Australia and New Zealand Banking Group Ltd. - Interim / Quarterly Report 2011

2011 BASEL II PILLAR 3 DISCLOSURE

HALF YEAR ENDED 31 MARCH 2011 APS 330: CAPITAL ADEQUACY & RISK MANAGEMENT IN ANZ

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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) Australian Prudential Standard (APS) 330 Capital Adequacy: Public Disclosure of Prudential Information.

This disclosure was prepared as at 31 March 2011. 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.

ANZ Basel II Pillar 3 disclosure

March 2011

TABLE OF CONTENTS[1]

Chapter 1 – Highlights ..............................................................................................................4
Chapter 2 – Introduction...........................................................................................................6
Chapter 3 – Group structure and capital adequacy .......................................................................7
Table 1 Capital deficiencies in non-consolidated subsidiaries.........................................7
Table 2 Capital Structure..........................................................................................7
Table 3 Capital Adequacy .........................................................................................8
Chapter 4 – Credit risk............................................................................................................ 10
Table 4 Credit risk – General disclosures .................................................................. 10
Table 5 Credit risk – Disclosures for portfolios subject to the Standardised approach and
supervisory risk weighting in the IRB approach.............................................. 21
Table 6 Credit risk – Disclosures for portfolios subject to Advanced IRB approaches ...... 22
Table 7 Credit risk mitigation disclosures.................................................................. 31
Chapter 5 – Securitisation ....................................................................................................... 34
Table 9 Securitisation disclosures ............................................................................ 34
Chapter 6 – Market risk .......................................................................................................... 42
Table 10 Market risk – Standardised approach............................................................ 42
Table 11 Market risk – Internal models approach ....................................................... 43
Chapter 7 – Equities .............................................................................................................. 44
Table 13 Equities – Disclosures for banking book positions........................................... 44
Chapter 8 – Interest Rate Risk in the Banking Book.................................................................... 45
Table 14 Interest Rate Risk in the Banking Book ......................................................... 45
Appendix 1 – Detail of capital structure..................................................................................... 46
Appendix 2 – ANZ Bank (Europe) Limited.................................................................................. 48

1 Each Table reference adopted in this document aligns to those required by APS 330 to be disclosed at half year.

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 1 – Highlights[ 2]

Capital ratios

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14.1%
2.3%
10.6% 10.7%
10.1% 10.5%
1.6% 2.2% 2.0%
2.1%
11.8%
9.0% 8.5% 8.0% 8.5%
Sep 09 Mar 10 Sep 10 Mar 11 FSA
Pro-forma
Core Tier 1 Hybrid Tier 1
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Exposure at Default ($bn)

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$bn
700
559.6 572.6
600 524.3 531.7
500
400
300
200
100
0
Sep 09 Mar 10 Sep 10 Mar 11
Corporate Bank & Sovereign
Residential Mortgage QRR & Other Retail
Specialised Lending Other CRWAs
Standardised
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Strengthening capital position through organic capital generation

Tier 1 capital position up 41bp since Sep 10, driven by retained profits.
ANZ well capitalised and positioned to manage transition to Basel III.

Growth in EAD of 2.3% to $572.6bn

Growth mainly driven by Residential Mortgages in Australia and Sovereign exposures offset by strong appreciation of the AUD (particularly against USD and NZD).

Movement in Credit Risk Weighted Assets ($bn)

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4.6 (0.1) (3.7)
233.5 (1.1) 233.2
Sep 10 Growth Data FX Risk Mar 11
Review Impact
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However, CRWA remained stable since Sep 10 due to:

Increases in lower risk weight assets (Residential Mortgages and Sovereign), offset by FX impacts.
Risk improvements in Corporate and Specialised Lending exposures.
2 FSA Pro-forma represents estimated March 2011 capital ratio using UK Financial Services Authority capital rules.

ANZ Basel II Pillar 3 disclosure

March 2011

Average Risk Weights (CRWA/EAD)

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120%
Mar 10 Sep 10 Mar 11
97%
100% 92%
80%
62% 63%
60% 53%
40%
18%
20% 14%
0%
Other CRWAs
Corporate Bank & Sovereign Residential Mortgage QRR & Other Retail Specialised Lending Standardised
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Portfolio average risk weight decreased by 1.0% in the Mar 11 half to 40.7%

Risk improvements in Corporate and Specialised Lending exposures (down 2.5% and 3.8% respectively).
Increased proportion of Residential Mortgages.

Impaired Assets ($m)

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6,561 6,561
6,221
5,595
6,001 6,420 5,517
4,922
141
673 560 704
Sep 10 Mar 10 Sep 10 Mar 11
Restructured Impaired Loans/Facilities
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Impaired Assets declined 5.2% in Mar 11

Slow down in the emergence of large corporate defaults.
Increase in restructured, mainly due to a downgrade of a large single name.

Provision ratios (Provisions/CRWA)

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2.10% 2.15% 2.10%
1.97%
1.31% 1.38% 1.35% 1.36%
Sep 09 Mar 10 Sep 10 Mar 11
Total Provision Balance / CRWA
Collective Provision Balance / CRWA
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Provision coverage ratios remain stable

Small increase in Collective Provision coverage due to new overlays for natural disasters.
Total Provision coverage remains stable.

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 2 – Introduction

Purpose of this document

This document has been prepared in accordance with the Australian Prudential Regulation Authority (APRA) Australian Prudential Standard (APS) 330 Capital Adequacy: Public Disclosure of Prudential Information (APS 330).

APS 330 mandates the release to the investment community and general public of information relating to capital adequacy and risk management practices. APS 330 was established to implement Pillar 3 of the Basel Committee on Banking Supervision’s framework for bank capital adequacy, known as ‘Basel II’. In simple terms, Basel II consists of three mutually reinforcing ‘Pillars’:

Pillar 1 Minimum capital requirement	Pillar 2 Supervisory review process	Pillar 3 Market discipline
Minimum capital requirements for Credit Risk, Operational Risk, Market Risk and Interest Rate Risk in the Banking Book	Firm-wide risk oversight, Internal Capital Adequacy Assessment Process (ICAAP), consideration of additional risks, capital buffers and targets and risk concentrations, etc	Regular disclosure to the market of qualitative and quantitative aspects of risk management, capital adequacy and underlying risk metrics

APS 330 requires the publication of various levels of information on a quarterly, semi-annual and annual basis. This document is the semi-annual disclosure.

Verification of disclosures

These Pillar 3 disclosures have been verified in accordance with Board approved policy, including ensuring consistency with information contained in ANZ’s published financial results and in Pillar 1 returns provided to APRA. This Pillar 3 disclosure is not audited by ANZ’s external auditor.

Comparison to ANZ’s published financial results

These disclosures have been produced in accordance with regulatory capital adequacy concepts and rules, rather than in accordance with International Financial Reporting Standards. As such, there are differences in some common areas of disclosures. These differences are most pronounced in the credit risk disclosures, for instance:

The principal method for measuring the amount at risk is Exposure at Default (EAD). This estimates the amount of exposure likely to be owed on a credit obligation at the time of default. Under the Advanced Internal Ratings Based (IRB) approach in APS 113, banks are accredited to provide their own estimates of EAD for all exposures (drawn, commitments or contingents) reflecting the current balance as well as the likelihood of additional drawings prior to default
Loss Given Default (LGD) is an estimate of the amount of losses expected in the event of default. LGD is essentially calculated as the amount at risk (EAD) less expected net recoveries from realisation of collateral as well as any post default repayments of principal and interest
Most credit risk disclosures split ANZ’s portfolio into regulatory asset classes, which span areas of ANZ’s internal divisional and business unit organisational structure.

Unless otherwise stated, all amounts are rounded to AUD millions.

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 3 – Group structure and capital adequacy

Top Corporate Entity

The top corporate entity in the Group is Australia and New Zealand Banking Group Limited.

Table 1 Capital deficiencies in non-consolidated subsidiaries

The aggregate amount of any under capitalisation of a non-consolidated subsidiary (or subsidiaries) that is required to be deducted from capital is zero (September 2010: zero; March 2010: zero).

Table 2 Capital Structure

Table 2 Capital Structure
	Mar 11	Sep 10	Mar 10
Tier 1 capital	$M	$M	$M
Paid-up ordinary share capital	20,839	20,140	19,563
Reserves	(3,143)	(2,574)	(2,225)
Retained earnings	14,732	13,685	13,176
Minority interests	64	64	66
Fundamental Tier 1 capital	32,492	31,315	30,580
Innovative Tier 1 capital	1,597	1,646	1,690
Non-innovative Tier 1 capital	3,751	3,787	3,791
Gross Tier 1 capital	37,840	36,748	36,061
Goodwill	(2,795)	(2,910)	(2,824)
Other deductions from Tier 1 capital only	(4,220)	(4,121)	(3,779)
50/50 deductions from Tier 1 capital	(3,055)	(3,026)	(2,830)
Deductions from Tier 1 capital	(10,070)	(10,057)	(9,433)

Net Tier 1 capital	27,770	26,691	26,628
Tier 2 capital
Upper Tier 2 capital
Perpetual subordinated notes	905	946	975
General reserve for impairment of financial assets net of attributable deferred tax asset	264	280	85
Lower Tier 2 capital	6,201	6,644	7,430
Gross Tier 2 capital	7,370	7,870	8,490
Upper and lower Tier 2 capital deductions	(28)	(28)	(28)
50/50 deductions from Tier 2 capital	(3,055)	(3,026)	(2,830)
Deductions from Tier 2 capital	(3,083)	(3,054)	(2,858)

Net Tier 2 capital	4,287	4,816	5,632

Total capital base	32,057	31,507	32,260

ANZ Basel II Pillar 3 disclosure

March 2011

Table 3 Capital Adequacy[3 4 ]

		Mar 11	Sep 10	Mar 10
Risk weighted assets		$M	$M	$M
Subject to Advanced Internal Rating Based (IRB) approach
Corporate		98,393	101,940	100,945
Sovereign		3,217	2,720	2,470
Bank		6,958	6,135	5,108
Residential Mortgage		40,126	38,708	37,423
Qualifying Revolving Retail		7,552	7,205	7,238
Other Retail		18,485	17,899	17,942
Credit risk weighted assets subject to Advanced IRB approach		174,731	174,607	171,126

Credit Risk Specialised Lending exposures subject to slotting approach		26,799	26,605	24,965

Subject to Standardised approach
Corporate		21,439	21,281	16,330
Residential Mortgage		406	567	399
Qualifying Revolving Retail		1,792	1,841	4
Other Retail		1,366	1,113	560
Credit risk weighted assets subject to Standardised approach		25,003	24,802	17,293
Credit	risk weighted assets relating to securitisation exposures	1,209	2,091	1,975
Credit	risk weighted assets relating to equity exposures	1,635	1,577	1,639
Other assets		3,869	3,835	3,377
Total credit risk weighted assets		233,246	233,517	220,375
Market risk weighted assets		2,547	5,652	3,969
Operational risk weighted assets		18,331	17,383	16,481
Interest rate risk in the banking book (IRRBB) risk weighted assets		10,112	7,690	8,136
Total risk weighted assets		264,236	264,242	248,961
Capital ratios(%)
Level 2 Total capital ratio		12.1%	11.9%	13.0%
Level 2 Tier 1 capital ratio		10.5%	10.1%	10.7%
Level 1: Extended licensed entity Total capital ratio		12.6%	12.3%	13.7%
Level 1: Extended licensed entity Tier 1 capital ratio		11.4%	11.0%	11.9%
Other significant Authorised Deposit-taking Institution (ADI) or overseas bank subsidiary:
	ANZ National Bank Limited - Total capital ratio	12.9%	13.1%	13.2%
	ANZ National Bank Limited - Tier 1 capital ratio	9.6%	9.7%	9.5%

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

4 ANZ National Bank Limited’s capital ratios have been calculated in accordance with Reserve Bank of New Zealand prudential standards.

ANZ Basel II Pillar 3 disclosure

March 2011

Credit Risk Weighted Assets (CRWA)

Total CRWA decreased $0.3 billion (0.1%) from September 2010 to $233.2 billion. The key impacts on the CRWA were an increase of $1.4 billion (3.7%) in IRB Residential Mortgage CRWA driven by growth in the Australian mortgage portfolio and a slight deterioration in credit quality, and a $3.5 billion (3.5%) reduction in IRB Corporate CRWA driven by reduced exposures, a stronger Australian dollar and improved credit quality. Portfolio growth across other asset classes was offset by a stronger Australian dollar and a general improvement in portfolio credit quality.

Market Risk and IRRBB RWA

The $3.1 billion (54.9%) decrease in Market Risk RWA was due to lower levels of traded risk held over the half and the progressive reduction of volatility used in the internal model calculation. For key risk factors, the volatility currently used is still higher than the long run average, however is lower than that observed post the Global Financial Crisis.

IRRBB RWA increased $2.4 billion (31.5%) during the six months to March 2011 as a result of repricing, yield curve risk and an increase in embedded losses.

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 4 – Credit risk

Table 4 Credit risk – General disclosures

Table 4(b): Period end and average Exposure at Default[5 6 7 8 ]

Table 4(b): Period end and average Exposure at Default5 6 7 8	Table 4(b): Period end and average Exposure at Default5 6 7 8
Mar 11
Advanced IRBapproach Risk Weighted Assets $M Exposure at Default $M Average Exposure at Default for half year $M Individual provision charge for half year $M Write-offs for half year $M
Advanced IRBapproach $M $M $M
Corporate 98,393 158,912 158,568	175 263
Sovereign 3,217 36,977 36,038	- -
Bank 6,958 34,974 33,828	(8) -
Residential Mortgage 40,126 226,659 223,356	23 40
Qualifying Revolving Retail 7,552 21,020 20,892	115 135
Other Retail 18,485 28,538 28,410	133 142
Total Advanced IRB approach 174,731 507,080 501,092	438 580

Specialised Lending 26,799 29,207 28,521	107 56

Standardised approach
Corporate 21,439 21,440 21,361	25 2
Residential Mortgage 406 1,154 1,317	1 -
Qualifying Revolving Retail 1,792 1,791 1,816	4 25
Other Retail 1,366 1,289 1,201	19 40
Total Standardised approach 25,003 25,674 25,695	49 67

Total 226,533 561,961 555,308	594 703

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

6 Individual Provision charge relates to loans and advances, and does not include impairment on Available-For-Sale assets of $16 million in March 2011 (September 2010: $1 million; March 2010: $20 million).

7 Some prior period comparatives have been restated to reflect reclassification between asset classes and industries.

8 Average Exposure at Default for half year is calculated as the simple average of the balances at the start and the end of each six month period.

ANZ Basel II Pillar 3 disclosure

March 2011

Sep 10	Sep 10
Advanced IRBapproach Risk Weighted Assets $M Exposure at Default $M Average Exposure at Default for half year $M Individual provision charge for half year $M Write-offs for half year $M
Advanced IRBapproach $M $M $M
Corporate 101,940 158,224 156,670	209 197
Sovereign 2,720 35,099 34,943	- -
Bank 6,135 32,681 30,317	(5) -
Residential Mortgage 38,708 220,055 214,282	65 65
Qualifying Revolving Retail 7,205 20,764 20,580	109 134
Other Retail 17,899 28,283 28,266	140 156
Total Advanced IRB approach 174,607 495,106 485,057	518 552

Specialised Lending 26,605 27,835 27,349	173 144

Standardised approach
Corporate 21,281 21,282 18,807	14 1
Residential Mortgage 567 1,479 1,307	4 -
Qualifying Revolving Retail 1,841 1,841 923	(3) 7
Other Retail 1,113 1,112 836	38 27
Total Standardised approach 24,802 25,714 21,872	53 35

Total 226,014 548,655 534,277	744 731

Mar 10	Mar 10
Advanced IRBapproach Risk Weighted Assets $M Exposure at Default $M Average Exposure at Default for half year $M Individual provision charge for half year $M Write-offs for half year $M
Advanced IRBapproach $M $M $M
Corporate 100,945 155,116 158,996	461 440
Sovereign 2,470 34,786 31,702	- -
Bank 5,108 27,952 28,698	(18) 8
Residential Mortgage 37,423 208,508 205,045	97 52
Qualifying Revolving Retail 7,238 20,396 20,108	107 128
Other Retail 17,942 28,250 28,451	162 174
Total Advanced IRB approach 171,126 475,008 472,999	809 802

Specialised Lending 24,965 26,862 26,027	164 136

Standardised approach
Corporate 16,330 16,331 14,748	28 1
Residential Mortgage 399 1,135 1,143	2 -
Qualifying Revolving Retail 4 4 2	- -
Other Retail 560 560 471	23 24
Total Standardised approach 17,293 18,030 16,363	53 25

Total 213,384 519,900 515,389	1,026 963

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(c): Geographic distribution of Exposure at Default

		Mar 11	Mar 11
			Asia Pacific, Europe and

	Australia	New Zealand	Americas Total
Portfolio Type	$M	$M	$M $M
Corporate	107,394	34,881	38,077 180,352
Sovereign	15,427	6,102	15,448 36,977
Bank	17,772	2,582	14,620 34,974
Residential Mortgage	185,462	41,206	1,145 227,813
Qualifying Revolving Retail	21,020	-	1,791 22,811
Other Retail	21,726	6,819	1,282 29,827
Specialised Lending	22,742	5,651	814 29,207
Total exposures	391,543	97,241	73,177 561,961

		Sep 10	Sep 10
			Asia Pacific, Europe and

	Australia	New Zealand	Americas Total
Portfolio Type	$M	$M	$M $M
Corporate	105,484	37,698	36,324 179,506
Sovereign	13,565	7,373	14,161 35,099
Bank	17,077	2,958	12,646 32,681
Residential Mortgage	178,566	41,565	1,403 221,534
Qualifying Revolving Retail	20,764	-	1,841 22,605
Other Retail	21,374	6,908	1,112 29,394
Specialised Lending	22,015	5,320	500 27,835
Total exposures	378,845	101,822	67,987 548,654

		Mar 10
		Asia Pacific, Europe and

	Australia	New Zealand Americas Total
Portfolio Type	$M	$M $M $M
Corporate	103,519	38,761 29,167 171,447
Sovereign	12,542	6,879 15,365 34,786
Bank	12,031	2,630 13,291 27,952
Residential Mortgage	166,496	42,069 1,078 209,643
Qualifying Revolving Retail	20,396	- 4 20,400
Other Retail	21,325	6,908 577 28,810
Specialised Lending	21,014	5,381 467 26,862
Total exposures	357,323	102,628 59,949 519,900

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(d): Industry distribution of Exposure at Default[9 10]

Mar 11

	Agriculture,
	Forestry,			Entertainment	Financial,	Government
	Fishing &	Business		, Leisure &	Investment &	and Official			Property	Wholesale		Transport &
	Mining	Services	Construction	Tourism	Insurance	Institutions	Manufacturing	Personal	Services	Trade	Retail Trade	Storage	Other	Total
Portfolio Type	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
Corporate	32,324	8,004	5,790	8,908	17,600	1,302	30,240	1,196	14,800	17,778	12,155	8,697	21,558	180,352
Sovereign	115	-	39	-	17,493	17,511	110	316	468	2	-	29	894	36,977
Bank	-	-	-	-	34,781	-	15	1	21	21	-	47	88	34,974
Residential Mortgage	-	-	-	-	-	-	-	227,813	-	-	-	-	-	227,813
Qualifying Revolving Retail	-	-	-	-	-	-	-	22,811	-	-	-	-	-	22,811
Other Retail	2,337	1,731	2,415	786	303	7	855	15,067	870	612	1,952	1,000	1,892	29,827
Specialised Lending	217	-	380	153	160	-	223	6	23,936	-	-	2,088	2,044	29,207
Total exposures	34,993	9,735	8,624	9,847	70,337	18,820	31,443	267,210	40,095	18,413	14,107	11,861	26,476	561,961
% of Total	6.2%	1.7%	1.5%	1.8%	12.5%	3.3%	5.6%	47.5%	7.1%	3.3%	2.5%	2.1%	4.7%	100.0%
							Sep 10

	Agriculture,
	Forestry,			Entertainment	Financial,	Government
	Fishing &	Business		, Leisure &	Investment &	and Official			Property	Wholesale		Transport &
	Mining	Services	Construction	Tourism	Insurance	Institutions	Manufacturing	Personal	Services	Trade	Retail Trade	Storage	Other	Total
Portfolio Type	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M	$M
Corporate	34,876	7,815	5,742	9,045	16,395	1,348	28,603	2,557	15,782	15,919	11,707	8,045	21,672	179,506
Sovereign	28	1	20	98	16,477	17,101	255	196	152	2	-	28	741	35,099
Bank	-	-	4	-	32,430	-	-	-	16	35	-	26	170	32,681
Residential Mortgage	-	-	-	-	-	-	-	221,534	-	-	-	-	-	221,534
Qualifying Revolving Retail	-	-	-	-	-	-	-	22,605	-	-	-	-	-	22,605
Other Retail	2,335	1,709	2,381	762	301	9	838	14,839	902	604	1,908	1,012	1,794	29,394
Specialised Lending	187	-	430	154	254	-	236	-	22,461	-	-	1,915	2,198	27,835
Total exposures	37,426	9,525	8,577	10,059	65,857	18,458	29,932	261,731	39,313	16,560	13,615	11,026	26,575	548,654
% of Total	6.8%	1.7%	1.6%	1.8%	12.0%	3.4%	5.5%	47.7%	7.2%	3.0%	2.5%	2.0%	4.8%	100.0%

9 Property Services includes Commercial property operators, Residential property operators, Retirement village operators/developers, Real estate agents, Non-financial asset investors and Machinery and equipment hiring and leasing.

10 Other industry includes Health & Community Services, Education, Communication Services, Electricity, Gas & Water Supply, and Personal & Other Services.

ANZ Basel II Pillar 3 disclosure

March 2011

	Mar 10

Agriculture, Forestry, Fishing & Mining Business Services Construction Entertainment , Leisure & Tourism Financial, Investment & Insurance Government and Official Institutions Manufacturing Personal Property Services Wholesale Trade Retail Trade Transport & Storage Other Total
Portfolio Type $M $M $M $M $M $M $M $M $M $M $M $M $M $M
Corporate 33,148 7,782 5,629 8,937 14,801 1,368 26,998 2,101 13,699 15,663 11,614 7,575 22,132 171,447
Sovereign 33 - 21 - 17,929 15,854 201 73 43 - - - 632 34,786
Bank - - - - 27,648 - 62 - - 72 - 64 106 27,952
Residential Mortgage - - - - - - - 209,643 - - - - - 209,643
Qualifying Revolving Retail - - - - - - - 20,400 - - - - - 20,400
Other retail 2,319 1,691 2,380 753 304 8 821 13,922 891 595 1,868 1,072 2,186 28,810
Specialised Lending 288 - 60 155 407 - 250 - 21,141 - - 2,086 2,475 26,862
Total exposures 35,788 9,473 8,090 9,845 61,089 17,230 28,332 246,139 35,774 16,330 13,482 10,797 27,531 519,900
% of Total 6.9% 1.8% 1.6% 1.9% 11.8% 3.3% 5.4% 47.3% 6.9% 3.1% 2.6% 2.1% 5.3% 100.0%

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(e): Residual contractual maturity of Exposure at Default[11]

	Mar 11
< 12 mths 1 - 5 years > 5 years No Maturity Specified Total
Portfolio Type $M $M $M $M $M
Corporate 84,032 76,952 19,289 79 180,352
Sovereign 19,111 14,565 3,301 - 36,977
Bank 17,960 16,844 170 - 34,974
Residential Mortgage 1,985 4,190 193,177 28,461 227,813
Qualifying Revolving Retail - - - 22,811 22,811
Other Retail 9,962 13,108 6,137 620 29,827
Specialised Lending 10,604 15,304 3,255 44 29,207
Total exposures 143,654 140,963 225,329 52,015 561,961


	Sep 10
< 12 mths 1 - 5 years > 5 years No Maturity Specified Total
Portfolio Type $M $M $M $M $M
Corporate 81,511 78,005 19,746 244 179,506
Sovereign 18,778 14,199 2,122 - 35,099
Bank 16,999 15,469 213 - 32,681
Residential Mortgage 1,850 4,210 187,467 28,007 221,534
Qualifying Revolving Retail - - - 22,605 22,605
Other Retail 9,924 13,051 5,701 718 29,394
Specialised Lending 9,603 14,833 3,380 19 27,835
Total exposures 138,665 139,767 218,629 51,593 548,654


	Mar 10
< 12 mths 1 - 5 years > 5 years No Maturity Specified Total
Portfolio Type $M $M $M $M $M
Corporate 78,241 73,191 19,650 365 171,447
Sovereign 13,043 18,675 3,068 - 34,786
Bank 18,688 9,124 140 - 27,952
Residential Mortgage 1,793 4,347 176,859 26,644 209,643
Qualifying Revolving Retail - - - 20,400 20,400
Other Retail 9,808 13,014 5,414 574 28,810
Specialised Lending 9,942 13,360 3,536 24 26,862
Total exposures 131,515 131,711 208,667 48,007 519,900

11 No Maturity Specified predominately includes credit cards and residential mortgage equity manager accounts.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(f) part (i): Impaired assets[12 13] , Past due loans[14] , Provisions[15] and Write-offs by Industry sector

Industry sector
			Mar	11
					Individual
		Impaired	Past due	Individual	provision
	Impaired	loans/	loans ≥ 90	provision	charge for	Write-offs
	derivatives	facilities	days	balance	half year	for half year
Industry Sector	$M	$M	$M	$M	$M	$M
Agriculture, Forestry, Fishing & Mining	-	1,361	217	245	83	17
Business Services	-	203	36	87	21	25
Construction	-	128	41	50	12	8
Entertainment Leisure & Tourism	-	46	7	18	2	5
Financial, Investment & Insurance	-	303	6	60	17	64
Government & Official
Institutions	-	-	-	-	-	-
Manufacturing	2	894	27	186	9	24
Personal	-	990	1,384	541	261	345
Property Services	31	1,223	96	233	148	161
Retail Trade	-	114	40	64	16	29
Transport & Storage	2	102	40	37	3	6
Wholesale Trade	-	332	21	95	3	5
Other	6	484	40	101	19	14
Total	41	6,180	1,955	1,717	594	703

			Sep 10
				Individual provision
		Impaired	Past due Individual
	Impaired	loans/	loans ≥ 90 provision	charge for Write-offs
	derivatives	facilities	days balance	half year for half year
Industry Sector	$M	$M	$M $M	$M $M
Agriculture, Forestry, Fishing &
	2	1,197	165 217	73 35
Mining

Business Services	-	218	50 102	16 21
Construction	-	98	35 44	23 47
Entertainment Leisure & Tourism	-	49	9 21	5 5
Financial, Investment &
	-	448	11 96	23 80
Insurance

Government & Official
	-	-	- -	- -
Institutions

Manufacturing	2	402	22 197	7 31
Personal	-	1,084	1,057 611	311 341
Property Services	41	1,831	88 257	179 72
Retail Trade	-	171	37 79	23 12
Transport & Storage	-	80	23 38	10 9
Wholesale Trade	-	353	18 101	13 14
Other	6	578	40 112	61 63
Total	51	6,510	1,555 1,875	744 731

12 Impaired derivatives include a credit valuation adjustment (CVA) of $71 million, being a market value based assessment of the credit risk of the relevant counterparties (September 2010: $77 million; March 2010: $61 million).

13 Impaired loans / facilities include restructured items of $704 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 2010: $141 million; March 2010: $560 million).

14 Past due loans ≥ 90 days includes $1,810 million well secured loans (September 2010: $1,416 million; March 2010: $1,370 million).

15 Individual Provision charge relates to loans and advances, and does not include impairment on Available-For-Sale of $16 million in March 2011 (September 2010: $1 million; March 2010: $20 million).

ANZ Basel II Pillar 3 disclosure

March 2011

			Mar 10
				Individual provision
		Impaired	Past due Individual
	Impaired	loans/	loans ≥ 90 provision	charge for Write-offs
	derivatives	facilities	days balance	half year for half year
Industry Sector	$M	$M	$M $M	$M $M
Agriculture, Forestry, Fishing &
	4	934	164 170	94 3
Mining

Business Services	-	268	66 103	23 35
Construction	-	119	42 62	37 14
Entertainment Leisure & Tourism	-	38	11 23	9 2
Financial, Investment &
	-	864	14 173	(3) 107
Insurance

Government & Official
	-	-	- -	- -
Institutions

Manufacturing	3	559	28 185	101 128
Personal	-	780	996 373	335 306
Property Services	48	1,755	102 207	222 190
Retail Trade	-	148	37 63	27 16
Transport & Storage	-	85	19 41	22 7
Wholesale Trade	-	255	18 84	67 67
Other	12	689	26 109	92 88
Total	67	6,494	1,523 1,593	1,026 963

Table 4(f) part (ii): Impaired asset, Past due loans, Provisions and Write-offs

	Mar 11
Impaired Past due Individual Individual provision
Impaired loans/ loans ≥ 90 provision charge for Write-offs
derivatives $M facilities $M days $M balance $M half year $M for half year $M
Portfolios subject to Advanced IRB approach
Corporate 22 3,123 186 617 175 263
Sovereign - - - - - -
Bank - 81 - 17 (8) -
Residential Mortgage - 555 1,211 182 23 40
Qualifying Revolving Retail - - 93 - 115 135
Other Retail - 352 160 222 133 142
Total Advanced IRB approach 22 4,111 1,650 1,038 438 580

Specialised Lending 19 1,404 60 252 107 56

Portfolios subject to Standardised approach
Corporate - 401 195 188 25 2
Sovereign - - - - - -
Bank - - - - - -
Residential Mortgage - 14 2 6 1 -
Qualifying Revolving Retail - 79 12 84 4 25
Other Retail - 171 36 149 19 40
Total Standardised approach - 665 245 427 49 67

Total 41 6,180 1,955 1,717 594 703

ANZ Basel II Pillar 3 disclosure

March 2011

	Sep 10
Impaired Past due Individual Individual provision
Impaired loans/ loans ≥ 90 provision charge for Write-offs
derivatives $M facilities $M days $M balance $M half year $M for half year $M
Portfolios subject to Advanced IRB approach
Corporate 33 3,331 233 751 209 197
Sovereign - - - - - -
Bank - 97 - 28 (5) -
Residential Mortgage - 574 881 215 65 65
Qualifying Revolving Retail - - 84 - 109 134
Other Retail - 362 139 225 140 156
Total Advanced IRB approach 33 4,364 1,337 1,219 518 552

Specialised Lending 18 1,509 65 214 173 144

Portfolios subject to Standardised approach
Corporate - 298 97 156 14 1
Sovereign - - - - - -
Bank - - - - - -
Residential Mortgage - 21 3 6 4 -
Qualifying Revolving Retail - 106 13 106 (3) 7
Other Retail - 212 40 174 38 27
Total Standardised approach - 637 153 442 53 35

Total 51 6,510 1,555 1,875 744 731


	Mar 10
Impaired Past due Individual Individual provision
Impaired loans/ loans ≥ 90 provision charge for Write-offs
derivatives $M facilities $M days $M balance $M half year $M for half year $M
Portfolios subject to Advanced IRB approach
Corporate 47 3,524 258 797 461 440
Sovereign - - - - - -
Bank - 123 - 33 (18) 8
Residential Mortgage - 511 849 234 97 52
Qualifying Revolving Retail - - 78 - 107 128
Other Retail - 344 141 202 162 174
Total Advanced IRB approach 47 4,502 1,326 1,266 809 802

Specialised Lending 20 1,801 80 219 164 136

Portfolios subject to Standardised approach
Corporate - 144 94 77 28 1
Sovereign - - - - - -
Bank - - - - - -
Residential Mortgage - 17 4 5 2 -
Qualifying Revolving Retail - - - - - -
Other Retail - 30 19 26 23 24
Total Standardised approach - 191 117 108 53 25

Total 67 6,494 1,523 1,593 1,026 963

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(g): Impaired assets[16 17] , Past due loans[18] and Provisions[19] by Geography

			Mar 11
		Impaired Past due		Individual Collective
	Impaired	loans/ loans		provision provision
	derivatives	facilities ≥ 90 days		balance balance
Geographic region	$M	$M $M		$M $M
Australia	37	3,899	1,611	938 2,144
New Zealand	2	1,634	246	406 544
Asia Pacific, Europe and America	2	647	98	373 489
Total	41	6,180	1,955	1,717 3,177


		Impaired Past due	Individual Collective
	Impaired	loans/ loans	provision provision
	derivatives	facilities ≥ 90 days	balance balance
Geographic region	$M	$M $M	$M $M
Australia	51	4,232 1,234	977 2,021
New Zealand	-	1,582 238	469 612
Asia Pacific, Europe and America	-	696 83	429 520
Total	51	6,510 1,555	1,875 3,153


		Impaired Past due	Individual Collective
	Impaired	loans/ loans	provision provision
	derivatives	facilities ≥ 90 days	balance balance
Geographic region	$M	$M $M	$M $M
Australia	67	4,441 1,162	1,009 2,013
New Zealand	-	1,424 286	471 672
Asia Pacific, Europe and America	-	629 75	113 352
Total	67	6,494 1,523	1,593 3,037

16 Impaired derivatives include a credit valuation adjustment (CVA) of $71 million, being a market value based assessment of the credit risk of the relevant counterparties (September 2010: $77 million; March 2010: $61 million).

17 Impaired loans / facilities include restructured items of $704 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 2010: $141 million; March 2010: $560 million).

18 Past due loans ≥ 90 days includes $1,810 million well secured loans (September 2010: $1,416 million; March 2010: $1,370 million).

19 Individual Provision charge relates to loans and advances, and does not include impairment on Available-For-Sale of $16 million in March 2011 (September 2010: $1 million; March 2010: $20 million).

ANZ Basel II Pillar 3 disclosure

March 2011

Table 4(h): Reconciliation of changes in Provisions

	Half year	Half year	Half year
	Mar 11	Sep 10	Mar 10
Collective Provision	$M	$M	$M
Balance at start of period	3,153	3,037	3,000
Charge to income statement	65	(40)	36
Provisions acquired	-	191	49
Adjustments for exchange rate fluctuations	(41)	(35)	(48)
Total Collective Provision	3,177	3,153	3,037

Individual Provision
Balance at start of period	1,875	1,593	1,526
Charge to income statement for loans and advances	594	744	1,026
Provisions acquired	-	355	39
Adjustments for exchange rate fluctuations	(43)	(68)	(32)
Discount unwind	(103)	(104)	(61)
Bad debts written-off	(703)	(730)	(963)
Recoveries of amounts previously written off	97	85	58
Total Individual Provision	1,717	1,875	1,593

Total Provisions for Credit Impairment	4,894	5,028	4,630

Specific Provision Balance and General Reserve for Credit Losses[20]

	Mar 11
Specific Provision Balance General Reserve for Credit Losses Total
$M $M $M
Collective Provision 271 2,906 3,177
Individual Provision 1,717 - 1,717
Total Provision for Credit Impairment 4,894


	Sep 10
Specific Provision Balance General Reserve for Credit Losses Total
$M $M $M
Collective Provision 233 2,920 3,153
Individual Provision 1,875 - 1,875
Total Provision for Credit Impairment 5,028


	Mar 10
Specific Provision Balance General Reserve for Credit Losses Total
$M $M $M
Collective Provision 260 2,777 3,037
Individual Provision 1,593 - 1,593
Total Provision for Credit Impairment 4,630

20 There is a difference in the split between ANZ’s Individual Provision and Collective Provision for accounting purposes and Specific Provision balance and General Reserve for Credit Losses (GRCL) for regulatory purposes, due to definitional differences. This difference 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 ANZ’s other published results.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 5 Credit risk – Disclosures for portfolios subject to the Standardised approach and supervisory risk weighting in the IRB approach

Table 5(b): Exposure at Default by risk bucket

Risk weight
	Mar 11	Sep 10	Mar 10
Standardised approach exposures	$M	$M	$M
0%	-	-	-
20%	2	3	3
35%	1,148	1,177	1,125
50%	-	292	10
75%	-	1	-
100%	24,368	24,239	16,892
150%	156	2	-
>150%	-	-	-
Capital deductions	-	-	-
Total	25,674	25,714	18,030
Other Asset exposures
0%		-	-
20%	1,746	1,625	1,746
35%	-	-	-
50%	-	-	-
75%	-	-	-
100%	3,520	3,510	3,028
150%	-	-	-
>150%	-	-	-
Capital deductions	-	-	-
Total	5,266	5,135	4,774
Specialised Lending exposures
0%	1,500	1,660	1,817
70%	9,218	6,993	6,531
90%	12,279	12,026	11,296
115%	4,615	5,189	5,791
250%	1,595	1,968	1,427
Total	29,207	27,836	26,862
Equity exposures
300%	2	-	-
400%	407	394	410
Total	409	394	410

ANZ Basel II Pillar 3 disclosure

March 2011

Table 6 Credit risk – Disclosures for portfolios subject to Advanced IRB approaches

Portfolios subject to the Advanced IRB (AIRB) approach

The following table summarises the types of borrowers and the rating approach adopted within each of of ANZ’s IRB portfolios:

IRB Asset Class	Borrower type	Rating approach
Sovereign	Central governments	AIRB
	Central banks
	Certain multilateral development banks
Bank	Banks21	AIRB
	In Australia only, other Authorised Deposit-taking
	Institutions (ADIs) incorporated in Australia
Corporate	Corporations, partnerships or proprietorships that	AIRB
	do not fit into any other asset class
Specialised Lending	Income Producing Real Estate22	AIRB – Supervisory
	Project Finance	Slotting23
	Object Finance
Residential Mortgages	Exposures secured by residential property	AIRB
Qualifying Revolving	Consumer credit cards <$100k limit	AIRB
Retail
Other Retail	Small business lending	AIRB
	Other lending to consumers
Equity	Equity investments	AIRB – fixed risk
		weights
Other Assets	All other assets not falling into the above classes	AIRB – fixed risk
	e.g. margin lending, fixed assets	weights

In addition, ANZ has applied the Standardised approach to some portfolio segments (mainly retail and local corporates in Asia Pacific) where currently available data does not enable development of advanced internal models for PD, EAD and LGD estimates. Under the Standardised approach, exposures are mapped to several regulatory risk weights, mainly based on the type of counterparty and its external rating.

ANZ applies its full normal risk measurement and management framework to these segments for internal management purposes.

ANZ has not applied the Foundation IRB approach to any portfolios.

The ANZ rating system

As an IRB bank, ANZ’s internal models generate the inputs into regulatory capital adequacy to determine the risk weighted exposure calculations for both on- and off-balance sheet exposures, including undrawn portions of credit facilities, committed and contingent exposures and expected loss calculations. ANZ’s internal models are used to generate the three key risk components that serve as inputs to the IRB approach to credit risk:

PD is an estimate of the level of the risk of borrower default. Borrower ratings are derived by way of rating models used both at loan origination and for ongoing monitoring.
EAD is defined as the expected facility exposure at the date of default.

21 The IRB asset classification of investment banks is Corporate, rather than Bank.

22 Since 2009, APRA has agreed that some large, well-diversified commercial property exposures may be treated as Corporate exposures, in line with the original Basel Committee’s definition of Specialised Lending.

23 ANZ uses an internal assessment which is mapped to the appropriate Supervisory Slot.

ANZ Basel II Pillar 3 disclosure

March 2011

LGD 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. When measuring economic loss, all relevant factors are taken into account, including material effects of the timing of cash flows and material direct and indirect costs associated with collecting on the exposure, including realisation of collateral.

Effective maturity is also calculated as an input to the risk weighted exposure calculation for Bank, Sovereign and Corporate IRB asset classes.

ANZ’s rating system has two separate and distinct dimensions that:

measure the PD, which is expressed by the Customer Credit Rating (CCR), reflecting the ability to service and repay debt
measure the LGD as expressed by the Security Indicator (SI) ranging from A to G. The SI is generally calculated by reference to the percentage of loan covered by security which can be realised in the event of default. This calculation uses standard ratios to adjust the current market value of collateral items to allow for historical realisation outcomes. The security-related SIs are supplemented with a range of other SIs which cover factors where ANZ’s LGD methodology indicates that these transaction characteristics have different recovery outcomes. ANZ’s LGD also includes recognition of the different legal and insolvency regimes in different countries, where this has been shown to influence recovery outcomes.

ANZ’s non retail PD master scale is made up of 27 rating grades. Each level/grade is separately defined and has a range of default probabilities attached to it. The PD master scale enables ANZ’s rating system to be mapped to the gradings of external rating agencies, using the PD as a common element after ensuring that default definitions and other key attributes are aligned. The following table demonstrates this alignment (for one year PDs):

ANZ CCR	Moody’s	S&P	PD range
0+ to 1-	Aaa to < A1	AAA to < A+	0.0000% -	0.0346%
2+ to 3+	A1 to < Baa2	A+ to < BBB	0.0347% -	0.1636%
3= to 4=	Baa2 to < Ba1	BBB to < BB+	0.1637% -	0.5108%
4- to 6-	Ba1 to < B1	BB+ to < B+	0.5109% -	3.4872%
7+ to 8+	B1 to < Caa	B+ to < CCC	3.4873% - 10.0928%
8=	Caa	CCC	10.0929% - 99.9999%
8-,9 and 10	Default	Default		100%

In the retail asset classes, most facilities utilise credit rating scores. The scores are calibrated to PD, so the PD master scale gives ANZ a common language to understand and manage credit risk. For retail asset class exposures, the LGD dimension is recognised through the process of pooling retail exposures into homogenous groups.

ANZ also uses two specialised PD master scales for the mapping of Sovereign and Bank PDs to external rating agency ratings.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 6(d): Non Retail Exposure at Default subject to Internal Ratings Based (IRB) approach[24 25 26 ]

				Mar 11
	AAA	A+	BBB	BB+	B+
	< A+	< BBB	< BB+	< B+	< CCC	CCC	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Corporate	6,079	36,019	48,978	55,696	5,883	2,551	3,706	158,912
Sovereign	32,441	1,796	67	2,443	228	-	2	36,977
Bank	28,537	3,450	2,230	637	3	3	114	34,974
Total	67,057	41,265	51,275	58,776	6,114	2,554	3,822	230,863
% of Total	29.0%	17.9%	22.2%	25.5%	2.6%	1.1%	1.7%	100.0%
Undrawn commitments (included in above)
Corporate	1,949	15,253	15,180	9,493	481	326	113	42,795
Sovereign	913	117	20	40	4	-	-	1,094
Bank	190	16	60	11	-	-	-	277
Total	3,052	15,386	15,260	9,544	485	326	113	44,166
Average Exposure at Default
Corporate	0.643	1.012	0.361	0.199	0.404	0.332	0.800	0.241
Sovereign	9.492	5.183	0.594	4.271	15.475	-	0.145	4.902
Bank	0.615	0.957	1.824	0.601	0.045	0.114	3.093	0.578
Exposure-weighted average	Loss Given Default (%)
Corporate	57.3%	60.1%	46.6%	35.8%	40.8%	46.2%	36.3%	45.8%
Sovereign	2.5%	4.3%	30.9%	53.7%	40.8%	-	59.0%	6.2%
Bank	62.2%	61.3%	63.6%	63.9%	34.1%	66.7%	64.8%	62.2%
Exposure-weighted average	risk weight (%)
Corporate	16.5%	36.0%	51.5%	70.6%	128.7%	215.2%	183.6%	61.9%
Sovereign	0.4%	1.4%	49.5%	111.1%	131.7%	-	781.8%	8.7%
Bank	14.3%	19.2%	58.9%	111.2%	123.1%	311.8%	156.0%	19.9%

24 In accordance with APS 330, Exposure at Default in Table 6(d) includes Advanced IRB exposures; however does not include Specialised Lending, Standardised, Securitisation, Equities or Other Assets exposures. Specialised Lending is excluded from Table 6(d) as it follows the Supervisory Slotting treatment, and a breakdown of risk weightings is provided in Table 5(b).

25 Average Exposure at Default is calculated as total Exposure at Default divided by the total number of credit risk generating exposures.

26 Exposure-weighted average risk weight (%) is calculated as RWA divided by Exposure at Default.

ANZ Basel II Pillar 3 disclosure

March 2011

				Sep 10
	AAA	A+	BBB	BB+	B+
	< A+	< BBB	< BB+	< B+	< CCC	CCC	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Corporate	6,423	30,304	48,335	59,584	6,611	2,951	4,015	158,223
Sovereign	30,545	2,271	40	1,981	260	-	2	35,099
Bank	28,084	2,365	1,505	610	10	13	94	32,681
Total	65,052	34,940	49,880	62,175	6,881	2,964	4,111	226,003
% of Total	28.8%	15.5%	22.1%	27.5%	3.0%	1.3%	1.8%	100.0%
Undrawn commitments (included in above)
Corporate	1,455	15,973	15,872	10,690	666	339	159	45,154
Sovereign	952	167	4	39	1	-	-	1,163
Bank	76	17	35	51	-	-	-	179
Total	2,483	16,157	15,911	10,780	667	339	159	46,496
Average Exposure at Default
Corporate	0.675	1.003	0.300	0.253	0.415	0.323	0.772	0.274
Sovereign	11.458	6.774	0.882	4.371	29.044	-	0.153	6.404
Bank	0.621	0.950	1.913	0.511	0.143	38.725	7.831	0.532
Exposure-weighted average	Loss Given Default (%)
Corporate	59.2%	59.6%	46.4%	37.3%	40.5%	44.5%	39.5%	45.6%
Sovereign	2.6%	4.9%	38.2%	54.9%	42.3%	-	59.0%	6.1%
Bank	62.7%	64.0%	63.7%	54.9%	61.4%	66.5%	64.2%	62.7%
Exposure-weighted average	risk weight (%)
Corporate	18.4%	34.4%	50.4%	75.1%	129.2%	208.1%	162.3%	64.4%
Sovereign	0.4%	2.0%	60.8%	110.4%	126.3%	-	781.7%	7.7%
Bank	13.8%	21.9%	58.9%	105.7%	205.6%	324.5%	160.5%	18.8%
				Mar 10
	AAA	A+	BBB	BB+	B+
	< A+	< BBB	< BB+	< B+	< CCC	CCC	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Corporate	6,403	28,468	45,854	61,453	6,095	2,602	4,241	155,116
Sovereign	30,821	1,919	145	1,589	310	-	2	34,786
Bank	24,928	1,557	865	472	12	13	105	27,952
Total	62,152	31,944	46,864	63,514	6,417	2,615	4,348	217,854
% of Total	28.5%	14.7%	21.5%	29.2%	2.9%	1.2%	2.0%	100.0%
Undrawn commitments (included in above)
Corporate	1,697	12,834	15,717	11,330	572	186	270	42,606
Sovereign	977	91	2	13	2	-	-	1,085
Bank	223	10	6	41	-	-	-	280
Total	2,897	12,935	15,725	11,384	574	186	270	43,971
Average Exposure at Default
Corporate	0.712	1.077	0.354	0.256	0.424	0.223	0.655	0.285
Sovereign	14.608	6.280	5.625	7.736	20.796	-	0.162	7.988
Bank	0.947	0.923	0.696	0.410	0.219	0.362	7.012	0.658
Exposure-weighted average	Loss Given Default (%)
Corporate	59.9%	58.9%	45.3%	38.2%	40.0%	39.3%	41.8%	45.2%
Sovereign	2.5%	4.9%	58.7%	55.3%	41.7%	85.0%	59.0%	5.6%
Bank	62.7%	63.2%	65.3%	67.0%	62.7%	74.7%	63.0%	62.9%
Exposure-weighted average	risk weight (%)
Corporate	16.9%	33.5%	49.1%	78.3%	128.7%	180.9%	167.3%	65.1%
Sovereign	0.5%	2.2%	68.9%	112.1%	124.8%	397.4%	781.7%	7.1%
Bank	13.7%	22.3%	64.2%	117.7%	208.0%	349.0%	157.5%	18.3%

ANZ Basel II Pillar 3 disclosure

March 2011

Table 6(d): Retail Exposure at Default subject to Advanced Internal Ratings Based (IRB) approach by risk grade

approach by risk grade
				Mar	11
0.00% <		0.11% <	0.30% <	0.51% <	3.49% <	10.09% <
	0.11%	0.30%	0.51%	3.49%	10.09%	100.00 %	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Residential Mortgage	4,200	149,533	17,368	42,250	6,851	4,566	1,891	226,659
Qualifying Revolving Retail	10,723	300	1,865	4,769	2,131	1,071	161	21,020
Other Retail	39	3,502	1,407	16,667	5,255	951	717	28,538
Total	14,962	153,335	20,640	63,686	14,237	6,588	2,769	276,217
% of Total	5.4%	55.5%	7.5%	23.1%	5.2%	2.4%	1.0%	100.0%
Undrawn commitments (included in above)
Residential Mortgage	535	17,307	1,773	2,715	271	234	9	22,844
Qualifying Revolving Retail	8,327	299	1,195	2,086	597	120	15	12,639
Other Retail	35	2,449	871	2,306	254	67	3	5,985
Total	8,897	20,055	3,839	7,107	1,122	421	27	41,468
Average Exposure at Default
Residential Mortgage	0.095	0.210	0.155	0.182	0.184	0.170	0.240	0.186
Qualifying Revolving Retail	0.011	0.006	0.010	0.009	0.008	0.007	0.008	0.010
Other Retail	0.007	0.010	0.012	0.014	0.009	0.007	0.030	0.012
Exposure-weighted average	Loss Given Default (%)
Residential Mortgage	22.7%	20.2%	20.4%	20.8%	20.3%	20.6%	21.3%	20.4%
Qualifying Revolving Retail	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%
Other Retail	72.0%	60.3%	55.5%	44.0%	51.6%	65.3%	58.0%	49.1%
Exposure-weighted average	risk weight (%)
Residential Mortgage	4.9%	7.0%	15.0%	28.7%	74.1%	112.7%	240.8%	17.7%
Qualifying Revolving Retail	4.7%	11.0%	13.6%	37.8%	105.8%	205.3%	317.7%	35.9%
Other Retail	17.6%	28.0%	37.7%	57.3%	81.2%	157.8%	229.0%	64.8%

ANZ Basel II Pillar 3 disclosure

March 2011

				Sep	10
0.00% <		0.11% <	0.30% <	0.51% <	3.49% <	10.09% <
	0.11%	0.30%	0.51%	3.49%	10.09%	100.00 %	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Residential Mortgage	4,152	143,452	16,817	43,586	6,174	4,294	1,581	220,056
Qualifying Revolving Retail	10,596	290	1,925	4,901	1,953	958	141	20,764
Other Retail	37	3,439	1,377	16,781	5,133	877	639	28,283
Total	14,785	147,181	20,119	65,268	13,260	6,129	2,361	269,103
% of Total	5.5%	54.7%	7.5%	24.3%	4.9%	2.3%	0.9%	100.0%
Undrawn commitments (included in above)
Residential Mortgage	523	16,527	1,705	2,859	249	219	9	22,091
Qualifying Revolving Retail	8,248	289	1,265	2,243	600	112	14	12,771
Other Retail	34	2,430	880	2,328	255	62	2	5,991
Total	8,805	19,246	3,850	7,430	1,104	393	25	40,853
Average Exposure at Default
Residential Mortgage	0.100	0.206	0.155	0.182	0.180	0.166	0.255	0.183
Qualifying Revolving Retail	0.011	0.006	0.010	0.009	0.008	0.007	0.008	0.010
Other Retail	0.006	0.010	0.011	0.014	0.009	0.007	0.035	0.012
Exposure-weighted average	Loss Given Default (%)
Residential Mortgage	22.7%	20.2%	20.4%	20.8%	20.3%	20.6%	21.6%	20.4%
Qualifying Revolving Retail	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%
Other Retail	72.2%	62.0%	56.6%	44.7%	48.4%	65.5%	56.5%	49.0%
Exposure-weighted average	risk weight (%)
Residential Mortgage	4.9%	7.1%	15.1%	28.7%	74.6%	113.6%	239.8%	17.6%
Qualifying Revolving Retail	4.8%	11.3%	14.0%	38.7%	106.5%	205.7%	316.7%	34.7%
Other Retail	18.4%	28.6%	38.2%	58.3%	76.4%	159.4%	199.4%	63.3%
				Mar	10
0.00% <		0.11% <	0.30% <	0.51% <	3.49% <	10.09% <
	0.11%	0.30%	0.51%	3.49%	10.09%	100.00 %	Default	Total
	$M	$M	$M	$M	$M	$M	$M	$M
Exposure at Default
Residential Mortgage	2,990	124,525	32,335	37,732	5,783	3,649	1,494	208,508
Qualifying Revolving Retail	10,390	274	1,824	4,688	2,044	1,019	157	20,396
Other Retail	30	3,440	1,772	16,577	4,932	876	623	28,250
Total	13,410	128,239	35,931	58,997	12,759	5,544	2,274	257,154
% of Total	5.2%	49.9%	14.0%	22.9%	5.0%	2.2%	0.9%	100.0%
Undrawn commitments (included in above)
Residential Mortgage	381	14,107	2,816	2,482	235	91	10	20,122
Qualifying Revolving Retail	8,068	274	1,194	2,151	628	128	25	12,468
Other Retail	26	2,283	1,174	2,121	262	55	7	5,928
Total	8,475	16,664	5,184	6,754	1,125	274	42	38,518
Average Exposure at Default
Residential Mortgage	0.037	0.202	0.220	0.177	0.172	0.172	0.258	0.179
Qualifying Revolving Retail	0.011	0.006	0.010	0.008	0.008	0.007	0.008	0.009
Other Retail	0.001	0.011	0.007	0.015	0.010	0.007	0.028	0.012
Exposure-weighted average	Loss Given Default (%)
Residential Mortgage	20.8%	20.0%	21.8%	20.6%	20.3%	20.5%	21.6%	20.4%
Qualifying Revolving Retail	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%	73.2%
Other Retail	71.2%	61.4%	60.3%	44.4%	48.6%	65.1%	58.5%	49.2%
Exposure-weighted average	risk weight (%)
Residential Mortgage	5.1%	6.8%	16.1%	30.3%	76.5%	113.5%	237.9%	18.0%
Qualifying Revolving Retail	4.7%	11.0%	13.6%	38.1%	106.0%	205.2%	271.7%	35.5%
Other Retail	18.1%	29.0%	41.7%	58.7%	76.5%	158.6%	209.7%	63.5%

ANZ Basel II Pillar 3 disclosure

March 2011

Table 6(e): Actual Losses by portfolio type[27 28]

Table 6(e): Actual Losses by portfolio type27 28
	Halfyear Mar 11
	Individual provision charge	Write-offs
Basel Asset Class	$M	$M
Corporate	175	263
Sovereign	-	-
Bank	(8)	-
Residential Mortgage	23	40
Qualifying Revolving Retail	115	135
Other Retail	133	142
Total Advanced IRB	438	580
Specialised Lending	107	56
Standardised approach	49	67
Total	594	703
	Halfyear Sep 10
	Individual provision charge	Write-offs
Basel Asset Class	$M	$M
Corporate	209	197
Sovereign	-	-
Bank	(5)	-
Residential Mortgage	65	65
Qualifying Revolving Retail	109	134
Other Retail	140	156
Total Advanced IRB	518	552
Specialised Lending	173	144
Standardised approach	53	35
Total	744	731
	Halfyear Mar 10
	Individual provision charge	Write-offs
Basel Asset Class	$M	$M
Corporate	461	440
Sovereign	-	-
Bank	(18)	8
Residential Mortgage	97	52
Qualifying Revolving Retail	107	128
Other Retail	162	174
Total Advanced IRB	809	802
Specialised Lending	164	136
Standardised approach	53	25
Total	1,026	963

27 28

Most portfolios experienced a reduction in provisions and write-offs during the half year to March 2011, reflecting lower defaults due to improved economies and reduction in large single name defaults that emerged during the Global Financial Crisis. The exceptions were small increases in provisions in Qualifying Revolving Retail due to seasonal factors, and a small increase in write-offs following a period of portfolio growth in the Standardised approach portfolios.

27 Individual Provision charge relates to loans and advances, and does not include impairment on Available-For-Sale assets of $16 million in March 2011 (September 2010: $1 million; March 2010: $20 million)

28 Some prior period comparatives have been restated to reflect reclassification between asset classes.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 6(f): Analysis of expected versus actual losses by portfolio type[29]

	Mar 10	Mar 11
	One year	Actual losses
	regulatory expected	for 12 months
	loss estimate	(Write-offs)
	$M	$M
Corporate	1,522	460
Sovereign	20	-
Bank	22	-
Residential Mortgage	587	105
Qualifying Revolving Retail	420	269
Other Retail	815	298
Specialised Lending	1,301	200
Total Advanced IRB and Specialised Lending	4,687	1,332
	Sep 09	Sep 10
	One year	Actual losses
	regulatory expected	for 12 months
	loss estimate	(Write-offs)
	$M	$M
Corporate	1,644	637
Sovereign	7	-
Bank	58	8
Residential Mortgage	561	117
Qualifying Revolving Retail	396	262
Other Retail	813	330
Specialised Lending	1,050	280
Total Advanced IRB and Specialised Lending	4,529	1,634
	Mar 09	Mar 10
	One year	Actual losses
	regulatory expected	for 12 months
	loss estimate	(Write-offs)
	$M	$M
Corporate	1,836	985
Sovereign	7	-
Bank	30	5
Residential Mortgage	469	84
Qualifying Revolving Retail	369	266
Other Retail	614	419
Specialised Lending	855	262
Total Advanced IRB and Specialised Lending	4,180	2,021

The Regulatory Expected Loss (EL) shown above represents estimated credit loss from defaults over a one-year horizon (computed as the product of PD, EAD and LGD) plus the Individual Provision balance. The actual loss measures are write-offs for the following year. While these metrics provide some insight into the predictive power of ANZ's estimations, any comparison has limitations due to definitional differences - eg:

The parameters PD, EAD and LGD underlying the Regulatory EL calculation represent throughthe-cycle estimates based on APRA requirements which include the use of a LGD floor of 20% for Mortgages, and Supervisory Slotting approach for project finance, object finance and nondiversified real estate. Regulatory EL also includes the Individual Provision balance on defaulted exposures
Regulatory EL is a measure of expected credit losses at the start of the year, whereas write-offs relate to a fluctuating portfolio and are recorded throughout the year

29 Table 6(f) relates only to Advanced IRB and not Standardised, Equities, Securitisation or Other Assets.

ANZ Basel II Pillar 3 disclosure

March 2011

There is typically a time lag between default and write-offs representing the workout period where recovery options are identified and pursued.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 7 Credit risk mitigation disclosures

Table 7(b): Credit risk mitigation on Standardised approach portfolios – collateral[30]

				Mar 11
						Total Exposure
		Eligible Financial		Other Eligible		post Credit Risk
	Exposure		Collateral	Collateral			Mitigation
	$M		$M	$M			$M	% Coverage
Standardised approach
Corporate	22,216		776		-		21,440	3.5%
Sovereign	-		-		-		-	0.0%
Bank	-		-		-		-	0.0%
Residential Mortgage	1,154		-		-		1,154	0.0%
Qualifying Revolving Retail	1,791		-		-		1,791	0.0%
Other Retail	1,290		1		-		1,289	0.1%
Total	26,451		777		-		25,674	2.9%
				Sep 10
						Total Exposure
	Exposure	Eligible Financial Collateral		Other Eligible Collateral		post Credit Risk Mitigation
	$M		$M	$M			$M	% Coverage
Standardised approach
Corporate	22,050		768		-		21,282	3.5%
Sovereign	-		-		-		-	0.0%
Bank	-		-		-		-	0.0%
Residential Mortgage	1,479		-		-		1,479	0.0%
Qualifying Revolving Retail	1,841		-		-		1,841	0.0%
Other Retail	1,112		-		-		1,112	0.0%
Total	26,482		768		-		25,714	2.9%
				Mar 10
						Total Exposure
		Eligible Financial		Other Eligible		post Credit Risk
	Exposure		Collateral	Collateral			Mitigation
	$M		$M	$M			$M	% Coverage
Standardised approach
Corporate	16,831		500		-		16,331	3.0%
Sovereign	-		-		-		-	0.0%
Bank	-		-		-		-	0.0%
Residential Mortgage	1,135		-		-		1,135	0.0%
Qualifying Revolving Retail	4		-		-		4	0.0%
Other Retail	560		-		-		560	0.0%
Total	18,530		500		-		18,030	2.7%

30 Eligible Collateral can include cash collateral (cash, certificates deposits and bank bills issued by the lending ADI), gold bullion and highly rated debt securities.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 7(c): Credit risk mitigation – guarantees and credit derivatives[31]

			Mar 11
		Exposures	Exposures	Total Exposure
		covered by	covered by	post Credit Risk
	Exposure	Guarantees	Credit Derivatives	Mitigation
	$M	$M	$M	$M	% Coverage
Advanced IRB
Corporate (incl. Specialised Lending)	190,749	13,634	140	188,119	7.2%
Sovereign	30,376	74	-	36,977	0.2%
Bank	39,084	4,352	-	34,974	11.1%
Residential Mortgage	226,660	-	-	226,659	0.0%
Qualifying Revolving Retail	21,020	-	-	21,020	0.0%
Other Retail	28,538	-	-	28,538	0.0%
Total	536,427	18,060	140	536,287	3.4%

Standardised approach
Corporate	21,440	-	-	21,440	0.0%
Sovereign	-	-	-	-	0.0%
Bank	-	-	-	-	0.0%
Residential Mortgage	1,154	-	-	1,154	0.0%
Qualifying Revolving Retail	1,791	-	-	1,791	0.0%
Other Retail	1,289	-	-	1,289	0.0%
Total	25,674	-	-	25,674	0.0%
			Sep 10
		Exposures	Exposures	Total Exposure
		covered by	covered by	post Credit Risk
	Exposure	Guarantees	Credit Derivatives	Mitigation
	$M	$M	$M	$M	% Coverage
Advanced IRB Corporate (incl. Specialised Lending)	192,037	16,497	229	186,059	8.7%
Sovereign	25,365	30	-	35,099	0.1%
Bank	36,666	4,236	-	32,681	11.6%
Residential Mortgage	220,055	-	-	220,055	0.0%
Qualifying Revolving Retail	20,764	-	-	20,764	0.0%
Other Retail	28,282	-	-	28,282	0.0%
Total	523,169	20,763	229	522,940	4.0%

Standardised approach
Corporate	21,282	-	-	21,282	0.0%
Sovereign	-	-	-	-	0.0%
Bank	-	-	-	-	0.0%
Residential Mortgage	1,479	-	-	1,479	0.0%
Qualifying Revolving Retail	1,841	-	-	1,841	0.0%
Other Retail	1,112	-	-	1,112	0.0%
Total	25,714	-	-	25,714	0.0%

31 Table 7(c) shows the exposure amount by asset class gross and net of the impact of guarantees and credit derivatives.

ANZ Basel II Pillar 3 disclosure

March 2011

			Mar 10
		Exposures	Exposures	Total Exposure
		covered by	covered by	post Credit Risk
	Exposure	Guarantees	Credit Derivatives	Mitigation
	$M	$M	$M	$M % Coverage
Advanced IRB
Corporate (incl. Specialised Lending)	185,540	13,500	378	181,978	7.5%
Sovereign	26,937	30	-	34,786	0.1%
Bank	32,617	4,970	-	27,952	15.2%
Residential Mortgage	208,508	-	-	208,508	0.0%
Qualifying Revolving Retail	20,396	-	-	20,396	0.0%
Other Retail	28,250	-	-	28,250	0.0%
Total	502,248	18,500	378	501,870	3.8%

Standardised approach
Corporate	16,331	-	-	16,331	0.0%
Sovereign	-	-	-	-	0.0%
Bank	-	-	-	-	0.0%
Residential Mortgage	1,135	-	-	1,135	0.0%
Qualifying Revolving Retail	4	-	-	4	0.0%
Other Retail	560	-	-	560	0.0%
Total	18,030	-	-	18,030	0.0%

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 5 – Securitisation

Table 9 Securitisation disclosures

Table 9(d): Traditional and synthetic securitisation Exposure at Default[32 33]

		Mar 11
Traditional securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlyingasset	$M	$M	$M	$M
Residential mortgage	184	-	-	1,641
Credit cards and other personal loans	-	-	-	18
Auto and equipment finance	-	-	-	808
Commercial loans	-	-	-	21
Other	-	-	-	2,434
Total	184	-	-	4,922
Synthetic securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlyingasset	$M	$M	$M	$M
Residential mortgage	-	-	-	-
Credit cards and other personal loans	-	-	-	-
Auto and equipment finance	-	-	-	-
Commercial loans	-	-	-	-
Other	-	-	-	-
Total	-	-	-	-
Aggregate of traditional and synthetic securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlying asset	$M	$M	$M	$M
Residential mortgage	184	-	-	1,641
Credit cards and other personal loans	-	-	-	18
Auto and equipment finance	-	-	-	808
Commercial loans	-	-	-	21
Other	-	-	-	2,434
Total	184	-	-	4,922

32 For the ANZ originated and Third party originated columns the value shown is the current outstanding value of the assets originated. For the Facilities provided column the value shown is the Exposure at Default of facilities extended to securitisation undertaken by third parties where ANZ does not act as an originator.

33 Total Exposure at Default in Table 9(d) varies from that presented in remaining tables by $45 million. This amount is included in total asset value of ANZ originated securitisations, however is excluded from facilities provided in Table 9(d) to avoid double counting.

ANZ Basel II Pillar 3 disclosure

March 2011

		Sep 10
Traditional securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlyingasset	$M	$M	$M	$M
Residential mortgage	211	-	-	1,908
Credit cards and other personal loans	-	-	-	18
Auto and equipment finance	-	-	-	542
Commercial loans	-	-	-	22
Other	-	-	-	2,887
Total	211	-	-	5,377
Synthetic securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlyingasset	$M	$M	$M	$M
Residential mortgage	-	-	-	-
Credit cards and other personal loans	-	-	-	-
Auto and equipment finance	-	-	-	-
Commercial loans	-	-	-	-
Other	-	-	-	-
Total	-	-	-	-
Aggregate of traditional and synthetic securitisations
	ANZ	Third party	Other	Facilities
	originated	originated	Services	provided
Underlying asset	$M	$M	$M	$M
Residential mortgage	211	-	-	1,908
Credit cards and other personal loans	-	-	-	18
Auto and equipment finance	-	-	-	542
Commercial loans	-	-	-	22
Other	-	-	-	2,887
Total	211	-	-	5,377

ANZ Basel II Pillar 3 disclosure

March 2011

		Mar 10
Traditional securitisations
	ANZ	Third party Other Facilities
	originated	originated Services provided
Underlying asset	$M	$M $M $M
Residential mortgage	242	- - 1,626
Credit cards and other personal loans	-	- - -
Auto and equipment finance	-	- - 870
Commercial loans	-	- - 161
Other	-	- - 3,626
Total	242	- - 6,283


Synthetic securitisations
	ANZ	Third party Other Facilities
	originated	originated Services provided
Underlying asset	$M	$M $M $M
Residential mortgage	-	- - -
Credit cards and other personal loans	-	- - -
Auto and equipment finance	-	- - -
Commercial loans	-	- - -
Other	-	- - 246
Total	-	- - 246


Aggregate of traditional and synthetic securitisations
ANZ originated		Third party Other Facilities
		originated Services provided
Underlyingasset $M		$M $M $M
Residential mortgage 242		- - 1,626
Credit cards and other personal loans -		- - -
Auto and equipment finance -		- - 870
Commercial loans -		- - 161
Other -		- - 3,872
Total 242		- - 6,529

ANZ Basel II Pillar 3 disclosure

March 2011

Table 9(e): Impaired and Past due loans relating to ANZ originated securitisations

		Mar 11
				Losses
				recognised
				for the six
	ANZ originated	Impaired	Past due	months ended
Underlying asset	$M	$M	$M	$M
Residential mortgage	184	-	-	-
Credit cards and other personal loans	-	-	-	-
Auto and equipment finance	-	-	-	-
Commercial loans	-	-	-	-
Other	-	-	-	-
Total	184	-	-	-
		Sep 10
				Losses
				recognised
				for the six
	ANZ originated	Impaired	Past due	months ended
Underlying asset	$M	$M	$M	$M
Residential mortgage	211	-	-	-
Credit cards and other personal loans	-	-	-	-
Auto and equipment finance	-	-	-	-
Commercial loans	-	-	-	-
Other	-	-	-	-
Total	211	-	-	-
		Mar 10
				Losses
				recognised
				for the six
	ANZ originated	Impaired	Past due	months ended
Underlying asset	$M	$M	$M	$M
Residential mortgage	242	-	-	-
Credit cards and other personal loans	-	-	-	-
Auto and equipment finance	-	-	-	-
Commercial loans	-	-	-	-
Other	-	-	-	-
Total	242	-	-	-

Table 9(f): Securitisation – Exposure at Default by exposure type[34]

	Mar 11	Sep 10	Mar 10
Securitisation exposure type	$M	$M	$M
Liquidity facilities	2,002	2,529	2,888
Funding facilities	2,486	2,549	3,034
Underwriting facilities	-	-	-
Lending facilities	-	-	-
Credit enhancements	26	25	26
Holdings of securities (excluding trading book)	453	319	626
Other	-	-	-
Total	4,967	5,422	6,574

34 Credit enhancement facilities are second loss facilities and benefit from credit enhancement from a third party first loss provider.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 9(g) part (i): Securitisation – Exposure at Default by risk weight band

		Mar 11	Mar 11
	Exposure at Default		Risk weighted assets
Securitisation risk weights		$M		$M
≤ 25%		3,914		469
>25 ≤ 35%		90		32
>35 ≤ 50%		-		-
>50 ≤ 75%		185		98
>75 ≤ 100%		536		536
>100 ≤ 650%		49		74
1250% (Deduction)		193		-
Total		4,967		1,209
		Sep 10
	Exposure at Default		Risk weighted assets
Securitisation risk weights		$M		$M
≤ 25%		3,230		369
>25 ≤ 35%		146		51
>35 ≤ 50%		20		10
>50 ≤ 75%		186		98
>75 ≤ 100%		1,482		1,482
>100 ≤ 650%		54		81
1250% (Deduction)		304		-
Total		5,422		2,091
		Mar 10
Securitisation risk weights	Exposure at Default $M		Risk weighted assets $M
≤ 25%		4,772		517
>25 ≤ 35%		-		-
>35 ≤ 50%		20		10
>50 ≤ 75%		14		10
>75 ≤ 100%		1,388		1,388
>100 ≤ 650%		20		50
1250% (Deduction)		360		-
Total		6,574		1,975

ANZ Basel II Pillar 3 disclosure

March 2011

Table 9(g) part (ii): Securitisation – Aggregate securitisation exposures by risk weight band

	Mar 11	Mar 11
	Deductions from Tier 1 Capital Deductions from Tier 2 Capital Total
Securitisation exposures deducted from Capital	$M $M $M
Residential mortgage	-	- -
Credit cards and other personal loans	-	- -
Auto and equipment finance	-	- -
Commercial loans	-	- -
Other	96	96 192
Total	96	96 192

		Sep 10
	Deductions from	Deductions from
	Tier 1 Capital	Tier 2 Capital	Total
Securitisation exposures deducted from Capital	$M	$M $M
Residential mortgage	-	-	-
Credit cards and other personal loans	-	-	-
Auto and equipment finance	-	-	-
Commercial loans	-	-	-
Other	152	152	304
Total	152	152	304
		Mar 10
	Deductions from	Deductions from
	Tier 1 Capital	Tier 2 Capital	Total
Securitisation exposures deducted from Capital	$M	$M $M
Residential mortgage	-	-	-
Credit cards and other personal loans	-	-	-
Auto and equipment finance	-	-	-
Commercial loans	-	-	-
Other	180	180	360
Total	180	180	360

Table 9(h) and 9(i): Security exposures subject to early amortisation or using Standardised approach

ANZ does not have any Securitisation exposures subject to early amortisation or using Standardised approach.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 9(j): Securitisation – Summary of current year’s activity by underlying asset type and facility[35]

and facility 35
	For the six months to 31 Mar 11
	Original value securitised
	ANZ originated Third party originated Recognised gain or loss on sale
Securitisation activity by underlying asset type	$M $M $M
Residential mortgage	-	1,525 -
Credit cards and other personal loans	-	157 -
Auto and equipment finance	-	695 -
Commercial loans	-	- -
Other	-	- -
Total	-	2,377 -

		Notional amount $M

Securitisation activity by facility provided

Liquidity facilities		-
Funding facilities		235
Underwriting facilities		-
Lending facilities		-
Credit enhancements		-
Holdings of securities (excluding trading book)		157
Other		-
Total		392

	For the	six months to 30 Sep 10
	Original value securitised
	ANZ originated Third party originated Recognised gain or loss on sale
Securitisation activity by underlying asset type	$M $M $M
Residential mortgage	- 971 -
Credit cards and other personal loans	- 139 -
Auto and equipment finance	- 830 -
Commercial loans	- - -
Other	- 152 -
Total	- 2,092 -

	Notional amount $M
Securitisation activity by facility provided
Liquidity facilities	-
Funding facilities	599
Underwriting facilities	-
Lending facilities	-
Credit enhancements	-
Holdings of securities (excluding trading book)	29
Other	-
Total	628
35

35 For the ANZ originated and Third party originated columns the value shown is the current outstanding value of the assets originated. For the Facilities provided column the value shown is the Exposure at Default of facilities extended to securitisation undertaken by third parties where ANZ does not act as an originator.

ANZ Basel II Pillar 3 disclosure

March 2011

	For the six months to 31	For the six months to 31	Mar 10
	Original value securitised
		Third party	Recognised gain
	ANZ originated	originated	or loss	on sale
Securitisation activity by underlying asset type	$M	$M		$M
Residential mortgage	-	505		-
Credit cards and other personal loans	-	-		-
Auto and equipment finance	-	-		-
Commercial loans	-	-		-
Other	-	164		-
Total	-	669		-
			Notional	amount
Securitisation activity by facility provided				$M
Liquidity facilities				-
Funding facilities				229
Underwriting facilities				-
Lending facilities				-
Credit enhancements				-
Holdings of securities (excluding trading book)				-
Other				-
Total				229

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 6 – Market risk

Table 10 Market risk – Standardised approach

Table 10(b): Market risk – Standardised approach[ 36]

	Mar 11	Sep 10	Mar 10
	$M	$M	$M
Interest rate risk	111	126	121
Equity position risk	7	10	2
Foreign exchange risk	-	-	-
Commodity risk	6	10	5
Total	124	146	128

Risk Weighted Assets equivalent	1,553	1,822	1,597

36 RWA equivalent is the capital requirement multiplied by 12.5 in accordance with APS 110.

ANZ Basel II Pillar 3 disclosure

March 2011

Table 11 Market risk – Internal models approach

Table 11(d): Value at Risk (VaR) over the reporting period[37 38]

		Six months ended	31 Mar 11
	Mean	Maximum	Minimum	Period end
Value at Risk (VaR)	$M	$M	$M	$M
Equities	-	-	-	-
Interest rate	10.8	14.9	7.4	8.3
Foreign exchange	3.1	6.0	1.5	3.3
Commodity	2.5	4.0	1.6	3.3
Credit	5.2	7.9	2.4	7.1
		Six months ended	30 Sep 10
	Mean	Maximum	Minimum	Period end
Value at Risk(VaR)	$M	$M	$M	$M
Equities	-	-	-	-
Interest rate	18.7	24.9	11.1	11.2
Foreign exchange	1.6	3.2	1.1	2.6
Commodity	2.3	3.7	1.6	2.1
Credit	3.2	4.9	2.2	3.0
		Six months ended	31 Mar 10
	Mean	Maximum	Minimum	Period end
Value at Risk (VaR)	$M	$M	$M	$M
Equities	-	-	-	-
Interest rate	15.7	23.8	9.2	23.8
Foreign exchange	2.5	7.8	0.8	1.9
Commodity	2.1	3.2	0.9	2.1
Credit	3.0	4.9	1.7	4.4

Comparison of VaR estimates to actual gains/losses

Back testing involves the comparison of calculated VaR exposures with profit and loss data to identify the frequency of incidents when trading losses exceed the calculated VaR. For APRA back testing purposes, VaR is calculated at the 99% confidence interval with a one day holding period. There have not been any back testing outliers over the past year, which is in line with management expectations (given volatility in the observation periods used has - in general - been higher than actual volatility) and below the APRA notification point of 10 outliers over a 250 trading day period.

37 Regulatory VaR is calculated at 97.5% confidence level for a one-day holding period.

38 The Foreign exchange VaR excludes foreign exchange translation exposures outside of the trading book. (Non Trading translation risk includes translation of the net mark-to-market of the structured credit business).

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 7 – Equities

Table 13 Equities – Disclosures for banking book positions

Table 13(b) and 13(c): Equities – Types and nature of Banking Book investments

		Mar 11
Equity investments		$M
	Balance sheet value	Fair value
Value of listed (publicly traded) equities	1,861	2,818
Value of unlisted (privately held) equities	1,789	1,825
Total	3,650	4,643
		Sep 10
Equity investments		$M
	Balance sheet value	Fair value
Value of listed (publicly traded) equities	1,903	2,831
Value of unlisted (privately held) equities	1,514	1,566
Total	3,417	4,397
		Mar 10
Equity investments		$M
	Balance sheet value	Fair value
Value of listed (publicly traded) equities	1,851	2,547
Value of unlisted (privately held) equities	1,531	1,558
Total	3,382	4,105

Table 13(d) and 13(e): Equities – gains (losses)[39]

	Half Year	Half Year	Half Year
	Mar 11	Sep 10	Mar 10
Gains(losses) on equity investments	$M	$M	$M
Cumulative realised gains (losses) from disposals and liquidations in the reporting period	5	23	2
Total unrealised gains (losses)	1	(80)	46
Total unrealised gains (losses) included in Gross
Tier 1/Tier 2 capital	-	-	-

Table 13(f): Equities Risk Weighted Assets

	Mar 11	Sep 10	Mar 10
Risk Weighted Assets	$M	$M	$M
Equity investments subject to a 300% risk weight	6	1	1
Equity investments subject to a 400% risk weight	1,629	1,576	1,638
Total RWA - Equity	1,635	1,577	1,639
Aggregate amount of equity investments subject to:
Supervisory provisions	-	-	-
Grandfathering provisions	-	-	-

39 The March 2011 amount for 'Cumulative realised gains (losses) from disposals and liquidations in the reporting period' does not include a $35 million impairment charge relating to the carrying value of ANZ's equity investment in Sacombank in Vietnam. This charge reflects impairment, rather than gains (losses) from disposals and liquidations.

ANZ Basel II Pillar 3 disclosure

March 2011

Chapter 8 – Interest Rate Risk in the Banking Book

Table 14 Interest Rate Risk in the Banking Book

Table 14(b): Interest Rate Risk in the Banking Book

	Change in Economic Value

Standard Shock Scenario Stress Testing:	Mar 11 Sep 10 Mar 10
Interest rate shock applied	$M $M $M
AUD
200 basis point parallel increase	28 128 32
200 basis point parallel decrease	(24) (135) (31)

NZD
200 basis point parallel increase	(8) (1) (20)
200 basis point parallel decrease	5 (0) 17

USD
200 basis point parallel increase	(54) (18) (7)
200 basis point parallel decrease	39 11 7

GBP
200 basis point parallel increase	(3) (8) (4)
200 basis point parallel decrease	2 3 1

Other
200 basis point parallel increase	21 (25) 8
200 basis point parallel decrease	(7) 16 3


IRRBB regulatory capital	809 615 651
IRRBB regulatory RWA	10,112 7,690 8,136

Stress testing methodology

Stress tests within ANZ include standard and extraordinary tests. These tests are used to highlight potential risk which may not be captured by VaR, and how the portfolio might behave under extraordinary circumstances. Standard stress tests include statistically derived scenarios based on historical yield curve movements. These combine parallel shocks with twists and bends in the curve to produce a wide range of hypothetical scenarios at high statistical confidence levels, the single worst scenario is identified and reported. Extraordinary stress tests include interest rate moves from historical periods of stress as well as stresses to assumptions made about the repricing term of exposures. The rate move scenarios include daily changes over the stressed periods and the worst theoretical losses over the selected periods are each reported. Stresses of the repricing term assumptions investigate scenarios where actual repricing terms are vastly different to those modelled.

ANZ Basel II Pillar 3 disclosure

March 2011

Appendix 1 – Detail of capital structure

			Mar 11	Sep 10	Mar 10
Fundamental Tier 1 capital			$M	$M	$M
Paid-up	ordinary share capital		20,839	20,140	19,563
Reserves
	Foreign currency translation reserve	(3,299)	(2,742)	(2,381)
	Share and share option reserve	156	168	156
	Total reserves		(3,143)	(2,574)	(2,225)
Prudential retained earnings
	Retained earnings including current year earnings	16,766	15,921	14,629
	Accumulated retained profits and reserves of insurance	(1,269)	(1,312)	(955)
	Funds management and securitisation
	entities and associates
	Dividend not provided for	(1,662)	(1,895)	(1,318)
	Deferred fee revenue including fees deferred as part of loan yields	398	402	425
	Accrual for Dividend Reinvestment Plans	499	569	395
	Total prudential retained earnings		14,732	13,685	13,176
Minority interests			64	64	66
Total			32,492	31,315	30,580
			Mar 11	Sep 10	Mar 10
Deductions from Tier 1 capital			$M	$M	$M
Goodwill			(2,795)	(2,910)	(2,824)
Other deductions from Tier 1 capital
	Intangible component of investment in
	OnePath Australia and New Zealand	(2,059)	(2,043)	(1,961)
	(excluding prudential goodwill)
	Capitalised software and other intangible assets	(1,323)	(1,169)	(1,008)
	Capitalised expenses including loan and
	lease origination fees, capitalised securitisation establishment costs and costs	(666)	(655)	(617)
	associated with debt raisings
	Applicable deferred tax assets (excluding
	the component relating to the general	(154)	(235)	(215)
	reserve for impairment of financial assets)
	Mark-to-market impact of own credit spread	(18)	(19)	22
	Total other deductions from Tier 1 capital		(4,220)	(4,121)	(3,779)
50/50 deductions from Tier 1 capital
	Investment in ANZ insurance subsidiaries	(200)	(198)	(189)
	Investment in funds management entities	(29)	(36)	(33)
	Investment in OnePath Australia and New Zealand	(901)	(845)	(634)
	Investment in other Authorised Deposit- taking Institutions and overseas equivalents	(1,162)	(988)	(981)
	Investment in other commercial operations	(8)	(21)	(36)
	Expected loss in excess of eligible provisions	(473)	(560)	(518)
	Other	(282)	(378)	(439)
	Total 50/50 deductions from Tier 1 capital		(3,055)	(3,026)	(2,830)
Total deductions from Tier 1 capital			(10,070)	(10,057)	(9,433)

ANZ Basel II Pillar 3 disclosure

March 2011

			Mar 11	Sep 10	Mar 10
Deductions from Tier 2 capital			$M	$M	$M
Upper and lower Tier 2 capital deductions			(28)	(28)	(28)
50/50 deductions from Tier 2 capital
	Investment in ANZ insurance subsidiaries	(200)	(198)	(189)
	Investment in funds management entities	(29)	(36)	(33)
	Investment in OnePath Australia and New Zealand	(901)	(845)	(634)
	Investment in other Authorised Deposit
	Taking Institutions and overseas	(1,162)	(988)	(981)
	equivalents
	Investment in other commercial operations	(8)	(21)	(36)
	Expected loss in excess of eligible provisions	(473)	(560)	(518)
	Other	(282)	(378)	(439)
	Total 50/50 deductions from Tier 2 capital		(3,055)	(3,026)	(2,830)
Total deductions from Tier 2 capital			(3,083)	(3,054)	(2,858)

ANZ Basel II Pillar 3 disclosure

March 2011

Appendix 2 – ANZ Bank (Europe) Limited

ANZ Bank (Europe) Limited (ANZBEL) is a 100% owned and controlled subsidiary of ANZ, and is regulated by the Financial Services Authority (FSA). ANZBEL is subject to similar Pillar 3 requirements as ANZ, under the FSA's Prudential Source Book for Banks, Building Societies and Investment Firms (BIPRU). The FSA has granted ANZBEL a Pillar 3 disclosure waiver direction, which can be found on the FSA website: http://www.fsa.gov.uk/pubs/waivers/bipru_waivers.pdf

In line with the FSA waiver direction, ANZBEL will rely on disclosures in this document to satisfy most of its Pillar 3 disclosure obligations. The following FSA requirements are not mirrored in APS 330 or included in this disclosure document, and as such are required by the FSA to be reported on an individual basis in the annual ANZBEL Statutory Accounts:

BIPRU 11.5.4R (4) – Disclosure of the firm’s minimum capital requirements covering position, foreign exchange, commodity, counterparty and concentration risks
BIPRU 11.5.12R – Disclosure: Market Risk.

ANZ Basel II Pillar 3 disclosure

March 2011

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Australia and New Zealand Banking Group Ltd. — Interim / Quarterly Report 2011

10425_rns_2011-05-25_0c8b94ef-8d62-4a35-bf62-2a6055b123ed.pdf

2011 BASEL II PILLAR 3 DISCLOSURE

Important notice

TABLE OF CONTENTS[1]

Chapter 1 – Highlights[ 2]

Capital ratios

Exposure at Default ($bn)

Strengthening capital position through organic capital generation

Growth in EAD of 2.3% to $572.6bn

Movement in Credit Risk Weighted Assets ($bn)

However, CRWA remained stable since Sep 10 due to:

Average Risk Weights (CRWA/EAD)

Portfolio average risk weight decreased by 1.0% in the Mar 11 half to 40.7%

Impaired Assets ($m)

Impaired Assets declined 5.2% in Mar 11

Provision ratios (Provisions/CRWA)

Provision coverage ratios remain stable

Chapter 2 – Introduction

Purpose of this document

Verification of disclosures

Comparison to ANZ’s published financial results

Chapter 3 – Group structure and capital adequacy

Top Corporate Entity

Table 1 Capital deficiencies in non-consolidated subsidiaries

Table 2 Capital Structure

Table 3 Capital Adequacy[3 4 ]

Credit Risk Weighted Assets (CRWA)

Market Risk and IRRBB RWA

Chapter 4 – Credit risk

Table 4 Credit risk – General disclosures

Table 4(b): Period end and average Exposure at Default[5 6 7 8 ]

Table 4(d): Industry distribution of Exposure at Default[9 10]

Mar 11

Table 4(f) part (ii): Impaired asset, Past due loans, Provisions and Write-offs

Table 4(h): Reconciliation of changes in Provisions

Specific Provision Balance and General Reserve for Credit Losses[20]

Table 5 Credit risk – Disclosures for portfolios subject to the Standardised approach and supervisory risk weighting in the IRB approach

Table 5(b): Exposure at Default by risk bucket

Table 6 Credit risk – Disclosures for portfolios subject to Advanced IRB approaches

Portfolios subject to the Advanced IRB (AIRB) approach

The ANZ rating system

Table 6(e): Actual Losses by portfolio type[27 28]

Table 7 Credit risk mitigation disclosures

Chapter 5 – Securitisation

Table 9 Securitisation disclosures

Table 9(e): Impaired and Past due loans relating to ANZ originated securitisations

Table 9(g) part (i): Securitisation – Exposure at Default by risk weight band

Table 9(g) part (ii): Securitisation – Aggregate securitisation exposures by risk weight band

Table 9(h) and 9(i): Security exposures subject to early amortisation or using Standardised approach

Chapter 6 – Market risk

Table 10 Market risk – Standardised approach

Table 11 Market risk – Internal models approach

Comparison of VaR estimates to actual gains/losses

Chapter 7 – Equities

Table 13 Equities – Disclosures for banking book positions

Table 13(d) and 13(e): Equities – gains (losses)[39]

Table 13(f): Equities Risk Weighted Assets

Chapter 8 – Interest Rate Risk in the Banking Book

Table 14 Interest Rate Risk in the Banking Book

Table 14(b): Interest Rate Risk in the Banking Book

Stress testing methodology

Appendix 1 – Detail of capital structure

Appendix 2 – ANZ Bank (Europe) Limited

More from Australia and New Zealand Banking Group Ltd.

Australia and New Zealand Banking Group Ltd. Interim / Quarterly Report 2011