Australia and New Zealand Banking Group Ltd. — Audit Report / Information 2016

Aug 8, 2016

BASEL III PILLAR 3 2016 DISCLOSURE AS AT 30 JUNE 2016 APS 330: PUBLIC DISCLOSURE

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Important notice

This document has been prepared by Australia and New Zealand Banking Group Limited (ANZ) to meet its disclosure obligations under the Australian Prudential Regulation Authority (APRA) ADI Prudential Standard (APS) 330: Public Disclosure.

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ANZ Basel III Pillar 3 disclosure

June 2016

Highlights

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Exposure at Default ($bn)
909 889 896
Dec-15 Mar-16 Jun-16
Standardised QCCP Specialised Lending
QRR & Other Retail Residential Mortgage Bank & Sovereign
Corporate
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EAD up $6.5bn to $896bn for 3Q16

• FX impact of +$15.8bn offset by underlying movement of -$9.3bn.

• Underlying movement driven by

• reduction in Corporate and Sovereign asset classes due to portfolio contraction in the Institutional business offset by growth in Residential Mortgages and QCCP asset classes.

*Exposure at Default is post Credit Risk Mitigation (CRM) and does not include Securitisation, Equities or Other Assets.

Movement in Credit Risk Weighted Assets ($bn)

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5.6 1.1 336.2
334.3
(4.8)
Mar-16 Growth FX Impact Other Jun-16
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Credit Risk Weighted Assets (CRWA) increased by $1.9bn quarter on quarter.

• FX movements increased CRWA by $5.6bn, mainly driven by depreciation of AUD against US and NZ currencies.

• Portfolio contraction decreased CRWA by $4.8bn, driven by a decrease in Institutional Corporate assets partially offset by an increase in Australia Residential Mortgages.

Impaired Assets ($m)

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2,632
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3,082
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3,136
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Impaired Assets up 1.9% quarter on quarter

• Impaired Assets increased by 1.9% QoQ due to small increase in Advanced Other Retail and Standardised asset classes.

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Dec-15 Mar-16 Jun-16
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June 2016

Table 3 Capital adequacy - Capital ratios and Risk Weighted Assets

		Jun 16	Mar 16	Dec 15
Risk weighted assets(RWA)		**$M **	**$M **	**$M **
Subject to Advanced Internal Rating Based (IRB) approach
Corporate		136,916	139,643	148,017
Sovereign		6,622	6,185	6,363
Bank		16,027	15,061	16,428
Residential Mortgage		58,600	57,218	56,479
Qualifying Revolving Retail		7,676	7,744	7,469
Other Retail		31,302	30,681	30,156
Credit risk weighted assets subject to Advanced IRB approach		257,143	256,532	264,912
Credit risk Specialised Lending exposures subject to slotting approach1		35,831	35,066	35,173
Subject to Standardised approach
Corporate		23,074	22,941	23,929
Residential Mortgage		2,606	2,616	2,765
Other Retail		3,402	3,550	3,638
Credit risk weighted assets subject to Standardised approach		29,082	29,107	30,332
Credit Valuation Adjustment and Qualifying Central Counterparties		9,078	8,355	8,723
Credit risk weighted assets relating to securitisation exposures		1,202	1,194	1,215
Other assets		3,876	4,054	3,735
Total credit risk weighted assets		336,212	334,308	344,090
Market risk weighted assets		6,312	6,059	5,903
Operational risk weighted assets		37,737	37,688	37,849
Interest rate risk in the bankingbook (IRRBB) risk weighted assets		11,468	10,280	9,457
Total risk weighted assets		391,729	388,335	397,299
Capital ratios(%)
Level 2 Common Equity Tier 1 capital ratio		9.7%	9.8%	9.4%
Level 2 Tier 1 capital ratio		11.8%	11.6%	11.2%
Level 2 Total capital ratio		14.4%	13.7%	13.3%

Credit Risk Weighted Assets (CRWA)

Total CRWA increased $1.9 billion (0.6%) from March 2016 to $336.2 billion at June 2016. This included a $5.6 billion increase due to foreign currency movements, combined with portfolio growth of $1.0 billion predominantly in the Australia IRB Residential Mortgage asset class. This growth was offset by a $4.7 billion portfolio contraction in Institutional business, mainly in the AIRB Corporate asset class.

Market Risk, Operational Risk and IRRBB Risk Weighted Assets (RWA)

Increase in IRRBB RWA over the quarter was due to an increase in repricing and yield curve risk. Traded Market Risk RWA increased 4% over the quarter moving from $6.1 billion to $6.3 billion. The Operational Risk RWA remained relatively unchanged since March 2016 reflecting minimal change in the ANZ operational risk profile.

1 Specialised Lending exposures subject to supervisory slotting approach are those where the main servicing and repayment is from the asset being financed, and includes specified commercial property development/investment lending and project finance.

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June 2016

Table 4 Credit risk exposures

In order to provide better alignment to the prudential reporting of other IRB accredited ADIs, ANZ has changed the reporting of exposure at default (EAD) from a pre credit risk mitigation basis to post credit risk mitigation basis.

Exposure at Default in Table 4 represents credit exposure net of offsets for credit risk mitigation such as guarantees, credit derivatives, netting and financial collateral. It includes Advanced IRB, Specialised Lending and Standardised exposures, however does not include Securitisation, Equities or Other Assets exposures.

The March 2016 and December 2015 EAD values have been restated to provide comparative post credit risk mitigation basis EAD figures for the past 6 months.

Table 4(a) part (i): Period end and average Exposure at Default[2]

				Jun 16
				Average	Individual
				Exposure	provision
		Risk Weighted	Exposure	at Default for	charge for	Write-offs for
		Assets	at Default	three months	three months	three months
**Advanced IRBapproach **		$M	$M	$M	$M	$M
Corporate		136,916	234,943	237,982	211	192
Sovereign		6,622	117,018	117,618	-	2
Bank		16,027	50,947	50,037	-	-
Residential Mortgage		58,600	345,176	341,245	10	10
Qualifying Revolving Retail		7,676	22,570	22,494	55	72
Other Retail		31,302	41,910	41,427	130	134
Total Advanced IRB approach		257,143	812,564	810,803	406	410
Specialised Lending		35,831	40,391	39,899	(1)	2
Standardised approach
Corporate		23,074	22,651	22,571	1	3
Residential Mortgage		2,606	7,153	7,168	1	1
Other Retail		3,402	3,404	3,480	41	48
Total Standardised approach		29,082	33,208	33,219	43	52
	Credit Valuation Adjustment and Qualifying Central Counterparties	9,078	9,733	8,713	-	-
Total		331,134	895,896	892,634	448	464

2 Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each three month period.

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June 2016

	Mar 16
Advanced IRB approach Risk Weighted Assets $M Exposure at Default $M	Average Exposure at Default for three months $M Individual provision charge for three months $M Write-offs for three months $M
Corporate 139,643 241,020	246,384 338 65
Sovereign 6,185 118,219	122,106 - -
Bank 15,061 49,127	50,927 - -
Residential Mortgage 57,218 337,314	335,847 7 7
Qualifying Revolving Retail 7,744 22,417	22,303 45 61
Other Retail 30,681 40,943	40,905 129 116
Total Advanced IRB approach 256,532 809,040	818,472 519 249
Specialised Lending 35,066 39,407	39,465 13 4
Standardised approach
Corporate 22,941 22,491	23,154 2 1
Residential Mortgage 2,616 7,182	7,351 (2) 3
Other Retail 3,550 3,556	3,601 41 56
Total Standardised approach 29,107 33,229	34,106 41 60
Credit Valuation Adjustment and Qualifying Central Counterparties 8,355 7,693	7,259 - -
Total 329,060 889,369	899,302 573 313

	Dec 15
Advanced IRBapproach Risk Weighted Assets $M Exposure at Default $M	Average Exposure at Default for three months $M Individual provision charge for three months $M Write-offs for three months $M
Corporate 148,017 251,747	253,687 100 79
Sovereign 6,363 125,994	122,597 2 -
Bank 16,428 52,728	53,502 - -
Residential Mortgage 56,479 334,380	328,777 3 9
Qualifying Revolving Retail 7,469 22,188	22,138 51 69
Other Retail 30,156 40,866	43,608 129 134
Total Advanced IRB approach 264,912 827,903	824,309 285 291
Specialised Lending 35,173 39,523	38,616 (7) 2
Standardised approach
Corporate 23,929 23,816	24,975 - 1
Residential Mortgage 2,765 7,520	7,665 - 1
Other Retail 3,638 3,645	3,640 41 48
Total Standardised approach 30,332 34,981	36,280 41 50
Credit Valuation Adjustment and Qualifying Central Counterparties 8,723 6,825	6,919 - -
Total 339,140 909,232	906,124 319 343

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June 2016

Table 4(a) part (ii): Exposure at Default by portfolio type[3]

					Average for the
		Jun 16	Mar 16	Dec 15	quarter ended
		$M	$M	$M	Jun 16
Portfolio Type					$M
Cash		24,341	31,759	20,542	28,050
Contingents liabilities, commitments, and other off-balance sheet exposures		156,442	160,920	166,936	158,681
Derivatives		41,884	39,263	40,640	40,573
Settlement Balances		20,736	20,026	41,568	20,381
Investment Securities		54,401	43,579	42,072	48,990
Net Loans, Advances & Acceptances		564,373	557,810	563,978	561,092
Other assets		4,327	5,405	2,538	4,866
Trading Securities		29,392	30,607	30,958	29,999
Total exposures		895,896	889,369	909,232	892,632

3 Average Exposure at Default for quarter is calculated as the simple average of the balances at the start and the end of each three month period.

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ANZ Basel III Pillar 3 disclosure

June 2016

Table 4(b): Impaired asset[4][5] , Past due loans[6] , Provisions and Write-offs

				Jun	16
						Individual
			Impaired	Past due	Individual	provision	Write-offs
		Impaired	loans/	loans ≥ 90	provision	charge for	for three
		derivatives	facilities	days	balance	three months	months
		$M	$M	$M	$M	$M	$M
Portfolios subject to Advanced IRB approach
Corporate		14	1,905	214	853	211	192
Sovereign		-	-	-	4	-	2
Bank		-	-	12	-	-	-
Residential Mortgage		-	211	1,992	78	10	10
Qualifying Revolving Retail		-	96	-	-	55	72
Other Retail		-	517	289	280	130	134
Total Advanced IRB approach		14	2,729	2,507	1,215	406	410
Specialised Lending		-	68	27	36	(1)	2
Portfolios subject to Standardised approach
Corporate		-	62	14	20	1	3
Residential Mortgage		-	33	10	12	1	1
Other Retail		-	230	7	(3)	41	48
Total Standardised approach		-	325	31	29	43	52
Qualifying Central Counterparties		-	-	-	-	-	-
Total		14	3,122	2,565	1,280	448	464

4 Impaired derivatives are net of credit value adjustment (CVA) of $72 million, being a market value based assessment of the credit risk of the relevant counterparties (March 2016: $63 million; December 2015: $64 million).

5 Impaired loans / facilities include restructured items of $251 million for customer 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 (March 2016: $226 million; December 2015: $211 million).

6 For regulatory reporting not well secured portfolio managed retail exposures have been reclassified from past due loans > 90 days to impaired loans / facilities

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June 2016

			Mar	16
					Individual
		Impaired	Past due	Individual	provision	Write-offs
	Impaired	loans/	loans ≥ 90	provision	charge for	for three
	derivatives	facilities	days	balance	three months	months
	$M	$M	$M	$M	$M	$M
Portfolios subject to Advanced IRB approach
Corporate	19	1,903	226	822	338	65
Sovereign	-	2	2	6	-	-
Bank	-	-	-	-	-	-
Residential Mortgage	-	212	1,815	77	7	7
Qualifying Revolving Retail	-	95	-	-	45	61
Other Retail	-	490	270	265	129	116
Total Advanced IRB approach	19	2,702	2,313	1,170	519	249
Specialised Lending	-	73	24	38	13	4
Portfolios subject to Standardised approach
Corporate	-	43	25	25	2	1
Residential Mortgage	-	32	5	11	(2)	3
Other Retail	-	213	8	(6)	41	56
Total Standardised approach	-	288	38	30	41	60
Qualifying Central Counterparties	-	-	-	-	-	-
Total	19	3,063	2,375	1,238	573	313
			Dec	15
					Individual
		Impaired	Past due	Individual	provision	Write-offs
	Impaired	loans/	loans ≥ 90	provision	charge for	for three
	Derivatives	facilities	days	balance	three months	months
	$M	$M	$M	$M	$M	$M
Portfolios subject to Advanced IRB	approach
Corporate	12	1,397	208	585	100	79
Sovereign	-	1	-	6	2	-
Bank	-	-	-	-	-	-
Residential Mortgage	-	218	1,592	81	3	9
Qualifying Revolving Retail	-	81	-	-	51	69
Other Retail	-	447	288	242	129	134
Total Advanced IRB approach	12	2,144	2,088	914	285	291
Specialised Lending	35	146	24	35	(7)	2
Portfolios subject to Standardised approach
Corporate	-	59	42	21	-	1
Residential Mortgage	-	38	9	13	-	1
Other Retail	-	198	5	3	41	48
Total Standardised approach	-	295	56	37	41	50
Qualifying Central Counterparties	-	-	-	-	-	-
Total	47	2,585	2,168	986	319	343

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June 2016

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses[7]

			Jun 16
		Specific Provision	General Reserve
		Balance	for Credit Losses	Total
		$M	$M	$M
Collective Provision		353	2,580	2,933
Individual Provision		1,280	-	1,280
Total Provision for Credit Impairment		1,633	2,580	4,213
			Mar 16
		Specific Provision	General Reserve
		Balance	for Credit Losses	Total
		$M	$M	$M
Collective Provision		313	2,549	2,862
Individual Provision		1,238	-	1,238
Total Provision for Credit Impairment		1,551	2,549	4,100
			Dec 15
		Specific Provision	General Reserve
		Balance	for Credit Losses	Total
		$M	$M	$M
Collective Provision		308	2,611	2,919
Individual Provision		986	-	986
Total Provision for Credit Impairment		1,294	2,611	3,905

7 Due to definitional differences, there is a variation in the split between ANZ’s Individual Provision and Collective Provision for accounting purposes and the Specific Provision and General Reserve for Credit Losses (GRCL) for regulatory purposes. This does not impact total provisions, and essentially relates to the classification of collectively assessed provisions on defaulted accounts. The disclosures in this document are based on Individual Provision and Collective Provision, for ease of comparison with other published results.

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June 2016

Table 5 Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset type and facility[8]

type and facility8
			Jun 16
			Original value securitised
Securitisation activity by underlying asset type		ANZ Originated $M	ANZ Self Securitised $M	ANZ Sponsored $M	Recognized gain or loss on sale $M
Residential mortgage		-	727	-	-
Credit cards and other personal loans		-	-	-	-
Auto and equipment finance		-	-	-	-
Commercial loans		-	-	-	-
Other		-	-	-	-
Total		-	727	- -
Securitisation activity by facility provided					Notional amount $M
Liquidity facilities		-	-	-	-
Funding facilities		-	-	-	105
Underwriting facilities		-	-	-	-
Lending facilities		-	-	-	-
Credit enhancements		-	-	-	-
Holdings of securities (excluding trading book)		-	-	-	(78)
Other		-	-	-	7
Total		-	-	-	34

Mar 16
Original value securitised
Securitisation activity by underlying asset type ANZ Originated $M ANZ Self Securitised $M ANZ Sponsored $M	Recognised gain or loss on sale $M
Residential mortgage - 451 -	-
Credit cards and other personal loans - - -	-
Auto and equipment finance - - -	-
Commercial loans - - -	-
Other - - -	-
Total - 451 -	-
Securitisation activity by facility provided	Notional amount $M
Liquidity facilities - - -	-
Funding facilities - - -	-
Underwriting facilities - - -	-
Lending facilities - - -	-
Credit enhancements - - -	-
Holdings of securities (excluding trading book) - - -	(186)
Other - - -	49
Total - - -	(137)

8 Activity represents net movement in outstandings.

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Dec 15
Original value securitised
Securitisation activity by underlying asset type ANZ Originated $M ANZ Self Securitised $M ANZ Sponsored $M	Recognised gain or loss on sale $M
Residential mortgage - (36) -	-
Credit cards and other personal loans - - -	-
Auto and equipment finance - - -	-
Commercial loans - - -	-
Other - - -	-
Total - (36) -	-
Securitisation activity by facility provided	Notional amount $M
Liquidity facilities - - -	-
Funding facilities - - -	-
Underwriting facilities - - -	-
Lending facilities - - -	-
Credit enhancements - - -	-
Holdings of securities (excluding trading book) - - -	142
Other - - -	11
Total - - -	154

Table 5(a) part (ii): Trading Book - Summary of current period's activity by underlying asset type and facility

No assets from ANZ's Trading Book were securitised during the reporting period.

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Table 5(b) part (i): Banking Book – Exposure at Default by exposure type

		Jun 16	Mar 16	Dec 15
Securitisation exposure type -On balance sheet		**$M **	**$M **	**$M **
Liquidity facilities		5	5	5
Funding facilities		6,256	6,100	5,841
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities (excluding trading book)		4,812	4,890	5,219
Protection provided		-	-	-
Other		166	170	161
Total		11,239	11,165	11,226
		Jun 16	Mar 16	Dec 15
Securitisation exposure type -Off Balance Sheet		**$M **	**$M **	**$M **
Liquidity facilities		64	62	72
Funding facilities		-	-	-
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities (excluding trading book)		-	-	-
Protection provided		-	-	-
Other		-	-	-
Total		64	62	72
		Jun 16	Mar 16	Dec 15
Total Securitisation exposure type		**$M **	**$M **	**$M **
Liquidity facilities		69	67	77
Funding facilities		6,256	6,100	5,841
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities (excluding trading book)		4,812	4,890	5,219
Protection provided		-	-	-
Other		166	170	161
Total		11,303	11,227	11,298

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Table 5(b) part (ii): Trading Book - Exposure at Default by exposure type

		Jun 16	Mar 16	Dec 15
Securitisation exposure type - On balance sheet		**$M **	**$M **	**$M **
Liquidity facilities		-	-	-
Funding facilities		-	-	-
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities		2	-	16
Protection provided		-	-	-
Other		-	-	-
Total		2	-	16

		Jun 16	Mar 16	Dec 15
Securitisation exposure type - Off Balance Sheet		**$M **	**$M **	**$M **
Liquidity facilities		-	-	-
Funding facilities		-	-	-
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities		-	-	-
Protection provided		-	-	-
Other		-	-	-
Total		-	-	-

		Jun 16	Mar 16	Dec 15
**Total Securitisation exposure type **		**$M **	**$M **	**$M **
Liquidity facilities		-	-	-
Funding facilities		-	-	-
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities		2	-	16
Protection provided		-	-	-
Other		-	-	-
Total		2	-	16

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Table 18 Leverage ratio

The Leverage Ratio requirements are part of the Basel Committee on Banking Supervision (BCBS) Basel III capital framework. It is a simple, non-risk based supplement or backstop to the current risk based capital requirements and is intended to restrict the build-up of excessive leverage in the banking system.

Consistent with the BCBS definition, APRA’s Leverage Ratio compares Tier 1 Capital to the Exposure Measure (expressed as a percentage) as defined by APS 110: Capital Adequacy. APRA has not finalised a minimum Leverage Ratio requirement for Australian ADIs, although the current BCBS proposal is for a minimum of 3%. Currently the Leverage Ratio is only a disclosure requirement. APRA intends to consult on the appropriate application of the Leverage Ratio as a minimum requirement for Australian ADIs once BCBS finalises its calibration for implementation as a Pillar 1 requirement by January 2018.

The following information is the short form data disclosure required to be published under paragraph 47 of APS 330

		Jun 16	Mar 16	Dec 15	Sep 15
Capital and total exposures		$M	$M	$M	$M
20	Tier 1 capital	46,356	45,062	44,364	45,484
21	Total exposures	909,177	888,850	908,186	896,985
Leverage ratio
22	Basel III leverage ratio	5.1%	5.1%	4.9%	5.1%

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Glossary

ADI Authorised Deposit-taking Institution. Basel III Credit Valuation CVA charge is an additional capital requirement under Basel III Adjustment (CVA) capital charge for bilateral derivative exposures. Derivatives not cleared through a central exchange/counterparty are subject to this additional capital charge and also receive normal CRWA treatment under Basel II principles. Collective provision (CP) Collective provision is the provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision may only be recognised when a loss event has already occurred. Losses expected as a result of future events, no matter how likely, are not recognised. Credit exposure The aggregate of all claims, commitments and contingent liabilities arising from on- and off-balance sheet transactions (in the banking book and trading book) with the counterparty or group of related counterparties. Credit risk The risk of financial loss resulting from the failure of ANZ’s customers and counterparties to honour or perform fully the terms of a loan or contract. Credit Valuation Adjustment (CVA) Over the life of a derivative instrument, ANZ uses a CVA model to adjust fair value to take into account the impact of counterparty credit quality. The methodology calculates the present value of expected losses over the life of the financial instrument as a function of probability of default, loss given default, expected credit risk exposure and an asset correlation factor. Impaired derivatives are also subject to a CVA. Days past due The number of days a credit obligation is overdue, commencing on the date that the arrears or excess occurs and accruing for each completed calendar day thereafter. Exposure at Default (EAD) Exposure At Default is defined as the expected facility exposure at the date of default. Impaired assets (IA) Facilities are classified as impaired when there is doubt as to whether the contractual amounts due, including interest and other payments, will be met in a timely manner. Impaired assets include impaired facilities, and impaired derivatives. Impaired derivatives have a credit valuation adjustment (CVA), which is a market assessment of the credit risk of the relevant counterparties. Impaired loans (IL) Impaired loans comprise of drawn facilities where the customer’s status is defined as impaired. Individual provision charge (IPC) Impaired provision charge is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments. Individual provisions (IP) Individual provisions are assessed on a case-by-case basis for all individually managed impaired assets taking into consideration factors such as the realisable value of security (or other credit mitigants), the likely return available upon liquidation or bankruptcy, legal uncertainties, estimated costs involved in recovery, the market price of the exposure in secondary markets and the amount and timing of expected receipts and recoveries.

Internationally Comparable Basel The Internationally Comparable Basel 3 CET1 ratio incorporates III Capital differences between APRA and both the Basel Committee Basel III framework (including differences identified in the March 2014 Basel Committee Regulatory Consistency Assessment Programme (RCAP) on Basel III implementation in Australia) and its application in major offshore jurisdictions.

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ANZ Basel III Pillar 3 disclosure

June 2016

Market risk The risk to ANZ’s earnings arising from changes in interest rates, currency exchange rates and credit spreads, or from fluctuations in bond, commodity or equity prices. ANZ has grouped market risk into two broad categories to facilitate the measurement, reporting and control of market risk: Traded market risk - the risk of loss from changes in the value of financial instruments due to movements in price factors for physical and derivative trading positions. Trading positions arise from transactions where ANZ acts as principal with clients or with the market. Non-traded market risk (or balance sheet risk) - comprises interest rate risk in the banking book and the risk to the AUD denominated value of ANZ’s capital and earnings due to foreign exchange rate movements. Operational risk The risk of loss resulting from inadequate or failed internal controls or from external events, including legal risk but excluding reputation risk. Past due facilities Facilities where a contractual payment has not been met or the customer is outside of contractual arrangements are deemed past due. Past due facilities include those operating in excess of approved arrangements or where scheduled repayments are outstanding but do not include impaired assets. Qualifying Central Counterparties QCCP is a central counterparty which is an entity that interposes (QCCP) itself between counterparties to derivative contracts. Trades with QCCP attract a more favorable risk weight calculation. Recoveries Payments received and taken to profit for the current period for the amounts written off in prior financial periods. Restructured items Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk. Risk Weighted Assets (RWA) Assets (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default and what the likely losses would be in the case of default. In the case of non asset backed risks (i.e. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5. Securitisation risk The risk of credit related losses greater than expected due to a securitisation failing to operate as anticipated, or of the values and risks accepted or transferred, not emerging as expected. Write-Offs Facilities are written off against the related provision for impairment when they are assessed as partially or fully uncollectable, and after proceeds from the realisation of any collateral have been received. Where individual provisions recognised in previous periods have subsequently decreased or are no longer required, such impairment losses are reversed in the current period income statement.

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ANZ Basel III Pillar 3 disclosure

June 2016

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ANZ Basel III Pillar 3 disclosure

June 2016

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