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

Feb 16, 2016

BASEL III PILLAR 3 2015 DISCLOSURE

AS AT 31 DECEMBER 2015 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.

This disclosure was prepared as at 31 December 2015. ANZ has a continuous disclosure policy, under which ANZ will immediately notify the market of any material price sensitive information concerning the Group, in accordance with legislative and regulatory disclosure requirements.

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ANZ Basel III Pillar 3 disclosure

December 2015

Table 3 Capital adequacy - Capital ratios and Risk Weighted Assets

		Dec-15	Sep-15	Jun-15
Risk weighted assets(RWA)		**$M **	**$M **	**$M **
Subject to Advanced Internal Rating Based (IRB) approach
Corporate		148,017	150,165	142,900
Sovereign		6,363	6,664	6,453
Bank		16,428	17,445	18,831
Residential Mortgage		56,479	54,996	53,474
Qualifying Revolving Retail		7,469	7,546	7,846
Other Retail		30,156	32,990	31,429
Credit risk weighted assets subject to Advanced IRB approach		264,912	269,806	260,933
Credit risk Specialised Lending exposures subject to slotting approach1		35,173	32,240	31,364
Subject to Standardised approach
Corporate		23,929	26,217	25,206
Residential Mortgage		2,765	2,882	2,645
Other Retail		3,638	3,625	3,345
Credit risk weighted assets subject to Standardised approach		30,332	32,724	31,196
Credit Valuation Adjustment and Qualifying Central Counterparties		8,723	10,170	8,854
Credit risk weighted assets relating to securitisation exposures		1,215	1,156	1,072
Other assets		3,735	3,655	3,761
Total credit risk weighted assets		344,090	349,751	337,180
Market risk weighted assets		5,903	6,868	6,874
Operational risk weighted assets		37,849	37,885	32,894
Interest rate risk in the bankingbook (IRRBB) risk weighted assets		9,457	7,433	7,010
Total risk weighted assets		397,299	401,937	383,958
Capital ratios(%)
Level 2 Common Equity Tier 1 capital ratio		9.4%	9.6%	8.6%
Level 2 Tier 1 capital ratio		11.2%	11.3%	10.5%
Level 2 Total capital ratio		13.3%	13.3%	12.5%

Credit Risk Weighted Assets (CRWA)

Total CRWA at December 2015 was $344.1 billion, a decrease of $5.7 billion (1.6%) from September 2015. This included a $2.3 billion decrease due to foreign currency movements, a reduction in IRB Other Retail, mainly driven by the sale of Esanda business assets, and a reduction in exposure for the Institutional business. These were partially offset by portfolio growth in Australia and New Zealand business in the IRB Residential Mortgage and Specialised Lending asset classes, together with a revised risk treatment being applied in the Specialised Lending asset class which increased the Specialised Lending RWA.

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

The 14% decrease in Traded Market Risk RWA was primarily the result of increased diversification in the trading book and a reduction in general market risk held over the quarter.

The Operational Risk RWA remained relatively unchanged since September 2015 reflecting minimal change in the ANZ operational risk profile.

IRRBB RWA increased $2.02b mainly due to realisation of prior embedded gains.

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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ANZ Basel III Pillar 3 disclosure

December 2015

Table 4 Credit risk exposures

Exposure at Default in Table 4 represents gross credit exposure without 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.

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

				Dec 15
				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 IRB approach		$M	$M	$M	$M	$M
Corporate		148,017	274,768	275,642	92	79
Sovereign		6,363	141,718	134,534	2	-
Bank		16,428	111,932	113,915	-	-
Residential Mortgage		56,479	334,380	328,777	4	9
Qualifying Revolving Retail		7,469	22,188	22,138	51	69
Other Retail		30,156	40,866	43,608	129	133
Total Advanced IRB approach		264,912	925,852	918,614	278	290
Specialised Lending		35,173	39,577	38,665	-	2
Standardised approach
Corporate		23,929	27,695	29,030	-	1
Residential Mortgage		2,765	7,536	7,683	-	1
Other Retail		3,638	3,645	3,641	41	48
Total Standardised approach		30,332	38,876	40,354	41	50
Credit Valuation Adjustment and Qualifying Central Counterparties		8,723	29,611	31,433	-	-
Total		339,140	1,033,916	1,029,066	319	342

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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ANZ Basel III Pillar 3 disclosure

December 2015

	Sep 15
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 150,165 276,516	273,182 148 135
Sovereign 6,664 127,349	124,471 (2) -
Bank 17,445 115,898	112,356 - -
Residential Mortgage 54,996 323,174	317,664 2 8
Qualifying Revolving Retail 7,546 22,088	22,151 49 71
Other Retail 32,990 46,351	45,929 142 138
Total Advanced IRB approach 269,806 911,376	895,753 339 352
Specialised Lending 32,240 37,754	37,496 (19) 51
Standardised approach
Corporate 26,217 30,365	29,656 5 6
Residential Mortgage 2,882 7,829	7,616 - 2
Other Retail 3,625 3,636	3,497 36 45
Total Standardised approach 32,724 41,830	40,769 41 53
Credit Valuation Adjustment and Qualifying Central Counterparties 10,170 33,255	28,903 - -
Total 344,940 1,024,215	1,002,921 361 456

	Jun 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 142,900 269,847	270,707 56 62
Sovereign 6,453 121,593	117,288 - -
Bank 18,831 108,814	115,704 - -
Residential Mortgage 53,474 312,154	311,477 7 9
Qualifying Revolving Retail 7,846 22,214	22,074 53 74
Other Retail 31,429 45,508	45,814 137 134
Total Advanced IRB approach 260,933 880,130	883,064 253 279
Specialised Lending 31,364 37,239	37,382 4 10
Standardised approach
Corporate 25,206 28,947	29,574 5 28
Residential Mortgage 2,645 7,402	7,346 - 2
Other Retail 3,345 3,357	3,320 32 40
Total Standardised approach 31,196 39,706	40,240 37 70
Credit Valuation Adjustment and Qualifying Central Counterparties 8,854 24,552	25,420 - -
Total 332,347 981,627	986,106 294 359

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ANZ Basel III Pillar 3 disclosure

December 2015

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

				Average for the
	Dec-15	Sep-15	Jun-15	quarter ended
	$M	$M	$M	Dec-15
Portfolio Type				$M
Cash	41,644	29,176	33,985	35,410
Contingents liabilities, commitments, and other off-balance sheet exposures	166,935	162,535	160,641	164,735
Derivatives	124,458	141,641	114,225	133,050
Settlement Balances	41,568	39,216	34,615	40,392
Investment Securities	42,072	37,811	34,440	39,941
Net Loans, Advances & Acceptances4	570,538	565,448	550,601	567,993
Other assets	15,743	12,114	17,739	13,929
Trading Securities	30,958	36,274	35,381	33,616
Total exposures	1,033,916	1,024,215	981,627	1,029,066

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.

4 Includes loans reclassified as held for sale for accounting purposes.

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ANZ Basel III Pillar 3 disclosure

December 2015

Table 4(b): Impaired asset[5][6] , Past due loans[7][8] , Provisions and Write-offs

					Dec 15	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 Retail9			-	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

5 Impaired derivatives are net of credit value adjustment (CVA) of $64 million, being a market value based assessment of the credit risk of the relevant counterparties (September 2015: $69 million; June 2015: $64 million).

6 Impaired loans / facilities include restructured items of $211 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 (September 2015: $184 million; June 2015: $270 million).

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

8 Quarter on quarter residential mortgage delinquency rate has decreased with past due loans ≥ 90 days as percentage of Exposure at Default of: December 2015 0.47%, September 2015 0.48% and June 2015 0.50%.

9 Quarter on quarter decreases in Other Retail impairments and individual provisions is partly due to the sale of Esanda assets.

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ANZ Basel III Pillar 3 disclosure

December 2015

			**Sep **	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	9	1,487	202	575	148	135
Sovereign	-	2	-	4	(2)	-
Bank	-	-	-	-	-	-
Residential Mortgage	-	240	1,570	86	2	8
Qualifying Revolving Retail	-	88	-	-	49	71
Other Retail	-	599	306	317	142	138
Total Advanced IRB approach	9	2,416	2,078	982	339	352
Specialised Lending	28	159	62	40	(19)	51
Portfolios subject to Standardised approach
Corporate	-	73	40	23	5	6
Residential Mortgage	-	37	12	14	-	2
Other Retail	-	177	7	2	36	45
Total Standardised approach	-	287	59	39	41	53
Qualifying Central Counterparties	-	-	-	-	-	-
Total	37	2,862	2,199	1,061	361	456
			Jun	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	-	1,363	254	543	56	62
Sovereign	-	2	-	4	-	-
Bank	-	-	-	-	-	-
Residential Mortgage	-	263	1,577	91	7	9
Qualifying Revolving Retail	-	96	-	-	53	74
Other Retail	-	597	327	323	137	134
Total Advanced IRB approach	-	2,321	2,158	961	253	279
Specialised Lending	23	378	47	86	4	10
Portfolios subject to Standardised approach
Corporate	-	70	49	21	5	28
Residential Mortgage	-	37	14	13	-	2
Other Retail	-	164	7	2	32	40
Total Standardised approach	-	271	70	36	37	70
Qualifying Central Counterparties	-	-	-	-	-	-
Total	23	2,970	2,275	1,083	294	359

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ANZ Basel III Pillar 3 disclosure

December 2015

Table 4(c): Specific Provision Balance and General Reserve for Credit Losses[10]

			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
			Sep 15
		Specific Provision	General Reserve
		Balance	for Credit Losses	Total
		$M	$M	$M
Collective Provision		334	2,622	2,956
Individual Provision		1,061	-	1,061
Total Provision for Credit Impairment		1,395	2,622	4,017
			Jun 15
		Specific Provision	General Reserve
		Balance	for Credit Losses	Total
		$M	$M	$M
Collective Provision		331	2,606	2,937
Individual Provision		1,083	-	1,083
Total Provision for Credit Impairment		1,414	2,606	4,020

10 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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ANZ Basel III Pillar 3 disclosure

December 2015

Table 5 Securitisation

Table 5(a) part (i): Banking Book - Summary of current period’s activity by underlying asset type and facility[11]

type and facility11
			Dec-15
			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		-	(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

Sep-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 - 5,778 -	-
Credit cards and other personal loans - - -	-
Auto and equipment finance - - -	-
Commercial loans - - -	-
Other - - -	-
Total - 5,778 -	-
Securitisation activity by facility provided	Notional amount $M
Liquidity facilities - - -	-
Funding facilities - - -	329
Underwriting facilities - - -	-
Lending facilities - - -	-
Credit enhancements - - -	-
Holdings of securities (excluding trading book) - - -	240
Other - - -	4
Total - - -	573

11 Activity represents net movement in outstandings.

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ANZ Basel III Pillar 3 disclosure

December 2015

Jun-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 - (494) -	-
Credit cards and other personal loans - - -	-
Auto and equipment finance - - -	-
Commercial loans - - -	-
Other - - -	-
Total - (494) -	-
Securitisation activity by facility provided	Notional amount $M
Liquidity facilities - - -	-
Funding facilities - - -	47
Underwriting facilities - - -	-
Lending facilities - - -	-
Credit enhancements - - -	-
Holdings of securities (excluding trading book) - - -	9
Other - - -	-
Total - - -	56

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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ANZ Basel III Pillar 3 disclosure

December 2015

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

Securitisation exposure type -On balance sheet	Securitisation exposure type -On balance sheet		Dec-15 **$M **		Sep15 **$M **		Jun-15 **$M **
Liquidity facilities			5		5		5
Funding facilities			5,841		5,593		4,991
Underwriting facilities			-		-		-
Lending facilities			-		-		-
Credit enhancements			-		-		-
Holdings of securities (excluding trading book)			5,219		5,076		4,846
Protection provided			-		-		-
Other			161		168		264
Total			11,226		10,842		10,106
Securitisation exposure type -Off Balance Sheet			Dec-15 **$M **		Sep15 **$M **		Jun-15 **$M **
Liquidity facilities			72		66		70
Funding facilities			-		-		-
Underwriting facilities			-		-		-
Lending facilities			-		-		-
Credit enhancements			-		-		-
Holdings of securities (excluding trading book)			-		-		-
Protection provided			-		-		-
Other			-		-		-
Total			72		66		70
Total Securitisation exposure type			Dec-15 **$M **	Sep15 $M Jun-15 **$M **
Liquidity facilities			77	71 75
Funding facilities			5,841	5,593 4,991
Underwriting facilities			-	- -
Lending facilities			-	- -
Credit enhancements			-	- -
Holdings of securities (excluding trading book)			5,219	5,076 4,846
Protection provided			-	- -
Other			161	168 264
Total			11,298	10,908 10,176

		Dec-15	Sep15	Jun-15
Total Securitisation exposure type		**$M **	**$M **	**$M **
Liquidity facilities		77	71	75
Funding facilities		5,841	5,593	4,991
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities (excluding trading book)		5,219	5,076	4,846
Protection provided		-	-	-
Other		161	168	264
Total		11,298	10,908	10,176

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ANZ Basel III Pillar 3 disclosure

December 2015

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

		Dec15	Sep-15	Jun-15
Securitisation exposure type - On balance sheet		**$M **	**$M **	**$M **
Liquidity facilities		-	-	-
Funding facilities		-	-	-
Underwriting facilities		-	-	-
Lending facilities		-	-	-
Credit enhancements		-	-	-
Holdings of securities		16	-	-
Protection provided		-	-	-
Other		-	-	-
Total		-	-	-

Securitisation exposure type - On balance sheet	Securitisation exposure type - On balance sheet	Securitisation exposure type - On balance sheet	Dec15 **$M **		Sep-15 **$M **	Jun-15 **$M **
Liquidity facilities			-		-	-
Funding facilities			-		-	-
Underwriting facilities			-		-	-
Lending facilities			-		-	-
Credit enhancements			-		-	-
Holdings of securities			16		-	-
Protection provided			-		-	-
Other			-		-	-
Total			-		-	-
Securitisation exposure type - Off Balance Sheet			Dec15 **$M **	Sep-15 $M Jun-15 **$M **
Liquidity facilities			-	- -
Funding facilities			-	- -
Underwriting facilities			-	- -
Lending facilities			-	- -
Credit enhancements			-	- -
Holdings of securities			-	- -
Protection provided			-	- -
Other			-	- -
Total			-	- -
**Total Securitisation exposure type **			Dec15 **$M **	Sep-15 $M Jun-15 **$M **
Liquidity facilities			-	- -
Funding facilities			-	- -
Underwriting facilities			-	- -
Lending facilities			-	- -
Credit enhancements			-	- -
Holdings of securities			16	- -
Protection provided			-	- -
Other			-	- -
Total			16	- -

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ANZ Basel III Pillar 3 disclosure

December 2015

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. 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.

		Dec-15	Sep-15
Capital and total exposures		**$M **	**$M **
20	Tier 1 capital	44,364	45,484
21	Total exposures	908,186	896,985
Leverage ratio
22	Basel III leverage ratio	4.9%	5.1%

The leverage ratio at 31 December 2015 was 4.9%, down 19 basis points over the quarter. This movement is largely due to the payment of the 2015 final dividend (-28bps) and balance sheet growth, partially offset by retained earnings.

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ANZ Basel III Pillar 3 disclosure

December 2015

Glossary

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. Expected loss (EL) Expected loss is determined based on the expected average annual loss of principal over the economic cycle for the current risk profile of the lending portfolio. Impaired assets (IA) Facilities are classified as impaired when there is doubt as to whether the contractual amounts due, including interest and other payments, will be met in a timely manner. Impaired assets include impaired facilities, and impaired derivatives. Impaired derivatives have a credit valuation adjustment (CVA), which is a market assessment of the credit risk of the relevant counterparties. Impaired loans (IL) Impaired loans comprise of drawn facilities where the customer’s status is defined as impaired. Individual provision charge (IPC) Individual provision charge is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flows over the lives of those financial instruments. 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.

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ANZ Basel III Pillar 3 disclosure

December 2015

Loss Given Default (LGD)	Loss Given Default is an estimate of the potential economic loss
	on a credit exposure, incurred as a consequence of obligor
	default and expressed as a percentage of the facility’s EAD.
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.
Probability of Default (PD)	Probability of Default is an estimate of the level of the risk of
	borrower default.
Qualifying Central Counterparties	QCCP is a central counterparty which is an entity that
(QCCP)	interposes itself between counterparties to derivative contracts.
	Trades with QCCP attract a more favorable risk weight
	calculation.
Recoveries	Payments received and taken to profit for the current period for
	the amounts written off in prior financial periods.
Regulatory Expected Loss	Regulatory Expected Loss is a measure of expected credit
	losses at the start of the year.
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 which are weighted for credit risk according to a set
	formula (APS 112/113).
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.
Slotting	Exposures where repayment is dependent on funds generated
	by the asset financed and with little/no recourse to any
	alternative source.
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

December 2015

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ANZ Basel III Pillar 3 disclosure

December 2015

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