Represents statutory income tax expense (including discontinued operations), unrecovered GST/VAT, employee related taxes, and other taxes/duties.
Includes individuals who have participated in more than one program (for example, people who have participated in MoneyMinded as part of Saver Plus are counted twice as they are included in both the MoneyMinded and Saver Plus totals).

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

What matters most to our stakeholders

Through our materiality assessment, we seek to identify those issues with the most potential to impact our ability to operate successfully and create value for our shareholders and other stakeholders. We engage with internal and external stakeholders to inform our identification of and responses to ESG risks and opportunities. We use the results to inform our strategy, ESG targets, group remuneration scorecard and external reporting.

This year, our materiality assessment again highlights the importance of continuing to act on climate change. Greenwashing was identified as an emerging topic. The importance of information security has increased commensurate to the scale and sophistication of scams targeting individuals. This is part of a broader theme of payments system safety. Innovation and technology is recognised as foundational to providing customers with a digitally connected experience, while also ensuring the responsible use of emerging technologies. Customer experience is determined by the products we offer customers and the value they deliver, and ensuring we have empathetic and helpful processes for when things go wrong, such as managing complaints and for customers in financial difficulty. This is of particular importance given the emerging impact of macroeconomic conditions on the cost of living and housing affordability. As staff return to workplaces, employee capability and wellbeing, including mental health, was viewed as essential to maintain an engaged and resilient workforce.

Top 5 material issues:

Climate change: Managing the business risks and opportunities associated with climate change. Includes the role we play in supporting our customers to transition to a low carbon economy.
Information Security: Policies and processes in place to protect our systems, data and customers against scams and cyber attacks. Includes customer access to personal data.
Innovation and technology: Keeping pace with digital innovation to ensure we are offering our customers reliable and convenient products and services in a rapidly changing market.# Customer experience
Delivering value and improved customer experience through appropriate nancial products and services for all customers, small business and personal.

Employee capability and wellbeing

Attracting and retaining a capable and engaged workforce, that is diverse and inclusive, helping us serve our customers better and drive strong business performance across the markets in which we operate. Includes supporting the physical and mental health and wellbeing of employees.

Insights from the assessment were presented to our executive Ethics and Responsible Business Committee and Board Ethics, Environment, Social and Governance Committee. Our material ESG issues are ‘mapped’ to the bank’s Key Material Risks on pages 40–42. The full list of our material ESG issues and key steps in the materiality assessment process are discussed in our 2022 ESG Supplement available at anz.com/annualreport Detailed information on other ways in which we have engaged with stakeholders is also included in the 2022 ESG Supplement.

ANZ 2022 Annual Report
10

Our operating environment

CHALLENGE

O UR RESP O NSE

Consumers are facing abrupt cost of living adjustments through rises in prices of energy and other items, and more recently, interest rates
After a period of strong growth, credit growth is moderating – driven by lower demand for housing credit

Rising ination and interest rates, and moderating credit growth

E  ectivel y assessing borrowers’ resilience to rising rates
E n suring consumers are o  ered  nanciall y appropriate pro d ucts an d services
D ea l ing appropriate ly wit h customers experiencing  nancial hardship or needing extra care
A d justing our sta  salaries appropriatel y

Increased competition

Ongoing competitive intensity, from both ‘traditional’ and new, digitally-enabled competitors
D e p l o y ing new an d improve d d igita l services, pro d ucts and processes to help meet customer needs f or ecient and accessible bankin g
I nvesting in un d er l ying tec h no l ogy an d systems t o establish more exible and res p onsive p latforms

Increased public and regulatory scrutiny

Challenges arising from regulatory expectations, and changing community standards and expectations, particularly as they relate to ESG
E n surin g our products and services are appropriate f or customer s
B u i ld ing trust by ‘ d oing w h at we sa y ’
W o r k ing cooperative ly wit h regu l ators, government a n d NG Os
S t rengt h ening our ESG po l icies an d processes an d ensuring we implement them eectively – transparently disclosin g our pro g ress

Climate change and biodiversity loss

Increasing regulatory, political and societal focus on the transition risks associated with climate change, including nancial risks associated with lending to customers impacted by climate change
P r oviding sustainable banking and  nance products and s ervices, suc h as green an d sustaina b i l ity- l in k e d l oans an d bonds, that drive the transition to a low carbon econom y
S t rengthening our strategy, policies, processes, products and services to mana g e the risks and opportunities associated with climate change and biodiversit y los s

Geopolitical tension

Heightened tension in our operating regions and other nations, aecting the global economy and creating signicant societal disruption
C ontingency plans have been developed for our medium-to-hi g her risk j urisdictions with t ri gg er events identied and monitored

Cyber-security threats

Increased cyber-attacks, scams and attempted fraud
O ngoing investment in cy b er-security an d scams d etection capa b i l ities an d raising customer a w a r e n ess as to t h e r e l e v a n t ri s k s

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

About our business

Our divisions

Australia Retail – serves retail customers across Australia through our branch network, ATMs, digital and mobile banking applications including ANZ Plus.
Australia Commercial – serves commercial and private banking customers across Australia through our business centres, digital and mobile banking applications.
Institutional – serves institutional and business customers across Transaction Banking, Loans and Specialised Finance and Markets.
New Zealand – serves retail and commercial banking customers in New Zealand and is one of the largest New Zealand companies based on prot and assets.
Pacic – provides products and services to retail and commercial customers located in the Pacic Islands, where our history dates back 139 years.
Group Centre – provides support to the operating divisions, including technology, property, risk management, nancial management, strategy, marketing, human resources and corporate aairs.

Our purpose and strategy

Our purpose is to shape a world where people and communities thrive. It explains ‘why’ we exist and drives everything we do at ANZ, including the choices we make each day about those we serve and how we operate. We bring our purpose to life through our strategy; to improve the nancial wellbeing and sustainability of customers through excellent services, tools and insights that engage and retain them, and help positively change their behaviour.

Through our purpose we have elevated areas facing signicant societal challenges aligned with our strategy and our reach which include commitments to:

Improving the nancial wellbeing of our people, customers and communities by helping them make the most of their money throughout their lives;
Supporting household, business and nancial practices that improve environmental sustainability; and
Improving the availability of suitable and aordable housing options for all Australians and New Zealanders.

In particular, we want to help customers:

$ Save for, buy and own a liveable home
$ Start or buy and sustainably grow their business
$ Move capital and goods around the region and sustainably grow their business

Fundamental to our approach is a commitment to fair and responsible banking – keeping pace with the expectations of our customers, employees and the community, behaving fairly and responsibly and maintaining high standards of conduct, as well as addressing issues identied through our annual materiality assessment. We provide banking and nancial products and services to around 8.5 million retail and business customers, and operate across 32 markets. Our expertise, products and services make us a bank. Our people, purpose, values and culture make us ANZ.

ANZ 2022 Annual Report

Achieving our strategy

Integrating ESG and purpose into our strategy has created an opportunity for us to better serve our customers and generate long-term shareholder value. We will achieve our strategy through…

Propositions our customers love... with easy-to-use services that evolve to meet their changing needs. Through better use of data we will be able to provide valuable insights about our customers and how they can improve their nancial wellbeing and sustainability over their lifetime, enabling us to create superior propositions.
Flexible and resilient digital banking platforms... powering our customers and made available for others to power the industry. Platforms underpin our own propositions and will increasingly underpin those of our customers, notably other banks or institutional corporations.
Partnerships that unlock new value... with ecosystems that help customers further improve their nancial wellbeing and sustainability. We recognise that no one institution can do everything or innovate at the pace necessary to satisfy customers’ needs – strong relationships with partners are therefore vital.
Purpose- and values-led people... who drive value by caring about our customers and the outcomes we create. Our people listen, learn, adapt and do the right thing the rst time – delivering the outcomes that address nancial and sustainability challenges.

Building the nancial wellbeing and sustainability of our customers creates a positive cycle of benets. It directly benets customers and also grows shareholder returns; it leads to a strong and positive reputation; it ultimately means it costs less to acquire customers; and it grows loyalty, which in turn generates better returns – delivering more capital so we can invest in building a better bank and continue to improve the lives of our customers.

Our values

Our values shape how we deliver our purpose-led strategy. They are the foundation of ‘how’ we work – living our values every day enables us to deliver on our strategy and purpose, strengthen stakeholder relationships and earn the community’s trust. All employees and contractors must comply with our Code of Conduct, which sets down the expected standards of professional behaviour and guides us in applying our values.

Our values are:
* Integrity
* Collaboration
* Accountability
* Respect
* Excellence

Supporting sustainable development

We are committed to the United Nations Sustainable Development Goals (SDGs) and believe that business has an important role to play in their achievement. Our 2022 ESG targets supported 12 of the 17 SDGs. In 2019 we became a founding signatory to the UN Principles for Responsible Banking. Under the Principles we are required to set at least two targets that address our most significant (potential) positive and negative impacts, aligned with the SDGs and the Paris Climate Agreement. Further information on our progress towards implementing the Principles, including targets we have set, is in our 2022 ESG Supplement.# Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Our approach to societal challenges

We’re focused on bringing our purpose to life through helping tackle complex issues that are core to our business strategy and matter to society. This work is underpinned by our commitment to fair and responsible banking and informed through our materiality assessment. Performance against our Environment, Social and Governance (ESG) targets and further information on our ESG approach can be located in our ESG Supplement available at anz.com/annualreport

Improving the availability of affordable and sustainable housing, and supporting customers through a changing economy

We remain committed to helping improve the availability of suitable and affordable housing options for all Australians and New Zealanders. Our work spans many sub-sectors of the market such as affordable housing, specialist disability accommodation, aged care and homelessness, as well as working with community partners to provide housing for people in need of additional support. We have targets to:

Fund and facilitate $10 billion of investment by 2030 to deliver more affordable, accessible and sustainable homes to buy and rent in Australia and New Zealand. Since 2018 we have funded and facilitated over $4.4 billion towards the target.
Support more customers into healthier homes in New Zealand by 2025. Since 2020 we have supported 1,446 households in New Zealand.

We strive to support our customers to achieve their home ownership goals in a way that also improves their financial wellbeing. This includes ensuring home loan customers are financially informed about the details of their mortgage, have borrowed within their means, and are resilient to potential future events. During the pandemic, our default response was to keep repayments at the same level to help Australian customers get ahead on their mortgage, meaning we did not automatically reduce minimum repayments as interest rates decreased. This assisted customers to build repayment buffers ahead of rising interest rates in Australia. With interest rates on an upwards trajectory across many geographies and costs for both discretionary and non-discretionary items growing, staying on top of household budgets and mortgage repayments has been a key issue for our customers. We are using real-time transaction data to adopt a proactive approach to identifying and contacting customers heading towards difficulty to discuss how we can help them before they get into trouble.

To help our customers buy and own a home, this year in Australia we increased our home loan balance by $6 billion to $284 billion and our home loan balance in New Zealand grew NZ$8 billion this year to NZ$101 billion.

Improving the financial wellbeing of our people, customers and communities

Financial wellbeing is at the heart of the bank we’re building to create better financial outcomes and resilience for our customers. This is particularly important as our customers navigate an economic environment with rising interest rates and cost of living challenges. We are committed to improving the financial wellbeing of our people, customers and communities by helping them make the most of their money throughout their lives. We continue to work closely with our partners to ensure we are supporting customers and the community in a respectful, fair and appropriate way.

Image: Assemble Kensington resident Sophie. ANZ 2022 Annual Report

Supporting employee capability and wellbeing

ANZ’s strong and inclusive culture, built over decades, has supported our people to maintain a strong alignment to our strategy and purpose while the majority of our workforce continued to work flexibly as the impacts of the pandemic lingered in some geographies. This strong culture supported team connectivity and contributed towards a high level of engagement despite a period of significant change. As employees have started to return to the office, we’ve evolved and simplified the behaviours that will continue to build our future success. Our new behaviour framework was introduced in February 2022.

Our behaviours:
* Create opportunities
* Deliver what matters
* Succeed together

People’s needs and expectations of when and where they work have changed, and we know that our employees are seeking value from their day-to-day work. Responding effectively to this is a key enabler of a stable, future-fit workforce. For many years, we have successfully operated a workforce based across multiple geographies and supported flexibility for all roles. We are committed to hybrid working and the pandemic has uplifted our flexible working capacity and capability. Key to this is how we support our people leaders and teams to create opportunities, deliver what matters and succeed together while working in a hybrid, flexible manner. We continued to provide psychological and ergonomic support to our workforce, who have worked from home for the majority of the year. We are future proofing our workforce in the face of a turbulent external environment and a volatile talent market by focusing on the most important capabilities that will drive our strategic agenda. This year we have continued to invest in key capabilities such as Engineering, Cloud, Data and Digital, and Customer Coaching. ANZ is well positioned to attract and retain talent, and our people tell us that they join and stay because we offer challenging, interesting and complex work that matters. They are empowered to work in a way that suits them and ANZ, and because they want to belong to a community that celebrates the value of diversity. Our focus on employee wellbeing and how we are future-proofing our workforce builds on our long history of support for employee diversity, underpinned by a strong culture. We help our people thrive in an internal environment that continues to adapt and evolve to ever-changing external demands.

Fair and responsible banking

Underpinning everything we do is a commitment to fair and responsible banking. Keeping pace with the expectations of customers, employees and the wider community, while behaving fairly, responsibly and maintaining high standards of conduct. We are committed to supporting customers in times of need and ensuring our products and services are accessible and inclusive to all. We continue to make progress implementing our strategy to assist customers who may require extra care and those facing financial difficulty in Australia. We are focused on delivering better customer outcomes by strengthening frontline capability and proactive external engagement, as well as improving product design and data use to improve accessibility and limit harm.

We have improved support for customers by changing the way we manage and think about customer complaints. We have been embedding a culture where complaints are valued as an opportunity to learn, improving products and services, and delivering better customer outcomes. We strive to deliver excellent products and services to our customers but if we get things wrong, we want to know, and seek to resolve complaints with empathy and fairness.

The expanded use of digital and real time payments has made it easier for criminals to move funds quickly and easily through various accounts, and ultimately offshore, making recall and recovery increasingly difficult. We are investing in new technology and tools to protect our customers from scammers looking to steal their data and money. This year we launched the first ANZ Plus retail banking proposition, taking a digital-first approach to designing banking products which drive positive financial wellbeing outcomes for customers. At the heart of ANZ Plus are nine financial wellbeing principles which aim to impart knowledge, provide clarity and empower customers to make better financial decisions:

Spend less than you earn
Put money aside for a rainy day
Save regularly towards your goals
Protect what you can’t afford to lose
Borrow within your means
Pay your most expensive debt first
Build towards your retirement
Invest in things that grow
Give back to family, friends and the community when you can

We play a key role in the community by leading considerations into what is influencing financial wellbeing and applying insights from research to our financial education programs, Saver Plus and MoneyMinded. These programs involve close collaboration with partners from the community and government sectors.

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

Our approach to climate change

We want to be the leading Australia- and New Zealand-based bank in supporting customers’ transition to net zero emissions by 2050. Our environmental sustainability strategy identifies priority sectors, technologies and financing opportunities to help achieve our ambition. Our climate change commitment provides the framework for our strategy and our commitment to enable the transition by aligning our lending portfolio with net zero emissions by 2050. We joined the Net-Zero Banking Alliance (NZBA) in 2021, reflecting that commitment. The most important role we can play in meeting the Paris Agreement goals is to help our customers reduce emissions and enhance their resilience to a changing climate. We support an orderly transition that recognises and responds to social impacts. This aligns with our purpose to shape a world in which people and communities thrive.# ANZ 2022 Annual Report

Our progress on the task force on Climate-related Financial Disclosures

Disclosures on our ESG Targets are outlined in our ESG Supplement and our detailed 2022 Climate-related Financial Disclosures will be released prior to our AGM and will be available at anz.com/annualreport

OUR PROGRESS TO DATE

To achieve our environmental sustainability strategy we are:
* Directing our finance into key priority areas (as per diagram to the right);
* Aligning our lending decisions to the Paris Agreement goals and have disclosed metrics and targets for our power generation portfolio and large-scale commercial buildings;
* Progressively developing metrics and targets for key sectors, in line with our NZBA commitment, which is aimed at ensuring the majority of our portfolio emissions are covered by end 2024;
* Funding and facilitating $50 billion of sustainable solutions by 2025, to support customers in their efforts to achieve improved environmental outcomes, including the reduction of their greenhouse gas emissions. This year, 140 transactions worth $18.09 billion have been completed, bringing our progress towards our $50 billion target to $40.04 billion since October 2019;
* Equipping our employees with a deeper understanding of climate risks and opportunities focusing on our Institutional bankers in key customer segments such as resources, energy and Agribusiness;
* Reducing emissions from our operations including a target to increase renewable energy use to 100% by 2025 and setting updated targets for our environmental footprint;
* Implementing strategic partnerships, for example with climate advisory and investment firm, Pollination;
* Actively participating in recognised industry associations to help shape policy development and settings to enable the development of taxonomy and standards; and
* Engaging constructively with stakeholders on our approach through Environmental, Social and Governance (ESG) market briefings, investor roundtables, civil society engagement and other avenues.

Refer to our ESG Supplement available at anz.com/annualreport for an update on our ESG Targets.

Supporting sustainable resource extraction in areas such as iron ore, lithium, nickel, cobalt, rare earths, copper and bauxite.
Supporting basic materials production including green steel and low-carbon aluminium production.
Supporting new technology projects focused on upstream hydrogen and carbon capture use and storage.
Initial focus on financing high-efficiency residential buildings and retrofits.
Supplying green investment options for environmental sustainability-focused funds/insurers and partnering with financial institutions to deliver alternative capital.

S upportin g our customers to transition to net zer o K ey priority areas an d sectors we’ ll pursue

Supporting sustainability in resource extraction, basic materials and new technologies
Banking the decarbonisation and electrification of the transportation value chain
Increasing our support for companies' transition to low carbon
Enabling the transition towards lower emissions buildings
Assisting sustainable food, beverage and commodities practices and supply chains
Offering solutions to, and partnering with, sustainability-focused financial institutions

Our 2022 Climate-related Financial Disclosures will be released prior to our Annual General Meeting (AGM). This will be our sixth report using the Task Force on Climate-related Financial Disclosures, (TCFD) recommendations and will be available at anz.com/annualreport. This report will provide a more detailed update on our approach to climate change including our customer engagement program.

FOCUS AREAS – 2022/23

Governance

Board Risk Committee oversees management of climate-related risks
Board Ethics, Environment, Social and Governance (EESG) Committee approves climate-related objectives, policy and targets
Ethics and Responsible Business Committee (ERBC) consisting of executive management oversees our approach to climate-related risks and opportunities
Climate Advisory Forum, chaired by our Group Executive Institutional, supports execution of our climate-related policy, opportunities and disclosures, subject to approval by ERBC and EESG
Enhance alignment with Australian Prudential Regulation Authority (APRA) CPG229 guidance on Climate Change Financial Risks and the New Zealand Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021

Strategy

ANZ’s Environmental Sustainability Strategy and Climate Change Commitment (available at anz.com.au/about-us/esg/environmental- sustainability/climate-change/) confirms our support for the Paris Agreement goals, our priority sectors, technologies and financing opportunities via products and services to help achieve our ambition and our focus in supporting customers’ transition to net zero emissions by 2050
Continue to engage with 100 of our largest emitting business customers to support them to, by end 2024:
- implement and strengthen their low carbon transition plans and
- enhance their eorts to protect biodiversity.
Continue to enhance banker capability to identify climate risks and opportunities
Extend transition plan engagement with other large emitting business customers into our regular customer assessments
Pilot the Taskforce on Nature-related Financial Disclosures (TNFD)

Risk management

Included climate risk in our Risk Appetite Statements for Institutional bank, and lending criteria in the Australian Retail, Commercial and New Zealand portfolios
Enhanced credit approval process applied to new Agribusiness customers and agricultural property purchases in regions of low average rainfall or measured variability
Reviewed and assessed current and emerging regulatory requirements across the jurisdictions in which we operate
Developed and piloted Climate Change Risk Assessment methodology in our Project Finance business (Australia)
Participated in the Australia Prudential Regulation Authority’s (APRA) climate vulnerability assessment which assessed the potential impact of transition and physical risks to parts of our portfolio
Completed analysis of physical and financial risks of flooding for home loan customers in a major regional location of Australia and of coastal flooding (nationwide) and inland flooding (Auckland) for the Reserve Bank of New Zealand’s climate sensitivity analysis (New Zealand)
Prepare a set of climate risk standards, based on regulatory obligations to be applied across all jurisdictions where ANZ operates
Extend our Climate Change Risk Assessment methodology beyond our Project Finance business, starting with Institutional customers in higher emitting sectors such as resources and energy
Develop a data strategy to inform our approach to sourcing and integrating climate data into sectoral pathways, scenario analysis, stress testing and analytics. This will include learning from the New Zealand climate risk program
Enhance risk assessment capability for our bankers through extending our Climate Change Risk Assessment
Extend analysis of physical climate risks of fire and flood to segments of Australian retail customers
Conduct scenario analysis for key New Zealand sectors
Conduct analysis of drought vulnerability for our Agricultural portfolio (Australia and New Zealand) and the impacts of a change in carbon price (New Zealand)

Metrics and targets

Transition Risk: Continued engaging 100 of our largest emitting business customers, to support them towards a ‘well developed’ or ‘advanced’ stage of transition planning; and enhance their efforts to protect biodiversity, by end 2024
Capital Deployment: $50 billion target to fund and facilitate sustainable solutions by 2025, $40.04 billion achieved to date
Greenhouse gas (GHG) emissions: Develop metrics, pathways and targets to enable progress tracking as we reduce ‘financed emissions¹’. Announced targets for large-scale commercial property and power generation (November 2021) in line with our commitment to the Net Zero Banking Alliance
GHG emissions: Target to procure 100% renewable electricity for ANZ’s operations by 2025², and reduce emissions in line with Paris Agreement goals
Management incentives for delivering our climate change strategy are in place at the most senior levels of the organisation including our Group Executive Committee and senior leaders. Our Group Performance Framework incorporates whether we have: Strengthened our position as a leading Sustainability bank in the region, and our performance against the S&P Global corporate sustainability assessment. Refer to page 79 of the Remuneration Report
Expand our metrics, pathways and targets for ‘financed emissions’ to other key sectors
Develop financed emissions reporting across majority of the New Zealand portfolio
Consider the use of emerging metrics to track our progress in helping to minimise biodiversity loss
Scope 3 emissions attributable to lending.
Self-generated renewable electricity, direct procurement from offsite grid-connected generators e.g. Power Purchase Agreement (PPA) and default delivered renewable electricity from the grid, supported by credible attributes in accordance with RE100 technical guidelines.

ANZ 2022 Annual Report 16

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Our divisions

Australia Retail

This year we’ve delivered strong returns by growing momentum in our home loans and deposits business. We’ve invested in the foundation of our future bank, ANZ Plus and helped more customers with simple banking needs switch to mobile and digital channels.

Maile Carnegie
Group Executive Australia Retail

Operating environment
Economic activity recovered in 2022, in part due to a strong housing market and employment growth, however high ination and increasing cost-of-living pressures are front of mind for our Retail customers.# Competition for home loans has intensified further with Retail customers across the sector proactively engaging with mortgage providers and third-party originators leading to increased levels of refinance activity in the industry. Our Retail customers continue to display positive financial wellbeing behaviours – offset accounts continue to grow; a large portion of our home loan customers remain ahead in their repayments; and savings have increased for those without a mortgage. Faced with a higher interest rate environment, support established through the peak of the COVID pandemic remains in place for our customers who are navigating uncertainty or having difficulty managing their loans. Comfort with and trust of digital and mobile banking channels continues to increase among customers. Looking ahead to 2023, we face a more subdued lending environment and increased demands on customer cashflows. We remain focused on growing revenue responsibly and committed to our automation and simplification initiatives to help reshape our business, deliver easy, personalised services to our customers and sustainably grow returns for our shareholders over the long-term.

Strategy and focus

Our strategy in Australia Retail is to support our customers to achieve their financial goals, in a way that also helps improve their overall financial wellbeing. For our one million home loan customers, this means making sure they are financially informed about their mortgage, that it’s within their means and they are resilient to potential future events. This year we’ve built momentum in our home loans business by improving turnaround times, enhancing our processing capacity, and simplifying our home loan product offering. We’ve also invested in tools like the home loan calculator to help our customers understand how changes to interest rates will impact their repayments, and a free home loan check-in to help them find ways to fine-tune their home loan so it continues to meet their needs. We’ve invested in building the foundation of our future business, ANZ Plus, with 20 modern cloud-based technology platforms now in place and working at scale. We have launched the first ANZ Plus transaction and savings product with deposits growth outpacing any new digital bank in Australia. Efforts to migrate our current ‘transact and save’ account customers from ANZ to ANZ Plus will continue to be a focus into 2023 and beyond. We’ve been helping customers make the move to digital and mobile channels, so they can bank when and where it is most convenient for them. We launched the Message Us feature in the ANZ App – a secure way for our customers to ask questions regarding their personal accounts, including Home Loans, inside the app. Customers can now receive comprehensive help through a messaging experience without having to call or visit a branch. We also introduced Broker Chat, a real-time ‘live chat’ function via the ANZ Broker Portal for brokers to easily obtain an expected credit response date on an application, check on the assessment for applications and organise call backs from assessors.

Financial Performance

Metric	FY22	FY21	Growth
Cash profit (continuing operations) ($m)¹	2,140	2,316	-8%
Net Loans & Advances ($b)	290.3	284.0	2%
Return on Avg. RWAs (%)	1.8%	2.1%	-
Customer Deposits ($b)	150.0	141.4	6%

¹ On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.

Ongoing customer remediation work continues to progress well, and we remain committed to growing our revenue responsibly and reinvigorating our product offering to ensure we get things right for our customers the first time. Looking ahead, we want to be the leading destination for homeowners and for people who are serious about one day owning a home. We’ll be the bank customers trust to better anticipate their needs and help them make the most of their money throughout their lives – whether they are just starting to save, ready to purchase their first home or paying off the family home quicker than planned. Progressing our ANZ Plus home loan offering will be a key factor in this and is a core priority for 2023.

Performance highlights

The Retail and Digital businesses were combined in Australia this year, creating a new Australia Retail Division to increase focus on customers’ needs and better position the business for future opportunities. With an emphasis on responsible growth, amidst a challenging operating environment, the Australia Retail Division delivered Cash Profit of $2.1 billion. Improvements in operational capacity and resilience helped restore Home Loan momentum, with volume growing $5.9 billion in the second half. This was achieved while balancing margins and returns in an extremely competitive environment. Customer deposits were up $8.5 billion in the year, representing a 6% increase on the prior year. Many customers are still demonstrating a cautious approach and increasing their savings buffers. In the rising-rate environment, customers are also moving their money from at-call products back to term deposits. Disciplined cost management saw a reduction in run-the-bank expenses, while the Division continued to invest for the future. This saw substantial progress on ANZ Plus, as well as the modernisation of the contact centre and physical branches to better support our digital transformation journey.

Enhancing the branch experience

Our customers continue to expect convenient, flexible and comprehensive digital banking options, many shifting towards higher levels of self-service, with just eight percent of our customers relying solely on branches for their everyday banking needs. Over-the-counter cash and cheque transactions declined 20 per cent YOY for the past two years and ATM transactions declined by 18 per cent in FY22, while the number of customers using digital channels increased steadily – 43 million transactions were completed in digital channels and digital logins increased 15.4 per cent. This increased uptake of digital channels and services has shifted the expectations of customers when it comes to face-to-face interactions with our bankers. The role of bankers has changed significantly and we’re responding by adapting our bricks and mortar presence to enable staff and customers to focus on digital adoption and financial wellbeing conversations, rather than just transactions. We’ve rolled out new branch formats across 32 locations and are piloting two ANZ Plus stores to meet the demand from our customers who now often visit a branch by appointment when they want help with more complex needs, like home loans or improving financial wellbeing. It is at these times that relationships and coaching are critical. We have also built the principle of self-service into ANZ Plus, with a comprehensive support section housed in the app. Customers can query suspicious transactions; lock, block, cancel or reorder their card; search years of transaction history and change their email address, postal address, Tax File Number, PIN and more – all in the app. We will continue to build-in convenient self-service options as the ANZ Plus product suite expands.

Our divisions

Australia Commercial

This year we announced Australia Commercial as a new division to better prepare it for future growth opportunities. Improving the visibility, focus and accountability of Commercial enables us to better support customers striving to start, run, or grow their businesses.

Shayne Elliott
CEO/Interim Group Executive, Australia Commercial

Operating environment

Australia’s small-to-medium business (SME) sector experienced moderate growth against a backdrop of intermittent COVID-19 related shutdowns, high inflation, increasing input costs, supply chain issues, and workforce shortages. Adapting to the operating conditions, we continued to see many customers invest, better manage costs, and pivot their businesses towards new market opportunities. With the unemployment rate reaching a 50-year low, employee vacancies were an ongoing issue for many customers particularly for businesses in regional Australia. This downward trend is expected to continue until early 2023 which will likely put upward pressure on wages, further increasing costs for some businesses. While inflation and interest rate rises lowered consumer confidence, consumer spending remained relatively strong creating buoyancy across the sector. Higher mortgage payments, and price increases for essential goods and services could inhibit future spending although savings buffers, population growth and accelerating wages should limit any impacts.

Strategy and focus

Australia Commercial provides banking products and services to ~630,550 Australian small and medium businesses, as well as high net-worth, private banking customers across Australia. Our ~2,800 Commercial employees include bankers and specialists working across all industry sectors who assist customers manage working capital, optimise cash-flow and support growth with business loans, asset finance, and transaction banking. Australia Commercial also works closely with ANZ’s Retail and Broker teams to deliver customers’ home lending needs.# Financial Performance

Cash continuing1

ANZ 2022 Annual Report 20

Through our direct customer relationships and a strong broker network, our Commercial lending increased by 4% during FY22. This result was also driven by the introduction of several self-service features and enhancements to both internet banking and the ANZ App. In a first for a major Australian bank, eligible customers can join ANZ and open a business transaction account in just a few minutes via ANZ’s app using a driver’s licence or passport, and an ABN, creating a fast and simple onboarding experience. We also expanded our suite of business management tools and personalised digital experiences to help our customers be financially ready. This includes investment in online business lending platforms such as ANZ GoBiz which uses customer accounting data to enable online applications for unsecured overdrafts up to $300,000 and term loans up to $500,000, with lending approvals issued in less than 48-hours. The platform assists customers with both cash-flow and investment opportunities. This work resulted in ANZ being awarded Canstar’s 2022 Bank of the Year – Small Business, which recognised our business banking products, services, and customer satisfaction relative to peers. Aligned with building our digital capabilities, in April we commenced ANZ Worldline Payment Solutions, a joint venture with leading European payments provider Worldline. The new joint venture will provide ANZ Commercial and Institutional customers in Australia access to market-leading point-of-sale and online payment technology.

On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.

	Growth	1,510	1,107
Cash profit ($m)	36%
		FY22	FY21
	Growth	59.7	57.2
Net Loans & Advances ($b)	4%
		FY22	FY21
Return on Avg. RWAs (%)		2.9%	2.1%
		FY22	FY21
	Growth	112.2	111.1
Customer Deposits ($b)	1%
		FY22	FY21

As customers refocused and rebuilt following the COVID-19 pandemic, we continued to look for ways to further support investment. This included an increase in our maximum loan term for eligible small business customers from 15-years to 30-years for facilities secured by standard commercial property. In addition, we simplified our refinance process for business lending up to $1m for eligible customers, creating quicker loan approvals and access to appropriate capital.

Performance highlights

Australia Commercial delivered a strong first set of financial results as a standalone division, increasing cash profit by 36% and revenue by 18% year-on-year. This result was driven by volume growth and disciplined margin management, assisted by the rising rate environment. Expenses were also tightly managed. Net loans and advances grew 4% driven by strong lending growth in our specialist segments which include agribusiness, health, and property. Our larger Commercial customers had the strongest credit appetite, while smaller business customers continued to prioritise financial solutions to aid cash-flow. Customer deposit growth of 1% was more subdued this year, following unprecedented government support during COVID-19 in the prior year. An improvement in our risk adjusted returns also demonstrated the continued strength in the credit quality of our Commercial loans.

Building a gem of a business with help from ANZ GoBiz

Customer story
Brisbane jeweller and Managing Director Ashley Portas is funding the next growth chapter of his successful jewellery store, Diamondport, with help from an ANZ GoBiz loan. Founded in 2015 with an initial import focus, the family business expanded four years later when it established its own workshop to enhance its design and production services. This led to 65% year-on-year growth and opened the door to new opportunities.

“When you grow this fast, you need more money to grow. Suddenly, we found ourselves needing more diamonds, new tools, more rings to market and sell,” said Ashley.

To support the next growth phase Ashley decided to apply for a $200,000 business loan. After approaching an online lender and his existing bank, Ashley discovered ANZ GoBiz offered a more convenient digital-enabled alternative.

“I found the ANZ GoBiz offer online and really liked what I saw. It only took me 20 minutes to apply,” said Ashley. “I applied on a Wednesday and was approved by Friday,” Ashley said. “I had no problems sharing my accounting details and banking information with ANZ, and I found it so refreshing to see a bank like ANZ put their trust in us.”

Now, with finances in place, Diamondport is expanding its portfolio of engagement rings. Alongside traditional designs like solitaire and halo, the team is creating more unique and bespoke engagement ring designs to appeal to a wider customer base.

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

Institutional

In the past year, some of the headwinds facing Institutional started to pivot to tailwinds, driving momentum in key businesses. Customer lending was robust, and we made significant progress delivering on our strategy – including through our digital offering, platforms and sustainability partnerships.

Mark Whelan
Group Executive Institutional

Operating environment

In 2022, Institutional customers remained resilient despite economic challenges, market volatility and geopolitical issues. In a clear signal that investment is strengthening, we saw significant demand for lending even as inflation and interest rates rose and consumer sentiment declined. Our business was well positioned for the market conditions, underpinning a solid performance in Payments and Cash Management, Trade and Corporate Finance. A sharp climb in energy prices brought issues such as climate change and energy policy to the forefront of the global economic debate, intensifying our strategic focus on supporting customers in their transition to net zero. Geopolitical uncertainty continued, highlighting the importance of a reliable banking partner with a strong international trade network and a deep understanding of global markets.

Strategy and focus

ANZ Institutional Bank is focused on supporting companies moving goods and capital around the region. Our past efforts to build a simpler, more efficient Division positioned us well to respond quickly to our customers’ needs through the pandemic and provide support during a challenging period. In 2022, we made significant progress in delivering strategic initiatives, including growing the Markets' customer-franchise business, maximising benefits from our international network, implementing an improved customer coverage model, building on our digital self-service offering, rolling out more efficient digital credit processes and establishing a market-leading Digital Asset Services Team. We also focused on extending our platforms as a service to customers. The volume of agency payments, processed by financial institutions for their customers, using ANZ’s infrastructure, grew 85% year-on-year. Overall payments volumes grew 52%, as we continued to invest in digital platforms. We continued to build our position as a regional leader in environmental sustainability, participating in $155 billion of sustainable finance deals in FY22 while rolling out sustainability education programs internally. Looking ahead, we see increasing opportunities for our customers as a result of the super cycle of activity that is underway.

Performance highlights

ANZ Institutional delivered a strong performance, with a cash profit of $1.8 billion while revenues were up 1% for the year and 10% half-on-half. The high-quality result was achieved despite challenging market conditions, reflecting strong customer momentum and effective margin management. In addition, lending momentum remained robust, up 24% year-on-year. ANZ also maintained our position as the region’s leading Institutional bank in key markets where we operate. In Australia, we were named #1 Lead Institutional bank for overall market penetration for the 7th consecutive year by Peter Lee Associates2. In New Zealand, Peter Lee Associates recognised ANZ as #1 for Overall Market Penetration and Lead Bank Penetration, and #1 for Relationship Strength.3

On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.
Peter Lee Associates, Australia Large Corporate Relationship Banking 2016–2022.
Peter Lee Associates, New Zealand Large Corporate Relationship Banking 2022.

	Growth	1,761	1,887
Cash profit ($m)	-7%
		FY22	FY21
	Growth	196.8	158.2
Net Loans & Advances ($b)	24%
		FY22	FY21
Return on Avg. RWAs (%)		0.9%	1.1%
		FY22	FY21
	Growth	259.4	239.6
Customer Deposits ($b)	8%
		FY22	FY21

Financial Performance
Cash continuing1

ANZ 2022 Annual Report 22

Peter Lee Associates, Australia Large Corporate Relationship Banking 2021–2022.
Peter Lee Associates, New Zealand Large Corporate Relationship Banking 2022.

In International, we held our top ranking for overall relationship quality in Asia for the fifth consecutive year according to the Coalition Greenwich 2021 Asian Large Corporate Banking Study.# Overview

Our focus on environmental sustainability was recognised in the market, with ANZ named market leader in Environmental, Social and Governance (ESG)/Sustainable Finance in Australia4 for the second consecutive year and ESG Bank of Choice in New Zealand5, according to Peter Lee Associates. In addition, ANZ formed a strategic collaboration with INPEX Corporation and Qantas Airways Limited to enter into a Memorandum of Understanding, for a project bringing together carbon farming and renewable biofuels in the Wheatbelt region of Western Australia. We also launched a comprehensive hydrogen guide to support customers in exploring opportunities associated with the emerging sector’s rapid commercialisation. ANZ led the market in our approach to digital assets, successfully executing the first ever Australian bank issued Australian dollar stablecoin (A$DC) payment through a public permissionless blockchain transaction. The team delivered the stablecoin for Victor Smorgon Group, closely followed by the purchase of tokenised Australian carbon credits using the new stablecoin.

A milestone transaction and partnership

ANZ has taken an important next step in progressing its digital asset strategy, supporting long-standing customer Victor Smorgon Group in successfully purchasing tokenised Australian carbon credits (BCAU) using the ANZ-issued stablecoin A$DC. This is an important step for ANZ as the bank explores greater circulation of the stablecoin. In this transaction, Victor Smorgon Group used A$DC as a medium of exchange to purchase the BCAU carbon tokens from Zerocap, an Australian digital asset investment platform. Zerocap sourced the BCAU from BetaCarbon, which tokenises Australian Carbon Credit Units (ACCUs) into digital tokens, with each representing 1kg of carbon captured. This transaction is also significant as it provided A$DC/BCAU liquidity, while offering both Victor Smorgon Group and Zerocap redemption rights for A$DC.

This latest A$DC transaction came after ANZ successfully executed the first Australian-bank issued Australian-dollar stablecoin payment through a public permissionless blockchain transaction in March. A$DC remains fully collateralised by the Australian dollar and is redeemable at par with funds held in an ANZ-managed reserve account.

Victor Smorgon Group CEO Peter Edwards said: “Victor Smorgon Group is one of Australia’s most established and successful family offices, operating across multiple asset classes, including digital assets. Through the Zerocap platform and continuing our multi-generational working relationship with the ANZ Bank, we are excited to now have an Australian dollar stablecoin giving us a safe and secure gateway to the digital economy.”

ANZ Banking Services Lead Nigel Dobson said: “This milestone transaction brings together two key focus areas for ANZ, sustainability and digital assets. We’re seeing increasing customer appetite to use A$DC to enter the digital economy, and will continue to partner with our clients to explore how this technology can help them achieve their goals.”

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Our divisions

New Zealand

We are proud of our many achievements over this year and the role we will continue to play to help Kiwis navigate the months ahead. With the pace and scale of change across the world, it will be essential to continue to adapt and help our personal and business customers stay focused on long-term financial wellbeing.

Antonia Watson
CEO of New Zealand

Operating environment

Rapidly rising interest rates, inflation and heightened commodity prices have become a reality at home and around the globe. Economic disruption fuelled by the war in Ukraine and continued supply chain issues add to the challenges that we knew would linger as long as COVID-19 was around. While we successfully navigated the year alongside our customers, there’s been a noticeable shift in consumer sentiment and it’s clear the broader environment has become increasingly challenging for many.

The data tells us many customers are more resilient than many may think – making the right moves by prioritising home loan repayments, savings and paying down credit card debt. We continue to work with our business customers on sustainable financing solutions – where borrowing more is often not the answer. Being well capitalised provides important assurance for our customer base.

Strategy and focus

Despite the onslaught of COVID-19 and being required to work from home for much of the past two years, our accelerated strategy work has progressed well. In that time, we’ve delivered a number of projects beneficial to customers and staff, such as voice-identity confirming proof of a bank account in goMoney, digital multi-authorisation for payments, automated customer communications, and digital home loan rate refixing among others.

The speed of customers’ adoption of our digital banking tools has continued at pace, with an increase of 81,000 active users since March 2020. The pandemic has accelerated the decline in over-the-counter branch transactions by 40%. Technology will continue to be central to how we make things easier for staff and customers. We’re bringing forward a major project to install a modern banking platform that is “cloud-based”, providing us with more flexibility to quickly add functions for our customers and staff. By moving to a modern banking platform we will have a new core system which can continue to deliver reliable, efficient and secure services for our customers. That’s why we’ve also lifted this program above our strategic acceleration work and given it a foundational title: “Ngā Tapuwae o ANZ – The Footsteps of ANZ”.

Ngā Tapuwae is our statement about ensuring quickness of feet either in the depths of our intellectual pursuits or physical prowess. Ngā Tapuwae calls for us all to transform as a bank, in a fleet footed manner, to serve the needs of an ever-changing customer base and Aotearoa New Zealand.

We recently launched our Good Energy Home Loan, which allows customers to borrow up to $80,000 at a 3-year fixed rate of 1% to make their homes more energy efficient. This was followed by our ANZ Business Green Loan, the first product of its kind in the market. Our Business and Corporate customers with environmental initiatives that meet eligibility criteria can access funding of up to $3 million at a special floating interest rate for up to five years. Customers can also re-finance existing business loans if they meet the criteria. Importantly, it’s the only advertised loan in market aligned to internationally-recognised Green Loan Principles (GLP) for assets that demonstrate a clear environmental benefit.

	FY22	FY21	Growth
Cash profit (NZ$m)	1,768	1,607	10%
Net Loans & Advances (NZ$b)	108.0	102.3	5%
Return on Avg. RWAs (%)	2.3%	2.2%	4%
Customer Deposits (NZ$b)	140.4	134.5	5%

Cash continuing1

On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations and is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.

ANZ 2022 Annual Report

Supporting a more sustainable and self-sufficient future

Customer story

Changes to the social, physical and financial operating environment mean businesses must become more sustainable and energy-efficient. There is a growing sense that if they are to survive and thrive in a warmer world, they must adapt, invest in technology and become more self-sufficient and resilient.

One Canterbury business demonstrates this in spades. Hagley Windows and Doors – set up by builder Geoff Ball – has grown from having just two employees in 1983 to more than 190 today. In recent years, Hagley has invested millions of dollars in computer-controlled robotic glass-cutting and double-glazing machines, giving it an edge over competitors. Its high-tech double-glazed window units are a growing part of its business, and now help make thousands of homes and businesses in the South Island warmer, dryer and more energy efficient.

The company has also made substantial investments in solar power for its own premises. It takes considerable power to run a factory the size of two football fields, dozens of machines and an energy-hungry glass-toughening furnace. To meet some of these electricity demands, the company has put its abundant roof space to work, installing over 2900 solar panels. It is one of the largest solar arrays in the South Island, and now generates over 20 per cent of the company’s power requirements.

As the country’s largest bank, we’re seeing our customers increasingly turning to us for support and help as they consider how best to adapt and invest in their future. As with any investment, making a business more sustainable comes at a price, but our Business Green loan removes some of that cost barrier. It is currently the only advertised green loan product in the market available to business customers and linked to the Green Loan Principles.

ANZ has led the way with sustainable finance for our Institutional Business customers and we’re proud to now offer a Business Green Loan which will support many more businesses start down the road of becoming more sustainable, resilient and self-sufficient.# ANZ’s People Agenda

ANZ’s People Agenda is critical to the performance of our bank. This year saw the launch of Tākiri Ā Rāngi – ANZ New Zealand’s Te Ao Māori strategy out to 2040. We are committed to growing cultural competency and understanding of Te Ao Māori (the Māori world view) with our staff and enhancing the financial wellbeing of Māori. This year we released a report called Watch Women Win, which examined the motivations for, and obstacles preventing, women’s success. A key finding was women are inspired by seeing other women celebrated for doing well. We undertook a number of engagements throughout the year meeting successful women and hearing and sharing their stories. In February we also launched our Equity, Diversity and Inclusion Strategy, ‘Bringing EDI to Life’. This supports our business to create an equitable and inclusive workplace where the diversity of our workforce in its broadest sense can be leveraged to the benefit of our customers and Aotearoa New Zealand.

Performance highlights

New Zealand delivered another strong year with Cash Profit of NZ$1.77 billion. Home lending continues to be a key driver for us. We increased our share of the New Zealand home loan market over the year, from 30.38% in September 2021 to 30.51% in August 2022. Lending to Business and Institutional customers also grew, increasing by NZ$900 million over the first half. Overall, Business and Institutional customers managed well through the COVID-19 disruptions in the first half of the financial year. Our Contact Centre is experiencing increasing demand. We’ve seen an increase in customer calls, particularly related to an uptick in fraud and scam cases, the wind-up of Bonus Bonds, interest rates and a surge in home loan rollovers. Our Staff Foundation distributed over NZ $1.1 million in donations to 93 charities across New Zealand.

25 Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Governance

Board of Directors

ANZ’s strong governance framework provides a solid structure for effective and responsible decision-making within the organisation. The Board is responsible for the oversight of ANZ and its sound and prudent management, with specific duties as set out in its charter available at anz.com/corporategovernance.

There are six principal Board Committees – the Audit Committee, the Ethics, Environment, Social and Governance Committee, the Risk Committee, the Human Resources Committee, the Digital Business and Technology Committee and the Nomination and Board Operations Committee. Each Committee has its own charter setting out its roles and responsibilities.

At management level, the Group Executive Committee comprises ANZ’s most senior executives. There is a delegation of authority framework that clearly outlines those matters delegated to the CEO and other members of senior management. For further detail on ANZ’s governance framework see our 2022 Corporate Governance Statement available at anz.com/corporategovernance. Full biography details can be found on our website at anz.com/directors and on pages 31-35 of this report.

Corporate governance framework

graph TD
    A[SHAREHOLDERS] --> B(BOARD OF DIRECTORS)
    B --> C(Digital Business and Technology Committee)
    B --> D(Ethics, Environment, Social and Governance Committee)
    B --> E(Human Resources Committee)
    B --> F(Audit Committee)
    B --> G(Nomination and Board Operations Committee)
    B --> H(Risk Committee)
    B --> I(GROUP EXECUTIVE COMMITTEE)
    B --> J(CHIEF EXECUTIVE OFFICER)
    J --> I
    I --> K(BOARD RESERVED POWERS AND DELEGATION OF AUTHORITY)

Directors

Director Name	Position
Paul O’Sullivan	Chairman, Independent Non-Executive Director
Shayne Elliott	Chief Executive Officer, Executive Director
Ilana Atlas, AO	Independent Non-Executive Director
Christine O’Reilly	Independent Non-Executive Director
Jeff Smith	Independent Non-Executive Director
Jane Halton, AO PSM	Independent Non-Executive Director
RT Hon Sir John Key, GNZM AC	Independent Non-Executive Director
Graeme Liebelt	Independent Non-Executive Director
John Macfarlane	Independent Non-Executive Director

ANZ 2022 Annual Report 26

Directors’ meetings

The number of Board, and Board Committee, meetings held during the year and each Director’s attendance at those meetings are set out below:

Director	Board	Risk Committee	Audit Committee	Human Resources Committee	Ethics, Environment, Social and Governance Committee	Digital Business and Technology Committee	Special Committee of the Board	Committee of the Board*	Nominations and Board Operations Committee	Shares Committee*
Paul O’Sullivan	18	8	8	7	7	6	6	4	4	3
Ilana Atlas, AO	18	8	8	7	7	6	6	1	1	4
Paula Dwyer	2	4	4	2	2	2	2	2	2	2
Shayne Elliott	18	1	1	2	2	2	2
Jane Halton, AO PSM	18	7	7	6	6	4	4			4
RT Hon Sir John Key, GNZM AC	18	7	8	6	6	4	4	1	1	4
Graeme Liebelt	18	8	8	8	7	7	1	1	2	4
John Macfarlane	18	8	8	8	4	4	1	1	1	4
Christine O’Reilly	3	1	6	1	6	6	7	7	5	4
Jeff Smith	4	1	1	1	1	1	1	1	1	1

Column A indicates the number of meetings the Director was eligible to attend as a member.
Column B indicates the number of meetings attended.

With respect to Committee meetings, the table above records attendance of Committee members.
1. The meetings of the Committee of the Board and Shares Committee as referred to in the table above include those conducted by written resolution.
2. Paula Dwyer ceased as a Non-Executive Director on 16 December 2021.
3. Christine O’Reilly commenced as a Non-Executive Director on 1 November 2021.
4. Jeff Smith commenced as a Non-Executive Director on 1 August 2022.

“The Board continues to focus on immediate and longer-term strategic matters. The Board closely monitored the rapidly changing operating environment, including inflation and interest rates and the continuing impact of COVID-19, together with ANZ’s approach to dealing with those matters in alignment with ANZ’s purpose.”

Paul O’Sullivan
Chairman

ANZ 2022 Annual Report 28

Executive Committee

Executive Name	Role	Joined Executive Committee
Maile Carnegie	Group Executive Australia Retail	27 June 2016
Shayne Elliott	Chief Executive Officer (appointed CEO on 1 January 2016)	1 June 2009
Kevin Corball	Group Chief Risk Officer	19 March 2018
Gerard Florian	Group Executive Technology	30 January 2017
Farhan Faruqui	Chief Financial Officer (appointed CFO on 11 October 2021)	1 February 2016
Kathryn van der Merwe	Group Executive Talent & Culture and Service Centres	1 May 2017
Mark Whelan	Group Executive Institutional	20 October 2014
Antonia Watson	Chief Executive Officer New Zealand	17 June 2019

Full biography details can be found on our website at anz.com/execo.

ANZ 2022 Annual Report 29

Board areas of focus

The Board and its Committees engage in key strategic, governance and oversight activities each year. The topics below are illustrative to provide stakeholders with an insight into some of the key matters considered by the Board and its Committees during the 2022 financial year and is not intended to be a comprehensive list.

Strategy and growth

During the financial year, the Board and its Committees continued to focus on longer-term strategic matters. In addition to participating in regular strategy sessions, the Board regularly discussed and reviewed ANZ’s strategic and growth priorities. At each regular Board meeting, there continued to be unstructured discussion with the Chief Executive Officer in relation to the progress of Management’s key priorities as agreed with the Board. The Board also received regular reports on progress (from both a strategic/operational viewpoint and a technology viewpoint) in the design and build and implementation, including customer migration strategy, relating to ANZ Plus.

Mergers & Acquisitions was a key topic of consideration during the year with discussions taking place at both regular and specially convened Board meetings in relation to key potential transactions that have been disclosed to the market, including the acquisition of Suncorp Bank. At the Interim Results in May, ANZ announced its intention to apply for approval to implement a non-operating holding company structure. The Board received regular reports throughout the year on the strategic rationale and details of how such a revised structure would work in practice, including in relation to governance and operations. The Board played a key role in the ultimate design and application of the proposed revised structure.

Risk, regulation and reputation

The Board Risk Committee and the Board played a key role in reviewing the Group’s approach to managing non-financial risk and the design and implementation of ANZ’s revised operational risk and compliance framework. The Board and its Committees continued their oversight of the Group’s risk appetite settings. The Board continued to meet with ANZ’s key Australian regulators during the course of the year with the purpose of maintaining constructive two-way dialogue. The Board also received regular education and briefing materials and held education sessions on key areas such as sanctions, competition law and cyber security, as well as participating in Banking Executive Accountability Regime (BEAR) scenario training.

Financial/Operational

While the Board and its Committees have had a strong focus on the long-term future of the Group, the Board (and its Committees) maintained an equally strong focus on the current performance of the Group, including:

Reviewing and ultimately approving ANZ’s revised structure for its Australia Retail & Commercial businesses.# Directors’ qualifications, experience and special responsibilities

As at the date of this report, the Board comprises eight Non-Executive Directors and one Executive Director, the Chief Executive Officer. The names of the current Directors, together with details of their qualifications, experience and special responsibilities are set out below.

Jeff Smith joined the Board on 1 August 2022 as a Non-Executive Director and will stand for election as a Director at ANZ’s AGM on 15 December 2022. Paula Dwyer ceased as Non-Executive Director on 16 December 2021, after serving on the Board since 2012. Graeme Liebelt will cease as a Non-Executive Director at the conclusion of the 2022 AGM.

Paul O’Sullivan

Member	Position
Chairman, Independent Non-Executive Director	Chairman
Qualiﬁcations: BA (Mod) Economics, Advanced Management Program of Harvard	Qualiﬁcations
Responsibilities: Chairman since October 2020 and a Non-Executive Director since November 2019. Paul is an ex-officio member of all Board Committees and Chair of the Ethics, Environment, Social and Governance Committee and Nomination and Board Operations Committee.	Responsibilities
Career: Paul has experience in the telecommunications and oil and gas sectors, both in Australia and overseas. He has held senior executive roles with Singapore Telecommunications (Singtel) and was previously the CEO of Optus. He has also held management roles with the Colonial Group and the Royal Dutch Shell Group in Canada, the Middle East, Australia and United Kingdom.	Career
Relevant other directorships: Chairman: Singtel Optus Pty Limited (from 2014, Director from 2004) and Western Sydney Airport Corporation (from 2017). Director: St Vincent’s Health Australia (from 2019) and Australian Tower Network Pty Ltd (from 2021).	Relevant other directorships
Relevant former directorships held in last three years include: Former Director: Telkomsel Indonesia (2010–2020), Healthscope Limited (2016–2019), National Disability Insurance Agency (2017–2020) and Coca-Cola Amatil (2017–2021).	Relevant former directorships held in last three years
Age: 62 years	Age
Residence: Sydney, Australia	Residence
Digital Business and Technology Committee	Digital Business and Technology Committee
Ethics, Environment, Social and Governance Committee	Ethics, Environment, Social and Governance Committee
Human Resources Committee	Human Resources Committee
Audit Committee	Audit Committee
Nomination and Board Operations Committee	Nomination and Board Operations Committee
Risk Committee	Risk Committee

Shayne Elliott

Member	Position
Chief Executive Officer and Executive Director	Position
Qualiﬁcations: BCom	Qualiﬁcations
Responsibilities: Chief Executive Officer and Executive Director since 1 January 2016.	Responsibilities
Career: Shayne has over 30 years’ experience in banking in Australia and overseas, in all aspects of the industry. Shayne joined ANZ as CEO Institutional in June 2009, and was appointed Chief Financial Officer in 2012. Prior to joining ANZ, Shayne held senior executive roles at EFG Hermes, the largest investment bank in the Middle East, which included Chief Operating Officer. He started his career with Citibank New Zealand and worked with Citibank/Citigroup for 20 years, holding various senior positions across the UK, USA, Egypt, Australia and Hong Kong. Shayne is a Director of the Financial Markets Foundation for Children and a member of the Australian Banking Association, the Business Council of Australia and the Australian Customs Advisory Board.	Career
Relevant other directorships: Director: ANZ Bank New Zealand Limited (from 2009) and the Financial Markets Foundation for Children (from 2016). Member: Business Council of Australia (from 2016), the Australian Banking Association (from 2016, Chairman 2017–2019) and the Australian Customs Advisory Board (from 2020).	Relevant other directorships
Age: 58 years	Age
Residence: Melbourne, Australia	Residence

Ilana Atlas, AO

| Member

| Member # Directors’ report

Career Graeme brings to the Board his experience of a 23-year executive career with Orica Limited (including a period as Chief Executive Officer), a global mining services company with operations in more than 50 countries. He has extensive international experience and a strong record of achievement as a senior executive, including in strategy development and implementation. Graeme is committed to global trade and cooperation, as well as community education.

Relevant other directorships

Chairman: Amcor Limited (from 2013, Director from 2012).
Director: Australian Foundation Investment Company Limited (from 2012) and Carey Baptist Grammar School (from 2012).

Relevant former directorships held in last three years include

Former Chairman: DuluxGroup Limited (2018–2019, Director from 2016).

Age 68 years
Residence Melbourne, Australia

John Macfarlane

Member

Position Independent Non-Executive Director

Qualifications

BCom, MCom (Hons)

Responsibilities

Non-Executive Director since May 2014. John is a member of the Audit Committee, Risk Committee, Digital Business and Technology Committee and Nomination and Board Operations Committee.

Career

John is one of Australia’s most experienced international bankers having previously served as Executive Chairman of Deutsche Bank Australia and New Zealand, and CEO of Deutsche Bank Australia. John has also worked in the USA, Japan and PNG, and brings to the Board a depth of banking experience in ANZ’s key markets in Australia, New Zealand and the Asia–Pacific. He is committed to community health, and is a Director of the Aikenhead Centre of Medical Discovery Limited (from 2016).

Relevant other directorships

Director: Colmac Group Pty Ltd (from 2014), AGInvest Holdings Limited (MyFarm Limited) (from 2014, Chairman 2014–2016), Balmoral Pastoral Investments (from 2017) and L1 Long Short Fund (from 2018).

Relevant former directorships held in last three years include

Former Director: Craigs Investment Partners Limited (2013–2020).

Age 62 years
Residence Melbourne, Australia

Christine O’Reilly

Chair

Position Independent Non-Executive Director

Qualifications

BBus

Responsibilities

Non-Executive Director since November 2021. Christine is Chair of the Audit Committee and a member of the Risk Committee, Human Resources Committee and Nomination and Board Operations Committee.

Career

Christine is one of Australia’s leading non-executive directors. Christine has held executive roles in the infrastructure and financial services industries. This includes being CEO of GasNet Australia and Co-Head of Unlisted Infrastructure Investments at Colonial First State Global Asset Management and follows an early career including investment banking and audit experience at Price Waterhouse.

Relevant other directorships

Director: The Baker Heart & Diabetes Institute (from 2013), Stockland (from 2018) and BHP Group Limited (from 2020).

Relevant former directorships held in last three years include

Former Director: Medibank Private Limited (2014–2021), CSL Limited (2011–2020) and Transurban Group (2012–2020).

Age 61 years
Residence Melbourne, Australia

Je Smith

Member

Position Independent Non-Executive Director

Qualifications

BAppSc, MBA

Responsibilities

Non-Executive Director since August 2022. Je is a member of the Nomination and Board Operations Committee.

Career

Je is an experienced global business and technology executive, with over 30 years corporate experience which includes senior executive roles in a number of companies including Telstra, Honeywell and Toyota. Je was previously Chief Information Officer at IBM Corporation where he was globally responsible for IT strategy, resources, systems and infrastructure and also led the company’s Agile transformation. Je was also CEO of Suncorp Business Services and Suncorp Chief Information Officer. Since 2017, Je has been Chief Operating Officer of World Fuel Services Corporation, a role he will step down from at the end of 2022. Je also served on the Australian Fulbright Commission awarding Australian post-graduate scholarships to US universities. He was previously a member of ANZ’s International Technology and Digital Business Advisory Panel until 2019.

Relevant other directorships

Director: Sonrai Security Inc (from 2021).
Advisor: Zoom Video Communications, Inc (from 2018) and Box, Inc. (from 2018).

Relevant former directorships held in last three years include

Former Member: ANZ International Technology and Digital Business Advisory Panel (2016–2019).

Age 60 years
Residence USA

Company Secretaries’ qualifications and experience

Currently there are two people appointed as Company Secretaries of the Company. Details of their roles are contained in the Corporate Governance Statement. Their qualifications and experience are as follows:

Position	Qualifications
Group General Counsel	BA, LLB, LLM
Company Secretary	LLB (Hons), FGIA, FCG (CS, CGP)

Ken Adams joined ANZ as Group General Counsel in August 2019, having assisted ANZ with major legal issues for over 10 years. Prior to ANZ, Ken was a Partner of Freehills and later Herbert Smith Freehills for 21 years, and for six years was a member of the Herbert Smith Freehills Global Board. Ken is one of Australia’s leading commercial lawyers with significant experience in class actions and other complex legal issues. He holds a Master of Laws from the University of Melbourne and is a co-author of Class Actions in Australia.
Simon Porda joined ANZ in May 2016. He is a Chartered Secretary and Chartered Governance Practitioner and has extensive company secretarial and corporate governance experience. From 2009 to 2016 he was Company Secretary for Australian Foundation Investment Company Limited and a number of other listed investment companies. Other former roles include being Deputy Company Secretary for ANZ and Head of Board Support for Barclays PLC in the United Kingdom. He is a formal brand ambassador for, and is a former National President and Chairman of, Governance Institute of Australia. He is also a member of the Chartered Governance Institute’s Global Thought Leadership Committee. Simon is committed to the promotion and practice of good corporate governance, and regularly presents on governance issues.

Risk management

The evolving macroeconomic and geopolitical conditions have continued to challenge our operating environment. Our Risk Management Framework (RMF) has remained robust in the face of these challenges, enabling the sound management of our business. Over the last year we have continued to work towards a stronger and simpler risk and governance framework. Our ability to respond to changes in existing risks, and to deal with emerging risks as they arise has been strengthened, including those discussed below.

Macroeconomic and Geopolitical environment

The rising geopolitical tensions including the conflict in Ukraine, trade tensions, energy security issues in the European Union accompanied with economic challenges relating to rising interest rates, inflation and real cost of living pressures, are creating uncertainty for many of our customers. The Board and management continually monitor these developing conditions, and maintain provisions and strong capital levels for a range of potential scenarios. In addition, we have focused on the following to help support our customers and their financial resilience:

Home Loans and Consumer Lending – We continue to engage with our home loans customers to help them better manage their home loan and personal finances. 70 per cent of our customers have paid additional funds to reduce their principal debt with over half of those more than 2 years ahead on their repayments. Measures such as interest rate floors and higher interest rate buffers when assessing home loans, and higher household expenditure measures, have contributed to customers being better placed to service their loans. We have proactively communicated with our customers to provide reassurance that where required, we have options available to continue to support them.
Data Analytics – Data and analytics play an important role in early identification of customers heading towards financial difficulty. We have invested in our retail risk systems to provide quality data analytics to assist our Collections and Hardship teams. Our analytics have focused on customer transaction data and the identification of customers that may need additional support. We are using data analytics to look at savings, credit, and offset accounts to better understand customers’ financial behaviour and potential future outcomes. The analysis considers interest rate changes, increases in living expenses and cashflow. In our Wholesale portfolio, we are using external (e.g., ASIC’s insolvency register, ATO arrears) and internal data sources (e.g., stress sensitivities and savings levels) to identify areas of systemic emerging risks to proactively manage the portfolio.
Financial health and Wellbeing – We have transformed our retail platform by simplifying and rebuilding products, systems and processes to improve the financial wellbeing of our customers. Our initial ‘transact and save’ product within the ANZ Plus App has provided functionality to enable customers to have better visibility and control over their money. The lessons we have learnt from COVID-19 and recent natural disasters, have been used to develop financial hardship assistance options that can be implemented quickly.

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information
35
Risk management# Portfolio management
Our new Head of Geopolitical Risk provides additional insights to support our customer management and understand the geopolitical impacts to our portfolio. The introduction of this role has provided focused analysis of global issues which allows us to better inform and support our customers and the Board.

Risk Culture

Risk culture is an important component of our organisational culture and underpins the shared values, behaviours and practices that drive how risk is considered in decisions. As part of ANZ’s ongoing focus on keeping communities safe, members of the ANZ Financial Crime team have security clearance to support intelligence initiatives. Leveraging lessons from previous operations involving fugitives and high-risk law enforcement targets, the team regularly checks internal and external intelligence sources for information. In 2022, a member of the Financial Crime team proactively reached out to law enforcement and regulatory partners to support a live child abduction case. The alleged perpetrator was on the run and actively being sought by law enforcement agencies. The team member checked our systems for the main perpetrators and any known associates, which led to the identification of accounts with activity outside of the account holder's normal spending behavior. Close examination of those accounts suggested the alleged perpetrator was using the account of a family member to avoid detection. This information was then shared with law enforcement. Law enforcement partners were able to follow up on ANZ’s leads and located the victim unharmed.

Keeping our community safe
ANZ 2022 Annual Report 36

We have made progress in strengthening risk culture through achieving greater awareness of the approach to risk culture and establishing strong leadership to deliver on our risk culture plans. This will allow us to achieve our defined target state. We have defined key risk culture principles that form the foundation of our risk culture approach and have embedded a framework for assessing each risk culture principle across the organisation. This framework incorporates desired risk behaviours and business and risk outcomes. We are monitoring risk culture through our Risk Culture Dashboard which captures risk management and business-related information. Our annual Risk Culture Survey informs us on the perceived and actual effectiveness of our risk behaviours, policies and processes, and decision making. Our Board Risk Committee receives half-yearly updates from management to assist the Board in forming a view on risk culture and the effectiveness of plans and actions. Risk culture is included as a performance objective for all Group Executives and risk is a key element of the balanced scorecard for our people’s performance and remuneration. Behaviours supporting the target risk culture are reinforced through the Enterprise Accountability Group (page 90). We acknowledge individuals who role model outstanding risk behaviours for their work to manage and mitigate the organisation’s risks.

Financial crime

We continue to maintain an effective financial crime risk management program that anticipates and navigates criminal threats supported by the right people with the right tools. The Financial Crime team continues to be responsible for the delivery of enhanced detection, investigative and/or intelligence capability that is focused on identifying, mitigating and managing financial crime risk and protecting the community via:
* Partnering with AUSTRAC’s Fintel Alliance, and similar programs globally.
* The development and maintenance of a central data repository, intelligence systems and tools.
* The creation and delivery of Dynamic Algorithms to meet new threats.

Non-financial risk

We have made further inroads in our non-financial risk management. We continue to uplift our non-financial RMF (the I.AM – Identify, Act, Monitor framework) to provide a holistic approach to risk management with insights that enable us to anticipate and navigate a changing environment and protect our customers, shareholders and the community from harm. We are improving how we manage our non-financial risk by updating our approach to be more standardised, integrated, dynamic and automated, so that it is both more effective and efficient.

Conduct Risk

The interests of our customers and community are fundamental to our strategy. We continue to responsibly manage our Conduct Risk, including by identifying, managing, and mitigating instances where our activities, products and/or services may result in unfair customer outcomes and/or damage to market integrity. The articulation of Conduct Risk as a Risk Theme under the new Compliance and Operational Risk model will help manage Conduct Risk as a key material risk for ANZ. To support this, we have developed a global Conduct Risk Framework and Conduct Risk taxonomy which facilitate a clear and consistent way of managing and monitoring the risk, in conjunction with the Compliance and Operational Risk Framework (I.AM).

37
Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

Emerging risks

Risks that continue to evolve and that we are paying particular attention to are:

Cyber security risk

We take the security of our bank, our customers and our customers’ information very seriously. Cyber security threats continue to be significant and our approach to mitigating cyber security risk involves a range of controls relying on people, technology and process. We are continually testing our defences internally and through independent third parties. We have a very sophisticated cyber security protection capability and have invested heavily in a range of recognised industry practices and technologies, processes and defences. We maintain a 24/7 sophisticated internal Security Operations Centre, analysing millions of data events daily including unusual or infrequently seen activities identified by our security team. In addition, we are cooperating with our counterparts, governments and associated entities around the world to protect against cyber security threats, which have increased since COVID-19 and the consequent shift to digital banking and remote working. We provide continuing staff education and run customer focused campaigns. We have developed threat intelligence newsletters and a ‘Simplifying Cyber for Business’ guide. We have continued to sponsor the Australian Computing Academy’s Schools Cyber Security Challenges, contributing to content and co-producing cyber security modules for students and teachers as part of the digital curriculum.

Climate change risk

The financial risks associated with climate change remain a key focus. Climate-related events can include severe storms, drought, fires, cyclones, hurricanes, floods and rising sea levels. The impact of these events can be widespread. The impact of these losses on the Group may be exacerbated by a decline in the value and liquidity of assets held as collateral, which may impact the Group’s ability to recover its funds when loans default. Recent examples in Australia include severe drought conditions, bushfires in 2019/2020, and severe flooding in 2021 and 2022. In addition, geological event impacts have occurred in New Zealand in recent years. We continue to improve our management of climate risks through workstreams focused on regulatory monitoring, policy governance, risk appetite, data and analytics. We have set a public ESG target to develop an enhanced RMF that anticipates potential climate-related impacts, and associated regulatory requirements, by the end of 2022. For details on our performance against our ESG Targets refer to our ESG Supplement available at anz.com/annualreport Our Climate Advisory Forum, chaired by the Group Executive, Institutional and includes the Group Chief Risk Officer, supports execution of our climate policy, disclosures and related matters across the Group. We are focusing on: aligning our lending portfolio with the goals of the Paris Agreement and supporting customers to expand in low or zero emission technologies; and factoring climate change risk into lending decisions for large business customers, assessing their capacity to respond to climate change and the evolving regulatory landscape. We participated in APRA’s Climate Vulnerability Assessment (CVA), which aims to examine the material exposures and financial risks that banks, the financial system and economy may face due to climate risks. APRA’s CVA comprised two stress tests, a counterparty assessment and a data assessment. APRA intends to disclose the outcomes of the CVA in late 2022, which may also be used to inform future supervisory guidance. Our 2022 Climate-related Financial Disclosures will be released prior to our Annual General Meeting (AGM) and will be available at anz.com/annualreport

Biodiversity risk

Risks associated with biodiversity loss, including as a result of species extinction or decline, ecosystem degradation and nature loss, are emerging risks that we are seeking to understand further. We acknowledge biodiversity risks are closely linked to climate-related risks. In relation to biodiversity, risks can arise from lending to customers that are significantly dependent on biodiversity and ecosystem services, or who may have negative impacts on biodiversity. In addition to physical risks associated with biodiversity loss, risks can also arise from changing societal preferences and regulatory or policy changes (including potential reforms to halt and reverse forest loss, species extinctions and land degradation). These changes may impact the bank directly, but the greater impact is likely to be through the impact of these changes on some of the bank's customers.We understand that failure to manage these risks may lead to financial and non-financial risks and adverse impacts to the Group’s Position. Biodiversity and natural capital loss are addressed in various ways by ANZ's risk policies and processes. In line with our Social and Environmental Risk Policy, we expect our business customers to use internationally accepted industry practices to manage social, environmental and economic impacts, including potential results on biodiversity. This year we also broadened our engagement with 100 of our largest emitting business customers to include a focus on biodiversity, encouraging and supporting them to identify and manage their potential impacts. We welcome the establishment of the Taskforce on Nature-related Financial Disclosures (TNFD) and have joined the TNFD Forum to support their work. We recognise their important role in driving widespread and improved disclosures of biodiversity impacts.

Our Risk Management Framework

The Board is ultimately responsible for establishing and overseeing the Group’s RMF which is supported by the Group’s underlying systems, structures, policies, procedures, processes and people. The Board has delegated authority to the Board Risk Committee (BRC) to develop and monitor compliance with the Group’s ANZ 2022 Annual Report 38 risk management policies. The Committee reports regularly to the Board on its activities. The key pillars of the Group RMF include:

The Risk Management Strategy (RMS), which describes the approach for managing risk arising from the Group’s purpose and strategy. The RMS includes: how the risk function is structured to support the Group’s purpose and strategy, and the execution of the Group Chief Risk Officer’s prescribed responsibilities as an Accountable Person for the Group under the Banking Executive Accountability Regime; the values, attitudes and behaviours required of employees in delivering on strategic priorities; a description of each material risk; and an overview of how the RMF addresses each risk, with reference to the relevant policies, standards and procedures. It also includes information on how the Group identifies, measures, evaluates, monitors, reports and then either controls or mitigates material risks and the oversight mechanism and/or committees in place.
The Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding, for each material risk, the maximum level of risk that the Group is willing to accept in pursuing its strategic objectives and its operating plans considering its shareholders’, depositors’ and customers’ interests.
The Risk Culture principles, which are a subset of the Group’s organisational culture and an intrinsic part of the Group’s RMF.

The Group operates a Three Lines-of-Defence Model in regard to risk management, helping to embed a culture where risk is everyone’s responsibility. The business has first line of defence responsibility for day-to-day ownership of risks and controls and accountability for implementation and ongoing maintenance of the RMF. The Group Risk (including Compliance) teams form the second line of defence, providing independent oversight of the Group’s risk profile and RMF. Internal Audit is the third line of defence, providing independent evaluation and assurance on the appropriateness, effectiveness and adequacy of the Group’s RMF.

The governance and oversight of risk management, while embedded in day-to-day activities, is also the focus of committees and regular forums across the bank (see diagram next page). The committees and forums discuss and monitor known and emerging risks, review management plans and monitor progress to address known issues.

Credit Ratings System Oversight Committee	Capital and Stress Testing Oversight Committee	Financial Crime ORE C Sub-Committee	Regional or Country Risk Management Committees	Country Assets and Liability Committees	Credit and Market Risk Committee	Audit Committee	Group Asset and Liability Committee	Ethics, Environment, Social and Governance Committee	Operational Risk Executive Committee	Risk Committee	Ethics and Responsible Business Committee	Digital Business and Technology Committee	Investment Committee	Group Executive People Committee	Nomination and Board Operations Committee	Risk Governance and Oversight Committee	Human Resources Committee
Divisional / Functional Accountability	Group Executive Committee	Group Performance Execution Committee	ANZ’s key Management Committee charged with oversight of the Group’s overall operational performance and position and execution of the operating plan.	Group Principal Board Committees	Country Division	Modelling Ratings Working Groups and Usage Forums	Divisional Initiatives Review Committees / Project Advisory Councils	Divisional Risk Management Committees	Board of Directors	Key Management Committees	Various Divisional Specific Management Committees	Operational Risk Committee	Product Committee
	ANZ’s most senior executives meet regularly to discuss performance and review shared initiatives.	Enterprise Accountability Group

Overview

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Performance overview
Remuneration report
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Shareholder information

Key material risks

The material risks facing the Group per the Group’s RMS, and how these risks are managed, are summarised below. As part of the annual review of our RMS we have classified Financial Crime Risk (previously captured under Operational Risk) as a key material risk to enhance its profile. We also specified the risk management approach for: Money Laundering risk, Terrorism Financing risk, Sanctions risk and Fraud risk, complying with better practice and align with the direction of the Compliance and Operational Risk Strategy to identify significant obligations and material risks that matter to the Group. For further information about the principal risks and uncertainties that the Group faces, see our “Principal Risks and Uncertainties” disclosure available at anz.com/shareholder/centre.

| Risk type | Description | Managing the risk # Risk type Description Managing the risk Material ESG issues

Technology Risk

The risk of loss and/or non-compliance with laws from inadequate or failed internal processes, people or systems that deliver Technology assets and services to customers and sta. This risk includes Technology assets and services delivered or managed by third parties, and external events. The risk specically includes Information Security and Cyber Security and how information held by the Group needs to be protected from inappropriate modication, loss, disclosure and unavailability. Our approach to manage Technology Risk is to manage our operational risks caused by the use of technology, including risks associated with cyber security and third party providers, in a manner that seeks to ensure customer information is secure and service disruption is within acceptable levels.

Conduct Risk

The risk of loss or damage arising from the failure of the Group, its employees or agents to appropriately consider the interests of customers, the integrity of the nancial markets and the expectations of the community in conducting its business activities. The Risk may arise not only from deliberate or negligent actions of individual employees but may also be inadvertent and caused by inadequacies in the Group’s systems, processes and procedures. Approach to manage Conduct Risk is to seek to ensure that risks to customers, community and market integrity are identied, assessed, measured, evaluated, treated, monitored and reported with appropriate governance and oversight. The articulation of Conduct Risk as a Level 1 Risk Theme under the new NFR model will help manage Conduct Risk as a key material risk for ANZ. To support the NFR model (and our obligations under Prudential Standard CPS 220 Risk Management), ANZ has developed a global Conduct Risk Framework and Conduct Risk taxonomy which facilitate a clear and consistent way of managing and monitoring the risk, and the risk is managed in conjunction with the Compliance and Operational Risk Framework (I.AM).

Financial Crime Risk

Financial Crime Risk covers the following risks at ANZ:
* Money Laundering (ML) Risk – the risk that we may reasonably face from our 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.
* Terrorism Financing (TF) Risk – the risk that we may reasonably face from our 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.
* 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 our products and services being misused to facilitate prohibited sanctions activities.
* Fraud Risk – the risk that we may reasonably face from our 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.

Financial Crime Risk at ANZ is managed using a risk-based approach in accordance with the Conduct Risk Framework, and in conjunction with the Compliance and Operational Risk Framework (I.AM) and a three lines of defence model. In additional to a risk-based approach to risk management, for Sanctions there is a rules-based lens to ensure compliance with Sanctions legislation. For the Business to identify and manage Financial Crime Risk, it must identify its regulatory obligations and impacted business activities and maintain and monitor key controls.

Cl imate c han g e

Information secur i t y

Customer e xper i ence

E mp l oyee capa b i l ity and wellbein g

I nnovation and technolog y

GROUP PERFORMANCE

The results of the Group’s operations and financial position are set out on pages 44-59. Page 13 outlines the Group’s strategy and pages 11-25 describe in further detail the Group’s prospects in terms of future financial position and performance. Discussion of our approach to risk management, including a summary of our key material risks, is outlined on pages 36-42.

GROUP PROFIT RESULTS

Income Statement	2022	2021	2022	2021
	$m	$m	$m	$m
Net interest income	14,874	14,874	14,161	14,161
Other operating income	4,552	3,673	3,259	3,286
Operating income	19,426	18,547	17,420	17,447
Operating expenses	(9,579)	(9,579)	(9,051)	(9,051)
Profit before credit impairment and income tax	9,847	8,968	8,369	8,396
Credit impairment (charge)/release	232	232	567	567
Profit before income tax	10,079	9,200	8,936	8,963
Income tax expense	(2,940)	(2,684)	(2,756)	(2,764)
Non-controlling interests	(1)	(1)	(1)	(1)
Profit after tax from continuing operations	7,138	6,515	6,179	6,198
Profit/(Loss) after tax from discontinued operations	(19)	(19)	(17)	(17)
Profit for the year	7,119	6,496	6,162	6,181

Statutory profit after tax for the year ended 30 September 2022 increased 16% on the prior year to $7,119 million. Statutory return on equity is 11.4% and statutory earnings per share is 250.0 cents, an increase of 16% on prior year.

The Group uses cash profit, a non-IFRS measure, to assess the performance of its business activities. It is an industry-wide measure which enables comparison with our peer group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents the financial performance of our core business activities. We use cash profit internally to set targets and incentivise our Senior Executives and leaders through our remuneration plans. Refer to page 45 for adjustments between statutory and cash profit. The adjustments made in arriving at cash profit are included in statutory profit which is subject to audit within the context of the external auditor’s audit of the 2022 Financial Report. Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that adjustments between statutory and cash profit have been determined on a consistent basis across each of the periods presented.

DISCONTINUED OPERATIONS

We completed the sale of our aligned dealer groups business and our OnePath pensions and investment business to IOOF Holdings Limited (IOOF, now known as Insignia Financial Limited), and our life insurance business to Zurich Financial Services Australia (Zurich) across the 2020 and 2019 financial years. The financial results of these divested businesses are treated as discontinued operations from a financial reporting perspective. The financial results after transaction completion primarily relate to residual operational costs on separation and partial recovery of certain costs based on the respective Transition Service Agreements. The separation of the business sold to Zurich completed in early April 2022, and the businesses sold to IOOF completed in early October 2022. There were no material financial impacts from the discontinued operations in each of the periods presented.# PENDING ORGANISATIONAL CHANGES WITH IMPACT TO FUTURE REPORTING PERIODS

Non-Operating Holding Company

On 4 May 2022, the Group announced its intention to lodge a formal application with APRA, the Federal Treasurer and other applicable regulators to establish a non-operating holding company and create distinct bank and non-bank groups within the organisation to assist ANZ to better deliver its strategy to strengthen and grow its core business further. Should the proposed restructure proceed, ANZ will establish a non-operating holding company, ANZ Group Holdings Limited, as the new listed parent holding company of the ANZ Group by a scheme of arrangement and to separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group. The ANZ Bank Group would comprise the current Australia and New Zealand Banking Group Limited and the majority of its present-day subsidiaries. The ANZ Non-Bank Group would house banking-adjacent businesses developed or acquired by ANZ Group, as we continue to seek ways to bring the best new technology and banking-adjacent services to our customers.

	2022	2021
Net interest margin – cash 1 (%)
Operating expenses to operating income – cash 1 (%)
Common equity tier 1 (%)	12.6	12.6
Cash profit 1 ($m)	6,515	6,198
Credit impairment charge /(release) –cash 1 ($m)	(232)	(567)
Return on equity – cash 1 (%)	10.7	9.9
Earnings per share – cash 1 (cents)	118.8	114.9
Dividend per share (cents)	47	47

Suncorp Bank Acquisition

On 18 July 2022, the Group announced an agreement to purchase 100% of the shares in SBGH Limited, the immediate non-operating holding company of Suncorp Bank. The acquisition is subject to a minimum completion period of 12 months and to certain conditions, being Federal Treasurer approval, Australian Competition and Consumer Commission authorisation or approval and certain amendments to the State Financial Institutions and Metway Merger Act 1996 (Qld). Unless the parties agree otherwise, the last date for satisfaction of these conditions is 24 months after signing (after which either party may terminate the agreement). The final purchase price is subject to completion adjustments and may be more or less than $4.9 billion. In addition, ANZ will also acquire Suncorp Bank’s Additional Tier I capital notes at face value ($0.6 billion as at June 2022). Completion is expected in the second half of calendar year 2023.

CONTINUING OPERATIONS

Key measures of our financial performance are set out below.

	2022	2021
Net interest margin – cash 1 (%)	1.64	1.65
Operating expenses to operating income – cash 1 (%)	48.6	47.9
Common equity tier 1 (%)	12.6	12.6
Cash profit 1 ($m)	6,515	6,198
Credit impairment charge /(release) – cash 1 ($m)	(232)	(567)
Return on equity – cash 1 (%)	10.7	9.9
Earnings per share – cash 1 (cents)	118.8	114.9
Dividend per share (cents)	47	47

Information has been presented on a cash profit from continuing operations basis.

ADJUSTMENTS BETWEEN STATUTORY PROFIT AND CASH PROFIT ($m)

Adjustments between continuing operations statutory profit and cash profit are summarised below:

| Adjustment | Reason for the adjustment # Completed divestment business results

Completed divestment business results relate to the ANZ Worldline partnership and financial planning and advice business, which completed during the 2022 financial year.

Merger and acquisition (M&A) related costs

During the 2022 financial year, the Group incurred transaction related external legal and advisor costs of $10 million after tax associated with M&A activities during the period, including the Suncorp Bank acquisition.

Customer remediation

Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims, penalties and litigation costs and outcomes.

Litigation settlements

During the 2022 financial year, the Group entered into an agreement to settle a United States class action related to the trading of products based on certain benchmark reference rates and recognised expenses of $10 million after tax in relation to the proposed settlement and related costs. The settlement is without admission of liability and remains subject to negotiation and execution of complete settlement terms as well as court approval.

During the 2021 financial year, the Group reached an agreement to settle a separate United States class action related to other benchmark-based products and activities and recognised expenses of $48 million after tax. The settlement is without admission of liability and remains subject to court approval.

Restructuring

In addition to the restructuring expenses of $18 million after tax included within business divestments/closures (2021: nil), the Group recognised restructuring expenses of $68 million after tax in 2022 (2021: $92 million) relating to operational changes across multiple divisions.

Withholding tax

During the 2022 financial year, a dividend payment of $714 million (net of withholding tax) was made by ANZ Papua New Guinea (ANZ PNG) to Australia and New Zealand Banking Group Limited (ANZBGL) in order to rebalance capital positions within the Group in response to APRA’s changes in the capital requirements for subsidiaries. ANZBGL made a capital injection into ANZ PNG equivalent to the dividend, net of withholding tax. As a result of the dividend payment, a dividend withholding tax expense of $126 million was recognised during the period.

Lease modification

During the 2022 financial year, the Group early terminated the head lease on the 55 Collins Street Melbourne building and recognised a net loss after tax of $17 million. The loss comprised a $31 million gain in Other operating income on lease modification arising from remeasurement of the lease liability and right-of-use asset net of a $8 million lease termination payment, a $47 million loss in Operating expenses associated with lease exit costs including accelerated depreciation and asset write-offs, and an income tax benefit of $7 million.

Asian associate items

During the 2021 financial year, the Group recognised a $347 million reduction in equity accounted earnings after tax, comprising $212 million reflecting its share of the settlement provision following AMMB Holdings Berhad’s (AmBank) agreement with the Malaysian Ministry of Finance to resolve potential claims relating to its involvement with 1Malaysia Development Berhad (1MDB), and $135 million reflecting its share of the impairment of AmBank goodwill.

ANZ 2022 Annual Report 48

ANALYSIS OF CASH PROFIT PERFORMANCE

Net interest income

GROUP NET INTEREST MARGIN (bps)	2022	2021	Movt
Net interest income¹	14,874	14,161	5%
Net interest margin (%) - cash¹	1.63	1.64	-1 bps
Average interest earning assets	910,037	863,691	5%
Average deposits and other borrowings	780,373	712,540	10%

¹ Balance Sheet activities includes the impact of discretionary liquid asset holdings and other Balance Sheet activities.

¹ Includes the major bank levy of -$340 million (2021: -$346 million).

Net interest income increased $713 million (5%) driven by a $46.3 billion (5%) increase in average interest earning assets, partially offset by 1 bps decrease in net interest margin.

Net interest margin decreased 1 bps driven by home loan pricing competition in the Australia Retail and New Zealand divisions, growth in lower yielding liquid assets to replace Committed Liquidity Facility (CLF) which, consistent with APRA requirements, will reduce to $0 on 1 January 2023, unfavourable asset and funding mix primarily from customers switching from variable to fixed home loans and lower unsecured lending, and lower average yield in Markets averages earning assets as a results of portfolio rebalancing in the prior year. This was partially offset by improvement in deposit margins from a rising interest rate environment, favourable deposit mix with growth in at-call deposits, and higher earnings on capital and replicating deposits.

Average interest earning assets increased $46.3 billion (5%) driven by higher central bank balances, lending growth in the Institutional and Australia Commercial divisions, and home loan growth in the New Zealand division. This was partially offset by lower trading assets and investment securities, lower reverse repurchase agreements, and decline in the Australia Retail division.

Average deposits and other borrowings increased $67.8 billion (10%) driven by growth in at-call deposits across all divisions and increases in commercial paper, partially offset by lower term deposits and certificates of deposit.

	Deposit pricing & wholesale funding	Asset and funding mix	Liquidity	Capital and replicating portfolio	Markets Balance Sheet activities	Large/ notable items	2022 Cash net interest margin	2021 Cash net interest margin
							(8)	(5)
							164	164
							(2)	(2)
							163	163

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49 Other operating income

OTHER OPERATING INCOME ($m)

	2022	2021	Movt
Net fee and commission income¹	1,907	2,063	-8%
Markets other operating income	860	1,130	-24%
Share of associates' profit/(loss)	177	(176)	large
Other¹	729	269	large
Total cash other operating income	3,673	3,286	12%

¹ Excluding the Markets business unit.

Net fee and commission income decreased $156 million (-8%) driven by Breakfree package fee changes in the Australia Retail division, lower divested business results, and removal or reduction of funds under management fees in the New Zealand division. This was partially offset by lower customer remediation, higher cards revenue due to recovery in consumer spending, and higher volume-related fees in the Institutional division.

Markets other operating income decreased $270 million (-24%) as Balance Sheet and Derivative Valuation Adjustments were impacted by high volatility and yield curve movements, and lower income in Credit and Capital Markets was driven by less favourable credit trading conditions and lower levels of customer issuances amid more volatile market conditions. This was partially offset by higher Foreign Exchange, Rates and Commodities income driven by customer demand and more favourable trading conditions.

Share of associates' profit increased $353 million driven by the Group’s equity accounted share of AmBank 1MDB settlement and goodwill impairment of $347 million in 2021 and increase in other equity accounted share of profits.

Other increased $460 million primarily driven by a gain on completion of the ANZ Worldline partnership and a loss on divestment of the ANZ Share Investing business in 2021, partially offset by a loss on sale of the financial planning and advice business.

	Other	Markets other operating income	Net fee and commission income	Share of associates’ profit/(loss)	2021 Cash other operating income	2022 Cash other operating income
	353	(270)	(156)		3,286	3,673
	460			1

ANZ 2022 Annual Report 50

Operating expenses

OPERATING EXPENSES ($m)

	2022	2021	Movt
Personnel	5,296	4,946	7%
Premises	721	705	2%
Technology	1,621	1,588	2%
Restructuring	101	127	-20%
Other	1,840	1,685	9%
Total cash operating expenses	9,579	9,051	6%
Full time equivalent staff from continuing operations¹	38,987	39,684	-2%
Average full time equivalent staff from continuing operations¹	39,546	38,043	4%

¹ Excludes FTE of the consolidated investments managed by 1835i Group Pty Ltd.

Personnel expenses increased $350 million (7%) driven by higher average resourcing supporting investments to develop digital capabilities, meet regulatory and compliance obligations and drive volume growth. The inclusion of Cashrewards after obtaining control in December 2021 and wage inflation also contributed to the increase. This was partially offset by benefits from customers continuing to embrace digital channels, productivity improvements arising from technology and back-office optimisation, higher employee leave utilisation and lower customer remediation.

Premises expenses increased $16 million (2%) driven by the modification of a significant lease arrangement, partially offset by ongoing optimisation of property footprint.

Technology expenses increased $33 million (2%) driven by higher software licence costs and increased spend on investment initiatives, partially offset by lower amortisation.

Restructuring expenses decreased $26 million (-20%) primarily driven by lower charges in the Group Centre and Australia Retail divisions.

Other expenses increased $155 million (9%) driven by increased spend on investment initiatives to develop digital capabilities and meet regulatory and compliance obligations.# 350 16 33 155 Restructuring2021 Cash operating expenses Personnel TechnologyPremises 9,051 Other 2022 Cash operating expenses (26) 9,579

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Credit impairment

	2022	2021	Movt
Collectively assessed credit impairment charge/(release) ($m)	(311)	(823)	-62%
Individually assessed credit impairment charge/(release) ($m)	79	256	-69%
Credit impairment charge/(release) ($m)	(232)	(567)	-59%
Gross impaired assets ($m)	1,445	1,965	-26%
Credit risk weighted assets ($b)	359.4	342.5	5%
Total allowance for expected credit losses (ECL) ($m)	4,395	4,882	-10%
Individually assessed as % of gross impaired assets	37.5%	35.0%
Collectively assessed as % of credit risk weighted assets	1.07%	1.22%

COLLECTIVELY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)

The collectively assessed impairment release of $311 million for the 2022 financial year was driven by improvements in credit risk, favourable changes in portfolio composition, and a net release of management temporary adjustments. This was partially offset by an increase for the downside risks associated with the economic outlook. The collectively assessed impairment release of $823 million for the 2021 financial year was driven by improving economic outlook, lower lending volumes, favourable changes in portfolio composition, and improvements in credit risk. This was partially offset by an increase in management temporary adjustments.

INDIVIDUALLY ASSESSED CREDIT IMPAIRMENT CHARGE/(RELEASE) ($m)

The individually assessed credit impairment charge decreased by $177 million (-69%) driven by decreases in the Institutional division with no material impairments during the 2022 financial year, and the Australia Retail and Australia Commercial divisions with underlying delinquency and impairment flows remaining subdued with the benefit from previous government and bank COVID-19 support packages persisting.

	2021	2022
Individually assessed credit impairment charge	(823)	(311)
Australia Retail	(34)	(4)
Australia Commercial	(82)	(36)
New Zealand	(101)	(283)
Institutional	(180)	(210)
Pacific	(102)	(8)
Group Centre	(172)	(319)
Collectively assessed credit impairment release	256	79
Australia Retail	16	7
Australia Commercial	180	102
New Zealand	96	0
Institutional	19	0
Pacific	(36)	(304)
Group Centre	(31)	(13)

ANZ 2022 Annual Report 52

GROSS IMPAIRED ASSETS BY DIVISION ($m)

Gross impaired assets decreased $520 million (-26%) driven by decreases in the Institutional division driven by the upgrade and repayments of several single name exposures, and the Australia Commercial division due to underlying delinquency flows remaining subdued with the benefit from previous government and bank COVID-19 support packages persisting and the upgrade and repayments of several single name exposures. This was partially offset by the Pacific division driven by exposures rolling off local COVID-19 support packages being classified as restructures.

	2021	2022
Gross impaired assets	1,965	1,445
Australia Retail	0	0
Australia Commercial	121	13
Institutional	16	0
New Zealand	13	0
Pacific	(304)	(31)
Group Centre	(319)	(8)

TOTAL ALLOWANCE FOR EXPECTED CREDIT LOSSES ($m)

The decrease in total allowance for expected credit losses was driven by a $342 million decrease in the collectively assessed expected credit loss, and a $145 million decrease in the individually assessed allowance for expected credit losses. The decrease in collectively assessed allowance for expected credit losses was driven by reduction of $344 million from improvements in credit risk, $258 million from changes in portfolio composition, $24 million in lower management temporary adjustments, and $31 million from foreign currency translation and other impacts. This was partially offset by an increase of $315 million for the downside risks associated with the economic outlook. The decrease in individually assessed allowance for expected credit losses was driven by decreases in the Institutional division with no material impairments during the 2022 financial year, and the Australia Retail and Australia Commercial due to underlying delinquency and impairment flows remaining subdued with the benefit from previous government and bank COVID-19 support packages persisting.

	2021	2022
Total allowance for expected credit losses	4,882	4,395
Australia Retail	(283)	(121)
Australia Commercial	0	(8)
Institutional	(210)	(6)
New Zealand	0	0
Pacific	(31)	(2)
Group Centre	(304)	(13)

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53

DIVISIONAL PERFORMANCE

On 1 March 2022, the Group announced a structural change to the existing Australia Retail and Commercial division, and the digital businesses in the Group Centre division (formerly known as the Technology, Services & Operations (TSO) and Group Centre division). This involved the integration of the Australian retail and digital businesses, and the separation of the Australian commercial business into a new division to improve productivity and accountability within the organisation. As a result of these changes there are now six divisions: Australia Retail, Australia Commercial, Institutional, New Zealand, Pacific and Group Centre, aligned to distinct strategies and opportunities within the Group. Comparative information has been restated accordingly. Other than those described above, there have been no other significant changes.

	Australia Retail	Australia Commercial	Institutional	New Zealand	Pacific	Group Centre	New Group
2022
Net interest margin	2.25%	2.10%	0.85%	2.47%	2.82%	n/a	1.63%
Operating expenses to operating income	52.2%	41.8%	49.6%	36.5%	93.3%	n/a	51.6%
Cash profit from continuing operations ($m)	2,140	1,510	1,761	1,633	9	(538)	6,515
Net loans and advances ($b)1	290.3	59.7	196.8	123.7	1.8	0.1	672.4
Customer deposits ($b)	150.0	112.2	259.4	95.1	3.8	(0.1)	620.4
Number of FTE	11,846	2,799	6,236	6,873	1,086	10,147	38,987
2021
Net interest margin	2.27%	1.98%	0.81%	2.33%	2.98%	n/a	1.64%
Operating expenses to operating income	48.0%	49.4%	49.1%	39.7%	89.4%	n/a	51.9%
Cash profit from continuing operations ($m)	2,316	1,107	1,887	1,508	(3)	(617)	6,198
Net loans and advances ($b)	284.0	57.2	158.2	128.5	1.8	-	629.7
Customer deposits ($b)	141.4	111.1	239.6	97.7	3.8	-	593.6
Number of FTE	11,764	3,095	6,196	7,060	1,089	10,480	39,684

During 2022, the Group revised its treatment of ongoing trail commission payable to mortgage brokers to recognise a liability within Payables and other liabilities equal to the present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs in Net loans and advances. The balance at 30 September 2022 was $1,226 million for the Australia Retail division and $94 million for the Australia Commercial division. Comparative information has not been restated.

ANZ 2022 Annual Report 54

DIVISIONAL PERFORMANCE

Australia Retail

Lending volumes increased driven by home loan growth, partially offset by lower unsecured lending. Net interest margin decreased driven by asset margin contraction from competitive pressure and unfavourable lending mix from stronger growth in lower margin fixed rate home loans. This was partially offset by improvement in deposit margins from rising interest rate environment and favourable deposit mix. Other operating income increased driven by the loss on divestment of ANZ Share Investing business in the prior year and higher cards revenue due to recovery in consumer spending, partially offset by Breakfree package fee changes. Operating expenses increased driven by higher investment spend on ANZ Plus and home loans momentum, partially offset by lower restructuring expenses. Credit impairment release decreased driven by a lower collectively assessed credit impairment release, partially offset by lower individually assessed credit impairment charge with underlying delinquency and impairment flows remaining subdued with the benefit from previous government and bank COVID-19 support packages persisting.

Australia Commercial

Lending volumes increased driven by Specialist Business lending growth. Net interest margin increased driven by improvement in deposit margins from a rising interest rate environment and favourable deposit mix. This was partially offset by unfavourable lending mix with stronger growth in lower margin large commercial customers, and asset margin contraction from competitive pressure. Other operating income increased driven by the gain on sale relating to the ANZ Worldline partnership. This was partially offset by the loss on sale of the financial planning and advice business and divested business results impact following ANZ Worldline partnership. Operating expenses decreased driven by lower restructuring expenses and lower impact of divested business results. Credit impairment release decreased driven by a lower collectively assessed credit impairment release, partially offset by lower individually assessed credit impairment charge with underlying delinquency and impairment flows remaining subdued with the benefit from previous government and bank COVID-19 support packages persisting.

Institutional

Lending volumes increased across Corporate Finance, Markets and Transaction Banking following strong core lending and customer flows during the period. Customer deposits increased predominantly in Transaction Banking. Net interest margin ex- Markets increased primarily driven by improvement in deposit margins from a rising interest rate environment. Other operating income decreased driven by lower Markets revenues as Balance Sheet and Derivative Valuation Adjustments were impacted by high volatility and yield curve movements.# Operating expenses increased driven by higher technology costs, partially offset by lower litigation settlements. Credit impairment release decreased driven by collectively assessed credit impairment release in the prior period, partially offset by release of individually assessed credit impairment charges in Transaction Banking. Income tax expense increased driven by the dividend withholding tax on the dividend payment from ANZ PNG to ANZBGL, partially offset by tax rate differentials on profits earned in International, and tax refunds and write-backs. New Zealand Lending volumes increased driven by home loan growth. Net interest margin increased driven by improvement in deposit margins from a rising interest rate environment, partially offset by lower home loan margins due to competition, and a higher mix of fixed rate home loans. Other operating income is flat as gains on sale of government securities was offset by lower fees from the removal or reduction of funds under management fees. Operating expenses increased driven by higher investment spend and inflation impacts, partially offset by productivity gains and other savings. Credit impairment charge increased primarily driven by collectively assessed credit impairment charge in the current year as opposed to a release in the prior year. Pacific Financial performance for the Pacific division is largely consistent with the prior year. Group Centre The 2022 financial year included the recycling of foreign currency translation reserves from Other comprehensive income to profit or loss on dissolution of Minerva Holdings Limited and ANZ Asia Limited, and a net charge on lease modification impacts of a signification lease arrangement. The 2021 financial year included the losses from the Group’s share of AmBank 1MDB settlement and goodwill impairment.

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55 FINANCIAL POSITION OF THE GROUP

Condensed balance sheet

	$b	$b	Movt
Assets
Cash / Settlement balances owed to ANZ / Collateral paid	185.6	168.0	10%
Trading assets and investment securities	121.4	127.8	-5%
Derivative financial instruments	90.2	38.7	large
Net loans and advances	672.4	629.7	7%
Other	16.0	14.7	9%
Total assets	1,085.6	978.9	11%
Liabilities
Settlement balances owed by ANZ / Collateral received	30.0	23.1	30%
Deposits and other borrowings	797.3	743.1	7%
Derivative financial instruments	85.1	36.0	large
Debt issuances	93.7	101.1	-7%
Other	13.2	11.9	11%
Total liabilities	1,019.3	915.2	11%
Total equity	66.4	63.7	4%

Cash / Settlement balances owed to ANZ / Collateral paid increased $17.6 billion (10%) driven by increases in balances with central banks. Trading assets and investment securities decreased $6.4 billion (-5%) primarily driven by lower revaluations in Markets as a result of interest rate increases. Derivative financial assets and liabilities increased $51.5 billion and $49.1 billion respectively driven by the impact of market rate movements, primarily the significant strengthening of the USD. Net loans and advances increased $42.7 billion (7%) driven by higher lending volumes in the Institutional ($34.6 billion) and Australia Commercial ($2.5 billion) divisions and increased home loan growth in the Australia Retail ($6.4 billion) and New Zealand ($5.2 billion) divisions, partially offset by the impact of foreign currency translation movements. Settlement balances owed by ANZ / Collateral received increased $6.9 billion (30%) driven by higher collateral received, partially offset by lower cash clearing account balances. Deposits and other borrowings increased $54.2 billion (7%) driven by increases in customer deposits across the Institutional ($11.6 billion), Australia Retail ($8.5 billion) and New Zealand ($5.0 billion) divisions, increases in deposits from banks and repurchase agreements ($14.5 billion) and commercial paper ($13.9 billion), and the impact of foreign currency translation movements. This was partially offset by decreases in certificates of deposit ($3.9 billion). Debt issuances decreased $7.4 billion (-7%) primarily driven by the maturity of unsubordinated debt and movement in hedge revaluations. Total equity increased $2.7 billion (4%) primarily driven by a share entitlement offer of $3.5 billion.

ANZ 2022 Annual Report 56

Liquidity

	Average 2022	Average 2021
Total liquid assets ($b)¹	241.7	225.9
Liquidity Coverage Ratio (LCR)¹	131%	137%

¹Full year average, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity ) and consistent with APS 330 requirements.

The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent with Basel III LCR:

Highest-quality liquid assets: cash, highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide same-day liquidity.
High-quality liquid assets: high credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
Alternative liquid assets: assets qualifying as collateral for the CLF and other eligible securities listed by the RBNZ.

The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory requirements and the risk appetite set by the Board.

Committed Liquidity Facility

As part of meeting LCR requirements, the Group has a CLF with the Reserve Bank of Australia (RBA). The CLF was established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form of contingent liquidity. The CLF is collateralised by assets, including internal residential mortgage backed securities, that are eligible to be pledged as security with the RBA. In September 2021, APRA wrote to ADI’s to advise that APRA and the RBA consider there to be sufficient HQLA for ADI’s to meet their LCR requirements, and therefore the use of the CLF should no longer be required beyond 2022 calendar year. Consistent with APRA’s requirement to reduce the $10.7 billion CLF with four equal reductions during the 2022 calendar year to $0 on 1 January 2023, ANZ’s CLF was $2.7 billion as at 30 September 2022 (2021: $10.7 billion). The LCR remained above the regulatory minimum of 100% throughout this period.

Funding

	2022	2021
	$b	$b
Customer liabilities (funding)	628.4	601.7
Wholesale funding	300.3	274.3
Shareholders’ equity	66.4	63.7
Total funding	995.1	939.7
Net Stable Funding Ratio	119%	124%

The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency. Net Stable Funding Ratio remained above the regulatory minimum of 100% throughout this period. $15.7 billion of term wholesale debt funding (excluding Additional Tier 1 Capital) with a remaining term greater than one year as at 30 September 2022 was issued during the year. In addition, the Group issued $1.3 billion of Additional Tier 1 Capital during the year (excluding ANZ Bank New Zealand Limited perpetual preference shares, which is classified as a non-controlling interest in the Group).

RBA Term Funding Facility

As an additional source of funding, in March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system to support lending to Australian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25% for drawdowns up to 4 November 2020, and reduced to 0.10% for new drawdowns from 4 November 2020 onwards. The TFF was closed to drawdowns on 30 June 2021. As at 30 September 2022, ANZ had drawn $20.1 billion under the RBA’s TFF.

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57

RBNZ Funding for Lending Programme and Term Lending Facility

Between May 2020 and July 2021, the RBNZ made funds available under a Term Lending Facility (TLF) to promote lending to businesses. The TLF is a five-year secured funding facility for New Zealand banks at a fixed rate of 0.25%. In November 2020 the RBNZ announced a Funding for Lending Programme (FLP) which aimed to lower the cost of borrowing for New Zealand businesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash Rate (OCR). New Zealand banks were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial businesses and non-profit institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An additional allocation of up to 2% of eligible loans is available, subject to certain conditions until 6 December 2022. As at 30 September 2022, ANZ Bank New Zealand Limited had drawn $0.3 billion under the TLF and $2.3 billion under the FLP.

Capital management

	2022	2021	Movt
Common Equity Tier 1 (Level 2) - APRA Basel III	12.3%	12.3%
Credit risk weighted assets ($b)	359.4	342.5	5%
Total risk weighted assets ($b)	454.7	416.1	9%
APRA Leverage Ratio	5.4%	5.5%

APRA, under the authority of the Banking Act 1959 , sets minimum regulatory requirements for banks including what is acceptable as regulatory capital and provides methods of measuring the risks incurred by the Bank. The Group’s Common Equity Tier 1 ratio was 12.29% based on APRA Basel III standards, exceeding APRA’s minimum requirements. It decreased 5 bps driven by the impact of dividends paid during the year, higher underlying CRWA and non-CRWA usage and the impact of the completed share buy-back.This was partially offset by cash earnings and the equity raising to support the acquisition of Suncorp Bank. At 30 September 2022, the Group’s APRA leverage ratio was 5.4% which is above the 3.5% proposed minimum for internal ratings-based approach ADI (IRB ADI), which includes ANZ.

Dividends

Our financial performance allowed us to propose that a final dividend of 74 cents be paid on each eligible fully paid ANZ ordinary share, bringing the total dividend for the year ended 30 September 2022 to 146 cents per share. This represents a dividend payout ratio of 64.9% of cash profit from continuing operations. The proposed 2022 final dividend of 74 cents per share will be fully franked for Australian taxation purposes, and carry New Zealand imputation credits of NZD 9 cents per ordinary share. It will be paid on 15 December 2022 to owners of ordinary shares at the close of business on 8 November 2022 (record date).

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2022 final dividend. For the 2022 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. Further details on dividends provided for or paid during the year ended 30 September 2022 are set out in Note 6 Dividends in the Financial Report.

Shareholders returns

	2022	2021	2020	2019	2018
Total shareholder return (%)
Earnings per share – cash¹ (cents)	117.1	148.8	131.5	147.7	148.2
Dividend per share (cents)	74	72	60	80	80
Dividend payout ratio¹ (%)	63.2	48.4	45.6	54.2	54.0

¹ Information has been presented on a cash profit from continuing operations basis.

FIVE YEAR SUMMARY

2022

$m | 2021
$m | 2020
$m | 2019
$m | 2018
$m
---|---|---|---|---
Financial performance - cash¹ | | | | | |
Net interest income | 14,874 | 14,161 | 14,049 | 14,339 | 14,514
Other operating income | 3,673 | 3,286 | 3,703 | 4,690 | 4,853
Operating expenses | (9,579) | (9,051) | (9,383) | (9,071) | (9,401)
Profit before credit impairment and income tax | 8,968 | 8,396 | 8,369 | 9,958 | 9,966
Credit impairment charge | 232 | 567 | (2,738) | (795) | (688)
Income tax expense | (2,684) | (2,764) | (1,872) | (2,678) | (2,775)
Non-controlling interests | (1) | (1) | (1) | (15) | (16)
Cash profit from continuing operations¹ | 6,515 | 6,198 | 3,758 | 6,470 | 6,487
Cash profit/(loss) from discontinued operations¹ | (19) | (17) | (98) | (309) | (682)
Cash profit¹ | 6,496 | 6,181 | 3,660 | 6,161 | 5,805
Adjustments to arrive at statutory profit¹ | 623 | (19) | (83) | (208) | 595
Profit attributable to shareholders of the Company | 7,119 | 6,162 | 3,577 | 5,953 | 6,400

Financial position | | | | | |
Assets | 1,085,729 | 978,857 | 1,042,286 | 981,137 | 943,182
Net assets | 66,401 | 63,676 | 61,297 | 60,794 | 59,405
Common Equity Tier 1 | 12.3% | 12.3% | 11.3% | 11.4% | 11.4%
Common Equity Tier 1 – Internationally Comparable Basel III² | 19.2% | 18.3% | 16.7% | 16.4% | 16.8%
Return on average ordinary equity (statutory)³ | 11.4% | 9.9% | 5.9% | 10.0% | 10.9%
Return on average assets (statutory) | 0.7% | 0.6% | 0.3% | 0.6% | 0.7%
Cost to income ratio (cash)¹ | 52.0% | 52.2% | 53.8% | 49.5% | 52.0%

Shareholder value – ordinary shares | | | | | |
Total return to shareholders (share price movement plus dividends) | -14.0% | 70.7% | -36.9% | 9.2% | 0.6%
Market capitalisation | 68,170 | 79,483 | 48,839 | 80,842 | 80,979
Dividend (cents) | 146 | 142 | 60 | 160 | 160
Franked portion – interim | 100% | 100% | 100% | 100% | 100%
– final | 100% | 100% | 100% | 70% | 100%
Share price – high (dollars) | $28.98 | $29.64 | $28.67 | $29.30 | $30.80
– low (dollars) | $20.95 | $16.97 | $14.10 | $22.98 | $26.08
– closing (dollars) | $22.80 | $28.15 | $17.22 | $28.52 | $28.18

Share information (per fully paid ordinary share) | | | | | |
Earnings per share (cents) (statutory)⁴ | 250.0 | 215.3 | 125.3 | 208.2 | 219.7
Dividend payout ratio (statutory) | 59.3% | 65.3% | 47.6% | 76.2% | 72.1%
Net tangible assets per ordinary share⁵ | $20.75 | $21.09 | $20.04 | $19.59 | $18.47
No. of fully paid ordinary shares issued (millions) | 2,990 | 2,824 | 2,840 | 2,835 | 2,874
Dividend reinvestment plan (DRP) issue price – interim | $25.52 | $27.91 | $18.06 | $27.79 | $27.76
– final | - | $27.68 | $22.19 | $25.03 | $26.03

Other information | | | | | |
No. of employees (full time equivalents) | 39,196 | 40,221 | 38,579 | 39,060 | 39,924
No. of shareholders | 541,788 | 534,166 | 553,171 | 506,847 | 509,238

1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. Cash profit is not audited; however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis across each period presented.

2. Internationally Comparable Methodology aligns with APRA’s information paper entitled ‘International Capital Comparison Study’ (13 July 2015). Basel Internationally Comparable ratios do not include an estimate of the Basel l capital floor requirement.

3. Average ordinary equity excludes non-controlling interests.

4. Earnings per share has been restated to reflect the bonus element of the share entitlement issue made in 2022, in accordance with AASB 133 Earnings per Share.

5. Equals shareholders’ equity less total non-controlling interests, goodwill and other intangible assets, divided by the number of ordinary shares.

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

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Shareholder information

	2022	2021	2020	2019	2018
Fair and responsible banking
Net Promoter Score Ranking (relative to peers)
Australia Retail⁴	4	4	3	4	3
Australia Commercial⁵	4	4	3	3	3
Australia Institutional⁶	2	2	1	1	1
New Zealand Retail⁷	4	4	4	4	4
New Zealand Commercial and Agricultural⁸	5	5	5	5	5
New Zealand Institutional⁹	1	1	1	1	1
Code of Conduct Breaches	518	573	569	784	1,114
Investigations resulting in termination	95	114	93	151	226
Whistleblower reports	142	157	157	156	137
Financial wellbeing
People reached by our financial inclusion programs¹⁰	>58,000	>67,600	>61,352	>90,850	>88,224
People
Employees
Employee Engagement (%)	84	81	86	77	73
Total Women in Leadership (%)¹¹	35.9	35.3	33.4	32.5	32.0
Recruitment of people from under-represented groups¹²	320	255	185	224	260
Community
Total community investment ($million)¹³	136.4	139.7	139.5	142.2	136.9
Volunteer hours	52,444	54,645	66,402	134,930	124,113
Employee volunteering participation rate (%)	13.8	15.5	20.5	42.4	34.6
Sustainable finance
Total funded or facilitated towards:
Environmentally sustainable solutions (AU$ billion)	16.18	9.18	7.57	7.60	4.65
Housing (AU$ billion)¹⁴	0.53	1.40	1.45
Other social (AU$ billion)¹⁵	1.37	2.29	0.06
Environmental sustainability
Environmental footprint
Total scope 1 & 2 (tCO₂e)	101,879	111,409	134,093	156,568	171,012
Total scope 1, 2 & 3 GHG emissions (tCO₂e)	140,514	153,697	203,700	250,857	266,906
Project finance portfolio¹⁶
Renewables (%)	90	88	87	83	76
Coal (%)	2	3	5	9	13
Gas (%)	8	9	8	8	11
Project finance commitment to renewable energy ($million)	1,505	1,425	1,501	1,371	1,076

Roy Morgan Single Source, Australian population aged 14+, Main Financial Institution, six-month rolling average to Sep’18, Sep’19, Sep’20, Sep’21 & Sep’22. Ranking based on the four major Australian banks.
DBM Atlas (Business). Base: Commercial (<$100 million annual turnover) Main Financial Institution customers. Six-month average to Sep’18, Sep’19, Sep’20, Sep’21 & Sep’22. Ranking based on the four major Australian banks.
Peter Lee Associates, 2018–2022 Large Corporate and Institutional Relationship Banking surveys, Australia. Ranking based on the four major Australian banks.
Retail Market Monitor, Camorra Research, six month rolling average to Sep’18, Sep’19, Sep’20, Sep’21 & Sep’22.
Business Finance Monitor, Kantar Research. Base: Commercial ($3 million–$150 million annual turnover) and Agricultural (>500K annual turnover) customers. Four quarter rolling average to Q3’18, Q3’19, Q3’20, Q3’21 & Q2’22.
Peter Lee Associates Large Corporate Relationship Banking Survey, New Zealand 2018–2022.
Includes individuals who have participated in more than one program or product (for example, people who have participated in MoneyMinded as part of Saver Plus are counted twice as they are included in both the MoneyMinded and Saver Plus totals.
Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave status but not contractors (which are included in FTE).
Including Aboriginal and Torres Strait Islander peoples, people with disability and refugees. Total may have duplicates as employees can identify with more than one under-represented group.
Figure includes forgone revenue, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not-for-profit organisations, students and the elderly. International transfer fees were waived for funds sent from Australia and New Zealand to the Pacific to support communities impacted by COVID-19.
Commenced reporting in 2020.
Commenced reporting in 2020. Includes transactions eligible for inclusion in $50 billion target but unable to be allocated to environmentally sustainable solutions, housing or financial wellbeing.
Breakdowns for 2020 and 2018 do not total to 100% due to rounding.

FIVE YEAR SUMMARY (CONTINUED)

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Ilana Atlas, AO Chair – Human Resources Committee

Remuneration report 2022

Remuneration Report – audited

Dear Shareholder,

As outlined in the Chairman’s message, ANZ delivered a strong financial outcome for shareholders particularly in the second half of the year. This was achieved as we supported our customers through the lingering effects of COVID in an inflationary environment, while at the same time investing for the future. While the environment remains volatile, our margin performance along with our disciplined focus on ‘run the bank’ costs enabled us to invest at record levels in new initiatives that will benefit shareholders, customers and our employees in the long term.# ANZ 2022 Annual Report

Remuneration Report

Ilana Atlas, AO
Chair – Human Resources Committee

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

The Remuneration Report for the Group outlines our remuneration strategy and structure and the remuneration practices that apply to Key Management Personnel (KMP). This report has been prepared, and audited, as required by the Corporations Act 2001. It forms part of the Directors’ Report.

1. Who is covered by this report

KMP are Directors of Australia and New Zealand Banking Group Limited (ANZBGL) (whether executive directors or otherwise), and those personnel with a key responsibility for the strategic direction and management of the Group (i.e., members of the Group Executive Committee (ExCo)) who have Banking Executive Accountability Regime (BEAR) accountability and who report to the Chief Executive Officer (CEO) (referred to as Disclosed Executives).

1.1 Disclosed Executive and NED changes

There were several changes to our KMP during the 2022 year:
• Christine O’Reilly commenced as a Non-Executive Director (NED) on 1 November 2021.
• Paula Dwyer retired as a NED on 16 December 2021, at the conclusion of the 2021 Annual General Meeting (AGM).
• Jeff Smith commenced as a NED on 1 August 2022.
• Farhan Faruqui commenced as ANZ’s Chief Financial Officer (CFO) in October 2021. Shane Buggle concluded acting at this time.
• ANZ’s Digital and Australia Retail businesses were combined, with Maile Carnegie commencing in the new Group Executive, Australia Retail role on 1 March 2022, and Mark Hand concluding in the Group Executive, Australia Retail and Commercial Banking role on 28 February 2022. As part of these changes the commercial business in Australia is now a separate Division. While this Division will report into the CEO in the future, the CEO has also been acting as the Group Executive for this business.

1.2 Key Management Personnel (KMP)

The KMP whose remuneration is disclosed in this year’s report are:

2022 Non-Executive Directors (NEDs) – Current


P O’Sullivan	Chairman
I Atlas	Director
J Halton	Director
J Key	Director
G Liebelt	Director
J Macfarlane	Director
C O’Reilly	Director (from 1 November 2021)
J Smith	Director (from 1 August 2022)

2022 Non-Executive Directors (NEDs) – Former


P Dwyer	Former Director – retired 16 December 2021

2022 Chief Executive Officer (CEO) and Disclosed Executives – Current


S Elliott	CEO and Executive Director
M Carnegie	Group Executive, Australia Retail (from 1 March 2022) (previously Group Executive, Digital and Australia Transformation to 28 February 2022)
K Corbally	Chief Risk Officer (CRO)
F Faruqui	CFO (from 11 October 2021)
G Florian	Group Executive, Technology
K van der Merwe	Group Executive, Talent & Culture and Service Centres (GE T&C)
A Watson	Group Executive and CEO, New Zealand
M Whelan	Group Executive, Institutional

2022 Disclosed Executives – Former


S Buggle	Former acting CFO – concluded in role 10 October 2021
M Hand	Former Group Executive, Australia Retail and Commercial Banking – concluded in role 28 February 2022

Changes to KMP since the end of 2022 up to the date of signing the Directors’ Report, as announced:
• Gerard Florian appointed

A particular highlight this year was the agreement to acquire Suncorp Bank. Suncorp Bank is a quality business and strategically aligned to ANZ. While still subject to government and regulatory approvals, Suncorp Bank will add more than one million retail customers and provide a platform for growth in the fast-growing Queensland market. Similarly, there was good progress made on the establishment of a new Non-Operating Holding Company (NOHC) structure. If approved by shareholders at the upcoming Scheme Meeting, following our 2022 Annual General Meeting (AGM), this will create distinct banking and non-banking groups within the organisation, providing greater flexibility to create value for shareholders. During the year we also made changes to improve productivity and accountability within the organisation. As part of these changes, we combined Australia Retail with our Digital Division, while also separating Commercial Australia as a stand-alone business. Together with New Zealand and Institutional, we now have four core business lines with distinct strategies and opportunities. Operational improvements within Australia Retail have already resulted in home loan processing times being back in-line with market.

2. 2022 outcomes at a glance

3. Overview of ANZ’s remuneration structure

4. 2022 outcomes

5. 2022 executive remuneration structure and delivery

6. Accountability and Consequence Framework

7. Non-Executive Director (NED) remuneration

8. Remuneration governance

9. Other information

62
ANZ 2022 Annual Report

ANZ 2022 Annual Report
62

Our technology continues to be modernised and we exceeded our target of 9,000 systems migrated to the Cloud or decommissioned with 31% of ANZ applications now hosted in the Cloud. The successful launch of our new retail banking platform in Australia, ANZ Plus, was a key milestone for the Group. While uptake was initially tracking slower than planned, momentum has improved following the commencement of marketing and branch activity. From a risk perspective, there were no material credit events, no major regulatory breaches and no overdue regulatory issues. While we are progressed on the development of our Group wide non- financial risk framework we are behind schedule with some elements and a $500m capital overlay remains in place. Improvements in this area will be a key focus for the Board and management over the next 12-months.

2022 variable remuneration outcomes

As a Board, we believe we have struck a balance between rewarding good performance while also holding management to account for areas that did not achieve expectations. Our Chief Executive Officer (CEO) performed well this year. In the Board’s view he met expectations in relation to his personal objectives. He also has accountability for the Group’s performance which was slightly below expectations. The Board determined the appropriate 2022 Short Term Variable Remuneration (STVR) outcome was 74% of his maximum opportunity. There was no 2022 Long Term Variable Remuneration (LTVR) award made as we transition to awarding LTVR at the beginning of the year rather than the end. The CEO’s proposed 2023 LTVR of $3.375m ($3.5m in 2021) will be subject to a shareholder vote at the upcoming AGM. For Disclosed Executives, the Board determined their 2022 STVR outcomes at an average outcome of 78% of maximum opportunity (ranging from 71% to 96% of maximum opportunity). This reflects the assessment of ‘slightly below expectations’ within the ANZ Group Performance Framework and their individual and Divisional performance.

51.6% of the performance rights granted in 2018 to the CEO and Disclosed Executives (excluding the Chief Risk Officer (CRO)) vested when their performance was tested in November 2021 against their performance hurdles. The remaining 48.4% of rights lapsed and executives received no value from this proportion of the awards.

Changes to the way we remunerate executives

The introduction of a new remuneration Prudential Standard (CPS 511 Remuneration) by our regulator APRA has driven a review of how we reward our executives. While the new regulatory standard does not come into effect until 1 January 2023, a range of changes were implemented in 2022. Importantly, these changes were designed not only to meet both the letter and spirit of APRA’s new prudential standard, but also to maintain our strong focus on performance and risk management, and attract, motivate and keep great people.

In line with CPS 511, the key structural changes for the CEO and Disclosed Executives include:
• Restructuring long term variable remuneration to now provide material weight to non-financial measures through the LTVR restricted rights award.
• Longer deferral (up to 6 years for CEO) with around 80% of variable remuneration deferred to ensure long-term focus.
• The ability to ‘clawback’ vested cash and equity variable remuneration where appropriate.

Additionally, we:
• Separated STVR and LTVR for Disclosed Executives, bringing them in-line with the structure for our CEO.
• Determined a fixed remuneration (FR) structural increase of approximately 4% for Disclosed Executives (excluding the CEO) so as to not materially disadvantage Disclosed Executives as a result of the structural changes. Note the Board decided to defer the payment of this increase to 2023, and also decided that the 2022 STVR opportunity would be based on the FR had the structural increase been effective for 2022.

As the likelihood of vesting is higher for the LTVR restricted rights for the CEO and Disclosed Executives, we have significantly reduced their total remuneration opportunity. It is important to note that the change in structure, and in particular, the change in the award of LTVR from the end of the year to the beginning of the year (i.e., resulting in no 2022 LTVR), makes comparisons with prior year difficult. A summary of the new remuneration structure for 2022 can be found in section 3.

Fixed remuneration

A market FR adjustment was provided for the CRO, effective 1 October 2021. There were no other changes to FR, noting that the ~4% structural adjustment for Disclosed Executives as part of the structural changes will only apply from 1 October 2022. Following a market review, the Non- Executive Director (NED) base fee remained unchanged however fees were increased for the Chairman and for the Chairs/members of most Committees from 1 April 2022.

Finally, while there is more to be done, this was a year where we made good progress towards our strategic ambition. Thank you to all our employees for their commitment and contribution this year. On behalf of the Board, I invite you to consider our Remuneration Report which will be presented to shareholders at the 2022 AGM.# ANZ 2022 Annual Report 64

2. 2022 outcomes at a glance

Chief Executive Officer (CEO) remuneration

FOR 2022, OUR CEO:

Had no increase to fixed remuneration (FR).
Was awarded Short Term Variable Remuneration (STVR) of 74% of maximum opportunity, having met most but not all performance expectations (see section 4).
No Long Term Variable Remuneration (LTVR) award was made for 2022, as we transition to awarding LTVR at the beginning of the year rather than at the end. Instead, shareholder approval will be sought at the 2022 AGM for a 2023 LTVR award of $3.375m.
Received total remuneration of $6m in 2022 (i.e., includes the value of prior equity awards which vested in 2022 as per section 4.1).

Disclosed Executive remuneration

FOR 2022:

There were no increases to FR for Disclosed Executives effective for 2022 except for the CRO who received a market adjustment on 1 October 2021.
Disclosed Executives’ STVR outcomes averaged 78% of maximum opportunity, with individual outcomes ranging from 71% to 96% of maximum opportunity.
Consistent with the CEO, no 2022 LTVR awards have been made to Disclosed Executives, as we transition to awarding LTVR at the start of the 2023 year under the new executive remuneration structure (see section 5.2).

Performance rights outcomes (CEO and Disclosed Executives)

51.6% of the 2018 performance rights (PR) granted in late 2018 to the CEO and Disclosed Executives (excluding the CRO) vested and the remaining 48.4% lapsed when tested against the performance hurdles at the end of the performance period in November 2021 (see section 4.4.3).

Non-Executive Director (NED)

Following a market review, the NED base fee remained unchanged (see section 7.1), however fees were increased for the Chairman and for the Chairs/members of most Committees from 1 April 2022. The Chairman’s shareholding requirement increased to $850,000, 100% of the Chairman fee (from $480,000, 200% of NED base fee), to better align to market.

ANZ 2022 Annual Report 65

3. Overview of ANZ’s remuneration structure

3.1 Context for change

As communicated in our 2021 Remuneration Report, the introduction of a new Prudential Standard CPS 511 Remuneration by our regulator APRA drove a detailed review of how we reward our CEO and Disclosed Executives. As a result, the Board approved changes to the executive remuneration structure in line with the following design principles, with those changes being effective for the 2022 financial year.

Meet the letter and spirit of the new APRA Prudential Standard

Structure promotes effective management of financial and non-financial risks
APRA requires material weight to non-financial metrics for variable remuneration outcomes
Introduction of clawback
Longer deferral

Shareholder alignment

A significant proportion of variable remuneration is deferred over a long period with ~80% delivered as deferred equity to ensure long-term focus
Total shareholder return (TSR) performance continues to be a key LTVR performance metric

Maintain a strong focus on performance and risk management

All components of variable remuneration linked to performance and sound risk management
Focus on long-term outcomes by ensuring consequences may be applied for risk issues even if they emerge several years after the event
Remuneration outcomes continue to be subject to Board discretion with supporting decision-making frameworks

Attract, motivate and keep great people

Balance meeting the CPS 511 requirements and having a market competitive remuneration structure
Maintain reasonably comparable value¹ so that individuals are not materially advantaged or disadvantaged by the structural changes
Simplify by having CEO and Disclosed Executives on a more aligned structure

¹ Variance in CEO vs Disclosed Executives reduction due to differences in previous structure where maximum opportunity for Disclosed Executives was 150% of combined Variable Remuneration (VR) component, compared to only the STVR component for CEO. In the new structure, maximum opportunity has reduced to 125% of target, and applies to STVR component only. See charts in section 3.4 for individual change in remuneration opportunity.

² Takes into consideration the differences between the new and former remuneration structures (including aspects such as expected vesting of variable remuneration awards, and changes to reward opportunity and deferral periods).

3.2 Key changes at a glance

Significantly reduced remuneration opportunity
Maximum remuneration opportunity down reflecting improved probability of LTVR vesting:
- CEO: -$1.375m / -14%
- Disclosed Executives: -30% (CRO -16%)
Simplified
Aligned CEO and Disclosed Executive structures by moving Disclosed Executives onto separate STVR and LTVR (previously combined variable remuneration)
Modified deferral periods
More balanced vesting over short and long term:
- STVR over years 2 to 3
- LTVR over years 4 to 5 / 6
Redesigned LTVR
To now provide material weight to non-financial measures (as per APRA requirement), with two equally weighted LTVR components
- Restricted rights (RR): Pre grant and pre vest assessments focused on risk measures
- Performance rights (PR): TSR hurdles
Introduced clawback
Strengthened risk and remuneration consequences, with clawback now applicable for two years post the payment/vesting of variable remuneration

ANZ 2022 Annual Report 66

3.3 Overview of new remuneration structure

CEO and Disclosed Executives (DEs) (excluding CRO³)

Component	Former Structure	New Structure
Mix	CEO and DEs on separate STVR and LTVR (previously DEs were on combined VR).	CEO and DEs now on separate STVR and LTVR (previously Disclosed Executives were on combined variable remuneration).
	CEO: 40% FR / 35% STVR / 25% LTVR. DE: 30% FR / 70% VR.	CEO and Disclosed Executives now have the same STVR and LTVR maximum opportunity of 100% and 135% of FR respectively.
		CEO previously had STVR maximum opportunity of 150% of FR and LTVR maximum opportunity of 140% of FR/Disclosed Executives previously had a combined VR maximum opportunity of 402% of FR.
Maximum opportunity	Previously, the opportunity to earn above target (up to 150% of target) applied to just the STVR for the CEO, and to the combined VR for Disclosed Executives.	Under the new structure, the maximum opportunity has been reduced to 125% of STVR target (i.e., 100% of FR) and applies to just the STVR for both the CEO and Disclosed Executives.
FR	30% 100% of FR CEO No change to FR DE ~4% structural increase	30% 100% of FR CEO No change to FR DE ~4% structural increase
STVR	YEAR 1 Cash 100%	30% 100% of FR 50% Cash 50% Deferred shares (DS) Awarded at end of year based on Group and individual performance
		YEAR 1 Cash 50% YEAR 2 DS 25% YEAR 3 DS 25%
LTVR	40% 135% of FR •Awarded at start of year subject to – RR: Pre grant assessment (risk-based measures) – RR & PR: Shareholder approval at AGM for CEO award •Performance condition tested at end of 4-year performance period – RR: Pre vest assessment (risk-based measures) – PR: Relative and absolute TSR hurdles For both RR and PR: Deferral period = 4-year Performance Period + Holding Period (HP)	50% Restricted rights (RR) 50% Performance rights (PR) •Awarded at start of year subject to – RR: Pre grant assessment (risk-based measures) – RR & PR: Shareholder approval at AGM for CEO award •Performance condition tested at end of 4-year performance period – RR: Pre vest assessment (risk-based measures) – PR: Relative and absolute TSR hurdles For both RR and PR: Deferral period = 4-year Performance Period + Holding Period (HP)
Delivery Timing/ deferral	YEAR 4 CEO: 33% / DE: 50% YEAR 5 CEO: 33% / DE: 50% YEAR 6 CEO: 34% ~2 yr HP ~1 yr HP4-year Performance Period	YEAR 4 CEO: 33% / DE: 50% YEAR 5 CEO: 33% / DE: 50% YEAR 6 CEO: 34% ~2 yr HP ~1 yr HP4-year Performance Period

³ CRO mix: 33.3% FR / 33.3% STVR / 33.3% LTVR. STVR maximum opportunity: the same as CEO/DE at 100% of FR, LTVR maximum opportunity: 100% of FR and delivered as 100% RR (consistent with former structure) to support independence.

All variable remuneration is subject to the Board’s ongoing discretion to apply in-year adjustments, malus and clawback

ANZ 2022 Annual Report 67

3.4 2022 maximum remuneration opportunity

The chart below illustrates the reduction in the maximum remuneration opportunity for the CEO and Disclosed Executives.

Maximum remuneration opportunity

	CEO	Disclosed Executives (excluding CRO)
FR	30%	30%
STVR Cash	15%	15%
STVR Deferred shares	15%	15%
LTVR RR	20%	20%
LTVR PR	20%	20%
Total	100%	100%

70% is at risk variable remuneration – of this approximately 80% is subject to deferral

CEO AND DISCLOSED EXECUTIVES (EXCLUDING CRO)

New maximum opportunity
The chart below illustrates that the CEO’s maximum remuneration opportunity has decreased from $9.75m to $8.375m (-$1.375m or -14%), largely due to the reduction in the STVR maximum opportunity from 150% to 100% of FR, and the reduction in the LTVR opportunity from 140% to 135% of FR. These reductions (which maintain a strong weighting on LTVR), reflect the increased certainty of the LTVR RR, while seeking to ensure the total remuneration opportunity remains market competitive.# Maximum remuneration opportunity – CEO ($m)

	2.500	1.250	1.250	1.688	1.688	2.500	1.875	1.875	3.500	8.375	9.750
New maximum opportunity
S ELLIOTT
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

Disclosed Executives

The charts below illustrate the significant reduction in maximum remuneration opportunity for Disclosed Executives, primarily due to the reduction in their maximum variable remuneration opportunity from 402% to 235% of FR. This reduction reflects the various structural changes – particularly the increased certainty of the LTVR RR component and the ~4% FR structural adjustment. While the new structure applied for 2022, the Board determined that the structural FR adjustment would not be effective until 2023, and that the 2022 STVR opportunity would be based on FR had the structural increase been effective for 2022. The Board will consider any market FR adjustments (where appropriate) in due course. FR in the ‘former maximum opportunity’ remuneration structures in the charts is as at 1 October 2021.

Maximum remuneration opportunity – Group Executive, Australia Retail ($m)

	1.250	0.625	0.844	0.844	0.625	1.200	1.188	1.188	2.448	4.188	6.024
New maximum opportunity
M CARNEGIE
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

Maximum remuneration opportunity – CFO ($m)

	1.250	0.625	0.844	0.844	0.625	1.200	1.188	1.188	2.448	4.188	6.024
New maximum opportunity
F FARUQUI
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

ANZ 2022 Annual Report 68

Maximum remuneration opportunity – Group Executive, Technology ($m)

	1.150	0.575	0.575	0.776	0.776	1.100	1.089	1.089	2.244	3.853	5.522
New maximum opportunity
G FLORIAN
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

Maximum remuneration opportunity – Group Executive, Talent & Culture and Service Centres ($m)

	1.040	0.520	0.520	0.702	0.702	1.000	0.990	0.990	2.040	3.484	5.020
New maximum opportunity
K VAN DER MERWE
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

Maximum remuneration opportunity – Group Executive and CEO, New Zealand ($m)

	1.110	0.555	0.555	0.749	0.749	1.079	1.068	1.068	2.201	3.718	5.415
New maximum opportunity
A WATSON
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

Maximum remuneration opportunity – Group Executive, Institutional ($m)

	1.460	0.730	0.730	0.986	0.986	1.400	1.386	1.386	2.856	4.891	7.028
New maximum opportunity
M WHELAN
Former maximum opportunity
PR
LTVRRR
LTVR
Deferred shares
STVR
Cash STVR
STVR FR

CRO

To preserve the independence of the role and to minimise any conflicts of interest in carrying out the risk control function across the organisation, the CRO’s remuneration arrangements differ to other Disclosed Executives. While the STVR opportunity (100% of FR) is the same as the CEO and Disclosed Executives, the LTVR opportunity is different (100% of FR instead of 135% of FR) reflecting the delivery of LTVR as 100% RR (instead of 50% RR and 50% PR). Maximum variable remuneration opportunity has reduced from 270% to 200% of FR for the CRO.

Maximum remuneration opportunity 33% 17% 17% 33% 67% is at risk variable remuneration – of this approximately 75% is subject to deferral

CRO

Maximum remuneration opportunity – CRO ($m)

	1.250	0.625	0.625	1.250	1.200	1.069	1.069	1.102	3.750	4.440
New maximum opportunity
K CORBALLY
Former maximum opportunity

69 Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information

ANZ’s purpose and strategy

Is underpinned by our Remuneration Policy which includes our Reward Principles:

Attract, motivate and keep great people
Reward our people for doing the right thing having regard to our customers and shareholders
Focus on how things are achieved as much as what is achieved
Fair and simple to understand

With remuneration delivered to our CEO and Disclosed Executives through:

See section 3.3 for overview of remuneration

Fixed remuneration (FR)
Variable remuneration
- Short Term Variable Remuneration (STVR)
- Long Term Variable Remuneration (LTVR)

Reinforced by aligning remuneration and risk:

Assessing behaviours based on ANZ’s values and risk/compliance standards (including the BEAR)
Determining variable remuneration outcomes with risk as a multiplier – impacting outcomes at both a pool and individual level
Weighting remuneration toward the longer-term with a significant proportion at risk
Emphasising risk in the determination and vesting of LTVR RR (see section 5.2.4)
Reinforcing the importance of risk culture in driving sustainable long-term performance in the LTVR design
Providing material weight to non-financial metrics (particularly risk) in line with APRA requirements
Ensuring risk measures are considered over a long time horizon (up to 5 and 6 years)
Determining accountability and applying consequences where appropriate
Strengthening risk consequences with clawback (see section 5.3)
Prohibiting the hedging of unvested equity

While supporting the alignment of executives and shareholders through:

Substantial shareholding requirements
Significant variable remuneration deferral up to 5 and 6 years in ANZ equity
Use of relative and absolute TSR hurdles
Consideration of cash profit and economic profit in determining the ANZ Incentive Plan (ANZIP) variable remuneration pool
Consideration of the shareholder experience (in respect of the share price and dividend) in determining ANZIP pool and individual outcomes

While governed by:

The Human Resources (HR) Committee and the Board determining FR and the variable remuneration outcomes for the CEO and each Disclosed Executive. Additionally, the CEO’s LTVR outcome is also subject to shareholder approval at the AGM. Board discretion is applied when determining performance and remuneration outcomes (including grant of short and long-term variable remuneration awards), before any scheduled release of previously deferred remuneration (see section 5.3), before the vesting of LTVR RR (see section 5.2.4), and in applying any required consequences (see section 6).

3.5 Remuneration framework overview

The following overview highlights how the executive remuneration framework supports ANZ’s purpose and strategy, reinforces ANZ’s focus on risk management, and aligns to shareholder value.

See the ‘About our business’ and ‘Achieving our strategy’ sections of the Annual Report.

ANZ 2022 Annual Report 70

4. 2022 outcomes

Variable remuneration is ’at risk’ remuneration and can range from zero to maximum opportunity. Annual performance objectives are set at the Group and also at the Divisional/individual level at the start of each year. They are designed to be stretching yet achievable. The HR Committee and the Board make variable remuneration outcome decisions for the CEO and Disclosed Executives following lengthy and detailed discussions and assessment, supported by comprehensive analysis of performance from a number of sources. Where expectations are met, STVR is likely to be awarded around 80% of maximum opportunity. Where performance is below expectations, STVR will be less (potentially down to zero), and where above expectations, STVR will be more (potentially up to maximum opportunity). LTVR will be awarded at the beginning of the year, based on maximum opportunity unless the LTVR RR pre grant assessment results in any reduction (and also subject to shareholder approval for the CEO).

Remuneration outcomes have been presented in the following three ways:

i. Actual remuneration received (see section 4.1): Reflects the actual remuneration received in 2022 (i.e., cash paid and the value of prior equity awards which vested in 2022).
ii. Year-on-year STVR awarded (see section 4.2): Reflects actual cash and deferred shares components of STVR (or Annual Variable Remuneration (AVR)/Variable Remuneration (VR) in prior years) awarded in respect of the relevant financial year. As non-cash components are subject to future vesting outcomes, the awarded value may be higher or lower than the future realised value.
iii. Statutory remuneration (see section 9.1): Reflects remuneration in accordance with Australian Accounting Standards which includes FR and the amortised accounting value of variable remuneration (not the actual awarded or received value in respect of the relevant financial year).

4.1 2022 actual remuneration received

This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2022 financial year as cash, or in the case of prior equity awards, the value which vested in 2022. The final column also shows the value of prior equity awards which lapsed/were forfeited in 2022 (these are the 2018 PR awards which partially met their performance hurdles when tested in November 2021). FR was increased for the CRO on 1 October 2021 from $1.1m to $1.2m to improve alignment with the market. There were no other market adjustments to FR for Disclosed Executives in 2022.

Actual remuneration received in 2022 – CEO and Disclosed Executives:

	Fixed remuneration $	Cash variable remuneration $	Total cash $	Deferred variable remuneration which vested during the year	Actual remuneration received $	Deferred variable remuneration which lapsed/ forfeited during the year
CEO and Current Disclosed Executives
S Elliott	2,500,000	930,000	3,430,000	2,570,069	6,000,069	(1,476,258)
M Carnegie	1,200,000	460,000	1,660,000	1,213,496	2,873,496	(557,157)
K Corbally	1,200,000	442,500	1,642,500	775,802	2,418,302	–
F Faruqui	1,164,000	579,575	1,743,575	1,747,173	3,490,748	(731,262)
G Florian	1,100,000	442,500	1,542,500	788,778	2,331,278	(348,210)
K van der Merwe	1,000,000	400,000	1,400,000	831,518	2,231,518	(383,026)
A Watson	1,062,629	422,742	1,485,371	426,037	1,911,408	(40,188)
M Whelan	1,400,000	535,000	1,935,000	1,697,449	3,632,449	(757,400)
Former Disclosed Executives
S Buggle	33,000	n/a	33,000	–	33,000	–
M Hand	492,000	n/a	492,000	770,215	1,262,215	(348,210)
How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information

The point in time value of previously deferred remuneration granted as deferred shares/deferred share rights and/or performance rights is based on the one day Volume Weighted Average Price (VWAP) of the Company’s shares traded on the ASX on the date of vesting or lapsing/forfeiture multiplied by the number of deferred shares/deferred share rights and/or performance rights. 2. The vested value includes 51.6% of the performance rights awarded in November/December 2018 which vested in November/December 2021, noting that for the CEO they were settled by delivery of shares, which remain subject to a further one-year restriction period. 3. The sum of fixed remuneration, cash variable remuneration and deferred variable remuneration which vested during the year. 4. The lapsed/forfeited values relate to 48.4% of the performance rights awarded in November/December 2018 which lapsed in November/December 2021 due to the performance hurdles not being fully met. 5. FR prorated for time as a Disclosed Executive. 6. Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant year.

4.2 Year-on-year STVR awarded

These tables show a year-on-year comparison of STVR awarded to the CEO (previously referred to as AVR), and Disclosed Executives for the 2021 and 2022 performance periods (noting that for Disclosed Executives the STVR equivalent in previous periods relates to the cash and deferred shares component of variable remuneration). 2022 remuneration outcomes reflect both the overall performance of the Group and the performance of each individual/Division.

CEO

Year-on-year comparisons of maximum opportunity on a percentage basis (as shown in the below table) are not comparable – as the maximum opportunity has been reduced from 150% to 125% of STVR target in 2022. However when comparing outcomes as a percentage of target, the table highlights that despite the CEO’s 2022 STVR outcome being higher as a % of target than 2021 (reflecting his better performance in 2022), his actual 2022 STVR dollar outcome is lower due to the reduced STVR opportunity in the new remuneration structure.

Financial year	STVR cash $	STVR deferred shares $	Total STVR $	STVR as % of Target opportunity	STVR as % of Maximum opportunity
CEO S Elliott
2022	2,500,000	1,860,000	930,000	93%	74%
2021	3,750,000	2,000,000	1,000,000	80%	53%

Disclosed Executives

The average STVR outcome for current Disclosed Executives is 78% of maximum opportunity, reflecting the overall ANZ Group performance assessment of ‘slightly below expectations’ (see section 4.5.3). Outcomes as a percentage of maximum opportunity range from 71% to 96%, with the variability at the lower end of the range largely due to being behind schedule on building a Group wide non- financial risk framework (currently more Divisionally focused), weaker than expected revenue performance in Markets and some below target customer outcomes (in particular delays in the delivery of our digital innovation product ANZ Plus and home loan performance across the full year), and at the higher end, recognition of the successful execution of the Suncorp Bank purchase agreement and the progress made on the establishment of the new Non-Operating Holding Company (NOHC) structure.
For the 2022 Disclosed Executives who were in role for full year 2021 and 2022, the year-on-year STVR dollar outcome has reduced on average by 31%, primarily due to the lower STVR opportunity in the new structure. For example as shown below, even where performance as a percentage of target is similar year-on-year, Disclosed Executives are receiving substantially reduced dollar outcomes. However, the outcomes as a percentage of maximum opportunity appear higher year-on-year because the maximum opportunity has been reduced from 150% to 125% of target in the new structure.
Variable remuneration continues to differ both year-on-year and between different executives demonstrating the at risk nature of this element of remuneration and the variability in Group and individual performance year-on-year. See section 4.4 for details. Year-on-year comparisons of maximum opportunity on a percentage basis (as shown in the below table) are not comparable – as the maximum opportunity has been reduced from 150% of the combined variable remuneration target under the previous structure, to 125% of just the STVR target under the new structure. The 2022 STVR opportunity is significantly lower in 2022 due to the changes in the remuneration structure.

ANZ 2022 Annual Report 72

Financial year	STVR cash $	STVR deferred shares $	Total STVR $	STVR as % of Target opportunity	STVR as % of Maximum opportunity
Current Disclosed Executives
M Carnegie
2022	1,250,000	920,000	460,000	92%	74%
2021	2,376,000	1,138,500	569,250	72%	48%
K Corbally
2022	1,250,000	885,000	442,500	89%	71%
2021	1,960,200	1,227,600	613,800	94%	63%
F Faruqui
2022	1,212,500	1,159,150	579,575	120%	96%
G Florian
2022	1,150,000	885,000	442,500	96%	77%
2021	2,147,310	1,353,000	676,500	95%	63%
K van der Merwe
2022	1,040,000	800,000	400,000	96%	77%
2021	1,795,860	1,188,000	594,000	99%	66%
A Watson
2022	1,108,830	845,483	422,742	95%	76%
2021	2,135,790	1,374,335	687,167	97%	64%
M Whelan
2022	1,460,000	1,070,000	535,000	92%	73%
2021	2,526,480	1,620,300	810,150	96%	64%
Former Disclosed Executives
S Buggle
2022	41,250	n/a	n/a	n/a	n/a
2021	1,393,920	924,000	462,000	99%	66%
M Hand
2022	615,000	n/a	n/a	n/a	n/a
2021	2,376,000	1,089,000	544,500	69%	46%

The 2022 maximum STVR opportunity is based on the Disclosed Executive's new FR (as shown in charts in section 3.4).
STVR prorated for time as a Disclosed Executive.
Paid in NZD and converted to AUD. Year to date average exchange rate used to convert NZD to AUD as at 30 September for the relevant year.
S Buggle's 2021 and 2022 STVR reflects the period he acted as CFO.

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 73

4.3 Application of Reward Principles

In considering variable remuneration outcomes the HR Committee and Board reflect on the application of ANZ’s Reward Principles:

Reward our people for doing the right thing having regard to our customers and shareholders: Variable remuneration should be primarily based on ‘outcomes’ rather than ‘effort’ and proportionate relative to performance. It also needs to consider the experience and expectations of a range of stakeholders (including shareholders, customers, employees, community and regulators).
Attract, motivate and keep great people: In determining remuneration outcomes, the Board acknowledge the importance of balancing performance with being market competitive to ensure retention of key talent – particularly in a competitive talent landscape.
Focus on how things are achieved as much as what is achieved: The Board ensures that appropriate consideration and weight is given to performance against objectives (which includes a risk modifier), a risk standards assessment (capturing financial and non-financial risks), and how that performance was achieved (i.e., in accordance with our values and purpose).
Fair and simple to understand: Variable remuneration should be fair and consistent through the cycle and have regard to external influences outside of management’s control.

4.4 Variable remuneration – detail

4.4.1 CEO PERFORMANCE, STVR AND LTVR

Performance
With regard to STVR, the CEO is assessed 50% on the ANZ Group Performance Framework and 50% on achievement of individual strategic objectives aligned to ANZ’s strategy. Both the ANZ Group Performance Framework and individual strategic objectives are agreed by the Board at the start of the financial year and are stretching.

WEIGHTING OF FINANCIAL METRICS
STVR
The CEO’s STVR is not formulaic – outcomes are moderated by the Risk element of the ANZ Group Performance Framework and the Board’s judgement on the appropriate STVR considering all aspects of performance.

LT VR
TSR (both relative and absolute) continue to determine the outcome of LTVR PR (50% LTVR weighting). However, LTVR now also includes a 50% weighted RR award that is primarily focused on risk-based measures (as part of the pre grant and pre vest assessments – see section 5.2.4). This ensures LTVR has a material weight to non-financial measures as required under the new APRA Prudential Standard CPS 511 Remuneration.

At the end of the financial year, ANZ’s performance is assessed against the ANZ Group Performance Framework, and the CEO’s performance is also assessed against this, along with his individual strategic objectives, the ANZ values (behaviours), delivery of the BEAR obligations and ANZ’s risk and compliance standards. In conducting the CEO’s performance assessment, the HR Committee seeks input from the Chairman, CRO (on risk management), CFO (on financial performance), GE T&C (on talent and culture matters) and Group General Manager Internal Audit (GGM IA) (on internal audit matters). Material risk, audit and conduct events that have either occurred or come to light in the year are also considered together with input from both the Audit Committee and the Risk Committee of the Board.# Remuneration Report

4.4.1 CEO Performance and Remuneration

The Board has assessed the CEO’s 2022 performance as follows:
* ANZ Group Performance Framework = Slightly below expectations (see section 4.5.3)
* Individual strategic objectives = Met expectations (see Board assessment below)
* ANZ values = Above expectations
* Individual risk/ compliance assessment = Met expectations
* Overall = Met most but not all expectations

The Board has considered the CEO’s performance in determining the appropriate STVR outcome for 2022. The Board determined that an STVR outcome of 74% of maximum opportunity was appropriate.

2022 CEO individual strategic objectives

Lead and role model the culture and accountability required to transform ANZ
Enhance the reputation of ANZ across all stakeholder groups
Drive the strategic direction of the organisation with a particular focus on growth, restore Home Lending momentum in Australia and embed our digital transformation, Sustainability, Platforms and Ecosystems
Focus on sound risk management, operational excellence and resilience including system stability, to ensure ANZ has robust and reliable platforms to support long-term growth
Materially progress the productivity initiatives to improve customer and staff experience while driving the bank operating costs towards a materially reduced run rate
Continue to build ExCo effectiveness and succession pipelines for ExCo and CEO

Board assessment of performance on individual strategic objectives:

The CEO, supported by his executive team, performed well in a challenging environment. In particular, the CEO led the team in the achievement of a number of important outcomes which will transform and position ANZ for long-term sustainable performance and growth. These include:

Successful execution of an agreement to purchase Suncorp Bank (which is now subject to regulatory approval), with a well-supported adjacent capital raising designed to provide the fairest possible outcome for all shareholders
Taking a lead role in developing a new Australia Commercial strategy – while also driving operational improvements in the business
Launching and consistently demonstrating the new cultural behaviours (aligned to our strategy)
Launching ANZ Plus – a significant step forward in ANZ’s digital transformation, laying the foundations for the future of the retail bank
Achieving meaningful progress on environmental sustainability strategies
De-risking of the business – exiting non-core customers and products, improving the quality of our processes and tightening risk appetite, a major achievement which sets us up well for the uncertain future
Progressing the implementation of a NOHC structure – including the relevant regulatory approvals and ensuring ANZ is ready for implementation early in the new year (subject to shareholder approval at the Scheme Meeting following the 2022 AGM)

While there were some challenges impacting what was an overall strong performance year, the CEO ensured the necessary steps were taken to position ANZ well for 2023, as evidenced by:

Driving a reset of our delivery approach for a new Group wide non-financial risk framework designed to drive a more integrated approach across the Group
Further improvements to home loan processing capability and capacity, which contributed to quality growth with a focus on risk adjusted returns

The CEO role models ANZ’s values. His focus on reshaping ANZ, leading by example, contributed to another strong year of employee engagement at 84% (compared to the Finance & Insurance Benchmark of 79%). He has communicated clearly and with authenticity, maintained strong and positive relationships with regulators and government, and been proactive in managing our external reputation. As part of the broader focus on our Group purpose he has engaged regularly with non-profit partners, and environmental and other community groups.

The CEO has a key role in the management of risk, including active engagement in a range of risk forums and committees to set a clear tone in driving a strong risk culture. There have been ongoing strong outcomes from risk metrics including the long run loss rate, however, there were some delivery challenges which slowed down the implementation of a Group wide non- financial risk framework. The CEO’s risk focus encompasses ensuring ANZ has stable systems, and robust and reliable platforms. ANZ’s performance in this area in 2022 has been solid, with no major regulatory breaches, positioning us well for long-term growth (see section 4.5.3 for details). His continued focus on strong cost management discipline (i.e., ‘run the bank’ costs were broadly flat), along with productivity initiatives, has enabled ANZ to invest at record levels and improve the customer experience (e.g., simpler home loan offering in Australia, simpler process for refinancing loans for small businesses), and the employee experience (e.g., new technology platform to enable more effective and efficient workforce execution).

Executive development continued with the movement of Farhan Faruqui into the CFO role in October 2021, and Maile Carnegie to the position of Group Executive, Australia Retail in March 2022, following the separation of the Australia Retail and Australia Commercial businesses. Financial performance included strong revenue momentum across all Divisions and strong performance on net interest margin and cost management. While not all initiatives progressed as quickly as we would have liked, there were many positive achievements, and from a long-term strategy perspective, the CEO has significantly moved the dial in support of our future performance and growth.

STVR and LTVR

At the end of the financial year, the HR Committee makes a recommendation to the Board for their approval in respect of the CEO’s STVR outcome. The CEO’s STVR will vary up or down year- on-year, it is not guaranteed, and may range from zero to a maximum opportunity. The Board determined that an STVR outcome of $1.86m (74% of maximum opportunity) was appropriate for 2022 having regard to both the overall performance of the CEO and also the overall performance of the Group. No LTVR award was made for 2022 for the CEO, as we transition to awarding LTVR at the beginning of the year rather than the end. The CEO’s proposed 2023 LTVR of $3.375m ($3.5m in 2021) is subject to shareholder approval at the 2022 AGM.

Summary of total remuneration

Awarded remuneration shown below is significantly lower than 2021 due to nil LTVR award in 2022 year as we transitioned to the new remuneration structure and also the lower STVR award. Received remuneration is higher in 2022 due to the increased value at vesting of previously awarded deferred shares which vested in 2022 and the 51.6% LTVR vesting outcome in 2022 compared to 43.3% in 2021, noting that the PR which vested in 2022 were settled by delivery of shares which remain subject to a further one-year restriction period. Statutory remuneration reflects the accounting expense value for 2022 and is thus different to the remuneration received in 2022 (which includes prior year awards which vested).

Summary of total remuneration – CEO

	Fixed remuneration $	STVR $	LTIVR (full face value) $	Total remuneration $	Total remuneration $	Total remuneration $
				Awarded	Received	Statutory
2022	2,500,000	1,860,000	n/a	4,360,000	6,000,069	5,489,133
2021	2,500,000	2,000,000	3,500,000	8,000,000	5,752,821	5,473,399

Includes the value of previously awarded STVR deferred shares and LTVR performance rights at the date of vesting.
Includes the value of STVR and LTVR that has been expensed in the year.
No 2022 LTVR award due to change of awarding LTVR at the start (rather than end) of the year. 2023 LTVR proposal is $3.375m.

Historical STVR and LTVR

This table shows the STVR as a % of maximum opportunity and LTVR vesting outcomes for the CEO over the last five years. In prior years the maximum STVR opportunity for the CEO was 150% of target, however under the new 2022 structure this has been reduced to 125% of target, therefore the 2022 STVR % of maximum opportunity shown below of 74% is not comparable with prior years. If the maximum opportunity had remained at 150% of target, then the 2022 STVR outcome for the CEO (on a like for like basis) would have equated to 62% of maximum opportunity.

Historical STVR and LTVR – CEO

	2018	2019	2020 (post 50% COVID-19 reduction)	2021	2022
STVR outcome (% of maximum opportunity)	56%	48%	33%	53%	74%
LTVR vesting outcome (% vested)	0%	21.8%	0%	43.3%	51.6%

Previously referred to as AVR pre-2022.

4.4.2 Disclosed Executive Performance

Performance

At the start of each year, stretching performance objectives are set in the form of Divisional Performance Frameworks for each of our Disclosed Executives, in alignment with the ANZ Group Performance Framework approved by the Board. At the end of the financial year, the performance of each Disclosed Executive is assessed against the ANZ Group Performance Framework (25% to 50% weighting), their Divisional Performance Framework, ANZ’s values (behaviours), delivery of BEAR obligations and ANZ’s risk and compliance standards. The ANZ Group Performance Framework weighting for Disclosed Executives reinforces the importance of collective accountability and contribution to Group outcomes.# The respective 2022 weighting varies based on role focus:
• 50% Group performance weighting: CFO, GE T&C, and GE Technology
• 25% Group performance weighting: CRO, GE Australia Retail, GE & CEO New Zealand, GE Institutional

Similar to the ANZ Group Performance Framework, the Divisional Performance Frameworks include the key elements of Financial Discipline and Operational Resilience, Customer, and People and Culture, with Risk acting as a modifier. The weighting of each element varies to reflect the responsibilities of each individual’s role. The Financial Discipline and Operational Resilience element weightings range from 20% to 35%.

The HR Committee seeks input from the CEO, and independent reports from Risk, Finance, Talent and Culture, and Internal Audit, and also reviews material risk, audit and conduct events, and seeks input from both the Audit Committee and the Risk Committee of the Board. The HR Committee reviews and recommends to the Board for approval the overall performance outcomes for each Disclosed Executive.

STVR and LTVR

At the end of the financial year, the CEO and HR Committee determine STVR recommendations for each Disclosed Executive, which are ultimately approved by the Board. STVR varies year-on-year in line with performance – it is not guaranteed and may be adjusted up or down ranging from zero to a maximum opportunity. As highlighted in section 4, performance against objectives impacts STVR outcomes (e.g., where expectations are met, STVR is likely to be awarded around target which equates to 80% of maximum opportunity). The degree of variance in individual STVR outcomes reflect the weighting of the Group component (i.e., roles with 50% Group weighting will generally have less differentiation), and relative performance of the different areas/individuals, ensuring appropriate alignment between performance and reward. The outcomes demonstrate the at risk nature of STVR, and that outcomes vary across the Disclosed Executives and also from year to year. The average 2022 STVR for Disclosed Executives is 78% of maximum opportunity (ranging from 71% to 96%).

Consistent with the CEO, no 2022 LTVR awards have been made to Disclosed Executives, as we transition to awarding LTVR at the start of the 2023 year under the new executive remuneration structure.

Performance arrangements for the CRO are addressed additionally by the Risk Committee. Performance arrangements for the Group Executive and CEO, New Zealand are determined and approved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsed by the HR Committee/Board, consistent with their respective regulatory obligations.
Except for the CRO who has a percentage weighting assigned to risk measures.
Remuneration arrangements for the Group Executive and CEO, New Zealand are determined and approved by the ANZ NZ Board in consultation with and endorsed by the Board, consistent with their respective regulatory obligations.

ANZ 2022 Annual Report 76

4.5 ANZIP VARIABLE REMUNERATION POOL AND GROUP PERFORMANCE

4.5.1 ANZIP VARIABLE REMUNERATION

The ANZ Incentive Plan (ANZIP) is the variable remuneration plan operating across ANZ. With the exception of the CEO’s STVR, individual variable remuneration outcomes for all other employees including STVR for Disclosed Executives are funded under ANZIP. The Board decides the CEO’s variable remuneration outcomes separately to help mitigate potential conflicts of interest. See section 8.1.3.

At the end of each financial year the Board exercise their judgement to determine a fair and reasonable ANZIP pool. An assessment of financial performance guides the pool range but it is not a formulaic outcome. The Board considers a range of factors including:

The ANZ Group Performance Framework assessment (see section 4.5.3).
The quality of earnings and operating environment.
The shareholder experience during 2022 (e.g., shareholder returns and dividend comparison with prior periods).
Our Reward Principles (e.g., attract, motivate and keep great people).

4.5.2 ANZ GROUP PERFORMANCE FRAMEWORK

The ANZ Group Performance Framework is approved by the Board at the start of each year. The key objective of our Group Performance Framework is to enable aligned focus across the organisation on delivering the critical outcomes that matter most in delivering on our strategy. It plays a key role to:

message internally what matters most;
reinforce the importance of sound management in addition to risk, customer, people and financial outcomes; and
inform focus of effort, prioritisation and decision-making across ANZ.

Historical Disclosed Executive VR

This table shows the VR as a % of maximum opportunity for the executives who were disclosed over the last five years. In prior years the maximum VR opportunity for Disclosed Executives was 150% of combined VR target, however under the new 2022 structure this has been reduced to 125% of STVR target component only, therefore the 2022 STVR % of maximum opportunity shown below of 78% is not comparable with prior years. If the maximum opportunity had remained at 150% of target, then the average 2022 STVR outcome for Disclosed Executives (on a like for like basis) would have equated to 65% of maximum opportunity (and a range of 59% to 80%).

	2018	2019	2020 (post 50% COVID-19 reduction)	2021	2022
STVR outcome (average % of maximum opportunity)	51%	45%	36%	60%	78%
STVR outcome (range % of maximum opportunity)	40% – 60%	0% – 74%	31% – 44%	46% – 66%	71% – 96%
VR PR vesting outcome (% vested)	0%	21.8%	0%	43.3%	51.6%

Previously referred to as VR pre-2022.
Pre 2022, % of maximum opportunity applied to the full VR due to the combined VR structure for Disclosed Executives in those years.

4.4.3 PR OUTCOMES (CEO AND DISCLOSED EXECUTIVES)

PR granted to the CEO in December 2018 and Disclosed Executives (excluding the CRO) in November 2018 reached the end of their performance period in November 2021. Based on performance against hurdles, 51.6% of these rights vested (noting that for the CEO they remain subject to a further one-year restriction period), the remaining 48.4% lapsed and executives received no value for this portion of the award.

PR outcomes

	Grant date	First date exercisable	Hurdle	TSR threshold	TSR target	Upper quartile TSR	TSR maximum target	% vested	Overall PR outcome
75% relative TSR Select Financial Services (SFS) comparator group	22-Nov-18	22-Nov-21	17.49% 5.60% 41.02% 68.85%	51.6% vested and 48.4% lapsed
25% absolute CAGR TSR	22-Nov-18	22-Nov-21	5.52%	10%	15%		0%

Grant date for the CEO was 19 December 2018, and date first exerciseable was 19 December 2021. The CEO’s performance period was the same as the performance period for Disclosed Executives.
Compound Annual Growth Rate (CAGR).
See section 5.2.5 for details of the SFS comparator group.
For the CEO, remain subject to a further one-year restriction period.

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 77

4.5.3 ASSESSMENT AGAINST THE ANZ GROUP PERFORMANCE FRAMEWORK FOR 2022

Overall, this was another volatile year with a lot of economic uncertainty. COVID continued to provide challenges operationally and for our customers. The hard work de-risking and simplifying the Bank over the previous 5 years and the lessons from COVID in 2020 and 2021 meant ANZ was well positioned to manage through a fast-changing environment. Despite these challenging circumstances, the achievement of many important initiatives position us well for 2023 and beyond (e.g., the agreement to acquire Suncorp Bank which will add more than one million retail customers and provide a platform for growth in the fast-growing Queensland market, the progress made on establishing the NOHC structure which if approved by shareholders will provide greater flexibility to grow value for shareholders, the new Australia Commercial strategy, sustainability investments), Australia home lending has also been returned to quality growth. Despite many achievements, we assess our 2022 performance as slightly below expectations primarily due to the slower than expected progress on the build of a Group wide non-financial risk framework (the current framework is more Divisionally focused), and the later than expected launch of our digital innovation product ANZ Plus.

The below table outlines ANZ’s performance objectives in 2022 and provides a summary of outcomes for each of the key performance categories to inform the overall assessment for 2022. Performance against expectations is evaluated for each category using a holistic assessment of progress and outcomes delivered in line with our Group strategic priorities and annual focus areas. A range of objective indicators and subjective factors are considered including management input on work undertaken, evidence of outcomes realised and lessons learned, and with consideration given to the operating, regulatory and competitive environment. As managing risk appropriately is fundamental to the way ANZ operates, risk forms an integral part of the assessment, directly impacting the overall ANZ Group Performance Framework outcome (a modifier ranging from 0% to 110% of the ANZ Group Performance assessment).# RI S K m odi f ier 0 to 110 %

O v e r all assess m e n t

S lightly below

O VERALL Grou p Pe rf o rm a n ce Assess m e n t

S lightl y below expectations – but man y objectives met or above target

C USTOMER 3 5 % w eig ht

O v e r all assess m e n t

B e l ow

PEOPLE & C ULTUR E 30% w eight

O v e r all assess m e n t

Met

F INANCIAL D IS C IPLINE & O PERATI O NAL R ESILIENCE 3 5 % weig h t

O v e r all assess m e n t

Slightl y abov e

ANZ 2022 Annual Report 78

Risk (modifier 0% to 110%)

Risk overall assessment: Slightly below

| Performance commentary # People & Culture

Overall assessment: Met

Performance commentary

Performance against objectives
GROUP STRATEGIC PRIORITY: Build a culture where our diverse teams are engaged and optimised for success.

Below	Met	Above
Our purposeful and continued focus on leadership and culture in one of the most challenging labour market environments in many years, is evidenced by our engaged workforce and recognition as a great place to work:

84% engagement index³ outcome (compared to Global Finance & Insurance average of 79%).
Awarded most popular graduate program in Australia at AFR’s “Top 100 Graduate Employers” awards and #1 globally in SWOOP Analytics’ 2021 Yammer Benchmarking for large firms.
Equal #1 position amongst major bank peers in Glassdoor⁴ ratings.

2022 was another successful year, and our focus on purpose and values delivered strong outcomes with regards to talent retention and further building key skills required for the future. Gender diversity continued to improve although not at the same strong pace we experienced in previous years. Overall, we delivered People & Culture on target.

Strategic initiative highlights include:

Launching and embedding our simplified culture behaviours.
Piloting a new leadership program to improve leadership capability.
Supporting employees to build new learning habits, with ~9,600 employees using our key digital learning platform each month.
Strong progress on our Talent & Culture (T&C) technology uplift program to improve and simplify how our people interact with T&C services and systems.

2022 focus areas

Performance commentary

Performance against objectives
GROUP STRATEGIC PRIORITY: Drive a culture of performance

Below	Met	Above
Our focus was on simplifying expectations, and supporting our teams, whilst refining where and how we work through the:

launch of a simplified set of culture behaviours to help us achieve our purpose and strategy – with support for our people to understand them in practice.
provision of ongoing COVID support, including delivery of programs to facilitate a safe and effective return to office, and targeted webinars and content aligned to wellbeing and mental health.

Attract, retain and develop people with the critical skills we need to reinvent banking

Developing
- Executive Leadership Series launched to upskill leaders on critical topics linked to the Bank we’re Building.
- Customer Coaching program pilot commenced with 300 participants across Australia and New Zealand.
- A more holistic Career Programs strategy developed.
Attracting
- Recruitment of >750 permanent engineers critical to delivering our strategy and active management of plans to strengthen data, digital and delivery expertise.
- Leveraging campaigns, talent market places and other strategic sourcing techniques to attract in demand talent.
Retaining
- Retention hotspots identified. A range of interventions implemented to address attrition rates driven by an extremely tight labour market.

Build the foundations for long-term, sustainable improvement in gender diversity

Overall women in leadership (WIL) was at 35.9%, up slightly (0.6%) on last year (with intense competition for talent and tight discipline over FTE impacting the degree of uplift). Positively, WIL in revenue generating roles increased from 28% to 30%.
Good progress was made in 2022 in building the foundations to improve gender diversity outcomes over the long-term, including:
- Progress against Gender Action Plan and roll out of the Diversity & Inclusion playbook.
- Recruitment of 57% females into the Australian graduate program.
- Update of executive promotion process to improve gender diversity.
- Achievement of Family Inclusive Workplace certification.

Peter Lee²
¹ Lead Sustainability Provider for Australia and New Zealand and Kanga News Global Coverage House of the Year – Sustainability and Australian Sustainability Debt House of Year.
² Peter Lee Associates 2022 Large Corporate and Institutional Relationship Banking surveys, Australia and New Zealand.
³ Based on a new research-based engagement index.
⁴ Glassdoor is a website where employees and former employees anonymously review companies and their management.

Overview	How we create value	Performance overview	Remuneration report	Directors’ report	Financial report	Shareholder information
80						81

Financial Discipline & Operational Resilience

Overall assessment: Slightly above

Performance commentary

Performance against objectives
GROUP STRATEGIC PRIORITY: Run core businesses well, focused on delivering sustainable growth and operational improvements.

Below	Met	Above
Despite the ongoing challenges in the environment, ANZ delivered strong financial outcomes which reflect the execution of our long-term strategy and the benefits of our diversified portfolio of businesses. Strong margin and lending momentum was evident across all Divisions, with a disciplined focus on quality growth and risk-adjusted returns. Within the Australian Home Loans business, further improvements to operational capacity and process resilience helped deliver consistently faster turnaround times and led to strong volume growth momentum in the second half of the financial year. Costs were again well managed. Despite the emergence of inflationary pressures, ‘run the bank’ costs were broadly flat as we continued to reduce operational complexity and simplify the business. This enabled continued high levels of investment in the business, allowing for progress on growth and productivity initiatives, such as ANZ Plus and Cloud migration. We continued to prudently manage risk. The low level of individual provisions is a function of ongoing portfolio credit quality improvements, while the collective provision balance appropriately factors in the uncertain domestic and global economic outlook. Our capital position remains strong, enabling us to profitably grow the balance sheet and fund the acquisition of Suncorp Bank. Overall, the performance on Financial Discipline & Operational Resilience was slightly above target.

2022 focus areas

Performance commentary

Performance against objectives
GROUP STRATEGIC PRIORITY: Deliver Group Economic Profit to plan or better in a high-quality manner

Below	Met	Above
* On a cash continuing basis, Economic Profit⁵ of $1,080m was generated in 2022, up 81% on prior year. Additionally, cash profit from continuing operations increased 5%, profit before provisions increased 7% and ROE increased 47 bps reflecting a strong outcome for shareholders.
* Excluding large/notable items⁶, revenue grew 2% for the financial year benefiting from disciplined volume growth and margin management across all our businesses. While our Markets customer franchise performed strongly, lower balance sheet trading income caused by volatile market conditions saw total Markets revenue fall. For second half, revenue grew 10% with strong exit rate momentum.
* Cost management remained disciplined despite inflationary pressures, with ‘run the bank’ costs broadly flat year-on-year. Overall costs increased, a factor of continued high levels of investment to grow and simplify the business and meet our regulatory and compliance obligations, and a higher proportion of investment spend being directly expensed.
* The credit quality of our lending portfolio remains strong, with long-run loss rates continuing to decline and low levels of individual provisions in 2022.
* Capital and liquidity continued to be well managed. CET1 (level 2) of 12.3% remains above regulatory minimums, while enabling profitable balance sheet growth and completing a $3.5bn capital raise to partially fund the acquisition of Suncorp Bank.

Performance against objectives
GROUP STRATEGIC PRIORITY: Drive BAU productivity improvements

Below	Met	Above
* Incremental ‘run the bank’ cost savings of $250m were delivered in 2022 via the Accelerated Strategy program, enabling ‘run the bank’ costs to remain broadly flat.
* The savings were achieved via a series of initiatives focusing on the continued move to a modern Cloud-based technology architecture, greater digital adoption for customers and employees and more streamlined business processes.

Performance against objectives
GROUP STRATEGIC PRIORITY: Restore Australia home lending momentum

Below	Met	Above
* Australia home lending volumes +4.9bn (or +1.8%) in 2022. Additional operational capacity and process resilience has seen home loan application volumes improve over the course of the year, with the majority of FUM growth delivered in the second half of the year, and the strongest FUM growth in the month of September.

Performance against objectives
GROUP STRATEGIC PRIORITY: Progress further on Cloud migration journey

Below	Met	Above
* Our technology continues to be modernised and we have exceeded targets with more than 12,000 systems migrated to Cloud or decommissioned (target 9,000), with 31% of applications now on Cloud.

Performance against objectives
GROUP STRATEGIC PRIORITY: Demonstrate progress towards improving our legal structure

Below	Met	Above
* Well progressed on the NOHC legal restructure with preparation activities on track to implement in 2023, subject to receipt of all regulatory and shareholder approvals.

⁵ Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is not subject to audit by the external auditor. Economic profit is calculated via a series of adjustments to cash profit with the economic credit cost adjustment replacing the accounting credit loss charge; the inclusion of the benefit of imputation credits (measured at 70% of Australian tax) and an adjustment to reflect the cost of capital.
⁶ Large/notable items include the impact of divestments, merger and acquisition related items, customer remediation, litigation, restructuring, withholding tax, lease modification and Asian Associate items.# ANZ 2022 Annual Report 82

Overall ANZ Group Performance assessment: Slightly below expectations

	Below	Met	Above

Despite a strong outcome in Financial Discipline & Operational Resilience, and on target performance for People & Culture, some areas for improvement in Customer and slower than expected progress in regards to building a Group wide non-financial risk framework in line with our high expectations, resulted in an overall Board assessment of slightly below target. However, the Board recognised that many objectives were met or exceeded in difficult circumstances, and several important achievements (e.g., Suncorp Bank purchase agreement, NOHC, Cloud) have positioned us well for the long-term.

4.5.4 ANZ PERFORMANCE OUTCOMES

ANZ’s financial performance 2018–2022

As highlighted in section 4.5.1, when determining variable remuneration outcomes for the CEO, Disclosed Executives and employees a range of different financial indicators are considered. The Group uses cash profit as a measure of performance for the Group’s ongoing business activities, as this provides a basis to assess Group and Divisional performance against earlier periods and against peer institutions. The adjustments made in arriving at cash profit are included in statutory profit which is subject to audit. Although cash profit is not audited, the external auditor has informed the Audit Committee that the cash profit adjustments have been determined on a consistent basis across each period presented. Statutory profit has increased 16% compared to the prior financial year, while cash profit from continuing operations has increased 5%. Part of the improvement has been driven by fewer one-off charges and divestment losses in the prior financial year. Underlying performance reflects stronger revenue, a focus on investing for growth. During 2022 the Group completed a $1.5bn share buy-back to return surplus capital to its shareholders and announced the proposed acquisition of Suncorp Bank to accelerate the growth of our Australia Retail and Australia Commercial businesses, anticipated to complete in calendar year 2023 (subject to regulatory approval). The expected acquisition will be partly funded by the $3.5bn equity raise in 2022. See ‘Note 24 Shareholders’ Equity’ of the Annual Report.

The table below provides ANZ’s financial performance, including cash profit, over the last five years.

	2018	2019	2020	2021	2022
Statutory profit attributable to ordinary shareholders ($m)	6,400	5,953	3,577	6,162	7,119
Cash profit ($m, unaudited)	5,805	6,161	3,660	6,181	6,496
Cash profit – Continuing operations ($m, unaudited)	6,487	6,470	3,758	6,198	6,515
Cash profit before provisions – Continuing operations ($m, unaudited)	9,966	9,958	8,369	8,396	8,968
Cash ROE (%) – Continuing operations (unaudited)	11.0	10.9	6.2	9.9	10.4
Cash EPS – Continuing operations (unaudited)	243.5	220.2	128.7	216.5	228.8
Share price at 30 September ($) (On 1 October 2017, opening share price was $29.60)	28.18	28.52	17.22	28.15	22.80
Total dividend (cents per share)	160	160	60	142	146
Total shareholder return (12 month %)	0.6	9.2	(36.9)	70.7	(14.0)

Cash profit excludes non-core items included in statutory profit with the net after tax adjustment a reduction to statutory profit of $623m for 2022, made up of several items. It is provided to assist readers understand the results of the core business activities of the Group.
Cash earnings per share has been restated to reflect the bonus element of the share entitlement issue in 2022, in accordance with AASB 133 Earnings per Share.

ANZ TSR performance (1 to 10 years)

The table below compares ANZ’s TSR performance against the median TSR and upper quartile TSR of the PR Select Financial Services (SFS) comparator group1 over one to ten years, noting that for this table TSR is measured over a different timeframe (i.e., to 30 September 2022) to the performance period for our PR.

ANZ’s TSR performance was above the median TSR of the SFS comparator group1 when comparing over three and five years; and
below the median over one year and ten years.

Years to 30 September 2022	1	3	5	10
ANZ (%)	(14.0)	(7.3)	0.2	59.5
Median TSR SFS (%)	(12.6)	(14.1)	(2.0)	88.4
Upper quartile TSR SFS (%)	8.4	25.5	51.2	166.6

See section 5.2.5 for details of the SFS comparator group.
The outcomes for PR granted in November/December 2018 and tested in November 2021 are detailed in section 4.4.3.

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 83

5. 2022 executive remuneration structure and delivery

There are two core components of remuneration at ANZ – FR and at risk variable remuneration. In structuring remuneration, the Board aims to find the right balance between fixed and variable remuneration (at risk), the way it is delivered (cash versus deferred remuneration) and appropriate deferral time frames (the short, medium and long-term). The Board sets (and reviews annually) the CEO and Disclosed Executives’ FR based on financial services market relativities and reflecting their responsibilities, performance, qualifications and experience. The annual market review of FR initially scheduled for September 2022 has been deferred until early 2023 to ensure the Board has a clearer picture of the impact of any remuneration changes in the market as a result of APRA’s new Prudential Standard CPS 511 Remuneration. The CEO and Disclosed Executives’ variable remuneration is comprised of STVR and LTVR consistent with external market practice. Variable remuneration is designed to focus our CEO and Disclosed Executives on stretching performance objectives supporting our business strategy, risk management and the delivery of long- term stakeholder value. Variable remuneration outcomes are based on a range of measures (as illustrated below), with material weight provided to non-financial measures in accordance with Prudential Standard CPS 511 Remuneration. Our variable remuneration approach has a strong focus on driving long-term sustainable outcomes for shareholders. For example, STVR outcomes include a number of objectives that are considered key drivers of shareholder value, and the significant weighting to the LTVR component (>60% of VR) as well as 50% of STVR delivered as ANZ shares, aligns a large proportion of executive remuneration to the shareholder experience (in respect of the share price and dividend).

Key Individual Assessment Inputs


Prudential Soundness •Capital ratio and liquidity prudential minimums	Risk Measures •Material risk outcomes Considers all risk types including capital adequacy risk, compliance risk, credit risk, liquidity and funding risk, market risk, operational risk, strategic risk, technology risk and conduct risk •APRA active supervision •Risk culture	TSR •75% relative TSR Rewards for performance relative to that of SFS comparator group •25% absolute TSR Ensures there is a continued focus on providing positive growth – even when market is declining Measures absolute CAGR
ALIGNED TO SHAREHOLDER EXPERIENCE	STVR and LTVR provide material weight to non-financial measures as per CPS 511	LTVR RR Mostly non-financial	LTVR PR Financial
ANZ values Behaviours	Risk/compliance Including material events BEAR obligations	Additional financial and non-financial overlays considered by the Board in determining Group and individual performance and the size of the ANZIP pool include: •Broader financial performance (beyond scorecard measures) •The quality of earnings and operating environment •The shareholder experience (e.g., share price growth anddividend comparison with prior periods)

ANZ Group Performance Framework

	25%-50% weighting	Individual strategic objectives/Divisional Performance Framework
	50%-75% weighting	Control function input Risk, Finance, T&C, Audit
RISK (MODIFIER)	Maintain risk discipline focused on good customer and regulatory outcomes
FINANCIAL DISCIPLINE & OPERATIONAL RESILIENCE (35%)	Run core businesses well, delivering sustainable growth and operational improvements •Deliver economic profit to plan or better in a high-quality manner with sustainable returns •Restore Australia home lending momentum and sustainably grow market share in target segments
PEOPLE & CULTURE (30%)	Build a culture where our diverse teams are engaged and optimised for success •Drive a culture of performance •Attract, retain and develop people with critical skills to reinvent banking
CUSTOMER (35%)	Deliver great customer outcomes, focused on improving financial wellbeing and experience of priority segments •Improve time to first decision for Australia home loans •Embed digital value propositions •Accelerate platforms, markets and sustainability strategies within Institutional •Deliver major regulatory commitments •Strengthen risk culture

FY22 ANZ Group Performance Framework Objectives below are examples of key drivers of shareholder value ANZ 2022 Annual Report 84

By deferring a significant portion of variable remuneration (79% of maximum opportunity for the CEO and Disclosed Executives and 75% for the CRO), we seek to ensure alignment with shareholder interests, to deliver on ANZ’s strategic objectives, and to ensure a focus on long-term value creation. Deferred variable remuneration has significant retention elements, and most importantly, can be adjusted downwards, including to zero, allowing the Board to hold executives accountable, individually or collectively, for the longer-term impacts of their decisions and actions.# 5.1 Remuneration mix

As highlighted in section 3, the CEO and Disclosed Executives now have an aligned remuneration mix (30% FR, 30% STVR and 40% LTVR at maximum opportunity), and structure (with the exception of longer deferral for the CEO in line with APRA’s deferral requirements).

CEO

This chart below highlights that despite the reduction in total remuneration opportunity, the LTVR component has only reduced slightly to reinforce the long-term focus and alignment to the shareholder experience.

Remuneration mix – CEO ($m)

	26%	38%	36%	30%	30%	40%
2.500	2.500	2.500	1.250	1.250	1.688	1.688
Minimum opportunity (45% cash, 55% equity)
New maximum opportunity (45% cash, 55% equity)	2.500	1.875	1.875	3.500	9.750
Former maximum opportunity
PR	LTVR	RR	LTVR	Deferred shares	STVR	Cash

Disclosed Executives

The chart below highlights the significant (~30%) reduction in maximum opportunity for Disclosed Executives (i.e., -$1.837m in this example). Under the former combined VR structure the maximum opportunity of 150% was applied to the combined VR, while under the new structure the maximum opportunity has been reduced to 125% and is applied to the STVR only.

Remuneration mix – Disclosed Executives ($m)

	1.250	1.250	1.200	0.625	0.625	0.844	0.844	1.188
1.188	2.448	1.250	4.188	6.024
Minimum opportunity (45% cash, 55% equity)
New maximum opportunity (40% cash, 60% equity)
Former maximum opportunity
PR	LTVR/VR	RR	LTVR/VR	Deferred shares	STVR/VR	Cash	STVR/VR	FR

Excluding CRO.

85 Overview

How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

CRO

Note for both Disclosed Executives and the CRO, as the Board decided to defer payment of the ~4% FR structural increase for Disclosed Executives to 2023, excluding the FR increase, the 2022 actual maximum opportunity remuneration mix for Disclosed Executives is 29% FR/30% STVR/41% LTVR (and for the CRO 32% FR/34% STVR/34% LTVR).

5.2 Variable remuneration delivery

Variable remuneration for the CEO and the Disclosed Executives (excluding the CRO) is delivered as follows:

STVR as 50% cash and 50% shares deferred equally over years 2 and 3; and
LTVR as RR and PR deferred over:
- year 4 (33%), year 5 (33%) and year 6 (34%) for the CEO; and
- year 4 (50%) and year 5 (50%) for Disclosed Executives.

Both RR and PR are tested against the relevant performance condition (see section5) at the end of the four-year performance period and are then subject to additional holding period(s) until the completion of the respective deferral periods.

At target performance, 63% of variable remuneration for the CEO and Disclosed Executives, and 56% of variable remuneration for the CRO will be deferred for at least four years (from the date the Board approved the variable remuneration in October (and the date shareholders approve the CEO’s LTVR)), noting that this complies with the BEAR minimum deferral requirement of 60% for the CEO and 40% for Disclosed Executives.

If the CEO receives above target STVR, the amount above target will be delivered as 40% cash and 60% deferred shares (20% year 4, 20% year 5, 20% year 6) to ensure compliance with the minimum deferral requirements with respect to BEAR and APRA’s Prudential Standard CPS 511 Remuneration.

Before any scheduled release of deferred remuneration, the Board considers whether malus should be applied to previously deferred remuneration (or further deferral of vesting) for the CEO and Disclosed Executives. The Board will also consider whether clawback should be applied to variable remuneration granted for the 2022 financial year and beyond. See section 5.3.

5.2.1 STVR CASH – CEO AND DISCLOSED EXECUTIVES

The cash component of STVR is paid to executives at the end of the annual Performance and Remuneration Review (December 2022), and from 2022 is subject to clawback for two years post payment.

5.2.2 STVR DEFERRED SHARES – CEO AND DISCLOSED EXECUTIVES

By deferring 50% of an executives’ STVR as deferred shares over years two and three (and it remaining subject to malus and clawback), we enable a substantial amount of their STVR to be directly linked to delivering shareholder value. We grant deferred shares in respect of performance for the 1 October to 30 September financial year in late November each year. For deferred variable remuneration for the CEO and Disclosed Executives, we calculate the number of deferred shares to be granted based on the VWAP of the shares traded on the ASX in the five trading days leading up to and including 1 October (i.e., in line with the beginning of the financial year). Allocations prior to the 2022 financial year are based on the VWAP in the five trading days leading up to and including the date of grant. The VWAP used for allocation varies from the fair value VWAP used for disclosure and expensing purposes (i.e., one-day VWAP at the date of grant). In some cases, we may grant deferred share rights to executives instead of deferred shares. Each deferred share right entitles theholder to one ordinary share.

5.2.3 LTVR – CEO AND DISCLOSED EXECUTIVES

LTVR reinforces the focus on achieving longer term strategic objectives, driving outperformance relative to peers, and creating long-term sustained value for all stakeholders. The following table details design features common to both LTVR RR and PR. As part of the transition to the new remuneration structure there is no 2022 LTVR grant, however this section details the LTVR approach that will apply to the 2023 LTVR award to be granted around November/ December 2022.

Element	Detail	Description
RR and PR		provide a right to acquire one ordinary ANZ share at nil cost – as long as applicable time and performance conditions are met. Their future value may range from zero to an indeterminate value. The value depends on performance against the applicable performance condition and on the share price at the time of exercise.
Performance period		Both RR and PR have a four-year performance period commencing from 1 October and ending four years later on 30 September (e.g., 1 October 2022 to 30 September 2026 for the 2023 grant), noting that LTVR will now be awarded at the start of the financial year (rather than the end). A four-year performance period provides sufficient time for longer term performance to be reflected.
Deferral periods		The deferral period is the sum of the four-year performance period and the applicable holding period. The holding period commences the day after the end of the four-year performance period (e.g., 1 October 2026 in the case of the 2023 LTVR award), and finishes on the 4th, 5th or 6th anniversary of grants.
Exercise period		Rights can only be exercised at the end of the relevant deferral period (4, 5 or 6 years) when the rights vest and become exercisable. There is a two-year exercise period which commences at the end of the relevant deferral period for RR and PR.

ANZ 2022 Annual Report 86

Element	Detail	Expensing
		ANZ engages PricewaterhouseCoopers to independently determine the fair value of RR and PR, which is only used for expensing purposes. They consider factors including: the market performance conditions, share price volatility, life of the instrument, dividend yield, and share price at grant date.
Dividends		A dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only made to the extent that all or part of the underlying rights meet the relevant performance condition and vest to the individual. Dividend equivalents accrue over the full deferral period for RR, and only during the holding period for PR.
Allocation basis		The value the Board uses to determine the number of RR and PR to be allocated to the CEO and Disclosed Executives is the face value of the Company’s shares traded on the ASX in the five trading days leading up to and including 1 October (beginning of the financial year and LTVR performance period). LTVR will be awarded around the start of the financial year in late November/early December for Disclosed Executives and December for the CEO (subject to shareholder approval).

5.2.4 LTVR RESTRICTED RIGHTS – CEO AND DISCLOSED EXECUTIVES

The introduction of RR ensures that LTVR provides material weight to non-financial measures (as required under APRA’s Prudential Standard CPS 511 Remuneration), as well as supporting long-term alignment with shareholders. The Board was very considered in working through the appropriate measures for RR. A holistic assessment of measures across STVR and LTVR components was considered to reduce the risk of a ‘double impact’ to remuneration outcomes. Having a risk-based focus reflects the intent of the new Prudential Standard CPS 511 Remuneration in ensuring remuneration arrangements appropriately incentivise individuals to prudently manage risks.# Remuneration report

Performance overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Element Performance condition detail
RR pre grant and pre vest assessments

Pre grant assessment purpose: Determines whether any reduction should be made to RR award value and is primarily based on outcomes in the prior financial year.

Pre vest assessment purpose: Determines whether the RR amount awarded should vest in full and is based on outcomes over the four-year performance period. The pre grant and pre vest assessments also take into consideration any adjustments already applied for the same event/ outcomes in either the current or prior years (i.e., adjustments to STVR and LTVR, malus and clawback), to ensure the overall impact is fair and proportionate to the severity of the outcome.

Therefore, given other remuneration adjustments are likely to be considered first, and as the award of RR is future focused, it is anticipated that RR will be allocated at maximum value in most years – unless the outcome of the following three assessment steps determines otherwise.

STEP 1 Assess Prudential soundness
* Nil award if ANZ does not meet capital ratio and liquidity prudential minimums.

STEP 2 Assess risk measures
* Consideration of any Material Risk Outcomes from executive actions or inactions which is expected to/or has resulted in significant impacts.
* Consideration of any significant adverse change in APRA’s Active Supervision level.

STEP 3 Apply Board discretion
* Consideration of Risk Culture (additional measure for pre vest) that examines whether or not ANZ has maintained (or made progress towards) a sound risk culture, considering both executive actions or inactions.
* Board to determine whether any reduction should be made to LTVR RR outcome based on consideration of a range of factors, including:
* the outcomes from steps 1 and 2;
* the impact, if any, of the issue/s on ANZ’s reputation/standing in the market;
* whether the issue was specic to ANZ, the banking industry or the broader market;
* any impacts already applied (e.g., re downward adjustment mechanisms, pre grant assessment impact to LTVR RR);
* whether any impact should be made on an individual or collective basis.

The assessments are not intended to be formulaic given the circumstances requiring the application of Board discretion will typically be different or unique, however a Board decision making framework is in place to guide theBoard in applying discretion.

Element Performance condition detail
Material risk outcomes process

The consideration of material risk outcomes is a key process that forms part of our broader Accountability and Consequence Framework (A&CF) (see section 6), and is a comprehensive bottom-up process designed to ensure that all relevant events are surfaced and considered appropriately. Key steps include:

Risk, conduct and audit events are reported in ANZ’s Compliance & Operational Risk System.
Divisional Accountability Groups review serious audit events, and conduct themes and trends, and provide recommendations regarding accountability and consequences.
Enterprise Accountability Group (EAG) reviews recommendations of the Divisional Accountability Groups and make final determination.
HR Committee reviews most serious risk, conduct and audit events (as part of independent report from CRO) and determines impacts at the Group, Division and individual level for the CEO and ExCo.

5.2.5 LTVR PERFORMANCE RIGHTS – CEO AND DISCLOSED EXECUTIVES EXCLUDING THE CRO

Element Performance condition detail
Performance rights hurdles

The PR have TSR performance hurdles reflecting the importance of focusing on achieving longer term strategic objectives and aligning executives’ and shareholders’ interests. We will apply two TSR performance hurdles for the 2023 grants of PR:

75% will be measured against a relative TSR hurdle, tranche 1.
25% will be measured against an absolute TSR hurdle, tranche 2.

TSR represents the change in value of a share plus the value of reinvested dividends paid. We regard it as the most appropriate long-term measure – it focuses on the delivery of shareholder value and is a well understood and tested mechanism to measure performance. The combination of relative and absolute TSR hurdles provides balance to the plan by:

Relative: rewarding executives for performance that exceeds that of comparator companies; and
Absolute: ensuring there is a continued focus on providing positive growth – even when the market is declining.

The two hurdles measure separate aspects of performance:

the relative TSR hurdle measures our TSR compared to that of the Select Financial Services (SFS) comparator group, made up of core local and global competitors. This comparator group is chosen to broadly reflect the geographies and business segments in which ANZ competes for revenue; and
the absolute CAGR TSR hurdle provides executives with a more direct line of sight to the level of shareholder return to be achieved. It also provides a tighter correlation between the executives’ rewards and the shareholders’ financial outcomes.

We will measure ANZ’s TSR against each hurdle at the end of the four-year performance period to determine whether each tranche of PR becomes exercisable. We measure each tranche independently from the other – for example one tranche may vest fully or partially but the other tranche may not vest.

Relative TSR hurdle for PR

The relative TSR hurdle is an external hurdle that measures our TSR against that of the SFS comparator group over four years. The SFS comparator group (unchanged from prior years) is made up of: Bank of Queensland Limited; Bendigo and Adelaide Bank Limited; Commonwealth Bank of Australia Limited; DBS Bank Limited; Macquarie Group Limited; National Australia Bank Limited; Standard Chartered PLC; Suncorp Group Limited; and Westpac Banking Corporation.

If our TSR when compared to the TSR of the comparator group then	the percentage of PR that vest is
less than the 50 th percentile is nil	nil
reaches at least the 50 th percentile, but is less than the 75 th percentile is 50% plus 2% for every one percentile increase above the 50 th percentile	50% plus 2% for every one percentile increase above the 50 th percentile
reaches or exceeds the 75 th percentile is 100%	100%

ANZ 2022 Annual Report
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Element Performance condition detail
Absolute TSR hurdle for PR

The absolute CAGR TSR hurdle is an internal hurdle as to whether ANZ achieves or exceeds a threshold level of growth the Board sets at the start of the performance period. The Board reviews and approves the absolute TSR targets each year for the PR award. When reviewing the targets, the Board references ANZ’s assessed Cost of Capital. The Cost of Capital is determined using methodologies including the Capital Asset Pricing Model (CAPM). The Cost of Capital is regularly reviewed and updated to reflect current market conditions. Due to the prospective nature of the 2023 PR and given the increased volatility in the 10-year bond rate, the Board determined it was appropriate to use the 2H average Cost of Capital as the CAGR TSR target for the 2023 PR.

If the absolute CAGR of our TSR	then	the percentage of PR that vest is
less than 9.125% is nil	nil	nil
is 9.125% is 50%	50%	50%
reaches at least 9.125%, but is less than 13.688% is progressively increased on a pro-rata, straight-line, basis from 50% to 100%	progressively increased on a pro-rata, straight-line, basis from 50% to 100%
reaches or exceeds 13.688% is 100%	100%	100%

Calculating TSR performance

When calculating performance against TSR, we:

reduce the impact of share price volatility – by using an averaging calculation over a 90-trading day period for start and end values;
ensure an independent measurement – by engaging the services of an external organisation, Mercer Consulting (Australia) Pty Ltd, to calculate ANZ’s performance against the TSR hurdles; and
test the performance against the relevant hurdle once only at the end of the four-year performance period – the rights lapse if the performance hurdle is not met – there is no retesting.

5.3 Downward adjustment – Board discretion

The Board can exercise its discretion to apply a number of downward adjustment options as part of consequence management (in accordance with applicable law and any terms and conditions provided). The Board may choose to exercise the following options or a combination of these at any time, but will always consider their use if any of the circumstances specified by Prudential Standard CPS 511 Remuneration occur. The downward adjustment options specified in #1 to #3 below are applicable to all employees, while clawback (#4) in 2022 is currently limited to select employees (primarily the CEO, Disclosed Executives and some senior employees in jurisdictions where clawback regulations apply):

In year adjustment, the most common type of downward adjustment, which reduces the amount of variable remuneration an employee may have otherwise been awarded for that year.
Further deferral/freezing delays the decision to pay/allocate variable remuneration, or further defers the vesting of deferred remuneration or freezes vested/unexercised shares and rights. This would typically only be considered where an investigation is pending/underway.
Malus is an adjustment to reduce the value of all or part of deferred remuneration before it has vested. Malus is used in cases of more serious performance or behaviour issues. Any and all variable remuneration we award or grant to an employee is subject to ANZ’s on-going and absolute discretion to apply malus and adjust variable remuneration downward (including to zero) at any time before the relevant variable remuneration vests.
Clawback is the recovery of variable remuneration that has already vested or been paid.# 6. Accountability and Consequence Framework

Throughout 2022 we continued to strengthen and evolve ANZ’s Accountability and Consequence Framework (A&CF). The Enterprise Accountability Group (EAG) is the primary governance mechanism for the operation of the A&CF.

6.1 Role of the EAG

The EAG is chaired by the CEO and members include the CRO, CFO and GE T&C. It operates under the delegated authority of the HR Committee and is responsible for:

supporting the Board in monitoring the implementation and ongoing effectiveness of ANZ’s A&CF;
reviewing the most material risk, conduct and audit events, accountability and the application of consequences, where appropriate;
providing guidance to the Divisions and considering initiatives across the Divisions to strengthen risk behaviours;
acknowledging material positive risk events (new in 2022) and recognising risk role models, whose achievements are profiled across the organisation; and
approving the release or application of downward adjustment for deferred variable remuneration (noting that for the CEO and Disclosed Executives this is approved by the Board).

6.2 Material positive risk events

In 2022, the EAG broadened its scope to include the review of material positive risk decisions and events – times when our proactive approach to identifying and mitigating risk have had a material positive outcome. Reviewing these examples provides an opportunity to acknowledge the importance of these events and share learnings across the enterprise.

6.3 Risk role models

In 2022, 59 individuals were recognised by the EAG for role modelling outstanding risk behaviours through their efforts to manage and mitigate the organisation’s risks and contribute to our strong risk culture. The recognition provided included a personalised e-mail from the CEO, and having their achievement profiled on our intranet and in internal newsletters.

6.4 Implementation of Prudential Standard CPS 511 Remuneration

As part of the implementation of APRA’s new Prudential Standard CPS 511 Remuneration, we conducted a comprehensive review of our A&CF and related processes to ensure alignment with the new Standard. Whilst it was assessed that the enterprise already complies with most of the new requirements, we have taken the opportunity to enhance our existing A&CF and processes. We introduced clawback provisions for the CEO and our Disclosed Executives effective 2022, in addition to existing adjustment tools such as in year adjustment, further deferral and malus, which continue to apply. Other enhancements included further raising employee awareness with respect to accountability and consequences through more explicit references to the A&CF (including remuneration consequences) in employee training and communications, and simplification of our performance and remuneration policy documents.

6.5 Consideration of consequences for material risk, audit and conduct events

The EAG has processes in place to ensure that we mitigate the risk of conflicts of interest in reviewing events and determining accountability and consequences. For example, when undertaking accountability reviews, a recommendation regarding the review leader and scope must be sent to the CRO or (in the case of an event involving Group Risk) the CEO, for review and approval to ensure the individual is capable of undertaking an impartial and unbiased review. Considerations regarding accountability and consequences for our most senior executives are considered and determined by the HR Committee and Board. Reports on the most material risk, audit and conduct issues were presented to the HR, Risk and Audit Committees at a concurrent meeting. This information was taken into consideration by the Board when considering the performance of the Group and the 2022 ANZIP variable remuneration pool for all employees and determining the performance and remuneration outcomes of the CEO and Disclosed Executives. The HR Committee and Board consider accountability and consequences for the CEO and Disclosed Executives, including the application of malus to previously deferred remuneration. No malus was applied to the previously deferred remuneration of the CEO and Disclosed Executives during 2022. When determining consequences, consideration is given to the level of accountability, and the severity of the issue, including customer impacts. Consequences may include, for example, one or more of the following: counselling, formal warnings, impacts to in year performance and remuneration outcomes or application of malus to previously deferred remuneration and ultimately termination of employment or clawback for the most serious issues.

6.6 Evolving the A&CF

Our ongoing focus on accountability, consequences and driving a strong risk culture supports our customer commitment that when things go wrong, we fix them quickly and hold executives, current (and former where we can), to account where appropriate. We are also focused on ensuring that we learn from the cause of the event, mitigate the risk of future recurrences and continuously seek to strengthen our risk culture. We review the effectiveness of the A&CF every year and implement enhancements to further strengthen the A&CF based on regulatory and internal stakeholder input.

6.7 Speak up culture

We continue to raise employee awareness of, and promote the various ways employees can speak up and raise issues and ideas for improvement including through initiatives such as:

Whistleblower awareness training sessions;
digital communications designed to build confidence and trust in the Whistleblower Program and process; and through monitoring responses in our employee engagement surveys.

In addition, key risk and speak-up scores, including ‘Leaders demonstrate accountability for risk’ (86%), ‘I can raise issues without fear of reprisals’ (80%) and ‘When I speak up, my ideas, opinions and concerns are heard’ (83%) remained strong and consistent with 2021 and 2020 results.

6.8 Application of consequences

In 2022, there were 1,133 employee relations cases involving alleged breaches of our Code of Conduct, with 518 resulting in a formal consequence or the employee leaving ANZ, down from 573 in 2021. Breaches ranged from compliance/ procedure breaches (23%), through to general unacceptable behaviour (36%), email/systems misuse (17%), attendance issues (14%), fraud/theft (4%), conflict of interest (2%) and breaches of our Equal Opportunity, Bullying and Harassment Policy (3%). Outcomes following investigations of breaches this year included 95 terminations, 322 warnings and 101 employees leaving ANZ.

In relation to the application of consequences to our senior leadership population (senior executives, executives and senior managers), 21 current and former employees (16 in 2021) had a consequence applied as a result of the application of our Code of Conduct Policy and/or findings of accountability for a relevant event. Consequences included warnings, impacts on performance and remuneration outcomes and, for former employees, malus of previously deferred remuneration where relevant.

All employees and contractors across the enterprise are required to complete mandatory learning modules. Permanent employees who fail to complete their mandatory learning requirements within 30 days of the due date are (in the absence of genuinely exceptional circumstances) ineligible for any FR or variable remuneration as part of our annual Performance and Remuneration Review. In 2022, the mandatory learning course compliance rate across the enterprise was 99.9%.

Results reported are taken from the Q2 and/or Q4 employee engagement surveys.
Employees are listed in all categories which are relevant, meaning one employee may be listed in multiple categories.

7. Non-Executive Director (NED) remuneration

7.1 Remuneration structure

NEDs receive a fee for being a Director of the Board, and additional fees for either chairing, or being a member of a Board Committee. The Chairman of the Board does not receive additional fees for serving on a Board Committee. The HR Committee and Board reviewed NED fees for 2022 and determined that the NED member fee and Committee fees for the Audit Committee chair and members would remain unchanged (noting that the Chairman, NED and Committee fees have remained unchanged since 2016 with the exception of the Digital Business & Technology Committee Chair fee which has remained unchanged since 2020). From 1 April 2022 fees increased for the Chairman, and for the chairs and members of the Risk Committee, HR Committee, Digital Business & Technology Committee, and Ethics, Environment, Social & Governance Committee. In setting Board and Committee fees, the Board considers: general industry practice, ASX Corporate Governance Principles and Recommendations, the responsibilities and risks attached to the NED role, the time commitment expected of NEDs on Group and Company matters, and fees paid to NEDs of comparable companies. ANZ compares NED fees to a comparator group of Australian listed companies with a similar market capitalisation, with particular focus on the major financial services institutions.This is considered an appropriate group, given similarity in size and complexity, nature of work and time commitment by NEDs. To maintain NED independence and impartiality: •NED fees are not linked to the performance of the Group; and •NEDs are not eligible to participate in any of the Group’s variable remuneration arrangements. The current aggregate fee pool for NEDs of $4m was approved by shareholders at the 2012 AGM. The annual total of NEDs’ fees, including superannuation contributions, is within this agreed limit. This table shows the NED fee policy structure for 2022.

2022 NED fee policy structure

	1H22		2H22
	Chair fee	Member fee	Chair fee	Member fee
Board	$825,000	$240,000	$850,000	$240,000
Audit Committee	$65,000	$32,500	$65,000	$32,500
Risk Committee	$62,000	$31,000	$65,000	$32,500
HR Committee	$57,000	$29,000	$65,000	$32,500
Digital Business & Technology Committee	$45,000	$15,000	$55,000	$27,500
Ethics, Environment, Social & Governance Committee	$35,000	$15,000	$55,000	$27,500

Including superannuation.
The Chairman of the Board does not receive additional fees for serving on a Board Committee. The Chairman of the Board and NEDs do not receive a fee for serving on the Nomination and Board Operations Committee.

NED shareholding guidelines

The HR Committee reviewed the shareholding guideline for the Chairman and determined that from 1 October 2021 it be increased from 200% of the NED member fee to 100% of the Chairman fee (i.e., from $480,000 to $850,000). We expect our NEDs to hold ANZ shares. NEDs are required:
•to accumulate shares – over a five-year period from their appointment to the value of:
– 100% of the NED member fee for Directors;
– 100% of the Chairman fee for the Chairman; and
•to maintain this shareholding while they are a Director of ANZ.

Based on the ANZ share price as at 30 September 2022, all NEDs but one who have served five years met the holding guideline. The value of the ANZ securities held by one NED who has served for more than 5 years as at 30 September dropped slightly below the guideline due to fluctuations in the ANZ share price.

ANZ 2022 Annual Report 92

7.2 2022 statutory remuneration – NEDS

The following table outlines the statutory remuneration of NEDs disclosed in accordance with Australian Accounting Standards. In addition to the fee shown below, Sir John Key received NZD 422,050 in 2022 and NZD 391,000 in 2021 for his role as Chairman of ANZ Bank New Zealand Limited.

2022 statutory remuneration – NEDS

	Financial year	Fees	$	Non-monetary benefits	$
Current Non-Executive Directors
P O’Sullivan	2022	813,501	6,128	23,999	843,628
	2021	764,033	19,931	22,163	806,127
I Atlas	2022	330,751	–	23,999	354,750
	2021	322,337	–	22,163	344,500
J Halton	2022	318,001	–	23,999	342,000
	2021	306,837	–	22,163	329,000
J Key	2022	290,251	–	23,999	314,250
	2021	278,837	–	22,163	301,000
G Liebelt	2022	360,427	–	6,323	366,750
	2021	341,337	–	22,163	363,500
J Macfarlane	2022	301,501	–	23,999	325,500
	2021	296,337	–	22,163	318,500
C O’Reilly	2022	302,863	–	22,579	325,442
J Smith	2022	36,003	–	3,780	39,783
Former Non-Executive Directors
P Dwyer	2022	76,372	4,944	–	81,316
	2021	365,000	–	–	365,000
Total of all Non-Executive Directors	2022	2,829,670	11,072	152,677	2,993,419
	2021	2,674,718	19,931	132,978	2,827,627

Year-on-year differences in fees relate to changes to the NED fee and also to the superannuation Maximum Contribution Base. From 1 October 2021 to 30 June 2022, G Liebelt, and from 1 October 2020 to the date of retirement P Dwyer, elected to receive all payments in fees and therefore did not receive superannuation contributions during this period.
Non-monetary benefits generally consist of company-funded benefits (and the associated Fringe Benefits Tax) such as car parking and gifts provided upon retirement.
Long-term benefits and share-based payments do not apply for the NEDs.
C O’Reilly’s 2022 remuneration reflects a partial service year as she commenced as a NED on 1 November 2021.
J Smith’s 2022 remuneration reflects a partial service year as he commenced as a NED on 1 August 2022.
P Dwyer's 2022 remuneration reflects a partial service year as she retired as a NED on 16 December 2021.

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

8.1 The Human Resources (HR) Committee

8.1.1 ROLE OF THE HR COMMITTEE

The HR Committee supports the Board on remuneration and other HR matters. It reviews the remuneration policies and practices of the Group, and monitors market practice and regulatory and compliance requirements in Australia and overseas. During the year the HR Committee met on seven occasions and reviewed and approved, or made recommendations to the Board on matters including:
•remuneration for the CEO and other key executives (broader than those disclosed in the Remuneration Report) covered by the ANZBGL Remuneration Policy, and fees for the NEDs;
•matters related to the implementation of APRA’s Prudential Standard CPS 511 Remuneration, and updates on the BEAR, and Treasury’s Financial Accountability Regime (FAR);
•changes to the executive remuneration structure in light of CPS 511 Remuneration;
•the ANZ Group Performance Framework (annual objectives setting and assessment) and annual variable remuneration spend;
•performance and reward outcomes for key senior executives, including the consideration of material events that have either occurred or came to light in the year;
•the release, further deferral or application of malus of deferred remuneration;
•key senior executive appointments and terminations;
•the effectiveness of the ANZBGL Remuneration Policy and the Accountability & Consequence Framework;
•ANZ’s response to the industry-wide Retail Remuneration Review by Stephen Sedgwick AO;
•building capabilities required to deliver on our strategy;
•succession plans for key senior executives; and
•culture, diversity and inclusion, employee engagement, and how we work in a post COVID environment.

Whilst we completed our implementation of the recommendations from Stephen Sedgwick AO’s Retail Remuneration Review in 2021 (noting the industry wide recommendations were ongoing at the time), we continue to review our processes to ensure ongoing adherence to the Sedgwick recommendations, with updates provided to the HR Committee. This review was focused on strengthening the alignment of retail bank incentives, sales practices and good customer outcomes. More details about the role of the HR Committee, including its Charter, can be found on our website. Go to anz.com > Our company > Strong governance framework > ANZ Human Resources Committee Charter.

8.1.2 LINK BETWEEN REMUNERATION AND RISK

The HR Committee has a strong focus on the relationship between business performance, risk management and remuneration, aligned with our business strategy. The chairs of the Risk and Audit Committees are members of the HR Committee and the full Board is in attendance for specific HR Committee meetings. A concurrent meeting of the HR, Risk and Audit Committees was held to review:
•material risk, conduct and audit events that either occurred or came to light in 2022;
•2022 performance and variable remuneration recommendations at both the Group, CEO and Disclosed Executive level.

To further reflect the importance of the link between remuneration and risk:
•the Board had two NEDs (in addition to the Chairman) in 2022 who served on both the HR Committee and the Risk Committee;
•the HR Committee has free and unfettered access to risk and financial control personnel (the CRO and CFO attend HR Committee meetings for specific agenda items);
•the CRO (together with GE T&C and GGM IA) provides an independent report to the HR Committee on the most material risk, conduct and audit events (as relevant) to help inform considerations of performance and remuneration, and accountability and consequences at the Group, Divisional and individual level;
•the CRO also provides an independent report to assist the Board in their assessment of performance and remuneration outcomes for the CEO and Disclosed Executives;
•the chairs of the Risk and Audit Committees are asked to provide input to ensure appropriate consideration of all relevant risk and internal audit issues;
•the ANZ Group Performance Framework and Divisional Performance Frameworks include Risk as a key element acting as a modifier, and it forms an integral part of each framework’s assessment and directly impacts the overall outcomes; and
•the LTVR RR pre grant and pre vest assessments undertaken by the Board are primarily based on non-financial risk outcomes.

8.1.3 CONFLICT OF INTEREST

To help mitigate potential conflicts of interest:
•management are not in attendance when their own performance or remuneration is being discussed by the HR Committee or Board;
•the CEO’s STVR is funded and determined separately from the ANZIP variable remuneration pool;
•the CRO’s remuneration arrangements differ to other Disclosed Executives to preserve the independence of the role;
•the EAG also has processes in place to help mitigate conflicts of interest as outlined in section 6; and
•the HR Committee seeks input from a number of sources to inform their consideration of performance and remuneration outcomes for the CEO and Disclosed Executives including:
– independent reports from Risk, Finance, Talent and Culture, and Internal Audit;
– material risk, conduct and audit event data provided by the CRO;
– input from both the Audit Committee and the Risk Committee of the Board.

Subsets of the HR Committee also met on a number of occasions during the year to discuss regulatory developments, the executive remuneration structure and 2022 outcomes.# Remuneration governance

8.1.4 EXTERNAL ADVISORS PROVIDED INFORMATION BUT NOT RECOMMENDATIONS

The HR Committee can engage independent external advisors as needed. Throughout the year, the HR Committee and management received information from the following external providers: Aon, Ashurst, EY, Mercer Consulting (Australia) Pty Ltd and PricewaterhouseCoopers. This information related to market data, market practices, analysis and modelling, legislative requirements and the interpretation of governance and regulatory requirements. During the year, ANZ did not receive any remuneration recommendations from external consultants about the remuneration of KMP. ANZ employs in-house remuneration professionals who provide recommendations to the HR Committee and the Board. The Board made its decisions independently, using the information provided and with careful regard to ANZ’s strategic objectives, purpose and values, risk appetite and the ANZBGL Remuneration Policy and Principles.

8.2 Internal governance

8.2.1 HEDGING PROHIBITION

All deferred equity must remain at risk until it has fully vested. Accordingly, executives and their associated persons must not enter into any schemes that specifically protect the unvested value of equity allocated. If they do so, then they would forfeit the relevant equity.

8.2.2 CEO AND DISCLOSED EXECUTIVES’ SHAREHOLDING GUIDELINES

We expect the CEO and each Disclosed Executive to, over a five-year period:
* accumulate ANZ shares to the value of 200% of their FR; and
* maintain this shareholding level while they are an executive of ANZ.

Executives are permitted to sell ANZ securities to meet taxation obligations on employee equity even if below the 200% guideline. However, tax obligations for the purpose of these guidelines is limited to that arising from the initial taxing point event (i.e., when the deferred shares vest or rights are exercised). Shareholdings include all vested and unvested equity (excluding PR). Based on equity holdings as at 30 September 2022, and the STVR deferred shares to be granted on 22 November 2022 as a result of the 2022 Performance and Remuneration Review outcomes, the CEO and all Disclosed Executives meet or, if less than five years’ tenure, are on track to meet their minimum shareholding guidelines requirements.

3 months by the former acting CFO.
For M Carnegie, K Corbally, F Faruqui, G Florian, K van der Merwe, M Whelan and M Hand, their contracts state that in particular circumstances they may be eligible for a retrenchment benefit in accordance with the relevant ANZ policy, as varied from time to time, and M Hand was also eligible to receive a Retirement Allowance on retirement, retrenchment, death, or resignation for illness, incapacity or domestic reasons (see footnote 5 of section 9.1). For A Watson, notice on retrenchment is 6 weeks and compensation on retrenchment is calculated on a scale up to a maximum of 79 weeks after 25 years’ service.
6 months by ANZ for the former acting CFO.
This approach is more aligned to industry practice.
Or deferred share rights granted to the CRO instead of PR.

8.2.3 CEO AND DISCLOSED EXECUTIVES’ CONTRACT TERMS AND EQUITY TREATMENT

The details of the contract terms and also the equity treatment on termination (in accordance with the Conditions of Grant) relating to the CEO and Disclosed Executives are below. Although they are similar, they vary in some cases to suit different circumstances.


Type of contract	Permanent ongoing employment contract.
Notice on resignation	• 12 months by CEO; • 6 months by Disclosed Executives.
Notice on termination by ANZ	• 12 months by ANZ for CEO and Disclosed Executives. However, ANZ may immediately terminate an individual’s employment at any time in the case of serious misconduct. In that case, the individual will be entitled only to payment of FR up to the date of their termination and their statutory entitlements.
How unvested equity is treated on leaving ANZ	Executives who resign or are terminated will forfeit all their unvested deferred equity – unless the Board determines otherwise. If an executive is terminated due to redundancy or they are classified as a ‘good leaver’, unless the Board determines otherwise, then: • their STVR (deferred shares/share rights) remain on foot and are released at the original vesting date; • their LTVR (RR/PR) (for grants awarded from 31 December 2020) remain on foot and are released at the original vesting date (to the extent that the performance hurdles are met); and • their PR (for grants awarded pre 31 December 2020) are prorated for service to the full notice termination date and released at the original vesting date (to the extent that the performance hurdles are met). On an executive’s death or total and permanent disablement, their deferred equity vests. Unvested equity remains subject to malus post termination.
Change of control (applies to the CEO only)	If a change of control or other similar event occurs, then we will test the performance conditions applying to the CEO’s PR. They will vest to the extent that the performance conditions are satisfied. A transitional agreement between ANZBGL and the CEO has been implemented that documents that if the proposed change in legal structure proceeds (to create distinct banking and non-banking groups, see ‘Note 35 Pending Organisational Changes Impacting Future Reporting Periods’ of the Annual Report), then it will not give rise to a ‘Change of Control’ under the conditions of grant relating to unvested variable remuneration equity awards.

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

9. Other information

9.1 2022 statutory remuneration – CEO and Disclosed Executives

The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the FR awarded (cash and superannuation contributions) and also the cash component of the 2022 variable remuneration award, it does not show the actual variable remuneration awarded or received in 2022 (see sections 4.2 and 4.1), but instead shows the amortised accounting value for this financial year of deferred remuneration (including prior year awards).

2022 statutory remuneration – CEO and Disclosed Executives

	Short–term employee benefits	Post–employment
Financial year	Cash salary $	Non monetary benefits $
CEO and Current Disclosed Executives
S Elliott
2022	2,476,001	15,384
2021	2,478,132	15,025
M Carnegie
2022	1,176,001	31,041
2021	1,178,047	22,621
K Corbally
2022	1,176,001	9,884
2021	1,078,030	9,525
F Faruqui
2022	1,159,194	174,222
G Florian
2022	1,072,169	18,569
2021	1,062,530	21,431
K van der Merwe
2022	976,001	16,034
2021	885,012	15,620
A Watson
2022	1,019,021	22,049
2021	1,040,213	9,786
M Whelan
2022	1,376,001	9,884
2021	1,254,082	12,275
Former Disclosed Executives
S Buggle
2022	28,785	–
2021	689,935	–
M Hand
2022	480,216	4,053
2021	1,178,047	9,525

Cash salary includes any adjustments required to reflect the use of ANZ's Lifestyle Leave Policy for the period in the KMP role.
Non monetary benefits generally consist of company-funded benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to relocation.
The total cash incentive relates to the cash component only. The relevant amortisation of the STVR deferred components is included in share-based payments and has been amortised over the vesting period. The total STVR was approved by the ANZBGL Board on 19 October 2022, and in addition for A Watson by the ANZ NZ Board on 18 October 2022. 100% of the cash component of the VR/STVR awarded for the 2021 and 2022 years vested to the executive in the applicable financial year.
For Australian based executives, the 2021 and 2022 superannuation contributions reflect the Superannuation Guarantee Contribution based on the Maximum Contribution Base. F Faruqui's 2022 amount reflects a part year superannuation contribution. A Watson participates in KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay. KiwiSaver employer superannuation contributions are also contributed on top of cash STVR at the time of payment.
Accrual relates to Retirement Allowance. As a result of being employed with ANZ before November 1992, M Hand was eligible to receive a Retirement Allowance on retirement, retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as three months of preserved notional salary (which is 65% of fixed remuneration) plus an additional 3% of notional salary for each year of full-time service above 10 years less the total accrual value of long service leave (including taken and untaken).
For Australian based executives, long service leave accrued takes into consideration the impact of changes to the Superannuation Guarantee percentage. Long service leave accrued during the year increased year-on-year for K Corbally as a result of his 2022 fixed remuneration increase, and decreased year-on-year for G Florian, K van der Merwe and M Whelan as a result of their 2021 fixed remuneration increases.# ANZ 2022 Annual Report 96

Long–term employee benefits

Total amortisation value of Variable remuneration	Other equity allocations	Long service leave accrued during the year	$	Deferred shares $	Deferred share rights $	Performance rights $	Deferred shares $	Termination benefits $	Total remuneration $
33,306	933,786	–	1,076,657	–	–	5,489,133	37,880	880,970	–
1,039,524	–	–	5,473,399	17,151	522,450	–	129,603	–	–
2,360,745	18,182	534,990	–	267,586	–	–	2,613,129	34,577	513,883
238,579	–	–	2,439,423	16,667	472,538	357,462	1,984	–	–
2,571,976	17,524	465,805	178,143	302,636	–	–	2,881,905	15,812	512,134
–	171,181	–	–	2,256,364	18,058	478,255	–	312,520	–
2,591,264	14,409	472,124	–	177,072	–	–	2,080,139	22,929	457,267
–	298,076	–	–	2,295,392	4,068	505,698	2,132	119,057	312
2,165,765	4,130	439,710	22,321	200,921	564	–	2,460,943	17,779	666,495
–	181,892	–	–	2,811,050	69,359	730,123	–	355,857	–
3,253,764	412	2,600	3,157	71	–	–	39,240	52,757	112,974
159,613	71,423	–	–	1,562,767	5,151	127,875	–	64,765	–
698,287	18,182	451,897	–	266,258	–	–	2,495,580

As required by AASB 2 Share-based payments, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet fully vested as at the commencement of the financial year. The fair value is determined at grant date and is allocated on a straight-line basis over the relevant vesting period. The amount included as remuneration neither relates to, nor indicates, the benefit (if any) that the executive may ultimately realise if the equity becomes exercisable. No terms of share-based payments have been altered or modified during the financial year. There were no cash settled share-based payments or any other form of share-based payment compensation during the financial year for the CEO or Disclosed Executives.
Other equity allocations relate to shares received in relation to the historical Employee Share Offer.
F Farhan's 2022 remuneration reflects a partial service year as he commenced in a Disclosed Executive role on 11 October 2021.
A Watson's fixed remuneration is paid in NZD and converted to AUD. 2021 cash salary, superannuation contribution and total remuneration restated to include gross value of KiwiSaver employer superannuation contributions relating to fixed remuneration and cash VR, and this represents a total change of AUD 17,622. In 2019 and 2020 A Watson was eligible to receive shares under the historical Employee Share Offer. That offer provided a grant of ANZ shares in each financial year to eligible employees subject to Board approval.
S Buggle's 2022 remuneration reflects a partial service year up to the date he ceased in a Disclosed Executive role on 10 October 2021 (noting his annual fixed remuneration for 2022 remained unchanged at $1.1m).
M Hand's 2022 remuneration reflects a partial service year up to the date he ceased in a Disclosed Executive role on 28 February 2022 (noting his annual fixed remuneration for 2022 remained unchanged at $1.2m).

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 97

9.2 Equity holdings

For the equity granted to the CEO and Disclosed Executives in November/December 2021, all deferred shares were purchased on the market. For deferred share rights and PR, which vested to the CEO and Disclosed Executives in November/December 2021, where the rights were not able to be satisfied through the reallocation of previously forfeited shares they were satisfied through the on market purchase of shares.

9.2.1 CEO AND DISCLOSED EXECUTIVES’ EQUITY GRANTED, VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED

The table below sets out details of deferred shares and rights that we granted to the CEO and Disclosed Executives:
• during the 2022 year, relating to 2021 Performance and Remuneration Review outcomes; or
• in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2022 year.

Equity granted, vested, exercised/sold and lapsed/forfeited – CEO and Disclosed Executives

Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercis- able as at 30 Sep 2022	Unexer- cisable as at 30 Sep 2022
	Number	%	Value $	Number	%	Value $	Number	%	Value $
CEO and Current Disclosed Executives
S Elliott
Deferred shares	8,529		22-Nov-17	22-Nov-21	–	8,529	100	229,122	–	–
Deferred shares	8,622		22-Nov-18	22-Nov-21	–	8,622	100	231,621	–	–
Deferred shares	9,003		22-Nov-19	22-Nov-21	–	9,003	100	241,856	–	–
Deferred shares	10,843		07-Dec-20	22-Nov-21	–	10,843	100	291,285	–	–
Deferred shares	14,441	26.86	22-Nov-21	22-Nov-22	–	–	–	–	–	–
Deferred shares	10,830	26.86	22-Nov-21	22-Nov-23	–	–	–	–	–	–
Deferred shares	7,220	26.86	22-Nov-21	22-Nov-24	–	–	–	–	–	–
Deferred shares	3,610	26.86	22-Nov-21	22-Nov-25	–	–	–	–	–	–
Performance rights	107,471		19-Dec-17	19-Dec-20	19-Dec-22	–	–	–	(62,010)	58
Performance rights	82,774		19-Dec-18	19-Dec-21	26-Dec-21	56,989	69	1,576,185	(25,785)	31
Performance rights	27,591		19-Dec-18	19-Dec-21	26-Dec-21	–	–	–	(27,591)	100
Performance rights	94,765	11.91	16-Dec-21	16-Dec-25	16-Dec-27	–	–	–	–	–
Performance rights	31,588	6.30	16-Dec-21	16-Dec-25	16-Dec-27	–	–	–	–	–
M Carnegie
Deferred shares	4,785		22-Nov-17	22-Nov-21	–	4,785	100	128,544	–	–
Deferred shares	5,202		22-Nov-18	22-Nov-21	–	5,202	100	139,746	–	–
Deferred shares	5,942		22-Nov-19	22-Nov-21	–	5,942	100	159,625	–	–
Deferred shares	7,099		07-Dec-20	22-Nov-21	–	7,099	100	190,707	–	–
Deferred shares	8,220	26.86	22-Nov-21	22-Nov-22	–	–	–	–	–	–
Deferred shares	6,165	26.86	22-Nov-21	22-Nov-23	–	–	–	–	–	–
Deferred shares	4,110	26.86	22-Nov-21	22-Nov-24	–	–	–	–	–	–
Deferred shares	2,055	26.86	22-Nov-21	22-Nov-25	–	–	–	–	–	–
Performance rights	29,580		22-Nov-17	22-Nov-20	22-Nov-22	–	–	–	(17,067)	58
Performance rights	32,163		22-Nov-18	22-Nov-21	22-Nov-23	22,144	69	594,874	(10,019)	31
Performance rights	10,721		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(10,721)	100
Performance rights	31,759	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–
Performance rights	10,586	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–
K Corbally
Deferred shares	3,007		22-Nov-18	22-Nov-21	–	3,007	100	80,780	–	–
Deferred shares	5,744		22-Nov-19	22-Nov-21	–	5,744	100	154,306	–	–
Deferred shares	5,582		07-Dec-20	22-Nov-21	–	5,582	100	149,954	–	–
Deferred shares	6,649	26.86	22-Nov-21	22-Nov-22	–	–	–	–	–	–
Deferred shares	6,647	26.86	22-Nov-21	22-Nov-23	–	–	–	–	–	–
Deferred shares	4,431	26.86	22-Nov-21	22-Nov-24	–	–	–	–	–	–
Deferred shares	4,431	26.86	22-Nov-21	22-Nov-25	–	–	–	–	–	–
Deferred share rights	14,546		22-Nov-18	22-Nov-21	29-Nov-21	14,546	100	390,762	–	–
Deferred share rights	22,830	21.60	22-Nov-21	22-Nov-25	29-Nov-25	–	–	–	–	–

ANZ 2022 Annual Report 98

Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercis- able as at 30 Sep 2022	Unexer- cisable as at 30 Sep 2022
	Number	%	Value $	Number	%	Value $	Number	%	Value $
CEO and Current Disclosed Executives
F Faruqui
Deferred shares	10,486	26.86	22-Nov-21	22-Nov-22	–	–	–	–	–	–
Deferred shares	7,862	26.86	22-Nov-21	22-Nov-23	–	–	–	–	–	–
Deferred shares	5,241	26.86	22-Nov-21	22-Nov-24	–	–	–	–	–	–
Deferred shares	2,620	26.86	22-Nov-21	22-Nov-25	–	–	–	–	–	–
Deferred share rights	10,138		22-Nov-17	22-Nov-21	29-Nov-21	10,138	100	272,346	–	–
Deferred share rights	8,013		22-Nov-18	22-Nov-21	29-Nov-21	8,013	100	215,260	–	–
Deferred share rights	11,363		22-Nov-19	22-Nov-21	29-Nov-21	11,363	100	305,254	–	–
Deferred share rights	6,459		07-Dec-20	22-Nov-21	29-Nov-21	6,459	100	173,514	–	–
Performance rights	28,845		22-Nov-17	22-Nov-20	22-Nov-22	–	–	–	(28,845)	100
Performance rights	42,215		22-Nov-18	22-Nov-21	22-Nov-23	29,065	69	780,799	(13,150)	31
Performance rights	14,071		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(14,071)	100
Performance rights	40,505	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–
Performance rights	13,501	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–
G Florian
Deferred shares	2,462		22-Nov-17	22-Nov-20	–	–	–	–	(2,462)	100
Deferred shares	2,462		22-Nov-17	22-Nov-21	–	2,462	100	66,139	–	–
Deferred shares	3,251		22-Nov-18	22-Nov-20	–	–	–	–	(3,251)	100
Deferred shares	3,251		22-Nov-18	22-Nov-21	–	3,251	100	87,335	–	–
Deferred shares	3,367		22-Nov-19	22-Nov-21	–	3,367	100	90,451	–	–
Deferred shares	6,442		07-Dec-20	22-Nov-21	–	6,442	100	173,057	–	–
Deferred shares	9,770	26.86	22-Nov-21	22-Nov-22	–	–	–	–	–	–
Deferred shares	7,326	26.86	22-Nov-21	22-Nov-23	–	–	–	–	–	–
Deferred shares	4,884	26.86	22-Nov-21	22-Nov-24	–	–	–	–	–	–
Deferred shares	2,442	26.86	22-Nov-21	22-Nov-25	–	–	–	–	–	–

The following tables set out the details of equity awards granted to, and held by, NED, CEO and Disclosed Executives.

Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercisable as at 30 Sep 2022	Unexercisable as at 30 Sep 2022	Name
Performance rights	2,442		22-Nov-17	22-Nov-20	22-Nov-22	–	–	–	–	(8,784)	58
Performance rights	20,102		22-Nov-18	22-Nov-21	22-Nov-23	13,840	69	371,796	(6,262)	31	(168,222)
Performance rights	6,700		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(6,700)	100	(179,988)
Performance rights	37,743	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Performance rights	12,581	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Deferred shares	679		22-Nov-17	22-Nov-18		–	–	–	–	–	(679)
Deferred shares	1,477		22-Nov-17	22-Nov-19		–	–	–	–	–	(1,477)
Deferred shares	1,477		22-Nov-17	22-Nov-20		–	–	–	–	–	(1,477)
Deferred shares	1,477		22-Nov-17	22-Nov-21		1,477	100	39,678	–	–	(1,477)
Deferred shares	3,577		22-Nov-18	22-Nov-19		–	–	–	–	–	(3,053)
Deferred shares	3,577		22-Nov-18	22-Nov-21		3,577	100	96,092	–	–	–
Deferred shares	4,951		22-Nov-19	22-Nov-21		4,951	100	133,003	–	–	–
Deferred shares	5,724		07-Dec-20	22-Nov-21		5,724	100	153,769	–	–	–
Deferred shares	8,579	26.86	22-Nov-21	22-Nov-22		–	–	–	–	–	–
Deferred shares	6,433	26.86	22-Nov-21	22-Nov-23		–	–	–	–	–	–
Deferred shares	4,288	26.86	22-Nov-21	22-Nov-24		–	–	–	–	–	–
Deferred shares	2,144	26.86	22-Nov-21	22-Nov-25		–	–	–	–	–	–
Performance rights	9,135		22-Nov-17	22-Nov-20	22-Nov-22	–	–	–	–	–	(5,270)
Performance rights	22,112		22-Nov-18	22-Nov-21	22-Nov-23	15,224	69	408,976	(6,888)	31	(185,039)
Performance rights	7,370		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(7,370)	100	(197,987)
Performance rights	33,140	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Performance rights	11,046	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercisable as at 30 Sep 2022	Unexercisable as at 30 Sep 2022	Name
---	---	---	---	---	---	---	---	---	---	---	---
Deferred shares	3,904		22-Nov-19	22-Nov-20		–	–	–	–	–	(3,904)
Deferred shares	3,901		22-Nov-19	22-Nov-21		3,901	100	104,796	–	–	(3,901)
Deferred shares	5,806		07-Dec-20	22-Nov-21		5,806	100	155,972	–	–	(5,806)
Deferred shares	9,924	26.86	22-Nov-21	22-Nov-22		–	–	–	–	–	–
Deferred shares	7,442	26.86	22-Nov-21	22-Nov-23		–	–	–	–	–	–
Deferred shares	4,961	26.86	22-Nov-21	22-Nov-24		–	–	–	–	–	–
Deferred shares	2,480	26.86	22-Nov-21	22-Nov-25		–	–	–	–	–	–
Employee Share Offer	29		03-Dec-18	03-Dec-21		29	100	781	–	–	–
Deferred share rights	2,817		22-Nov-18	22-Nov-21	22-Nov-23	2,817	100	75,676	–	–	(2,817)
Performance rights	4,802		22-Nov-18	22-Nov-21	22-Nov-23	3,306	69	88,812	(1,496)	31	(40,188)
Performance rights	38,338	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Performance rights	12,779	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercisable as at 30 Sep 2022	Unexercisable as at 30 Sep 2022	Name
---	---	---	---	---	---	---	---	---	---	---	---
Deferred shares	9,218		22-Nov-17	22-Nov-21		9,218	100	247,631	–	–	(9,218)
Deferred shares	7,072		22-Nov-18	22-Nov-21		7,072	100	189,982	–	–	(7,072)
Deferred shares	10,498		22-Nov-19	22-Nov-21		10,498	100	282,017	–	–	(10,498)
Deferred shares	6,297		07-Dec-20	22-Nov-21		6,297	100	169,162	–	–	(6,297)
Deferred shares	11,700	26.86	22-Nov-21	22-Nov-22		–	–	–	–	–	–
Deferred shares	8,774	26.86	22-Nov-21	22-Nov-23		–	–	–	–	–	–
Deferred shares	5,849	26.86	22-Nov-21	22-Nov-24		–	–	–	–	–	–
Deferred shares	2,924	26.86	22-Nov-21	22-Nov-25		–	–	–	–	–	–
Performance rights	43,722		22-Nov-18	22-Nov-21	22-Nov-23	30,102	69	808,657	(13,620)	31	(365,886)
Performance rights	14,574		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(14,574)	100	(391,514)
Performance rights	45,200	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Performance rights	15,066	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Type of equity	Number granted	Equity fair value at grant (for 2022 grants only) $	Grant date	First date exercisable	Date of expiry	Vested	Lapsed/ Forfeited	Exercised/Sold	Vested and exercisable as at 30 Sep 2022	Unexercisable as at 30 Sep 2022	Name
---	---	---	---	---	---	---	---	---	---	---	---
Deferred shares	3,251		22-Nov-18	22-Nov-21		3,251	100	87,335	–	–	(2,160)
Deferred shares	3,565		22-Nov-19	22-Nov-21		3,565	100	95,770	–	–	–
Deferred shares	8,015		07-Dec-20	22-Nov-21		8,015	100	215,314	–	–	–
Deferred shares	7,864	26.86	22-Nov-21	22-Nov-22		–	–	–	–	–	–
Deferred shares	5,897	26.86	22-Nov-21	22-Nov-23		–	–	–	–	–	–
Deferred shares	3,931	26.86	22-Nov-21	22-Nov-24		–	–	–	–	–	–
Deferred shares	1,965	26.86	22-Nov-21	22-Nov-25		–	–	–	–	–	–
Performance rights	20,102		22-Nov-18	22-Nov-21	22-Nov-23	13,840	69	371,796	(6,262)	31	(168,222)
Performance rights	6,700		22-Nov-18	22-Nov-21	22-Nov-23	–	–	–	(6,700)	100	(179,988)
Performance rights	30,379	11.66	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–
Performance rights	10,126	6.37	22-Nov-21	22-Nov-25	22-Nov-27	–	–	–	–	–	–

For the purpose of the five highest paid executive disclosures, Executives are defined as Disclosed Executives or other members of the ExCo. For the 2022 financial year the five highest paid executives include five Disclosed Executives. Rights granted to Disclosed Executives as remuneration in 2022 are included in the table. No rights have been granted to the CEO, Disclosed Executives or the five highest paid executives since the end of 2022 up to the Directors’ Report sign-off date.
The point in time value of deferred shares/deferred share rights and/or performance rights is based on the one day VWAP of the Company’s shares traded on the ASX on the date of vesting, lapsing/forfeiture or exercising/sale/transfer out of trust, multiplied by the number of deferred shares/deferred share rights and/or performance rights. The exercise price for all deferred share rights/performance rights is $0.00. No terms or conditions of grant of the share-based payment transactions have been altered or modified during the reporting period.
The number vested and exercisable is the number of shares, options and rights that remain vested at the end of the reporting period. No shares, options and rights were vested and unexercisable.
Performance rights granted in prior years (by grant date) that remained unexerciseable at 30 September 2022 or date ceased in a Disclosed Executive role include:

	Nov-18	Nov-19	Nov-20	Nov-21
S Elliott	-	168,066	159,308	126,353
M Carnegie	-	40,816	38,378	42,345
K Corbally	----
F Faruqui	-	69,118	34,045	54,006
G Florian	-	23,128	34,820	50,324
K van der Merwe	-	34,013	30,950	44,186
A Watson	-	-	31,389	51,117
M Whelan	-	72,108	34,045	60,266
S Buggle	6,464	-	-	-
M Hand	-	24,489	43,330	40,505

Performance rights granted to S Elliott in 2022 were approved by shareholders at the 2021 AGM in accordance with ASX Listing Rule 10.14.

The vested value for S Elliott’s performance rights includes the value of 51.6% of performance rights we awarded in December 2018 which vested in December 2021 due to performance hurdles being met and were settled by delivery of shares, which remain subject to a further one-year restriction period.
Equity transactions disclosed from date commenced as a Disclosed Executive.
Equity transactions disclosed up to date ceased in a Disclosed Executive role. There were no disclosable transactions up to the date S Buggle concluded as a Disclosed Executive.

9.2.2 NED, CEO AND DISCLOSED EXECUTIVES’ EQUITY HOLDINGS

The table below sets out details of equity held directly, indirectly or beneficially by each NED, the CEO and each Disclosed Executive, including their related parties.

Name	Type of equity	Opening balance at 1 Oct 2021	Granted during the year as remuneration	Received during the year on exercise of options or rights	Resulting from any other changes during the year	Closing balance at 30 Sep 2022 
Current Non–Executive Directors
P O’Sullivan	Ordinary shares	4,078	–	–	272	4,350
	Capital notes 2	9,250	–	–	(9,250)	–
	Capital notes 7	–	–	–	9,250	9,250
I Atlas	Ordinary shares	14,360	–	–	958	15,318
J Halton	Ordinary shares	9,049	–	–	604	9,653
J Key	Ordinary shares	3,000	–	–	7,500	10,500
G Liebelt	Ordinary shares	20,315	–	–	1,356	21,671
	Capital notes 2	2,500	–	–	(2,500)	–
	Capital notes 6	2,500	–	–	–	2,500
	Capital notes 7	–	–	–	2,500	2,500
J Macfarlane	Ordinary shares	17,851	–	–	1,191	19,042
	Capital notes 2	2,000	–	–	(2,000)	–
	Capital notes 3	5,000	–	–	–	5,000
	Capital notes 6	2,140	–	–	–	2,140
	Capital notes 7	–	–	–	2,000	2,000
C O’Reilly	Ordinary shares	6,000	–	–	400	6,400
J Smith	Ordinary shares	2,605	–	–	174	2,779
Former Non–Executive Directors
P Dwyer	Ordinary shares	17,500	–	–	–	17,500
CEO and Current Disclosed Executives
S Elliott	Deferred shares	70,882	36,101	–	(36,997)	69,986
	Ordinary shares	290,675	–	62,010	42,423	395,108
	Vested shares 1yr restriction	–	–	56,989	–	56,989
	Performance rights	499,749	126,353	(118,999)	(53,376)	453,727
M Carnegie	Deferred shares	92,284	20,550	–	–	112,834
	Ordinary shares	8,670	–	39,211	(13,783)	34,098
	Performance rights	139,145	42,345	(39,211)	(20,740)	121,539
K Corbally	Deferred shares	38,019	22,158	–	(14,333)	45,844
	Ordinary shares	1,431	–	14,546	(14,596)	1,381
	Capital notes 6	1,400	–	–	–	1,400

9.3.1 OVERVIEW

When we lend to NEDs, the CEO or Disclosed Executives, we do so in the ordinary course of business and on normal commercial terms and conditions that are no more favourable than those given to other employees or customers – this includes the term of the loan, the security required and the interest rate. Details of the terms and conditions of lending products can be found on anz.com. No amounts have been written off during the period, or individual assessed allowance for expected credit losses raised in respect of these balances. Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2022 (including those with balances less than $100,000) was $24,339,919 (2021: $25,444,692) with interest paid of $790,118 (2021: $776,791) during the period.

9.3.2 NED, CEO AND DISCLOSED EXECUTIVES’ LOAN TRANSACTIONS

The table below sets out details of loans outstanding to NEDs, the CEO and Disclosed Executives including their related parties, if – at any time during the year – the individual’s aggregate loan balance exceeded $100,000.

Loan transactions – NED, CEO and Disclosed Executives	Opening balance at 1 Oct 2021 $	Closing balance at 30 Sep 2022 $	Interest paid and payable in the reporting period $	Highest balance in the reporting period $
Current Non–Executive Directors
P O’Sullivan	792,259	731,495	65	810,049
J Key	–	3,703,009	73,835	3,704,351
J Macfarlane	12,913,111	9,364,205	423,076	14,104,140
CEO and Current Disclosed Executives
S Elliott	2,616,885	2,521,407	54,579	2,641,851
G Florian	4,483,293	4,250,856	140,327	8,072,732
K van der Merwe	2,464,654	1,655,942	47,480	2,479,909
M Whelan	1,628,540	1,550,938	50,625	1,681,066
Former Disclosed Executives
S Buggle3	504,008	499,193	–	504,061
Total	25,402,750	24,277,045	789,987	33,998,158

Opening balances have been adjusted to take into account timing variances.
Actual interest paid after considering offset accounts. The loan balance is shown gross, however the interest paid takes into account the impact of offset amounts.
Closing balance is as at the date ceased in a KMP role.

9.4 Other transactions

Other transactions with NEDs, the CEO and Disclosed Executives, and their related parties included deposits.

Other transactions – NED, CEO and Disclosed Executives	Opening balance at 1 Oct 2021 $	Closing balance at 30 Sep 2022 $
Total KMP deposits	27,513,114	30,208,600

Opening balance is at 1 October 2021 or the date of commencement as a KMP if part way through the year and it has been adjusted to take into account timing variances.
Closing balance is at 30 September 2022 or at the date ceased in a KMP role if part way through the year.
Interest received on deposits for 2022 was $140,355 (2021: $88,209).

Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service fees, brokerage, bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated with the performance of their duties. These transactions are conducted on normal commercial terms and conditions are no more favourable than those given to other employees or customers.

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information
103

Directors’ report

The Directors’ Report for the nancial year ended 30 September 2022 has been prepared in accordance with the requirements of the Corporations Act 2001. The information below forms part of this Directors’ Report:
•Principal activities on page 12;
•Operating and nancial review on pages 44 to 60;
•Dividends on page 58;
•Information on the Directors, Company Secretaries and Directors’ meetings on pages 26 to 35;
•Remuneration report on pages 62 to 103.

Signicant changes in state of aairs

There have been no signicant changes in the Group’s state of aairs.

Events since the end of the nancial year

There have been no signicant events from 30 September 2022 to the date of signing this report.

Participation in political-related activities

ANZ aims to assist the democratic process in Australia by attending and participating in paid events hosted by the major federal political parties. For the year ended 30 September 2022, ANZ contributed $90,000 to participate in political activities hosted by the Australian Labor Party and the Liberal Party of Australia. These activities included speeches, political functions and policy dialogue forums. ANZ discloses these contributions to the Australian Electoral Commission (AEC), noting the AEC’s reporting year is a dierent period to ANZ’s nancial year.

Environmental regulation

ANZ recognises the expectations of its stakeholders – customers, shareholders, sta and the community – to operate in a way that mitigates its environmental impact. In Australia, ANZ meets the requirements of the National Greenhouse and Energy Reporting Act 2007 (Cth), which imposes reporting obligations where energy production, usage or greenhouse gas emissions trigger specied thresholds. The Group does not believe that its operations are subject to any other particular and signicant environmental regulation under a law of the Commonwealth of Australia or of an Australian State or Territory. It may become subject to environmental regulation as a result of its lending activities in the ordinary course of business and has developed policies, which are reviewed on a regular basis to help identify and manage such environmental matters. Having made due enquiry, and to the best of ANZ’s knowledge, no entity of the Group has incurred any material environmental liability during the year. Further details of ANZ’s environmental performance, including progress against its targets and management of material issues aligned with its commitment to fair and responsible banking and priority areas of nancial wellbeing, environmental sustainability and housing, are available in ANZ’s ESG Supplement, at anz.com/annualreport.

Corporate Governance Statement

ANZ is committed to maintaining a high standard in its governance framework. ANZ conrms it has followed the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition) during the 2022 nancial year. ANZ’s Corporate Governance Statement, together with the ASX Appendix 4G which relates to the Corporate Governance Statement, can be viewed at anz.com/corporategovernance and has been lodged with the ASX.

Pillar III information

ANZ provides information required by APS 330: Public Disclosure in the Regulatory Disclosures section at anz.com/shareholder/ centre/reporting/regulatory-disclosure/.

External auditor

The Group’s external auditor is KPMG. The Group appointed Peat, Marwick, Mitchell & Co (predecessor to KPMG) in 1969. The Board Audit Committee conducts a formal annual performance assessment of the external auditor, including whether to commence an external tender for the audit. After considering relevant factors including tenure, audit quality, local and international capability and experience, and independence, the Board Audit Committee resolved to reappoint KPMG for the 30 September 2023 nancial year audit.# KPMG and Auditor Independence

KPMG regularly rotates Group Lead Audit Engagement Partner and the Engagement Quality Control Review Partner with the most recent rotation being for the financial year ended 30 September 2021 and 30 September 2020 respectively.

Non-audit services

The Group’s Stakeholder Engagement Model for Relationship with the External Auditor (the Policy), which incorporates requirements of the Corporations Act 2001 and industry best practice, prevents the external auditor from providing services that are perceived to be in conflict with the role of the external auditor or breach independence requirements. This includes consulting advice and sub-contracting of operational activities normally undertaken by management, and engagements where the external auditor may ultimately be required to express an opinion on its own work. Specifically the Policy:

Limits the scope of non-audit services that may be provided;
Requires that audit, audit-related and permitted non-audit services be considered in light of independence requirements and for any potential conflicts of interest before they are approved by the Audit Committee, or approved by the Chair of the Audit Committee (or delegate) and notified to the Audit Committee; and
Requires pre-approval before the external auditor can commence any engagement for the Group.

ANZ 2022 Annual Report 104

Further details about the Policy can be found in the Corporate Governance Statement. The external auditor has confirmed to the Audit Committee that it has:

Implemented procedures to ensure it complies with independence rules in applicable jurisdictions; and
Complied with applicable policies and regulations in those jurisdictions regarding the provision of non-audit services, and the Policy.

The Audit Committee has reviewed the non-audit services provided by the external auditor during the 2022 financial year, and has confirmed that the provision of these services is consistent with the Policy, compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001. This has been formally advised by the Audit Committee to the Board of Directors.

The categories of non-audit services supplied to the Group during the year ended 30 September 2022 by the external auditor, KPMG, or by another person or firm on KPMG’s behalf, and the amounts paid or payable (including GST) by the Group are as follows:

Non-audit services	Amount paid/payable $’000’s
	2022	2021
Training and related services	–	–
Controls related assessments	–	90
Methodology and procedural reviews	8	101
Total	8	191

Further details on the compensation paid to KPMG is provided in Note 34 Auditor Fees to the financial statements including details of audit-related services provided during the year of $7.50 million (2021: $4.43 million). For the reasons set out above, the Directors are satisfied that the provision of non-audit services by the external auditor during the year ended 30 September 2022 is compatible with the general standard of independence for external auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001.

Directors’ and officers’ indemnity

The Company’s Constitution (Rule 11.1) permits the Company to:

Indemnify any officer or employee of the Company, or its auditor, against liabilities (so far as may be permitted under applicable law) incurred as such by an officer, employee or auditor, including liabilities incurred as a result of appointment or nomination by the Company as a trustee or as an officer or employee of another corporation; and
Make payments in respect of legal costs incurred by an officer, employee or auditor in defending an action for a liability incurred as such by an officer, employee or auditor, or in resisting or responding to actions taken by a government agency, a duly constituted Royal Commission or other official inquiry, a liquidator, administrator, trustee in bankruptcy or other authorised official.

It is the Company’s policy that its employees should be protected from any liability they incur as a result of acting in the course of their employment, subject to appropriate conditions. Under the policy, the Company will indemnify employees and former employees against any liability they incur to any third party as a result of acting in good faith in the course of their employment with the Company or a subsidiary of the Company and this extends to liability incurred as a result of their appointment/nomination by or at the request of the Group as an officer or employee of another corporation or body or as a trustee. The indemnity is subject to applicable law and certain exceptions.

In accordance with the employee indemnity policy, the Company has during or since the year ended 30 September 2022 paid legal expenses totalling $328,250.32 incurred by Mr Richard Moscati in relation to legal proceedings that had been brought against him and the Company by the Commonwealth Director of Public Prosecutions. The Company has entered into Indemnity Deeds with each of its Directors, with certain secretaries and former Directors of the Company, and with certain employees and other individuals who act as directors or officers of related bodies corporate or of another company, to indemnify them against liabilities and legal costs of the kind mentioned in the Company’s Constitution.

During the financial year, the Company has paid premiums for insurance for the benefit of the Directors and employees of the Company and related bodies corporate of the Company. In accordance with common commercial practice, the insurance prohibits disclosure of the nature of the liability insured against and the amount of the premium.

Key management personnel and employee share and option plans

The Remuneration Report contains details of Non-Executive Directors, Chief Executive Officer and Disclosed Executives’ equity holdings and options/rights issued during the 2022 financial year and as at the date of this report. Note 31 Employee Share and Option Plans to the 2022 Financial Report contains details of the 2022 financial year and as at the date of this report:

Options/rights issued over shares granted to employees;
Shares issued as a result of the exercise of options/rights granted to employees; and
Other details about share options/rights issued, including any rights to participate in any share issues of the Company.

The names of all persons who currently hold options/rights are entered in the register kept by the Company pursuant to section 170 of the Corporations Act 2001. This register may be inspected free of charge.

105

Overview

How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

Rounding of amounts

The Company is a company of the kind referred to in Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 and, in accordance with that Instrument, amounts in the consolidated financial statements and this Directors’ Report have been rounded to the nearest million dollars unless specifically stated otherwise.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors.

Lead Auditor’s Independence Declaration

The Lead Auditor’s Independence Declaration given under Section 307C of the Corporations Act 2001 is set out below and forms part of the Directors’ Report for the year ended 30 September 2022.

To: the Directors of Australia and New Zealand Banking Group Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Australia and New Zealand Banking Group Limited for the financial year ended 30 September 2022, there have been:

No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

Paul D O’Sullivan
Chairman
26 October 2022

Martin McGrath
Partner
26 October 2022

Shayne C Elliott
Managing Director
26 October 2022

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

ANZ 2022 Annual Report 106

Financial Statements

Income Statements 108
Statements of Comprehensive Income 109
Balance Sheets 110
Cash Flow Statements 111
Statements of Changes in Equity 112

Notes to the Financial Statements

Basis of Preparation

About Our Financial Statements 114

Financial Performance

Net Interest Income 118
Non-Interest Income 119
Operating Expenses 122
Income Tax 124
Dividends 126
Earnings per Ordinary Share 128
Segment Reporting 129

Financial Assets and Other Trading Assets

Cash and Cash Equivalents 133
Trading Assets 134
Derivative Financial Instruments 135
Investment Securities 147
Net Loans and Advances 149
Allowance for Expected Credit Losses 150

Financial Liabilities

Deposits and Other Borrowings 161
Payables and Other Liabilities 162
Debt Issuances 163

Financial Instrument Disclosures

Financial Risk Management 169
Fair Value of Financial Assets and Financial Liabilities 191
Assets Charged as Security for Liabilities and Collateral Accepted as Security for Assets 198
Offsetting 199

Non-Financial Assets

Goodwill and Other Intangible Assets 201

Non-Financial Liabilities

Other Provisions 205

Equity

Shareholders’ Equity 207
Capital Management 210

Consolidation and Presentation

Controlled Entities 212
27.# Financial Report

Income Statements

Consolidated

For the year ended 30 September	Note	2022 $m	2021 $m
Interest income1		23,609	19,529
Interest expense		(8,735)	(5,368)
Net interest income	2	14,874	14,161
Other operating income	3	4,235	3,325
Net income from insurance business	3	140	110
Share of associates’ profit/(loss)	3	177	(176)
Operating income		19,426	17,420
Operating expenses	4	(9,579)	(9,051)
Profit before credit impairment and income tax		9,847	8,369
Credit impairment (charge)/release	14	232	567
Profit before income tax		10,079	8,936
Income tax expense	5	(2,940)	(2,756)
Profit after tax from continuing operations		7,139	6,180
Profit/(Loss) after tax from discontinued operations		(19)	(17)
Profit for the year		7,120	6,163
Comprising:
Profit attributable to shareholders of the Company		7,119	6,162
Profit attributable to non-controlling interests		1	1

The Company

For the year ended 30 September	Note	2022 $m	2021 $m
Interest income1		18,408	15,347
Interest expense		(7,433)	(4,822)
Net interest income	2	10,975	10,525
Other operating income	3	6,424	4,854
Net income from insurance business	3	-	-
Share of associates’ profit/(loss)	3	(12)	(1)
Operating income		17,387	15,378
Operating expenses	4	(8,123)	(7,594)
Profit before credit impairment and income tax		9,264	7,784
Credit impairment (charge)/release	14	265	469
Profit before income tax		9,529	8,253
Income tax expense	5	(1,933)	(1,922)
Profit after tax from continuing operations		7,596	6,331
Profit/(Loss) after tax from discontinued operations		-	-
Profit for the year		7,596	6,331
Comprising:
Profit attributable to shareholders of the Company		7,596	6,331
Profit attributable to non-controlling interests		-	-

Consolidated

For the year ended 30 September

	Note	2022	2021
Earnings per ordinary share (cents) including discontinued operations2	7
Basic		250.0	215.3
Diluted		233.2	203.2
Earnings per ordinary share (cents) from continuing operations2	7
Basic		250.7	215.9
Diluted		233.8	203.7
Dividend per ordinary share (cents)	6	146	142

Includes interest income calculated using the effective interest method on financial assets measured at amortised cost or fair value through other comprehensive income of $22,844 million (2021: $19,054 million) in the Group and $17,123 million (2021: $14,363 million) in the Company.
Earnings per share in 2021 has been restated to reflect the bonus element of the share entitlement offer made in 2022 in accordance with AASB 133 Earnings per Share.

The notes appearing on pages 114 to 232 form an integral part of these financial statements.
ANZ 2022 Annual Report 108

Statements of Comprehensive Income

Consolidated

For the year ended 30 September	2022 $m	2021 $m
Profit for the year from continuing operations	7,139	6,180
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI	(55)	80
Other reserve movements1	127	(41)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve	(759)	456
Other reserve movements	(4,180)	(1,052)
Income tax attributable to the above items	1,172	301
Share of associates’ other comprehensive income2	(40)	(48)
Other comprehensive income after tax from continuing operations	(3,735)	(304)
Profit/(Loss) after tax from discontinued operations	(19)	(17)
Total comprehensive income for the year	3,385	5,859
Comprising total comprehensive income attributable to:
Shareholders of the Company	3,399	5,858
Non-controlling interests1	(14)	1

The Group includes -$15 million (2021: nil) relating to foreign currency retranslation of the non-controlling interest in ANZ Bank New Zealand Limited.
The Group’s share of associates’ other comprehensive income, that may be reclassified subsequently to profit or loss in the Group, includes:

	2022 $m	2021 $m
FVOCI reserve gain/(loss)	(56)	(42)
Defined benefits gain/(loss)	15	(5)
Cash flow hedge reserve gain/(loss)	-	1
Foreign currency translation reserve gain/(loss)	1	(2)
Total	(40)	(48)

The notes appearing on pages 114 to 232 form an integral part of these financial statements.

The Company

For the year ended 30 September	2022 $m	2021 $m
Profit for the year from continuing operations	7,596	6,331
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI	(119)	67
Other reserve movements1	132	(95)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve	139	(14)
Other reserve movements	(4,132)	(1,003)
Income tax attributable to the above items	1,186	303
Share of associates’ other comprehensive income2	-	-
Other comprehensive income after tax from continuing operations	(2,794)	(742)
Profit/(Loss) after tax from discontinued operations	-	-
Total comprehensive income for the year	4,802	5,589
Comprising total comprehensive income attributable to:
Shareholders of the Company	4,802	5,589
Non-controlling interests1	-	-

The Group includes -$15 million (2021: nil) relating to foreign currency retranslation of the non-controlling interest in ANZ Bank New Zealand Limited.
The Group’s share of associates’ other comprehensive income, that may be reclassified subsequently to profit or loss in the Group, includes:

	2022 $m	2021 $m
FVOCI reserve gain/(loss)	(56)	(42)
Defined benefits gain/(loss)	15	(5)
Cash flow hedge reserve gain/(loss)	-	1
Foreign currency translation reserve gain/(loss)	1	(2)
Total	(40)	(48)

The notes appearing on pages 114 to 232 form an integral part of these financial statements.
Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 109

Balance Sheets

Consolidated

As at 30 September	Note	2022 $m	2021 $m
Assets
Cash and cash equivalents1	9	168,132	151,260
Settlement balances owed to ANZ		4,762	7,530
Collateral paid		12,700	9,166
Trading assets	10	35,237	44,688
Derivative financial instruments	11	90,174	38,736
Investment securities	12	86,153	83,126
Net loans and advances	13	672,407	629,719
Regulatory deposits		632	671
Due from controlled entities		-	-
Shares in controlled entities	26	-	-
Investments in associates	27	2,181	1,972
Current tax assets		46	57
Deferred tax assets		3,384	2,339
Goodwill and other intangible assets	22	3,877	4,124
Premises and equipment		2,431	2,734
Other assets		3,613	2,735
Total assets		1,085,729	978,857
Liabilities
Settlement balances owed by ANZ		13,766	17,427
Collateral received		16,230	5,657
Deposits and other borrowings	15	797,281	743,056
Derivative financial instruments	11	85,149	36,035
Due to controlled entities		-	-
Current tax liabilities		829	419
Deferred tax liabilities		83	70
Payables and other liabilities	16	9,835	8,647
Employee entitlements		549	602
Other provisions	23	1,872	2,214
Debt issuances	17	93,734	101,054
Total liabilities		1,019,328	915,181
Net assets		66,401	63,676
Shareholders' equity
Ordinary share capital	24	28,797	25,984
Reserves	24	(2,606)	1,228
Retained earnings	24	39,716	36,453
Share capital and reserves attributable to shareholders of the Company	24	65,907	63,665
Non-controlling interests	24	494	11
Total shareholders' equity	24	66,401	63,676

Includes settlement balances owed to ANZ that meet the definition of cash and cash equivalents.

The Company

As at 30 September	Note	2022 $m	2021 $m
Assets
Cash and cash equivalents1	9	155,483	141,436
Settlement balances owed to ANZ		4,024	7,183
Collateral paid		11,368	8,343
Trading assets	10	28,073	34,752
Derivative financial instruments	11	88,056	38,736
Investment securities	12	72,399	67,940
Net loans and advances	13	537,345	488,487
Regulatory deposits		249	213
Due from controlled entities		22,860	23,530
Shares in controlled entities	26	17,630	15,693
Investments in associates	27	53	20
Current tax assets		43	55
Deferred tax assets		2,992	1,887
Goodwill and other intangible assets	22	935	1,017
Premises and equipment		2,171	2,415
Other assets		2,402	1,909
Total assets		946,083	833,172
Liabilities
Settlement balances owed by ANZ		10,224	14,922
Collateral received		14,425	5,148
Deposits and other borrowings	15	665,607	606,723
Derivative financial instruments	11	84,500	37,005
Due to controlled entities		25,305	23,079
Current tax liabilities		488	193
Deferred tax liabilities		54	70
Payables and other liabilities	16	8,562	7,244
Employee entitlements		409	447
Other provisions	23	1,648	1,873
Debt issuances	17	75,828	81,088
Total liabilities		887,050	777,792
Net assets		59,033	55,380
Shareholders' equity
Ordinary share capital	24	28,720	25,907
Reserves	24	(2,546)	341
Retained earnings	24	32,859	29,132
Share capital and reserves attributable to shareholders of the Company	24	59,033	55,380
Non-controlling interests	24	-	-
Total shareholders' equity	24	59,033	55,380

Includes settlement balances owed to ANZ that meet the definition of cash and cash equivalents.

The notes appearing on pages 114 to 232 form an integral part of these financial statements.
ANZ 2022 Annual Report 110

Cash Flow Statements

Consolidated

For the year ended 30 September	2022 $m	2021 $m
Profit after income tax	7,120	6,163
Adjustments to reconcile to net cash provided by/(used in) operating activities:
Allowance for expected credit losses	(232)	(567)
Depreciation and amortisation	1,008	1,087
(Profit)/Loss on sale of premises and equipment	(8)	(11)
Net derivatives/foreign exchange adjustment	(4,434)	(6,350)
(Gain)/Loss on sale from divestments	(252)	238
Other non-cash movements	(909)	(237)
Net (increase)/decrease in operating assets:
Collateral paid	(2,638)	4,995
Trading assets	8,020	10
Net loans and advances	(46,378)	(8,259)
Net intra-group loans and advances	-	-
Other assets	685	143
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings	48,879	48,896
Settlement balances owed by ANZ	(3,486)	(4,928)
Collateral received	9,468	(3,466)
Other liabilities	3,333	6,108
Total adjustments	13,056	37,659
Net cash (used in)/provided by operating activities1	20,176	43,822
Cash flows from investing activities
Investment securities assets:
Purchases	(34,292)	(52,639)
Proceeds from sale or maturity	32,797	63,445
Proceeds from divestments, net of cash disposed	394	13
Net movement in shares in controlled entities	(65)	-
Net investments in other assets	(651)	(561)
Net cash (used in)/provided by investing activities	(1,817)	10,258
Cash flows from financing activities
Deposits and other borrowings drawn down	1,226	9,310
Debt issuances:2
Issue proceeds	23,422	12,624
Redemptions	(26,017)	(27,709)
Dividends paid3	(3,784)	(2,834)
On market purchase of treasury shares	(117)	(79)
Repayment of lease liabilities	(218)	(330)
Share buyback	(846)	(654)
ANZ Bank New Zealand Perpetual Preference Shares	492	-
Share entitlement issue	3,497	-
Net cash (used in)/provided by financing activities	(2,345)	(9,672)
Net (decrease)/increase in cash and cash equivalents	16,014	44,408
Cash and cash equivalents at beginning of year	151,260	107,923
Effects of exchange rate changes on cash and cash equivalents	858	(1,071)
Cash and cash equivalents at end of year	168,132	151,260

Net cash (used in)/provided by operating activities for the Group includes interest received of $22,748 million (2021: $19,649 million), interest paid of $7,857 million (2021: $5,793 million) and income taxes paid of $2,171 million (2021: $2,427 million).
Issue proceeds of debt securities are before transaction costs.
Includes dividends paid to ordinary shareholders.

The Company

For the year ended 30 September	2022 $m	2021 $m
Profit after income tax	7,596	6,331
Adjustments to reconcile to net cash provided by/(used in) operating activities:
Allowance for expected credit losses	(265)	(469)
Depreciation and amortisation	867	959
(Profit)/Loss on sale of premises and equipment	(1)	(11)
Net derivatives/foreign exchange adjustment	(4,687)	(4,374)
(Gain)/Loss on sale from divestments	(246)	(12)
Other non-cash movements	(488)	(456)
Net (increase)/decrease in operating assets:
Collateral paid	(2,054)	4,484
Trading assets	6,355	(2,778)
Net loans and advances	(42,003)	(300)
Net intra-group loans and advances	978	(1,212)
Other assets	655	89
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings	45,058	41,908
Settlement balances owed by ANZ	(4,769)	(4,671)
Collateral received	8,074	(2,728)
Other liabilities	3,426	5,579
Total adjustments	10,900	36,008
Net cash (used in)/provided by operating activities1	18,496	42,339
Cash flows from investing activities
Investment securities assets:
Purchases	(30,065)	(23,040)
Proceeds from sale or maturity	28,201	35,493
Proceeds from divestments, net of cash disposed	(5)	-
Net movement in shares in controlled entities	(133)	(175)
Net investments in other assets	(667)	(650)
Net cash (used in)/provided by investing activities	(2,669)	11,628
Cash flows from financing activities
Deposits and other borrowings drawn down	-	8,091
Debt issuances:2
Issue proceeds	20,145	9,517
Redemptions	(21,985)	(23,104)
Dividends paid3	(3,782)	(2,834)
On market purchase of treasury shares	(117)	(79)
Repayment of lease liabilities	(226)	(288)
Share buyback	(846)	(654)
ANZ Bank New Zealand Perpetual Preference Shares	-	-
Share entitlement issue	3,497	-
Net cash (used in)/provided by financing activities	(3,314)	(9,351)
Net (decrease)/increase in cash and cash equivalents	12,513	44,616
Cash and cash equivalents at beginning of year	141,436	98,083
Effects of exchange rate changes on cash and cash equivalents	1,534	(1,263)
Cash and cash equivalents at end of year	155,483	141,436

Net cash (used in)/provided by operating activities for the Company includes interest received of $17,672 million (2021: $15,435 million), interest paid of $6,692 million (2021: $5,117 million) and income taxes paid of $1,443 million (2021: $1,541 million).
Issue proceeds of debt securities are before transaction costs.
Includes dividends paid to ordinary shareholders.# 1. ABOUT OUR FINANCIAL STATEMENTS

These are the financial statements for Australia and New Zealand Banking Group Limited (the Company) and its controlled entities (together, the Group or ANZ) for the year ended 30 September 2022. The Company is a publicly listed company incorporated and domiciled in Australia. The address of the Company’s registered office and its principal place of business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals and business customers and operates in and across 32 markets.

On 26 October 2022, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material and relevant if, for example:
* the amount is significant in size (quantitative factor);
* the information is significant by nature (qualitative factor);
* the user cannot understand the Group’s results without the specific disclosure (qualitative factor);
* the information is critical to a user’s understanding of the impact of significant changes in the Group’s business during the period - for example, business acquisitions or disposals (qualitative factor);
* the information relates to an aspect of the Group’s operations that is important to its future performance (qualitative factor); and
* the information is required under legislative requirements of the Corporations Act 2001, the Banking Act 1959 (Cth) or by the Group’s principal regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).

This section of the financial statements:
* outlines the basis upon which the Group’s financial statements have been prepared; and
* discusses any new accounting standards or regulations that directly impact the financial statements.

BASIS OF PREPARATION

This financial report is a general purpose (Tier 1) financial report prepared by a ‘for profit’ entity, in accordance with Australian Accounting Standards (AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the Corporations Act 2001, and International Financial Reporting Standards (IFRS) and interpretations published by the International Accounting Standards Board (IASB).

We present the financial statements of the Group in Australian dollars, which is the Company’s functional and presentation currency. We have rounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the ASIC Corporations (Rounding in Financial/Directors Report) Instrument 2016/191. We measure the financial statements of each entity in the Group using the currency of the primary economic environment in which that entity operates (the functional currency).

BASIS OF MEASUREMENT AND PRESENTATION

We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we have stated at their fair value:
* derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;
* financial instruments held for trading;
* financial assets and financial liabilities designated at fair value through profit or loss;
* financial assets at fair value through other comprehensive income; and
* assets and liabilities classified as held for sale (except those required to be at carrying value).

In accordance with AASB 119 Employee Benefits (AASB 119) we have measured defined benefit obligations using the Projected Unit Credit Method.

During the 2022 financial year, the Group revised its treatment of ongoing trail commission payable to mortgage brokers and now recognises a liability within Payables and other liabilities equal to the present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs in Net loans and advances. Comparatives have not been restated.

The sale of Wealth Australia business to IOOF Holdings Limited (IOOF, now known as Insignia Financial Limited) and Zurich Financial Services Australia (Zurich) completed across 2020 and 2019. The separation of the business sold to Zurich completed in early April 2022, and the business sold to IOOF completed in early October 2022. The financial results of these divested businesses are treated as discontinued operations from a financial reporting perspective.

Notes to the financial statements

STATEMENT OF CHANGES IN EQUITY

	Ordinary share capital	Reserves	Retained earnings	Total shareholders’ equity	Non- controlling interests	Total shareholders’ equity
Consolidated	$m	$m	$m	$m	$m	$m
As at 1 October 2020	26,531	1,501	33,255	61,287	10	61,297
Profit or loss from continuing operations	-	-	6,179	6,179	1	6,180
Profit or loss from discontinued operations	-	-	(17)	(17)	-	(17)
Other comprehensive income for the year from continuing operations	-	(264)	(40)	(304)	-	(304)
Total comprehensive income for the year	-	(264)	6,122	5,858	1	5,859
Transactions with equity holders in their capacity as equity holders:
Dividends paid	-	-	(2,928)	(2,928)	-	(2,928)
Dividend Reinvestment Plan¹	94	-	-	94	-	94
Group share buy-back²	(654)	-	-	(654)	-	(654)
Other equity movements:
Group employee share acquisition scheme	13	-	-	13	-	13
Other items	-	(9)	4	(5)	-	(5)
As at 30 September 2021	25,984	1,228	36,453	63,665	11	63,676
Profit or loss from continuing operations	-	-	7,138	7,138	1	7,139
Profit or loss from discontinued operations	-	-	(19)	(19)	-	(19)
Other comprehensive income for the year from continuing operations	-	(3,835)	115	(3,720)	(15)	(3,735)
Total comprehensive income for the year	-	(3,835)	7,234	3,399	(14)	3,385
Transactions with equity holders in their capacity as equity holders:
Dividends paid	-	-	(3,965)	(3,965)	(2)	(3,967)
Dividend Reinvestment Plan¹	183	-	-	183	-	183
Group share buy-back²	(846)	-	-	(846)	-	(846)
Share entitlement issue³	3,497	-	-	3,497	-	3,497
Other equity movements:
Group employee share acquisition scheme	(21)	-	-	(21)	-	(21)
Preference shares issued	-	-	(7)	(7)	499	492
Other items	-	1	1	2	-	2
As at 30 September 2022	28,797	(2,606)	39,716	65,907	494	66,401

7.2 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2022 interim dividend (2021 final and interim dividend: nil; 2020 final dividend: 4.2 million). On-market share purchases for the DRP in 2022 were $204 million (2021: $199 million).
The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares on 25 March 2022 resulting in 31 million (2021: 23 million) shares being cancelled in 2022.
The Group issued 187.1 million new ordinary shares under the share entitlement offer in 2022.

The notes appearing on pages 114 to 232 form an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

	Ordinary share capital	Reserves	Retained earnings	Total shareholders’ equity
The Company	$m	$m	$m	$m
As at 1 October 2020	26,454	1,018	25,800	53,272
Profit for the year	-	-	6,331	6,331
Other comprehensive income for the year	-	(668)	(74)	(742)
Total comprehensive income for the year	-	(668)	6,257	5,589
Transactions with equity holders in their capacity as equity holders:
Dividends paid	-	-	(2,928)	(2,928)
Dividend Reinvestment Plan¹	94	-	-	94
Group share buy-back²	(654)	-	-	(654)
Other equity movements:
Group employee share acquisition scheme	13	-	-	13
Other items	-	(9)	3	(6)
As at 30 September 2021	25,907	341	29,132	55,380
Profit for the year	-	-	7,596	7,596
Other comprehensive income for the year	-	(2,888)	94	(2,794)
Total comprehensive income for the year	-	(2,888)	7,690	4,802
Transactions with equity holders in their capacity as equity holders:
Dividends paid	-	-	(3,965)	(3,965)
Dividend Reinvestment Plan¹	183	-	-	183
Group share buy-back²	(846)	-	-	(846)
Share entitlement issue³	3,497	-	-	3,497
Other equity movements:
Group employee share acquisition scheme	(21)	-	-	(21)
Other items	-	1	2	3
As at 30 September 2022	28,720	(2,546)	32,859	59,033

7.2 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2022 interim dividend (2021 final and interim dividend: nil; 2020 final dividend: 4.2 million). On-market share purchases for the DRP in 2022 were $204 million (2021: $199 million).
The Company completed its $1.5 billion on-market share buy-back on 25 March 2022 resulting in 31 million (2021: 23 million) shares being cancelled in 2022.
The Company issued 187.1 million new ordinary shares under the share entitlement offer in 2022.

The notes appearing on pages 114 to 232 form an integral part of these financial statements.

BASIS OF CONSOLIDATION

The consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries.# 1. ABOUT OUR FINANCIAL STATEMENTS

An entity, including a structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of the entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.

FOREIGN CURRENCY TRANSLATION TRANSACTIONS AND BALANCES

Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate. Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise. We measure translation differences on non-monetary items at fair value through profit or loss and report them as part of the fair value gain or loss on these items. For non-monetary items classified as investment securities measured at fair value through other comprehensive income, translation differences are included in Other comprehensive income.

FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS

The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group Financial Statements using the following method:

Foreign currency item	Exchange rate used
Assets and liabilities	The reporting date rate
Equity	The initial investment date rate
Income and expenses	The average rate for the period – but if for a significant transaction we believe the average rate is not reasonable, then we use the rate at the date of the transaction

Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.

FIDUCIARY ACTIVITIES

The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does not control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or another legislative requirement.

KEY JUDGEMENTS AND ESTIMATES

In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates and assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the financial statements are contained within each relevant note to the financial statements. Whilst the course of the COVID-19 pandemic is moderating and the management of its impact on the populace, businesses and economic activity is better understood, the responses of consumers, business and governments remain uncertain. Compounding the effects of the pandemic are mounting geopolitical tensions, global supply chain disruptions, the conflict in Ukraine, commodity price pressures and increasing inflation and interest rates impacting the economy. Thus, there remains an elevated level of estimation uncertainty involved in the preparation of these financial statements. The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect expectations and assumptions at 30 September 2022 about future events considered reasonable in the circumstances. There is a considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets. The impact of these uncertainties on each of these accounting estimates is discussed further below and/or in the relevant notes in this Financial Report. Readers should consider these disclosures in light of the inherent uncertainties described above.

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

115

1. ABOUT OUR FINANCIAL STATEMENTS (continued)

INTEREST RATE BENCHMARK REFORM

Interbank offered rates (IBORs) have played a critical role in global financial markets, serving as reference rates for derivatives, loans and securities, and in the valuation of financial instruments. The IBOR reforms have a wide-ranging impact for the Group and our customers given the fundamental differences between IBORs and risk-free rates (RFRs). The key difference between IBORs and RFRs is that IBOR rates include a term and bank credit risk premium, whereas RFRs do not. As a result of these differences, adjustments are required to an RFR to ensure contracts referencing an IBOR rate transition on an economically comparable basis.

Update on the Group’s approach to interest rate benchmark reform

In line with the regulatory announcements made in 2021, the majority of IBOR rates, including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF), Japanese Yen (JPY), and the US Dollar (USD) 1-week and 2-month LIBOR rate settings ceased on 31 December 2021 and have been replaced by alternative RFRs. This transition had an immaterial impact to the Group’s profit and loss. Through its loan and derivative transactions with customers, issuance of debt and its asset and liability management activities the Group continues to have exposure to the remaining USD LIBOR settings and other IBOR-related benchmarks that are due to largely cease by 30 June 2023. The Group continues to manage the transition from the remaining USD LIBOR tenors and other remaining IBOR settings to RFR’s through its enterprise-wide Benchmark Transition Program (the Program). The program is responsible for managing the risks associated with the transition including operational, market, legal, conduct and financial reporting risks that may arise.

Exposures subject to benchmark reform as at 30 September 2022

The table below shows the Group’s exposure to interest rate benchmarks subject to IBOR reform. These are financial instruments that contractually reference an IBOR benchmark planned to transition to an RFR and have a contractual maturity date beyond the planned IBOR cessation date.

	USD Libor	Others
	$m	$m
Loan and advances¹	13,349	126
Non-derivative financial assets¹	154	-
Non-derivative financial liabilities²	669	36
Derivative asset (notional value)³	571,393	14,400
Derivative liability (notional value)³	553,754	14,540
Loan commitments¹,⁴	16,312	222

Excludes Expected Credit Losses (ECL).
Comprises floating rate debt issuances by the Group.
For cross-currency swaps, where both the receive and pay legs are in currencies subject to reform, the Group discloses the Australian dollar-equivalent notional amounts for both. Where one leg of a swap is subject to reform, the Group discloses the notional amount of the receive leg.
For multi-currency IBOR referenced facilities, the undrawn balance has been allocated to the pricing currency of the facility or where there are multiple pricing currencies impacted by cessation, the most likely currency of drawdown.

Hedge accounting exposures subject to IBOR reform

The Group has hedge-accounted relationships referencing USD LIBOR, primarily due to fixed rate investment securities and the Group’s fixed rate debt issuances denominated in USD that are designated in fair value hedge accounting relationships. The table below details the carrying values of the Group's USD exposures designated in hedge accounting relationships referencing LIBOR that will be impacted by reform. The nominal value of the associated hedging instruments is also included:

As at 30 September 2022	$m
Hedged items
Investment securities at FVOCI	8,457
Net loans and advances	216
Deposits and other borrowings	163
Debt issuances	19,861
Hedging instruments
Fair value hedges	8,523
Cash flow hedges	-

Notional designated up to 30 June 2023	Notional designated beyond 30 June 2023	Total notional amount
$m	$m	$m
21,795	30,318	30,318
286	286	286

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. ABOUT OUR FINANCIAL STATEMENTS (continued)

ACCOUNTING STANDARDS ADOPTED IN THE PERIOD

There were no new accounting standards or interpretations adopted in 2022 that had a significant effect on the Group. Accounting policies have been consistently applied, unless otherwise noted.

ACCOUNTING STANDARDS NOT EARLY ADOPTED

A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements for the year ended 30 September 2022 and have not been applied by the Group in preparing these financial statements. Further details of these are set out below.

GENERAL HEDGE ACCOUNTING

AASB 9 Financial Instruments (AASB 9) introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when hedging both financial and non-financial risks.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

AASB 9 FINANCIAL INSTRUMENTS

AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) hedge accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Group continues to apply the hedge accounting requirements of AASB 139.

AASB 17 INSURANCE CONTRACTS (AASB 17)

The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4 Insurance Contracts , AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts . AASB 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change. AASB 17 is not expected to have a material impact on the Group.

DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION

AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction amends AASB 112 Income Taxes and clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a liability and that give rise to equal taxable and deductible temporary differences. This may include transactions such as leases and decommissioning or restoration obligations. This amendment is effective for the Group from 1 October 2023 and is not expected to have a significant impact.

2. NET INTEREST INCOME

	Consolidated	The Company
	2022 2021	2022 2021
	$m $m	$m $m
Net interest income
Interest income by type of financial asset
Financial assets at amortised cost	21,737 18,188	16,289 13,767
Investment securities at FVOCI	1,107 866	834 596
Trading assets	700 446	547 325
Financial assets at FV through profit or loss	65 29	177 124
External interest income	23,609 19,529	17,847 14,812
Controlled entities' income	- -	561 535
Interest income	23,609 19,529	18,408 15,347
Interest expense by type of financial liability
Financial liabilities at amortised cost	(8,019) (4,830)	(6,170) (3,681)
Securities sold short	(214) (91)	(191) (82)
Financial liabilities designated at FV through profit or loss	(162) (101)	(151) (158)
External interest expense	(8,395) (5,022)	(6,512) (3,921)
Controlled entities expense	- -	(581) (555)
Interest expense	(8,395) (5,022)	(7,093) (4,476)
Major bank levy	(340) (346)	(340) (346)
Net interest income	14,874 14,161	10,975 10,525

Includes charges associated with customer remediation of nil (2021: -$86 million) for the Group and -$5 million (2021: -$82 million) for the Company.

RECOGNITION AND MEASUREMENT

NET INTEREST INCOME

Interest Income and Expense

We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading, assets measured at fair value through other comprehensive income and at fair value through profit or loss. We use the effective interest rate method to calculate the amortised cost of assets held at amortised cost and to recognise interest income on financial assets measured at fair value through other comprehensive income. The effective interest rate is the rate that discounts the stream of estimated future cash receipts or payments over the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject to prepayment, we determine their expected life on the basis of historical behaviour of the particular asset portfolio - taking into account contractual obligations and prepayment experience. We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using the effective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial instrument is a financial asset or financial liability.

Major Bank Levy

The Major Bank Levy Act 2017 (levy or major bank levy) applies a rate of 0.06% to certain liabilities of the Company. The Group has determined that the levy represents a finance cost for the Group and the Company and it is presented as interest expense in the Income Statement.

3. NON-INTEREST INCOME

	Consolidated	The Company
	2022 2021	2022 2021
	$m $m	$m $m
Non-interest income
Fee and commission income
Lending fees¹	374 474	340 436
Non-lending fees	2,394 2,552	1,744 1,961
Commissions	103 97	74 65
Funds management income	261 287	27 5
External fee and commission income	3,132 3,410	2,185 2,467
Controlled entities' income	- -	244 235
Fee and commission income	3,132 3,410	2,429 2,702
Fee and commission expense	(1,160) (1,267)	(695) (836)
Net fee and commission income	1,972 2,143	1,734 1,866
Other income
Net foreign exchange earnings and other financial instruments income²	1,993 1,371	1,296 1,064
Gain on completion of ANZ Worldline partnership	307 -	307 -
Impairment of interest in controlled entities	- -	(180) -
Loss on disposal of ANZ Share Investing business	- (251)	- 12
Release of foreign currency translation reserve	(65) -	- -
Loss on disposal of financial planning and advice business	(62) -	(22) -
Dividends received from controlled entities	- -	3,181 1,845
Other	90 62	108 67
Other income	2,263 1,182	4,690 2,988
Other operating income	4,235 3,325	6,424 4,854
Net income from insurance business	140 110	- -
Share of associates' profit/(loss)³	177 (176)	(12) (1)
Non-interest income⁴	4,552 3,259	6,412 4,853

Lending fees exclude fees treated as part of the effective yield calculation in Interest income.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit or loss.
Includes -$347 million of the Group’s share of AMMB Holdings Berhad’s 1Malaysia Development Berhad settlement and goodwill write-off in 2021.
Includes charges associated with customer remediation of -$34 million (2021: -$56 million) for the Group and -$20 million (2021: -$84 million) for the Company.

RECOGNITION AND MEASUREMENT

OTHER OPERATING INCOME

Fee and Commission Revenue

We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is satisfied across more than one reporting period, or (b) at a point in time when the performance obligation is satisfied immediately or is satisfied within one reporting period.

Lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee and commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct good or service that are recognised separately from the underlying lending product.
Non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customer transactions such as international money transfers. Where the Group provides multiple goods or services to a customer under the same contract, the Group allocates the transaction price of the contract to distinct performance obligations based on the relative stand-alone selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
Commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to provide goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service to the customer. If the Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission it retains as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
Funds management income represents fees earned from customers for providing financial advice and fees for asset management services and advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or over the period in which the asset management services are delivered. Performance fees associated with funds management activities are only recognised when it becomes highly probable the performance hurdle will be achieved.# Net Foreign Exchange Earnings and Other Financial Instruments Income

We recognise the following as net foreign exchange earnings and other financial instruments income:
* exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates different to those at which they were initially recognised or included in a previous financial report;
* fair value movements (excluding realised and accrued interest) on derivatives that we use to manage interest rate and foreign exchange risk on funding instruments not designated as accounting hedges;
* the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
* immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges and amounts accumulated in equity related to designated cash flow hedges;
* fair value movements on financial assets and financial liabilities designated at fair value through profit or loss or held for trading;
* amounts released from the fair value through other comprehensive income (FVOCI) reserve when a debt instrument classified as FVOCI is sold; and
* the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.

Gain or Loss on Disposal of Non-Financial Assets

The gain or loss on the disposal of assets is the difference between the carrying value of the asset and the proceeds of disposal net of costs. This is recognised in Other income in the year in which the significant risks and rewards from the asset transfer to the buyer. When a non-financial asset or group of assets is classified as held for sale, the difference between the carrying value immediately prior to reclassification and the fair value less costs to sell is recognised in Other operating income to align with the classification of gain or loss on sale that would have applied if the sale had completed during the year.

120 ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. NON-INTEREST INCOME (CONTINUED)

RECOGNITION AND MEASUREMENT

NET INCOME FROM INSURANCE BUSINESS

We recognise:
* premiums received (net of reinsurance premiums paid) based on an assessment of the likely pattern in which risk will emerge over the term of the policies written. This assessment is undertaken periodically and updated in accordance with the latest pattern of risk emergence; and
* claims incurred net of reinsurance, on an accruals basis once the liability to the policy owner has been established under the terms of the contract and through actuarial assumptions of future claims.

SHARE OF ASSOCIATES’ PROFIT/(LOSS)

The equity method is applied to accounting for associates. Under the equity method, our share of the after tax results of associates is included in the Income Statement and the Statement of Comprehensive Income.

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4. OPERATING EXPENSES

	Consolidated		The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
Personnel
Salaries and related costs	4,754	4,425	3,494	3,241
Superannuation costs	375	337	317	281
Other	167	184	127	110
Personnel	5,296	4,946	3,938	3,632
Premises
Rent	88	85	67	62
Depreciation	419	446	344	371
Other	214	174	168	131
Premises	721	705	579	564
Technology
Depreciation and amortisation	578	638	521	585
Subscription licences and outsourced services	899	786	648	587
Other	144	164	162	170
Technology	1,621	1,588	1,331	1,342
Restructuring	101	127	78	77
Other
Advertising and public relations	165	178	128	134
Professional fees	935	769	864	714
Freight, stationery, postage and communication	172	185	128	141
Other	568	553	1,077	990
Other	1,840	1,685	2,197	1,979
Operating expenses¹	9,579	9,051	8,123	7,594

Includes customer remediation expenses of $190 million (2021: $185 million) for the Group and $189 million (2021: $148 million) for the Company, litigation settlement expenses of $10 million (2021: $69 million) for the Group and $9 million (2021: $69 million) for the Company, and merger and acquisition related costs of $12 million (2021: nil) for the Group and the Company.

122 ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. OPERATING EXPENSES (CONTINUED)

RECOGNITION AND MEASUREMENT

OPERATING EXPENSES

Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a liability is created.

SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS

Wages and salaries, annual leave and other employee entitlements expected to be paid or settled within twelve months of employees rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when the liabilities are settled. We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff departures, leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future cash outflows. If we expect to pay short term cash bonuses, then a liability is recognised when the Group has a present legal or constructive obligation to pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured. Personnel expenses also include share-based payments which may be cash or equity settled. We calculate the fair value of equity settled remuneration at grant date, which is then amortised over the vesting period, with a corresponding increase in share capital or the share option reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as share price performance conditions. We take non-market vesting conditions, such as service conditions, into account by adjusting the number of equity instruments included in the expense. After the grant of an equity-based award, the amount we recognise as an expense is reversed when non-market vesting conditions are not met, for example an employee fails to satisfy the minimum service period specified in the award on resignation, termination or notice of dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure to meet a market-based performance condition. Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note 31 Employee Share and Option Plans.

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5. INCOME TAX

INCOME TAX EXPENSE

Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:

	Consolidated		The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
Profit before income tax from continuing operations	10,079	8,936	9,529	8,253
Prima facie income tax expense at 30%	3,024	2,681	2,859	2,476
Tax effect of permanent differences:
Net (gain)/loss from divestments/closures	(83)	71	(113)	(4)
Share of associates' (profit)/loss	(53)	53	4	-
Interest on convertible instruments	49	44	49	44
Overseas tax rate differential	(128)	(88)	(70)	(33)
Provision for foreign tax on dividend repatriation	155	37	150	33
Rebatable and non-assessable dividends	-	-	(954)	(554)
Impairment of interest in controlled entities	-	-	54	-
Other	4	(26)	(21)	(23)
Subtotal	2,968	2,772	1,958	1,939
Income tax (over)/under provided in previous years	(28)	(16)	(25)	(17)
Income tax expense	2,940	2,756	1,933	1,922
Current tax expense	2,694	2,616	1,725	1,743
Adjustments recognised in the current year in relation to the current tax of prior years	(28)	(16)	(25)	(17)
Deferred tax expense/(income) relating to the origination and reversal of temporary differences	274	156	233	196
Income tax expense	2,940	2,756	1,933	1,922
Australia	1,844	1,897	1,755	1,806
Overseas	1,096	859	178	116
Effective tax rate	29.2%	30.8%	20.3%	23.3%

124 ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAX (CONTINUED)

TAX CONSOLIDATION

The Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. The Company is the head entity in the tax-consolidated group. We recognise each of the following in the separate financial statements of members of the tax consolidated group on a ‘group allocation’ basis: tax expense/income, and deferred tax liabilities/assets that arise from temporary differences for members of the tax-consolidated group. The Company (as head entity in the tax-consolidated group) recognises current tax liabilities and assets of the tax-consolidated group. Under a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the tax-consolidated group in relation to the tax contribution amounts paid or payable between the Company and the other members of the tax-consolidated group. Members of the tax-consolidated group have also entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities were the head entity to default on its income tax payment obligations.

UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

Unrecognised deferred tax assets related to unused realised tax losses (on revenue account) total $1 million (2021: $6 million) for the Group and nil (2021: $2 million) for the Company.# Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches and subsidiaries are repatriated) total $250 million (2021: $344 million) for the Group and $18 million (2021: $15 million) for the Company.

RECOGNITION AND MEASUREMENT

INCOME TAX EXPENSE

Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the accounting and tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when the tax relates to items recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in equity or other comprehensive income respectively.

CURRENT TAX EXPENSE

Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).

DEFERRED TAX ASSETS AND LIABILITIES

We account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as the taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax asset, or liability, on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset is realised, or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date. We offset current and deferred tax assets and liabilities only to the extent that:
* they relate to income taxes imposed by the same taxation authority;
* there is a legal right and intention to settle on a net basis; and
* it is allowed under the tax law of the relevant jurisdiction.

KEY JUDGEMENTS AND ESTIMATES

Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based on its understanding of the relevant law in each of the countries in which it operates and seeks independent advice where appropriate.

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How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

6. DIVIDENDS

ORDINARY SHARE DIVIDENDS

Dividends are provided for in the financial statements once determined, accordingly, the final dividend announced for the current financial year is provided for and paid in the following financial year.

Financial Year	Amount per share	Total dividend $m	Dividends % of total
2021	final dividend paid1,2	35 cents	994
2021	interim dividend paid1,2	70 cents	1,992
	Bonus option plan adjustment		(58)
	Dividends paid during the year ended 30 September 2021		2,928
	Cash		90.0%
	Dividend reinvestment plan3		10.0%
	Dividends paid during the year ended 30 September 2021		2,928
2022	final dividend paid1,2	72 cents	2,030
2022	interim dividend paid1,2	72 cents	2,012
	Bonus option plan adjustment		(77)
	Dividends paid during the year ended 30 September 2022		3,965
	Cash		90.2%
	Dividend reinvestment plan3		9.8%
	Dividends paid during the year ended 30 September 2022		3,965

	Amount per share	Total dividend $m	Dividends announced and to be paid after year-end	Payment date
	2022 final dividend (fully franked for Australian tax, New Zealand imputation credit NZD 9 cents per share)	74 cents	2,213	15 December 2022

Carries New Zealand imputation credits of NZD 9 cents for the 2022 interim dividend, NZD 8 cents for the 2021 final dividend and 2021 interim dividend, and NZD 4 cents for the 2020 final dividend.
Fully franked for Australian tax purposes (30% tax rate).
Includes on-market share purchases for the DRP of $204 million (2021: $199 million).

DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN

Eligible shareholders can elect to reinvest their dividend entitlement into ANZ ordinary shares under the Company’s Dividend Reinvestment Plan (DRP). Eligible shareholders can elect to forgo their dividend entitlement and instead receive ANZ ordinary shares under the Company’s Bonus Option Plan (BOP). For the 2022 final dividend, DRP and BOP participation will be satisfied by an issue of new ANZ ordinary shares. There will be no discount applied to the DRP and BOP price. Refer to Note 24 Shareholders’ Equity for details of shares the Company purchased or issued in respect of the DRP and BOP.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

6. DIVIDENDS (continued)

DIVIDEND FRANKING ACCOUNT

	2022 $m	2021 $m
Australian franking credits available at 30% tax rate	AUD 396	772
New Zealand imputation credits available (which can be attached to our Australian dividends but may only be used by New Zealand resident shareholders)	NZD 5,000	5,020

The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
* franking credits that will arise from the payment of income tax payable as at the end of the financial year; and
* franking credits/debits from the receipt/payment of dividends that have been recognised as tax receivables/payables as at the end of the financial year.

The proposed 2022 final dividend will utilise the entire balance of $396 million franking credits available at 30 September 2022. Instalment tax payments on account of the 2022 financial year, which will be made after 30 September 2022, will generate sufficient franking credits to enable the 2022 final dividend to be fully franked. The extent to which future dividends will be franked will depend on a number of factors, including the level of profits generated by the Group that will be subject to tax in Australia.

RESTRICTIONS ON THE PAYMENT OF DIVIDENDS

APRA’s written approval is required before paying dividends on ANZ ordinary shares if:
* the aggregate dividends exceed the Company’s after tax earnings (in calculating those after tax earnings, we take into account any payments we made on senior capital instruments) in the financial year to which they relate; or
* the Group’s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.

If the Company fails to pay a dividend or distribution on its ANZ Capital Notes or ANZ Capital Securities on the scheduled payment date, it may (subject to a number of exceptions) be restricted from resolving to pay or paying any dividend on the ANZ ordinary shares.

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7. EARNINGS PER ORDINARY SHARE

Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares (WANOS) outstanding during the period (after eliminating ANZ shares held within the Group known as treasury shares). Diluted EPS is calculated by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares used in the basic EPS calculation for the effect of dilutive potential ordinary shares.

	2022 cents	2021 cents
Earnings per ordinary share - Basic1
Earnings Per Share	250.0	215.3
Earnings Per Share from continuing operations	250.7	215.9
Earnings Per Share from discontinued operations	(0.7)	(0.6)

	2022 cents	2021 cents
Earnings per ordinary share - Diluted1
Earnings Per Share	233.2	203.2
Earnings Per Share from continuing operations	233.8	203.7
Earnings Per Share from discontinued operations	(0.6)	(0.5)

	2022 $m	2021 $m
Reconciliation of earnings used in earnings per share calculations
Basic:
Profit for the year	7,120	6,163
Less: Profit attributable to non-controlling interests	1	1
Earnings used in calculating basic earnings per share	7,119	6,162
Less: Profit/(Loss) after tax from discontinued operations	(19)	(17)
Earnings used in calculating basic earnings per share from continuing operations	7,138	6,179
Diluted:
Earnings used in calculating basic earnings per share	7,119	6,162
Add: Interest on convertible subordinated debt	199	187
Earnings used in calculating diluted earnings per share	7,318	6,349
Less: Profit/(Loss) after tax from discontinued operations	(19)	(17)
Earnings used in calculating diluted earnings per share from continuing operations	7,337	6,366

	2022 millions	2021 millions
Reconciliation of WANOS used in earnings per share calculations1,2
WANOS used in calculating basic earnings per share	2,847.5	2,862.6
Add: Weighted average dilutive potential ordinary shares
Convertible subordinated debt	282.9	252.5
Share based payments (options, rights and deferred shares)	7.7	10.0
WANOS used in calculating diluted earnings per share	3,138.1	3,125.1

WANOS and EPS have been restated to reflect the bonus element of the share entitlement issue made in 2022, in accordance with AASB 133 Earnings per Share.
WANOS excludes the weighted average number of treasury shares held in ANZEST Pty Ltd of 4.4 million (2021: 4.6 million).

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. SEGMENT REPORTING

DESCRIPTION OF SEGMENTS

The Group’s six operating segments are presented on a basis that is consistent with the information provided internally to the Chief Executive Officer, who is the chief operating decision maker. This reflects the way the Group’s businesses are managed, rather than the legal structure of the Group. We measure the performance of these segments on a cash profit basis. To calculate cash profit, we remove certain non-core items from statutory profit. Details of these items are included in the ‘Other items’ section of this note. Transactions between business units across segments within ANZ are conducted on an arm’s length basis and disclosed as part of the income and expenses of these segments. The reportable segments are divisions engaged in providing either different products or services or similar products and services in different geographical areas. They are as follows:

Australia Retail

The Australia Retail division provides a full range of banking services to Australian consumers. This includes Home Loans, Deposits, Credit Cards and Personal Loans. Products and services are provided via the branch network, home loan specialists, contact centres, a variety of self-service channels (digital and internet banking, website, ATMs and phone banking) and third-party brokers. It also includes the costs related to the development and operation of the ANZ Plus proposition for retail customers.

Australia Commercial

The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across the following customer segments: small business owners and medium commercial customers (SME Banking) and large commercial customers, high net worth individuals and family groups (Specialist Business).

Institutional

The Institutional division services governments, global institutional and corporate customers across Australia, New Zealand and International via the following business units:
* Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing, commodity financing as well as cash management solutions, deposits, payments and clearing.
* Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export finance, debt structuring and acquisition finance and corporate advisory services.
* Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets in addition to managing the Group's interest rate exposure and liquidity position.

New Zealand

The New Zealand division comprises the following business units:
* Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
* Business provides a full range of banking services including small business banking, through our digital, branch and contact centre channels, and traditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium and large enterprises, the agricultural business segment, government and government-related entities.

Pacific

The Pacific division provides products and services to retail customers, small to medium-sized enterprises, institutional customers and governments located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticated financial solutions provided to business customers through dedicated managers.

Group Centre

The Group Centre division provides support to the operating divisions, including technology, property, risk management, financial management, strategy, marketing, human resources and corporate affairs. It also includes residual components of Group divestments, Group Treasury, Shareholder Functions, minority investments in Asia, and digital businesses.

129 Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 8. SEGMENT REPORTING (continued)

OPERATING SEGMENTS

	Australia Retail	Australia Commercial	Institutional	New Zealand	Pacific	Group Centre	Other items¹	Group Total
Year ended 30 September 2022	$m	$m	$m	$m	$m	$m	$m	$m
Net interest income	5,527	2,568	3,401	3,168	96	114	-	14,874
Net fee and commission income
- Lending fees	8	90	262	8	6	-	-	374
- Non-lending fees	849	384	524	622	26	(11)	-	2,394
- Commissions	52	22	1	28	-	-	-	103
- Funds management income	-	26	1	234	-	-	-	261
- Fee and commission expense	(432)	(118)	(140)	(464)	(6)	-	-	(1,160)
Net income from insurance business	140	-	-	-	-	-	-	140
Other income	5	258	1,002	33	42	44	879	2,263
Share of associates’ profit/(loss)	-	(10)	(2)	-	-	189	-	177
Other operating income	622	652	1,648	461	68	222	879	4,552
Operating income	6,149	3,220	5,049	3,629	164	336	879	19,426
Operating expenses	(3,210)	(1,346)	(2,503)	(1,324)	(153)	(1,043)	-	(9,579)
Profit before credit impairment and income tax	2,939	1,874	2,546	2,305	11	(707)	879	9,847
Credit impairment (charge)/release	129	133	18	(36)	6	(18)	-	232
Profit before income tax	3,068	2,007	2,564	2,269	17	(725)	879	10,079
Income tax expense and non-controlling interests	(928)	(497)	(803)	(636)	(8)	187	(256)	(2,941)
Profit after tax from continuing operations	2,140	1,510	1,761	1,633	9	(538)	623	7,138
Profit/(Loss) after tax from discontinued operations	(19)
Profit after tax attributable to shareholders								7,119

Includes non-cash items:
| Share of associates’ profit/(loss) | - | (10) | (2) | - | - | 189 | - | 177 |
| Depreciation and amortisation | (61) | (12) | (158) | (116) | (10) | (652) | - | (1,009) |
| Equity-settled share based payment expenses | (5) | (1) | (72) | (4) | (1) | (19) | - | (102) |
| Credit impairment (charge)/release | 129 | 133 | 18 | (36) | 6 | (18) | - | 232 |

	Australia Retail	Australia Commercial	Institutional	New Zealand	Pacific	Group Centre	Group Total
Financial position	$m	$m	$m	$m	$m	$m	$m
Goodwill²	178	-	1,022	1,706	-	-	2,906
Investments in associates	-	47	5	-	-	2,129	2,181
Total external assets	292,825	60,031	533,450	126,919	3,707	68,797	1,085,729
Total external liabilities	153,491	118,363	470,006	118,371	4,065	155,032	1,019,328

Cash profit represents our preferred measure of the result of the segments as presented in the table above. We remove certain items from the segments as discussed on page 132 if we consider them not integral to the ongoing performance of the segment, and present these as Other items.
The Group recognised $78 million of goodwill in relation to the acquisition of the Cashrewards business in the Australia Retail division, and wrote off $40 million of goodwill in relation to the exit of the financial planning and advice business servicing the affluent customer segment in the Australia Commercial division.

130 ANZ 2022 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 8. SEGMENT REPORTING (continued) OPERATING SEGMENTS (continued)

	Australia Retail	Australia Commercial	Institutional	New Zealand	Pacific	Group Centre	Other items¹	Group Total
Year ended 30 September 2021	$m	$m	$m	$m	$m	$m	$m	$m
Net interest income	5,708	2,281	3,105	2,870	96	101	-	14,161
Net fee and commission income
- Lending fees	136	80	241	10	7	-	-	474
- Non-lending fees	738	530	683	585	20	(4)	-	2,552
- Commissions	40	24	1	32	-	-	-	97
- Funds management income	-	32	1	254	-	-	-	287
- Fee and commission expense	(358)	(202)	(274)	(430)	(2)	(1)	-	(1,267)
Net income from insurance business	110	-	-	-	-	-	-	110
Other income	(234)	(8)	1,227	18	40	166	(27)	1,182
Share of associates’ profit/(loss)	1	-	(1)	-	-	(176)	-	(176)
Other operating income	433	456	1,878	469	65	(15)	(27)	3,259
Operating income	6,141	2,737	4,983	3,339	161	86	(27)	17,420
Operating expenses	(2,948)	(1,353)	(2,447)	(1,325)	(144)	(834)	-	(9,051)
Profit before credit impairment and income tax	3,193	1,384	2,536	2,014	17	(748)	(27)	8,369
Credit impairment (charge)/release	227	199	89	76	(21)	(3)	-	567
Profit before income tax	3,420	1,583	2,625	2,090	(4)	(751)	(27)	8,936
Income tax expense and non-controlling interests	(1,104)	(476)	(738)	(582)	1	134	8	(2,757)
Profit after tax from continuing operations	2,316	1,107	1,887	1,508	(3)	(617)	(19)	6,179
Profit/(Loss) after tax from discontinued operations	(17)
Profit after tax attributable to shareholders								6,162

Includes non-cash items:
| Share of associates’ profit/(loss) | 1 | - | (1) | - | - | (176) | - | (176) |
| Goodwill write-off² | (251) | - | - | - | - | - | - | (251) |
| Depreciation and amortisation | (84) | (24) | (115) | (117) | (11) | (739) | - | (1,090) |
| Equity-settled share based payment expenses | (3) | (1) | (63) | (6) | (1) | (17) | - | (91) |
| Credit impairment (charge)/release | 227 | 199 | 89 | 76 | (21) | (3) | - | 567 |

	Australia Retail	Australia Commercial	Institutional	New Zealand	Pacific	Group Centre	Group Total
Financial position	$m	$m	$m	$m	$m	$m	$m
Goodwill²	100	40	1,100	1,849	-	-	3,089
Investments in associates	17	-	4	-	-	1,951	1,972
Total external assets	286,566	57,481	429,362	132,232	3,755	69,461	978,857
Total external liabilities	143,709	117,739	384,106	121,999	3,898	143,730	915,181

Cash profit represents our preferred measure of the result of the segments as presented in the table above. We remove certain items from the segments as discussed on page 132 if we consider them not integral to the ongoing performance of the segment, and present these as Other items.
The Group wrote off $251 million of goodwill upon the reclassification of ANZ Share Investing business to held for sale with the remaining $13 million derecognised on completion of the disposal in the Australia Retail division.

131 Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information 8.# SEGMENT REPORTING (continued)

OTHER ITEMS

The table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.

Item	Related segment	Profit after tax
		2022 $m
Economic hedges	Institutional, New Zealand, Group Centre	569
Revenue and expense hedges	Group Centre	54
Total other items from continuing operations		623

SEGMENT INCOME BY PRODUCTS AND SERVICES

The primary sources of our external income across all divisions are Interest income and Other operating income, which includes net fee and commission income, net foreign exchange earnings and other financial instruments income. The Australia Retail, Australia Commercial, New Zealand, and Pacific divisions derive income from products and services from retail and commercial banking. The Institutional division derives its income from institutional products and market services. No single customer amounts to greater than 10% of the Group’s income.

GEOGRAPHICAL INFORMATION

The reportable segments operate across three geographical regions as follows:
* Australia Retail division - Australia
* Australia Commercial division - Australia
* Institutional division - all three geographical regions
* New Zealand division - New Zealand
* Pacific division - International
* Group Centre division - all three geographical regions

Discontinued operations results are included in the Australia geography. The International region includes Asia, Pacific, Europe and Americas. The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year based on the geographical regions in which the Group operates.

	Australia	International	New Zealand	Total
	2022 $m	2021 $m	2022 $m	2021 $m
Total operating income¹	12,462	11,822	2,547	1,778
Assets to be recovered in more than one year²	384,724	362,588	32,350	28,213

Includes Operating income earned from discontinued operations of $84 million (2021: $72 million).
Represents Net loans and advances based on the contractual maturity.

132 ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk of changes in value and with remaining maturities of three months or less, including reverse repurchase agreements.

	Consolidated	The Company
	2022 $m	2021 $m
Coins, notes and cash at bank	1,147	1,127
Securities purchased under agreements to resell in less than 3 months	15,996	17,571
Balances with central banks	127,790	107,915
Settlement balances owed to ANZ within 3 months	23,199	24,647
Cash and cash equivalents	168,132	151,260

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10. TRADING ASSETS

	Consolidated	The Company
	2022 $m	2021 $m
Government debt securities and notes	27,291	33,880
Corporate and financial institution securities	3,941	5,630
Commodities	3,860	4,995
Other securities	145	183
Total	35,237	44,688

	2021	2022
Other securities	183	145
Commodities	4,995	3,860
Government debt securities and notes	33,880	27,291
Corporate and financial institution securities	5,630	3,941

RECOGNITION AND MEASUREMENT

Trading assets are financial instruments or other assets we either:
* acquire principally for the purpose of selling in the short-term; or
* hold as part of a portfolio we manage for short-term profit making.

Trading assets include commodity inventories measured at fair value less cost to sell in accordance with the broker trader exemption under AASB 102 Inventories . We recognise purchases and sales of trading assets on trade date:
* initially, we measure them at fair value; and
* subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.

Assets disclosed as Trading assets are subject to the general classification and measurement policy for Financial Assets outlined at the commencement of the Group’s financial assets disclosures on page 133.

KEY JUDGEMENTS AND ESTIMATES

Judgement is required when applying the valuation techniques used to determine the fair value of trading assets not valued using quoted market prices. Refer to Note 19 Fair Value of Financial Assets and Financial Liabilities for further details.

134 ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. DERIVATIVE FINANCIAL INSTRUMENTS

	Consolidated
	Assets 2022	Liabilities 2022	Assets 2021	Liabilities 2021
	Fair Value $m	$m	$m	$m
Derivative financial instruments - held for trading	89,716	(84,793)	38,080	(35,833)
Derivative financial instruments - designated in hedging relationships	458	(356)	656	(202)
Derivative financial instruments	90,174	(85,149)	38,736	(36,035)

	The Company
	Assets 2022	Liabilities 2022	Assets 2021	Liabilities 2021
	Fair Value $m	$m	$m	$m
Derivative financial instruments - held for trading	87,650	(84,200)	37,700	(36,847)
Derivative financial instruments - designated in hedging relationships	406	(300)	592	(158)
Derivative financial instruments	88,056	(84,500)	38,292	(37,005)

FEATURES

Derivative financial instruments are contracts:
* whose value is derived from an underlying price index (or other variable) defined in the contract - sometimes the value is derived from more than one variable;
* that require little or no initial net investment; and
* that are settled at a future date.

Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.

PURPOSE

The Group’s derivative financial instruments have been categorised as following:

Trading
Derivatives held in order to:
* meet customer needs for managing their own risks.
* manage risks in the Group that are not in a designated hedge accounting relationship (some elements of balance sheet management).
* undertake market making and positioning activities to generate profits from short-term fluctuations in prices or margins.

Designated in Hedging Relationships
Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching movements in underlying positions relating to:
* hedges of the Group’s exposures to interest rate risk and currency risk.
* hedges of other exposures relating to non-trading positions.

TYPES

The Group offers or uses four different types of derivative financial instruments:

Forwards
A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional principal amount at a future date.

Futures
An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on the transaction date, with a net settlement in cash paid on the future date without physical delivery of the asset.

Swaps
A contract in which two parties exchange one series of cash flows for another.

Options
A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a ‘call option’) or to sell (known as a ‘put option’) an asset or instrument at a set price on a future date. The seller has the corresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises the option.

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11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

RISKS MANAGED

The Group offers and uses the instruments described above to manage fluctuations in the following market factors:

Foreign Exchange
Currencies at current or determined rates of exchange.

Interest Rate
Fixed or variable interest rates applying to money lent, deposited or borrowed.# Commodity Soft commodities (that is, agricultural products such as wheat, coffee, cocoa and sugar) and hard commodities (that is, mined products such as gold, oil and gas).

Credit Risk of default by customers or third parties.

The Group uses a number of central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting of collateral exist with these exchanges:
* some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying values of the associated derivative assets and liabilities held at their fair value.
* other transactions, are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative instruments by the amount paid or received.

DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING

The majority of the Group’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:

	Consolidated	Consolidated	Consolidated	Consolidated
	Assets	Liabilities	Assets	Liabilities
	2022	2022	2021	2021
	$m	$m	$m	$m
Interest rate contracts
Forward rate agreements	-	(1)	2	(23)
Futures contracts	336	(123)	105	(24)
Swap agreements	10,421	(15,031)	10,267	(8,065)
Options purchased	1,698	-	971	-
Options sold	-	(1,954)	-	(1,207)
Total	12,455	(17,109)	11,345	(9,319)
Foreign exchange contracts
Spot and forward contracts	42,221	(37,426)	13,869	(11,462)
Swap agreements	32,169	(27,548)	11,109	(12,425)
Options purchased	926	-	277	-
Options sold	-	(1,343)	-	(577)
Total	75,316	(66,317)	25,255	(24,464)
Commodity and other contracts	1,927	(1,353)	1,445	(2,017)
Credit default swaps
Credit derivatives purchased	16	(2)	-	(33)
Credit derivatives sold	2	(12)	35	-
Total	18	(14)	35	(33)
Derivative financial instruments - held for trading¹	89,716	(84,793)	38,080	(35,833)

¹ Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.

136 ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING (continued)

The majority of the Company’s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:

	The Company	The Company	The Company	The Company
	Assets	Liabilities	Assets	Liabilities
	2022	2022	2021	2021
	$m	$m	$m	$m
Interest rate contracts
Forward rate agreements	2	(7)	3	(24)
Futures contracts	240	(116)	87	(19)
Swap agreements	10,778	(15,098)	11,598	(10,538)
Options purchased	1,684	-	969	-
Options sold	-	(1,947)	-	(1,206)
Total	12,704	(17,168)	12,657	(11,787)
Foreign exchange contracts
Spot and forward contracts	36,576	(33,376)	11,840	(9,658)
Swap agreements	35,526	(30,949)	11,463	(12,940)
Options purchased	895	-	267	-
Options sold	-	(1,331)	-	(408)
Total	72,997	(65,656)	23,570	(23,006)
Commodity and other contracts	1,923	(1,352)	1,422	(2,015)
Credit default swaps
Credit derivatives purchased	24	(2)	-	(39)
Credit derivatives sold	2	(22)	51	-
Total	26	(24)	51	(39)
Derivative financial instruments - held for trading¹	87,650	(84,200)	37,700	(36,847)

¹ Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.

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DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS

There are three types of hedge accounting relationships the Group utilises:

	Fair value hedge	Cash flow hedge	Net investment hedge
Objective of this hedging arrangement	To hedge our exposure to changes to the fair value of a recognised asset or liability or unrecognised firm commitment caused by interest rate or foreign currency movements.	To hedge our exposure to variability in cash flows of a recognised asset or liability, a firm commitment or a highly probable forecast transaction caused by interest rate, foreign currency and other price movements.	To hedge our exposure to exchange rate differences arising from the translation of our foreign operations from their functional currency to Australian dollars.
Recognition of effective hedge portion	The following are recognised in profit or loss at the same time: x all changes in the fair value of the underlying item relating to the hedged risk; and x the change in the fair value of the derivatives.	We recognise the effective portion of changes in the fair value of derivatives designated as a cash flow hedge in the cash flow hedge reserve.	We recognise the effective portion of changes in the fair value of the hedging instrument in the foreign currency translation reserve (FCTR).
Recognition of ineffective hedge portion	Recognised immediately in Other operating income.
If a hedging instrument expires, or is sold, terminated, or exercised; or no longer qualifies for hedge accounting	When we recognise the hedged item in profit or loss, we recognise the related unamortised fair value adjustment in profit or loss. This may occur over time if the hedged item is amortised to profit or loss as part of the effective yield over the period to maturity.	Only when we recognise the hedged item in profit or loss is the amount previously deferred in the cash flow hedge reserve transferred to profit or loss.	The amount we defer in the foreign currency translation reserve remains in equity and is transferred to profit or loss only when we dispose of, or partially dispose of, the foreign operation.
Hedged item sold or repaid	We recognise the unamortised fair value adjustment immediately in profit or loss.	Amounts accumulated in equity are transferred immediately to profit or loss.	The gain or loss, or applicable proportion, we have recognised in equity is transferred to profit or loss on disposal or partial disposal of a foreign operation.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

Under the policy choice provided by AASB 9, the Group has continued to apply the hedge accounting requirements of AASB 139. The fair value of derivative financial instruments designated in hedging relationships is:

	2022	2022	2022	2021	2021	2021
	Nominal amount	Assets	Liabilities	Nominal amount	Assets	Liabilities
	$m	$m	$m	$m	$m	$m
Consolidated
Fair value hedges
Foreign exchange spot and forward contracts	604	-	(37)	548	-	(13)
Interest rate swap agreements	106,366	79	(168)	95,384	370	(121)
Interest rate futures contracts	17,361	264	(3)	8,704	191	(2)
Cash flow hedges
Interest rate swap agreements	125,063	33	(53)	105,416	27	(20)
Foreign exchange swap agreements	656	48	(44)	642	22	-
Foreign exchange spot and forward contracts	161	-	(4)	153	-	(1)
Net investment hedges
Foreign exchange spot and forward contracts	940	34	(47)	1,097	46	(45)
Derivative financial instruments - designated in hedging relationships	251,151	458	(356)	211,944	656	(202)

The Company
Fair value hedges
Foreign exchange spot and forward contracts	604	-	(37)	548	-	(13)
Interest rate swap agreements	80,185	65	(163)	68,708	358	(116)
Interest rate futures contracts	17,361	264	(3)	8,704	191	(2)
Cash flow hedges
Interest rate swap agreements	94,928	28	(49)	78,852	19	(16)
Foreign exchange swap agreements	656	48	(44)	642	22	-
Foreign exchange spot and forward contracts	161	-	(4)	153	-	(1)
Net investment hedges
Foreign exchange spot and forward contracts	146	1	-	299	2	(10)
Derivative financial instruments - designated in hedging relationships	194,041	406	(300)	157,906	592	(158)

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DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The maturity profile of the nominal amounts of our hedging instruments held is:

	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
	Average Rate	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years
As at 30 September 2022
Fair value hedges
Interest rate	1.65%	10,931	17,322	65,259	30,215
Foreign exchange	5.43	604	-	-	-
Cash flow hedges
Interest rate	1.59%	3,317	32,145	88,461	1,140
Foreign exchange¹	0.74	40	121	-	656
	0.91	-	-	-	-
Net investment hedges
Foreign exchange	20.68	794	146	-	-
	25.05	-	-	-	-
As at 30 September 2021
Fair value hedges
Interest rate	1.26%	2,597	14,328	58,658	28,505
Foreign exchange	5.74	548	-	-	-
Cash flow hedges
Interest rate	1.17%	4,593	14,180	84,924	1,719
Foreign exchange¹	0.74	38	115	-	642
	0.91	-	-	-	-
Net investment hedges
Foreign exchange	20.81	456	641	-	-
	24.18	-	-	-	-

¹ Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS (continued)# 11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The Company

Average Rate	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	Total	Nominal Amount As at 30 September 2022
	$m	$m	$m	$m	$m
Fair value hedges
Interest rate	1.75%	10,931	13,466	48,011	25,138	97,546
Foreign exchange	HKD/AUD FX Rate 5.43	604	-	-	-	604
Cash flow hedges
Interest rate	1.37%	1,708	22,611	69,600	1,009	94,928
Foreign exchange¹	AUD/USD FX Rate 0.74	40	121	-	656	817
USD/EUR FX Rate 0.91
Net investment hedges
Foreign exchange	TWD/AUD FX Rate 20.68	-	146	-	-	146

As at 30 September 2021

Average Rate	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	Total	Nominal Amount
	$m	$m	$m	$m	$m	$m
Fair value hedges
Interest rate	1.37%	2,445	10,884	43,063	21,020	77,412
Foreign exchange	HKD/AUD FX Rate 5.74	548	-	-	-	548
Cash flow hedges
Interest rate	1.06%	2,125	7,233	67,799	1,695	78,852
Foreign exchange¹	AUD/USD FX Rate 0.74	38	115	-	642	795
USD/EUR FX Rate 0.91
Net investment hedges
Foreign exchange	TWD/AUD FX Rate 20.81	150	149	-	-	299

¹Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.

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11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:

Consolidated

	Change in value of hedging instrument²	Change in value of hedged item	Hedge ineffectiveness recognised in profit or loss³	Amount reclassified from the cash flow hedge reserve or FCTR to profit or loss⁴
	$m	$m	$m	$m
As at 30 September 2022
Fair value hedges¹
Interest rate	697	(719)	(22)	-
Foreign exchange	(55)	55	-	-
Cash flow hedges¹
Interest rate	(3,619)	3,453	(166)	(13)
Foreign exchange	(4)	4	-	1
Net investment hedges¹
Foreign exchange	62	(62)	-	-

As at 30 September 2021 | | | | |
Fair value hedges¹ | | | | |
Interest rate | 1,005 | (1,006) | (1) | - |
Foreign exchange | 9 | (9) | - | - |
Cash flow hedges¹ | | | | |
Interest rate | (934) | 909 | (25) | 4 |
Foreign exchange | (10) | 10 | - | (1) |
Net investment hedges¹ | | | | |
Foreign exchange | 61 | (61) | - | - |

The Company

	Change in value of hedging instrument²	Change in value of hedged item	Hedge ineffectiveness recognised in profit or loss³	Amount reclassified from the cash flow hedge reserve or FCTR to profit or loss⁴
	$m	$m	$m	$m
As at 30 September 2022
Fair value hedges¹
Interest rate	1,570	(1,586)	(16)	-
Foreign exchange	(55)	55	-	-
Cash flow hedges¹
Interest rate	(3,643)	3,477	(166)	(13)
Foreign exchange	(4)	4	-	1
Net investment hedges¹
Foreign exchange	58	(58)	-	-

As at 30 September 2021 | | | | |
Fair value hedges¹ | | | | |
Interest rate | 731 | (734) | (3) | - |
Foreign exchange | 9 | (9) | - | - |
Cash flow hedges¹ | | | | |
Interest rate | (797) | 772 | (25) | (6) |
Foreign exchange | (10) | 10 | - | (1) |
Net investment hedges¹ | | | | |
Foreign exchange | (6) | 6 | - | - |

¹All hedging instruments are classified as derivative financial instruments.
²Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
³Recognised in Other operating income.
⁴Recognised in Net interest income and Other operating income.

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ANZ 2022 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The hedged items in relation to the Group’s fair value hedges are:

	Carrying amount	Accumulated fair value hedge adjustments on the hedged item	Balance sheet presentation
	Assets $m	Liabilities $m	Assets $m	Liabilities $m	Hedged risk
As at 30 September 2022
Fixed rate loans and advances	10,252	-	(369)	-	Interest rate
Fixed rate debt issuance	-	(51,531)	-	3,721	Interest rate
Fixed rate investment securities at FVOCI¹	53,915	-	(5,349)	-	Interest rate
Equity securities at FVOCI¹	604	-	75	-	Foreign exchange
Total	64,771	(51,531)	(5,643)	3,721

As at 30 September 2021 | | | | | |
Fixed rate loans and advances | 3,416 | - | 9 | - | Interest rate |
Fixed rate debt issuance | - | (53,885) | - | (999) | Interest rate |
Fixed rate investment securities at FVOCI¹ | 53,321 | - | (209) | - | Interest rate |
Equity securities at FVOCI¹ | 548 | - | 20 | - | Foreign exchange |
Total | 57,285 | (53,885) | (180) | (999) | |

¹The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment since accounting for the hedge relationship results in the transfer of the hedge adjustment out of Other comprehensive income into the Income Statement to match the profit or loss on the hedging instrument. The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$7 million (2021: $2 million).

The hedged items in relation to the Company’s fair value hedges are:

	Carrying amount	Accumulated fair value hedge adjustments on the hedged item	Balance sheet presentation
	Assets $m	Liabilities $m	Assets $m	Liabilities $m	Hedged risk
As at 30 September 2022
Fixed rate loans and advances	10,252	-	(369)	-	Interest rate
Fixed rate debt issuance	-	(37,141)	-	2,572	Interest rate
Fixed rate investment securities at FVOCI¹	44,038	-	(4,489)	-	Interest rate
Equity securities at FVOCI¹	604	-	75	-	Foreign exchange
Total	54,894	(37,141)	(4,783)	2,572

As at 30 September 2021 | | | | | |
Fixed rate loans and advances | 3,416 | - | 7 | - | Interest rate |
Fixed rate debt issuance | - | (38,222) | - | (769) | Interest rate |
Fixed rate investment securities at FVOCI¹ | 41,944 | - | 129 | - | Interest rate |
Equity securities at FVOCI¹ | 548 | - | 20 | - | Foreign exchange |
Total | 45,908 | (38,222) | 156 | (769) | |

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11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The hedged items in relation to the Group’s and the Company’s cash flow and net investment hedges are:

Consolidated

	Cash flow hedge reserve	Foreign currency translation reserve
	Continuing hedges $m	Discontinued hedges $m	Continuing hedges $m	Discontinued hedges $m
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances	(4,286)	19	-	-
Floating rate customer deposits	1,357	5	-	-
Foreign currency debt issuances	(1)	(1)	-	-
Highly probable forecast transactions	(7)	-	-	-
Net investment hedges
Foreign operations	-	-	43	(149)

As at 30 September 2021 | | | | | |
Cash flow hedges | | | | | |
Floating rate loans and advances | 546 | 20 | - | - | Interest rate |
Floating rate customer deposits | 4 | (6) | - | - | Interest rate |
Foreign currency debt issuances | (4) | (1) | - | - | Foreign exchange |
Highly probable forecast transactions | (1) | - | - | - | Foreign exchange |
Net investment hedges | | | | | |
Foreign operations | - | - | (19) | (149) | Foreign exchange |

The Company

	Cash flow hedge reserve	Foreign currency translation reserve
	Continuing hedges $m	Discontinued hedges $m	Continuing hedges $m	Discontinued hedges $m
As at 30 September 2022
Cash flow hedges
Floating rate loans and advances	(4,005)	11	-	-
Floating rate customer deposits	1,053	6	-	-
Foreign currency debt issuances	(1)	(1)	-	-
Highly probable forecast transactions	(7)	-	-	-
Net investment hedges
Foreign operations	-	-	88	(149)

As at 30 September 2021 | | | | | |
Cash flow hedges | | | | | |
Floating rate loans and advances | 541 | 11 | - | - | Interest rate |
Floating rate customer deposits | 8 | (6) | - | - | Interest rate |
Foreign currency debt issuances | (4) | (1) | - | - | Foreign exchange |
Highly probable forecast transactions | (1) | - | - | - | Foreign exchange |
Net investment hedges | | | | | |
Foreign operations | - | - | 30 | (149) | Foreign exchange |

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ANZ 2022 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS (continued)

The table below details the reconciliation of the Group’s cash flow hedge reserve by risk type:

	Interest rate $m	Foreign currency $m	Total $m
Consolidated
Balance at 1 October 2020	1,034	4	1,038
Fair value gains/(losses)	(909)	(10)	(919)
Transferred to profit or loss	4	(1)	3
Income taxes and others	269	2	271
Balance at 30 September 2021	398	(5)	393
Fair value gains/(losses)	(3,453)	(4)	(3,457)
Transferred to profit or loss	(13)	1	(12)
Income taxes and others	1,040	-	1,040
Balance at 30 September 2022	(2,028)	(8)	(2,036)

Hedges of net investments in a foreign operation resulted in a $62 million increase in FCTR during the year (2021: $61 million increase).# 11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

RECOGNITION AND MEASUREMENT

Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as a liability. Valuation adjustments are integral in determining the fair value of derivatives. This includes:
* a credit valuation adjustment to reflect the counterparty risk and/or event of default; and
* a funding valuation adjustment to account for funding costs and benefits in the derivatives portfolio.

Derecognition of assets and liabilities

We remove derivative assets from our Balance Sheet when the contracts expire or we have transferred substantially all the risks and rewards of ownership. We remove derivative liabilities from our Balance Sheet when the Group’s contractual obligations are discharged, cancelled or expired. With respect to derivatives cleared through a central clearing counterparty or exchange, derivative assets or liabilities may be derecognised in accordance with the principle above when collateral is settled, depending on the legal arrangements in place for each instrument.

Impact on the Income Statement

The recognition of gains or losses on derivative financial instruments depends on whether the derivative is held for trading or is designated in a hedging relationship. For derivative financial instruments held for trading, gains or losses from changes in the fair value are recognised in profit or loss. For an instrument designated in a hedging relationship, the recognition of gains or losses depends on the nature of the item being hedged. Refer to the table on page 138 for details of the recognition approach applied for each type of hedge accounting relationship. Sources of hedge ineffectiveness may arise from differences in the interest rate reference rate, margins, or rate set differences and differences in discounting between the hedged items and the hedging instruments.

Hedge effectiveness

To qualify for hedge accounting under AASB 139, a hedge relationship is expected to be highly effective. A hedge relationship is highly effective only if the following conditions are met:
* the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated (prospective effectiveness); and
* the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).

The Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date.

KEY JUDGEMENTS AND ESTIMATES

Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection of valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 19 Fair Value of Financial Assets and Financial Liabilities for further details.

The table below details the reconciliation of the Company’s cash flow hedge reserve by risk type:

	Interest rate	Foreign currency	Total
Balance at 1 October 2020	931	4	935
Fair value gains/(losses)	(772)	(10)	(782)
Transferred to profit or loss	(6)	(1)	(7)
Income taxes and others	236	2	238
Balance at 30 September 2021	389	(5)	384
Fair value gains/(losses)	(3,477)	(4)	(3,481)
Transferred to profit or loss	(13)	1	(12)
Income taxes and others	1,048	-	1,048
Balance at 30 September 2022	(2,053)	(8)	(2,061)

Hedges of net investments in a foreign operation resulted in a $58 million increase in FCTR during the year (2021: $6 million decrease).

12. INVESTMENT SECURITIES

Consolidated

	2022	2021
Investment securities measured at fair value through other comprehensive income
Debt securities	76,817	74,743
Equity securities	1,353	1,310
Investment securities measured at amortised cost
Debt securities1	7,943	7,031
Investment Securities measured at fair value through profit or loss
Debt securities	40	42
Total	86,153	83,126

Includes allowance for expected credit losses of $38 million (2021: $31 million) for the Group and $1 million (2021: $1 million) for the Company.

The maturity profile of investment securities is as follows:

Consolidated

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	No maturity	Total
As at 30 September 2022
Government securities	6,544	14,045	29,806	21,856	-	72,251
Corporate and financial institution securities	324	2,462	4,906	97	2	7,791
Other securities	429	423	543	3,363	-	4,758
Equity securities	-	-	-	-	1,353	1,353
Total	7,297	16,930	35,255	25,316	1,355	86,153

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	No maturity	Total
As at 30 September 2021
Government securities	6,396	12,984	32,179	19,382	-	70,941
Corporate and financial institution securities	285	1,179	5,701	110	-	7,275
Other securities	129	295	553	2,623	-	3,600
Equity securities	-	-	-	-	1,310	1,310
Total	6,810	14,458	38,433	22,115	1,310	83,126

During the year, the Group recognised a net gain (before tax) of $28 million (2021: $303 million) in Other operating income from the recycling of gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.

	2021	2022
Government securities	70,941	72,251
Corporate and financial institution securities	7,275	7,791
Other securities	3,600	4,758
Equity securities	1,310	1,353

The Company

	2022	2021
Investment securities measured at fair value through other comprehensive income
Debt securities	65,257	61,623
Equity securities	1,027	1,054
Investment securities measured at amortised cost
Debt securities1	6,115	5,263
Investment Securities measured at fair value through profit or loss
Debt securities	-	-
Total	72,399	67,940

Includes allowance for expected credit losses of $38 million (2021: $31 million) for the Group and $1 million (2021: $1 million) for the Company.

The maturity profile of investment securities is as follows:

The Company

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	No maturity	Total
As at 30 September 2022
Government securities	5,715	11,647	23,100	19,853	-	60,315
Corporate and financial institution securities	276	1,972	3,993	58	-	6,299
Other securities	429	423	543	3,363	-	4,758
Equity securities	-	-	-	-	1,027	1,027
Total	6,420	14,042	27,636	23,274	1,027	72,399

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	No maturity	Total
As at 30 September 2021
Government securities	5,453	11,646	24,390	16,350	-	57,839
Corporate and financial institution securities	175	830	4,371	71	-	5,447
Other securities	129	295	553	2,623	-	3,600
Equity securities	-	-	-	-	1,054	1,054
Total	5,757	12,771	29,314	19,044	1,054	67,940

During the year, the Company recognised a net gain (before tax) of $1 million (2021: $301 million) in Other operating income from the recycling of gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.

RECOGNITION AND MEASUREMENT

Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group’s customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the arrangement. Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is made, gains or losses 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. Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at the commencement of the Group’s financial asset disclosures on page 133. Additionally, expected credit losses associated with ‘Investment securities - debt securities at amortised cost’ and ‘Investment securities - debt securities at fair value through other comprehensive income’ are recognised and measured in accordance with the accounting policy outlined in Note 14 Allowance for Expected Credit Losses. For ‘Investment securities - debt securities at fair value through other comprehensive income’, the allowance for Expected Credit Loss (ECL) is recognised in the FVOCI reserve in equity with a corresponding charge to profit or loss.

KEY JUDGEMENTS AND ESTIMATES

Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 19 Fair Value of Financial Assets and Financial Liabilities for further details.

13. NET LOANS AND ADVANCES

The following table provides details of Net loans and advances for the Group and the Company:

	Consolidated	The Company
	2022	2021
	$m	$m
Overdrafts	5,266	5,360
Credit cards	6,755	6,570
Commercial bills	5,214	6,000
Term loans – housing	374,625	372,572
Term loans – non-housing	279,730	239,277
Other	2,035	2,985
Subtotal	673,625	632,764
Unearned income	(518)	(434)
Capitalised brokerage and other origination costs	2,882	1,434
Gross loans and advances	675,989	633,764
Allowance for expected credit losses (refer to Note 14)	(3,582)	(4,045)
Net loans and advances	672,407	629,719

Residual contractual maturity:

	Within one year	More than one year
Net loans and advances
2022	146,142	526,265
2021	125,952	503,767
Net loans and advances
2022	121,513	415,832
2021	98,214	390,273

Carried on Balance Sheet at:

	Amortised cost	Fair value through profit or loss
Net loans and advances
2022	667,732	4,675
2021	626,099	3,620
Net loans and advances
2022	533,082	4,263
2021	485,015	3,472

Amortised over the expected life of the loan.
Capitalised brokerage and other origination costs.# 14. ALLOWANCE FOR EXPECTED CREDIT LOSSES

During 2022, the Group revised its accounting treatment of ongoing trail commission payable to mortgage brokers to recognise a liability within Payables and other liabilities equal to the present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs in Net loans and advances. The balance at 30 September 2022 was $1,320 million for the Group and the Company. Comparatives have not been restated. 3. Net loans and advances of the Group and the Company include a balance of $667 million relating to the Share Investing lending portfolio that is in the process of being sold with completion anticipated in 2023.

RECOGNITION AND MEASUREMENT

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are facilities the Group provides directly to customers or through third party channels. Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance, which are primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then measure loans and advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses, or at fair value when they are specifically designated on initial recognition as fair value through profit or loss, are classified as held for sale or when held for trading. We classify contracts to lease assets and hire purchase agreements as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the customer or an unrelated third party. We include these facilities in ‘Other’ in the table above. The Group enters into transactions in which it transfers financial assets that are recognised on its Balance Sheet. When the Group retains substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Group’s Balance Sheet, however if substantially all the risks and rewards are transferred, the Group derecognises the asset. If the risks and rewards are partially retained and control over the asset is lost, the Group derecognises the asset. If control over the asset is not lost, the Group continues to recognise the asset to the extent of its continuing involvement. We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate. Assets disclosed as Net loans and advances are subject to the general classification and measurement policy for financial assets outlined on page 133. Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in accordance with the accounting policy outlined in Note 14 Allowance for Expected Credit Losses.

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14. ALLOWANCE FOR EXPECTED CREDIT LOSSES

2022	2021
Consolidated	$m
Collectively assessed	$m
Individually assessed	$m
Total	$m
Net loans and advances at amortised cost	3,049
Off-balance sheet commitments	766
Investment securities - debt securities at amortised cost	38
Total	3,853
Other comprehensive income
Investment securities - debt securities at FVOCI¹	10

2022	2021
The Company	$m
Collectively assessed	$m
Individually assessed	$m
Total	$m
Net loans and advances at amortised cost	2,500
Off-balance sheet commitments	668
Investment securities - debt securities at amortised cost	1
Total	3,169
Other comprehensive income
Investment securities - debt securities at FVOCI¹	7

For FVOCI assets, the allowance for ECL does not alter the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding charge to profit or loss.

The following tables present the movement in the allowance for ECL for the year.

Net loans and advances - at amortised cost

Allowance for ECL is included in Net loans and advances.

Consolidated	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m
As at 1 October 2020	1,204	2,465	461	851	4,981
Transfer between stages	399	(421)	(137)	159	-
New and increased provisions (net of releases)	(639)	(53)	90	663	61
Write-backs	-	-	-	(365)	(365)
Bad debts written off (excluding recoveries)	-	-	-	(626)	(626)
Foreign currency translation and other movements²	4	3	3	(16)	(6)
As at 30 September 2021	968	1,994	417	666	4,045
Transfer between stages	219	(224)	(95)	100	-
New and increased provisions (net of releases)	(48)	(202)	42	420	212
Write-backs	-	-	-	(222)	(222)
Bad debts written off (excluding recoveries)	-	-	-	(428)	(428)
Foreign currency translation and other movements²	2	(20)	(4)	(3)	(25)
As at 30 September 2022	1,141	1,548	360	533	3,582

The Group’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impacts of discount unwind on individually assessed allowance for ECL or the impact of divestments completed during the year.

150
ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

The Company	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m
As at 1 October 2020	1,028	2,114	373	704	4,219
Transfer between stages	392	(382)	(130)	120	-
New and increased provisions (net of releases)	(620)	(49)	106	619	56
Write-backs	-	-	-	(308)	(308)
Bad debts written off (excluding recoveries)	-	-	-	(556)	(556)
Foreign currency translation and other movements²	(3)	(4)	(1)	(16)	(24)
As at 30 September 2021	797	1,679	348	563	3,387
Transfer between stages	192	(201)	(84)	93	-
New and increased provisions (net of releases)	(59)	(220)	31	354	106
Write-backs	-	-	-	(193)	(193)
Bad debts written off (excluding recoveries)	-	-	-	(386)	(386)
Foreign currency translation and other movements²	16	1	-	(6)	11
As at 30 September 2022	946	1,259	295	425	2,925

The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impact of discount unwind on individually assessed allowance for ECL.

Off-balance sheet commitments - undrawn and contingent facilities

Allowance for ECL is included in Other provisions.

Consolidated	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m
As at 1 October 2020	596	239	23	40	898
Transfer between stages	51	(49)	(3)	1	-
New and increased provisions (net of releases)	(92)	19	-	1	(72)
Write-backs	-	-	-	(21)	(21)
Foreign currency translation	-	2	(1)	-	1
As at 30 September 2021	555	211	19	21	806
Transfer between stages	40	(34)	(8)	2	-
New and increased provisions (net of releases)	7	(28)	18	(2)	(5)
Write-backs	-	-	-	(11)	(11)
Foreign currency translation and other movements²	(9)	(5)	-	(1)	(15)
As at 30 September 2022	593	144	29	9	775

The Group’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include impact of divestments completed during the year.

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ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

The Company	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m
As at 1 October 2020	513	183	15	20	731
Transfer between stages	45	(41)	(5)	1	-
New and increased provisions (net of releases)	(72)	28	2	1	(41)
Write-backs	-	-	-	(15)	(15)
Foreign currency translation	(2)	1	-	-	(1)
As at 30 September 2021	484	171	12	7	674
Transfer between stages	33	(27)	(6)	-	-
New and increased provisions (net of releases)	17	(29)	20	-	8
Write-backs	-	-	-	(2)	(2)
Foreign currency translation and other movements²	(4)	(3)	-	-	(7)
As at 30 September 2022	530	112	26	5	673

The Company’s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
Other movements include the impact of divestments completed during the year.

Investment securities - debt securities at amortised cost

Allowance for ECL is included in Investment securities.

Consolidated	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m	Total $m
As at 30 September 2021	31	-	-	-	31
As at 30 September 2022	38	-	-	-	38

The Company	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m	Total $m
As at 30 September 2021	1	-	-	-	1
As at 30 September 2022	1	-	-	-	1

Investment securities - debt securities at FVOCI

As FVOCI assets are measured at fair value, there is no separate allowance for ECL. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding charge to profit or loss.

Consolidated	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m	Total $m
As at 30 September 2021	11	-	-	-	11
As at 30 September 2022	10	-	-	-	10

The Company	Stage 1 $m	Stage 2 $m	Stage 3 $m	Collectively assessed $m	Individually assessed $m	Total $m
As at 30 September 2021	7	-	-	-	7
As at 30 September 2022	7	-	-	-	7

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14.# 14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT

Credit impairment charge/(release) analysis

	Consolidated	The Company	Consolidated	The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
New and increased provisions (net of releases)¹‚²
- Collectively assessed	(311)	(823)	(333)	(726)
- Individually assessed	520	824	447	741
Write-backs³	(233)	(386)	(195)	(323)
Recoveries of amounts previously written-off	(208)	(182)	(184)	(161)
Total credit impairment charge	(232)	(567)	(265)	(469)

Includes the impact of transfers between collectively assessed and individually assessed.
New and increased provisions (net of releases) includes:

	Consolidated $m	Individually assessed $m	Collectively assessed $m	Individually assessed $m	Collectively assessed $m	Individually assessed $m	Collectively assessed $m	Individually assessed $m
	2022	2021	2022	2021	2022	2021	2022	2021
Net loans and advances at amortised cost	(308)	520	(761)	822	(341)	447	(683)	739
Off-balance sheet commitments	(5)	-	(74)	2	8	-	(43)	2
Investment securities - debt securities at amortised cost	3	-	11	-	-	-	-	-
Investment securities - debt securities at FVOCI	(1)	-	1	-	-	-	-	-
Total	(311)	520	(823)	824	(333)	447	(726)	741

Consists of write-backs in Net loans and advances at amortised cost of $222 million (2021: $365 million) for the Group and $193 million (2021: $308 million) for the Company, and Off-balance sheet commitments of $11 million (2021: $21 million) for the Group and $2 million (2021: $15 million) for the Company. The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity is $143 million (2021: $168 million) for the Group, and $128 million (2021: $138 million) for the Company.

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14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

RECOGNITION AND MEASUREMENT

EXPECTED CREDIT LOSS MODEL

The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and takes into account the time value of money, past events, current conditions and forecasts of future economic conditions. Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on 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 (SICR) since origination, an allowance equivalent to 12 months ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next 12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are estimated based on default events that are possible over the remaining time to maturity.
Stage 2: Where there has been a SICR since origination, an allowance equivalent to lifetime ECL is recognised reflecting expected credit losses resulting from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification with ECL measured accordingly.
Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised. Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis when transferred to Stage 3.

MEASUREMENT OF EXPECTED CREDIT LOSS

ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:

Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;
Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest, expected additional drawdowns and accrued interest; and
Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD, taking into account direct and indirect recovery costs.

These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.

EXPECTED LIFE

When estimating ECL for exposures in Stage 2 and 3, the Group considers the expected lifetime over which it is exposed to credit risk. For non-retail portfolios, the Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Group’s contractual right to withdraw a facility as part of a contractually agreed annual review, after taking into account the applicable notice period. For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour and events that give rise to substantial modifications.

DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS

The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all portfolios. This definition is also in line with the regulatory definition of default. 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 default. When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the Group’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of amounts previously written-off are recorded as a release to the credit impairment charge in the income statement.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

RECOGNITION AND MEASUREMENT (continued)

MODIFIED FINANCIAL ASSETS

If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered substantial. This assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall instrument risk profile; for example, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is considered non-substantial, the existing financial asset is not derecognised and its date of origination continues to be used to determine SICR. Where a modification is considered substantial, the existing financial asset is derecognised and a new financial asset is recognised at its fair value on the modification date, which also becomes the date of origination used to determine SICR for this new asset.

SIGNIFICANT INCREASE IN CREDIT RISK (SICR)

Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Group considers both qualitative and quantitative information:

i. Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility since origination and is measured by application of thresholds. For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date to the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least annually or more frequently when an event occurs which could affect the credit risk of the customer. For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime probability of default may increase significantly if:
* there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
* there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.

ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only, facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.

FORWARD-LOOKING INFORMATION

Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since origination and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group considers four probability-weighted forecast economic scenarios as follows:

i. Base case scenario
The base case scenario is ANZ’s view of future macroeconomic conditions. It reflects management’s assumptions used for strategic planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process the Group applies in strategic and capital planning over a 3-year time horizon;

ii. Upside and

iii.# 14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

RECOGNITION AND MEASUREMENT (continued)

FORWARD-LOOKING INFORMATION (continued)

The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic events and uncertainty over long term horizons; and iv.Severe downside scenario To better reflect the current economic conditions and geopolitical environment, the Group has altered the severe downside scenario in 2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Group- wide stress testing.

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14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

RECOGNITION AND MEASUREMENT (continued)

FORWARD-LOOKING INFORMATION (continued)

The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models) depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates, GDP growth rates, house price indices, commercial property price indices and consumer price indices. Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case economic scenario, as well as specific portfolio considerations where required. The Group Asset and Liability Committee (GALCO) is responsible for reviewing and approving the base case economic scenario and the Credit and Market Risk Committee (CMRC) approves the probability weights applied to each scenario. Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately addressed in the modelling process. CMRC is responsible for approving such adjustments.

KEY JUDGEMENTS AND ESTIMATES

Collectively assessed allowance for expected credit losses

In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:
xthe selection of an estimation technique or modelling methodology; and
xthe selection of inputs for those models, and the interdependencies between those inputs.

The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between those inputs, and highlights significant changes during the current period. The judgements and associated assumptions have been made within the context of the uncertainty of how various factors might impact the global economy and reflect historical experience and other factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the circumstances. The Group’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.

Judgement/Assumption	Description	Considerations for the year ended 30 September 2022
Determining when a Significant Increase in Credit Risk has occurred	In the measurement of ECL, judgement is involved in setting the rules and trigger points to determine whether there has been a SICR since initial recognition of a loan, which would result in the financial asset moving from Stage 1 to Stage 2. This is a key area of judgement since transition from Stage 1 to Stage 2 increases the ECL from an allowance based on the probability of default in the next 12 months, to an allowance for lifetime expected credit losses. Subsequent decreases in credit risk resulting in transition from Stage 2 to Stage 1 may similarly result in significant changes in the ECL allowance. The setting of precise trigger points requires judgement which may have a material impact upon the size of the ECL allowance. The Group monitors the effectiveness of SICR criteria on an ongoing basis.	 The Group has adjusted the ECL this period to account for expected deterioration in credit-worthiness of certain customer segments which are considered particularly vulnerable to economic pressures such as higher interest rates, increasing inflation and low wage growth.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES (continued)

Judgement/Assumption	Description	Considerations for the year ended 30 September 2022
Measuring both 12- month and lifetime credit losses	The probability of default (PD), loss given default (LGD) and exposure at default (EAD) credit risk parameters used in determining ECL are point-in- time measures reflecting the relevant forward- looking information determined by management. Judgement is involved in determining which forward-looking information variables are relevant for particular lending portfolios and for determining each portfolio’s point-in-time sensitivity.	The modelled outcome as at 30 September 2021 included a model adjustment to recognise increased model uncertainties as a result of COVID-19. With these uncertainties largely being appropriately reflected in the underlying models, the COVID-19 model adjustments have been removed. In addition, judgement is required where behavioural characteristics are applied in estimating the lifetime of a facility to be used in measuring ECL. There were no material changes to the policies.
Base case economic forecast	The Group derives a forward-looking ‘base case’ economic scenario which reflects ANZ Research - Economics’ (ANZ Economics) view of future macroeconomic conditions. There have been no changes to the types of forward-looking variables (key economic drivers) used as model inputs.	As at 30 September 2022, the base case assumptions have been updated to reflect the relaxation of COVID-19 related restrictions, continuing supply chain and labour market pressures, and rapidly increasing global inflation and interest rate rises, as well as lower growth in key economies. The expected outcomes of key economic drivers for the base case scenario at 30 September 2022 are described below under the heading ‘Base case economic forecast assumptions’.
Probability weighting of each economic scenario (base case, upside, downside and severe downside scenarios)	Probability weighting of each economic scenario is determined by management considering the risks and uncertainties surrounding the base case economic scenario at each measurement date. The assigned probability weightings in Australia, New Zealand and Rest of world are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. To better reflect the current economic conditions and geopolitical environment, the Group has altered the severe downside scenario from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Group-wide stress testing. The key considerations for probability weightings in the current period include the emergence from COVID-19 restrictions, how customers will respond to interest rate rises and higher inflation, and potential impacts of lower growth prospects globally. Weightings for current and prior periods are as detailed in the section on ‘Probability weightings’ below.	1. The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.

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14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES (continued)

Judgement/Assumption	Description	Considerations for the year ended 30 September 2022
Management temporary adjustments	Management temporary adjustments to the ECL allowance are used in circumstances where it is judged that our existing inputs, assumptions and model techniques do not capture all the risk factors relevant to our lending portfolios. Emerging local or global macroeconomic, microeconomic or political events, and natural disasters that are not incorporated into our current parameters, risk ratings, or forward-looking information are examples of such circumstances. The use of management temporary adjustments may impact the amount of ECL recognised.	As at 30 September 2022, Management no longer consider that a separate management temporary adjustment is necessary for the uncertainty associated with COVID-19. Management have however included adjustments to accommodate uncertainty associated with rising inflation, rapidly increasing interest rates, and ongoing supply chain and labour market pressures. In addition, management overlays have been made for risks particular to retail, including home loans and small business in Australia and NZ, for personal, and for tourism in the Pacific.

Base case economic forecast assumptions

Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of the ECL balance. The economic drivers of the base case economic forecasts, reflective of ANZ Economics’ view of future macroeconomic conditions used at 30 September 2022 are set out below. For the years following the near term forecasts below, the ECL models project future year economic conditions which include an assumption of eventual reversion to mid-cycle economic conditions.# ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES (continued)

The base case economic forecasts for Australia, New Zealand and Rest of World reflect the expected slow down in economic activity globally from higher interest rates and increasing inflation, along with declining residential property prices until 2024. Tight labour markets are expected to persist until central banks’ monetary policies have the intended impact of reducing demand and bringing inflation down.

Probability weightings

Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base case economic scenario, including the uncertainties described above. The base case scenario represents an overall deterioration in the forecasts since September 2021 for all three geographical segments. Given uncertainties associated with how the economy may respond to rapidly moving factors including inflation and lower economic growth globally, the average upside case weighting across geographies has been reduced to 0% (Sep 21: 5%), the base case weighting has been increased to 45% (Sep 21: 41%), and the severe downside scenario increased to 15% (Sep 21: 6%). The assigned probability weightings in Australia, New Zealand and Rest of World are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography to provide estimates of the possible loss outcomes and taking into account short and long term inter-relationships within the Group’s credit portfolios. The average weightings applied across the Group are set out below:

	Consolidated 2022	Consolidated 2021	The Company 2022	The Company 2021
Base	45.0%	41.3%	45.0%	40.0%
Upside	0.0%	5.2%	0.0%	5.4%
Downside	40.0%	47.7%	40.0%	48.8%
Severe downside	15.0%	5.8%	15.0%	5.8%

ECL - Sensitivity analysis

Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future periods, expected credit losses reported by the Group should be considered as a best estimate within a range of possible estimates. The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2022:

	Consolidated ECL $m	Consolidated Impact $m	The Company ECL $m	The Company Impact $m
If 1% of Stage 1 facilities were included in Stage 2	3,936	83	3,242	73
If 1% of Stage 2 facilities were included in Stage 1	3,848	(5)	3,165	(4)
100% upside scenario	1,423	(2,430)	1,190	(1,797)
100% base scenario	1,750	(2,103)	1,454	(1,715)
100% downside scenario	3,239	(614)	2,699	(470)
100% severe downside scenario	6,951	3,098	5,725	2,556

Individually assessed allowance for expected credit losses

In estimating individually assessed ECL, the Group makes judgements and assumptions in relation to expected repayments, the realisable value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process. Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties described above.

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FINANCIAL LIABILITIES

Outlined below is a description of how we classify and measure financial liabilities relevant to the subsequent note disclosures.

CLASSIFICATION AND MEASUREMENT

Financial liabilities

Financial liabilities are measured at amortised cost, or fair value through profit or loss (FVTPL) when they are held for trading. Additionally, financial liabilities can be designated at FVTPL where:

the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
a group of financial liabilities are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management strategy; or
the financial liability contains one or more embedded derivatives unless:
a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or
b) the embedded derivative is closely related to the host financial liability.

Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included in Other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

15. DEPOSITS AND OTHER BORROWINGS

	Consolidated 2022 $m	Consolidated 2021 $m	The Company 2022 $m	The Company 2021 $m
Certificates of deposit	34,049	37,708	32,411	35,696
Term deposits	200,064	177,081	157,479	136,067
On demand and short term deposits	369,460	366,755	310,857	303,381
Deposits not bearing interest	50,906	49,746	29,416	26,836
Deposits from banks & securities sold under repurchase agreements	103,580	86,082	98,825	83,294
Commercial paper and other borrowings	39,222	25,684	36,619	21,449
Deposits and other borrowings	797,281	743,056	665,607	606,723
Residual contractual maturity:
Within one year	781,573	717,889	654,997	584,816
More than one year	15,708	25,167	10,610	21,907
Deposits and other borrowings	797,281	743,056	665,607	606,723
Carried on Balance Sheet at:
Amortised cost	794,621	738,772	665,567	606,673
Fair value through profit or loss	2,660	4,284	40	50
Deposits and other borrowings	797,281	743,056	665,607	606,723

Certificates of deposit	Term deposits	On demand and short term deposits	Deposits not bearing interest	Deposits from banks & securities sold under repurchase agreements	Commercial paper and other borrowings
37,708	177,081	366,755	49,746	86,082	25,684

34,049	200,064	369,460	50,906	103,580	39,222

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RECOGNITION AND MEASUREMENT

For deposits and other borrowings that:

are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the effective interest rate method; and
are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them as measured at fair value through profit or loss. Refer to Note 19 Fair Value of Financial Assets and Financial Liabilities for further details.

For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in the Group’s own credit risk in Other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise directly in profit or loss. Once we have recognised an amount in Other comprehensive income, we do not later reclassify it to profit or loss.

Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since the risks and rewards of ownership remain with the Group. Over the life of the repurchase agreement, we recognise the difference between the sale price and the repurchase price and charge it to interest expense in profit or loss.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

16. PAYABLES AND OTHER LIABILITIES

	Consolidated 2022 $m	Consolidated 2021 $m	The Company 2022 $m	The Company 2021 $m
Payables and accruals	2,896	2,062	2,189	1,526
Liabilities at fair value	3,239	3,913	2,857	3,245
Lease liabilities	1,040	1,245	1,628	1,831
Trail commission liabilities	1,320	-	1,320	-
Other liabilities	1,340	1,427	568	642
Payables and other liabilities	9,835	8,647	8,562	7,244

During 2022, the Group revised its treatment of ongoing trail commission payable to mortgage brokers to recognise a liability within Payables and other liabilities equal to the present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs in Net loans and advances. The balance at 30 September 2022 was $1,320 million for the Group and the Company. Comparatives have not been restated.

RECOGNITION AND MEASUREMENT

The Group recognises liabilities when there is a present obligation to transfer economic resources as a result of past events. Below is the measurement basis for each item classified as other liabilities:

Payables, accruals and other liabilities are measured at the contractual amount payable or the best estimate of consideration required to settle the payable.
Liabilities at fair value are trading liabilities measured based on quoted prices in active markets.
Lease liabilities are initially measured at the present value of the future lease payments using the Group’s incremental borrowing rate at the lease commencement date. The carrying amount is then subsequently adjusted to reflect the interest on the lease liability, lease payments that have been made and any lease reassessments or modifications.
Trail commission liabilities are measured based on the present value of expected future trail commission payments taking into consideration average behavioural loan life and outstanding balances of broker originated loans.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17.# 17. DEBT ISSUANCES

The Group uses a variety of funding programmes to issue senior debt (including covered bonds and securitisations) and subordinated debt. The difference between senior debt and subordinated debt is that holders of senior debt take priority over holders of subordinated debt owed by the relevant issuer. In the winding up of the relevant issuer, the subordinated debt will be repaid by the relevant issuer only after the repayment of claims of its depositors, other creditors and the senior debt holders.

Consolidated

	The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
Senior debt	52,324	58,952	40,325	45,348
Covered bonds	12,967	15,399	9,371	11,342
Securitisation	1,115	1,424	-	-
Total unsubordinated debt	66,406	75,775	49,696	56,690
Subordinated debt
- Additional Tier 1 capital	7,705	8,506	7,763	8,191
- Tier 2 capital	17,907	16,207	17,907	16,207
- Other subordinated debt securities¹	1,716	566	462	-
Total subordinated debt	27,328	25,279	26,132	24,398
Total debt issued	93,734	101,054	75,828	81,088
Residual contractual maturity²:
Within one year	25,208	22,621	21,990	18,512
More than one year	66,660	76,594	51,929	60,605
No maturity date (instruments in perpetuity)	1,866	1,839	1,909	1,971
Total debt issued	93,734	101,054	75,828	81,088

This includes the Company’s USD 300 million perpetual subordinated debt and the subordinated debt issued by ANZ Bank New Zealand. The Company’s USD 300 million perpetual subordinated notes were included in the Group’s Tier 2 capital in 2021 pursuant to APRA’s Basel III transition arrangements which ended in December 2021.
Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).

TOTAL DEBT ISSUED BY CURRENCY

The table below shows the Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.

Consolidated

	The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
USD United States dollars	25,527	29,788	17,206	22,354
EUR Euro	19,923	22,984	14,049	15,294
AUD Australian dollars	36,398	35,709	35,259	34,299
NZD New Zealand dollars	1,628	3,276	46	839
JPY Japanese yen	2,159	1,854	2,159	1,853
CHF Swiss francs	954	940	-	-
GBP Pounds sterling	5,261	4,286	5,261	4,287
HKD Hong Kong dollars	771	727	771	727
Other Chinese yuan, Norwegian kroner, Singapore dollars and Canadian dollars	1,113	1,490	1,077	1,435
Total debt issued	93,734	101,054	75,828	81,088

SUBORDINATED DEBT

At 30 September 2022, all subordinated debt issued by the Company qualifies as regulatory capital for the Group (other than the Company’s USD 300 million perpetual subordinated notes – refer to commentary below). Depending on their terms and conditions, the Company’s subordinated debt instruments are classified as either Additional Tier 1 (AT1) capital for the Group (in the case of the ANZ Capital Notes (ANZ CN) and ANZ Capital Securities (ANZ CS)), or Tier 2 capital (in the case of the Company’s term subordinated notes) for APRA’s capital adequacy purposes.

Subordinated debt issued externally by ANZ Bank New Zealand Limited (ANZ Bank New Zealand) will constitute subordinated debt of both ANZ Bank New Zealand and the Group. Whilst it will constitute tier 2 capital for ANZ Bank New Zealand for the purposes of the Reserve Bank of New Zealand’s (RBNZ) capital requirements, it will not constitute Tier 2 capital for the Group as the terms of the subordinated debt does not satisfy APRA’s capital requirements.

Tier 2 capital instruments rank ahead of AT1 capital instruments, and AT1 capital instruments rank only ahead of ordinary shares, in any liquidation event impacting the issuer of the instruments.

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17. DEBT ISSUANCES (continued)

AT1 Capital

All outstanding AT1 capital instruments of the Company are Basel III fully compliant instruments (refer to Note 25 Capital Management for further information about Basel III). Each of the ANZ CN and ANZ CS rank equally with each other. Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions (including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZ ordinary shares.

Where specified, the AT1 capital instruments provide the issuer with an early redemption or conversion option on a specified date and in certain other circumstances (such as a tax or regulatory event). This redemption option is subject to APRA’s prior written approval.

Each of the AT1 capital instruments will immediately convert into a variable number of ANZ ordinary shares (based on the average market price of the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZ ordinary shares) if:
* The Group’s or the Company’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
* APRA notifies the Company that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent support), it considers that the Company would become non-viable – known as a Non-Viability Trigger Event.

Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZ ordinary shares (based on the average market price of the shares immediately prior to conversion less a 1% discount):
* on a specified mandatory conversion date; or
* on an earlier date under certain circumstances as set out in the terms.

However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.

Preference shares issued externally by ANZ Bank New Zealand will constitute additional tier 1 capital for ANZ Bank New Zealand for the purposes of the RBNZ’s capital requirements, however they will not constitute Additional Tier 1 capital for the Group as the terms of the preference shares do not satisfy APRA’s capital requirements. The preference shares are included within non-controlling interests in Note 24 Shareholders’ Equity.

The tables below show the key details of the Group’s AT1 capital instruments on issue at 30 September in both the current and prior years:

Consolidated

	The Company
	2022	2021	2022	2021
	$m	$m	$m	$m
Additional Tier 1 capital (perpetual subordinated securities)¹
ANZ Capital Notes (ANZ CN)
AUD 1,610m ANZ CN2²	-	1,609	-	1,609
AUD 970m ANZ CN3	970	968	985	998
AUD 1,622m ANZ CN4	1,619	1,617	1,619	1,617
AUD 931m ANZ CN5	928	927	928	927
AUD 1,500m ANZ CN6	1,487	1,486	1,487	1,486
AUD 1,310m ANZ CN7	1,297	-	1,297	-
ANZ Capital Securities (ANZ CS)
USD 1,000m ANZ Capital Securities	1,404	1,422	1,447	1,554
ANZ NZ Capital Notes (ANZ NZ CN)
NZD 500m ANZ NZ Capital Notes³	-	477	-	-
Total Additional Tier 1 capital⁴	7,705	8,506	7,763	8,191

Carrying values are net of issuance costs.
All of the ANZ Capital Notes 2 were redeemed on 24 March 2022 with approximately $860 million of the proceeds from redemption reinvested into ANZ Capital Notes 7 on the same date.
All of the ANZ NZ Capital Notes were redeemed by ANZ Bank New Zealand Limited on 31 December 2021.
This forms part of qualifying Additional Tier 1 capital. Refer to Note 25 Capital Management for further details.

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17. DEBT ISSUANCES (continued)

ANZ Capital Notes (ANZ CN)

	CN2	CN3	CN4
Issuer	ANZ	ANZ, acting through its New Zealand branch	ANZ
Issue date	31 March 2014	5 March 2015	27 September 2016
Issue amount	$1,610 million	$970 million	$1,622 million
Face value	$100	$100	$100
Distribution frequency	Semi-annually in arrears	Semi-annually in arrears	Quarterly in arrears
Distribution rate	Floating rate: (180 day Bank Bill rate +3.25%)x(1- Australian corporate tax rate)	Floating rate: (180 day Bank Bill rate +3.6%)x(1-Australian corporate tax rate)	Floating rate: (90 day Bank Bill rate +4.7%)x(1-Australian corporate tax rate)
Issuer’s early redemption or conversion option	24 March 2022¹	24 March 2023	20 March 2024
Mandatory conversion date	24 March 2024²	24 March 2025	20 March 2026
Common equity capital trigger event	Yes	Yes	Yes
Non-viability trigger event	Yes	Yes	Yes
Carrying value (net of issue costs)	$nil (2021: $1,609 million)	$970 million (2021: $968 million)	$1,619 million (2021: $1,617 million)

	CN5	CN6	CN7
Issuer	ANZ	ANZ	ANZ
Issue date	28 September 2017	8 July 2021	24 March 2022
Issue amount	$931 million	$1,500 million	$1,310 million
Face value	$100	$100	$100
Distribution frequency	Quarterly in arrears	Quarterly in arrears	Quarterly in arrears
Distribution rate	Floating rate: (90 day Bank Bill rate +3.8%)x(1-Australian corporate tax rate)	Floating rate: (90 day Bank Bill rate +3.0%)x(1-Australian corporate tax rate)	Floating rate: (90 day Bank Bill rate +2.7%)x(1-Australian corporate tax rate)
Issuer’s early redemption or conversion option	20 March 2025	20 March 2028	20 March 2029
Mandatory conversion date	20 March 2027	20 September 2030	20 September 2031
Common equity capital trigger event	Yes	Yes	Yes
Non-viability trigger event	Yes	Yes	Yes
Carrying value (net of issue costs)	$928 million (2021: $927 million)	$1,487 million (2021: $1,486 million)	$1,297 million (2021: $nil)

All of the ANZ Capital Notes 2 were redeemed on 24 March 2022 with approximately $860 million of the proceeds from redemption reinvested into ANZ Capital Notes 7 on the same date.
The mandatory conversion date is no longer applicable as all of CN2 has been redeemed.

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How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

17.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17. DEBT ISSUANCES (continued)

DEBT ISSUANCES

	ANZ Capital Securities (ANZ CS) Issuer ANZ, acting through its London branch	ANZ NZ Capital Notes (ANZ NZ CN)¹ Issuer ANZ Bank New Zealand Limited
Issue date	15 June 2016	31 March 2015
Issue amount	USD 1,000 million	NZD 500 million
Face value	Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that	NZD 1
Interest frequency	Semi-annually in arrears	Quarterly in arrears
Interest rate	Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary to a floating rate: 5 year USD mid-market swap rate + 5.168%	Fixed at 7.2% p.a. until 25 May 2020. The rate reset in May 2020 to a floating rate: New Zealand 3 month bank bill rate + 3.5%
		Interest payments are subject to ANZ Bank New Zealand’s absolute discretion and certain payment conditions (including APRA and RBNZ requirements)
Issuer’s early redemption option	15 June 2026 and each 5 year anniversary	The option was not exercised on 25 May 2020 and has expired
Mandatory conversion date		25 May 2022
Common equity capital trigger event	Yes	Yes
Non-viability trigger event	Yes	Yes
Carrying value (net of issue costs)	$1,404 million (2021: $1,422 million)	$nil (2021: $477 million)

All of the ANZ NZ CNs were redeemed by ANZ Bank New Zealand Limited on 31 December 2021.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17. DEBT ISSUANCES (continued)

TIER 2 CAPITAL

Convertible term subordinated notes issued by the Company are Basel III fully compliant instruments. If a Non-Viability Trigger Event occurs, each of the convertible term subordinated notes will immediately convert into ANZ ordinary shares (based on the average market price of the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number).

The table below shows the Tier 2 capital subordinated debt the Group holds at 30 September in both the current and prior year:

	Consolidated	The Company
	2022	2021
	$m	$m
	2022	2021
	$m	$m
Basel III transitional subordinated notes (perpetual)¹
USD 300m	Perpetual	Each semi-annual interest payment date
Total Basel III transitional subordinated notes	-	417
Tier 2 capital (term subordinated notes)
USD 800m	2024	N/A
SGD 500m	2027	2022
AUD 200m	2027	2022
JPY 20,000m	2026	N/A
USD 1,500m	2026	N/A
JPY 10,000m	2028	2023
AUD 225m	2032	2027
AUD 1,750m	2029	2024
EUR 1,000m	2029	2024
AUD 265m	2039	N/A
USD 1,250m	2030	2025
AUD 1,250m	2031	2026
USD 1,500m	2035	2030
AUD 330m	2040	N/A
AUD 195m	2040	N/A
EUR 750m	2031	2026
GBP 500m	2031	2026
AUD 1,450m	2032	2027
AUD 300m	2032	2027
JPY 59,400m	2032	2027
SGD 600m	2032	2027
AUD 900m	2034	2029
Total Basel III fully compliant subordinated notes	17,907	15,790
Total Tier 2 capital²,³	17,907	16,207

The Company’s USD 300 million perpetual subordinated notes were included in the Group’s Tier 2 capital in 2021 pursuant to APRA’s Basel III transition arrangements, which ended in December 2021. In 2022 this has been included in Other subordinated debt securities.
Carrying values are net of issuance costs, and, where applicable, include fair value hedge accounting adjustments.
This forms part of qualifying Tier 2 capital. Refer to Note 25 Capital Management for further details.

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17. DEBT ISSUANCES (continued)

OTHER SUBORDINATED DEBT SECURITIES

The Company’s USD 300 million perpetual subordinated notes no longer form a component part of regulatory capital for the Group (as APRA’s transitional Basel III capital treatment ceased to apply from January 2022). These subordinated notes do not contain a Non-Viability Trigger Event. A subsidiary of the Group, ANZ Bank New Zealand, issued NZD 600 million of unsecured subordinated notes in September 2021 and USD 500 million of unsecured subordinated notes in August 2022. Whilst these subordinated notes constitute tier 2 capital under RBNZ requirements, the subordinated notes do not (among other things) contain a Non-Viability Trigger Event and therefore do not meet APRA’s requirements for Tier 2 capital instruments in order to qualify as regulatory capital for the Group.

	Consolidated	The Company
	2022	2021
	$m	$m
	2022	2021
	$m	$m
Non-Basel III compliant perpetual subordinated notes issued by the Company
USD 300m	Perpetual	Each semi-annual interest payment date
Term subordinated notes issued by ANZ Bank New Zealand Limited
NZD 600m	2031	2026
USD 500m	2032	2027
Other subordinated debt	1,716	566

Subject to APRA’s or RBNZ’s prior approval (as applicable).
The Company’s USD 300 million perpetual subordinated notes were included in the Group’s Tier 2 capital in 2021 pursuant to APRA’s Basel III transition arrangements, which ended in December 2021.

RECOGNITION AND MEASUREMENT

Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at fair value through profit or loss. Interest expense on debt issuances is recognised using the effective interest rate method. Where the Group enters into a fair value hedge accounting relationship, the fair value attributable to the hedge risk is reflected in adjustments to the carrying value of the debt. Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are considered to contain embedded derivatives that we account for separately at fair value through profit or loss. The embedded derivatives arise because the amount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they have no significant value as of the reporting date given the remote nature of those trigger events.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. FINANCIAL RISK MANAGEMENT

RISK MANAGEMENT FRAMEWORK AND MODEL INTRODUCTION

The use of financial instruments is fundamental to the Group’s businesses of providing banking and other financial services to our customers. The associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group’s key material risks. We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governance and Risk Management sections of this Annual Report. This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.

Key material financial risks

Key sections applicable to this risk

Credit risk
The risk of financial loss resulting from:
x a counterparty failing to fulfil its obligations; or
x a decrease in credit quality of a counterparty resulting in a financial loss.
Credit risk incorporates the risks associated with us lending to customers who could be impacted by climate change or by changes to laws, regulations, or other policies adopted by governments or regulatory authorities, including carbon pricing and climate change adaptation or mitigation policies.

Market risk
The risk to the Group’s earnings arising from:
x changes in interest rates, foreign exchange rates, credit spreads, volatility and correlations; or
x fluctuations in bond, commodity or equity prices.

the Risk Appetite Statement (RAS), 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 business plan; and
the Risk Management Strategy (RMS), which describes ANZ’s strategy for managing risks and the key elements of the RMF that give effect to this strategy.

This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference to the relevant policies, standards and procedures. It also includes information on how ANZ identifies, measures, evaluates, monitors, reports and controls or mitigates material risks.

The Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment in which all employees understand their roles and obligations. At ANZ, risk is everyone’s responsibility.

The Group has an independent risk management function, headed by the Chief Risk Officer who:

is responsible for overseeing the risk profile and the risk management framework;
can effectively challenge activities and decisions that materially affect ANZ’s risk profile; and
has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.

The Internal Audit Function reports directly to the Board Audit Committee (BAC). Internal Audit provides:

an independent evaluation of the Group’s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management framework;
facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk management framework; and
recommendations to improve the framework and/or work practices to strengthen the effectiveness of day to day operations.

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18. FINANCIAL RISK MANAGEMENT (continued)

CREDIT RISK

CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES

Granting credit facilities to customers is one of the Group’s major sources of income. As this activity is also a principal risk, the Group dedicates considerable resources to its management. The Group assumes credit risk in a wide range of lending and other activities in diverse markets and in many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and capital markets activities around the world.

Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:

sets the credit risk appetite and credit strategies; and
approves credit transactions beyond the discretion of executive management.

We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistent framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:

Probability of Default (PD)
Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability to service and repay debt.
Exposure at Default (EAD)
The expected balance sheet exposure at default taking into account repayments of principal and interest, expected additional drawdowns and accrued interest at the time of default.
Loss Given Default (LGD)
Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the percentage of loan covered by security which the Group can realise if a customer defaults. The A-G scale is supplemented by a range of other SIs which cover factors such as cash cover and sovereign backing. For retail and some small business lending, we group exposures into large homogenous pools – and the LGD is assigned at the pool level.

Our specialist credit risk teams develop and validate the Group’s PD and LGD rating models. The outputs from these models drive our day-to-day credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and credit provisioning.

All customers with whom ANZ has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:

	Large and more complex lending	Retail and some small business lending
Rating models provide a	Rating models provide a consistent and structured assessment, with judgement required around the use of out-of-model factors. We handle credit approval on a dual approval basis, jointly with the business writer and an independent credit officer.	Automated assessment of credit applications using a combination of scoring (application and behavioural), policy rules and external credit reporting information. If the application does not meet the automated assessment criteria, then it is subject to manual assessment.

We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped to external rating agency scales as follows:

Credit Quality	Description	Internal CCR	ANZ Customer Requirements	Moody’s Rating	S&P Global Ratings
Strong	Demonstrated superior stability in their operating and financial performance over the long-term, and whose earnings capacity is not significantly vulnerable to foreseeable events.	0+ to 4-		Aaa – Baa3	AAA – BBB-
Satisfactory	Demonstrated sound operational and financial stability over the medium to long-term, even though some may be susceptible to cyclical trends or variability in earnings.	5+ to 6-		Ba1 – B1	BB+ – B+
Weak	Demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly medium term.	7+ to 8=		B2 - Caa	B - CCC
Defaulted	When doubt arises as to the collectability of a credit facility, the financial instrument (or ‘the facility’) is classified as defaulted.	8- to 10	N/A	N/A	N/A

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18. FINANCIAL RISK MANAGEMENT (continued)

CREDIT RISK (continued)

MAXIMUM EXPOSURE TO CREDIT RISK

For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to market risk, or bank notes and coins.

For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum exposure to credit risk is the maximum amount the Group would have to pay if the instrument is called upon.

The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any collateral held or other credit enhancements.

	Reported	Excluded¹	Maximum exposure to credit risk
	2022 2021	2022 2021	2022 2021
	$m $m	$m $m	$m $m
Consolidated
On-balance sheet positions
Net loans and advances	672,407 629,719	- -	672,407 629,719
Other financial assets:
Cash and cash equivalents	168,132 151,260	1,147 1,127	166,985 150,133
Settlement balances owed to ANZ	4,762 7,530	4,762 7,530	- -
Collateral paid	12,700 9,166	- -	12,700 9,166
Trading assets	35,237 44,688	3,860 4,996	31,377 39,692
Derivative financial instruments	90,174 38,736	- -	90,174 38,736
Investment securities
- debt securities at amortised cost	7,943 7,031	- -	7,943 7,031
- debt securities at FVOCI	76,817 74,743	- -	76,817 74,743
- equity securities at FVOCI	1,353 1,310	1,353 1,310	- -
- debt securities at FVTPL	40 42	- -	40 42
Regulatory deposits	632 671	- -	632 671
Other financial assets²	2,943 2,054	- -	2,943 2,054
Total other financial assets	400,733 337,231	11,122 14,963	389,611 322,268
Subtotal	1,073,140 966,950	11,122 14,963	1,062,018 951,987
Off-balance sheet positions
Undrawn and contingent facilities³	285,041 259,789	- -	285,041 259,789
Total	1,358,181 1,226,739	11,122 14,963	1,347,059 1,211,776

Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; Equity securities, precious metal exposures and carbon credits within Trading assets; and Equity securities within Investment securities were excluded as they do not have credit risk exposure.
Other financial assets mainly comprise accrued interest and acceptances.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.

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18.# FINANCIAL RISK MANAGEMENT (continued)

CREDIT RISK (continued)

Maximum exposure to credit risk	2022	2021	2022	2021	2022	2021
The Company	$m	$m	$m	$m	$m	$m
On-balance sheet positions
Net loans and advances	537,345	488,487	-	-	537,345	488,487
Other financial assets:
Cash and cash equivalents	155,483	141,436	787	721	154,696	140,715
Settlement balances owed to ANZ	4,024	7,183	4,024	7,183	-	-
Collateral paid	11,368	8,343	-	-	11,368	8,343
Trading assets	28,073	34,752	3,348	4,957	24,725	29,795
Derivative financial instruments	88,056	38,292	-	-	88,056	38,292
Investment securities
- debt securities at amortised cost	6,115	5,263	-	-	6,115	5,263
- debt securities at FVOCI	65,257	61,623	-	-	65,257	61,623
- equity securities at FVOCI	1,027	1,054	1,027	1,054	-	-
- debt securities at FVTPL	-	-	-	-	-	-
Regulatory deposits	249	213	-	-	249	213
Due from controlled entities	22,860	23,530	-	-	22,860	23,530
Other financial assets²	1,882	1,371	-	-	1,882	1,371
Total other financial assets	384,394	323,060	9,186	13,915	375,208	309,145
Subtotal	921,739	811,547	9,186	13,915	912,553	797,632
Off-balance sheet positions
Undrawn and contingent facilities³	246,722	220,445	-	-	246,722	220,445
Total	1,168,461	1,031,992	9,186	13,915	1,159,275	1,018,077

Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; Equity securities, precious metal exposures, and carbon credits within Trading assets; and Equity securities within Investment securities were excluded as they do not have credit risk exposure.
Other financial assets mainly comprise accrued interest and acceptances.
Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.

CREDIT QUALITY

An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal credit quality rating by stage without taking account of the effects of any collateral or other credit enhancements:

Net loans and advances

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
Consolidated	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	443,571	15,880	-	-	-	459,451
Satisfactory	154,823	31,864	-	-	-	186,687
Weak	9,197	9,244	-	-	-	18,441
Defaulted	-	-	3,328	1,043	-	4,371
Gross loans and advances at amortised cost	607,591	56,988	3,328	1,043	-	668,950
Allowance for ECL	(1,141)	(1,548)	(360)	(533)	-	(3,582)
Net loans and advances at amortised cost	606,450	55,440	2,968	510	-	665,368
Coverage ratio	0.19%	2.72%	10.82%	51.10%	-	0.54%
Loans and advances at fair value through profit or loss	4,675
Unearned income	(518)
Capitalised brokerage and other origination costs	2,882
Net carrying amount	672,407
As at 30 September 2021
Strong	412,821	12,596	-	-	-	425,417
Satisfactory	146,368	31,228	-	-	-	177,596
Weak	7,921	12,907	-	-	-	20,828
Defaulted	-	-	3,754	1,549	-	5,303
Gross loans and advances at amortised cost	567,110	56,731	3,754	1,549	-	629,144
Allowance for ECL	(968)	(1,994)	(417)	(666)	-	(4,045)
Net loans and advances at amortised cost	566,142	54,737	3,337	883	-	625,099
Coverage ratio	0.17%	3.51%	11.11%	43.00%	-	0.64%
Loans and advances at fair value through profit or loss	3,620
Unearned income	(434)
Capitalised brokerage and other origination costs	1,434
Net carrying amount	629,719

Net loans and advances

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
The Company	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	334,850	9,641	-	-	-	344,491
Satisfactory	142,772	26,186	-	-	-	168,958
Weak	9,181	7,759	-	-	-	16,940
Defaulted	-	-	2,744	853	-	3,597
Gross loans and advances at amortised cost	486,803	43,586	2,744	853	-	533,986
Allowance for ECL	(946)	(1,259)	(295)	(425)	-	(2,925)
Net loans and advances at amortised cost	485,857	42,327	2,449	428	-	531,061
Coverage ratio	0.19%	2.89%	10.75%	49.82%	-	0.55%
Loans and advances at fair value through profit or loss	4,263
Unearned income	(480)
Capitalised brokerage and other origination costs	2,501
Net carrying amount	537,345
As at 30 September 2021
Strong	297,511	9,329	-	-	-	306,840
Satisfactory	131,979	25,538	-	-	-	157,517
Weak	7,913	11,038	-	-	-	18,951
Defaulted	-	-	3,089	1,345	-	4,434
Gross loans and advances at amortised cost	437,403	45,905	3,089	1,345	-	487,742
Allowance for ECL	(797)	(1,679)	(348)	(563)	-	(3,387)
Net loans and advances at amortised cost	436,606	44,226	2,741	782	-	484,355
Coverage ratio	0.18%	3.66%	11.27%	41.86%	-	0.69%
Loans and advances at fair value through profit or loss	3,472
Unearned income	(390)
Capitalised brokerage and other origination costs	1,050
Net carrying amount	488,487

Off-balance sheet commitments - undrawn and contingent facilities

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
Consolidated	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	191,363	1,703	-	-	-	193,066
Satisfactory	18,583	3,078	-	-	-	21,661
Weak	774	706	-	-	-	1,480
Defaulted	-	-	113	19	-	132
Gross undrawn and contingent facilities subject to ECL	210,720	5,487	113	19	-	216,339
Allowance for ECL included in Other provisions (refer to Note 23)	(593)	(144)	(29)	(9)	-	(775)
Net undrawn and contingent facilities subject to ECL	210,127	5,343	84	10	-	215,564
Coverage ratio	0.28%	2.62%	25.66%	47.37%	-	0.36%
Undrawn and contingent facilities not subject to ECL¹	69,477
Net undrawn and contingent facilities	285,041
As at 30 September 2021
Strong	174,808	1,754	-	-	-	176,562
Satisfactory	23,799	3,564	-	-	-	27,363
Weak	1,030	1,185	-	-	-	2,215
Defaulted	-	-	138	50	-	188
Gross undrawn and contingent facilities subject to ECL	199,637	6,503	138	50	-	206,328
Allowance for ECL included in Other provisions (refer to Note 23)	(555)	(211)	(19)	(21)	-	(806)
Net undrawn and contingent facilities subject to ECL	199,082	6,292	119	29	-	205,522
Coverage ratio	0.28%	3.24%	13.77%	42.00%	-	0.39%
Undrawn and contingent facilities not subject to ECL¹	54,267
Net undrawn and contingent facilities	259,789

¹ Commitments that can be unconditionally cancelled at any time without notice.

Off-balance sheet commitments - undrawn and contingent facilities

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
The Company	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	185,979	1,725	-	-	-	187,704
Satisfactory	15,496	2,306	-	-	-	17,802
Weak	711	463	-	-	-	1,174
Defaulted	-	-	97	13	-	110
Gross undrawn and contingent facilities subject to ECL	202,186	4,494	97	13	-	206,790
Allowance for ECL included in Other provisions (refer to Note 23)	(530)	(112)	(26)	(5)	-	(673)
Net undrawn and contingent facilities subject to ECL	201,656	4,382	71	8	-	206,117
Coverage ratio	0.26%	2.49%	26.80%	38.46%	-	0.33%
Undrawn and contingent facilities not subject to ECL¹	40,605
Net undrawn and contingent facilities	246,722
As at 30 September 2021
Strong	162,232	1,745	-	-	-	163,977
Satisfactory	19,790	2,662	-	-	-	22,452
Weak	1,005	966	-	-	-	1,971
Defaulted	-	-	91	28	-	119
Gross undrawn and contingent facilities subject to ECL	183,027	5,373	91	28	-	188,519
Allowance for ECL included in Other provisions (refer to Note 23)	(484)	(171)	(12)	(7)	-	(674)
Net undrawn and contingent facilities subject to ECL	182,543	5,202	79	21	-	187,845
Coverage ratio	0.26%	3.18%	13.19%	25.00%	-	0.36%
Undrawn and contingent facilities not subject to ECL¹	32,600
Net undrawn and contingent facilities	220,445

¹ Commitments that can be unconditionally cancelled at any time without notice.

Investment securities - debt securities at amortised cost

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
Consolidated	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	6,279	-	-	-	-	6,279
Satisfactory	113	-	-	-	-	113
Weak	1,589	-	-	-	-	1,589
Gross investment securities - debt securities at amortised cost	7,981	-	-	-	-	7,981
Allowance for ECL	(38)	-	-	-	-	(38)
Net investment securities - debt securities at amortised cost	7,943	-	-	-	-	7,943
Coverage ratio	0.48%	-	-	-	-	0.48%
As at 30 September 2021
Strong	5,574	-	-	-	-	5,574
Satisfactory	121	-	-	-	-	121
Weak	1,367	-	-	-	-	1,367
Gross investment securities - debt securities at amortised cost	7,062	-	-	-	-	7,062
Allowance for ECL	(31)	-	-	-	-	(31)
Net investment securities - debt securities at amortised cost	7,031	-	-	-	-	7,031
Coverage ratio	0.44%	-	-	-	-	0.44%

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
The Company	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Strong	6,032	-	-	-	-	6,032
Satisfactory	84	-	-	-	-	84
Gross investment securities - debt securities at amortised cost	6,116	-	-	-	-	6,116
Allowance for ECL	(1)	-	-	-	-	(1)
Net investment securities - debt securities at amortised cost	6,115	-	-	-	-	6,115
Coverage ratio	0.02%	-	-	-	-	0.02%
As at 30 September 2021
Strong	5,162	-	-	-	-	5,162
Satisfactory	102	-	-	-	-	102
Gross investment securities - debt securities at amortised cost	5,264	-	-	-	-	5,264
Allowance for ECL	(1)	-	-	-	-	(1)
Net investment securities - debt securities at amortised cost	5,263	-	-	-	-	5,263
Coverage ratio	0.02%	-	-	-	-	0.02%

CREDIT RISK (continued)

Investment securities - debt securities at FVOCI

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
Consolidated
As at 30 September 2022
Strong	76,668	-	-	-	-	76,668
Satisfactory	149	-	-	-	-	149
Investment securities - debt securities at FVOCI	76,817	-	-	-	-	76,817
Allowance for ECL recognised in Other comprehensive income	(10)	-	-	-	-	(10)
Coverage ratio	0.01%	-	-	-	-	0.01%
As at 30 September 2021
Strong	74,541	-	-	-	-	74,541
Satisfactory	202	-	-	-	-	202
Investment securities - debt securities at FVOCI	74,743	-	-	-	-	74,743
Allowance for ECL recognised in Other comprehensive income	(11)	-	-	-	-	(11)
Coverage ratio	0.01%	-	-	-	-	0.01%

	Stage 3	Stage 1	Stage 2	Collectively assessed	Individually assessed	Total
The Company
As at 30 September 2022
Strong	65,257	-	-	-	-	65,257
Satisfactory	-	-	-	-	-	-
Investment securities - debt securities at FVOCI	65,257	-	-	-	-	65,257
Allowance for ECL recognised in Other comprehensive income	(7)	-	-	-	-	(7)
Coverage ratio	0.01%	-	-	-	-	0.01%
As at 30 September 2021
Strong	61,623	-	-	-	-	61,623
Satisfactory	-	-	-	-	-	-
Investment securities - debt securities at FVOCI	61,623	-	-	-	-	61,623
Allowance for ECL recognised in Other comprehensive income	(7)	-	-	-	-	(7)
Coverage ratio	0.01%	-	-	-	-	0.01%

Other financial assets

	Consolidated	The Company
	2022	2021
	$m	$m
Strong	301,735	235,847
Satisfactory¹	2,164	3,513
Weak	945	1,122
Defaulted	7	12
Total carrying amount	304,851	240,494
1. Includes Investment Securities - debt securities at FVTPL of $40 million (2021: $42 million) for the Group and nil (2021: nil) for the Company.

CONCENTRATIONS OF CREDIT RISK

Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Group monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Group also applies single customer counterparty limits to protect against unacceptably large exposures to one single customer. Composition of financial instruments that give rise to credit risk by industry group are presented below:

	Loans	Other financial assets	Off-balance sheet credit related commitments	Total
Consolidated	2022	2021	2022	2021
	$m	$m	$m	$m
Agriculture, forestry, fishing and mining	33,668	34,862	781	335
Business services	9,252	9,161	242	119
Construction	6,155	5,886	48	46
Electricity, gas and water supply	9,650	6,513	790	807
Entertainment, leisure and tourism	12,886	12,710	89	157
Financial, investment and insurance	75,118	56,107	305,148	229,273
Government and official institutions	7,280	4,651	71,139	83,741
Manufacturing	28,072	23,752	1,279	741
Personal lending	363,539	361,814	955	664
Property services	55,203	50,396	606	489
Retail trade	11,648	9,967	98	104
Transport and storage	12,311	11,710	327	437
Wholesale trade	15,215	12,434	1,235	583
Other	33,628	32,801	6,912	4,803
Gross total	673,625	632,764	389,649	322,299
Allowance for ECL	(3,582)	(4,045)	(38)	(31)
Subtotal	670,043	628,719	389,611	322,268
Unearned income	(518)	(434)	-	-
Capitalised brokerage and other origination costs	2,882	1,434	-	-
Maximum exposure to credit risk	672,407	629,719	389,611	322,268

	Loans	Other financial assets	Off-balance sheet credit related commitments	Total
The Company	2022	2021	2022	2021
	$m	$m	$m	$m
Agriculture, forestry, fishing and mining	19,065	18,283	751	297
Business services	8,382	8,096	202	73
Construction	5,004	4,710	42	30
Electricity, gas and water supply	8,820	5,523	533	580
Entertainment, leisure and tourism	11,267	10,934	58	138
Financial, investment and insurance	71,889	52,230	306,318	236,430
Government and official institutions	7,272	4,621	58,342	65,429
Manufacturing	24,645	20,143	664	369
Personal lending	282,095	278,526	912	638
Property services	42,592	37,580	531	379
Retail trade	10,048	8,273	74	82
Transport and storage	11,231	10,564	270	339
Wholesale trade	13,055	10,345	791	380
Other	22,884	21,386	5,721	3,982
Gross total	538,249	491,214	375,209	309,146
Allowance for ECL	(2,925)	(3,387)	(1)	(1)
Subtotal	535,324	487,827	375,208	309,145
Unearned income	(480)	(390)	-	-
Capitalised brokerage and other origination costs	2,501	1,050	-	-
Maximum exposure to credit risk	537,345	488,487	375,208	309,145

COLLATERAL MANAGEMENT

We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there is sufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers is fundamental to the product’s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables is typically repaid by the collection of those receivables. During the period there was no change in our collateral policies.

The nature of collateral or security held for the relevant classes of financial assets is as follows:

Net loans and advances

Loans - housing and personal
Housing loans are secured by mortgage(s) over property and additional security may take the form of guarantees and deposits. Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take security, then it is restricted to eligible vehicles, motor homes and other assets.
Loans - business
Business loans may be secured, partially secured or unsecured. Typically, we take security by way of a mortgage over property and/or a charge over the business or other assets. If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters of credit or derivative protection.

Other financial assets

Trading assets, Investment securities, Derivatives and Other financial assets
For trading assets, we do not seek collateral directly from the issuer or counterparty. However, the collateral may be implicit in the terms of the instrument (for example, with an asset-backed security). The terms of debt securities may include collateralisation. For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at market levels current at the time of a counterparty default under International Swaps and Derivatives Association (ISDA) Master Agreements. Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative positions with the counterparty are aggregated and cash collateral (or other forms of eligible collateral) is exchanged daily. The collateral is provided by the counterparty when their position is out of the money (or provided to the counterparty by ANZ when our position is out of the money).
Off-balance sheet positions
- Undrawn and contingent facilities
  Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured by mortgages over residential property and business lending secured by commercial real estate and/or charges over business assets.# 18. FINANCIAL RISK MANAGEMENT (continued)

MARKET RISK

MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES

Market risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlations between interest rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices. The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit & Market Risk Committee (CMRC) and the Group Asset & Liability Committee (GALCO). Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market risk at the Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at various levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk factors and profit and loss limits. Management, measurement and reporting of market risk is undertaken in two broad categories:

	Traded Market Risk	Non-Traded Market Risk
Risk of loss from changes in the value of financial instruments due to movements in price factors for both physical and derivative trading positions. Principal risk categories monitored are: 1.Currency risk – potential loss arising from changes in foreign exchange rates or their implied volatilities. 2.Interest rate risk – potential loss from changes in market interest rates or their implied volatilities. 3.Credit spread risk – potential loss arising from a movement in margin or spread relative to a benchmark. 4.Commodity risk – potential loss arising from changes in commodity prices or their implied volatilities. 5.Equity risk – potential loss arising from changes in equity prices.	Risk of loss associated with the management of non-traded interest rate risk, liquidity risk and foreign exchange exposures. This includes interest rate risk in the banking book. This risk of loss arises 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.

MEASUREMENT OF MARKET RISK

We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing. VaR measures the Group’s possible daily loss based on historical market movements. The Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices and volatilities over:

the previous 500 business days, to calculate standard VaR; and
a 1-year stressed period, to calculate stressed VaR.

We calculate traded and non-traded VaR using one-day and ten-day holding periods. For stressed VaR, we use a ten-day period. Back testing is used to ensure our VaR models remain accurate. ANZ measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant holding period.

TRADED AND NON-TRADED MARKET RISK

Traded market risk

The table below shows the traded market risk VaR on a diversified basis by risk categories:

Consolidated

	2022	2021
	As at	High for year
	$m$	$m$
Traded value at risk 99% confidence
Foreign exchange	1.8	4.8
Interest rate	7.9	22.7
Credit	2.6	11.8
Commodity	4.3	7.0
Equity	-	-
Diversification benefit¹	(7.2)	n/a
Total VaR	9.4	26.9

The Company

	2022	2021
	As at	High for year
	$m$	$m$
Traded value at risk 99% confidence
Foreign exchange	2.0	5.1
Interest rate	6.7	18.6
Credit	2.0	11.9
Commodity	1.4	7.2
Equity	-	-
Diversification benefit¹	(4.2)	n/a
Total VaR	7.9	23.4

The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

Non-traded market risk

Balance sheet risk management

The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative impact of movements in interest rates on the earnings and market value of the Group’s banking book, while ensuring the Group maintains sufficient liquidity to meet its obligations as they fall due.

Interest rate risk management

Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group’s future Net interest income. This risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the impact of a 1% rate shock). The table below shows VaR figures for non-traded interest rate risk for the combined Group as well as Australia, New Zealand and Asia Pacific, Europe and Americas (APEA) geographies which are calculated separately.

Consolidated

	2022	2021
	As at	High for year
	$m$	$m$
Non-traded value at risk 99% confidence
Australia	78.5	93.4
New Zealand	25.4	27.1
Asia Pacific, Europe & America	21.7	38.0
Diversification benefit¹	(38.1)	n/a
Total VaR	87.5	104.9

The Company

	2022	2021
	As at	High for year
	$m$	$m$
Non-traded value at risk 99% confidence
Australia	78.5	93.4
New Zealand	0.0	0.1
Asia Pacific, Europe & America	22.1	37.7
Diversification benefit¹	(17.1)	n/a
Total VaR	83.5	94.5

The diversification benefit reflects the historical correlation between the regions. The high and low VaR figures reported for the region did not necessarily occur on the same day as the high and low VaR reported for the Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.

We undertake scenario analysis to stress test the impact of extreme events on the Group’s market risk exposures. We model a 1% overnight parallel positive shift in the yield curve to determine the potential impact on our Net interest income over the next 12 months. This is a standard risk measure which assumes the parallel shift is reflected in all wholesale and customer rates. The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported Net interest income.

	Consolidated	The Company
	2022	2021
Impact of 1% rate shock on 12 months of net interest income
As at period end	1.29%	2.43%
Maximum exposure	2.08%	2.43%
Minimum exposure	1.15%	0.98%
Average exposure (in absolute terms)	1.56%	1.55%

EQUITY SECURITIES DESIGNATED AT FVOCI

Our investment securities contain equity investment holdings which predominantly comprise Bank of Tianjin and equity holding in 1835i Ventures Trust business unit. The market risk impact on these equity investments is not captured by the Group’s VaR processes for traded and non-traded market risks.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. FINANCIAL RISK MANAGEMENT (continued)

FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES

Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian Dollar - exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of exchange differences are reflected in the foreign currency translation reserve in equity. Where it is considered appropriate, the Group takes out economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar, US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on the consolidated capital ratios are minimised.

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ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. FINANCIAL RISK MANAGEMENT (continued)

LIQUIDITY AND FUNDING RISK

LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES

Liquidity risk is the risk that the Group is either:
* unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
* does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.

Management of liquidity and funding risks are overseen by GALCO. The Group’s liquidity and funding risks are governed by a set of principles approved by the BRC and include:
* maintaining the ability to meet all payment obligations in the immediate term;
* ensuring that the Group has the ability to meet ‘survival horizons’ under a range of ANZ specific, and general market, liquidity stress scenarios, at the site and Group-wide level, to meet cash flow obligations over the short to medium term;
* maintaining strength in the Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
* ensuring the liquidity management framework is compatible with local regulatory requirements;
* preparing daily liquidity reports and scenario analysis to quantify the Group’s positions;
* targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
* holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
* establishing detailed contingency plans to cover different liquidity crisis events.

KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISK

Scenario modelling of funding sources

ANZ’s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the Board. The metrics cover a range of scenarios of varying duration and level of severity. A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking regulators including APRA. As part of meeting LCR requirements, the Group has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). The CLF was established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form of contingent liquidity. The CLF is collateralised by assets, including internal residential mortgage backed securities, that are eligible to be pledged as security with the RBA. In September 2021, APRA wrote to ADI’s to advise that APRA and the RBA consider there to be sufficient HQLA for ADI’s to meet their LCR requirements, and therefore the use of the CLF should no longer be required beyond 2022 calendar year. Consistent with APRA’s requirement to reduce the $10.7 billion CLF with four equal reductions during the 2022 calendar year to $0 on 1 January 2023, ANZ’s CLF was $2.7 billion as at 30 September 2022 (2021: $10.7 billion).

Liquid assets

The Group holds a portfolio of high quality (unencumbered) liquid assets to protect the Group’s liquidity position in a severely stressed environment and to meet regulatory requirements. HQLA comprise three categories consistent with Basel III LCR requirements:
* HQLA1 - Cash and highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide same-day liquidity.
* HQLA2 - High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
* Alternative liquid assets (ALA) - Assets qualifying as collateral for the CLF and eligible securities that the Reserve Bank of New Zealand (RBNZ) will accept in its domestic market operations.

LIQUIDITY RISK OUTCOMES

Metric	2022	2021	Regulatory Minimum
Liquidity Coverage Ratio (LCR)	131%	137%	100%
Net Stable Funding Ratio (NSFR)	119%	124%	100%

This information is not within the scope of the external audit of the Group Financial Report by the Group’s external auditor, KPMG. The Liquidity Coverage Ratio and Net Stable Funding Ratio are non-IFRS disclosures and are disclosed as part of the Group's APS 330 Public Disclosure which is subject to specific review procedures in accordance with the Australian Standard on Related Services (ASRS) 4400 Agreed upon Procedures Engagements to Report Factual Findings.

187

Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information

18. FINANCIAL RISK MANAGEMENT (continued)

LIQUIDITY AND FUNDING RISK (continued)

Liquidity crisis contingency planning

The Group maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country and Group-wide level. Key liquidity contingency crisis planning requirements and guidelines include:

Ongoing business management	Early signs/ mild stress	Severe stress
x establish crisis/severity levels	x liquidity limits	x activate contingency funding plans
x early warning indicators	x management actions not requiring business rationalisation	x management actions for altering asset and liability behaviour
x monitoring and review

Assigned responsibility for internal and external communications and the appropriate timing to communicate. Since the precise nature of any stress event cannot be known in advance, we design the plans to be flexible to the nature and severity of the stress event with multiple variables able to be accommodated in any plan.

Group funding

The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that an appropriate proportion of the Group’s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding (with a remaining term exceeding one year); and equity.

Funding plans prepared

3 year strategic plan prepared annually
annual funding plan as part of the Group’s planning process
forecasting in light of actual results as a calibration to the annual plan
customer balance sheet growth
changes in wholesale funding including: targeted funding volumes; markets; investors; tenors; and currencies for senior, secured, subordinated, hybrid transactions and market conditions

RBA Term Funding Facility

RBNZ Funding for Lending Programme and Term Lending Facility

Between May 2020 and July 2021, the RBNZ made funds available under a Term Lending Facility (TLF) to promote lending to businesses. The TLF is a five-year secured funding facility for New Zealand banks at a fixed rate of 0.25%. In November 2020 the RBNZ announced a Funding for Lending Programme (FLP) which aimed to lower the cost of borrowing for New Zealand businesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash Rate (OCR). New Zealand banks were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial businesses and non-profit institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An additional allocation of up to 2% of eligible loans is available, subject to certain conditions until 6 December 2022. As at 30 September 2022, ANZ Bank New Zealand had drawn $0.3 billion under the TLF and $2.3 billion under the FLP.

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ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

18. FINANCIAL RISK MANAGEMENT (continued)

LIQUIDITY AND FUNDING RISK (continued)

RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF GROUP’S LIABILITIES

The tables below provide residual contractual maturity analysis of financial liabilities at 30 September within relevant maturity groupings. All outstanding debt issuance and subordinated debt is profiled on the earliest date on which the Group may be required to pay. All at-call liabilities are reported in the ‘Less than 3 months’ category unless there is a longer minimum notice period.The amounts represent principal and interest cash flows - so they may differ from equivalent amounts reported on balance sheet. It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 187.

LIQUIDITY AND FUNDING RISK (continued)

Consolidated

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	Total
As at 30 September 2022
Settlement balances owed by ANZ	13,766	-	-	-	13,766
Collateral received	16,230	-	-	-	16,230
Deposits and other borrowings	667,568	117,166	15,960	160	800,854
Liability for acceptances	352	-	-	-	352
Debt issuances¹ ²	7,591	22,315	60,716	13,667	104,289
Derivative liabilities (excluding those held for balance sheet management)³	71,073	-	-	-	71,073
Lease liabilities	81	210	654	168	1,113
Derivative assets and liabilities (balance sheet management)⁴
— Funding: Receive leg	(33,155)	(49,030)	(66,661)	(12,851)	(161,697)
— Funding: Pay leg	30,845	49,191	68,211	12,913	161,160
— Other balance sheet management: Receive leg	(125,122)	(44,835)	(29,188)	(10,063)	(209,208)
— Other balance sheet management: Pay leg	120,959	44,126	31,026	15,170	211,281
As at 30 September 2021
Settlement balances owed by ANZ	17,427	-	-	-	17,427
Collateral received	5,657	-	-	-	5,657
Deposits and other borrowings	634,145	84,357	25,247	227	743,976
Liability for acceptances	392	-	-	-	392
Debt issuances¹	4,218	24,928	65,198	14,588	108,932
Derivative liabilities (excluding those held for balance sheet management)³	30,474	-	-	-	30,474
Lease liabilities	86	224	755	301	1,366
Derivative assets and liabilities (balance sheet management)⁴
— Funding: Receive leg	(29,186)	(36,462)	(62,061)	(14,334)	(142,043)
— Funding: Pay leg	28,538	35,082	61,867	14,473	139,960
— Other balance sheet management: Receive leg	(104,036)	(37,275)	(14,982)	(8,029)	(164,322)
— Other balance sheet management: Pay leg	103,586	36,804	15,457	9,974	165,821

The Company

	Less than 3 months	3 to 12 months	1 to 5 years	After 5 years	Total
As at 30 September 2022
Settlement balances owed by ANZ	10,224	-	-	-	10,224
Collateral received	14,425	-	-	-	14,425
Deposits and other borrowings	564,147	93,197	10,639	157	668,140
Liability for acceptances	144	-	-	-	144
Debt issuances¹ ²	7,648	18,951	48,323	9,970	84,892
Derivative liabilities (excluding those held for balance sheet management)³	75,810	-	-	-	75,810
Lease liabilities	76	202	744	826	1,848
Derivative assets and liabilities (balance sheet management)⁴
— Funding: Receive leg	(29,397)	(39,350)	(46,997)	(8,857)	(124,601)
— Funding: Pay leg	27,413	40,237	48,281	9,064	124,995
— Other balance sheet management: Receive leg	(121,112)	(40,061)	(21,417)	(9,498)	(192,088)
— Other balance sheet management: Pay leg	116,992	39,921	24,081	14,666	195,660
As at 30 September 2021
Settlement balances owed by ANZ	14,922	-	-	-	14,922
Collateral received	5,148	-	-	-	5,148
Deposits and other borrowings	524,654	60,427	21,844	227	607,152
Liability for acceptances	223	-	-	-	223
Debt issuances¹	4,108	20,244	54,465	8,965	87,782
Derivative liabilities (excluding those held for balance sheet management)³	34,240	-	-	-	34,240
Lease liabilities	81	208	814	989	2,092
Derivative assets and liabilities (balance sheet management)⁴
— Funding: Receive leg	(25,170)	(26,362)	(48,026)	(7,364)	(106,922)
— Funding: Pay leg	24,523	25,344	47,467	7,318	104,652
— Other balance sheet management: Receive leg	(102,921)	(35,426)	(11,063)	(7,633)	(157,043)
— Other balance sheet management: Pay leg	102,346	34,908	11,501	9,587	158,342

Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Group and subordinated debt issued by ANZ New Zealand which constitutes Tier 2 capital under RBNZ requirements but does not qualify as the APRA Tier 2 requirements.
Perpetual debt instrument of USD 300 million has been included in the ‘3 to 12 months’ category to reflect the end of the APRA Basel III capital transitional period (December 2021). This was included in the ‘After 5 years’ category in 2021.
The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘Less than 3 months’ category.
Includes derivatives designated into hedging relationships of $356 million (2021: $202 million) and $13,720 million (2021: $5,359 million) categorised as held for trading but form part of the Group’s balance sheet managed activities. At 30 September 2022, $236,051 million (2021: $212,265 million) of the Group’s undrawn facilities and $49,765 million (2021: $48,330 million) of its issued guarantees mature in less than 1 year, based on the earliest date on which the Group may be required to pay.

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FINANCIAL RISK MANAGEMENT (continued)

LIQUIDITY AND FUNDING RISK (continued)

Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Company.
Perpetual debt instrument of USD 300 million has been included in the ‘3 to 12 months’ category to reflect the end of the APRA Basel III capital transitional period (December 2021). This was included in the ‘After 5 years’ category in 2021.
The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘Less than 3 months’ category.
Includes derivatives designated into hedging relationships of $300 million (2021: $158 million) and $8,390 million (2021: $2,607 million) categorised as held for trading but form part of the Company’s balance sheet managed activities. At 30 September 2022, $201,204 million (2021: $176,077 million) of the Company’s undrawn facilities and $46,191 million (2021: $45,042 million) of its issued guarantees mature in less than 1 year, based on the earliest date on which the Company may be required to pay.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial instruments on the balance sheet at fair value. Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The following tables set out the classification of financial asset and liabilities according to their measurement bases together with their carrying amounts as recognised on the balance sheet.

Consolidated	Note	At amortised cost	At fair value	Total	At amortised cost	At fair value	Total
		2022	2022	2022	2021	2021	2021
		$m	$m	$m	$m	$m	$m
Financial assets
Cash and cash equivalents	9	168,132	-	168,132	151,260	-	151,260
Settlement balances owed to ANZ		4,762	-	4,762	7,530	-	7,530
Collateral paid		12,700	-	12,700	9,166	-	9,166
Trading assets	10	-	35,237	35,237	-	44,688	44,688
Derivative financial instruments	11	-	90,174	90,174	-	38,736	38,736
Investment securities	12	7,943	78,210	86,153	7,031	76,095	83,126
Net loans and advances	13	667,732	4,675	672,407	626,099	3,620	629,719
Regulatory deposits		632	-	632	671	-	671
Other financial assets		2,943	-	2,943	2,054	-	2,054
Total		864,844	208,296	1,073,140	803,811	163,139	966,950

Financial liabilities
Settlement balances owed by ANZ		13,766	-	13,766	17,427	-	17,427
Collateral received		16,230	-	16,230	5,657	-	5,657
Deposits and other borrowings	15	794,621	2,660	797,281	738,772	4,284	743,056
Derivative financial instruments	11	-	85,149	85,149	-	36,035	36,035
Payables and other liabilities		6,596	3,239	9,835	4,734	3,913	8,647
Debt issuances	17	92,623	1,111	93,734	99,092	1,962	101,054
Total		923,836	92,159	1,015,995	865,682	46,194	911,876

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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

The Company	Note	At amortised cost	At fair value	Total	At amortised cost	At fair value	Total
		2022	2022	2022	2021	2021	2021
		$m	$m	$m	$m	$m	$m
Financial assets
Cash and cash equivalents	9	155,483	-	155,483	141,436	-	141,436
Settlement balances owed to ANZ		4,024	-	4,024	7,183	-	7,183
Collateral paid		11,368	-	11,368	8,343	-	8,343
Trading assets	10	-	28,073	28,073	-	34,752	34,752
Derivative financial instruments	11	-	88,056	88,056	-	38,292	38,292
Investment securities	12	6,115	66,284	72,399	5,263	62,677	67,940
Net loans and advances	13	533,082	4,263	537,345	485,015	3,472	488,487
Regulatory deposits		249	-	249	213	-	213
Due from controlled entities		20,360	2,500	22,860	21,489	2,041	23,530
Other financial assets		1,882	-	1,882	1,371	-	1,371
Total		732,563	189,176	921,739	670,313	141,234	811,547

Financial liabilities
Settlement balances owed by ANZ		10,224	-	10,224	14,922	-	14,922
Collateral received		14,425	-	14,425	5,148	-	5,148
Deposits and other borrowings	15	665,567	40	665,607	606,673	50	606,723
Derivative financial instruments	11	-	84,500	84,500	-	37,005	37,005
Due to controlled entities		25,305	-	25,305	23,079	-	23,079
Payables and other liabilities		5,705	2,857	8,562	3,999	3,245	7,244
Debt issuances	17	72,757	3,071	75,828	77,053	4,035	81,088
Total		793,983	90,468	884,451	730,874	44,335	775,209

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE

The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.# 19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

If the Group holds offsetting risk positions, then we use the portfolio exception in AASB 13 Fair Value Measurement (AASB 13) to measure the fair value of such groups of financial assets and financial liabilities. We measure the portfolio based on the price that would be received to sell a net long position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.

Fair value designation

We designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
x where they contain a separable embedded derivative which significantly modifies the instruments’ cash flow ensuring we recognise the fair value movements on the assets or liabilities in profit or loss in the same period as the movement on the associated hedging instruments; or
x in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch arises due to measuring the derivative financial instruments (which we use to mitigate interest rate risk of these assets or liabilities) at fair value through profit or loss. Our approach ensures that we recognise the fair value movements on the assets or liabilities in profit or loss in the same period as the movement on the associated derivatives.

We may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit or loss where they are managed on a fair value basis to align the measurement with how the instruments are managed.

FAIR VALUE APPROACH AND VALUATION TECHNIQUES

We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted price in an active market exists for that asset or liability. This includes the following:

Asset or Liability	Fair Value Approach
Financial instruments held for trading: - Securities sold short - Derivative financial assets and financial liabilities - Debt and equity securities	Valuation techniques are used that incorporate observable market inputs for financial instruments with similar credit risk, maturity and yield characteristics. Equity securities where an active market does not exist are measured using comparable company valuation multiples (such as price-to-book ratios).
Financial instruments classified as: - Derivative financial assets and financial liabilities (not held for trading) - Net loans and advances - Deposits and other borrowings	Discounted cash flow techniques are used whereby contractual future cash flows of the instrument are discounted using wholesale market interest rates, or market borrowing rates for debt or loans with similar maturities or yield curve appropriate for the remaining term to maturity.
Financial instruments classified as: - Investment securities – debt or equity	Valuation techniques use comparable multiples (such as price-to-book ratios) or discounted cashflow (DCF) techniques incorporating, to the extent possible, observable inputs from instruments with similar characteristics.

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19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

FAIR VALUE HIERARCHY

The Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with AASB 13 based on the observability of inputs used to measure the fair value:
x Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
x Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or indirectly; and
x Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.

The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:

Fair value measurements

	Quoted price in active markets (Level 1)	Using observable inputs (Level 2)	Using unobservable inputs (Level 3)	Total
	2022	2021	2022	2021
Consolidated	$m	$m	$m	$m
Assets
Trading assets¹	28,455	36,025	6,782	8,663
Derivative financial instruments	944	494	89,185	38,187
Investment securities¹	68,211	68,007	8,614	6,756
Net loans and advances²	-	-	4,272	3,510
Total	97,610	104,526	108,853	57,116
Liabilities
Deposits and other borrowings	-	-	2,660	4,284
Derivative financial instruments	309	1,131	84,809	34,874
Payables and other liabilities²,³	2,842	3,690	397	223
Debt issuances (designated at fair value)	-	-	1,111	1,962
Total	3,151	4,821	88,977	41,343

Fair value measurements

	Quoted price in active markets (Level 1)	Using observable inputs (Level 2)	Using unobservable inputs (Level 3)	Total
	2022	2021	2022	2021
The Company	$m	$m	$m	$m
Assets
Trading assets¹	23,037	27,764	5,036	6,988
Derivative financial instruments	848	470	87,181	37,788
Investment securities¹	58,259	56,277	7,006	5,354
Net loans and advances²	-	-	3,860	3,362
Due from controlled entities	-	-	2,500	2,041
Total	82,144	84,511	105,583	55,533
Liabilities
Deposits and other borrowings	-	-	40	50
Derivative financial instruments	301	1,121	84,179	35,854
Payables and other liabilities²,³	2,510	3,040	347	205
Debt issuances (designated at fair value)	985	998	2,086	3,037
Total	3,796	5,159	86,652	39,146

During 2022, $1,043 million of assets were transferred from Level 1 to Level 2 (2021: $3,845 million transferred from Level 1 to Level 2), as well as $ 1,677 million of assets were transferred from Level 2 to Level 1 (2021: nil transferred from Level 2 to Level 1) for the Group and the Company due to a change of the observability of valuation inputs. There were no other material transfers during the year. Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
During 2022, the Group revised its accounting treatment of ongoing trail commission payable to mortgage brokers to recognise a liability within Payables and other liabilities equal to the present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs in Net loans and advances. The balance at 30 September 2022 was $1,320 million for the Group and the Company. Comparatives have not been restated.
Payables and other liabilities relate to securities sold short, which we classify as held for trading and measured at fair value through profit or loss.

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ANZ 2022 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA

Level 3 fair value measurements

Level 3 financial instruments are a net asset of $1,802 million (2021: $1,467 million) for the Group and $1,429 million (2021: $1,160 million) for the Company. The assets and liabilities which incorporate significant unobservable inputs are:
x equity securities for which there is no active market or traded prices cannot be observed;
x loans and advances measured at fair value for which there is no observable market data; and
x derivatives referencing market rates that cannot be observed primarily due to lack of market activity.

Level 3 Transfers

During the year, the Group and the Company transferred $312 million of Loan and advances measured at fair value from Level 2 to Level 3, as a result of valuation parameters becoming unobservable during the year. There were no other transfers into or out of Level 3 in the current or prior year.

The material Level 3 financial instruments as at 30 September 2022 are listed as below:

i) Investment Securities - equity holdings classified as FVOCI
* Bank of Tianjin (BoT)
The Group holds an investment in the Bank of Tianjin. The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is the ratio of the market value of equity to the book value of equity). The extent of judgement applied in determining the appropriate multiple and comparator group from which the multiple is derived resulted in the Level 3 classification. As at September 2022, the BoT equity holding balance was $854 million (2021: $991 million). A decrease in the BoT fair valuation in the financial year was mainly due to a decrease in the P/B multiple used in the valuation.
* 1835i Ventures Trust
The Group holds $324 million (2021: $241 million) of unlisted equities in its 1835i Ventures Trust business unit classified as FVOCI, for which there are no active markets or traded price observed resulting in Level 3 classification. The increase in the 1835i equity holding balance in the financial year were mainly due to new equity investments as well as revaluation increases.
* Institutional division - Equity Holdings
The Group holds $137 million (2021: $4 million) of unlisted equities in the Institutional division classified as FVOCI, for which there are no active markets or traded prices available, resulting in Level 3 classification. The increase in the Institutional division equity holdings balance was mainly due to new equity purchases during the financial year.

ii) Net loans and advances - classified as FVTPL
* Syndication Loans
The Group holds $403 million (2021: $110 million) of syndication loans for sale which are measured at FVTPL.# 19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

These loans are classified as Level 3 when there is no observable market data available for the valuation. During the financial year the Group transferred $312 million of syndication loans measured at fair value from Level 2 to Level 3, due to valuation parameters for these financial instruments becoming unobservable.

Sensitivity to Level 3 data inputs

When we make assumptions due to significant inputs to a valuation not being directly observable (Level 3 inputs), then changing these assumptions changes the Group’s estimate of the instrument’s fair value. Favourable and unfavourable changes are determined by changing the primary unobservable parameters used to derive the fair valuation.

Investment Securities - equity holdings

The valuation of the equity investments are sensitive to variations in select unobservable inputs, with valuation techniques used including P/B multiples and discounted cashflow techniques. If for example, a 10% increase or decrease to the primary input into the valuations were to occur (such as the P/B multiple), it would result in a $135 million increase or decrease in the fair value of the portfolio, which would be recognised in shareholders’ equity in the Group ($102m for the Company), with no impact to net profit or loss.

Net Loans and Advances

Syndicated loan valuations are sensitive to credit spreads and discount curves in determining their fair valuation. However as these are primarily investment-grade loans, an increase or decrease in credit spreads and / or interest yield would have an immaterial impact on net profit or net assets of the Group.

Other

The remaining Level 3 balance is immaterial and changes in inputs have a minimal impact on net profit and net assets of the Group.

Deferred fair value gains and losses

Where fair values are determined using unobservable inputs significant to the fair value of a financial instrument, the Group does not immediately recognise the difference between the transaction price and the amount we determine based on the valuation technique (day one gain or loss) in profit or loss. After initial recognition, we recognise the deferred amount in profit or loss on a straight-line basis over the life of the transaction or until all inputs become observable. Day one gains and losses which have been deferred are not material.

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19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE

The financial assets and financial liabilities listed below are carried at amortised cost on the Group’s Balance Sheet. While this is the value at which we expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of the financial assets and financial liabilities at balance date in the tables below.

	Quoted price active markets (Level 1)	Using observable inputs (Level 2)	With significant non- observable inputs (Level 3)	At amortised cost	Total fair value
	2022	2021	2022	2021	2022
Consolidated	$m	$m	$m	$m	$m
Financial assets
Investment securities	7,943	7,031	-	-	7,918
Net loans and advances	667,732	626,099	-	-	29,460
Total	675,675	633,130	-	-	37,378
Financial liabilities
Deposits and other borrowings	794,621	738,772	-	-	794,124
Debt issuances	92,623	99,092	22,982	27,785	69,028
Total	887,244	837,864	22,982	27,785	863,152

	Quoted price active markets (Level 1)	Using observable inputs (Level 2)	With significant non- observable inputs (Level 3)	At amortised cost	Total fair value
	2022	2021	2022	2021	2022
The Company	$m	$m	$m	$m	$m
Financial assets
Investment securities	6,115	5,263	-	-	6,092
Net loans and advances	533,082	485,015	-	-	28,708
Due from controlled entities	20,360	21,489	-	-	-
Total	559,557	511,767	-	-	34,800
Financial liabilities
Deposits and other borrowings	665,567	606,673	-	-	665,242
Due to controlled entities	25,305	23,079	-	-	-
Debt issuances	72,757	77,053	19,741	24,280	52,453
Total	763,629	706,805	19,741	24,280	717,695

196
ANZ 2022 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

19. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE (continued)

The following table sets out the Group’s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where the carrying value is not typically a reasonable approximation of fair value. The carrying values of certain on-balance sheet financial instruments approximate fair values. These financial instruments are short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period.

Financial Asset and Liability	Fair Value Approach
Investment securities - debt securities at amortised cost	Calculated based on quoted market prices or observable inputs as applicable. If quoted market prices are not available, we use a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of the debt instrument. T he fair value reflects adjustments to credit spreads applicable for that instrument.
Net loans and advances to banks	Discounted cash flows using prevailing market rates for loans with similar credit quality.
Net loans and advances to customers	Present value of future cash flows, discounted using a curve that incorporates changes in wholesale market rates, the Group’s cost of wholesale funding and the customer margin, as appropriate.
Deposit liability without a specified maturity or at call	T he amount payable on demand at the reporting date. We do not adjust the fair value for any value we expect the Group to derive from retaining the deposit for a future period.
Interest bearing fixed maturity deposits and other borrowings and acceptances with quoted market rates	Market borrowing rates of interest for debt with a similar maturity are used to discount contractual cash flows to derive the fair value.
Debt issuances	Calculated based on quoted market prices or observable inputs as applicable. If quoted market prices are not available, we use a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of the debt instrument. T he fair value reflects adjustments to credit spreads applicable to ANZ for that instrument.

KEY JUDGEMENTS AND ESTIMATES

A significant portion of financial instruments are carried on the Group and the Company balance sheets at fair value. The Group therefore regularly evaluates the key valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within the financial statements, as this can involve a high degree of judgement and estimation in determining the carrying values at the balance sheet date. In determining the fair valuation of financial instruments, the Group has considered the impact of related economic and market conditions on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, as well as the impact of these matters on the classification of financial instruments in the fair value hierarchy. Most of the valuation models the Group uses employ only observable market data as inputs. For certain financial instruments, we may use data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement to determine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair value of a financial instrument using a valuation technique, the Group also considers any required valuation adjustments in determining the fair value. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments – refer to Note 11 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants would consider in determining fair value of a particular financial instrument.

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20. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS SECURITY FOR ASSETS

The following disclosure excludes the amounts presented as collateral paid and received in the Balance Sheet that relate to derivative liabilities and derivative assets respectively. The terms and conditions of those collateral agreements are included in the standard Credit Support Annex that forms part of the International Swaps and Derivatives Association Master Agreement under which most of our derivatives are executed.

ASSETS CHARGED AS SECURITY FOR LIABILITIES

Assets charged as security for liabilities include the following types of instruments:
* securities provided as collateral for repurchase transactions.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

21. OFFSETTING

We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132 Financial Instruments: Presentation) when there is:
* a current legally enforceable right to set off the recognised amounts in all circumstances; and
* an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.

The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of over-collateralisation.

Consolidated

Amount subject to master netting agreement or similar	Total amounts recognised in the Balance Sheet	Amounts not subject to master netting agreement or similar	Total	Financial instruments	Financial collateral (received)/ pledged	Net amount
$m	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Derivative financial assets	90,174	(6,983)	83,191	(56,491)	(16,951)	9,749
Reverse repurchase, securities borrowing and similar agreements¹	29,776	(6,697)	23,079	(1,985)	(21,094)	-
Total financial assets	119,950	(13,680)	106,270	(58,476)	(38,045)	9,749
Derivative financial liabilities	(85,149)	9,936	(75,213)	56,491	9,964	(8,758)
Repurchase, securities lending and similar agreements²	(47,229)	12,497	(34,732)	1,985	32,747	-
Total financial liabilities	(132,378)	22,433	(109,945)	58,476	42,711	(8,758)
As at 30 September 2021
Derivative financial assets	38,736	(3,078)	35,658	(24,186)	(5,750)	5,722
Reverse repurchase, securities borrowing and similar agreements¹	26,082	(3,166)	22,916	(1,052)	(21,864)	-
Total financial assets	64,818	(6,244)	58,574	(25,238)	(27,614)	5,722
Derivative financial liabilities	(36,035)	2,822	(33,213)	24,186	5,530	(3,497)
Repurchase, securities lending and similar agreements²	(46,147)	11,461	(34,686)	1,052	33,634	-
Total financial liabilities	(82,182)	14,283	(67,899)	25,238	39,164	(3,497)

Reverse repurchase agreements:
- with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
- with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.

The Company

Amount subject to master netting agreement or similar	Total amounts recognised in the Balance Sheet	Amounts not subject to master netting agreement or similar	Total	Financial instruments	Financial collateral (received)/ pledged	Net amount
$m	$m	$m	$m	$m	$m	$m
As at 30 September 2022
Derivative financial assets	88,056	(4,242)	83,814	(61,038)	(14,876)	7,900
Reverse repurchase, securities borrowing and similar agreements¹	28,045	(5,323)	22,722	(1,629)	(21,093)	-
Total financial assets	116,101	(9,565)	106,536	(62,667)	(35,969)	7,900
Derivative financial liabilities	(84,500)	6,839	(77,661)	61,038	8,548	(8,075)
Repurchase, securities lending and similar agreements²	(42,940)	11,021	(31,919)	1,629	30,290	-
Total financial liabilities	(127,440)	17,860	(109,580)	62,667	38,838	(8,075)
As at 30 September 2021
Derivative financial assets	38,292	(1,539)	36,753	(27,288)	(5,189)	4,276
Reverse repurchase, securities borrowing and similar agreements¹	24,958	(2,042)	22,916	(1,052)	(21,864)	-
Total financial assets	63,250	(3,581)	59,669	(28,340)	(27,053)	4,276
Derivative financial liabilities	(37,005)	1,343	(35,662)	27,288	5,425	(2,949)
Repurchase, securities lending and similar agreements²	(43,925)	10,480	(33,445)	1,052	32,393	-
Total financial liabilities	(80,930)	11,823	(69,107)	28,340	37,818	(2,949)

Reverse repurchase agreements:
- with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
- with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.

22. GOODWILL AND OTHER INTANGIBLE ASSETS

Consolidated

	Goodwill¹	Software	Other Intangibles	Total
	2022	2021	2022	2021
	$m	$m	$m	$m
Balance at start of year	3,089	3,264	960	1,039
Additions²	78	-	315	356
Amortisation expense	-	-	(375)	(434)
Impairment expense³	-	(251)	(3)	(1)
Written-off on disposal/exit³˒⁴	(40)	(13)	-	-
Foreign currency exchange difference	(221)	89	(1)	-
Balance at end of year	2,906	3,089	896	960
Cost⁵	2,906	3,089	7,843	7,639
Accumulated amortisation	n/a	n/a	(6,947)	(6,679)
Carrying amount	2,906	3,089	896	960

The Company

	Goodwill¹	Software	Other Intangibles	Total
	2022	2021	2022	2021
	$m	$m	$m	$m
Balance at start of year	62	62	952	1,030
Additions	-	-	287	345
Amortisation expense	-	-	(363)	(422)
Impairment expense	-	-	(3)	(1)
Foreign currency exchange difference	-	-	(1)	-
Balance at end of year	62	62	872	952
Cost⁵	62	62	7,544	7,342
Accumulated amortisation	n/a	n/a	(6,672)	(6,390)
Carrying amount	62	62	872	952

Goodwill excludes notional goodwill in equity accounted investments.
2022 goodwill addition relates to acquisition of Cashrewards.
2021 goodwill impairment expense relates to the write-off on reclassification of ANZ Share Investing business to held for sale with a remaining $13 million derecognised on sale of the business. This impairment was recognised in Other income to align with the classification on completion of the disposal in 2021.
2022 goodwill written-off on disposal/exit relates to the exit of the financial planning and advice business.
Includes impact of foreign currency translation differences.

IMPAIRMENT TESTING FOR CASH GENERATING UNITS CONTAINING GOODWILL

Goodwill acquired in a business combination is tested for impairment annually and whenever there are indicators of potential impairment. Goodwill is allocated at the date of acquisition to the cash generating unit (CGU) or group of CGUs that are expected to benefit from the synergies of the related business combination. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. We estimate the recoverable amount of each CGU to which goodwill is allocated using a fair value less costs of disposal (FVLCOD) approach, with a value-in-use (VIU) assessment performed where the FVLCOD is less than the carrying amount.

During the year ended 30 September 2022, the Group restructured its business to establish separate Australia Retail and Australia Commercial divisions. For the purpose of goodwill impairment testing, these changes led to the creation of new CGUs which reflect the new divisional structure. Goodwill is allocated to the following CGUs based on the lowest level at which goodwill is monitored.

Cash generating units:

	2022	2021
	$m	$m
Australia Retail	178	100
Australia Commercial	-	40
New Zealand	1,706	1,849
Institutional	1,022	1,100

We estimate the FVLCOD of each CGU to which goodwill is allocated by applying observable price earnings multiples of comparable companies to the estimated future maintainable earnings of each CGU. A deduction is then made for estimated costs of disposal. The valuation is considered to be level 3 in the fair value hierarchy due to unobservable inputs used in the valuation. Management’s approach and the key assumptions used in determining FVLCOD are as follows:

Key assumption	Approach to determining the value (or values) for each key assumption
Future maintainable earnings	Future maintainable earnings for each CGU is estimated as the sum of: * The Group’s 2023 financial plan for each CGU; and * An allocation of the central costs recorded outside of the CGUs to which goodwill is allocated.

Where relevant, adjustments are made to the Group’s financial plan to reflect the long-term expectations for items such as expected credit losses and investment spend. Price/Earnings (P/E) multiple P/E multiples applicable to each CGU have been derived from a comparator group of publicly traded companies, and include a 30% control premium, discussed below. In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments to P/E multiples to address specific factors relevant to those CGUs. A control premium has been applied which recognises the increased consideration a potential acquirer would be willing to pay in order to gain sufficient ownership to achieve control over the relevant activities of the CGU. For each CGU, the control premium has been estimated as 30% of the comparator group P/E multiple based on historical transactions. Costs of disposalCosts of disposal have been estimated as 2% of the fair value of the CGU based on those observed from historical and recent transactions. As noted above, our impairment testing did not result in any material impairment of goodwill being identified as at 30 September 2022. The FVLCOD estimates for each CGU are sensitive to assumptions about P/E multiples, future maintainable earnings and control premium (30%). However, each CGU would continue to show a surplus in recoverable amount over carrying amount even where other reasonably possible alternative estimates were used.

22. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

RECOGNITION AND MEASUREMENT

The table below details how we recognise and measure different intangible assets:

	Goodwill	Software	Other Intangibles
Definition	Excess amount the Group has paid in acquiring a business over the fair value of the identifiable assets and liabilities acquired.	Purchased software owned by the Group is capitalised. Internal and external costs incurred in building software and computer systems costing greater than $20 million are capitalised as assets. Those less than $20 million are expensed in the year in which the costs are incurred.	Management fee rights arising from acquisition of funds management business and other intangible assets arising from contractual rights.
Carrying value	Cost less any accumulated impairment losses. Allocated to the cash generating unit to which the acquisition relates.	Initially, measured at cost. Subsequently, carried at cost less accumulated amortisation and impairment losses. Costs incurred in planning or evaluating software proposals or in maintaining systems after implementation are not capitalised.	Initially, measured at fair value at acquisition. Subsequently, carried at cost less accumulated amortisation and impairment losses.
Useful life	Indefinite. Goodwill is reviewed for impairment at least annually or when there is an indication of impairment.	Except for major core infrastructure, amortised over periods between 2-5 years; however major core infrastructure may be amortised up to 7 years subject to approval by the Audit Committee. Purchased software is amortised over 2 years unless it is considered integral to other assets with a longer useful life.	Management fee rights with an indefinite life are reviewed for impairment at least annually or when there is an indication of impairment. Other intangible assets are amortised over 3 years.
Depreciation method	Not applicable.	Straight-line method. Purchased software is amortised over 2 years unless it is considered integral to other assets with a longer useful life.	Not applicable to indefinite life intangible assets. Straight-line method for assets with a finite life.

KEY JUDGEMENTS AND ESTIMATES

Management judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of an asset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.

Goodwill

A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:

the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Group’s revenue generating segments that benefit from relevant historical business combinations generating goodwill.
determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis, of corporate assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
assessment of the recoverable amount of each CGU including:
- selection of the model used to determine the fair value – the Group has used the market multiple approach to estimate the fair value; and
selection of the key assumptions in respect of future maintainable earnings, the P/E multiple applied, including selection of an appropriate comparator group and determination of an appropriate control premium, and costs of disposal as described above.

Software and other intangible assets

At each reporting date, software and other intangible assets are assessed for indicators of impairment and, where such indicators are identified, an impairment assessment is performed. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the carrying amount of the asset is written down immediately. Those assets not yet ready for use are tested for impairment annually. In addition, the expected useful lives of intangible assets are assessed at each reporting date. The assessment requires management judgement, and in relation to our software assets, a number of factors can influence the expected useful lives. These factors include changes to business strategy, significant divestments and the pace of technological change.

23. OTHER PROVISIONS

	Consolidated	The Company
	2022	2021
	$m	$m
ECL allowance on undrawn and contingent facilities¹	775	806
Customer remediation	662	886
Restructuring costs	68	99
Non-lending losses, frauds and forgeries²	105	133
Other²	262	290
Total other provisions	1,872	2,214

	Customer remediation	Restructuring costs	Non-lending losses, frauds and forgeries²	Other²
Consolidated	$m	$m	$m	$m
Balance at 1 October 2021	886	99	133	290
New and increased provisions made during the year	231	64	122	191
Provisions used during the year	(404)	(67)	(148)	(202)
Unused amounts reversed during the year	(51)	(28)	(2)	(17)
Balance at 30 September 2022	662	68	105	262

	Customer remediation	Restructuring costs	Non-lending losses, frauds and forgeries²	Other²
The Company	$m	$m	$m	$m
Balance at 1 October 2021	791	44	115	249
New and increased provisions made during the year	228	54	13	170
Provisions used during the year	(375)	(27)	(35)	(181)
Unused amounts reversed during the year	(44)	(24)	-	(3)
Balance at 30 September 2022	600	47	93	235

Refer to Note 14 Allowance for Expected Credit Losses for movement analysis.
Certain provisions have been reclassified during 2022 from Other to Non-lending losses, frauds and forgeries to better reflect their nature. Comparatives have been restated accordingly, with a reclassification impact of $72 million to the Group and $61 million to the Company.

23. OTHER PROVISIONS (continued)

Customer remediation

Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims, penalties and litigation costs and outcomes.

Restructuring costs

Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or the manner in which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for and are expensed as incurred.

Non-lending losses, frauds and forgeries

Non-lending losses include losses arising from certain legal actions not directly related to amounts of principal outstanding for loans and advances and losses arising from forgeries, frauds and the correction of operational issues. The amounts recognised are the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround the events and circumstances that affect the provision.

Other

Other provisions comprise various other provisions including workers compensation, make-good provisions associated with leased premises, warranties and indemnities provided in connection with various disposals of businesses and assets, and contingent liabilities recognised as part of a business combination.

RECOGNITION AND MEASUREMENT

The Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources is probable, and the amount of the provision can be measured reliably. The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using the estimated cash flows required to settle the present obligation, its carrying amount is the present value of those cash flows.

KEY JUDGEMENTS AND ESTIMATES

The Group holds provisions for various obligations including customer remediation, restructuring costs, non-lending losses, fraud and forgeries and litigation related claims.These provisions involve judgements regarding the timing and outcome of future events, including estimates of expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such advice, provisions and/or disclosures as deemed appropriate have been made. In relation to customer remediation, determining the amount of the provisions, which represent management’s best estimate of the cost of settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of different assumptions, including, the number of impacted customers, the average refund per customer, the associated remediation project costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is a heightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence including expert legal advice, and adjustments are made to the provisions where appropriate.

24. SHAREHOLDERS’ EQUITY

SHAREHOLDERS' EQUITY

	Consolidated	The Company
	2022	2021
	$m	$m
Ordinary share capital	28,797	25,984
Reserves
Foreign currency translation reserve¹	(148)	611
Share option reserve	78	76
FVOCI reserve	(478)	170
Cash flow hedge reserve	(2,036)	393
Transactions with non-controlling interests reserve	(22)	(22)
Total reserves	(2,606)	1,228
Retained earnings	39,716	36,453
Share capital and reserves attributable to shareholders of the Company	65,907	63,665
Non-controlling interests²	494	11
Total shareholders’ equity	66,401	63,676

As a result of the dissolution of Minerva Holdings Limited in the United Kingdom and ANZ Asia Limited in Hong Kong, $65 million of the associated foreign currency translation reserve was recycled from Other comprehensive income to profit or loss in 2022.
ANZ Bank New Zealand has issued $484 million of perpetual preference shares in 2022 that are considered non-controlling interests to the Group.

ORDINARY SHARE CAPITAL

The table below details the movement in ordinary shares and share capital for the period.

	2022	2021	2022	2021
	Number of shares	Number of shares	$m	$m
Consolidated
Balance at start of the year	2,823,563,652	2,840,370,225	25,984	26,531
Dividend reinvestment plan issuances	7,195,108	4,242,368	183	94
Bonus option plan	2,890,268	2,259,507	-	-
Group employee share acquisition scheme	-	-	(21)	13
Share buy-back¹	(30,831,227)	(23,308,448)	(846)	(654)
Share entitlement issue²	187,105,950	-	3,497	-
Balance at end of year	2,989,923,751	2,823,563,652	28,797	25,984
Less: Treasury Shares	(4,209,150)	(4,401,593)
Balance at end of year	2,985,714,601	2,819,162,059	28,797	25,984
	2022	2021	2022	2021
	Number of shares	Number of shares	$m	$m
The Company
Balance at start of the year	2,823,563,652	2,840,370,225	25,907	26,454
Dividend reinvestment plan issuances	7,195,108	4,242,368	183	94
Bonus option plan	2,890,268	2,259,507	-	-
Group employee share acquisition scheme	-	-	(21)	13
Share buy-back¹	(30,831,227)	(23,308,448)	(846)	(654)
Share entitlement issue²	187,105,950	-	3,497	-
Balance at end of year	2,989,923,751	2,823,563,652	28,720	25,907

The Company completed its $1.5 billion on-market share buy-back of ANZ ordinary shares in 2022, purchasing $846 million (2021: $654 million) worth of shares resulting in 31 million (2021: 23 million) shares being cancelled in 2022.
On 18 July 2022, the Group announced a fully underwritten pro rata accelerated renounceable entitlement offer of new ANZ ordinary shares to help fund the Group’s anticipated acquisition of Suncorp Bank. All eligible shareholders were invited to purchase one new ordinary share for every 15 existing ordinary shares held on 21 July 2022 at an issue price of $18.90 per share. The Company issued a total of 187.1 million ordinary shares under the offer, raising $3,497 million of new share capital (net of issue costs).

24. SHAREHOLDERS’ EQUITY (continued)

NON-CONTROLLING INTERESTS

	2022	2021	2022	2021	2022	2021
	$m	$m	$m	$m	$m	$m
	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
Profit attributable to non- controlling interests	1	1
Equity attributable to non-controlling interests			494	11
Dividend paid to non- controlling interests					2	-
ANZ Bank New Zealand PPS	-	-	484	-	-	-
Other	1	1	10	11	2	-
Total	1	1	494	11	2	-

ANZ Bank New Zealand Preference Shares

ANZ Bank New Zealand Limited (ANZ Bank New Zealand), a wholly owned subsidiary of the Group, has perpetual preference shares (PPS) on issue that are considered non-controlling interests to the Group. The key terms of the PPS are summarised below:

PPS dividends
PPS dividends are payable at the discretion of the Directors of ANZ Bank New Zealand and are non-cumulative. ANZ Bank New Zealand must not resolve to pay any dividend or make any other distribution on its ordinary shares until the next PPS dividend payment date if a PPS is not paid. Should ANZ Bank New Zealand elect to pay a PPS dividend, the PPS dividend is 6.95% per annum up until 18 July 2028 and thereafter a floating rate equal to the aggregate of the New Zealand 3 month bank bill rate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PPS dividend is fully imputed), with PPS dividend payments due on 18 January, 18 April, 18 July and 18 October each year.
Redemption features
Holders of PPS have no right to require that the PPS be redeemed. ANZ Bank New Zealand may at its option redeem all of the PPS on an optional redemption date (each PPS dividend date from 18 July 2028), or at any time following the occurrence of a tax event or regulatory event, subject to prior written approval of RBNZ and meeting of other conditions.

RECOGNITION AND MEASUREMENT

Ordinary shares

Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds available on winding up of the Company, in proportion to the number of fully paid ordinary shares held. They are recognised at the amount paid per ordinary share net of directly attributable costs. Every holder of fully paid ordinary shares present at a meeting in person, or by proxy, is entitled to:
* on a show of hands, one vote; and
* on a poll, one vote, for each share held.

Treasury shares

Treasury shares are shares in the Company which:
* the ANZ Employee Share Acquisition Plan purchases on market and have not yet distributed, or
* the Company issues to the ANZ Employee Share Acquisition Plan and have not yet been distributed.

Treasury shares are deducted from share capital and excluded from the weighted average number of ordinary shares used in the earnings per share calculations.

Reserves:

Foreign currency translation reserve
Includes differences arising on translation of assets and liabilities into Australian dollars when the functional currency of a foreign operation (including subsidiaries and branches) is not Australian dollars. In this reserve, we reflect any offsetting gains or losses on hedging these exposures, together with any tax effect.
Cash flow hedge reserve
Includes fair value gains and losses associated with the effective portion of designated cash flow hedging instruments together with any tax effect.
FVOCI reserve
Includes changes in the fair value of certain debt securities and equity securities included within Investment Securities together with any tax effect. In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records accumulated changes in fair value arising subsequent to initial recognition, except for those relating to allowance for expected credit losses, interest income and foreign currency exchange gains and losses which are recognised in profit or loss. As debt securities at FVOCI are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowance associated with such assets. When a debt security measured at FVOCI is derecognised, the cumulative gain or loss recognised in the FVOCI reserve in respect of that security is reclassified to profit or loss and presented in Other operating income. In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records accumulated changes in fair value arising subsequent to initial recognition (including any related foreign exchange gains or losses). When an equity security measured at FVOCI is derecognised, the cumulative gain or loss recognised in the FVOCI reserve in respect of that security is not recycled to profit or loss.
Share option reserve
Includes amounts which arise on the recognition of share-based compensation expense.
Transactions with non-controlling interests reserve
Includes the impact of transactions with non-controlling shareholders in their capacity as shareholders.
Non-controlling interests
Share in the net assets of controlled entities attributable to equity interests which the Company does not own directly or indirectly.

25. CAPITAL MANAGEMENT

CAPITAL MANAGEMENT STRATEGY

ANZ’s capital management strategy aims to protect the interests of depositors, creditors and shareholders. We achieve this through an Internal Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts detailed strategic and capital planning over a 3 year time horizon.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

25. CAPITAL MANAGEMENT

The process involves:
* forecasting economic variables, financial performance of ANZ’s divisions and the financial impact of new strategic initiatives to be implemented during the planning period;
* performing stress tests under different economic scenarios to determine the level of additional capital (stress capital buffer) needed to absorb losses that may be experienced under an economic downturn;
* reviewing capital ratios and targets across various classes of capital against ANZ’s risk profile; and
* developing a capital plan, taking into account capital ratio targets, current and future capital issuances requirements and options around capital products, timing and markets to execute the capital plan under differing market and economic conditions.

The capital plan is approved by the Board and updated as required. The Board and senior management are provided with regular updates of ANZ’s capital position. Any material actions required to ensure ongoing prudent capital management are submitted to the Board for approval.

Throughout the year, the Group maintained compliance with all the regulatory requirements related to Capital Adequacy in the jurisdictions in which it operates.

REGULATORY ENVIRONMENT

Australia

As ANZ is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959 (Cth). ANZ must comply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that APRA sets and which are consistent with the global Basel III capital framework. This is the common framework for determining the appropriate level of bank regulatory capital as set by the Basel Committee on Banking Supervision (BCBS).

APRA requirements are summarised below:

Regulatory Capital Definition
Common Equity Tier 1 (CET1) Capital	Shareholders’ equity adjusted for specific items.
Tier 1 Capital	CET1 Capital plus certain securities with complying loss absorbing characteristics known as Additional Tier 1 Capital.
Tier 2 Capital	Subordinated debt instruments which have a minimum term of 5 years at issue date.
Total Capital	Tier 1 plus Tier 2 Capital.

Minimum Prudential Capital Ratios (PCRs)
CET1 Ratio	CET1 Capital divided by total risk weighted assets must be at least 4.5%.
Tier 1 Ratio	Tier 1 Capital divided by total risk weighted assets must be at least 6.0%.
Total Capital Ratio	Total Capital divided by total risk weighted assets must be at least 8.0%.

Reporting Levels
Level 1	The ADI on a stand-alone basis (that is the Company and specified subsidiaries which are consolidated to form the ADI’s Extended Licensed Entity).
Level 2	The consolidated Group less certain subsidiaries and associates that are excluded under prudential standards.
Level 3	A conglomerate Group at the widest level.

APRA also requires the ADI to hold additional CET1 buffers as follows:
* a capital conservation buffer (CCB) of 3.5% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs). APRA has determined that ANZ is a D-SIB.
* a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set to zero for Australia.

ANZ reports to APRA on a Level 1 and Level 2 basis, and measures capital adequacy monthly on a Level 1 and Level 2 basis, and is not yet required to maintain capital on a Level 3 basis (APRA have yet to conclude required timing for Level 3 reporting).

210 ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

25. CAPITAL MANAGEMENT (continued)

Life Insurance and Funds Management

As required by APRA’s Prudential Standards, insurance and funds management activities are:
* de-consolidated for the purposes of calculating capital adequacy; and
* excluded from the risk-based capital adequacy framework.

We deduct the investment in these controlled entities 100% from CET1 capital, and if we include any profits from these activities in the Group’s results, then we exclude them from the determination of CET1 capital to the extent they have not been remitted to the Company.

Outside Australia

In addition to APRA, the Company’s branch operations and major banking subsidiary operations are also 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. They may impose minimum capital levels on operations in their individual jurisdictions.

CAPITAL ADEQUACY¹

The following table provides details of the Group’s capital adequacy ratios at 30 September:

	Consolidated
	2022
	$m
Qualifying capital
Tier 1
Shareholders' equity and non-controlling interests	66,401
Prudential adjustments to shareholders' equity	(175)
Gross Common Equity Tier 1 capital	66,226
Deductions	(10,354)
Common Equity Tier 1 capital	55,872
Additional Tier 1 capital²	7,686
Tier 1 capital	63,558
Tier 2 capital³	19,277
Total qualifying capital	82,835

Capital adequacy ratios (Level 2)
Common Equity Tier 1	12.3%
Tier 1	14.0%
Tier 2	4.2%
Total capital ratio	18.2%

Risk weighted assets	454,718

¹ This information is not within the scope of the external audit of the Group Financial Report by the Group’s external auditor, KPMG. The information presented in this table is a regulatory requirement disclosed in Part A of the APRA Reporting Form (ARF) 110 Capital Adequacy which will be subject to audit in accordance with Prudential Standard APS 310 Audit and Related Matters.
² This includes Additional Tier 1 capital of $7,705 million (2021: $8,506 million) (refer to Note 17 Debt Issuances), regulatory adjustments and deductions of -$19 million (2021: -$392 million).
³ This includes Tier 2 capital of $17,907 million (2021: $16,207 million) (refer to Note 17 Debt Issuances), general reserve for impairment of financial assets of $1,233 million (2021: $1,412 million) and regulatory adjustments and deductions of $137 million (2021: -$494 million).

26. CONTROLLED ENTITIES

The ultimate parent of the Group is Australia and New Zealand Banking Group Limited
Incorporated in Australia
Nature of Business: Banking

The Group holds 100% of the voting interests in all controlled entities, unless noted otherwise. The material controlled entities of the Group are:


ANZ Bank (Vietnam) Limited¹	Vietnam Banking
ANZ Funds Pty. Ltd.	Australia Holding Company
ANZ Bank (Kiribati) Limited¹ (75% ownership)	Kiribati Banking
ANZ Bank (Samoa) Limited¹	Samoa Banking
ANZ Bank (Thai) Public Company Limited¹	Thailand Banking
ANZ Holdings (New Zealand) Limited¹	New Zealand Holding Company
ANZ Bank New Zealand Limited¹	New Zealand Banking
ANZ Investment Services (New Zealand) Limited¹	New Zealand Funds Management
ANZ New Zealand (Int’l) Limited¹	New Zealand Finance
ANZ New Zealand Investments Holdings Limited (formerly ANZ Wealth New Zealand Limited)¹	New Zealand Holding Company
ANZ New Zealand Investments Limited¹	New Zealand Funds Management
ANZNZ Covered Bond Trust¹,4	New Zealand Finance
ANZ International Private Limited¹	Singapore Holding Company
ANZ Singapore Limited¹	Singapore Merchant Banking
ANZ International (Hong Kong) Limited¹	Hong Kong Holding Company
ANZ Bank (Vanuatu) Limited²	Vanuatu Banking
ANZcover Insurance Private Ltd¹	Singapore Captive-Insurance
ANZ Lenders Mortgage Insurance Pty. Limited	Australia Mortgage Insurance
ANZ Residential Covered Bond Trust⁴	Australia Finance
Australia and New Zealand Bank (China) Company Limited¹	China Banking
Australia and New Zealand Banking Group (PNG) Limited¹	Papua New Guinea Banking
Chongqing Liangping ANZ Rural Bank Company Limited¹	China Banking
Citizens Bancorp³	Guam Holding Company
ANZ Guam Inc³	Guam Banking
Institutional Securitisation Services Limited (formerly ANZ Capel Court Limited)	Australia Securitisation Manager
PT Bank ANZ Indonesia¹ (99% ownership)	Indonesia Banking

¹ Audited by overseas KPMG firms — either as part of the Group audit, or for standalone financial statements as required.
² Audited by Law Partners.
³ Audited by Deloitte Guam.
⁴ Not owned by the Group. Control exists as the Group retains substantially all the risks and rewards of the operations.

CHANGES TO MATERIAL CONTROLLED ENTITIES
ANZ Asia Limited was deregistered in July 2022.

SIGNIFICANT RESTRICTIONS
Controlled entities that are subject to prudential regulation may be required to maintain minimum capital or other regulatory requirements which may, from time to time, limit the entity’s ability to transfer assets, pay dividends or make other capital distributions to the parent entity or to other entities in the Group. The Group manages such restrictions within our risk management framework, as outlined in Note 18 Financial Risk Management and our capital management strategy, as outlined in Note 25 Capital Management. As at 30 September 2022, there were no significant restrictions on the ability of an entity within the Group to transfer assets, pay dividends or make other capital distributions to other entities in the Group.

212 ANZ 2022 Annual Report
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. CONTROLLED ENTITIES (continued)

RECOGNITION AND MEASUREMENT

The Group’s subsidiaries are those entities it controls through:
* being exposed to, or having rights to, variable returns from the entity; and
* being able to affect those returns through its power over the entity.

The Group assesses whether it has power over those entities by examining the Group’s existing rights to direct the relevant activities of the entity.# NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. INVESTMENTS IN ASSOCIATES

If the Group sells or acquires subsidiaries during the year, it includes their operating results in the Group results to the date of disposal or from the date of acquisition. When the Group’s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non- controlling interest and other components of equity. If the Group’s ownership interest in a subsidiary changes in a way that does not result in a loss of control, then the Group accounts for that as a transaction with equity holders in their capacity as equity holders. All transactions between Group entities are eliminated on consolidation.

Name of entity	Principal activity	Ordinary share interest	Carrying amount $m
		2022	2021
AMMB Holdings Berhad (AmBank)	Banking and insurance	22%	22%
PT Bank Pan Indonesia (PT Panin)	Consumer and business bank	39%	39%
Worldline Australia Pty Ltd (Worldline)	Payment and transactional services	49%	-
Aggregate other individually immaterial associates	n/a	n/a	26
Total carrying value of associates¹			2,181

¹Includes the impact of foreign currency translation recognised in the foreign currency translation reserve.

FINANCIAL INFORMATION ON SIGNIFICANT ASSOCIATES

Set out below is the summarised financial information of each associate that is significant to the Group. The summarised financial information is based on the associates’ IFRS financial information and may require the use of unaudited financial information as each associate has a different financial year to the Group (PT Panin 31 December, AmBank 31 March, Worldline 31 December).

	AMMB Holdings Berhad	PT Bank Pan Indonesia	Worldline Australia Pty Ltd¹
Principal place of business and country of incorporation	Malaysia	Indonesia	Australia
	2022	2021	2022
	$m	$m	$m
Summarised results
Operating income²	1,511	1,560	1,206
Profit/(Loss) for the year	529	(1,192)	198
Other comprehensive income/(loss)	(128)	(39)	6
Total comprehensive income/(loss)	401	(1,231)	204
Less: Total comprehensive (income)/loss attributable to non–controlling interests	(18)	(25)	25
Total comprehensive income/(loss) attributable to owners of associate	383	(1,256)	229
Summarised financial position
Total assets³	57,220	55,711	20,537
Total liabilities³	53,234	49,773	17,234
Total net assets³	3,986	5,938	3,303
Less: Non-controlling interests of associate	(402)	(327)	(315)
Net assets attributable to owners of associate	3,584	5,611	2,988
Reconciliation to carrying amount of Group's interest in associate
Carrying amount at the beginning of the year	719	1,056	1,210
Acquired	-	-	-
Group's share of total comprehensive income/(loss)	81	(313)	71
Dividends received from associate	(12)	-	(18)
Foreign currency translation reserve adjustments	2	(24)	55
Carrying amount at the end of the year	790	719	1,318
Market value of Group's investment in associate	929	756	2,016

¹During 2022, the Group entered into a partnership with Worldline SA. This included the creation of a new entity, Worldline Australia Pty Ltd, which commenced operations on 8 March 2022.
²2021 operating income was restated for AmBank to align with the change in presentation in AmBank’s financial statements.
³Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).

RECOGNITION AND MEASUREMENT

An associate is an entity over which the Group has significant influence over its operating and financial policies but does not control. The Group accounts for associates using the equity method. Its investments in associates are carried at cost plus the post-acquisition share of changes in the associate’s net assets less accumulated impairments. Dividends the Group receives from associates are recognised as a reduction in the carrying amount of the investment. The Group includes goodwill recognised by the associate in the carrying amount of the investment. It does not individually test the goodwill incorporated in the associates carrying amount for impairment.

At least at each reporting date, the Group reviews investments in associates for any indication of impairment. If an indication of impairment exists, then the Group determines the recoverable amount of the associate using the higher of:
* the associate’s fair value less cost of disposal; and
* its value-in-use.

We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology), to determine the recoverable amount.

KEY JUDGEMENTS AND ESTIMATES

Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired. In addition, the Group is required to assess at each reporting date whether the recoverable amount of the Group’s investment has increased to such a level as to support the reversal of prior period impairments.

During the year ended 30 September 2022, the fair value less costs of disposal of the Group’s investment in PT Bank Pan Indonesia (PT Panin) as determined by reference to the quoted share price increased significantly and as at 30 September 2022 was greater than its carrying value. The increase in fair value is a significant reversal of the position at 30 September 2021 when the fair value less cost of disposal determined by reference to share price was lower than the carrying value of the investment. In considering whether a full or partial reversal of previous periods’ impairments of PT Panin is appropriate, the Group has assessed particular features of the PT Panin stock. Given the recent rapid increase and ongoing elevated volatility in the share price, the Group has determined that none of the prior period impairment will be reversed. If management had assessed these factors differently, then the amount of impairment reversed could be anywhere between nil and $220 million.

28. STRUCTURED ENTITIES

A Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives. SEs are classified as subsidiaries and consolidated when control exists. If the Group does not control a SE, then it is not consolidated. This note provides information on both consolidated and unconsolidated SEs.

The Group’s involvement with SEs is as follows:

Type	Details
Securitisation	The Group establishes SEs to securitise customer loans and advances that it has originated, in order to diversify sources of funding for liquidity management. Securitisation programs include customer loans and advances assigned to bankruptcy remote SEs to provide either security for obligations payable on notes issued by the SEs to external investors or create assets held by the Group eligible for repurchase agreements with applicable central banks. The Group retains control over these SEs and therefore they are consolidated. Refer to Note 29 Transfers of Financial Assets for further details. The Group also establishes SEs on behalf of customers to securitise their loans or receivables. The Group may manage these securitisation vehicles or provide liquidity or other support. Additionally, the Group may acquire interests in securitisation vehicles set up by third parties through holding securities issued by such entities. In limited circumstances where control exists, the Group consolidates the SE.
Covered bond issuances	Certain loans and advances have been assigned to bankruptcy remote SEs to provide security for issuances of debt securities by the Group. The Group retains control over these SEs and therefore they are consolidated. Refer to Note 29 Transfers of Financial Assets for further details.
Structured finance arrangements	The Group is involved with SEs established: x in connection with structured lending transactions to facilitate debt syndication and/or to ring-fence collateral; and x to own assets that are leased to customers in structured leasing transactions. The Group may manage the SE, hold minor amounts of the SE’s capital, or provide risk management products (derivatives) to the SE. In most instances, the Group does not control these SEs. In limited circumstances where control exists, the Group consolidates the SE.
Funds management activities	The Group is the scheme manager for a number of Managed Investment Schemes (MIS) in New Zealand. These MIS are financed through the issue of units to investors and the Group considers them to be SEs. The Group’s interests in these MIS are limited to receiving fees for services or providing risk management products (derivatives). These interests do not create significant exposures that would allow the Group to control the funds. Therefore, these MIS are not consolidated.

CONSOLIDATED STRUCTURED ENTITIES FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES

The Group provides financial support to consolidated SEs as outlined below.


Securitisation and covered bond issuances	The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments that they have issued.
Structured finance arrangements	The assets held by these SEs are normally pledged as collateral for financing provided.

UNCONSOLIDATED STRUCTURED ENTITIES

GROUP’S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES

An ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass-on risks specific to the performance of the SE; lending; loan commitments; financial guarantees; and fees from funds management activities.

For the purpose of disclosing interests in unconsolidated SEs:

no disclosure is made if the Group’s involvement is not more than a passive interest - for example: when the Group’s involvement constitutes a typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading and investing activities are not considered disclosable interests - unless the design of the structured entity allows the Group to participate in decisions about the relevant activities (being those that significantly affect the entity’s returns).
‘interests’ do not include derivatives intended to expose the Group to market-risk (rather than performance risk specific to the SE) or derivatives through which the Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit protection under a credit default swap).

The table below sets out the Group’s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from those interests:

	Securitisation	Structured finance	Total
	2022	2021	2022	2021	2022	2021
	$m	$m	$m	$m	$m	$m
On-balance sheet interests
Investment securities	3,352	2,624	-	-	3,352	2,624
Gross loans and advances	9,433	7,697	43	53	9,476	7,750
Total on-balance sheet	12,785	10,321	43	53	12,828	10,374
Off-balance sheet interests
Commitments (facilities undrawn)	2,078	2,034	-	-	2,078	2,034
Guarantees	50	50	-	-	50	50
Total off-balance sheet	2,128	2,084	-	-	2,128	2,084
Maximum exposure to loss	14,913	12,405	43	53	14,956	12,458

In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $181 million (2021: $192 million) during the year.

The Group’s maximum exposure to loss represents the maximum amount of loss that the Group could incur as a result of its involvement with unconsolidated SEs if loss events were to take place - regardless of the probability of occurrence. This does not in any way represent the actual losses expected to be incurred. Furthermore, the maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered into to mitigate ANZ’s exposure to loss.

The maximum exposure to loss has been determined as:

the carrying amount of Investment securities measured at amortised cost; and
the carrying amount plus the undrawn amount of any committed loans and advances.

The size of unconsolidated SEs is indicated by total assets which vary by SE with the largest single SE having a value of approximately $5.2 billion. The Group did not provide any non-contractual support to unconsolidated SEs during the year (2021: nil) nor does it have any current intention to provide financial or other support to unconsolidated SEs.

KEY JUDGEMENTS AND ESTIMATES

Significant judgement is required in assessing whether the Group has control over Structured Entities. Judgement is required to determine the existence of:

power over the relevant activities (being those that significantly affect the entity’s returns); and
exposure to variable returns of the entity.

29. TRANSFERS OF FINANCIAL ASSETS

In the normal course of business the Group enters into transactions where it transfers financial assets directly to third parties or to SEs. These transfers may give rise to the Group fully, or partially, derecognising those financial assets - depending on the Group’s exposure to the risks and rewards or control over the transferred assets. If the Group retains substantially all of the risk and rewards of a transferred asset, the transfer does not qualify for derecognition and the asset remains on the Group’s balance sheet in its entirety.

SECURITISATIONS

Net loans and advances include residential mortgages securitised under the Group’s securitisation programs which are assigned to bankruptcy remote SEs to provide security for obligations payable on the notes issued by the SEs. The holders of the issued notes have full recourse to the pool of residential mortgages which have been securitised and the Group cannot otherwise pledge or dispose of the transferred assets. In some instances, the Group is also the holder of the securitised notes issued by the SEs. In addition, the Group is entitled to any residual income of the SEs and sometimes enters into derivatives with the SEs. The Group retains the risks and rewards of the residential mortgages and continues to recognise the mortgages as financial assets. The Group is exposed to variable returns from its involvement with these securitisation SEs and has the ability to affect those returns through its power over the SEs activities. The SEs are therefore consolidated by the Group.

COVERED BONDS

The Group operates various global covered bond programs to raise funding in its primary markets. Net loans and advances include residential mortgages assigned to bankruptcy remote SEs associated with these covered bond programs. The mortgages provide security for the obligations payable on the issued covered bonds. The covered bond holders have dual recourse to the issuer and the cover pool of assets. The issuer cannot otherwise pledge or dispose of the transferred assets, however, subject to legal arrangements it may repurchase and substitute assets as long as the required cover is maintained. The Company is required to maintain the cover pool at a level sufficient to cover the bond obligations. In addition, the Company is entitled to any residual income of the covered bond SEs and enters into derivatives with the SEs. The Company retains the majority of the risks and rewards of the residential mortgages and continues to recognise the mortgages as financial assets. The obligation to pay this amount to the SEs is recognised as a financial liability of the Company. The Group is exposed to variable returns from its involvement with the covered bond SEs and has the ability to affect those returns through its power over the SEs activities. The SEs are therefore consolidated by the Group. The covered bonds issued externally are included within debt issuances.

REPURCHASE AGREEMENTS

When the Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership, then those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.

STRUCTURED FINANCE ARRANGEMENTS

The Group arranges funding for certain customer transactions through structured leasing. These transactions are recognised on Group’s balance sheet as lease receivables or loans. At times, other financial institutions participate in the funding of these arrangements. This participation involves a proportionate transfer of the rights to the assets recognised by the Group. The participating banks have limited recourse to the leased assets and related proceeds. Where the Group continues to be exposed to some of the risks of the transferred assets through a derivative or other continuing involvement, the Group does not derecognise the lease receivable or loan. Instead, the Group recognises an associated liability representing its obligations to the participating financial institutions. The tables below set out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities.# Financial report

30. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS

Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:

	Consolidated	The Company
	2022	2021
	$m	$m
Defined benefit obligation and scheme assets
Present value of funded defined benefit obligation	(930)	(1,477)
Fair value of scheme assets	1,123	1,679
Net defined benefit asset	193	202
As represented in the Balance Sheet
Net liabilities arising from defined benefit obligations included in payables and other liabilities	(6)	(11)
Net assets arising from defined benefit obligations included in other assets	199	213
Net defined benefit asset	193	202
Weighted average duration of the benefit payments reflected in the defined benefit obligation (years)	14.8	14.9

As at the most recent reporting dates of the schemes, the aggregate surplus of net market value of assets over the value of accrued benefits on a funding basis was $69 million (2021: $109 million surplus). In 2022, the Group made defined benefit contributions totalling $2 million (2021: $3 million). It expects to make contributions of approximately $2 million next financial year.

GOVERNANCE OF THE SCHEMES AND FUNDING OF THE DEFINED BENEFIT SECTIONS

The main defined benefit superannuation schemes in which the Group participates operate under trust law and are managed and administered on behalf of the members in accordance with the terms of the relevant trust deed and rules and all relevant legislation. These schemes have corporate trustees, which are wholly owned subsidiaries of the Group. The trustees are the legal owners of the assets, which are held separately from the assets of the Group, and are responsible for setting investment policy and agreeing funding requirements with the employer through the triennial actuarial valuation process.

The Group has defined benefit arrangements in Australia, Japan, New Zealand, Philippines, Taiwan and United Kingdom. The defined benefit section of the ANZ Australian Staff Superannuation Scheme, the ANZ UK Staff Pension Scheme and the ANZ National Retirement Scheme in New Zealand are the three largest plans. They have been closed to new members since 1987, 2004 and 1991 respectively.

None of the schemes had a material deficit, or surplus, at the last funding valuation. The Group has no present liability under any of the schemes’ trust deeds to fund a deficit (measured on a funding basis). A contingent liability of the Group may arise if any of the schemes were wound up.

RECOGNITION AND MEASUREMENT

Defined benefit superannuation schemes

The Group operates a small number of defined benefit schemes. Independent actuaries calculate the liability and expenses related to providing benefits to employees under each defined benefit scheme. They use the Projected Unit Credit Method to value the liabilities. The balance sheet includes:
* a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
* an asset (capped to its recoverable amount) if the fair value of the assets is greater than the obligation.

In each reporting period, the movements in the net defined benefit liability are recognised as follows:
* the net movement relating to the current period’s service cost, net interest on the defined benefit liability, past service costs and other costs (such as the effects of any curtailments and settlements) as operating expenses;
* remeasurements of the net defined benefit liability (which comprise actuarial gains and losses and return on scheme assets, excluding interest income included in net interest) directly in retained earnings through other comprehensive income; and
* contributions of the Group directly against the net defined benefit position.

Defined contribution superannuation schemes

The Group operates a number of defined contribution schemes. It also contributes (according to local law, in the various countries in which it operates) to Government and other plans that have the characteristics of defined contribution plans. The Group’s contributions to these schemes are recognised as personnel expenses when they are incurred.

	Sensitivity analysis change in significant assumptions	Increase/(decrease) in defined benefit obligation
		2022 $m
Consolidated
Discount rate (% p.a.)	0.5% increase	(49)
Future salary increases (% p.a.)	0.5% increase	32
Future pension indexation In payment (% p.a.)/In deferment (% p.a.)	1 year increase	40
Life expectancy at age 60 for current pensioners
– Males (years)
– Females (years)

	Sensitivity analysis change in significant assumptions	Increase/(decrease) in defined benefit obligation
		2022 $m
The Company
Discount rate (% p.a.)	0.5% increase	(43)
Future salary increases (% p.a.)	0.5% increase	26
Future pension indexation In payment (% p.a.)/In deferment (% p.a.)	1 year increase	35
Life expectancy at age 60 for current pensioners
– Males (years)
– Females (years)

31. EMPLOYEE SHARE AND OPTION PLANS

ANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan.

ANZ EMPLOYEE SHARE ACQUISITION PLAN

The Deferred Share Plan was the only ANZ Employee Share Acquisition Plan scheme that operated during 2022 and 2021.

Deferred Share Plan

i) ANZ Incentive Plan (ANZIP) - Chief Executive Officer (CEO), Group Executive Committee (ExCo) and other Banking Executive Accountability Regime (BEAR) Accountable Executives: Based on the 2021 and 2020 Performance and Remuneration Review (granted in the 2022 and 2021 financial years)
Eligibility
CEO, ExCo and Group General Manager Internal Audit (GGM IA).
Grant
50% of the CEO’s Short Term Variable Remuneration (STVR), 25% of ExCo’s Variable Remuneration (VR) (except for the Chief Risk Officer (CRO)), and 33% of the CRO and GGM IA’s VR, was received as deferred shares.
Conditions
Deferred over at least one to four years from the date the Board approved the variable remuneration award.

ii) ANZIP: Based on the 2021 and 2020 Performance and Remuneration Reviews (granted in the 2022 and 2021 financial years)
Eligibility
All employees excluding the CEO, ExCo and GGM IA (i.e., other BEAR Accountable Executive), and select roles in the United Kingdom (UK)/China1.
Grant
If VR is at or exceeds AUD 100,000, then 60% of total VR amount is deferred as shares.
Conditions
Deferred over three years from grant date.

iii) Exceptional circumstances
Remuneration foregone
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to compensate them for remuneration they have foregone from their previous employer. The vesting period generally aligns with the remaining vesting period of the remuneration they have foregone, and therefore varies between grants.

Retention
We may grant deferred shares to high performing employees who are regarded as a significant retention risk to ANZ.

iv) Further information
Cessation
Unless the Board decides otherwise, employees forfeit their unvested deferred shares if they resign, are terminated on notice, or are dismissed for serious misconduct. The deferred shares may be held in trust beyond the deferral period.

Dividends
Dividends are reinvested in the Dividend Reinvestment Plan.

Instrument
Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see deferred share rights section).

Allocation value
All deferred shares are issued based on the VWAP of ANZ shares traded on the ASX in the week leading up to and including the date of grant.

Expensing value (fair value)
We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we recognise the expense as a share-based compensation expense with a corresponding increase in equity.

2022 and 2021 grants
During the 2022 year, we granted 1,971,715 deferred shares (2021: 1,653,585) with a weighted average grant price of $27.52 (2021: $23.31).# Malus (downward adjustment)

Deferred shares remain at risk and the Board has the discretion to adjust the number of deferred shares downwards, including to zero at any time before the vesting date. ANZ’s malus (downward adjustment) provisions are detailed in section 5.3 of the 2022 Remuneration Report. Board discretion was not exercised to adjust downward any deferred shares in 2022 (2021: nil).

Specific deferral arrangements also exist under ANZIP for roles defined as UK Material Risk Takers and China Material Risk Takers, in line with local regulatory requirements.

Expensing of the ANZ Employee Share Acquisition Plan

Expensing value (fair value)

The fair value of shares we granted during 2022 under the Deferred Share Plan, measured as at the date of grant of the shares, is $52.6 million (2021: $38.9 million) based on 1,971,715 shares (2021: 1,653,585) at VWAP of $26.69 (2021: $23.53).

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

31. EMPLOYEE SHARE AND OPTION PLANS (continued)

ANZ SHARE OPTION PLAN

Allocation

We may grant selected employees options/rights which entitle them to acquire fully paid ordinary ANZ shares at a fixed price at the time the options/rights vest. Voting and dividend rights will be attached to the ordinary shares allocated on exercise of the options/rights. Each option/right entitles the holder to one ordinary share subject to the terms and conditions imposed on grant. Exercise price of options, determined in accordance with the rules of the plan, is generally based on the VWAP of the shares traded on the ASX in the week leading up to and including the date of grant. For rights, the exercise price is nil.

Rules

Prior to the exercise of the option/right if ANZ changes its share capital due to a bonus share issue, pro-rata new share issue or reorganisation the following adjustments are required:

Issue of bonus shares - When the holder exercises their option, they are also entitled to be issued the number of bonus shares they would have been entitled to had they held the underlying shares at the time of the bonus issue;
Pro-rata share offer - We will adjust the exercise price of the option in the manner set out in the ASX Listing Rules; and
Reorganisation - In respect of rights, if there is a bonus issue or reorganisation of ANZ’s share capital, then the Board may adjust the number of rights or the number of underlying shares so that there is no advantage or disadvantage to the holder.

Holders otherwise have no other entitlements to participate:

in any new issue of ANZ securities before they exercise their options/rights; or
in a share issue of a body corporate other than ANZ (such as a subsidiary).

Any portion of the award which vests may, at the Board’s discretion, be satisfied by a cash equivalent payment rather than shares.

Expensing

We expense the fair value of options/rights on a straight-line basis over the relevant vesting period and we recognise the expense as a share-based compensation expense with a corresponding increase in equity.

Cessation

The provisions that apply if the employee’s employment ends are in section 8.2.3 of the 2022 Remuneration Report.

Malus (downward adjustment)

ANZ’s malus (downward adjustment) provisions are detailed in section 5.3 of the 2022 Remuneration Report.

Option Plans that operated during 2022 and 2021

i) Performance Rights

Allocation

We grant performance rights to the CEO and ExCo as part of ANZ’s variable remuneration plans. Performance rights provide the holder with the right to acquire ANZ shares at nil cost, subject to a four-year vesting period and Total Shareholder Return (TSR) performance hurdles. Further details on the performance hurdles are in section 5.2.5 of the 2022 Remuneration Report.

Satisfying vesting

Any portion of the award of performance rights (that have met the performance hurdles) may be satisfied by a cash equivalent payment rather than shares at the Board’s discretion. In 2022 (and 2021), the performance rights that vested (previously granted in November/December 2018 (and in November/December 2017)) were satisfied through a share allocation, other than 24,011 performance rights for which a cash payment was made (2021: 36,103).

2022 and 2021 grants

During 2022, we granted 542,747 performance rights (2021: 485,032).

Malus (downward adjustment)

Board discretion was not exercised to adjust downward any performance rights in 2022 (2021: nil).

ii) Deferred Share Rights (no performance hurdles)

Allocation

Deferred share rights provide the holder with the right to acquire ANZ shares at nil cost after a specified vesting period. We adjust the fair value of rights for the absence of dividends during the restriction period.

Satisfying vesting

Any portion of the award of share rights may be satisfied by a cash equivalent payment rather than shares at the Board’s discretion. All share rights were satisfied through a share allocation, other than 55,977 deferred share rights (2021: 89,296) for which a cash payment was made.

2022 and 2021 grants

During the 2022 year, 2,576,907 deferred share rights (no performance hurdles) were granted (2021: 2,258,774).

Malus (downward adjustment)

Board discretion was not exercised to adjust downward any deferred share rights in 2022 (2021: 8,414).

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Overview How we create value Performance overview Remuneration report Directors’ report Financial report Shareholder information

31. EMPLOYEE SHARE AND OPTION PLANS (continued)

Options, Deferred Share Rights and Performance Rights on Issue

As at 26 October 2022, there were 457 holders of 4,804,445 deferred share rights on issue and 22 holders of 1,402,847 performance rights on issue.

Options/Rights Movements

This table shows the options/rights over unissued ANZ shares and their related weighted average (WA) exercise prices as at the beginning and end of 2022 and the movements during 2022:

	Opening balance 1 Oct 2021	Options/ rights granted	Options/ rights forfeited¹	Options/ rights expired	Options/ rights exercised	Closing balance 30 Sep 2022
Number of options/rights	6,307,778	3,119,654	(747,744)	0	(2,470,648)	6,209,040
WA exercise price	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00
WA closing share price	$25.56
WA remaining contractual life	1.9 years
WA exercise price of all exercisable options/rights outstanding	$0.00
Outstanding exercisable options/rights	141,633

This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2021 and the movements during 2021:

	Opening balance 1 Oct 2020	Options/ rights granted	Options/ rights forfeited¹	Options/ rights expired	Options/ rights exercised	Closing balance 30 Sep 2021
Number of options/rights	6,724,557	2,743,806	(918,589)	0	(2,241,996)	6,307,778
WA exercise price	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00
WA closing share price	$25.34
WA remaining contractual life	1.8 years
WA exercise price of all exercisable options/rights outstanding	$0.00
Outstanding exercisable options/rights	227,412

¹Refers to any circumstance where equity can be forfeited (for example on cessation, downward adjustment or performance conditions not met).

All of the shares issued as a result of the exercise of options/rights during 2022 and 2021, were issued at a nil exercise price.

As at the date of the signing of the Directors’ Report on 26 October 2022:

no options/rights over ordinary shares have been granted since the end of 2022; and
no shares issued as a result of the exercise of options/rights since the end of 2022.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

31. EMPLOYEE SHARE AND OPTION PLANS (continued)

Fair Value Assumptions

When determining the fair value, we apply the standard market techniques for valuation, including Monte Carlo and/or Black Scholes pricing models. We do so in accordance with the requirements of AASB 2 Share-based Payments. The models take into account early exercise of vested equity, non-transferability and internal/external performance hurdles (if any). The table below shows the significant assumptions we used as inputs into our fair value calculation of instruments granted during the period. We present the values as weighted averages, but the specific values we use for each allocation are the ones we use for the fair value calculation.

	2022		2021
	Deferred share rights	Performance rights	Deferred share rights	Performance rights
Exercise price ($)	0.00	0.00	0.00	0.00
Share closing price at grant date ($)	26.62	26.92	23.37	23.32
Expected volatility of ANZ share price (%)¹	20.0	20.0	26.5	25.0
Equity term (years)	2.2	6.0	2.3	6.0
Vesting period (years)	2.1	4.0	2.0	4.0
Expected life (years)	2.1	4.0	2.0	4.0
Expected dividend yield (%)	5.50	5.50	4.85	5.25
Risk free interest rate (%)	0.80	1.25	0.10	0.21
Fair value ($)	23.71	10.38	21.15	9.56

¹Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the rights. The measure of volatility used in the model is the annualised standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility is then used to estimate a reasonable expected volatility over the expected life of the rights.

SATISFYING EQUITY AWARDS

All shares underpinning equity awards may be purchased on market, reallocated or be newly issued shares, or a combination. The equity we purchased on market during the 2022 financial year (either under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan, or to satisfy options or rights) for all employees amounted to 4,230,962 shares at an average price of $27.57 per share (2021: 3,593,574 shares at an average price of $22.03 per share).

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32.# 32. RELATED PARTY DISCLOSURES

KEY MANAGEMENT PERSONNEL COMPENSATION

Key Management Personnel (KMP) are Directors of Australia and New Zealand Banking Group Limited (whether executive directors or otherwise), and those personnel with a key responsibility for the strategic direction and management of the Group (i.e., members of the Group Executive Committee (ExCo)) who have Banking Executive Accountability Regime (BEAR) accountability and who report to the Chief Executive Officer (CEO). KMP compensation included within total personnel expenses in Note 4 Operating Expenses is as follows:

	Consolidated 2022	Consolidated 2021
	$'000	$'000
Short-term benefits	18,294	21,107
Post-employment benefits	394	403
Other long-term benefits	160	258
Termination benefits	-	250
Share-based payments	7,368	5,066
Total	26,216	27,084

Includes former disclosed KMP until the end of their employment.

KEY MANAGEMENT PERSONNEL LOAN TRANSACTIONS

Loans made to KMP are made in the ordinary course of business and on normal commercial terms and conditions that are no more favourable than those given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts have been written off during the period, or individual provisions raised in respect of these balances. Details of the terms and conditions of lending products can be found on anz.com. The aggregate of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP including their related parties, were as follows:

	Consolidated 2022	Consolidated 2021	The Company 2022	The Company 2021
	$'000	$'000	$'000	$'000
Loans advanced¹	24,340	25,445	11,270	12,534
Undrawn facilities¹	489	531	277	277
Interest charged²	790	777	293	434

Balances are as at the balance sheet date (for KMP in office at balance sheet date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of commencement) for new KMP in the current period.
Interest charged is for all KMP’s during the period.

KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES

KMP, including their related parties, held subordinated debt, shares, share rights and options over shares in the Company directly, indirectly or beneficially as shown below:

	Consolidated 2022	Consolidated 2021
	Number	Number
Shares, options and rights¹	2,911,138	2,471,577
Subordinated debt¹	29,948	25,870

Balances are as at the balance sheet date (for KMP in office at balance sheet date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of commencement) for new KMP in the current period.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

32. RELATED PARTY DISCLOSURES (continued)

OTHER TRANSACTIONS OF KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES

The aggregate of deposits of KMP and their related parties with the Group were $30 million (2021: $28 million) and with the Company were $21 million (2021: $20 million). During the year, KMP participated in the ANZ Retail Entitlement Offer in their capacity as shareholders on the same terms and conditions as other shareholders of the Group. Refer to Note 24 Shareholders’ Equity for additional details regarding the ANZ Retail Entitlement Offer. Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service fees, brokerage and bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated with the performance of their duties. These transactions are conducted on normal commercial terms and conditions no more favourable than those given to other employees or customers. Gifts were provided to KMP on retirement amounting to $4,944 during the year.

ASSOCIATES

We disclose significant associates in Note 27 Investments in Associates. During the course of the financial year, transactions conducted with all associates were on terms equivalent to those made on an arm’s length basis.

	Consolidated 2022	Consolidated 2021	The Company 2022	The Company 2021
	$'000	$'000	$'000	$'000
Amounts receivable from associates	86,469	7	18,572	-
Amounts payable to associates	102,042	1,739	101,198	716
Interest revenue from associates	5,570	-	4,477	-
Interest expense to associates	34	2	26	-
Other revenue from associates	14,296	-	14,296	-
Other expenses paid to associates	11,159	9,988	8,592	8,063
Guarantees given to associates	72	28	72	28
Dividend income from associates	38,692	-	-	-
Undrawn facilities	94,097	-	94,097	-

There have been no material guarantees given or received. No amounts receivable from the associates have been written-off during the period, or individual provisions raised in respect of these balances.

SUBSIDIARIES

We disclose material controlled entities in Note 26 Controlled Entities. During the financial year, subsidiaries conducted transactions with each other and with associates on terms equivalent to those on an arm’s length basis. As of 30 September 2022, we consider all outstanding amounts on these transactions to be fully collectible. Transactions between the Company and its subsidiaries include providing a wide range of banking and other financial facilities. Details of amounts paid to, or received from, related parties, in the form of dividends or interest, are set out in Note 2 Net Interest Income and Note 3 Non-Interest Income. Other intragroup transactions include providing management and administrative services, staff training, data processing facilities, transfer of tax losses, and the leasing of Premises and equipment. The Company also issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business.

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33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

CREDIT RELATED COMMITMENTS AND CONTINGENCIES

	Consolidated 2022	Consolidated 2021	The Company 2022	The Company 2021
	$m	$m	$m	$m
Contract amount of:
Undrawn facilities	236,051	212,265	201,204	176,077
Guarantees and letters of credit	23,729	30,027	21,557	27,957
Performance related contingencies	26,036	18,303	24,634	17,085
Total	285,816	260,595	247,395	221,119

UNDRAWN FACILITIES

The majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Group or the Company may be required to pay, the full amount of undrawn facilities for the Group and the Company mature within 12 months.

GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES

Guarantees, letters of credit and performance related contingencies relate to transactions that the Group has entered into as principal – including guarantees, standby letters of credit and documentary letters of credit. Documentary letters of credit involve the Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured against an underlying shipment of goods or backed by a confirmatory letter of credit from another bank. Performance related contingencies are liabilities that oblige the Group to make payments to a third party if the customer fails to fulfil its non-monetary obligations under the contract. To reflect the risk associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that we apply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Based on the earliest date on which the Group or the Company may be required to pay, the full amount of guarantees and letters of credit and performance related contingencies for the Group and the Company mature within 12 months.

OTHER CONTINGENT LIABILITIES

As at 30 September 2022, the Group had contingent liabilities in respect of the matters outlined below. Where relevant, expert legal advice has been obtained and, in the light of such advice, provisions (refer to Note 23 Other Provisions) and/or disclosures as deemed appropriate have been made. In some instances we have not disclosed the estimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice the interests of the Group.

REGULATORY AND CUSTOMER EXPOSURES

The Group regularly engages with its regulators in relation to regulatory investigations, surveillance and reviews, reportable situations, civil enforcement actions (whether by court action or otherwise), formal and informal inquiries and regulatory supervisory activities in Australia and globally. The Group has received various notices and requests for information from its regulators as part of both industry-wide and Group-specific reviews and has also made disclosures to its regulators at its own instigation. The nature of these interactions can be wide ranging and, for example, include or have included in recent years a range of matters including responsible lending practices, regulated lending requirements, product suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance distribution, pricing, competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering and counter-terrorism financing obligations, privacy obligations and information security, business continuity management, reporting and disclosure obligations and product disclosure documentation.# ANZ 2022 Annual Report

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)

OTHER CONTINGENT LIABILITIES (continued)

BENCHMARK/RATE ACTIONS

In July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including the Company. The class actions are expressed to apply to persons and entities that engaged in US-based transactions in financial instruments that were priced, benchmarked, and/or settled based on certain benchmark rates. The claimants sought damages or compensation in amounts not specified, and alleged that the defendant banks, including the Company, violated US anti-trust laws, antiracketeering laws, and (in one case only), the Commodity Exchange Act and unjust enrichment principles. As at 30 September 2022, ANZ has reached agreements to settle each of these matters. The financial impact is not material. The settlements are without admission of liability and remain subject to finalisation and court approval.

In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company alleging breaches of the cartel provisions of the South African Competition Act in respect of trading in the South African rand. The potential civil penalty or other financial impact is uncertain.

CAPITAL RAISING ACTION

In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company alleging failure to comply with continuous disclosure obligations in connection with the Company’s August 2015 underwritten institutional equity placement. ASIC alleges the Company should have advised the market that the joint lead managers took up approximately 25.5 million ordinary shares of the placement. The Company is defending the allegations.

CONSUMER CREDIT INSURANCE LITIGATION

In February 2020, a class action was brought against the Company alleging breaches of financial advice obligations, misleading or deceptive conduct and unconscionable conduct in relation to the distribution of consumer credit insurance products. The issuers of the insurance products, QBE and OnePath Life, are also defendants to the claim. The Company is defending the allegations.

ESANDA DEALER CAR LOAN LITIGATION

In August 2020, a class action was brought against the Company alleging unfair conduct, misleading or deceptive conduct and equitable mistake in relation to the use of flex commissions in dealer arranged Esanda car loans. The Company is defending the allegations.

ONEPATH SUPERANNUATION LITIGATION

In December 2020, a class action was brought against OnePath Custodians, OnePath Life and the Company alleging that OnePath Custodians breached its obligations under superannuation legislation, and its duties as a trustee, in respect of superannuation investments and fees. The claim also alleges that the Company was involved in some of OnePath Custodians’ investment breaches. The Company is defending the allegations.

NEW ZEALAND LOAN INFORMATION LITIGATION

In September 2021, a representative proceeding was brought against ANZ Bank New Zealand Limited, alleging breaches of disclosure requirements under consumer credit legislation in respect of variation letters sent to certain loan customers. ANZ Bank New Zealand Limited is defending the allegations.

CREDIT CARDS LITIGATION

In November 2021, a class action was brought against the Company alleging that certain interest terms in credit card contracts were unfair contract terms and that it was unconscionable for the Company to rely on them. The Company is defending the allegations.

UNLICENSED THIRD PARTIES ACTION

In November 2021, ASIC commenced civil penalty proceedings against the Company alleging that three unlicensed third parties provided home loan application documents to the Company’s lenders, including in connection with the Company’s home loan introducer program. ASIC alleges that the Company contravened its obligations under credit legislation.

AVAILABLE FUNDS ACTION

In May 2022, ASIC commenced civil penalty proceedings against the Company in relation to fees charged to customers in some circumstances for credit card cash advance transactions made using recently deposited unprocessed funds. ASIC alleges that the Company made false or misleading representations, engaged in misleading or deceptive conduct and breached certain statutory obligations as a credit licensee. The Company is defending the allegations.

33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)

OTHER CONTINGENT LIABILITIES (continued)

ROYAL COMMISSION

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019. Following the Royal Commission there have been, and continue to be, additional costs and further exposures, including exposures associated with further regulator activity or potential customer exposures such as class actions, individual claims or customer remediation or compensation activities. The outcomes and total costs associated with these possible exposures remain uncertain.

SECURITY RECOVERY ACTIONS

Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets. These claims will be defended.

WARRANTIES, INDEMNITIES AND PERFORMANCE MANAGEMENT FEES

The Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to claims under those warranties, indemnities and commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.

The Group has entered an arrangement to pay performance management fees to external fund managers in the event predetermined performance criteria are satisfied in relation to certain Group investments. The satisfaction of the performance criteria and associated performance management fee remains uncertain.

CLEARING AND SETTLEMENT OBLIGATIONS

Certain group companies have a commitment to comply with rules governing various clearing and settlement arrangements which could result in a credit risk exposure and loss if another member institution fails to settle its payment clearing activities. The Group’s potential exposure arising from these arrangements is unquantifiable in advance.

Certain group companies hold memberships of central clearing houses, including ASX Clear (Futures), London Clearing House (LCH) SwapClear and RepoClear, Korea Exchange (KRX), Hong Kong Exchange (HKEX), Clearing Corporation of India and the Shanghai Clearing House. These memberships allow the relevant group company to centrally clear derivative instruments in line with cross-border regulatory requirements. Common to all of these memberships is the requirement for the relevant group company to make default fund contributions. In the event of a default by another member, the relevant group company could potentially be required to commit additional default fund contributions which are unquantifiable in advance.

PARENT ENTITY GUARANTEES

The Company has issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under these letters and guarantees, the Company undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to certain conditions including that the entity remains a controlled entity of the Company.

SALE OF GRINDLAYS BUSINESS

On 31 July 2000, the Company completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited (Grindlays) and certain other businesses. The Company provided warranties and indemnities relating to those businesses. The indemnified matters include civil penalty proceedings and criminal prosecutions brought by Indian authorities against Grindlays and certain of its officers, in relation to certain transactions conducted in 1991 that are alleged to have breached the Foreign Exchange Regulation Act, 1973. Civil penalties were imposed in 2007 which are the subject of appeals. The criminal prosecutions are being defended.

CONTINGENT ASSETS

NATIONAL HOUSING BANK

The Company is pursuing recovery of the proceeds of certain disputed cheques which were credited to the account of a former Grindlays customer in the early 1990s. The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds of the cheques were resolved in early 2002. Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to be shared between the Company and NHB.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

34.# AUDITOR FEES

Consolidated

The Company

$’000	2022	2021	2022	2021
KPMG Australia
Audit or review of financial reports	8,217	7,434	7,726	7,021
Audit-related services¹	6,037	2,772	5,956	2,696
Non-audit services²	8	106	8	106
Total³	14,262	10,312	13,690	9,823
Overseas related practices of KPMG Australia
Audit or review of financial reports	5,808	5,511	2,033	1,965
Audit-related services¹	1,459	1,657	831	917
Non-audit services²	-	85	-	85
Total	7,267	7,253	2,864	2,967
Total auditor fees	21,529	17,565	16,554	12,790

Group audit-related services comprise prudential and regulatory services of $6.26 million (2021: $3.27 million), comfort letters $0.52 million (2021: $0.49 million) and other services $0.71 million (2021: $0.67 million). Company audit-related services comprise prudential and regulatory services of $5.90million (2021: $2.78 million), comfort letters $0.48 million (2021: $0.45 million) and other services $0.41 million (2021: $0.38 million).
The nature of non-audit services for the Group and the Company include controls related assessments and methodology and procedural reviews. Further details are provided in the Directors’ Report.
Inclusive of goods and services tax. The Group and the Company’s Policy allows KPMG Australia or any of its related practices to provide assurance and other audit-related services that, while outside the scope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews requested by regulators such as APRA. Any other services that are not audit or audit-related services are non-audit services. The Policy allows certain non-audit services to be provided where the service would not contravene auditor independence requirements. KPMG Australia or any of its related practices may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor independence. These include consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the external auditor may ultimately be required to express an opinion on its own work.

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35. PENDING ORGANISATIONAL CHANGES IMPACTING FUTURE REPORTING PERIODS

Non-Operating Holding Company

On 4 May 2022, the Group announced its intention to lodge a formal application with APRA, the Federal Treasurer and other applicable regulators to establish a non-operating holding company and create distinct bank and non-bank groups within the organisation to assist ANZ to better deliver its strategy to strengthen and grow its core business further. Should the proposed restructure proceed, ANZ will establish a non-operating holding company, ANZ Group Holdings Limited, as the new listed parent holding company of the ANZ Group by a scheme of arrangement and to separate ANZ’s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group. The ‘ANZ Bank Group’ would comprise the current Australia and New Zealand Banking Group Limited and the majority of its present-day subsidiaries. The ‘ANZ Non-Bank Group’ would house banking-adjacent businesses developed or acquired by the ANZ Group, as we continue to seek ways to bring the best new technology and banking-adjacent services to our customers. The Explanatory Memorandum has been registered with the Australian Securities and Investments Commission and ANZ shareholders will be asked to vote on the scheme on 15 December 2022. A copy of the Explanatory Memorandum will be made available on ANZ’s website (www.anz.com/schememeeting).

Suncorp Bank Acquisition

36. EVENTS SINCE THE END OF THE FINANCIAL YEAR

There have been no significant events from 30 September 2022 to the date of signing this report.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Directors’ Declaration

The Directors of Australia and New Zealand Banking Group Limited declare that:

a) in the Directors’ opinion, the financial statements and notes of the Company and the Consolidated Entity are in accordance with the Corporations Act 2001 , including:
i) section 296, that they comply with the Australian Accounting Standards and any further requirements of the Corporations Regulations 2001 ; and
ii) section 297, that they give a true and fair view of the financial position of the Company and the Consolidated Entity as at 30 September 2022 and of their performance for the year ended on that date; and

b) the notes to the financial statements of the Company and the Consolidated Entity include a statement that the financial statements and notes of the Company and the Consolidated Entity comply with International Financial Reporting Standards; and

c) the Directors have been given the declarations required by section 295A of the Corporations Act 2001 ; and

d) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

Paul D O’Sullivan
Chairman
26 October 2022

Shayne C Elliott
Managing Director

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TO THE SHAREHOLDERS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

REPORT ON THE AUDITS OF THE FINANCIAL REPORTS

OPINIONS

We have audited the consolidated Financial Report of Australia and New Zealand Banking Group Limited (the Group Financial Report). We have also audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company Financial Report). In our opinion, each of the accompanying Group Financial Report and Company Financial Report are in accordance with the Corporations Act 2001 , including:

giving a true and fair view of the Group’s and of the Company’s financial position as at 30 September 2022 and of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.

The respective Financial Reports of the Group and the Company comprise:

balance sheets as at 30 September 2022
income statements, statements of comprehensive income, statements of changes in equity, and cash flow statements for the year then ended
notes 1 to 36 including a summary of significant accounting policies
Directors’ Declaration.

The Group consists of Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year-end or from time to time during the financial year.

BASIS FOR OPINIONS

We conducted our audits in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audits of the Financial Reports section of our report. We are independent of the Group and Company in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants ((including Independence Standards) (the Code) that are relevant to our audits of the Financial Reports in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements.

KEY AUDIT MATTERS

The Key Audit Matters we identified for the Group and Company are:

Allowance for expected credit losses;
Subjective and complex valuation of financial instruments held at fair value;
Provisions for customer remediation; and
IT systems and controls.

The additional Key Audit Matter we identified for the Group (only) is:

Carrying value of investment in PT Bank Pan Indonesia (PT Panin).

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our respective audits of the Financial Reports of the current period. These matters were addressed in the context of our audits of each of the Financial Reports as a whole, and in forming our opinions thereon, and we do not provide a separate opinion on these matters.

ANZ 2022 Annual Report
234

KEY AUDIT MATTERS (continued)

ALLOWANCE FOR EXPECTED CREDIT LOSSES (Group $4,395m; Company $3,599m)

Refer to the critical accounting estimates and judgements disclosures in relation to the allowance for expected credit losses in Note 14 to the Group and Company Financial Reports.# KEY AUDIT MATTERS (continued)

The Key Audit Matter

Allowance for expected credit losses is a key audit matter due to the significance of the loans and advances balances to the financial statements and the inherent complexity of the Company and Group’s Expected Credit Loss models (ECL models) used to measure ECL allowances. These models are reliant on data and a number of estimates including the impact of multiple economic scenarios and other assumptions such as defining a significant increase in credit risk (SICR). AASB 9 Financial Instruments requires the Company and Group to measure ECLs on a forward-looking basis reflecting a range of economic conditions. Post-model adjustments are made by the Company and Group to address known ECL model limitations or emerging trends in the loan portfolios. We exercise significant judgement in challenging the economic scenarios used and the judgmental post-model adjustments the Company and Group applies to the ECL results. Additional subjectivity and judgement has been introduced into the Group and Company’s measurement of ECL due to the heightened uncertainty associated with the impact of the economic outlook to the Group and Company’s customers, increasing our audit effort thereon. The Company and Group’s criteria selected to identify a SICR, such as a decrease in customer credit rating (CCR), are key areas of judgement within the Company and Group’s ECL methodology as these criteria determine if a forward-looking 12 month or lifetime allowance is recorded. Additionally, allowances for individually assessed wholesale loans exceeding specific thresholds are assessed by the Company and Group. We exercise significant judgement in challenging the assessment of specific allowances based on the expected future cash repayments and estimated proceeds from the value of the collateral held by the Company and Group in respect of the loans.

How the matter was addressed in our audits

Our audit procedures for the allowance for ECL included assessing the Company and Group’s significant accounting policies against the requirements of the accounting standard. Additionally, our procedures included:

Testing key controls of the Company and Group in relation to:
- The ECL model governance and validation processes which involved assessment of model performance;
- The assessment and approval of the forward-looking macroeconomic assumptions and scenario weightings through challenge applied by the Company and Group’s internal governance processes;
- Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;
Customer credit rating (CCR) for wholesale loans (larger customer exposures are monitored individually). This covered elements such as: approval of new lending facilities against the Company and Group’s lending policies, monitoring of counterparty credit quality against the Company and Group’s exposure criteria for internal factors specific to the counterparty or external macroeconomic factors, and accuracy and timeliness of CCR and security indicator (SI) assessments against the requirements of the Company and Group’s lending policies and regulatory requirements;
IT system controls which record retail loans lending arrears, group exposures into delinquency buckets, and re-calculate individual allowances. We tested automated calculation and change management controls and evaluated the Company and Group’s oversight of the portfolios, with a focus on controls over delinquency monitoring. We tested relevant General Information Technology Controls (GITCs) in relation to the key IT applications used by the Company and Group in measuring ECL allowances as detailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:
Re-performing credit assessments of a sample of wholesale loans controlled by the Company and Group’s specialist workout and recovery team assessed as higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Company and Group as showing signs of deterioration, or in areas of emerging risk. For each loan sampled, we challenged the Company and Group’s assessment of CCR and SI using the customer’s financial position, the valuation of security, and, where relevant, the risk of stranded assets, to inform our overall assessment of loan recoverability and the impact on the credit allowance. To do this, we used the information on the Company’s and Group’s loan file and discussed the facts and circumstances of the case with the loan officer. Exercising our judgement, our procedures included using our understanding of relevant industries and the macro-economic environment and comparing data and assumptions used by the Company and Group in recoverability assessments to externally sourced evidence, such as commodity prices, publicly available audited financial statements and comparable external valuations of collateral held. Where relevant we assessed the forecast timing of future cash flows in the context of underlying valuations and approved business plans and challenged key assumptions in the valuations;
Obtaining an understanding of the Company and Group’s processes to determine ECL allowances, evaluating the Company and Group’s ECL model methodologies against established market practices and criteria in the accounting standards;
Working with our Credit risk specialists, we assessed the accuracy of the Company and Group’s ECL model estimates by re-performing, for a sample of loans, the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Company and Group;
Working with our economic specialists, we challenged the Company and Group’s forward-looking macro-economic assumptions and scenarios incorporated in the Company and Group’s ECL models. We compared the Company and Group’s forecast GDP, unemployment rates, CPI and property price indices to relevant publicly available macro-economic information, and considered other known variables and information obtained through our other audit procedures to identify contradictory indicators;
Testing the implementation of the Company and Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into consideration movements in the CCR from loan origination and comparing our result to actual staging applied on an individual account level in the Company and Group’s ECL model;
Assessing the accuracy of the data used in the ECL models by checking a sample of data fields such as account balance and CCR to relevant source systems. We challenged key assumptions in the components of the Company and Group’s post-model adjustments to the ECL allowance balance. This included:
Assessing post-model adjustments against the Company and Group’s ECL model and data deficiencies identified by the Company and Group’s ECL model validation processes, particularly in light of the significant volatility in economic scenarios;
Comparing underlying data used in concentration risk and economic cycle allowances to underlying loan portfolio characteristics of recent loss experience, current market conditions and specific risks in the Company and Group’s loan portfolios;
* Assessing certain post-model adjustments identified by the Group and Company against internal and external information;
* Assessing the completeness of post-model adjustments by checking the consistency of risks we identified in the loan portfolios against the Company and Group’s assessment.
Assessing the appropriateness of the Company and Group’s disclosures in the financial reports using our understanding obtained from our testing and against the requirements of the accounting standards.

SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:

GROUP - FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,833m
GROUP - FAIR VALUE OF LEVEL 2 ASSET POSITIONS $108,853m
GROUP - FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $31m
GROUP - FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $88,977m
COMPANY - FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,449m
COMPANY - FAIR VALUE OF LEVEL 2 ASSET POSITIONS $105,583m
COMPANY - FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $20m
COMPANY - FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $86,652m

Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 19 to the Group and Company Financial Reports.

The Key Audit Matter

The fair value of the Company and Group’s Level 3 and 2 financial instruments is determined by the Company and Group’s application of valuation techniques which often involve the exercise of judgement and the use of assumptions and estimates. In assessing this Key Audit Matter, we involved our valuation specialists to supplement our senior team members who understand the Company and Group’s methods, assumptions and data relevant to their valuation of Financial Instruments. The Company and Group’s valuation of Level 3 and Level 2 financial instruments held at fair value is a Key Audit Matter due to:

The high degree of estimation uncertainty and potentially significant range of reasonable outcomes associated with the valuation of financial instruments classified as Level 3 where significant pricing inputs used in the valuation methodology and models are not observable.
The complexity associated with the Company and Group’s valuation methodology and models of certain more complex Level 2 financial instruments leading to an increase in subjectivity and estimation uncertainty.

These factors increased the level of judgement applied by us and our audit effort thereon.# INDEPENDENT AUDITOR'S REPORT (CONTINUED)

KEY AUDIT MATTERS (continued)

How the matter was addressed in our audits

Our audit procedures in relation to the valuation of financial instruments held at fair value included:

Performing an assessment of the population of financial instruments held at fair value by the Company and Group to identify portfolios with a higher risk of misstatement arising from significant judgements over valuation either due to unobservable inputs or complex models.
Testing the design and operating effectiveness of key controls relating specifically to these financial instruments, including those in relation to:
- Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;
- model validation at inception and periodically, including assessment of model limitation and assumptions;
- review, approval and challenge of daily profit and loss by a control function;
- collateral management process, including review and approval of margin reconciliations with clearing houses; and
- review and approval of fair value adjustments (FVAs), including exit price and portfolio level adjustments.
In relation to the subjective valuation of complex Level 2 and Level 3 financial instruments, with our valuation specialists:
- Assessing the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives;
- Comparing the Company and Group’s valuation methodology to industry practice and the criteria in the accounting standards.
With the assistance of our valuation specialists, independently re-valuing a selection of financial instruments and FVAs of the Company and Group. This involved sourcing independent inputs from comparable data in the market and available alternatives. We challenged the Company and Group where our revaluations significantly differed from the Company and Group’s valuations.
Assessing the appropriateness of the Company and Group’s disclosures in the financial reports using our understanding obtained from our testing and against the requirements of the accounting standards.

CARRYING VALUE OF INVESTMENT IN PT BANK PAN INDONESIA (PT PANIN) (Group $1,318m)

Refer to the critical accounting estimates, judgements and disclosures in Note 27 to the Group Financial Report.

The Key Audit Matter

The carrying value of the Group’s investment in associate, PT Panin, is a key audit matter as:

The investment is equity accounted as an associate and where indicators of impairment are identified the recoverable amount must be assessed. This involves judgement and consideration of valuation models given historical volatility in the market price of the shares and limited liquidity in the market for the shares. Impairment has been recognised in prior periods.
The Group’s impairment assessment identified that the Group’s investment in associate, PT Panin, experienced a significant increase in the quoted share price during the period. At 30 September 2022, this indicated a value greater than its carrying value, indicating a possible reversal of previous impairment under accounting standard requirements.
We critically evaluated the Group’s conclusion not to reverse the impairment losses recorded against the investment in PT Panin in prior periods. This required analysis of the market and comparison against the Group’s value in use modelled outcome and other fair value approaches.
We focused on critically evaluating the Group’s judgement in relation to key assumptions for assessing the recoverable amount, including:
- The nature of alternative valuation methodologies;
- Forecast earnings, forecast growth rates and terminal growth rates – the Group’s model is highly sensitive to small changes in these assumptions;
- Discount rates – these are complicated in nature and vary according to the conditions and environment the associate investment operates in.
We involved our valuation specialists to supplement our senior team members in assessing this key audit matter.

How the matter was addressed in our audit

Working with our valuation specialists, our procedures included:

Considering the appropriateness of the recoverable amount assessment used by the Group to conclude the carrying value of the Group’s investment in associate, PT Panin, is supportable;
Understanding the features of the PT Panin stock and the drivers of the recent significant increase in fair value indicated by reference to the quoted share price. This included analysis of the volatility of movements, the nature and size of the Group’s shareholdings and the volumes of trading of the limited free float of shares;
Critically evaluating other fair valuation approaches and comparing this to the quoted share price value, and the Group’s value in use outcome;
Considering the appropriateness of the value in use valuation method applied by the Group against the requirements of the accounting standards. This included:
- Assessing the integrity of the model used, including the accuracy of the underlying calculation formulas;
Assessing the Group’s key assumptions used in the model, such as, discount rates, forecast earnings, forecast growth rates and terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market practice;
Independently developing a discount rate estimate or range considered comparable using publicly available market data for comparable entities, adjusted for factors specific to the investment and the market and industry it operates in;
- Comparing the forecast earnings contained in the model to broker consensus reports, and released financial results;
- Assessing the accuracy of previous forecasts to inform our evaluation of current forecasts incorporated in the model;
Considering the sensitivity of the model by varying key assumptions, such as, discount rates and terminal growth rates, within a reasonable possible range. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures.
Assessing the recoverable amount at the reporting date against the recoverable amount of the investment when it was last impaired to critically assess reversal of previous impairment losses;
Assessing the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards.

PROVISIONS FOR CUSTOMER REMEDIATION (Group $662m; Company $600m)

Refer to the critical accounting estimates, judgements and disclosures in Notes 23 and 33 to the Group and Company Financial Reports.

The Key Audit Matter

The Company and Group have recognised provisions in relation to certain customer remediation activities arising from both internal and external investigations and reviews. Provisions for customer remediation activities is a key audit matter due to the judgements required by us in assessing the Company and Group’s determination of:

The completeness of the population of matters requiring remediation;
The existence of a present legal or constructive obligation arising from a past event, considering the conditions of the event against the criteria in the accounting standards;
Reliable estimates of the remediation amounts which may be paid arising from investigations and legal actions, including estimates of related costs; and
The potential for legal proceedings, further investigations, and reviews from their regulators leading to a wider range of estimation outcomes for us to consider.

How the matter was addressed in our audits

Our audit procedures for customer remediation provisions included:

Obtaining an understanding of the Company and Group’s processes and controls for identifying and assessing the impact of the investigations into customer remediation activities;
Enquiring with the Company and Group regarding ongoing legal, regulatory and other investigations into past activities which may require remediation;
Conducting independent discussions on significant matters with external legal counsel;
Reading the minutes and other relevant documentation of the Company’s Board of Directors, Board Committees, various management committees, and attending the Company’s Audit and Risk Committee meetings, for consistency to the basis used to estimate the provision;
Inspecting correspondence with relevant regulatory bodies and comparing the status and positioning with the basis for estimation used by the Company and Group;
For a sample of individual customer remediation matters, evaluating the basis for recognition of a provision and associated costs against the requirements of the accounting standards and for consistency with the Group and Company’s policies. We did this by obtaining an understanding of the matter and its status and independently assessing this against the recognition requirements of the accounting standards;
For a sample of individual customer remediation matters:
- Assessing and challenging the methods, data and assumptions used by the Company and Group to provide for customer remediation matters;
- Sample checking data accuracy to underlying systems;
- Performing model integrity checks;
Testing the accuracy of historical remediation provisions by comparing to actual payments. We used this knowledge to challenge the Group’s and Company’s current estimates and to inform our further procedures.
Testing completeness by evaluating where exposures may have arisen based upon our knowledge and experience of broader industry matters, the Company and Group's documentation and the current regulatory environment.# INDEPENDENT AUDITOR'S REPORT (CONTINUED)

KEY AUDIT MATTERS (continued)

Assessing the appropriateness of the Company and Group’s conclusions against the requirements of Australian Accounting Standards where estimates were unable to be reliably made for a provision to be recognised;
Evaluating the related disclosures using our understanding obtained from our testing and against the requirements of Australian Accounting Standards.

IT SYSTEMS AND CONTROLS

The Key Audit Matter

As a major Australian bank, the Company and Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to process and record a high volume of transactions. The controls over access, changes to and operation of IT systems are key to the recording of financial information and the preparation of financial reports which provide a true and fair view of the Company and Group’s financial positions and performance. The IT systems and controls, as they impact the financial recording and reporting of the Company and Group’s transactions, is a key audit matter as our audit approaches could significantly differ depending on the effective operation of the Company and Group’s IT controls. We work with our IT specialists as a core part of our audit team.

How the matter was addressed in our audits

Our testing focused on the technology control environments for key IT applications (systems) used in processing significant transactions and recording balances in the general ledgers, and the automated controls embedded within these systems which link the technology-enabled business processes. Working with our IT specialists, our audit procedures included:

Assessing the governance and higher-level controls across the IT environments, including those regarding policy design, policy review and awareness, and IT Risk and cyber security management practices;
Design and operating effectiveness testing of key controls across the user access management lifecycle, including how users are on-boarded, reviewed for access levels assigned, and removed on a timely basis from key IT applications and supporting infrastructure. We also examined the management of privileged roles and functions across relevant IT application and the supporting infrastructure;
Design and operating effectiveness testing of key controls for IT change management including authorisation of changes prior to development, testing performed and approvals prior to migration into the production environment of key IT applications. We assessed user access to release changes to IT application production environments across the Company and Group and whether access was commensurate with their job responsibilities;
Design and operating effectiveness testing of key controls used by the Company and Group’s technology teams to restrict access to and monitor system batch job schedules;
Design and operating effectiveness testing of key automated business process controls including those relating to enforcing segregation of duties to avoid conflicts from inappropriate role combinations within IT applications.

Our testing included:

Configurations to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (both between systems and intra-system); and
Data integrity of key system reporting used by us in our audit to select samples and analyse data used by the Company and Group to generate financial reporting.

OTHER INFORMATION

Other Information is financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which is provided in addition to the Financial Reports and the Auditor's Report. The Directors are responsible for the Other Information. Our opinions on the Financial Reports do not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audits of the Financial Reports, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Reports or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report, we have nothing to report.

239

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORTS

The Directors are responsible for:

preparing the Financial Reports that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal controls to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDITS OF THE FINANCIAL REPORTS

Our objective is:

to obtain reasonable assurance about whether each of the Financial Reports as a whole are free from material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinions.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Reports. A further description of our responsibilities for the audits of the Financial Reports is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.

REPORT ON THE REMUNERATION REPORT

In our opinion, the Remuneration Report of Australia and New Zealand Banking Group Limited for the year ended 30 September 2022 complies with Section 300A of the Corporations Act 2001 .

DIRECTORS’ RESPONSIBILITIES

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001 .

OUR RESPONSIBILITIES

We have audited the Remuneration Report included in pages 62 to 103 of the Directors’ report for the year ended 30 September 2022. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

KPMG
Martin McGrath
Partner
Melbourne
26 October 2022

ANZ 2022 Annual Report
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Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

241

Independent Limited Assurance Report to the Directors of Australia and New Zealand Banking Group Limited

Conclusion

Based on the evidence we obtained from the procedures performed, we are not aware of any material misstatements in the specified ESG Information in the ANZ 2022 Annual Report and ANZ 2022 Annual Review which has been prepared by ANZ in accordance with the Criteria for the year ended 30 September 2022.

Information Subject to Assurance

Australia and New Zealand Banking Group Limited (ANZ) engaged KPMG to perform a limited assurance engagement in relation to the ESG Information in the ANZ 2022 Annual Report and ANZ 2022 Annual Review. The scope of work comprised limited assurance over the material text and data claims as specified in the table below:

ESG Information	Page
2022 Performance Snapshot	3
What matters most to our stakeholders	10
Our approach to societal challenges	14-15
Our approach to climate change	16-17
Performance overview (Five year summary)	60

The ANZ 2022 Annual Report and ANZ 2022 Annual Review covers ANZ’s global operations for the year ended 30 September 2022 unless otherwise indicated.

Criteria

The ESG Information has been extracted from and prepared by ANZ on a consistent basis with the information in the ANZ 2022 ESG Supplement and accompanying ANZ 2022 ESG Supplement Data Pack, copies of which are available at anz.com/annualreport (the criteria). The ANZ 2022 ESG Supplement and ANZ 2022 ESG Supplement Data Pack has been prepared in accordance with the GRI Standards published by the Global Reporting Initiative, version dated 2016 and management’s basis of reporting, a summary of which is included in the Explanatory Notes section in the ANZ 2022 ESG Supplement.

Basis of our Conclusion

We conducted our work in accordance with International Standard on Assurance Engagements ISAE 3000 (Standard).In accordance with the Standard we have:
• Used our professional judgement to plan and perform the engagement to obtain limited assurance that we are not aware of any material misstatements in the ESG Information, whether due to fraud or error;
• Considered relevant internal controls when designing our assurance procedures, however we do not express a conclusion on their effectiveness; and
• Ensured that the engagement team possess the appropriate knowledge, skills and professional competencies.

Summary of Procedures Performed
Our limited assurance conclusion is based on the evidence obtained from performing the following procedures:
• Interviews with relevant employees responsible for developing the content (text and data) within the ESG Information to understand the approach for monitoring, collation and reporting of such information and the accuracy, completeness and existence of reported text and data;
• Undertaking analytical review procedures to support the reasonableness of the data;
• Identifying and testing assumptions supporting the calculations;
• Comparing text and data (on a sample basis) presented to underlying sources; and
• Reviewing the ANZ 2022 Annual Report, ANZ 2022 Annual Review and ANZ 2022 ESG Supplement and ANZ 2022 ESG Supplement Data Pack in their entirety for consistency with the ESG Information and our knowledge obtained through our assurance engagement.

How the Standard Defines Limited Assurance and Material Misstatement
A limited assurance engagement is restricted primarily to enquiries and analytical procedures. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for a reasonable assurance engagement. Consequently the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. The Standard requires our report to be worded around what we have not found, rather than what we have found. Misstatements, including omissions, are considered material if, individually or in the aggregate, they could reasonably be expected to influence relevant decisions of the Directors of ANZ.

Use of this Assurance Report
This report has been prepared for the Directors of ANZ Banking Group Limited for the purpose of providing an assurance conclusion on the ESG Information within the ANZ 2022 Annual Report and ANZ 2022 Annual Review and may not be suitable for another purpose. We disclaim any assumption of responsibility for any reliance on this report, to any person other than the Directors of ANZ, or for any other purpose than that for which it was prepared.

ANZ 2022 Annual Report 242

ANZ’s responsibility

Determining that the criteria is appropriate to meet their needs;
Preparing and presenting the ESG Information in accordance with the criteria; and
Establishing internal controls that enable the preparation and presentation of the ESG Information that is free from material misstatement, whether due to fraud or error.

Our responsibility

Our responsibility is to perform a limited assurance engagement in relation to the ESG Information for the year ended 30 September 2022, and to issue an assurance report that includes our conclusion.

Our Independence and Quality Control

We have complied with our independence and other relevant ethical requirements of the Code of Ethics for Professional Accountants (including Independence Standards) issued by the Australian Professional and Ethical Standards Board, and complied with the applicable requirements of Australian Standard on Quality Control 1 to maintain a comprehensive system of quality control. We have also complied with ANZ’s Stakeholder Engagement Model for Relationship with External Auditor (available on anz.com).

KPMG
Adrian King
Partner
KPMG Melbourne
26 October 2022

© 2022 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

243

Shareholder information – unaudited

Ordinary shares

At 3 October 2022, the 20 largest holders of ANZ ordinary shares held 1,759,194,451 ordinary shares, equal to 58.84% of the total issued ordinary capital. At 3 October 2022 the issued ordinary capital was 2,989,923,751 ordinary shares.

Name	Number of shares	% of shares
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	808,413,840	27.04
2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	431,466,278	14.43
3 CITICORP NOMINEES PTY LIMITED	252,524,808	8.45
4 NATIONAL NOMINEES LIMITED	83,083,608	2.78
5 BNP PARIBAS NOMS PTY LTD	64,392,488	2.15
6 BNP PARIBAS NOMINEES PTY LTD	20,227,003	0.68
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	16,628,966	0.56
8 NETWEALTH INVESTMENTS LIMITED	13,875,105	0.46
9 CITICORP NOMINEES PTY LIMITED	11,271,404	0.38
10 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	8,676,983	0.29
11 AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED	8,487,710	0.28
12 ARGO INVESTMENTS LIMITED	8,265,275	0.28
13 CUSTODIAL SERVICES LIMITED	5,137,333	0.17
14 ANZEST PTY LTD	5,069,233	0.17
15 BNP PARIBAS NOMS (NZ) LTD	4,292,644	0.14
16 AUSTRALIAN EXECUTOR TRUSTEES LIMITED	3,790,040	0.13
17 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	3,595,926	0.12
18 NAVIGATOR AUSTRALIA LTD	3,345,745	0.11
19 NULIS NOMINEES (AUSTRALIA) LIMITED	3,329,987	0.11
20 NEW ZEALAND CENTRAL SECURITIES DEPOSITORY LIMITED	3,320,075	0.11
Total	1,759,194,451	58.84

Distribution of shareholdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of shares	% of shares
1 to 1,000	307,454	56.75	107,410,298	3.59
1,001 to 5,000	183,466	33.87	416,441,341	13.93
5,001 to 10,000	32,166	5.94	222,420,822	7.44
10,001 to 100,000	18,203	3.36	361,607,658	12.09
Over 100,000	455	0.08	1,882,043,632	62.95
Total	541,744	100.00	2,989,923,751	100.00

At 3 October 2022:
* The average size of holdings of ordinary shares was 5,519 (2021: 5,287) shares; and
* There were 22,486 holdings (2021: 19,915 holdings) of less than a marketable parcel (less than $500 in value or 22 shares based on the market price of $22.77 per share).

On 12 May 2017 ANZ was notified by BlackRock Group that it held a substantial shareholding of 148,984,864 ordinary shares in ANZ (5.07%) and on 2 December 2019, BlackRock Group’s interest increased to 172,225,527 ordinary shares in ANZ (6.07%). As at 3 October 2022 ANZ has received no further update in relation to this substantial holding.

On 22 April 2022 ANZ was notified by Vanguard Group that it held a substantial shareholding of 139,745,231 ordinary shares in ANZ (5.001%). As at 3 October 2022 ANZ has received no further update in relation to this substantial shareholding.

On 20 July 2022 ANZ was notified by State Street Corporation that it held a substantial shareholding of 142,312,309 ordinary shares in ANZ (5.08%). As at 3 October 2022 ANZ has received no further update in relation to this substantial shareholding.

Voting rights of ordinary shares

The Constitution provides for votes to be cast as follows:
i) on show of hands, one vote for each shareholder; and
ii) on a poll, one vote for every fully paid ordinary share.

A register of holders of ordinary shares is held at:
452 Johnston Street
Abbotsford Victoria, Australia
(Telephone: +61 3 9415 4010)

ANZ 2022 Annual Report 244

ANZ capital notes

ANZ CN3

On 5 March 2015 the Company acting through its New Zealand branch, issued convertible subordinated perpetual notes (ANZ CN3) which were offered pursuant to a prospectus dated 5 February 2015. At 3 October 2022 the 20 largest holders of ANZ CN3 held 2,638,744 securities, equal to 27.21% of the total issued securities. At 3 October 2022 the total number of ANZ CN3 on issue was 9,701,791.

Name	Number of securities	% of securities
1 CITICORP NOMINEES PTY LIMITED	588,619	6.07
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	426,311	4.39
3 BNP PARIBAS NOMINEES PTY LTD	248,376	2.56
4 NETWEALTH INVESTMENTS LIMITED	168,482	1.74
5 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	156,689	1.62
6 BERNE NO 132 NOMINEES PTY LTD <684168 A/C>	129,191	1.33
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	112,770	1.16
8 NATIONAL NOMINEES LIMITED	110,039	1.13
9 LONGHURST MANAGEMENT SERVICES PTY LTD	96,868	1.00
10 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	85,242	0.88
11 MUTUAL TRUST PTY LTD	82,031	0.85
12 BNP PARIBAS NOMINEES PTY LTD	76,855	0.79
13 NULIS NOMINEES (AUSTRALIA) LIMITED	54,238	0.56
14 INVIA CUSTODIAN PTY LIMITED	50,850	0.52
15 JDB SERVICES PTY LTD	45,154	0.47
16 HAWAII INVESTMENTS PTY LTD	44,250	0.46
17 NAVIGATOR AUSTRALIA LTD	44,203	0.46
18 NAVIGATOR AUSTRALIA LTD	42,104	0.43
19 MR PAUL WILLIAM BROTCHIE + MR KENNETH FRANCIS WALLACE	40,000	0.41
20 MR RONI G SIKH	36,472	0.38
Total	2,638,744	27.21

Distribution of ANZ CN3 holdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of securities	% of securities
1 to 1,000	10,614	89.88	3,526,189	36.35
1,001 to 5,000	1,057	8.95	2,221,629	22.90
5,001 to 10,000	76	0.64	599,672	6.18
10,001 to 100,000	54	0.46	1,413,824	14.57
Over 100,000	8	0.07	1,940,477

ANZ CN4

On 27 September 2016 the Company issued convertible subordinated perpetual notes (ANZ CN4) which were offered pursuant to a prospectus dated 24 August 2016. At 3 October 2022 the 20 largest holders of ANZ CN4 held 5,168,713 securities, equal to 31.87% of the total issued securities. At 3 October 2022 the total number of ANZ CN4 on issue was 16,220,000.

Name	Number of securities	% of securities
1 CITICORP NOMINEES PTY LIMITED	1,351,688	8.33
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	1,273,673	7.85
3 NETWEALTH INVESTMENTS LIMITED	346,315	2.14
4 BNP PARIBAS NOMINEES PTY LTD	317,240	1.96
5 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	235,006	1.45
6 NATIONAL NOMINEES LIMITED	199,778	1.23
7 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	187,363	1.16
8 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	151,882	0.94
9 MUTUAL TRUST PTY LTD	151,333	0.93
10 AUSTRALIAN EXECUTOR TRUSTEES LIMITED	150,589	0.93
11 NULIS NOMINEES (AUSTRALIA) LIMITED	147,870	0.91
12 NAVIGATOR AUSTRALIA LTD	114,221	0.70
13 PAMDALE INVESTMENTS PTY LTD	96,498	0.59
14 MARROSAN INVESTMENTS PTY LTD	78,500	0.48
15 NETWEALTH INVESTMENTS LIMITED	72,356	0.45
16 TAVERNERS NO 11 PTY LTD	66,930	0.41
17 BNP PARIBAS NOMINEES PTY LTD	65,850	0.41
18 AUSTRALIAN EXECUTOR TRUSTEES LIMITED	61,021	0.38
19 JMB PTY LTD	50,300	0.31
20 RETFORD PTY LTD	50,300	0.31
Total	5,168,713	31.87

Distribution of ANZ CN4 holdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of securities	% of securities
1 to 1,000	15,810	88.87	5,323,813	32.82
1,001 to 5,000	1,760	9.89	3,617,715	22.30
5,001 to 10,000	140	0.79	1,032,247	6.37
10,001 to 100,000	68	0.38	1,619,267	9.98
Over 100,000	12	0.07	4,626,958	28.53
Total	17,790	100.00	16,220,000	100.00

At 3 October 2022 there were 7 holdings (2021: 8 holdings) of less than a marketable parcel (less than $500 in value or 5 securities based on the market price of $105.42 per security).

Voting rights of ANZ CN4

ANZ CN4 do not confer on holders a right to vote at any meeting of members of the Company. A register of holders of ANZ CN4 is held at: 452 Johnston Street, Abbotsford, Victoria, Australia (Telephone: +61 3 9415 4010)

ANZ CN5

On 28 September 2017 the Company issued convertible subordinated perpetual notes (ANZ CN5) which were offered pursuant to a prospectus dated 24 August 2017. At 3 October 2022 the 20 largest holders of ANZ CN5 held 2,715,522 securities, equal to 29.17% of the total issued securities. At 3 October 2022 the total number of ANZ CN5 on issue was 9,310,782.

Name	Number of securities	% of securities
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	804,925	8.65
2 CITICORP NOMINEES PTY LIMITED	541,629	5.82
3 NETWEALTH INVESTMENTS LIMITED	166,252	1.79
4 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	124,861	1.34
5 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	116,540	1.25
6 NULIS NOMINEES (AUSTRALIA) LIMITED	95,952	1.03
7 AUSTRALIAN EXECUTOR TRUSTEES LIMITED	95,212	1.02
8 DIMBULU PTY LTD	85,000	0.91
9 LONGHURST MANAGEMENT SERVICES PTY LTD	78,246	0.84
10 NAVIGATOR AUSTRALIA LTD	70,096	0.75
11 BNP PARIBAS NOMINEES PTY LTD	69,997	0.75
12 NETWEALTH INVESTMENTS LIMITED	65,396	0.70
13 BNP PARIBAS NOMINEES PTY LTD	65,062	0.70
14 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	58,502	0.63
15 EASTCOTE PTY LTD	50,000	0.54
16 FEDERATION UNIVERSITY AUSTRALIA	50,000	0.54
17 MARROSAN INVESTMENTS PTY LTD	50,000	0.54
18 G C F INVESTMENTS PTY LTD	44,811	0.48
19 NATIONAL NOMINEES LIMITED	43,041	0.46
20 MR RONALD MAURICE BUNKER	40,000	0.43
Total	2,715,522	29.17

Distribution of ANZ CN5 holdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of securities	% of securities
1 to 1,000	10,208	90.83	3,529,543	37.91
1,001 to 5,000	917	8.16	1,942,051	20.85
5,001 to 10,000	60	0.53	474,591	5.10
10,001 to 100,000	49	0.44	1,610,390	17.30
Over 100,000	5	0.04	1,754,207	18.84
Total	11,239	100.00	9,310,782	100.00

At 3 October 2022 there were 6 holdings (2021: 6 holdings) of less than a marketable parcel (less than $500 in value or 5 securities based on the market price of $105.00 per security).

Voting rights of ANZ CN5

ANZ CN5 do not confer on holders a right to vote at any meeting of members of the Company. A register of holders of ANZ CN5 is held at: 452 Johnston Street, Abbotsford, Victoria, Australia (Telephone: +61 3 9415 4010)

ANZ CN6

On 8 July 2021 the Company issued convertible subordinated perpetual notes (ANZ CN6) which were offered pursuant to a prospectus dated 9 June 2021. At 3 October 2022 the 20 largest holders of ANZ CN6 held 4,803,233 securities, equal to 32.03% of the total issued securities. At 3 October 2022 the total number of ANZ CN6 on issue was 15,000,000.

Name	Number of securities	% of securities
1 CITICORP NOMINEES PTY LIMITED	1,242,190	8.28
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	1,148,243	7.65
3 NETWEALTH INVESTMENTS LIMITED	327,403	2.18
4 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	303,827	2.03
5 BNP PARIBAS NOMINEES PTY LTD	274,387	1.83
6 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	235,739	1.57
7 NATIONAL NOMINEES LIMITED	212,805	1.42
8 DIMBULU PTY LTD	140,000	0.93
9 NETWEALTH INVESTMENTS LIMITED	132,273	0.88
10 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	125,992	0.84
11 MUTUAL TRUST PTY LTD	102,518	0.68
12 BNP PARIBAS NOMINEES PTY LTD	92,409	0.62
13 DIOCESE DEVELOPMENT FUND – CATHOLIC DIOCESE OF PARRAMATTA	84,820	0.57
14 AUSTRALIAN EXECUTOR TRUSTEES LIMITED	66,593	0.44
15 LEDA HOLDINGS PTY LTD	57,760	0.39
16 NAVIGATOR AUSTRALIA LTD	55,123	0.37
17 SMART SUPER INVESTMENTS P/L	53,285	0.36
18 NULIS NOMINEES (AUSTRALIA) LIMITED	53,266	0.36
19 MARROSAN INVESTMENTS PTY LTD	50,000	0.33
20 ALWOOD PTY LTD	44,600	0.30
Total	4,803,233	32.03

Distribution of ANZ CN6 holdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of securities	% of securities
1 to 1,000	15,276	89.05	5,340,489	35.60
1,001 to 5,000	1,722	10.04	3,423,835	22.83
5,001 to 10,000	101	0.59	740,132	4.94
10,001 to 100,000	44	0.26	1,250,167	8.33
Over 100,000	11	0.06	4,245,377	28.30
Total	17,154	100.00	15,000,000	100.00

At 3 October 2022 there were 5 holdings (2021: 4 holdings) of less than a marketable parcel (less than $500 in value or 5 securities based on the market price of $101.42 per security).

Voting rights of ANZ CN6

ANZ CN6 do not confer on holders a right to vote at any meeting of members of the Company. A register of holders of ANZ CN6 is held at: 452 Johnston Street, Abbotsford, Victoria, Australia (Telephone: +61 3 9415 4010)

ANZ CN7

On 24 March 2022 the Company issued convertible subordinated perpetual notes (ANZ CN7) which were offered pursuant to a prospectus dated 23 February 2022. At 3 October 2022 the 20 largest holders of ANZ CN7 held 5,436,074 securities, equal to 41.51% of the total issued securities. At 3 October 2022 the total number of ANZ CN7 on issue was 13,100,000.

Name	Number of securities	% of securities
1 BNP PARIBAS NOMINEES PTY LTD	1,310,868	10.01
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	955,676	7.30
3 CITICORP NOMINEES PTY LIMITED	947,665	7.23
4 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD	315,124	2.41
5 NETWEALTH INVESTMENTS LIMITED	279,065	2.13
6 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2	229,403	1.75
7 NETWEALTH INVESTMENTS LIMITED	217,871	1.66
8 JOHN E GILL TRADING PTY LTD	200,035	1.53
9 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	162,251	1.24
10 BNP PARIBAS NOMINEES PTY LTD	132,285	1.01
11 MUTUAL TRUST PTY LTD	106,382	0.81
12 NATIONAL NOMINEES LIMITED	100,302	0.77
13 DIMBULU PTY LTD	100,000	0.76
14 NAVIGATOR AUSTRALIA LTD	90,620	0.69
15 KOLL PTY LTD	50,000	0.38
16 ROYAL FREEMASONS' BENEVOLENT INSTITUTION	49,580	0.38
17 NAVIGATOR AUSTRALIA LTD	49,239	0.38
18 TAVERNERS NO 11 PTY LTD	48,118	0.37
19 CITICORP NOMINEES PTY LIMITED	47,590	0.36
20 H WENAS PTY LTD	44,000	0.34
Total	5,436,074	41.51

Distribution of ANZ CN7 holdings

At 3 October 2022 –

Range of securities	Number of holders	% of holders	Number of securities	% of securities
1 to 1,000	11,468	89.14	3,752,697	28.65
1,001 to 5,000	1,260	9.79	2,538,208	19.37
5,001 to 10,000	73	0.57	531,456	4.06
10,001 to 100,000	52	0.41	1,320,712	10.08
Over 100,000	12	0.09	4,956,927	37.84
Total	12,865	100.00	13,100,000	100.00

At 3# Shareholder Information

October 2022 there were 4 holdings of less than a marketable parcel (less than $500 in value or 6 securities based on the market price of $99.90 per security). Voting rights of ANZ CN7 ANZ CN7 do not confer on holders a right to vote at any meeting of members of the Company. A register of holders of ANZ CN7 is held at: 452 Johnston Street, Abbotsford, Victoria, Australia (Telephone: +61 3 9415 4010)

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

Employee Shareholder Information

In order to comply with the requirements of the ANZ Employee Share Acquisition Plan Rules and the ANZ Share Option Plan Rules, shares or options must not be issued under these plans if the aggregate number of shares and options that remain subject to the rules of either plan exceed 5% of the total number of ANZ shares of all classes on issue (including preference shares). At 30 September 2022, participants under the following plans/schemes held 0.58% (2021: 0.65%) of the total number of ANZ shares of all classes on issue:

ANZ Employee Share Acquisition Plan;
ANZ Employee Share Save Scheme; and
ANZ Share Option Plan.

Stock Exchange Listings

Australia and New Zealand Banking Group Limited’s (ANZBGL) ordinary shares are listed on the Australian Securities Exchange (ASX) and New Zealand’s Exchange (NZX). The Group’s other stock exchange listings include:

ASX – ANZ Capital Notes (CN3, CN4, CN5, CN6 and CN7), senior debt and subordinated debt issued by ANZBGL;
– residential mortgage backed securities;
London Stock Exchange – senior debt (including covered bonds) and subordinated debt issued by ANZBGL;
– subordinated debt issued by ANZ Bank New Zealand Limited;
– senior debt (including covered bonds) issued by ANZ New Zealand (Int’l) Limited;
NZX – perpetual preference shares, senior debt and subordinated debt issued by ANZ Bank New Zealand Limited; and
SIX Swiss Exchange – senior debt issued by ANZ New Zealand (Int’l) Limited.

For more information on the ANZ Capital Notes and ANZ Capital Securities refer to Note 17 to the Financial Report.

American Depositary Receipts

The Company has American Depositary Receipts (ADRs) representing American Depositary Shares (ADSs) that are traded on the over-the-counter securities market ‘OTC Pink’ electronic platform operated by OTC Markets Group Inc. in the United States under the ticker symbol: ANZBY and the CUSIP number: 052528304. With effect from 23 July 2008, the ADR ratio changed from one ADS representing five ANZ ordinary shares to one ADS representing one ANZ ordinary share.

The Bank of New York Mellon (BNY Mellon) is the Depositary for the Company’s ADR program in the United States. For further information about ADRs, please call BNY Mellon at 1-888-269-2377 if you are calling from within the United States. If you are calling from outside the United States, please call 1-201-680-6825. You may also visit BNY Mellon’s website at www.adrbnymellon.com.

SHAREHOLDER INFORMATION – UNAUDITED (CONTINUED)

ANZ 2022 Annual Report 250

Important dates for shareholders

Date	Event
1 MAY 2023	Half Year Results Announcement
9 May	Interim Dividend Ex-Date
10 May	Interim Dividend Record Date
11 May	DRP/BOP/Foreign Currency Election Date
3 July 2023	Interim Dividend Payment Date
OCTOBER 2023
TBC	Closing date for receipt of Director Nominations
TBC	Annual Results Announcement
NOVEMBER 2023
TBC	Final Dividend Ex-Date
TBC	Final Dividend Record Date
TBC	DRP/BOP/Foreign Currency Election Date
DECEMBER 2023
TBC	Final Dividend Payment Date
TBC	Annual General Meeting

Asia	Pacific	Europe	Middle East
China	American Samoa	France	United Arab Emirates (Dubai)
Hong Kong	Cook Islands	Germany	United States of America
India	Fiji	United Kingdom
Indonesia	Guam
Japan	Kiribati
Laos	Papua New Guinea
Malaysia	Samoa
Myanmar	Solomon Islands
The Philippines	Timor-Leste
Singapore	Tonga
South Korea	Vanuatu
Taiwan
Thailand
Vietnam

If there are any changes to these dates, the Australian Securities Exchange will be notified accordingly.
On a Cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations included in cash profit. It is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 45.

Our international presence and earning composition by geography

New Zealand $1,907 million
Australia $3,829 million
International $779 million

ANZ 2022 Annual Report 251

Overview	How we create value	Performance overview	Remuneration report	Directors’ report	Financial report	Shareholder information	Contacts

Registered office

ANZ Centre Melbourne
Level 9, 833 Collins Street
Docklands VIC 3008
Australia

Telephone: +61 3 9273 5555
Facsimile: +61 3 8542 5252
Company Secretary: Simon Pordage

Investor relations

Level 10, 833 Collins Street
Docklands VIC 3008
Australia

Telephone: +61 3 8654 7682
Facsimile: +61 3 8654 8886
Email: [email protected]
Web: shareholder.anz.com

Group General Manager Investor Relations: Jill Campbell

Communications and public affairs

Level 10, 833 Collins Street
Docklands VIC 3008
Australia

Telephone: +61 2 6198 5001
Email: [email protected]
Group General Manager Communications and Public Affairs: Tony Warren

Share and securities registrar

Australia

Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001
Australia

Telephone within Australia: 1800 11 33 99
International Callers: +61 3 9415 4010
Facsimile: +61 3 9473 2500
Email: [email protected]

AutraClear Services Limited
20 Bridge Street
Sydney NSW 2000
Australia

Telephone: 1300 362 257

Japan

Japan Securities Depository Center, Incorporated
1-1, Nihombashi Kayabacho 2-chome,
Chuo-ku, Tokyo 103-0025
Japan

Telephone: +81 3 3661 0295

Luxembourg

Deutsche Bank Luxembourg S.A.
2, Boulevard Konrad Adenauer
L-1115 Luxembourg, Luxembourg

Telephone: +352 421 22 1

New Zealand

Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
New Zealand

Telephone: 0800 174 007
Facsimile: +64 9 488 8787

United Kingdom

Computershare Investor Services PLC
The Pavilions, Bridgewater Road
Bristol BS99 6ZZ
UK

Telephone: +44 870 702 0000
Facsimile: +44 870 703 6101

United States

The Bank of New York Mellon
240 Greenwich St, Floor 7E
New York, NY 10286
USA

Telephone: +1 212 495 1784

BNY Mellon Shareowner Services
P.O. Box 4306
Providence RI 02940-3078
USA

Toll Free Telephone: 1888 269 2377
Telephone for International Callers: 1201 680 6825
Web: www-us.computershare.com/investor
Email: [email protected]

Deutsche Bank Trust Company Americas
1 Columbus Circle
New York, NY 10019-8735
USA

Telephone: +1 212 250 2500

Germany

Deutsche Bank AG
Taunusanlage 12
60262 Frankfurt am Main
Germany

Telephone: +49 69 910 00

MORE INFORMATION

General information on ANZ can be obtained from our website at anz.com. Shareholders can visit our Shareholder Centre at anz.com/shareholder/centre.

ANZ Corporate Governance: for information about ANZ’s approach to Corporate Governance and to obtain copies of ANZ’s Constitution, Board/Board Committee Charters, Code of Conduct and summaries of other ANZ policies of interest to shareholders and stakeholders, visit anz.com/corporategovernance.

Australia and New Zealand Banking Group Limited ABN 11 005 357 522. This Annual Report has been prepared for Australia and New Zealand Banking Group Limited (the Company) together with its subsidiaries which are variously described as: “ANZ”, “Group”, “ANZ Group”, “the Bank”, “us”, “we” or “our”.

DISCLOSURE INSIGHT ACTION

Founding Signatory of :ff:
ANZ 2022 Annual Report 252

Glossary

AASs: Australian Accounting Standards.
AASB: Australian Accounting Standards Board. The term ‘AASB’ is commonly used when identifying AASs issued by the AASB. In doing so, the term is used together with the AAS number.
ADI: Authorised Deposit-taking Institution as defined by APRA.
ANZEST: ANZ Employee Share Trust.
ANZ Research – Economics: a business unit within ANZ, which conducts analysis of key economic inputs and developments and assessment of the potential impacts on the local, regional and global economies.
APRA: Australian Prudential Regulation Authority.
APS: ADI Prudential Standard.
AT1: Additional Tier 1 capital.
ASX: Australian Securities Exchange.
BCBS: Basel Committee on Banking Supervision.

Cash and cash equivalents comprise coins, notes, money at call, balances held with central banks, liquid settlement balances (readily convertible to known amounts of cash which are subject to insignificant risk of changes in value) and securities purchased under agreements to resell (reverse repurchase agreements) in less than three months.

Cash profit is an additional measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents ANZ’s preferred measure of the result of the core business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit as noted below. These items are calculated consistently period on period so as not to discriminate between positive and negative adjustments.# Definitions and Key Terms

Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories: 1. gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the core operations of the Group; 2. economic hedging impacts and similar accounting items that represent timing differences that will reverse through earnings in the future; and 3. accounting reclassifications between individual line items that do not impact reported results, such as credit risk on impaired derivatives.

Cash profit is not a measure of cash flow or profit determined on a cash accounting basis.

Collectively assessed allowance for expected credit loss represents the Expected Credit Loss (ECL), which incorporates forward-looking information and does not require an actual loss event to have occurred for a credit loss provision to be recognised.

Committed Liquidity Facility (CLF) is a facility with the RBA that was established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form of contingent liquidity. The CLF is collateralised by assets, including internal residential mortgage-backed securities, that are eligible to be pledged as security with the RBA. The total amount of the CLF available to a qualifying ADI is set annually by APRA. In September 2021, APRA wrote to ADIs to advise that APRA and the RBA consider there to be sufficient HQLA for ADIs to meet their Liquidity Coverage Ratio (LCR) requirements, and therefore the use of the CLF should no longer be required beyond 2022 calendar year.

Coronavirus (COVID-19) is a respiratory illness which was declared a Public Health Emergency of International Concern. COVID-19 was characterised as a pandemic by the World Health Organisation on 11 March 2020.

Covered bonds are bonds issued by an ADI to external investors secured against a pool of the ADI’s assets (the cover pool) assigned to a bankruptcy remote special purpose entity. The primary assets forming the cover pool are mortgage loans. The mortgages remain on the issuer’s balance sheet. The covered bond holders have dual recourse to the issuer and the cover pool assets. The mortgages included in the cover pool cannot be otherwise pledged or disposed of but may be repurchased and substituted in order to maintain the credit quality of the pool. The Group issues covered bonds as part of its funding activities.

Credit risk is the risk of financial loss resulting from the failure of ANZ’s customers and counterparties to honour or perform fully the terms of a loan or contract.

Credit risk weighted assets (CRWA) represent assets which are weighted for credit risk according to a set formula as prescribed in APS 112/113.

Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations’ debt excluding securitisation deposits.

Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims, penalties and litigation outcomes.

Derivative credit valuation adjustment (CVA) Over the life of a derivative instrument, ANZ uses a 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.

Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company.

Embedded losses In relation to interest rate risk in the banking book, APRA requires ADIs to give consideration to embedded gains or losses in banking book items that are not accounted for on a marked-to-market basis when determining regulatory capital. The embedded loss or gain measures the difference between the book value and the economic value of banking book activities at a point in time.

Fair value is an amount at which an asset or liability could be exchanged between knowledgeable and willing parties in an arm’s length transaction.

Funding for Lending Programme (FLP) refers to three-year funding announced by the RBNZ in November 2020 and offered to New Zealand banks, which aimed to lower the cost of borrowing for New Zealand businesses and households.

Overview
How we create value
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information

Gross loans and advances (GLA) is made up of loans and advances, capitalised brokerage and other origination costs less unearned income.

Group is Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year (together, the Group).

IFRS International Financial Reporting Standards.

Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or where concessional terms have been provided because of the financial difficulties of the customer. Impaired loans comprise drawn facilities where the customer’s status is defined as impaired.

Individually assessed allowance for expected credit losses is 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.

Interest rate risk in the banking book (IRRBB) relates to the potential adverse impact of changes in market interest rates on ANZ’s future net interest income. The risk generally arises from:
1. Repricing and yield curve risk – the risk to earnings or market value as a result of changes in the overall level of interest rates and/or the relativity of these rates across the yield curve;
2. Basis risk – the risk to earnings or market value arising from volatility in the interest margin applicable to banking book items; and
3. Optionality risk – the risk to earnings or market value arising from the existence of stand-alone or embedded options in banking book items.

Internationally comparable ratios are ANZ’s interpretation of the regulations documented in the Basel Committee publications; ‘Basel III: 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).

Level 1 in the context of APRA supervision, Australia and New Zealand Banking Group Limited consolidated with certain approved subsidiaries.

Level 2 in the context of APRA supervision, the consolidated ANZ Group excluding associates, insurance and funds management entities, commercial non-financial entities and certain securitisation vehicles.

Level 3 in the context of APRA supervision, the consolidated ANZ Group.

Net interest margin is net interest income as a percentage of average interest earning assets.

Net loans and advances represent gross loans and advances less allowance for expected credit losses.

Net Stable Funding Ratio (NSFR) is the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by APRA. The amount of ASF is the portion of an ADI capital and liabilities expected to be a reliable source of funds over a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets and off-balance sheet activities. ADIs must maintain an NSFR of at least 100%.

Net tangible assets equal share capital and reserves attributable to shareholders of the Company less unamortised intangible assets (including goodwill and software).

NZX New Zealand’s Exchange.

RBA Reserve Bank of Australia, Australia’s central bank.

RBNZ Reserve Bank of New Zealand, New Zealand’s central bank.

Regulatory deposits are mandatory reserve deposits lodged with local central banks in accordance with statutory requirements.

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.

Return on average assets is the profit attributable to shareholders of the Company, divided by average total assets.

Return on average ordinary shareholders’ equity is the profit attributable to shareholders of the Company, divided by average ordinary shareholders’ equity.

Risk weighted assets (RWA) 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.

Settlement balances owed to/by ANZ represent financial assets and/or liabilities which are in the course of being settled. These may include trade dated assets and liabilities, vostro accounts and securities settlement accounts.

Term Funding Facility (TFF) refers to three-year funding announced by the Reserve Bank of Australia (RBA) on 19 March 2020 and offered to ADIs in order to support lending to Australian businesses at low cost.# Principal risks and uncertainties faced by Australia and New Zealand Banking Group Limited

Introduction

The Group’s activities are subject to risks that can adversely impact its business, operations, results of operations, reputation, liquidity, capital resources, financial performance and financial condition (together, the “Group’s Position”). The risks and uncertainties described below are not the only ones that the Group may face. Additional risks and uncertainties that the Group is unaware of, or that the Group currently deems to be immaterial, may also become important factors that affect it. If any of the specified or unspecified risks actually occur, the Group’s Position may be materially and adversely affected, with the result that the trading price of the Group's equity or debt securities could decline, and investors could lose all or part of their investment.

Risks related to the Group's business activities and industry

1. Changes in political and general business and economic conditions, including disruption in regional or global credit and capital markets, may adversely affect the Group’s Position

The Group’s financial performance is primarily influenced by the political and economic conditions and the level of business activity in the major countries and regions in which the Group or its customers or counterparties operate, trade or raise funding including, without limitation, Australia, New Zealand, the Asia Pacific region, the United Kingdom (“UK”), Europe and the United States (the “Relevant Jurisdictions”). The political, economic and business conditions that prevail in the Group’s operating and trading markets are affected by, among other things, domestic and international economic events, developments in global financial markets, resilience of global supply chains, political perspectives, opinions and related events and natural disasters.

Global political conditions that impact the global economy have led to, and may continue to result in extended periods of increased political and economic uncertainty and volatility in the global financial markets, which could adversely affect the Group’s Position. Examples of events that have affected (and may continue to affect) global political conditions include the ongoing conflict in Ukraine, the UK ceasing to be a member of the European Union (“EU”) and the European Economic Area on 31 January 2020 (commonly referred to as “Brexit”), UK political developments and financial market challenges, and global trade developments relating to, among other things, the imposition or threatened imposition of trade tariffs and levies by major countries, including the United States, China and other countries that are Australia’s and New Zealand’s significant trading partners and allies. There are a number of remaining uncertainties regarding, among other things, post-Brexit protocols and arrangements among the parties involved.

The conflict in Ukraine is ongoing and fluid, it has had, and is expected to continue to have, significant ramifications on the geopolitical and economic landscape, particularly in Europe. Commodity prices, in particular energy, food and metals, have already been impacted and the future impacts of the conflict remain uncertain. As a result of the conflict, the United States, the UK and EU announced broadly coordinated actions that collectively impose significant and wide-reaching economic sanctions and export controls relating to Russia – including the freezing of some of the Central Bank of Russia’s foreign exchange reserves. Other jurisdictions, including Australia, New Zealand and Japan, have announced sanctions, export controls and similar restrictions focusing on some of the same targets and sectors. These sanctions are materially impacting the Russian and other economies and the international financial system. The extent and duration of the conflict and any corresponding economic sanctions, export controls and similar restrictions and resulting market disruptions are difficult to predict. Though the Group does not operate in and does not currently have any direct exposure to Russia or Ukraine, the conflict has the potential to adversely impact the markets in which the Group does operate, and any prolonged market volatility or economic uncertainty could adversely impact the Group’s Position.

Inflationary pressures are at high levels in many economies, including in Australia, New Zealand, the United States, Canada, Europe and the UK. Geopolitical tensions, rising interest rates, central bank tightening, and persistent COVID-19 challenges to the global economy, such as global shipping capacity constraints, higher costs for freight, supply chain issues, higher energy prices, higher food prices, and tightened labour markets, are all contributing to rising inflationary pressures on the global economy. This may lead to counterparties defaulting on their debt obligations, countries re-denominating their currencies and/or introducing capital controls and/or one or more major economies collapsing. While difficult to predict, such events could destabilise global financial markets, adversely affecting all participants, including adversely affecting the Group’s Position.

Food price and supply, already affected by the war in Ukraine, is also being impacted by extreme weather conditions in key agricultural regions. These factors may impact financial market or economic and social stability and could adversely affect the Group’s Position.

Trade and broader geopolitical relationships between the United States and some of its trading partners, such as China, remain volatile. The implementation of trading policies or divergent regulatory frameworks by Australia’s and New Zealand’s key trading partners and allies may adversely impact the demand for Australian and New Zealand exports and may lead to declines in global economic growth. In particular, China is one of Australia’s and New Zealand’s major trading partners and a significant driver of commodity demand and prices in many of the markets in which the Group and its customers operate. Any heightening of geopolitical tensions and the occurrence of events that adversely affect China’s economic growth and Australia’s and New Zealand’s economic relationship with China, including the implementation of additional tariffs and other protectionist trade policies, could adversely affect Australian or New Zealand economic activity, and, as a result, could adversely affect the Group’s Position.

Instability in global political conditions, including as a result of the conflict in Ukraine, has contributed to economic uncertainty and declines in market liquidity and could increase volatility in the global financial markets and negatively impact consumer and business activity within the markets in which the Group or its customers or counterparties operate, or result in the introduction of new and/or divergent regulatory frameworks that the Group will be required to adhere to. Should economic conditions deteriorate in markets in which the Group or its customers or counterparties operate, asset values in the housing, commercial or rural property markets could decline, unemployment could rise and corporate and personal incomes could suffer. Deterioration in global markets, including equity, property, currency and other asset markets, may impact the Group’s customers and the security the Group holds against loans and other credit exposures, which may impact the Group’s ability to recover loans and other credit exposures. Should any of these occur, the Group's Position could be materially adversely affected. Refer to risk factor 11 “Credit risk may adversely affect the Group’s Position”.

The Group’s financial performance may also be adversely affected if the Group is unable to adapt its cost structures, products, pricing or activities in response to a drop in demand or lower than expected revenues. Similarly, higher than expected costs (including credit and funding costs and increases in costs resulting from inflationary conditions) could be incurred because of adverse changes in the economy, general business conditions or the operating environment in the countries or regions in which the Group or its customers or counterparties operate. Should any of these occur, the Group's Position could be materially adversely affected.

2. The COVID-19 pandemic and future outbreaks of other communicable diseases or pandemics may materially and adversely affect the Group’s Position

The COVID-19 pandemic continues to impact the Group’s Position, and the domestic and global economy. Increasing vaccination rates have led to the easing of restrictions on regional and international travel, events, meetings and other more normal activities. Governments across Australia (including at the state level), and New Zealand have indicated that they may in the foreseeable future reintroduce prior restrictions or implement and introduce further measures to contain the spread of future COVID-19 outbreaks. Further variants may develop that require different government responses and greater restrictions to those that have been adopted to date. The ongoing impacts of COVID-19 combined with other risks, e.g. geopolitical risk, could exacerbate impacts and materially increase economic disruption.Disruptions to community health and economic activity continue to impact most business sectors in Australia, New Zealand and globally. Ongoing COVID-19 related supply chain disruption and labour mobility constraints could result in a decline in profit margins, and could impact customer’s cash flows, capital, liquidity and financing needs. This in turn has impacted demand for the Group’s products and services and may result in further short and long-term deteriorations of the quality of the Group’s credit portfolio. Many of the Group’s borrowers may continue to be negatively impacted by the COVID-19 pandemic, resulting in an increased risk of credit loss, particularly in the following sectors: transportation; tourism and travel; entertainment; education; discretionary retail; and property segments. See Notes 14 of the consolidated financial statements for the financial year ended 30 September 2022 as set forth in the Group’s 2022 Annual Report (“2022 Financial Statements”) COVID-19 has notably impacted the property construction industry through increased contractor risk and a potential contagion effect impacting stability of the property development sectors. Disrupted supply chains and resultant cost increases remain a risk to project feasibility where underlying property prices may not increase in line with cost increases, causing projects to be delayed or cancelled. Substantially reduced global economic activity has caused substantial volatility in the financial markets and such volatility is expected to continue to have a significant impact on the global economy and global markets, as well as on the economies of Australia and New Zealand. Travel restrictions, border controls, social distancing measures, quarantine protocols and other containment measures (including ongoing lockdown measures in China) have contributed, and may continue to contribute, to reduced economic activity in Australia, New Zealand and elsewhere around the world and suppress demand for commodities, interrupt the supply chain for industries, dampen consumer confidence and suppress business earnings and growth prospects, all of which could contribute to ongoing volatility in global financial markets. Conduct risk may be heightened because of the blended/hybrid working model through its impact on employees’ behaviour and/or the Group’s systems and processes. The risk of customer harm will continue to be shaped by the economic and social impact of the pandemic. As the economy recovers, individual customers still enduring hardship may suffer detriment if the Group cannot provide tailored support and sustainable arrangements based on individual circumstances. The ongoing ramifications of the COVID-19 pandemic remain uncertain and, as of the date of this document, it is difficult to predict to what extent vaccines, boosters or other medical treatments will be effective in curtailing the effects of the COVID-19 pandemic. All or any of the negative conditions related to the COVID-19 pandemic described above may cause a further reduction in demand for the Group’s products and services and/or an increase in loan and other credit defaults, bad debts, and impairments and/or an increase in the cost of the Group’s operations. Should any of these occur, the Group’s Position could be materially adversely affected. The effectiveness of government and central bank responses to the pandemic, also remain subject to significant uncertainties. To the extent the COVID-19 pandemic continues to adversely affect the Group’s Position, it may also have the effect of heightening many of the other risks described in these Principal Risks and Uncertainties.

3. Competition in the markets in which the Group operates may adversely affect the Group’s Position

4 The markets in which the Group operates are highly competitive and could become more competitive in the future. Competition has increased and is expected to continue to increase, including from non-Australian financial service providers who continue to expand in Australia and from new non-bank entrants or smaller providers in those markets. Examples of factors that may affect competition and negatively impact the Group’s Position include:

entities that the Group competes with, including those outside of Australia and New Zealand, could be subject to lower levels of regulation and regulatory activity. This could allow them to offer more competitive products and services, because those lower levels of regulation may give them a lower cost base and/or the ability to attract employees that the Group would otherwise seek to employ;
digital technologies and business models are changing customer behaviour and the competitive environment and emerging competitors are increasingly utilising new technologies and seeking to disrupt existing business models in the financial services sector;
existing companies from outside of the traditional financial services sector are directly competing with the Group by offering products and services traditionally provided by banks, including by obtaining banking licenses and/or by partnering with existing providers;
consumers and businesses may choose to transact using, or to invest or store value in, new forms of currency (such as cryptocurrencies or central bank digital currencies) in relation to which the Group may choose not, or may not competitively be able, to provide financial services. For example, each of the Reserve Bank of Australia and the Reserve Bank of New Zealand (“RBNZ”) has announced that it is actively researching central bank digital currency, the effect of which, if adopted, on the Group’s Position is uncertain. Any new form of currency could change how financial intermediation and markets operate and, with that, the competitive and commercial position of the Group; and
Open Banking (as described below) may lead to increased competition (see risk factor 17 “Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position”).

The impact on the Group of an increase in competitive market conditions or a technological change that puts the Group’s business platforms at a competitive disadvantage, especially in the Group’s main markets and products, could lead to a material reduction in the Group’s market share, customers and margins and adversely affect the Group’s Position. Increased competition for deposits may increase the Group’s cost of funding. If the Group is not able to successfully compete for deposits, the Group would be forced to rely more heavily on other, less stable or more expensive forms of funding, or to reduce lending. This may adversely affect the Group’s Position. Geopolitical and economic disruptions could have a significant impact on competition and profitability in the financial services sector over the medium term due to funding cost and provision increases, changes in interest rates, insufficient liquidity, implementation of business continuity plans, changes to business strategies and temporary regulatory safe harbours. The low-growth environment will likely lead to heightened competitive intensity and margin compression.

4. The proposed restructure of the Group to establish a non-operating holding company may adversely affect the Group’s Position

ANZ is proposing to establish a non-operating holding company, ANZ Group Holdings Limited (“ANZ NOHC”), as the new listed parent company of the Group, and to separate ANZ’s banking and certain non-banking businesses. (the “restructure”). APRA has not yet finalised its prudential framework for Australian Non-Operating Holding 5 Companies (“NOHCs”) of ADIs. There is a risk that APRA’s final regulatory framework for Australian NOHCs of ADIs and the regulation of the ANZ NOHC over time will differ from the existing regulatory framework. This may have negative consequences for the Group and/or may require further changes to its structure. If implemented, the restructure will result in certain changes to ANZ’s existing operating model. ANZ considers that these changes can be implemented and managed appropriately following the restructure. However, it is possible that unexpected business, market and/or regulatory factors may result in these operating model changes not functioning as expected and further changes may be required. Implementation of the restructure will involve a number of steps, and unexpected developments may arise which can affect the implementation and/or the timing, form and scope of the restructure. Similarly, unexpected liabilities may be caused by any delays in non-material regulatory approvals or by regulatory relief not being granted. The failure to successfully implement all of the transition and other items associated with the restructure, or the restructure itself, could have an adverse impact on the Group’s Position. If for any reason the restructure is not completed, the Group’s ongoing business may be adversely impacted and the Group may be subject to various risks, including financial markets reacting negatively, and the Group may experience negative reactions from its customers, vendors, and employees. The Group will have incurred additional expenses and will be required to pay certain costs relating to the restructure. Matters relating to the restructure also required substantial commitments of time and resources by the Group’s management, which could otherwise have been devoted to other opportunities that may have benefited the Group.

5. Changes in the real estate markets in Australia, New Zealand or other markets where the Group does business may adversely affect the Group’s Position

Residential and commercial property lending, together with real estate development and investment property finance, constitute important businesses of the Group.# Major sub- segments within the Group's lending portfolio include:

residential housing loans (owner occupier and investment); and
commercial real estate loans (investment and development).

Since 2009, the world’s major central banks have embarked upon unprecedented monetary policy stimulus. The resulting weight of funds searching for yield has been a significant driver underlying property markets in the Group’s core property jurisdictions (Australia, New Zealand, Singapore and Hong Kong) since that time. While property markets generally remained strong throughout the COVID-19 pandemic, since interest rates have increased we have seen property prices in Australia and New Zealand fall. Investors are taking a cautious approach and the extent of property price falls will ultimately depend on the speed and magnitude of interest rate rises and impact on the broader economic outlook.

In June 2022 APRA introduced credit-based macroprudential measures in Australia, which require ADIs to ensure they have the ability to limit growth in particular forms of lending (including commercial and residential property); moderate higher risk lending during periods of heightened systemic risk or meet particular lending standards, at levels determined by APRA; and ensure adequate reporting against limits is established. Also, APRA have indicated that commercial property definitions will be more broadly aligned across the prudential framework. These changes to APRA’s policy framework and the formalisation of the credit-based macroprudential policy measures prudential standard, effective from September 2022, may adversely affect the Group’s Position. These proposals are described in risk factor 17 "Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position".

In New Zealand, median prices for residential property increased in prior years, peaking in November 2021, prior to declining in the 2022 calendar year. The RBNZ has acknowledged that higher interest rates and rising costs of living are putting pressure on households that may affect home prices and that house prices are expected to keep falling in the coming year and are expected to continue to do so for at least the next 12 months.

Increases in interest rates may affect debt serviceability, increase loan defaults experienced by the Group’s borrowers, reduce demand for commercial and residential property and the Group’s associated lending products in both Australia and New Zealand. New Zealand is already seeing a material reduction in demand for residential property.

Following a prolonged period of asset price inflation and record low interest rates, interest rates commenced increasing from May 2022 in Australia and from June 2021 in New Zealand. Interest rates are increasing sharply in both jurisdictions, for example the average 1-year fixed mortgage rate in New Zealand has increased from 2.162% in June 2021 to 4.958% in June 2022. Interest rate increases may continue through the rest of 2022 and into 2023.

The Group’s portfolio of commercial property loans may be susceptible to a sudden increase in interest rates. This coupled with recent asset price inflation and yield compression could cause a decline in interest coverage ratios and asset values, increase refinance risk and necessitate equity contributions towards debt reduction. Secondary grade assets may be more susceptible to a decline in prices if investors have overlooked weaker fundamentals in a highly liquid market (debt and equity), a more favourable interest rate environment and stable economy. Separately, construction risk, including contractor stability, the impact of supply chain constraints on cost of materials together with increasing labour costs may impact commercial property development feasibility and land values in the short to medium term. Each of the factors outlined above may adversely affect the Group’s Position.

6. Sovereign risk events may destabilise global financial markets and may adversely affect the Group’s Position

Sovereign risk is the risk that governments will default on their debt obligations, be unable to refinance their debts as and when they fall due or nationalise parts of their economy. Sovereign defaults may adversely impact the Group directly, through adversely impacting the value of the Group’s assets, or indirectly through destabilising global financial markets, thereby adversely impacting the Group’s Position. Sovereign risk exists in many economies, including economies in which the Group operates or has direct exposures, such as the United States, the UK, China, Europe, Australia and New Zealand. Should one sovereign default, there could be a cascading effect to other markets and countries, the consequences of which, while difficult to predict, may be similar to or worse than those experienced during the global financial crisis and subsequent sovereign debt crises.

7. Market risk events may adversely affect the Group’s Position

Market risk is the risk of loss arising from adverse changes in interest rates, currency exchange rates, credit spreads, or from fluctuations in bond, commodity or equity prices. For purposes of financial risk management, the Group differentiates between traded and non-traded market risks. Traded market risks principally arise from the Group’s trading operations in interest rates, foreign exchange, commodities and securities. The non-traded market risk is predominantly interest rate risk in the banking book. Other non-traded market risks include transactional and structural foreign exchange risk arising from capital investments in offshore operations and non-traded equity risk. Losses arising from the occurrence of such market risk events may adversely affect the Group's Position.

8. Changes in exchange rates may adversely affect the Group’s Position

As the Group conducts business in several different currencies, its businesses may be affected by movements in currency exchange rates. Additionally, as the Group’s annual and interim reports are prepared and stated in Australian dollars, any change in the value of the Australian dollar against other currencies in which the Group earns revenues (particularly the New Zealand dollar and the U.S. dollar) or holds capital, may adversely affect the Group’s reported earnings and/or capital ratios. While the Group has put in place hedges to partially mitigate the impact of currency changes, there can be no assurance that the Group’s hedges will be sufficient or effective, and any change in the value of the Australian dollar against other currencies in which the Group earns its revenue, or holds capital, may have an adverse impact upon the Group’s Position.

9. The ongoing discontinuation of LIBOR and developments affecting other benchmark rates could have adverse consequences on the Group’s securities issuances and its capital markets and investment activities

As of 31 December 2021, one week and two month U.S. dollar LIBOR (“USD LIBOR”) settings (and certain LIBOR settings for other currencies) were discontinued, while the remaining non-USD LIBOR settings ceased to be representative and are now being published only on a temporary “synthetic” basis. In addition, the UK Financial Conduct Authority (the “FCA”), which is the regulator of the LIBOR administrator, has announced that the principal USD LIBOR settings (overnight and one, three, six and 12 months) will cease to be published by any administrator, or will no longer be representative, as of 30 June 2023 (although the FCA is considering requiring their continued publication after that date, on a “synthetic” basis). Despite the expected publication of the principal USD LIBOR settings on the current basis until 30 June 2023, the FCA has prohibited the firms it regulates from using such settings in new contracts after 31 December 2021 (subject to limited exceptions), and certain U.S. (and other) regulators have stated that no new contracts using USD LIBOR should be entered into after that date.

Accordingly, many LIBOR obligations have transitioned, and many other LIBOR obligations will be transitioned, to another benchmark; and different types of financial product have transitioned, or are expected to transition, to different alternative benchmarks. However, there are many loans, mortgages, securities, derivatives and other financial instruments which remain linked to LIBOR, including USD LIBOR (and rates which incorporate USD LIBOR in their construction such as the benchmark rates used in Singapore, Thailand, the Philippines and India). Any failure to execute effective transitional arrangements to address LIBOR discontinuation could result in disruption in the financial markets, suppress capital markets activities and give rise to litigation claims. In addition, financial markets, particularly the trading market for floating rate obligations, may in general be adversely affected in 2023 by the discontinuation of the remaining LIBOR settings and the transition to alternative reference rates. There is no assurance that any alternative reference rate will be the economic equivalent of the LIBOR setting it is intended to replace. Any or all of these matters could have a negative impact on the Group’s Position and on the value of LIBOR-linked securities or other instruments which are issued, funded or held by the Group. The Group is party to loans, securities, derivatives and other financial instruments that currently use USD LIBOR as a benchmark rate or are otherwise linked to USD LIBOR. In some cases, those instruments include terms providing for the relevant interest or payment calculations to be made by reference to an alternative benchmark rate or on some other basis in the event of USD LIBOR’s discontinuation; and such instruments should transition away from USD LIBOR in accordance with those terms.# In cases where an instrument’s terms do not include robust fallback provisions or the fallback provisions are considered to be inadequate, the instrument, may need to be amended to add or amend such provisions in line with emerging market standards (or, where applicable, amendments may be made by operation of law), or other arrangements may have to be made with regard to such instrument when USD LIBOR is discontinued. Progress is being made by the Group on the amendment of these types of instruments. In some cases, it may not be possible to amend the relevant terms of USD LIBOR-linked instruments. The potential legal, regulatory and other consequences if this occurs are uncertain. In any event, implementation of existing fallback provisions or changes made on any other basis may, for example, alter the amounts payable under the relevant instrument, its value and its liquidity, and may result in a mismatch between such instrument and any related contract (such as a hedging agreement). In addition, the process of taking the necessary action with regard to this large volume of contracts prior to the end of June 2023 involves operational risks for the Group.

Other benchmark rates have been, or may be, reformed (for example, the Euro Interbank Offered Rate (“EURIBOR”)). Any such reforms may cause the relevant benchmarks to perform differently than in the past, or the reforms made to the rate may have other consequences which cannot be fully anticipated. If a benchmark rate is discontinued, there may or may not be a suitable, similar alternative reference rate and there may be adverse consequences in transitioning to an alternative rate. Any of these developments, and any future initiatives with regard to the regulation of benchmarks, could result in adverse consequences to the return on, value of and market for loans, mortgages, securities, derivatives and other financial instruments whose returns are linked to any such benchmark rate, including those issued, funded or held by the Group; and could result in widespread dislocation in the financial markets, engender volatility in the pricing of securities, derivatives and other instruments, and suppress capital markets activities, all of which could have adverse effects on the Group’s Position.

10. Acquisitions and/or divestments may adversely affect the Group’s Position

The Group regularly examines a range of corporate opportunities, including acquisitions and divestments, with a view to determining whether those opportunities will enhance the Group’s strategic position and financial performance. Integration (or separation) of an acquired (or divested) business can be complex and costly, sometimes including combining (or separating) relevant accounting and data processing systems, technology platforms and management controls, as well as managing relevant relationships and contracts with employees, customers, regulators, counterparties, suppliers and other business partners. The loss of key relationships and/or personnel from an acquisition or divestment could have an adverse effect on the Group’s Position. There can also be no assurance that any acquisition (or divestment) would have the anticipated positive results around synergies, cost or cost savings, time to integrate (or separate) and overall performance; as the underlying assumptions for the acquisition (or divestment) may not ultimately prove to be accurate or achievable. Any acquisition (or divestment) may also impact the Group’s credit ratings, cost of funds and access to further funding, which could in turn adversely affect the Group’s funding and liquidity positions. Integration (or separation) efforts could create inconsistencies in standards, controls, procedures and policies, as well as diverting management attention and resources. There is also the risk of counterparties making claims in respect of completed or uncompleted transactions against the Group that could adversely affect the Group’s Position. All or any of these factors could adversely affect the Group’s ability to conduct its business successfully and impact the Group’s operations or results. Additionally, there can be no assurance that employees, customers, counterparties, suppliers and other business partners of newly acquired (or retained) businesses will remain post-acquisition (or post- divestment). Further, there is a risk that completion of an agreed transaction may not occur whether in the form originally agreed between the parties or at all, including due to failure of the Group or the counterparty to satisfy its completion conditions or because other completion conditions such as obtaining relevant regulatory, shareholder or other approvals are not satisfied. Should any of these integration or separation risks occur, this could adversely affect the Group’s Position.

Transactions that the Group has previously announced but not yet completed include the following:

The acquisition of Suncorp Bank from Suncorp Group Limited, which remains subject to satisfaction of certain conditions and is expected to occur in the second half of calendar year 2023; and
The sale of ANZ’s Share Investment Lending portfolio to Leveraged Equities Limited, which is expected to occur in the first half of calendar year 2023.

If for any reason any announced acquisition, including the acquisition of Suncorp Bank, is not completed, the Group’s ongoing business may be adversely impacted and the Group may be subject to a number of risks, including:

the financial markets may react negatively, resulting in negative impacts on the Group’s securities and other adverse impacts;
the Group may experience negative reactions from its customers, vendors, and employees;
the Group will have incurred expenses and will be required to pay certain costs relating to the acquisition, whether or not the acquisition is completed, such as legal, accounting, investment banking, and other professional and administrative fees; and
matters relating to the acquisition may require substantial commitments of time and resources by the Group’s management, which could otherwise have been devoted to other opportunities that may have benefited the Group

The acquisition of Suncorp Bank from Suncorp Group Limited is subject to satisfaction of certain conditions. These include Federal Treasurer approval, Australian Competition and Consumer Commission authorisation or approval and certain amendments to the State Financial Institutions and Metway Merger Act 1996 (Qld). The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the Group or its business following the acquisition, or require changes to the terms of the transaction. There can be no assurance that the regulators will not impose any such conditions, obligations or restrictions, and that such conditions, limitations, obligations or restrictions will not have the effect of delaying or preventing completion of the transaction, imposing additional material costs on or materially limiting the revenues of the Group following the acquisition or otherwise reducing the anticipated benefits of the acquisition to the Group, any of which might have an adverse effect on the Group following the acquisition.

ANZ undertook a due diligence process in relation to the proposed acquisition of Suncorp Bank which relied in part on a review of financial, technology, legal and other information provided in respect of Suncorp Bank or was otherwise provided at meetings with Suncorp Bank management. Despite making reasonable efforts as part of the due diligence investigations, ANZ has not been able to verify the accuracy, reliability or completeness of all the information provided to it. If any information provided or relied upon by ANZ in its due diligence proves to be incorrect, incomplete or misleading, there is a risk that the actual financial position and performance of Suncorp Bank may be different to the expectations. There is also no assurance that the due diligence conducted was conclusive, and that all material issues and risks in respect of the proposed acquisition have been identified and avoided or managed, and therefore, there is a risk that issues or risks may arise that may adversely impact on the ANZ Group. Suncorp Group Limited has provided ANZ with indemnities relating to certain pre-completion matters as well as representations and warranties in favour of ANZ. There is a risk that these protections may be insufficient to fully cover liabilities relating to these matters, which may have an adverse impact on the Group's financial performance and position. As is usual, the warranties and indemnities are also subject to certain financial claims thresholds and other limitations.

Risks related to the Group's financial situation

11. Credit risk may adversely affect the Group’s Position

As a financial institution, the Group is exposed to the risks associated with extending credit to other parties, including incurring credit-related losses that can occur as a result of a counterparty being unable or unwilling to honour its contractual obligations. Credit losses can and have resulted in financial services organisations realising significant losses and, in some cases, failing altogether.# 11. Credit risk

Whilst the risk of credit-related losses has increased as a result of the impact of the COVID-19 pandemic and heightened political tensions, particularly those referred to in risk factor 1 “Changes in political and general business and economic conditions, including disruption in regional or global credit and capital markets, may adversely affect the Group’s Position”, the risk of credit-related losses may further increase as a result of a number of factors, including a deterioration in the financial condition of the economies in which the Group or its customers or counterparties operate, a sustained high level of unemployment and/or further changes in interest rates and inflationary conditions in the markets in which the Group or its customers or counterparties operate, material disruptions to supply chains, a deterioration of the financial condition of the Group’s 10 customers or counterparties, a reduction in the value of assets the Group holds as collateral, and a reduction in the market value of the counterparty instruments and obligations it holds. Less favourable business or economic conditions, whether generally or in a specific industry sector or geographic region, as well as the occurrence of events such as natural disasters or pandemics, could cause customers or counterparties to fail to meet their obligations in accordance with agreed terms. Some of the Group’s customers and counterparties in or with exposures to the below mentioned sectors are increasingly vulnerable:

industries impacted by the COVID-19 pandemic particularly those referred to in the risk factor 2 “The COVID-19 pandemic and future outbreaks of other communicable diseases or pandemics may materially and adversely affect the Group’s Position”;
industries exposed to the unwinding of government stimulus packages and increasing interest rates, as well as industries reliant on consumer discretionary spending;
industries that are heavily exposed to fuel supply shortages and associated rising costs including aviation, road transport & shipping and agriculture, particularly given the conflict between Russia and Ukraine and the associated impact on oil and gas prices, production and supply;
participants in energy or commodity markets that are exposed to rising margin payment requirements under hedge or futures contracts that arise due to underlying price volatility;
industries at risk of sanctions, geopolitical tensions or trade disputes (e.g. technology, agriculture, communications, and financial institutions) and/or declining global growth and disruption to global supply chains which include but are not limited to retail, wholesale, automotive, manufacturing and packaging industries;
the commercial property sector (including construction and contractors) which is exposed to rising interest rates, a decline in investor demand for large scale inner city apartment buildings and a material decline in net migration. In some markets, commercial contractors and sub-contractors may face cash flow/liquidity issues over the next 12 to 24 months as current projects run off and their forward books are diminished. The residential development sector is experiencing supply chain issues, increased costs and labour mobility issues. Earnings for hotel accommodation and certain retail sectors are still being impacted by reduced mobility and the extent of longer-term implications for some offices remains uncertain due to the shift to remote working arrangements;
industries facing labour supply shortages and/or who are reliant on access to both skilled and unskilled migrant workers, including tourism and hospitality, technology, agriculture, retail, health, construction and services;
customers and industries exposed to disruption from physical climate risk (e.g. bushfires, floods, storms and drought), and transition risk (e.g. industry exposed to carbon reduction requirements and resulting changes in demand for goods and services or liquidity). For more information on climate-related risks, see risk factor 31 “Impact of future climate events, biodiversity loss, human rights, geological events, plant, animal and human diseases, and other extrinsic events may adversely affect the Group’s Position”; and
industries exposed to the volatility in exchange rates and foreign exchange markets generally.

The Group is also subject to the risk that its rights against third parties may not be enforceable in certain circumstances, which may result in credit losses. Should material credit losses occur to the Group’s credit exposures, this may adversely affect the Group’s Position.

Credit risk may also arise from certain derivative, clearing and settlement contracts that the Group enters into, and from the Group’s dealings with, and holdings of, debt securities issued by other banks, financial institutions, companies, governments and government bodies where the financial conditions of such entities are affected by economic conditions in global financial markets. In addition, in assessing whether to extend credit or enter into other transactions with customers and/or counterparties, the Group relies on information provided by or on behalf of customers and/or counterparties, including financial statements and other financial information. The Group may also rely on representations of customers and independent consultants as to the accuracy and completeness of that information. The Group’s financial performance could be negatively impacted to the extent that it relies on information that is incomplete, inaccurate or materially misleading. The Group holds provisions for credit impairment that are determined based on current information and subjective and complex judgements of the impairment within the Group’s lending portfolio. If the information upon which the assessment is made proves to be inaccurate or if the Group fails to analyse the information correctly, the provisions made for credit impairment may be insufficient, which may adversely affect the Group’s Position.

12. Challenges in managing the Group’s capital base could give rise to greater volatility in capital ratios, which may adversely affect the Group’s Position

The Group’s capital base is critical to the management of its businesses and access to funding. Prudential regulators of the Group include, but are not limited to, APRA, the RBNZ and various regulators in the United States, the UK and the countries in the Asia Pacific region. The Group is required by its primary regulator, APRA and the RBNZ for the ANZ Bank New Zealand Limited (“ANZ New Zealand”, and, together with its subsidiaries, the “ANZ New Zealand Group”) to maintain adequate regulatory capital. Under current regulatory requirements, risk-weighted assets and expected loan losses increase as a counterparty’s risk grade worsens. These regulatory capital requirements are likely to compound the impact of any reduction in capital resulting from lower profits in times of stress. As a result, greater volatility in capital ratios may arise and may require the Group to raise additional capital. There can be no certainty that any additional capital required would be available or could be raised on reasonable terms. The Group’s capital ratios may be affected by a number of factors, such as (i) lower earnings (including lower dividends from its deconsolidated subsidiaries such as those in the insurance business as well as from its investment in associates), (ii) increased asset growth, (iii) changes in the value of the Australian dollar against other currencies in which the Group operates (particularly the New Zealand dollar and U.S. dollar) that impact risk weighted assets or the foreign currency translation reserve, (iv) changes in business strategy (including acquisitions, divestments and investments or an increase in capital intensive businesses), and (v) changes in regulatory requirements. APRA and the RBNZ have implemented prudential standards to accommodate Basel III. Certain other regulators have either implemented or are in the process of implementing regulations, including Basel III, that seek to strengthen, among other things, the liquidity and capital requirements of banks, funds management entities and insurance entities, though there can be no assurance that these regulations have had or will have their intended effect. These regulations, together with risks arising from any regulatory changes such as from APRA’s ‘unquestionably strong’ requirements, the requirements of the Basel Committee on Banking Supervision and the RBNZ’s reform of capital requirements are described in risk factor 17 "Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position". Any inability of the Group to maintain its regulatory capital may have a material adverse effect on the Group's Position.

13. The Group’s credit ratings could change and adversely affect the Group’s ability to raise capital and wholesale funding and constrain the volume of new lending, which may adversely affect the Group’s Position

The Group’s credit ratings have a significant impact on both its access to, and cost of, capital and wholesale funding. They may also be important to customers or counterparties when evaluating the Group’s products and services. Credit ratings and rating outlooks may be withdrawn, qualified, revised or suspended by credit rating agencies at any time. The methodologies used by ratings agencies to determine credit ratings and rating outlooks may be revised in response to legal or regulatory changes, market developments or for any other reason. The Group’s credit ratings or rating outlooks could be negatively affected by a change in the credit ratings or rating outlooks of the Commonwealth of Australia or New Zealand, the occurrence of one or more of the other risks identified in this document, a change in ratings methodologies or by other events.## Risk Factors

As a result, downgrades in the Group’s credit ratings or rating outlooks could occur that do not reflect changes in the general economic conditions or the Group's financial condition. In addition, the ratings of individual securities (including, but not limited to, certain Tier 1 capital and Tier 2 capital securities and covered bonds) issued by the Group (and other banks globally) could be impacted from time to time by changes in the regulatory requirements for those instruments as well as the ratings methodologies used by rating agencies. Any future downgrade or potential downgrade to the Group’s credit ratings or rating outlooks may reduce access to capital and wholesale debt markets and could lead to an increase in funding costs, which could constrain the volume of new lending and affect the willingness of counterparties to transact with the Group which may adversely affect the Group’s Position. Credit ratings are not a recommendation by the relevant rating agency to invest in securities offered by the Group.

14. Liquidity and funding risk events may adversely affect the Group’s Position

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. Liquidity and funding risk is inherent in all banking operations due to the timing mismatch between cash inflows and cash outflows. Reduced liquidity could lead to an increase in the cost of the Group’s borrowings and constrain the volume of new lending which may adversely affect the Group’s Position. Deterioration and volatility in market conditions and/or declines in investor confidence in the Group may materially impact the Group’s ability to replace maturing liabilities and access funding (in a timely and cost effective manner), which may adversely impact the Group’s Position. The Group raises funding from a variety of sources, including customer deposits and wholesale funding in domestic and in offshore markets to meet its funding requirements and to maintain or grow its business generally. Developments in major markets can adversely affect liquidity in global capital markets. For example, in times of liquidity stress, if there is damage to market confidence in the Group or if funding inside or outside of domestic markets is not available or constrained, the Group’s ability to access sources of funding and liquidity may be constrained and the Group will be exposed to liquidity and funding risk.

15. Changes in the valuation of some of the Group’s assets and liabilities may adversely affect the Group’s earnings and/or equity, and therefore the Group’s Position

The Group applies accounting standards, which require that various financial instruments, including derivative instruments, assets and liabilities classified as fair value through other comprehensive income, and certain other assets and liabilities (as per Note 19 of the 2022 Financial Statements) are measured at fair value with changes in fair value recognised in earnings or equity. Generally, in order to measure the fair value of these instruments, the Group relies on quoted market prices or present value estimates or other valuation techniques that incorporate the impact of factors that a market participant would take into account when pricing the asset or liability. The fair value of these instruments is impacted by changes in market prices or valuation inputs that may have a material adverse effect on the Group’s earnings and/or equity. In addition, the Group may be exposed to a reduction in the value of non-lending related assets as a result of impairments that are recognised in earnings. The Group is required to test the recoverability of goodwill balances and intangible assets with indefinite useful lives or not yet available for use at least annually and other non-lending related assets including premises and equipment (including right-of-use assets arising from leases), investment in associates, capitalised software and other intangible assets where there are indicators of impairment. For the purpose of assessing the recoverability of the goodwill balances, the Group uses a multiple of earnings calculation. Changes in the assumptions upon which the calculation is based, together with changes in earnings, may materially impact this assessment, resulting in the potential write-off of a part or all of the goodwill balances. In respect of other non-lending related assets, in the event that an asset is no longer in use, or that the cash flows generated by the asset do not support the carrying value, impairment charges may be recorded. This, in conjunction with the other potential changes above, could impact the Group’s Position.

16. Changes to accounting policies may adversely affect the Group’s Position

The accounting policies that the Group applies are fundamental to how it records and reports its financial position and results of operations. Management exercises judgement in selecting and applying many of these accounting policies so that they comply with the applicable accounting standards or interpretations and reflect the most appropriate manner in which to record and report on the Group’s financial position and results of operations. However, these accounting policies may be applied inaccurately, resulting in a misstatement of the Group’s financial position. In addition, the application of new or revised accounting standards or interpretations may adversely affect the Group’s Position. The impact of new accounting standards effective for the first time in the Group’s 2022 fiscal year is outlined in Note 1 of the 2022 Financial Statements. In some cases, management must select an accounting policy from two or more alternatives, any of which would comply with the relevant accounting standard or interpretation and be reasonable under the circumstances, yet might result in reporting materially different outcomes than would have been reported under the alternative.

Legal and regulatory risk

17. Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position

The Group’s businesses and operations are highly regulated. The pace of regulatory change has accelerated in recent years. The Group is subject to a substantial and increasing number of laws, regulations and policies, including industry self-regulation, in the Relevant Jurisdictions in which it carries on business or obtains funding and is supervised by a number of different authorities in each of these jurisdictions. The volume of changes, and resources allocated to the regulation and supervision of financial services groups, such as the Group, and the enforcement of laws against them, including through litigation, has increased substantially in recent years, including in response to community concern regarding the conduct of financial services groups in Australia and New Zealand. As a result, the regulation and supervision of, and enforcement against, financial services groups, including the Group has become increasingly extensive, complex and costly across the Relevant Jurisdictions. Such regulation, supervision and enforcement continue to evolve. The COVID-19 pandemic has had, and may continue to have an impact on the regulation and supervision of, and enforcement against, financial services groups such as the Group. Any future ramifications of the COVID-19 pandemic remain uncertain and, as of the date of this document, difficult to predict. There have been delays and deferrals to the implementation of regulatory reforms in Australia and New Zealand and a re-ranking of priorities, including enforcement priorities. Such delays and deferrals could impact the Group’s ability to manage regulatory change and increase the risk of the Group not complying with new regulations when they come into effect. The ongoing COVID-19 pandemic also has the potential to complicate the Group’s dealings with its regulators in a number of ways. In particular, disruptions to the Group’s business, operations, third party contractors and suppliers resulting from the COVID-19 pandemic may increase the risk that the Group will not be able to satisfy its regulatory obligations or processes and/or address outstanding issues, potentially increasing the prospect of a regulator taking adverse action against the Group. For more information on risks relating to the COVID-19 pandemic see risk factor 2 “The COVID-19 pandemic and future outbreaks of other communicable diseases or pandemics may materially and adversely affect the Group’s Position”. Developments in prudential regulation continue to impact the Group in a material way. At any given time, there are a number of items that are open for consultation with APRA and the RBNZ and therefore the potential impact of regulatory developments on the Group is inherently uncertain. Further changes to APRA’s or the RBNZ’s prudential standards could increase the level of regulatory capital that the Group is required to maintain, restrict the Group’s flexibility, require it to incur substantial costs and/or impact the profitability of one or more business lines any of which may adversely affect the Group’s Position. Particular points include the following. Prudential Developments • In November 2021, APRA released their final requirements in relation to capital adequacy and credit risk capital requirements for ADIs with an implementation date of 1 January 2023. This follows the consultation process that began in December 2020 when APRA released a consultation paper regarding proposed changes to the capital framework for ADIs aimed at having ADI’s achieve ‘unquestionably strong’ capital holding levels, improving the flexibility of the capital adequacy framework, and improving the transparency of ADI capital strength.# Key aspects of ARPA's final requirements are:
* Increased alignment with internationally agreed Basel standards for non-residential mortgages exposures;
* Implementing more risk-sensitive risk weightings for residential mortgage lending;
* Introduction of the Basel II capital floor that limits the risk weighted asset (“RWA”) outcome for Internal Ratings-Based (“IRB”) ADIs to no less than 72.5% of the RWA outcome under the standardised approach;
* Improving the flexibility of the capital framework through the introduction of a default level of the countercyclical capital buffer (“CCyB”) and increasing the capital conservation buffer (“CCB”) for IRB ADIs;
* Improving the transparency and comparability of ADIs’ capital ratios, including by requiring IRB ADIs to also publish their capital ratios under the standardised approach; and
* Implementing a Minimum Leverage Ratio for IRB ADIs at 3.5%.

APRA has indicated that the above changes will likely result in a decrease in RWA, but this would be offset by the increased capital allocation to regulatory buffers. APRA has also indicated that, as ADIs are currently meeting the ‘unquestionably strong’ benchmarks, it is not APRA’s intention to require ADIs to raise additional capital. Accordingly, APRA has therefore sought to calibrate the proposed capital requirements for ADIs, measured in dollar terms, to be consistent at an industry level with the existing ‘unquestionably strong’ capital benchmarks for ADIs under the current capital framework.

The impact of these proposed changes on individual ADIs (including ANZBGL), however, will vary depending on the final form of requirements implemented by APRA. Additionally, APRA is consulting on revisions to a number of prudential standards relating to market risk, being Interest Rate Risk in the Banking Book (“IRRBB”), Market Risk and Counterparty Credit Risk. Given the number of items that are yet to be finalised by APRA, the aggregate final outcome from all changes to APRA's prudential standards relating to their review of ADIs ‘unquestionably strong’ capital framework remains uncertain.

In June 2022, APRA finalised its macroprudential policy framework.

To support the implementation of the framework, APRA also formalised and embedded credit-based macroprudential policy measures within its prudential standards, within a new attachment to Prudential Standard APS 220 Credit Risk Management (“APS 220”). APRA’s objective is to strengthen the transparency, implementation and enforceability of macroprudential policy. The updates to APS 220 include a set of credit-based macroprudential measures to be used to address systemic risks if needed. The proposed updates to APS 220 include two main types of credit-based macroprudential measures: lending limits (the purpose of temporary lending limits would be to moderate any excessive growth in higher-risk lending during periods of heightened systemic risks); and lending standards, whereby APRA may also set minimum requirements for lending standards, including measures such as the serviceability buffer for residential mortgages. APRA have also indicated that commercial property definitions will be more broadly aligned across the prudential framework. The implementation of such changes could restrict the Group’s flexibility and/or impact the profitability of one or more business lines. For further information, see risk factor 5 “Changes in the real estate markets in Australia, New Zealand or other markets where the Group does business may adversely affect the Group’s Position”.

In August 2022, APRA commenced consultation on a new prudential standard CPS 230 Operational Risk Management (“CPS 230”)

which will set out minimum standards for managing operational risk, including updated requirements for business continuity and service provider management. The new standard will incorporate updated requirements for service provider management (currently outsourcing) and business continuity management that are currently contained in prudential standards CPS 231 Outsourcing and CPS 232 Business Continuity Management. Those standards will be replaced by the new CPS 230. After reviewing industry feedback in response to the consultation, APRA expects to release the final CPS 230 in early 2023, before the new standard comes into force from 1 January 2024. The CPS 230 proposal in its current form will pose significant regulatory burden and challenges to regulated entities, including ANZ, including potentially causing disruption to the banking industry. Given the complexity and size of the implementation process, which will require changes to systems, operations and contractual arrangements with third parties, it may not be possible for ANZ to meet the currently proposed implementation timeline.

In July 2019, APRA announced its decision on loss-absorbing capacity

pursuant to which it will require Australian D-SIBs, including ANZBGL, to increase their total capital by 3% of RWA by January 2024. On 2 December 2021, APRA announced that it has finalised its loss-absorbing capacity requirements and stated that it will require Australian D-SIBs to increase their total capital by a further 1.5% of RWA by January 2026. Inclusive of the previously announced interim increase of 3%, this will result in a total increase to the minimum total capital requirement of 4.5% of RWA. APRA expects the requirement to be satisfied predominantly with additional Tier 2 capital with an equivalent decrease in other senior funding. The amount of the additional total capital requirement will be based on ANZ’s actual RWA as at January 2026, including the final impact of the revisions to APRA’s capital framework announced on 29 November 2021. APRA noted “Given changes to RWA from the ADI capital reforms, the lower end of the range in dollar terms broadly equates to a requirement of 4.5 percentage points of RWA under the new capital framework, in place from 2023”.

The RBNZ has released new capital adequacy requirements for New Zealand banks,

which are set out in the Banking Prudential Requirements (“BPR”) documents, and are being implemented in stages during a transition period from October 2021 to July 2028. The net impact on ANZ’s Level 1 CET1 capital is approximately A$1.0 to A$1.5 billion between 30 September 2022 and the end of the transition period in 2028 (based on the Group’s 30 September 2022 balance sheet). However, the net impact on the overall Group capital position may be lower post implementation of the APRA capital reforms from January 2023, given the expected narrowing of the Level 1 and Level 2 CET1 ratios as a result of these reforms. The amount could also vary over time subject to changes to the capital position in ANZ New Zealand (e.g. from RWA growth, management buffer requirements, potential dividend payments).

Additionally, under changes outlined in the BPR documents, from 1 January 2022 there will be an annual 12.5% reduction in the maximum regulatory capital recognition of ANZ New Zealand’s total Additional Tier 1 capital instruments that were outstanding at 30 September 2021.

ASIC’s Regulatory Priorities

In August 2022, the Australian Securities and Investments Commission (“ASIC”) released its Corporate Plan for 2022 through 2026, which outlines ASIC’s priorities to reduce the risk of harm to consumers caused by poor product design and governance, as well as enhancing cyber and operational resilience. ASIC will also broaden their focus to other digitally enabled misconduct as emerging technologies and products change the financial ecosystem. ASIC’s focus will include scams and crypto-assets. ASIC’s four external strategic priorities are:
(i) Product design and distribution;
(ii) Sustainable finance;
(iii) Retirement decision making; and
(iv) Technology risks.

Supporting these priorities are core strategic projects, focused on sustainable finance practices, crypto-assets, scams, cyber and operational resilience, breach reporting, design and distribution obligations and the Financial Accountability Regime. A failure by the Group to comply with applicable law may have a negative impact on the Group’s reputation and financial performance and may give rise to litigation and regulatory enforcement proceedings, which may in turn, have an adverse impact on the Group’s Position.

Competition Laws, Regulations and Inquiries

There is a strong focus on the regulation of competition in the Australian and New Zealand financial services sectors. In March 2022, the Australian Competition and Consumer Commission (“ACCC”) announced its compliance and enforcement priorities for the year. The ACCC announced that it will continue to focus on competition issues in the financial services sector, particularly with payment services and noted its focus on promoting healthy competition in the financial services sector and investigating anti-competitive conduct. Increased scrutiny by ACCC may result in an associated increase in costs for the Group in addition to adversely impacting the Group's ability to grow through the implementation of potential acquisitions which may in turn, have a negative impact on the Group's Position

Product Laws, Regulations and Inquiries

There remains a strong focus on the suitability of products offered by financial services providers, including the Group. Regulatory policy development and monitoring of responsible consumer lending has increased significantly, and continues to drive the review of, and changes to, business practices. If any additional changes in law, regulation or policy are implemented, as a result of the development and monitoring of responsible consumer lending, such changes may impact the manner in which the Group provides consumer lending services in the future that may in some respects adversely affect the Group’s operations in this area and consequently, the Group’s Position. ASIC published updated regulatory guidance on responsible lending laws in December 2019.# Laws for stricter anti-hawking prohibitions in relation to financial products and a deferred sales model for add on insurance have been passed.
The design and distribution obligation legislation, which came into effect in Australia on 5 October 2021, require product issuers and distributors to, among other things, identify appropriate target markets for financial and credit products and distribute those products so that they likely reach the relevant target market. There are significant penalties for non-compliance and such legislation could impact the Group’s ability to issue and market financial products in the future. Increased compliance costs resulting from financial product distribution requirements may adversely impact the Group’s Position.

17 Increasing Regulatory Powers, Corporate Penalties and Funding for Regulators

There are increased penalties for breaches of laws in Australia, including the Australian consumer law, as well as increased powers to regulators and funding for regulators to enforce breaches. Increasing regulatory powers include ASIC’s product intervention power and proposed expansions of ASIC directions powers. The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 significantly increased the sanctions applicable to the contravention of a range of corporate and financial sector obligations. The Australian Government is consulting on draft legislation relating to increased maximum fines and civil penalties for breaches of the Competition and Consumer Act (including the Australian consumer law). This includes increasing the maximum pecuniary penalty for corporations where relevant from 10 per cent of a corporation’s annual turnover to 30 per cent of turnover over the period the breach occurred. The imposition of such penalties on the Group may adversely affect the Group’s Position.

Senior Executive Accountability Laws and Regulations

There are increasing penalties and specialised rules applicable to senior executives in the banking sector. The Banking Executive Accountability Regime (“BEAR”) was introduced in 2018 as a new responsibility and accountability framework for the directors and most senior executives in ADI groups. The Australian Government announced in January 2020 that BEAR will be replaced by the Financial Accountability Regime (“FAR”), extending the regime to other APRA-regulated entities. It was proposed that the FAR be jointly administered by APRA and ASIC and could impose larger civil penalties for any breaches. In October 2021, the Australian Government introduced the Financial Accountability Regime Bill 2021 (“FAR Bill”). In April 2022, the FAR Bill lapsed following the announcement of an election. The FAR Bill was re-introduced to Parliament in September 2022 and did not include civil penalties for accountable persons as part of the FAR Bill. The FAR Bill will come into effect for ADIs six months after its passage into legislation. Potential risks to the Group from the BEAR legislation and the FAR include the risk of penalties and the risk to the Group’s ability to attract and retain high-quality directors and senior executives.

Royal Commission’s compensation scheme of last resort

The Royal Commission made various recommendations concerning law reform and self- regulatory standards, a number of which have been addressed. There will be additional costs and further exposures associated with the proposed establishment of the Government’s Compensation Scheme of Last Resort (“CSLR”) scheme. The purpose of the CSLR is to support ongoing confidence in the financial system’s dispute resolution framework by facilitating compensation payments to eligible consumers who have received a determination for compensation from the Australian Financial Complaints Authority (“AFCA”). In September 2022, the Australian Government introduced a bill implementing the CSLR and is consulting on draft supporting regulations. The new Australian Government re-introduced a bill implementing the CSLR to Parliament in September 2022 with a consultation period open until 7 October 2022. The outcomes and total costs associated with these possible exposures and the legislative change remain uncertain and the impact may adversely affect the Group’s Position.

Other government or regulatory interventions in the financial sector

There are various Australian Government, Parliamentary and regulator led inquiries and interventions into Australia’s financial sector. These inquiries are wide ranging and could lead to legislative or regulatory changes or measures that may adversely affect the Group’s Position, including through taxes and levies. Scrutiny of banks continues following the commencement by the Australian Transaction Reports and Analysis Centre (“AUSTRAC”) (the Australian Government financial intelligence agency set up to monitor financial transactions to identify money laundering, organised crime, tax evasion, and terrorism financing) of civil penalty proceedings in 2017 and 2019 against two major Australian banks relating to alleged past and ongoing contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Commonwealth). The Australian Senate Select Committee (“ASSC”) on Australia as a Technology and Financial Centre has released its final report from an inquiry into a range of issues concerning technology and Australian financial services, including the ‘debanking’ of fintechs by Australian banks. The Australian Government has also released a policy paper concerning ‘Transforming Australia’s Payment System’ that responds, in part, to the ASSC’s report (see “Payments Policy” below). The Australian Government has also established a regional banking taskforce to assess the impact of bank branch closures on regional communities. The impact of these areas of work on ANZBGL, if any, is not yet clear. See also risk factor 19 “Significant fines and sanctions in the event of breaches of law or regulation relating to anti-money laundering, counter-terrorism financing and sanctions may adversely affect the Group’s Position”.

Industry self-regulation

There is continued focus on industry best practice guidance and standards impacting retail and small business banking. An independent review of the Australian Banking Code (“Code”) concluded in December 2021 with a report that made 116 recommendations, including for a new enforceable provision requiring banks to have systems and mechanisms to ensure that all provisions in the Code are implemented. The Australian Banking Association (“ABA”) and member banks have been working on developing industry positions on the recommendations. Separately, the ABA and members have been considering approaches to simplifying the Code. The timeline for the implementation of recommendations from the 2021 review and/or the simplification of the Code is not yet clear. A failure to comply with the Code may have a negative impact on the Group’s reputation and may result in litigation or regulatory enforcement actions, which may in turn, adversely impact the Group’s Position.

Open Banking Laws

Open Banking is part of a new consumer data right (“CDR”) in Australia that came into effect in August 2019. The CDR gives customers access to and control over their data and establishes and seeks to improve consumers’ ability to compare and switch between products and services. It is expected to reduce the barriers to new entrants into the banking industry in Australia. The CDR regime is still evolving. In December 2020, the Australian Government released the report of the Inquiry into Future Directions of the Consumer Data Right. The report contains 100 recommendations for the expansion of the CDR. In December 2021, the Australian Government agreed to the vast majority of the report’s 100 recommendations. In September 2022, consultation commenced on draft legislation to enable third parties to initiate actions, including payments, on behalf of customers. While the implications for the Group of an expansion of CDR are not yet clear and will depend on the new Australian Government’s policy, Open Banking may lead to increased competition that may adversely affect the Group’s Position.

19 Cyber Security and Critical Infrastructure

In December 2021, the Security Legislation Amendment (Critical Infrastructure) Act 2021 came into effect. The Act extends the application of the Security of Critical Infrastructure Act 2008 to other sectors including the financial services and markets sector. It also introduces ‘last resort’ powers for the Australian Government to direct an entity to take a particular action and to authorise the Australian Signals Directorate to intervene against cyber-attacks and registration and reporting requirements for critical infrastructure assets and cyber incidents. The Security Legislation Amendment (Critical Infrastructure Protection) Act 2022 came into effect in April 2022 introducing further reforms including positive security obligations for critical infrastructure assets to be delivered through sector-specific requirements, and enhanced cyber security obligations for systems of national significance. The Group is considering the impact of the changes as more detail is released. Implementation of the legislation could increase costs, and may give rise to regulatory enforcement proceedings, which may in turn, have an adverse impact on the Group’s Position.

Payments Policy

In December 2021 the Australian Government simultaneously responded to three inquiries and reviews relating to payments: a review into the Australian payments system; an inquiry into mobile payments and digital wallets; and an inquiry into Australia as a technology and financial centre (which addressed de-banking of fintech and cryptocurrency exchanges). The Australian Government agreed to many of the recommendations and the Australian Treasury is consulting on the implementation of the recommendations in 2022.# Risk Factors

Other Offshore Developments

Other offshore regulatory developments include the discontinuation of LIBOR, the reform of certain other benchmark rates and the transition to alternative benchmark rates (as to which see risk factor 9 “The ongoing discontinuation of LIBOR and developments affecting other benchmark rates could have adverse consequences on the Group’s securities issuances and its capital markets and investment activities” above). A failure by the Group to comply with laws, regulations or policies in any of the Relevant Jurisdictions could result in regulatory investigations, legal or regulatory sanctions, 20 financial or reputational loss, litigation, fines, penalties, restrictions on the Group’s ability to do business, revocation, suspension or variation of conditions of relevant regulatory licences or other enforcement or administrative action or agreements (such as enforceable undertakings) that may adversely affect the Group’s Position. The impact of the COVID-19 pandemic on the Group’s operations may result in delays to the implementation of regulatory changes or steps required to address commitments made to regulators or publicly. Any delays will be dependent on how regulators choose to adjust the prioritisation, timing and deployment of their supervisory mandate or legislative change. Such failures may also result in the Group being exposed to the risk of litigation brought by third parties (including through class action proceedings). The outcome of any litigation (including class action proceedings) may result in the payment of compensation to third parties and/or further remediation activities. For information in relation to the Group’s litigation and contingent liabilities, see risk factor 18 “Litigation and contingent liabilities may adversely affect the Group’s Position” and Note 33 of the 2022 Financial Statements.

18. Litigation and contingent liabilities may adversely affect the Group’s Position

From time to time, the Group may be subject to material litigation, regulatory actions, legal or arbitration proceedings and other contingent liabilities that may adversely affect the Group’s Position. The Group had contingent liabilities as at 30 September 2022 in respect of the matters outlined in Note 33 of the 2022 Financial Statements. Note 33 includes, among other things, descriptions of:
* regulatory and customer exposures;
* benchmark/rate actions;
* capital raising action;
* consumer credit insurance litigation;
* Esanda dealer car loan litigation;
* OnePath superannuation litigation;
* New Zealand loan information litigation;
* Credit cards litigation;
* Unlicensed third parties action;
* Available Funds action;
* the Royal Commission;
* security recovery actions; and
* warranties, indemnities and performance management fees.

19. Significant fines and sanctions in the event of breaches of law or regulation relating to anti-money laundering, counter-terrorism financing and sanctions may adversely affect the Group’s Position

Anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and sanctions compliance have been the subject of significant regulatory change and enforcement in recent years. The increasingly complicated environment in which the Group operates has heightened these operational and compliance risks. Furthermore, the increased transparency of the outcomes of compliance issues at financial institutions both domestically and globally and the related fines and settlement sums mean that these risks continue to be an area of focus for the Group. As a result of the current conflict in Ukraine, there is an unprecedented volume of sanctions being applied to Russia, and potentially other governments, by regulators around the globe. Whilst many governments across the United States, Europe and Australia are largely united as regards to the intended sanctions targets, the nuances and specific restrictions are not fully aligned. Furthermore, many corporate institutions around the world are assessing their risk appetite regarding ongoing business activity with or in Russia or with Russian owned entities. This has heightened the operational and compliance risks in navigating those transactions and dealings that are considered lawful, or within other counterparties’ risk appetite. This situation is expected to continue for the medium term, and to increase as the conflict in the region persists. In recent years, there has been an increase in action taken by key AML/CTF regulators against ‘Reporting Entities’ (in Australia, a ‘Reporting Entity’ constitutes a legal entity that provides at least one ‘designated service’ to a customer, such as opening a bank account or providing a loan). AUSTRAC continues to publish material to inform Reporting Entities of AUSTRAC’s expectations in areas such as investment in systems and controls required to identify, mitigate and manage their AML/CTF risks, and involvement of senior management and boards in managing the risks. In late 2019, AUSTRAC commenced civil penalty proceedings against a major Australian bank relating to alleged past reporting contraventions of the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006. In September 2020, an agreed statement of facts was filed in Federal Court resulting in a civil penalty of A$1.3 billion being imposed against the bank.

On de-banking, the Australian Government is considering advice from the Council of Financial Regulators on the underlying causes and possible policy responses. The impact of this work on the Group, if any, is not yet clear. Potential policy responses include new regulatory requirements and broader access to payment systems which could increase competition, which may adversely impact the Group’s position.

Privacy Act Review

The Australian Government is consulting on a draft bill to increase penalties and enforcement measures and to introduce a binding online privacy code to enhance privacy protections. As currently drafted the code would likely apply to online banking platforms. The Australian Government is also consulting on an expansive set of potential reforms to the Privacy Act which would have a significant impact on how an entity can use individuals’ information. It is not yet clear how or whether the new Australian Government will progress the draft bill. However implementing additional regulatory obligations may adversely affect the Group’s Position.

Quality of Advice Review

In September 2022 the Australian Government’s Quality of Advice Review (led by an independent reviewer) consulted on a series of proposals to reform the regulatory framework for the provision of financial advice. These proposals included broadening the scope of ‘personal advice’ and replacing the duty of financial advisers to act in a client’s best interests with a duty to provide ‘good advice’. It is unclear whether the Australian Government will implement the proposals. If implemented, the new framework could place additional regulatory obligations on banks and may adversely affect the Group’s position.

Outside of Australia: New Zealand Developments

The New Zealand Government and regulatory authorities have proposed, or have implemented, significant legislative and regulatory changes for New Zealand financial institutions. These changes include, among other things: the RBNZ’s reform of capital requirements and revised outsourcing policy (BS11), proposed changes to RBNZ’s mortgage lending standards, proposed conduct regulations for financial institutions under the Financial Markets (Conduct of Institutions) Amendment Act 2022, a climate related financial disclosure regime, the replacement of the Reserve Bank of New Zealand Act 1989with a deposit takers regime, including a depositor compensation scheme and changes to the Credit Contracts and Consumer Finance Act 2003. Such changes may adversely affect the ANZ New Zealand Group, potentially impacting its corporate structures, businesses, strategies, capital, liquidity, funding and profitability, cost structures, and the cost and access to credit for its customers and the wider economy. This in turn may adversely affect the Group's Position.# This is the largest financial penalty imposed on a financial institution in Australia’s history (almost twice the amount of the previous largest AUSTRAC financial penalty) confirming AUSTRAC’s continued efforts to penalise significant non-compliance with the AML/CTF regime. AUSTRAC has continued to use its regulatory powers toward Reporting Entities across its regulated populations with further civil action and other orders in place that the Group closely monitors. AUSTRAC also announced in May 2022 that it has accepted an Enforceable Undertaking (EU) from another of the major Australian Banks, this being the third public enforcement outcome AUSTRAC has achieved against a major bank in 5 years. The EU in this case requires the bank to undertake to implement a comprehensive remedial action plan, which will see improvements to its systems, controls and record-keeping. Similarly, the RBNZ has stated that its appetite for taking formal enforcement action for breaches of the New Zealand Anti-Money Laundering and Countering Financing of Terrorism Act 2009 has increased, and the propensity for other regulators (including in Asia and the Pacific) to take action for non-compliance with their local AML/CTF laws has increased. In 2021, ANZ New Zealand self-identified and notified three prescribed transaction reporting ("PTR") matters to the RBNZ, where transaction reports had not been filed 22 within the prescribed timeframe. The RBNZ informed ANZ New Zealand that it considers one of these matters (related to 6,409 transaction reports of a certain SWIFT message type) to be a material breach, and the other two to be minor breaches, of New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009 relating to PTR. ANZ New Zealand is expecting requests for further information from RBNZ on this during the second half of 2022. These matters have been referred to the RBNZ's enforcement team for review. The potential outcome of these matters remains uncertain at this time. While the COVID-19 pandemic continues to evolve at different paces in many of the jurisdictions in which the Group operates, close monitoring of the levels and types of financial crimes continues across the Group. To date, the most notable impact has been the changing types of scams with criminals targeting vulnerable customers using the COVID-19 pandemic as a cover, identity theft and false applications for Government support and a significant increase in scams occurring concurrently with the Russia- Ukraine crisis. There is a continuing risk that the management of alerts for potential money laundering or terrorism financing activities may be slowed due to both resource availability and/or changed working arrangements. The risk of non-compliance with AML/CTF and sanction laws remains high given the scale and complexity of the Group and the lack of clarity around some mandatory reporting requirements. Emerging technologies, such as those provided by virtual asset service providers (e.g. digital currency exchanges and wallet providers) as well as increasingly complex remittance arrangements via fintechs and other disruptors, may limit the Group’s ability to track the movement of funds, develop relevant transaction monitoring, and meet reporting obligations. Additionally, the complexity of the Group’s technology, and the increasing frequency of changes to systems that play a role in AML/CTF and sanctions compliance puts the Group at risk of inadvertently failing to identify an impact on the systems and controls in place. A failure to operate a robust program to report the movement of funds, combat money laundering, terrorism financing, and other serious crimes may have serious financial, legal and reputational consequences for the Group and its employees. Consequences can include fines, criminal and civil penalties, civil claims, reputational harm and limitations on doing business in certain jurisdictions. These consequences individually or collectively may adversely affect the Group’s Position. The Group’s foreign operations may place the Group under increased scrutiny by regulatory authorities, and subject the Group to increased compliance costs.

Changes in monetary policies may adversely affect the Group’s Position

Central monetary authorities (including the RBA, the RBNZ, the United States Federal Reserve, the Bank of England and the monetary authorities in the Asian jurisdictions in which the Group operates) set official interest rates or take other measures to affect the demand for money and credit in their relevant jurisdictions. In addition, in some jurisdictions, currency policy is used to influence general business conditions and the demand for money and credit. These measures and policies can significantly affect the Group’s cost of funds for lending and investing and the return that the Group will earn on those loans and investments. These factors impact the Group’s net interest margin and can affect the value of financial instruments it holds, such as debt securities and hedging instruments. The measures and policies of the central monetary authorities can also affect the Group’s borrowers, potentially increasing the risk that they may fail to repay loans. Changes in interest rates and monetary policy are difficult to predict and may adversely affect the Group’s Position.

Ongoing significant compliance costs with respect to the evolving and extensive Automatic Exchange of Information (“AEoI”) obligations imposed by global customer tax transparency regimes may adversely affect the Group’s Position

There continues to be mandatory and substantial changes to, and increasing regulatory focus on, compliance by all global Financial Institutions (“FIs”), including the Group, with global customer tax transparency regimes, under the Foreign Account Tax Compliance 23 Act (“FATCA”), the Organisation for Economic Co-operation and Development’s (“OECD’s”) Common Reporting Standard (“CRS”) and similar anti-tax avoidance regimes. This includes global regulatory movement to enforcement and penalty activities and increasing regulatory implementation of additional compliance framework requirements, compliance assessment requirements/questionnaires, onsite financial institution audits/evidentiary requirements and detailed rules and frameworks to close down circumventions and deter, detect and penalise non-compliance. The ongoing OECD government level peer reviews and IRS/regulatory FI compliance review/audit requirements increase scrutiny and therefore unplanned workload of FIs globally. Each country of CRS adoption is being pushed by the OECD to ensure its penalty regime is sufficient to deter and penalise non-compliance. Consequently, as an in scope FI, operating in a globally interlinked operating environment, the highly complex and rigid nature of the obligations under each countries varied implementation of these regimes present heightened operational and compliance risks for the Group. As regulators around the world continue to mature their compliance framework requirements and shift focus to enforcement, including financial penalties and other more general tax risk framework implications, this may result in significant penalty provision requirements and reputational damage in the event of failures. Accordingly, compliance with global customer tax transparency regimes continues to be a key area of focus and major cost for the Group. In addition, under FATCA and other relevant U.S. Treasury Regulations, the Group could be subject to:

a 30% withholding tax on certain amounts (including amounts payable to customers), and be required to provide certain information to upstream payers, as well as other adverse consequences, if the ongoing detailed obligations are not adequately met; and
broader compliance issues, significant withholding exposure, competitive disadvantage and other operational impacts if the FATCA Intergovernmental Agreements between the United States and the applicable jurisdictions in which the Group operates cease to be in effect.

Under the CRS, the Group:

faces challenges in developing countries where the Group has operations, such as the Pacific region. The local regulators in these countries are generally assisted by a ‘partner’ country; this is leading to the introduction of standards and evidentiary requirements that continue to be challenging to implement and adhere to;
must deal with substantial ongoing country specific variations in local law and regulatory implementation, with significant broader ‘justified trust’ ramifications and penalties for non-collection or failed reporting in respect of prescribed customer information;
along with other FIs, is under increasingly stringent regulatory scrutiny and measures as regulators have turned their focus from the initial establishment of the CRS to the effectiveness of FI implementation. This tightening of the regulatory focus (along with the potential FI ramifications outlined above) can lead to significant negative experience for affected customers (including unilateral account blocking and closure, underlying client issues resulting from same and potential direct customer penalties), which may adversely affect the Group’s Position and if not similarly implemented by other FIs, may present a significant competitive disadvantage and loss of business;
faces poor customer outcomes with customers who may feel aggrieved as a result of blocking and closure impacts including increased potential exposure to legal/third party liability, particularly where ANZ has not communicated the regulatory issue clearly to a customer or has blocked or closed the account incorrectly (for example, due to a data or process error); and
continues to deal with the substantive implementation challenges associated with the complex requirements across the intermediary space, which may also increase the risk of regulatory ramifications.# The scale and complexity of the Group, like other FIs, means that the risk of inadvertent non-compliance with the FATCA, CRS and other tax reporting regimes is high. In addition, the ongoing loss of key resources and critical subject matter expertise, combined with the ongoing subsequent challenges of finding sufficiently qualified replacements increases the risk of inadvertent non-compliance with the breadth and detail of the obligations. A failure to successfully operate the implemented processes or to identify and implement all obligations could lead to legal, financial and reputational consequences for the Group and its employees. Consequences include fines, criminal and civil penalties, civil claims, reputational harm, competitive disadvantage, loss of business and constraints on doing business. On a global scale, natural disasters and the COVID-19 pandemic have resulted in challenges for staff including unplanned staff absences, access to systems, tools and information, and have impacted the delivery of the Group’s regulatory obligations on requisite timeframes, including mandatory FATCA and CRS regulatory reporting, customer follow-up strategies, resolution and action of regulatory recommendations, as well as continuous improvement activities required to achieve the zero rate of error expected by regulators. The Group’s global taxation obligations in relation to the enterprise’s own tax lodgements and payments may similarly be impacted. Initial leniency from global regulators continue to be tightened or withdrawn due to the expectation for FIs to adapt to the ongoing challenges presented by external factors such as the COVID-19 pandemic, further heightening the risk of additional regulatory scrutiny, associated penalties and reputational ramifications resulting from any deficiencies or delays in meeting regulatory obligations to the level of quality and within the timeframes required. These consequences, individually or collectively, may adversely affect the Group’s Position.

22. Unexpected changes to the Group’s licence to operate in any jurisdiction may adversely affect the Group’s Position

The Group is licensed to operate in various countries, states and territories. Unexpected changes in the conditions of the licenses to operate by governments, administrations or regulatory agencies that prohibit or restrict the Group from trading in a manner that was previously permitted may adversely impact the Group’s Position.

Internal control, operations and reputational risk

23. Operational risk events may adversely affect the Group’s Position

Operational risk is the risk of loss and/or non-compliance with laws resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, and the risk of reputational loss or damage arising from inadequate or failed internal processes, people, and/or systems, but excludes strategic risk.

Operational risk categories under ANZ’s risk taxonomy include:

Financial Crime (the risk of money laundering, sanctions violations, bribery and corruption, and “Know-Your-Customer” failure). See risk factor 19 “Significant fines and sanctions in the event of breaches of law or regulation relating to anti-money laundering, counter-terrorism financing and sanctions may adversely affect the Group’s Position”;
Internal fraud (fraud attempted of perpetrated by an internal party (or parties) against the organisation);
External fraud (fraud attempted or perpetrated against the organisation by an external party (i.e. a party without a direct relationship to ANZ (excluding customers)) without involvement of an employee);
Physical Security & Safety (the risk of damage to ANZ’s physical assets, client assets, or public assets for which ANZ is liable, and (criminal) injury to ANZ’s employees or affiliates);
People (the risk of breaching employment legislation, mismanaging employee relations and failing to ensure a safe working environment);
Transaction Processing & Execution (failure to process, manage and execute transactions and/or other processes correctly and/ or appropriately);
Technology (the risk associated with the failure or outage of systems, including hardware, software and networks). See risk factor 27 “Disruption of information technology systems or failure to successfully implement new technology systems could significantly interrupt the Group’s business, which may adversely affect the Group’s Position”;
Conduct (the risk of loss or damage arising from the failure of ANZ, its employees or agents to appropriately consider the interests of consumers, the integrity of the financial markets and the expectations of the community, in conducting ANZ business activities). See risk factor 26 “Conduct risk events may adversely affect the Group’s Position”;
Legal (the risk of execution errors in legal procedures and processes);
Regulatory Compliance (failure to comply with any legal or regulatory obligations that are not captured through other mentioned risks). See risk factor 17 “Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position”;
Third Party (the risk of failing to manage third party relationship and risks appropriately, for example, not taking reasonable steps to identify and mitigate additional operational risks resulting from the outsourcing of services or functions);
Information Security including Cyber and Privacy (the risk of information security incidents, including the loss, theft or misuse of data/information — this covers all types of data, and can include the failure to comply with rules concerning information security). See risk factor 28 “Risks associated with information security including cyber-attacks, may adversely affect the Group’s Position”;
Data Management (the risk of failing to appropriately manage and maintain data, including all types of data, for example, client data, employee data and ANZ’s proprietary data). See risk factor 29 “Data management risks may adversely affect the Group’s Position”;
Model (the risk of incorrect model design, improper implementation of a correct model, or inappropriate application of a correct model). See risk factor 30 “Modelling risks may adversely affect the Group’s Position”; and
Statutory Reporting and Tax (the risk of failing to meet statutory reporting and tax payments/filing requirements). Statutory reporting includes all external reporting that ANZ is obliged to perform (e.g. regulatory reporting, financial reporting).

Loss from operational risk events may adversely affect the Group’s Position. Such losses can include fines, penalties, imposts (including capital imposts), loss or theft of funds or assets, legal costs, customer compensation, loss of shareholder value, reputation loss, loss of life or injury to people, and loss of property and/or information.

Operational Risk can arise from a number of causes, such as change risk events (for example, a failure to deliver a change or risks resulting from change initiatives), and have a number of different impacts, including reputational impacts (see risk factor 25 “Reputational risk events as well as operational failures and regulatory compliance failures may give rise to reputational risk, which may undermine the trust of stakeholders, erode the Group’s brand and adversely affect the Group’s Position”).

Pursuant to APRA and RBNZ requirements, the Group and ANZ New Zealand Group must also maintain “operational risk capital” reserves in the event future operational events occur.

COVID-19 related challenges have resulted in a number of changes to how the Group undertakes its operations including adapting to remote working arrangements. Whilst most major offices have returned to a blended/hybrid working environment, the Group endeavours to follow the relevant government directions in terms of place of work, and any occupancy restrictions. Reliance on digital channels continues to remain high, which in turn heightens the risks associated with cyber-attacks and any disruption to system/service availability. Whilst business continuity plans have been well tested and refined during the pandemic, impact to system/service availability still has the ability to impact the Group’s position from a reputational, financial and compliance perspective.

24. Human Capital Risk, which relates to the inability to attract, develop, motivate and retain the Group’s people to meet current and future business needs, could result in poor financial and customer outcomes and reduce the ability of the Group to deliver against customer and other stakeholders’ expectations

Key executives, employees and directors play an integral role in the operation of the Group's business and its pursuit of its strategic objectives. The unexpected departure of an individual in a key role, or the Group's failure given the challenges in the current environment to recruit, develop and retain an appropriately skilled and qualified person into these roles particularly in areas such as digital, technology, risk or compliance, could have an adverse effect on the Group’s Position. These risks may be further exacerbated by the ongoing impacts of the COVID-19 pandemic, including on employee well-being, social and employment choices.

25. Reputational risk events as well as operational failures and regulatory compliance failures may give rise to reputational risk, which may undermine the trust of stakeholders, erode the Group’s brand and adversely affect the Group’s Position

The Group’s reputation is a valuable asset and a key contributor to the support that it receives from the community in respect of its business initiatives and its ability to raise funding or capital. Reputational risk may arise as a result of an external event or the Group’s actual or perceived actions and practices, which include operational and regulatory compliance failures.# Risk Factors

Reputational Damage

The occurrence of such events may adversely affect perceptions about the Group held by the public (including the Group’s customers), shareholders, investors, regulators or rating agencies. The impact of a risk event on the Group’s reputation may exceed any direct cost of the risk event itself and may adversely impact the Group’s Position. The Group may incur reputational damage where one of its practices fails to meet community expectations which are continually changing and evolving. As these expectations may exceed the standard required in order to comply with applicable law, the Group may incur reputational damage even where it has met its legal obligations. A divergence between community expectations and the Group’s practices could arise in a number of ways, including in relation to its product and services disclosure practices, pricing policies and use of data. Further, the Group’s reputation may also be adversely affected by community perception of the broader financial services industry, particularly in an environment of rising interest rates. Additionally, reputational damage may also arise from the Group’s failure to effectively manage risks, enforcement or supervisory action by regulators, adverse findings from regulatory reviews and failure or perceived failure to adequately respond to community, environmental and ethical issues. While impacts of the COVID-19 pandemic are ongoing, and the longer-term financial and non-financial effects are yet to be fully realised, it is possible there may be unintended consequences from the Group’s actions which may give rise to negative perceptions about the Group. Additionally, certain operational and regulatory compliance failures or perceived failures, may give rise to reputational risk. Such operational and regulatory compliance failures include, but are not limited to:

failures related to fulfilment of identification obligations;
failures related to new product development;
failures related to ongoing product monitoring activities;
failures related to suitability requirements when products are sold outside of the target market;
failure to comply with disclosure obligations;
market manipulation or anti-competitive behaviour;
inappropriate crisis management/response to a crisis event;
inappropriate handling of customer complaints;
inappropriate third party arrangements;
privacy breaches; and
unexpected risks (e.g. credit, market, operational or compliance).

Damage to the Group’s reputation may have wide-ranging impacts, including adverse effects on the Group’s profitability, capacity and cost of funding, increased regulatory scrutiny, regulatory enforcement actions, additional legal risks and availability of new business opportunities. The Group’s ability to attract and retain customers could also be adversely affected if the Group’s reputation is damaged, which may adversely affect the Group’s Position.

Conduct Risk Events

Conduct risk events may adversely affect the Group’s Position The Group defines conduct risk as the risk of loss or damage arising from the failure of the Group, its employees or agents to appropriately consider the interests of consumers, the integrity of the financial markets, and the expectations of the community in conducting the Group’s business activities. Conduct risks include:
the provision of unsuitable or inappropriate advice to customers;
the representation of, or disclosure about, a product or service which is inaccurate, or does not provide adequate information about risks and benefits to customers;
a failure to deliver product features and benefits in accordance with terms, disclosures, recommendations and/or advice;
a failure to appropriately avoid or manage conflicts of interest;
inadequate management of complaints or remediation processes;
a failure to respect and comply with duties to customers in financial hardship; and
unauthorised trading activities in financial markets, in breach of the Group’s policies and standards.

There has been an increasing regulatory and community focus on conduct risk, including in Australia and New Zealand. Continued cost of living increases are creating pressure on affordability which may impact both the ability to lend to customers, and also the extent to which forbearance may need to be offered to those already struggling. Furthermore, it is expected to increase the number of customers that may fall into financial difficulty. This is an evolving and fluid situation, and the Group will need to continue to adapt and respond to mitigate the risk of customer harm because of this ongoing pressure on affordability. The Group has a centralised and dedicated team tasked with undertaking a variety of customer remediation programs, including to address specific conduct issues identified in Group reviews. Conduct risk events may expose the Group to regulatory actions, restrictions or conditions on banking licenses and/or reputational consequences that may adversely affect the Group's Position. It is possible that remediation programs may not be implemented appropriately or may lead to further remediation work being required, resulting in litigation, regulatory action and/or increasing cost to the Group, all of which may adversely affect the Group’s Position.

For further discussion of the increasing regulatory focus on conduct risk, see risk factor 17 “Regulatory changes or a failure to comply with laws, regulations or policies may adversely affect the Group’s Position” and risk factor 18 “Litigation and contingent liabilities may adversely affect the Group’s Position”.

Disruption of Information Technology Systems

Disruption of information technology systems or failure to successfully implement new technology systems could significantly interrupt the Group’s business, which may adversely affect the Group’s Position The Group’s day-to-day activities and its service offerings (including digital banking) are highly dependent on information technology (“IT”) systems. Disruption of IT systems, or the services the Group uses or is dependent upon, may result in the Group failing to meet its compliance obligations and/or customers’ banking needs. In a digital world, customer’s expectations of always on (24/7) banking services necessitates highly available and resilient IT systems. The Group has an ongoing obligation to maintain its IT systems and to identify, assess and respond to risk exposures associated with these systems, including IT asset lifecycle, IT asset project delivery, technology resilience, technology security, use of third parties, data retention/restoration and business rules and automation. Inadequate responses to these risk exposures could lead to unstable or insecure systems adversely impacting customers, increased costs, and non-compliance with regulatory requirements, which may adversely affect the Group’s Position. The Group has incident response, disaster recovery and business continuity measures in place designed to ensure that critical IT systems will continue to operate during both short-term and prolonged disruption events for all businesses across the Group’s network, including ANZ New Zealand and international branches, which rely on the Group to provide a number of IT systems. A failure of the Group’s systems may affect the Group’s network, which may in turn, adversely affect the Group’s Position. The COVID-19 pandemic has highlighted that these arrangements must cater for vast and improbable events, and ensure critical IT systems can be supported and accessed remotely by a large number of technologists and business users for extended periods. If such measures cannot be effectively implemented, this may adversely affect the Group’s Position. In addition, the Group must implement and integrate new IT systems, most notably Cloud, Data and Automation technologies, into the existing technology landscape to ensure that the Group’s technology environment is cost-effective and can support evolving customer requirements. Inadequate implementation and integration of these systems, or improper operation and management, including of their vendors and the supply chain, may adversely affect the Group’s Position. This risk factor should be read in conjunction with risk factor 28 “Risks associated with information security including cyber-attacks, may adversely affect the Group’s Position” as information security breaches and cyber-attacks have the potential to result in the disruption of IT systems.

Risks Associated with Information Security

Risks associated with information security including cyber-attacks, may adversely affect the Group’s Position The primary focus of information security is to protect information and technology systems from disruptions to confidentiality, integrity or availability. As a bank, the Group handles a considerable amount of personal and confidential information about its customers and its own internal operations, from the multiple geographies in which the Group operates. This information is processed and stored on both internal and third party hosted environments. Any failure of security controls operated by the Group or its third parties could adversely affect the Group’s business. The risks to systems and information are inherently higher in certain countries where, for example, political threats or targeted cyber-attacks by terrorist or criminal organisations are greater. The Group is conscious that cyber threats, such as advanced persistent threats, distributed denial of service, malware and ransomware, are continuously evolving, becoming more sophisticated and increasing in volume. The COVID-19 pandemic has increased the number of staff working offsite for an extended period, which may increase information security risks to the Group. Cyber criminals may attempt to take advantage through pursuing exploits in end point security, spreading malware, and increasing phishing attempts. Furthermore, these risks may be further exacerbated by geopolitical risks.# Additional Risks

Data Security and Privacy

Cybersecurity and Data Breach Risks

Additionally, failures in the Group’s cybersecurity policies, procedures or controls, could result in loss of data or other sensitive information (including as a result of an outage) and may cause associated reputational damage. Any of these events could result in significant financial losses (including costs relating to notification of, or compensation for customers), regulatory investigations or sanctions or may affect the Group’s ability to retain and attract customers, and thus may adversely affect the Group’s Position.

Data Management Risks

Data management processes include capturing, processing, distributing, accessing, retaining and disposing of large quantities of data, including sensitive data. Data management is reliant on the Group’s systems and technology. Data quality management is a key area of focus, as data is relied on to assess various issues and risk exposures. Any deficiencies in data quality, or the effectiveness of data gathering, analysis and validation processes, or failure to appropriately manage and maintain the Group’s data, systems and technology, could result in ineffective risk management practices and, inaccurate risk reporting which may adversely impact the Group’s Position. Furthermore, failure to comply with data management obligations, including regulatory obligations may cause the Group to incur losses, or result in regulatory action.

Modelling Risks

As a large financial institution, the Group relies on a number of models for material business decision making including but not limited to lending decisions, calculating capital requirements, provision levels, customer compensation payments and stressing exposures. If the models used prove to be inadequately designed, implemented or maintained or based on incorrect assumptions or inputs this may adversely impact the Group’s Position.

Environmental, Social and Governance Risks

Impact of Future Climate Events, Biodiversity Loss, Human Rights, Geological Events, Plant, Animal and Human Diseases, and Other Extrinsic Events

The Group and its customers are exposed to environmental, social and governance risks, including climate-related events, geological events (including volcanic seismic activity or tsunamis), biodiversity loss, plant, animal and human diseases or a pandemic such as COVID-19 and human rights risks. Each of these can cause significant impacts on the Group’s operations and its customers. Climate-related events can include severe storms, drought, fires, cyclones, hurricanes, floods and rising sea levels. The impact of these events can be widespread, extending beyond primary producers to customers of the Group who are suppliers to the agricultural sector, and to those who reside in, and operate businesses within, impacted communities. The impact of these losses on the Group may be exacerbated by a decline in the value and liquidity of assets held as collateral, which may impact the Group’s ability to recover its funds when loans default. Recent examples in Australia include severe drought conditions, bushfires in 2019/2020, and severe flooding in 2021 and 2022. In addition, geological event impacts have occurred in New Zealand in recent years and the COVID-19 pandemic continues to impact the Group’s operations and customers.

The risk of biodiversity loss, as a result of species extinction or decline, ecosystem degradation and nature loss, is an emerging risk that we are seeking to understand further. In relation to biodiversity, risks can arise from lending to customers that are significantly dependent on biodiversity and ecosystem services, or who may have negative impacts on biodiversity. We acknowledge the need to protect and restore ecosystems and mitigate biodiversity loss, including working to halt and reverse forest loss and land degradation. We understand that failure to manage these risks may lead to financial and non-financial risks and adverse impacts to the Group’s Position.

Human rights risks can relate to the safety and security of our people, labour rights, modern slavery, privacy and consumer protection, corruption and bribery and land rights. The Group uses risk-based due diligence to identify human rights risks and impacts associated with our business relationships. Failure to manage these risks may result in adverse impacts to the Group’s Position.

New regulations or guidance relating to climate change, biodiversity, human rights, or other environmental, social or governance risks, as well as the perspectives of shareholders, employees and other stakeholders, may affect whether and on what terms and conditions the Group engages in certain activities or offer certain products. Depending on their frequency and severity, these extrinsic events may continue to interrupt or restrict the provision of some local services such as the Group branch or business centres or Group services, and may also adversely affect the Group’s financial condition or collateral position in relation to credit facilities extended to customers, which in turn may adversely affect the Group’s Position.

Risk Management Framework Failures

The Group’s risk management framework may fail to manage all existing risks appropriately or detect new and emerging risks fast enough, which could adversely affect the Group’s Position. Risk management is an integral part of the Group’s activities and includes the identification, measurement, reporting, monitoring and mitigation of the Group’s risk appetite and reporting on the Group’s risk profile and effectiveness of identified controls. However, there can be no assurance that the Group’s risk management framework will be effective in all instances including in respect of existing risks, or new and emerging risks that the Group may not anticipate or identify in a timely manner and/or for which its controls may not be effective. Failure to manage risks effectively could adversely impact the Group’s reputation or compliance with regulatory obligations.

The effectiveness of the Group’s risk management framework is also connected to the establishment and maintenance of a sound risk management culture, which is supported by appropriate remuneration structures. A failure in designing or effectively implementing appropriate remuneration structures, could have an adverse impact on the Group’s risk culture and effectiveness of the Group’s risk management frameworks. The Group seeks to continuously improve its risk management frameworks. It has implemented, and regularly reviews, its risk management policies and allocates additional resources across the Group to manage and mitigate risks. However, such efforts may not insulate the Group from future instances of misconduct and no assurance can be given that the Group’s risk management framework will be effective.

A failure in the Group’s risk management processes or governance could result in the Group suffering unexpected losses and reputational damage, and failing to comply with regulatory obligations, which could adversely affect the Group’s Position. While these principles continue to underpin the Group’s risk management framework, the ongoing COVID-19 pandemic requires the Group to continue to maintain good practices and a robust risk management framework as its operational activities continue to evolve, so as to manage the impacts of the pandemic both to its workforce and customers. In these circumstances, a failure in the Group’s risk management framework, processes or governance could adversely affect the Group’s Position.

Climate Risk in Lending

Risks associated with lending to customers that could be directly or indirectly impacted by climate risk may adversely affect the Group’s Position. The risks associated with climate change are subject to increasing regulatory, political and societal focus, including in Australia and New Zealand. APRA has released a prudential practice guide CPG 229 that is designed to assist regulated entities (including the Group) in managing climate-related risks and opportunities as part of their existing risk management and governance frameworks. APRA is also conducting its first climate vulnerability assessment in calendar year 2021 and 2022 to (i) assess banks’ potential financial exposure to climate risk; (ii) understand how banks may adjust business models and implement management actions in response to different scenarios; and (iii) foster improvement in climate risk management capabilities. Similarly, the RBNZ is increasing its focus on climate change and in October 2021 released its Climate Change Report 2021. The Climate Change Report 2021 outlines the RBNZ’s approach to climate change, including future actions to further incorporate climate change into stress testing and embed climate change into supervisory frameworks, data collection and internal planning. The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 will require ANZBGL and ANZ New Zealand, as ‘climate reporting entities’, to annually prepare, seek independent assurance for and make public disclosures on the management of, and effects of climate change to their business, in accordance with climate-related disclosure standards, to be issued by the New Zealand External Reporting Board. The first disclosures will be due for the financial year ending 30 September 2024. Embedding climate change risk into the Group’s risk management framework in line with APRA’s and other stakeholders’ expectations, and adapting the Group’s operation and business strategy to address both the risks and opportunities posed by climate change and the transition to a low carbon economy, could have a significant impact on the Group.The Group’s most material climate-related risks result from its lending to business and retail customers, including credit-related losses incurred as a result of a customer being unable or unwilling to repay debt, or events impacting the value and liquidity of collateral, which may adversely affect the Group’s Position. The risk to the Group from credit-related issues with the Group’s customers could result directly from climate-related events, and indirectly from changes to laws, regulations, or other policies such as carbon pricing and climate risk adaptation or mitigation policies, which may impact the customer’s supply chain.

Responsibility statement of the Directors of ANZBGL in accordance with Rule 4.1.12 (3)(b) of the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority

The Directors of Australia and New Zealand Banking Group Limited confirm to the best of their knowledge that: ANZ’s 2022 Annual Financial Report (as defined in this DTR Annual Financial Report) includes: (i) a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole; together with (ii) a description of the principal risks and uncertainties faced by the Group.

Signed in accordance with a resolution of the Directors.

Paul D O’Sullivan Shayne C Elliott
Chairman Managing Director

26 October 2022


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2021-09-30	ifrs-full:NoncontrollingInterestsMember	JHE42UYNWWTJB8YTTU19	2021-09-30
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Australia and New Zealand Banking Group Ltd. — Annual Report (ESEF) 2022

11 November 2022

DISCLOSURE AND TRANSPARENCY RULES – ANNUAL FINANCIAL REPORT SUBMISSION

ANZ 2022 ANNUAL REPORT

WE’RE CONTINUING TO SHAPE A WORLD WHERE PEOPLE AND COMMUNITIES THRIVE

Contents

ANZ 2022 Annual Report

Annual Report structure

Additional information

Our 2022 reporting suite

Integrated reporting

ANZ 2022 Annual Report | 2

ANZ 2022 ANNUAL REPORT

2022 performance snapshot

Chairman’s message

Non-Operating Holding Company

Board Renewal

5 Overview

CEO’s message

We are a safer bank

ANZ Plus

Shayne Elliott Chief Executive Officer

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

How we create value

Value drivers

Better financial outcomes for shareholders and staff

Better access to capital and talent, driving greater capacity to invest well

Better customer propositions that are purposeful, engaging, efficient and safe

Better financial wellbeing and sustainability outcomes for customers and the community

Better reputation among customers and the community, and higher workforce engagement

Better customer engagement, and greater use of our products and services

Better data, insights, risk decisions and pricing

Better acquisition and retention rates, and higher share of target customers

ANZ 2022 Annual Report

...creating value for our stakeholders

Shareholder value

Customer value

Employee value

Community value

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

What matters most to our stakeholders

Employee capability and wellbeing

Our operating environment

CHALLENGE

Rising ination and interest rates, and moderating credit growth

Increased competition

Increased public and regulatory scrutiny

Climate change and biodiversity loss

Geopolitical tension

Cyber-security threats

Overview

How we create value

Performance overview

Remuneration report

Directors’ report

Financial report

Shareholder information

About our business

Our divisions

Our purpose and strategy

Achieving our strategy

Our values

Supporting sustainable development

How we create value

Performance overview

Remuneration report

Directors’ report

Australia and New Zealand Banking Group Ltd. Annual Report (ESEF) 2022