| PILLAR 3 REPORT SEPTEMBER 2023 INCORPORATING THE REQUIREMENTS OF APS330 WESTPAC BANKING CORPORATION ABN 33 007 457 141 |
| II WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT TABLE OF CONTENTS Structure of Pillar 3 Report EXECUTIVE SUMMARY 1 Introduction 4 Risk appetite and risk types 5 Controlling and managing risk 6 Group structure 11 Capital overview 13 Leverage ratio 17 Credit risk management 18 Credit risk exposures 28 Credit risk mitigation 57 Counterparty credit risk 59 Securitisation 60 Market risk 70 Interest rate risk in the banking book 75 Operational risk 77 Equity risk 79 Funding and liquidity risk management 80 Liquidity coverage ratio 81 Net stable funding ratio 82 Remuneration 84 In this report references to ‘Westpac’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its controlled entities (unless the context indicates otherwise). In this report, unless otherwise stated or the context otherwise requires, references to ‘$’, ‘AUD’ or ‘A$’ are to Australian dollars. References to ‘US$’, ‘USD’ or ‘US dollars’ are to United States dollars, references to ‘NZ$’, ‘NZD’ or ‘NZ dollars’ are to New Zealand dollars and references to GBP are to British Pound Sterling. Refer to Appendix VII for information regarding the rates of exchange between the Australian dollar and other currencies applied by the Group as part of its operating activities as at 30 September 2023, 31 March 2023 and 30 September 2022. Any discrepancies between totals and sums of components in tables contained in this report are due to rounding. In this report, unless otherwise stated, disclosures reflect the Australian Prudential Regulation Authority’s (APRA) implementation of Basel III. Information contained in or accessible through the websites mentioned in this report does not form part of this report unless we specifically state that it is incorporated by reference and forms part of this report. All references in this report to websites are inactive textual references and are for information only. Westpac Banking Corporation ABN 33 007 457 141 APPENDICES 91 Appendix I - APRA’s capital framework 91 Appendix II – Regulatory capital reconciliation 93 Appendix III – Entities included in regulatory consolidation 100 Appendix IV – Level 3 entities’ assets and liabilities 102 Appendix V – Regulatory expected loss 103 Appendix VI – APS330 quantitative requirements 104 Appendix VII – Exchange rates 107 GLOSSARY 108 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 112 Acknowledgment of Indigenous Peoples Westpac acknowledges the First Peoples of Australia and recognises their ongoing role as Traditional Owners of the land and waters of this country, and we pay respect to Elders past and present. We extend that respect to Westpac’s Aboriginal and Torres Strait Islander employees, partners and stakeholders, and to the Indigenous Peoples in the other locations where we operate. In Aotearoa (New Zealand) we also acknowledge tangata whenua and the unique relationship that Indigenous Peoples share with all New Zealanders as partners and custodians of their natural ecosystems under Te Tiriti o Waitangi. WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT |
| 1 EXECUTIVE SUMMARY Key capital ratios 30 Sept 31 March 30 Sept $m 2023 2023 2022 Level 2 Regulatory capital structure Common equity Tier 1 capital after deductions $m 55,885 55,644 53,943 Risk weighted assets $m 451,418 452,946 477,620 Common equity Tier 1 capital ratio % 12.38 12.28 11.29 Additional Tier 1 capital ratio % 2.21 2.20 2.10 Tier 1 capital ratio % 14.59 14.48 13.39 Tier 2 capital % 5.86 5.27 5.01 Total regulatory capital ratio % 20.45 19.75 18.40 APRA leverage ratio % 5.50 5.46 5.61 Level 1 Regulatory capital structure Common equity Tier 1 capital after deductions $m 52,273 52,021 50,722 Risk weighted assets $m 414,293 416,254 447,010 Level 1 Common equity Tier 1 capital ratio % 12.62 12.50 11.35 APRA’s revised capital framework (Basel III) became effective on 1 January 2023. A summary of the changes can be found in Appendix I. These revisions are reflected in the disclosed capital ratios at 30 September 2023 and 31 March 2023. Prior periods have not been restated with capital reported under APRA’s then applicable framework. Common equity Tier 1 (CET 1) capital ratio movement for Full Year 2023 Westpac’s Level 2 CET1 capital ratio at 30 September 2023 was 12.38%, 109 basis points higher than 30 September 2022 primarily due to net profit, less payment of the 2022 final dividend (net of the dividend reinvestment plan) and the 2023 interim dividend. Total risk weighted assets (RWA) decreased from 30 September 2022 by $26.2 billion or 5.5%. Credit RWA decreased by $22.3 billion, mostly from the implementation of APRA’s revised capital framework and reduced credit RWA by $23.7 billion, a 62 basis points addition to the CET1 ratio on implementation. CET1 capital ratio movement for Second Half 20231 (%, basis points) 71 bps 5 bps (54 bps) (11 bps) (1 bp) Mar-23 Net profit 1H23 dividend RWA movement Capital deductions and other items FX translation impacts Sep-23 Westpac’s Level 2 CET1 capital ratio at 30 September 2023 was 10 basis points higher than 31 March 2023. Movements included: • Second Half 2023 net profit: 71 basis points increase; • Payment of the 2023 interim dividend: 54 basis points reduction; • Total RWAs: 5 basis points increase from a reduction in total RWAs from both lower credit and non-credit RWAs. The decrease in credit RWA was mainly from the impact of data refinements which have offset higher lending and credit quality deterioration. Lower non-credit RWAs include a decrease in market risk and operational risk, offsetting an increase in interest rate risk in the banking book (IRRBB) RWA; • Capital deductions and other capital movements: reduced the ratio by 11 basis points. The main drivers were higher deductions for capitalised software and expenditure (7 basis points decrease) and other reserve movements (4 basis points decrease); and • Foreign currency: reduction of 1 basis point from the depreciation of the A$ against the US$ partly offset by the appreciation of the A$ against the NZ$. 1. 1H23 reference refers to First Half 2023. |
| 2 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT EXECUTIVE SUMMARY Westpac’s Level 1 CET1 capital ratio was 12.62% at 30 September 2023, 12 basis points higher than 31 March 2023 with movements in line with Level 2. Risk Weighted Assets (RWA) 30 Sept 31 March 30 Sept $m 2023 2023 2022 Risk weighted assets at Level 2 Credit risk 339,758 340,558 362,098 Market risk 11,538 15,168 9,290 Operational risk 55,175 56,900 59,063 Interest rate risk in the banking book 40,138 34,748 42,782 Other 4,809 5,572 4,387 Total RWA 451,418 452,946 477,620 Total Exposure at Default 1,173,867 1,187,904 1,214,041 Total RWA decreased by 0.34% to $451.4 billion over the half with decreases across all RWA categories other than IRRBB RWA. Credit RWA decreased by $0.8 billion. Key movements included: • A $5.6 billion decrease mostly due to data refinements related to Financial Institutions, Business Lending and Property Finance; • A $2.3 billion increase from deteriorating credit quality largely reflecting an increase in delinquencies in Residential Mortgages and New Zealand, partly offset by a reduction in impaired exposures in Corporate and Business Lending; • A $2.1 billion increase from higher lending mainly in Corporate lending and Property Finance; • A $0.3 billion increase from counterparty credit risk and mark-to-market related credit risk primarily due to increases in the mark-to-market value of derivatives from changes in underlying foreign currency rates; and • A $0.2 billion increase from foreign currency translation impacts from the depreciation of the A$ against the US$ partly offset by the appreciation of the A$ against the NZ$. Non-credit RWA were $0.7 billion lower. Key movements included: • Market RWA: $3.6 billion decrease from market risk exposure changes and lower Risks-Not-In-VaR1; • Operational RWA: $1.7 billion decrease related to indemnities provided as part of the exit of non-core businesses that have been settled over the half; • IRRBB RWA: $5.4 billion increase from: – $3.2 billion higher regulatory embedded loss; and – $2.2 billion increase in the repricing and yield curve outcome from the underlying banking book position. 1. VaR refers to Value at Risk. |
| 3 Exposure at Default Exposure at default (EAD) decreased $14.0 billion over the half. Key movements include: • A $36.5 billion decrease in Sovereign exposures, primarily due to a decrease in holdings of liquid assets reflecting a reduction in cash balances as Term Funding Facility maturities were repaid in the period; • A $19.8 billion increase mainly from higher lending in Residential Mortgages, Securitisation, Corporate lending and Property Finance asset classes; • A $1.5 billion increase in derivative exposures; and • A $1.1 billion increase from foreign currency translation impacts. Additional Tier 1 and Tier 2 During the half the Group issued A$2.9 billion of Tier 2 capital instruments and redeemed A$1.2 billion of Tier 2 instruments. The net impact of these transactions was an increase in total capital of approximately 38 basis points. There were no Additional Tier 1 capital instruments issued or redeemed. On 2 December 2021, APRA announced a requirement for domestic systemically important banks (D-SIBs) including Westpac, to increase total capital requirements by 4.5 percentage points of RWA to meet additional loss absorbing capacity. This includes an interim total capital requirement of 16.75% from 1 January 2024 and a final total capital requirement from 1 January 2026 of 18.25%. The increase in total capital is expected to be met through additional Tier 2 capital1. Leverage ratio The leverage ratio represents the amount of Tier 1 capital relative to exposure2. At 30 September 2023, Westpac’s leverage ratio was 5.50%, up 4 basis points from 31 March 2023 due to decreases in total exposures and higher Tier 1 capital. Liquidity Coverage Ratio (LCR) Westpac’s average LCR for the quarter ended 30 September 2023 was 134% (30 June 2023: 138%) well above the regulatory minimum of 100%. The decrease in the ratio was mainly due to a decrease in holdings of liquid assets reflecting a reduction in cash balances as Term Funding Facility maturities were repaid in the period. Net Stable Funding Ratio (NSFR) Westpac had an NSFR of 115% as at 30 September 2023 (30 June 2023: 118%) and continues to be above the regulatory minimum of 100%. The decrease in the ratio reflects a 3% increase in required stable funding. This has been driven by the first allocation of the Term Funding Facility maturing, as the mortgages backing the facilities are no longer used as collateral. 1. Within Westpac’s funding, this increase in total capital is likely to be offset by a decrease in long-term wholesale funding. 2. As defined under Attachment D of APS110: Capital Adequacy |
| 4 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT INTRODUCTION Westpac Banking Corporation is an Authorised Deposit-taking Institution (ADI) subject to regulation by APRA. APRA has accredited Westpac to apply advanced models permitted by the Basel III global capital adequacy regime to the measurement of its regulatory capital requirements. Westpac uses the Advanced Internal Ratings-Based approach (Advanced IRB) for credit risk and the Standardised Measurement Approach (SMA) for operational risk. In accordance with APS330 Public Disclosure, financial institutions that have received the Advanced IRB accreditation, such as Westpac, are required to disclose prudential information about their risk management practices on a semi-annual basis. A subset of this information must be disclosed quarterly. This report describes Westpac’s risk management practices and presents the prudential assessment of Westpac’s capital adequacy as at 30 September 2023. In addition to this report, the regulatory disclosures section of the Westpac website1 contains the reporting requirements for: • Capital instruments under Attachment B of APS330; and • The identification of potential Global-Systemically Important Banks (G-SIB) under Attachment H of APS330 (disclosed annually). Capital instruments disclosures are updated when: • A new capital instrument is issued that will form part of regulatory capital; or • A capital instrument is redeemed, converted into CET1 capital, written off, or its terms and conditions are changed. 1. http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/ |
| 5 RISK APPETITE AND RISK TYPES Westpac’s appetite for risk is informed by our strategic objectives and business plans, regulatory rules and ratios, and the potential for adverse outcomes that may result in material impacts on our customers, our staff, our reputation, our regulatory relationships and/or our financial position including the potential for capital and liquidity ratios to fall below target levels in stressed scenarios. Westpac distinguishes between different types of risk and takes an integrated approach toward identifying, assessing, and managing risks. The annual review of Westpac’s Risk Management Framework, which includes the Risk Management Strategy and Board Risk Appetite Statement, together with the establishment and monitoring of key controls through supporting frameworks and policies all play vital roles. Overview of key risk types • risk culture – the risk that our culture does not promote and reinforce behavioural expectations or structures to identify, understand, discuss and act on risks. Ineffective risk management could lead to poor risk awareness, risk-taking outside of risk appetite that is tolerated and a culture where key learnings are not integrated into Group-wide customer outcomes and impeding continuous improvement; • strategic risk – the risk that Westpac makes inappropriate strategic choices, does not implement its strategies successfully, or does not respond effectively to changes in the environment; • capital adequacy risk – the risk that Westpac has an inadequate level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under both normal or stressed operating environments; • funding and liquidity risk – the risk that Westpac cannot meet its payment obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets; • credit risk – the risk of financial loss where a customer or counterparty fails to meet their financial obligations to Westpac; • market risk – the risk of an adverse impact to Westpac’s financial positions as a result of a change in financial market factors, such as foreign exchange rates, interest rates, commodity prices and equity prices. This includes interest rate risk in the banking book, which is the risk of loss in earnings or economic value in the banking book as a consequence of movements in interest rates; • operational risk – the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The definition excludes strategic risk. While legal risk and regulatory risk arise through inadequate or failed processes, people, and systems or from external events, these are reflected primarily in compliance and conduct risk; • cyber risk – the risk that Westpac or its third parties’ data or technology are inappropriately accessed, manipulated, or damaged from cyber threats or vulnerabilities; • compliance and conduct risk – the risk of failing to abide by compliance obligations required of us or otherwise failing to have behaviours and practices that deliver suitable, fair, and clear outcomes for our customers and that support market integrity; • reputational and sustainability risk − the risk of failing to recognise or address environmental, social or governance (ESG) issues and the risk that an action, inaction, transaction, investment, or event will reduce trust in Westpac’s integrity and competence by clients, counterparties, investors, regulators, employees, or the public; and • financial crime risk – the risk that Westpac fails to prevent financial crime and comply with applicable global financial crime regulatory obligations. We have put in place a risk management framework that seeks to: • achieve Westpac’s purpose of creating better futures together; • deliver fair outcomes for our customers and counterparties that support market integrity; • protect Westpac’s depositors and investors by maintaining a balance sheet with sound credit quality and buffers over regulatory minimums; • manage risk within risk appetite; • are resilient to operational risks and disruptions, and manage the risks arising from service providers; • ensure appropriate reward for risk we take aligned to our purpose, values and behaviours; and • meet our regulatory and statutory obligations. The Board Risk Appetite Statement and Group Risk Management Framework and Strategy are reviewed annually by the Board Risk Committee. This review includes consideration of whether the framework continues to be sound, and that Westpac is operating with due regards to risk appetite. The Board Risk Appetite Statement and Group Risk Management Framework and Strategy were approved by the Board during the 12 months to 30 September 2023. |
| 6 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CONTROLLING AND MANAGING RISK Roles and responsibilities We have adopted and continue to embed a Three Lines of Defence model which enables all our people to understand their own roles and responsibilities in the active management of risk. First Line First Line under the Three Lines of Defence Model refers to all Divisions and Functions excluding the Risk Division and Group Audit. The First Line proactively identifies, evaluates, owns, monitors, manages and controls the existing and emerging risks in their business. It manages business activities within approved risk appetite and policies. In managing its risk, the First Line establishes and maintains appropriate governance structures, controls resources and self-assessment processes, including issue identification, recording and escalation procedures. Second Line Second Line under the Three Lines of Defence Model refers to the Risk Division. The Second Line is an independent function that develops risk management frameworks, defines guardrails, provides objective review and challenge regarding the effectiveness of risk management within the First Line business, and executes specific risk management activities where functional independence and/or specific risk capability is required. Its approach is risk-based and proportionate to First Line activities. Third Line Group Audit is the Third Line assurance function that provides the Board and Senior Executive with independent and objective evaluation of the adequacy and effectiveness of the Group’s governance, risk management and internal controls. Risk management governance structure as at 30 September 2023 Board • approves the overall risk management framework for managing financial and non-financial risks, as well as Westpac’s Risk Management Framework, Risk Management Strategy and Board Risk Appetite Statement, and monitors the effectiveness of risk management by Westpac; • forms a view of Westpac’s risk culture and oversees the identification of, and steps taken, to address any changes to risk culture; • approves the Internal Capital Adequacy Assessment Process (ICAAP), including reviewing Group stress testing outcomes/scenarios, and approves recovery and exit plans and resolution plans; and • makes its annual declaration to APRA on risk management under APRA prudential standard CPS 220 Risk Management. |
| 7 Board Risk Committee (BRiskC) From the perspective of specific types of risk, the BRiskC’s role includes: • credit risk – reviewing and approving Westpac’s Credit Risk Management Framework, Credit Risk Management Strategy, Credit Risk Appetite Statement and material policies and limits supporting Westpac’s Credit Risk Management Framework, approving credit provisioning levels, and monitoring the risk profile, performance, and management of our credit portfolio; • funding and liquidity risk – reviewing and approving Westpac’s Liquidity Risk Management Framework and key policies and limits supporting that framework, including our annual funding strategy, and liquidity targets and limits, reviewing and recommending recovery and exit plans and resolution plans to the Board for approval, and monitoring the liquidity position and requirements; • capital adequacy risk – reviewing and approving Westpac’s Capital Adequacy Risk Management Framework and key policies supporting that framework, reviewing and recommending the ICAAP to the Board for approval including target capital ranges (where appropriate) and reviewing and monitoring capital levels for consistency with the Board Risk Appetite Statement; • market risk – reviewing and approving Westpac’s Market Risk Management Framework and key policies and limits supporting that framework, and reviewing Westpac’s trading and non-trading market risk profiles and their respective exposure against limits; • non-financial risks, including operational risk, compliance and conduct risk, cyber risk, financial crime risk, and reputational and sustainability risk – reviewing and approving the risk class’s Risk Management Framework and key policies supporting those frameworks, and monitoring the performance of risk class, management and controls; and • risk culture – reviewing and approving Westpac’s Risk Culture Framework, forming a view on Westpac’s risk culture and the extent to which it supports our ability to operate consistently within Westpac’s Risk Management Framework and Board Risk Appetite Statement, and overseeing the identification of, and steps taken to address, any desirable changes to risk culture. The Board Risk Committee also: • reviews Westpac’s Group stress testing results, monitors management response and, together with the Board provides recommendations for future scenarios; • provides relevant periodic assurances and reports (as appropriate) to the Board Audit Committee; • refers or recommends to the Board and any other Board Committees (as appropriate) any matters that have come to the attention of the Board Risk Committee that are relevant for the Board or the respective Board Committee; and • in its capacity as the Westpac Group’s US Risk Committee, oversees the key risks, risk management framework and policies of Westpac’s US operations. Assists the Board to: • consider and approve Westpac’s overall risk management framework for managing financial and non-financial risks; • oversee risk culture across Westpac; • oversee Westpac’s risk profile and set risk appetite for material risks; • review and approve the Risk Management Framework, Risk Management Strategy and Board Risk Appetite Statement; • make its annual declaration to APRA on risk management under APRA prudential standard CPS 220 Risk Management; and • oversee compliance risk management within Westpac. The Committee is also responsible for: • reviewing and monitoring Westpac’s risk profile and controls for consistency with the Board Risk Appetite Statement; • overseeing and recommending recovery and exit plans and resolution plans to the Board for approval; • reviewing and approving the limits and conditions that apply to the delegated credit risk approval authorities; • monitoring changes anticipated for the economic and business environment including consideration of emerging risks and other factors considered relevant to our risk profile and risk appetite; • reviewing and where appropriate approving risks beyond the approval discretion provided to management; and • overseeing material legal and regulatory change relevant to Westpac and the management of material litigation and regulatory investigations and associated remediation activities. Risk management governance structure as at 30 September 2023 (continued) |
| 8 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CONTROLLING AND MANAGING RISK Board Committees with a Risk Focus Board Audit Committee (BAC) Assists the Board by overseeing the: • integrity of financial statements and financial reporting systems of Westpac and its related bodies corporate; • external audit engagement, including the external auditor’s qualifications, performance, independence and fees; • performance of the internal audit function; and • integrity of the Group’s corporate reporting including Westpac’s financial reporting and compliance with prudential regulatory reporting and professional accounting requirements. Board Remuneration Committee (BRemC) • The Board Remuneration Committee assists the Board to discharge its responsibility by overseeing the design, operation and monitoring of the remuneration framework. • The Board Remuneration Committee seeks feedback from and considers matters raised by other Board Committees (as appropriate) with respect to remuneration outcomes, adjustments to remuneration in light of relevant matters and alignment of remuneration with the risk management framework. • Cross membership of the Board Remuneration Committee and the Board Risk Committee also supports alignment between risk management and remuneration. • Independent input is received from the Chief Risk Officer on risk, compliance and conduct matters that may need to be considered in remuneration outcomes. Executive Team Westpac Executive Team (ET) • executes the Board-approved strategy; • delivers Westpac’s various strategic and performance goals within the approved risk appetite; and • endorse climate change and human rights position statements for approval by the Board. All other position statements on sustainability issues are approved by the CEO. Executive risk committees Westpac Group Executive Risk Committee (RISKCO) • informs the CEO, Chief Risk Officer and other accountable individuals in making risk-related decisions in respect of the Group; • informs attendees in making material decisions in their area of responsibility, with due consideration of Westpac’s risk profile and risk culture; • reviews and provides input on Westpac’s Risk Management Framework and Risk Management Strategy for approval by the Board; • oversees the implementation and performance of the Risk Management Framework and the Risk Management Strategy as well as required controls and actions; • reviews and monitors risk class risk management frameworks and key supporting policies, as required; • reviews and provides input on the Board Risk Appetite Statement for approval by the Board, oversees the implementation of the Board Risk Appetite Statement and monitors Westpac’s risk profile against its risk appetite measures and thresholds; • monitors the Group’s risk culture, its alignment to risk appetite and related actions; • analyses emerging risks and oversees the adequacy of Westpac’s response; and • reviews outcomes of, annual stress testing, material risk models and risk measurement methodologies, including impacts on capital adequacy and the Group’s Recovery Plan. Westpac Group Asset & Liability Committee (ALCO) • facilitates the optimisation of funding and liquidity risk-reward across Westpac; • reviews the level and quality of capital to ensure that it is commensurate with Westpac’s risk profile, business strategy and risk appetite; • oversees the Liquidity Risk Management Framework, Capital Adequacy Risk Management Framework and key supporting policies; • oversees the funding and liquidity risk profile and balance sheet risk profile (including interest rate risk in the banking book); and • identifies emerging funding, liquidity, and interest rate risk in the banking book risks and oversees actions to respond as appropriate. Risk management governance structure as at 30 September 2023 (continued) |
| 9 Executive risk committees (continued) Westpac Group Credit Risk Committee (CREDCO) • reviews and provides input on the Credit Risk Management Framework, Credit Risk Management Strategy, Credit Risk Appetite Statement, and key supporting policies and limits; • oversees Westpac’s credit risk profile against the Board Risk Appetite Statement and thresholds and reviews and monitors Westpac’s credit risks that are outside of risk appetite or approaching tolerance levels; • reviews reporting from the Climate Change Financial Risk Committee on the potential impact on credit exposures from climate-related transition and physical risks; and • analyses emerging credit risks and implications of changes in the regulatory and external environment on the Group credit risk exposures, and reviews business proposals with material credit risk-related impacts. Westpac Group Market Risk Committee (MARCO) • reviews and provides input on the Market Risk Management Framework and key market risk management policies; • reviews and provides input on policies and limits for managing traded and non-traded market risk; and • monitors Westpac’s market risk profile, appetite and exposures. Westpac Group Operational Risk, Compliance and Resilience Committee (ORCR) • reviews and provides input on the Operational Risk Management Framework, the Cyber Risk Management Framework and the Compliance and Conduct Risk Management Framework, and key supporting policies; • oversees Westpac’s operational risk, cyber risk, and conduct and compliance risk profiles; and • analyses emerging operational, cyber, conduct and compliance risks. Westpac Group Remuneration Oversight Committee (ROC) • supports the BRemC and the Board in fulfilling their responsibility to oversee the design, operation and monitoring of the remuneration framework. Model Risk Committee • oversees the Group Model Risk Policy and associated model risk sub-policies; • reviews and monitors the model risk profile and material model risk exposures across Westpac; • reviews and monitors design quality and operating effectiveness of material models; and • reviews material model risk matters raised by other committees, forums and working groups with responsibility for oversight of identified areas of model risk. Stress Testing Committee • reviews and provides input on the Westpac Group Stress Testing Policy, stress testing results and mitigating actions; • reviews and monitors the effectiveness of Westpac’s Group stress-testing framework; and • oversees the generation and selection of Group stress testing scenarios, with reference to emerging risks. Westpac Group Financial Crime Risk Committee • reviews and provides input on Westpac’s Financial Crime risk appetite measures for inclusion in the Board Risk Appetite Statement; • reviews and provides input on the Financial Crime Risk Management Framework, key supporting policies, programs and standards; • reviews regular reporting on Westpac’s aggregate Financial Crime risk exposures, regulatory matters and measures; and • analyses emerging financial crime risks developments and implications of changes in the regulatory and external environment. Risk management governance structure as at 30 September 2023 (continued) |
| 10 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CONTROLLING AND MANAGING RISK Risk Function Risk Function • promotes a strong risk culture and the ‘Voice of Risk’ across the lines of defence; • owns the design and content of the Risk Management Framework; • defines the structure and coverage of risk appetite; • defines the annual Risk Management Strategy to execute the Risk Management Framework ensuring that the management of risks is in alignment with risk appetite and business strategy; • establishes risk policies, procedures and limits; • measures and reports on risk levels; and • provides oversight of and direction on the management of risks, including Compliance and Conduct and Financial Crime risks. Independent internal review Group Audit • provides independent assurance to the Board, relevant Board Committees and Senior Management on the adequacy and effectiveness of the Group’s governance, risk management and internal controls. Divisional business units and functions Business units and functions • responsible for identifying, evaluating and managing the risks that they originate within approved risk appetite and policies; and • establish and maintain appropriate governance structures, controls, resources and self-assessment processes, including issue identification, recording and escalation procedures. Risk management governance structure as at 30 September 2023 (continued) |
| 11 GROUP STRUCTURE APRA applies a tiered approach to measuring Westpac’s capital adequacy1 by assessing financial strength at three levels: • Level 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved by APRA as being part of a single ‘Extended Licensed Entity’ (ELE) for the purposes of measuring capital adequacy; • Level 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except those entities specifically excluded by APRA regulations. The head of the Level 2 group is Westpac Banking Corporation; and • Level 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities. Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of Westpac’s financial strength on a Level 2 basis2. Refer to Appendix II for a list of entities included in regulatory consolidation for the purposes of measuring capital adequacy at Level 1 and Level 2. The Westpac Group The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory consolidation. /HYHO&RQVROLGDWLRQ /HYHO&RQVROLGDWLRQ /HYHO&RQVROLGDWLRQ :HVWSDF%DQNLQJ &RUSRUDWLRQ :HVWSDF/HYHO VXEVLGLDULHV :HVWSDF1HZ =HDODQG/WG 2WKHU:HVWSDF /HYHOVXEVLGLDULHV 5HJXODWRU\ QRQFRQVROLGDWHG VXEVLGLDULHV Accounting consolidation3 The consolidated financial statements incorporate the assets and liabilities of all entities (including structured entities) controlled by Westpac. Westpac and its subsidiaries are referred to collectively as the ‘Group’. The effects of all transactions between entities in the Group are eliminated on consolidation. Control exists when the parent entity is exposed to, or has rights to, variable returns from its involvement with an entity, and has the ability to affect those returns through its power over that entity. Subsidiaries are fully consolidated from the date on which control commences and they are no longer consolidated from the date that control ceases. Group entities excluded from the regulatory consolidation at Level 2 Regulatory consolidation at Level 2 covers the global operations of Westpac and its subsidiary entities, including other controlled banking, securities and financial entities, except for those entities involved in the following business activities: • insurance; • acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management; • non-financial (commercial) operations; or • special purpose entities to which assets have been transferred in accordance with the requirements of APS120 Securitisation. Retained earnings and equity investments in subsidiary entities excluded from the consolidation at Level 2 are deducted from capital, with the exception of securitisation special purpose entities. 1. APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy of an ADI. 2. Impaired assets and provisions held in Level 3 entities are excluded from the tables in this report. 3. Refer to Note 29 of Westpac’s 2023 Annual Report for further details. |
| 12 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT GROUP STRUCTURE Subsidiary banking entities Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity, is a registered bank incorporated in New Zealand and regulated by, among others, the Reserve Bank of New Zealand (RBNZ) for prudential purposes. WNZL uses both the Advanced IRB and Standardised methodologies for credit risk, and the SMA for operational risk. Other subsidiary banking entities in the Group include Westpac Bank PNG Limited, Westpac Europe Limited and Westpac Europe GMBH (banking licence activated in July 2023). For the purposes of determining Westpac’s capital adequacy subsidiary banking entities are consolidated at Level 2. Restrictions and major impediments on the transfer of funds or regulatory capital within the Group Certain subsidiary banking and trustee entities are subject to local prudential regulation in their own right, including capital adequacy requirements and investment or intra-group exposure limits. Westpac seeks to ensure that its subsidiary entities are adequately capitalised and adhere to regulatory requirements at all times. Dividends and capital are repatriated in line with the Group’s policy subject to subsidiary Board approval and local regulations. Minimum capital (‘thin capitalisation’) rules Tax legislation in most jurisdictions in which the Group operates prescribes minimum levels of capital that must be retained in that jurisdiction to avoid a portion of the interest costs incurred in the jurisdiction ceasing to be tax deductible. Capital for these purposes includes both contributed capital and non-distributed retained earnings. Westpac seeks to maintain sufficient capital/retained earnings in these entities to comply with these rules. Tax costs associated with repatriation Repatriation of retained earnings (and capital) may result in tax being payable in either the jurisdiction from which the repatriation occurs or Australia on receipt of the relevant amounts. This cost would reduce the amount actually repatriated. Intra-group exposure limits Exposures to related entities are managed within the prudential limits prescribed by APRA in APS222 Associations with Related Entities1 .. Westpac has an internal limit structure and approval process governing credit exposures to related entities. This limit structure and approval process, combined with APRA’s prudential limits, is designed to reduce the potential for unacceptable contagion risk. Prudential regulation of subsidiary entities On 23 March 2021, RBNZ issued two notices to Westpac New Zealand Limited (WNZL) under section 95 of the Banking (Prudential Supervision) Act 1989 (NZ) requiring WNZL to supply two external reviews to the RBNZ. One review related to risk governance, and the other related to liquidity risk management and culture. These reviews only applied to WNZL and not to Westpac in Australia nor its New Zealand branch. Both reviews were completed during 2021 and 2022, and work arising from the reviews has been delivered to the satisfaction of the WNZL Board. From 31 March 2021, the RBNZ amended WNZL’s conditions of registration, requiring WNZL to discount the value of its liquid assets by approximately 14%. The RBNZ subsequently reduced the overlay quantum to approximately 7% from 15 August 2022; and removed the remaining overlay from 15 September 2023. RBNZ capital review The RBNZ capital adequacy framework became effective from 1 July 2022. The reforms begun being phased in from 1 October 2021, with changes yet to be fully implemented including: • WNZL Tier 1 capital requirement will increase to 16% of RWA by 1 July 2028, of which 13.5% must be CET1 and up to 2.5% may be AT1; • WNZL’s total capital requirement will increase to 18% of RWA by 1 July 2028, of which up to 2% can be Tier 2 capital; and • Eligible Tier 1 capital will comprise common equity and redeemable perpetual preference shares. Existing AT1 capital instruments will be phased out over a seven year transition period. 1. For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent ‘related entities’. Prudential and internal limits apply to intra-group exposures between the ELE and related entities, both on an individual and aggregate basis. |
| 13 CAPITAL OVERVIEW Capital structure This table shows Westpac’s capital resources on a Level 2 basis under APS111 Capital Adequacy: Measurement of Capital. 30 Sept 31 March 30 Sept $m 2023 2023 2022 Common equity Tier 1 capital Paid up ordinary capital 39,826 39,824 39,666 Treasury shares (759) (759) (712) Equity based remuneration 1,929 1,907 1,843 Foreign currency translation reserve (171) (160) (537) Accumulated other comprehensive income (221) (38) 28 Non-controlling interests - other 44 44 57 Retained earnings 31,436 30,686 29,063 Less retained earnings in life and general insurance, funds management and securitisation entities (369) (343) (300) Deferred fees 334 276 300 Total common equity Tier 1 capital 72,049 71,437 69,408 Deductions from common equity Tier 1 capital Goodwill (excluding funds management entities) (7,940) (7,943) (7,914) Deferred tax assets (2,144) (2,065) (1,746) Goodwill in life and general insurance, funds management and securitisation entities (149) (149) (204) Capitalised expenditure (2,375) (2,250) (2,148) Capitalised software (2,797) (2,631) (2,263) Investments in subsidiaries not consolidated for regulatory purposes (76) (201) (316) Regulatory expected loss in excess of eligible provisions1 - (2) (144) Securitisation (16) - - Defined benefit superannuation fund surplus (217) (67) (219) Equity investments (228) (209) (187) Regulatory adjustments to fair value positions (222) (276) (324) Total deductions from common equity Tier 1 capital (16,164) (15,793) (15,465) Total common equity Tier 1 capital after deductions 55,885 55,644 53,943 Additional Tier 1 capital Basel III complying instruments 10,037 9,958 10,021 Total Additional Tier 1 capital 10,037 9,958 10,021 Deductions from Additional Tier 1 capital Holdings of own and other financial institutions Additional Tier 1 capital instruments (46) (25) (25) Total deductions from Additional Tier 1 capital (46) (25) (25) Net Additional Tier 1 regulatory capital 9,991 9,933 9,996 Net Tier 1 regulatory capital 65,876 65,577 63,939 Tier 2 capital Basel III complying instruments 25,740 23,160 23,791 Eligible general reserve for credit loss 1,051 1,103 411 Total Tier 2 capital 26,791 24,263 24,202 Deductions from Tier 2 capital Holdings of own and other financial institutions Tier 2 capital instruments (370) (367) (243) Total deductions from Tier 2 capital (370) (367) (243) Net Tier 2 regulatory capital 26,421 23,896 23,959 Total regulatory capital 92,297 89,473 87,898 1. An explanation of the relationship between this deduction, regulatory expected loss and provisions for impairment charges is contained in Appendix V. |
| 14 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CAPITAL OVERVIEW Capital management strategy Westpac evaluates its approach to capital management through an Internal Capital Adequacy Assessment Process (ICAAP). Key features include: • The development of a capital management strategy, including consideration of regulatory capital minimums, capital buffers and contingency plans. The current regulatory capital minimums together with the capital conservation buffer (CCB) and countercyclical capital buffer are the Total CET1 requirement. The Total CET1 Requirement for Westpac is at least 10.25%1 based on an industry minimum CET1 requirement of 4.5% plus a capital conservation buffer of 4.75% and a countercyclical capital buffer of 1.0%2; • Consideration of regulatory capital requirements and the perspectives of external stakeholders including rating agencies as well as equity and debt investors; and • A stress testing framework that challenges the capital measures, coverage and capital requirements including the impact of adverse economic scenarios. The Board has determined that Westpac will target a CET1 operating capital range of between 11.0% and 11.5%, in normal operating conditions. Westpac’s capital adequacy ratios 30 Sept 31 March 30 Sept % 2023 2023 2022 The Westpac Group at Level 2 Common equity Tier 1 capital ratio 12.4 12.3 11.3 Additional Tier 1 capital 2.2 2.2 2.1 Tier 1 capital ratio 14.6 14.5 13.4 Tier 2 capital 5.9 5.3 5.0 Total regulatory capital ratio 20.5 19.8 18.4 The Westpac Group at Level 1 Common equity Tier 1 capital ratio 12.6 12.5 11.3 Additional Tier 1 capital 2.4 2.4 2.2 Tier 1 capital ratio 15.0 14.9 13.6 Tier 2 capital 6.5 5.8 5.4 Total regulatory capital ratio 21.5 20.7 19.0 Westpac New Zealand Limited’s capital adequacy ratios 30 Sept 31 March 30 Sept % 2023 2023 2022 Westpac New Zealand Limited Common equity Tier 1 capital ratio 11.1 11.1 11.0 Additional Tier 1 capital 1.6 1.6 2.0 Tier 1 capital ratio 12.7 12.7 13.0 Tier 2 capital 1.7 1.0 0.9 Total regulatory capital ratio 14.4 13.7 13.9 Westpac New Zealand capital ratios are reported in accordance with RBNZ requirements. 1. Noting that APRA may apply higher CET1 requirements for an individual ADI. 2. APRA has currently set a 1.0% default countercyclical capital buffer for Australian exposures however this may be varied by APRA in the range of 0 to 3.5%. The final countercyclical capital buffer is ADI specific and dependent on a bank’s international exposures. |
| 15 This table shows risk weighted assets for each risk type included in the regulatory assessment of Westpac’s capital adequacy. Westpac’s approach to managing each risk type, and more detailed disclosures on the prudential assessment of capital requirements, are presented in the following sections of this report. 30 September 2023 $m IRB Approach1 FIRB Approach2 Standardised Approach3 Total Risk Weighted Assets Credit risk Corporate 24,818 - 656 25,474 Business Lending 23,860 - 223 24,083 Property Finance 30,416 - - 30,416 Large Corporate - 20,570 - 20,570 Sovereign - 2,143 1,805 3,948 Financial Institutions - 13,457 71 13,528 Residential Mortgages 112,948 - 19,290 132,238 Australian Credit Cards 3,712 - - 3,712 Other Retail 4,607 - 425 5,032 Small Business 17,040 - 125 17,165 Specialised Lending 3,065 - 466 3,531 Securitisation 7,661 - - 7,661 New Zealand 44,350 - 2,298 46,648 Mark-to-market related credit risk4 - - 5,752 5,752 Total Credit risk 272,477 36,170 31,111 339,758 Market risk 11,538 Operational risk 55,175 Interest rate risk in the banking book 40,138 Other5 4,809 Total 451,418 1. IRB approaches excluding Foundation IRB (FIRB). Refer page 20 for a summary of approach by asset class. 2. Under FIRB, an ADI must provide its own estimates of probability of default (PD) and maturity and rely on supervisory estimates of loss given default (LGD) and EAD. 3. Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories. 4. Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk. 5. Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets. |
| 16 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CAPITAL OVERVIEW 31 March 2023 $m IRB Approach1 FIRB Approach Standardised Approach2 Total Risk Weighted Assets Credit risk Corporate 24,309 - 1,147 25,456 Business Lending 25,928 - 177 26,105 Property Finance 31,234 - - 31,234 Large Corporate - 21,228 - 21,228 Sovereign - 2,357 1,777 4,134 Financial Institutions - 15,057 75 15,132 Residential Mortgages 109,164 - 19,651 128,815 Australian Credit Cards 3,957 - - 3,957 Other Retail 5,304 - 464 5,768 Small Business 18,219 - 170 18,389 Specialised Lending 2,931 - 464 3,395 Securitisation 6,400 - - 6,400 New Zealand 43,301 - 2,030 45,331 Mark-to-market related credit risk3 - - 5,214 5,214 Total Credit risk 270,747 38,642 31,169 340,558 Market risk 15,168 Operational risk 56,900 Interest rate risk in the banking book 34,748 Other4 5,572 Total 452,946 30 September 2022 $m IRB Approach Standardised Approach2 Total Risk Weighted Assets Credit risk Corporate 72,688 880 73,568 Business lending 30,541 738 31,279 Sovereign 2,335 1,689 4,024 Bank 4,609 84 4,693 Residential mortgages 149,208 2,885 152,093 Australian credit cards 3,917 - 3,917 Other retail 6,726 717 7,443 Small business 13,991 - 13,991 Specialised lending 57,338 428 57,766 Securitisation 6,947 - 6,947 Mark-to-market related credit risk3 - 6,377 6,377 Total credit risk 348,300 13,798 362,098 Market risk 9,290 Operational risk 59,063 Interest rate risk in the banking book 42,782 Other assets4 4,387 Total 477,620 1. IRB approaches excluding FIRB. Refer page 20 for a summary of approach by asset class. 2. Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories. 3. Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk. 4. Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets. |
| 17 LEVERAGE RATIO Leverage ratio The following table summarises Westpac’s leverage ratio. $ billion 30 Sept 2023 30 June 2023 31 March 2023 31 Dec 2022 Net Tier 1 Regulatory Capital 65.9 64.5 65.6 63.4 Total Exposures 1,196.7 1,202.1 1,200.1 1,151.3 Leverage ratio 5.5% 5.4% 5.5% 5.5% Leverage ratio disclosure $m 30 Sept 2023 On-balance sheet exposures 1 On-balance sheet items (excluding derivatives and securities financing transactions (SFTs), but including collateral) 1,021,436 2 Asset amounts deducted in determining Tier 1 capital (16,165) 3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of rows 1 and 2) 1,005,271 Derivative exposures 4 Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin) 9,877 5 Add-on amounts for potential future credit exposure (PFCE) associated with all derivatives transactions 21,785 6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the Australian Accounting Standards 6,833 7 Deductions of receivables assets for cash variation margin provided in derivatives transactions - 8 Exempted central counterparty (CCP) leg of client-cleared trade exposures (3,836) 9 Adjusted effective notional amount of written credit derivatives - 10 Adjusted effective notional offsets and add-on deductions for written credit derivatives 65 11 Total derivative exposures (sum of rows 4 to 10) 34,724 SFT exposures 12 Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions 43,532 13 Netted amounts of cash payables and cash receivables of gross SFT assets - 14 Counterparty credit risk exposure for SFT assets 7,886 15 Agent transaction exposures - 16 Total SFT exposures (sum of rows 12 to 15) 51,418 Other off-balance sheet exposures 17 Off-balance sheet exposure at gross notional amount 213,494 18 Adjustments for conversion to credit equivalent amounts (108,198) 19 Other off-balance sheet exposures (sum of rows 17 and 18) 105,296 Capital and total exposures 20 Net Tier 1 Regulatory Capital 65,876 21 Total exposures (sum of rows 3, 11, 16 and 19) 1,196,709 Leverage ratio % 22 Leverage ratio 5.50% Summary comparison of total consolidated assets to leverage ratio exposure measure $m 30 Sept 2023 1 Total consolidated assets disclosed in 2023 financial statements 1,029,774 2 Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation (242) 3 Adjustment for assets held on the balance sheet in a fiduciary capacity pursuant to the Australian Accounting Standards but excluded from the leverage ratio exposure measure - 4 Adjustments for derivative financial instruments 13,381 5 Adjustment for SFTs (i.e. repos and similar secured lending) 39,364 6 Adjustment for off-balance sheet exposures (i.e. conversion to credit equivalent amounts of off-balance sheet exposures) 105,296 7 Other adjustments 9,136 8 Leverage ratio exposure 1,196,709 |
| 18 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MANAGEMENT Credit risk is the potential for financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. Westpac maintains a credit risk management framework and of supporting policies, processes and controls governing the assessment, approval and management of customer and counterparty credit risk. These incorporate the assignment of risk grades, the quantification of loss estimates in the event of default, and the segmentation of credit exposures. Credit risk management framework and policies Westpac maintains a credit risk management framework and supporting policies that are designed to clearly define roles and responsibilities, acceptable practices, limits and key controls. The Credit Risk Management Framework describes the principles, methodologies, systems, roles and responsibilities, reports and controls that exist for managing credit risk in Westpac. The Credit Risk Rating System policy describes the credit risk rating system philosophy, design, key features, roles and responsibilities and uses of rating outcomes. Concentration risk policies cover individual counterparties, specific industries (e.g. property) and individual countries. In addition, we have policies covering risk appetite statements, environmental, social and governance (ESG) risk, credit risks and the delegation of credit approval authorities. At the divisional level, credit policies and standards embed the Group’s framework requirements for application in the businesses. Policies and standards cover the origination, evaluation, approval, documentation, settlement and on-going management of credit risks, and sector policies to guide the extension of credit where industry-specific guidelines are considered necessary. Credit approval limits represent the formal delegation of credit approval authority to responsible individuals throughout the organisation. Structure and organisation The Chief Risk Officer (CRO) is responsible for the effectiveness of overall risk management throughout Westpac, including credit risk. The Group Chief Credit Officer is responsible for the effectiveness of credit risk management, including credit approval decisioning beyond business authority level and appointing our most senior authorised credit officers. Authorised credit officers have delegated authority to approve credit risk exposures, including customer risk grades, other credit parameters and their ongoing review. Our largest exposures are approved by our most experienced authorised credit officers. Management is responsible for managing credit risks originated in their business and for managing risk adjusted returns from their business credit portfolios, within the approved risk appetite, risk management framework and policies. Approach Westpac adopts two approaches to managing credit risk depending upon the nature of the customer and the product. Transaction-managed approach For larger customers, Westpac evaluates credit requests by undertaking detailed individual customer and transaction risk analysis (the ‘transaction-managed’ approach). Such customers are assigned a customer risk grade (CRG) representing Westpac’s estimate of their probability of default (PD). Each facility is assigned a loss given default (LGD). The Westpac credit risk rating system has 20 risk grades for non-defaulted customers and 10 risk grades for defaulted customers. Non-defaulted CRGs down to the level of normally acceptable risk (i.e. D grade – see table below) are mapped to Moody’s and Standard & Poor’s (S&P) external senior ranking unsecured ratings. This mapping allows Westpac to integrate the rating agencies’ default history with internal historical data when calculating PDs. The final assignment of CRGs and LGDs is approved by authorised credit approvers with appropriate delegated approval authority. All material credit exposures are also approved by authorised Credit Officers who are part of the risk management stream and operate independently of the areas originating the credit risk proposals. Authorised Credit Officer decisions are subject to reviews to ensure consistent quality and confirm compliance with approval authority. Separate teams are responsible for maintaining accurate and timely recording of all credit risk approvals and changes to customer and facility data. These teams also operate independently of both the areas originating the credit risk proposals and the credit risk approvers. Appropriate segregation of functions is one of the key requirements of our credit risk management framework. |
| 19 Alignment of Westpac risk grades The table below shows the current alignment between Westpac’s internal CRGs and the corresponding external rating. Note that only high-level CRG groupings are shown. Westpac customer risk grade Standard & Poor’s rating Moody’s rating A AAA to AA– Aaa to Aa3 B A+ to A– A1 to A3 C BBB+ to BBB– Baa1 to Baa3 D BB+ to B+ Ba1 to B1 Westpac Rating E Watchlist F Special mention G Substandard/default H Doubtful/default For Specialised Lending Westpac aligns exposures to the appropriate supervisory slot based on an assessment that takes into account borrower strength and security quality, as required by APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk (APS113). Program-managed approach High-volume retail customer credit portfolios with homogenous credit risk characteristics are managed on a statistical basis according to pre-determined objective criteria (the ‘program-managed’ approach). Program-managed exposure includes all consumer customers. Quantitative scorecards are used to assign application and behavioural scores to enable risk-based decision making within these portfolios. For capital estimation and other purposes, risk-based customer segments are created based upon modelled PD, LGD and, where applicable, exposure at default (EAD)1 .. Accounts are then assigned to respective segments based on customer and account characteristics. Each segment is assigned a quantified measure of its PD, LGD and EAD. For both transaction-managed and program-managed approaches, PD and LGD assignment is regularly monitored and validated against subsequent customer performance and models and credit processes are recalibrated when required. CRGs, PDs and LGDs are reviewed at least annually. Alignment of Basel categories to Westpac portfolios APRA’s capital framework includes prudential standards for credit risk capital (APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk). In line with the standard an ADI must categorise banking book exposures into four broad IRB APS113 asset classes (Corporate, Sovereign, Financial Institution and Retail) and apply the prescribed treatment for those classes to each credit exposure within them for the purposes of deriving its regulatory capital requirement. APS113 cascades these asset classes into further sub-asset classes as per below. APRA’s capital framework resulted in changes to previously reported credit asset classes from 1 January 2023. This included changes to credit RWA calculations from Advanced Internal rating based approach (AIRB) to a foundation IRB approach (FIRB) for some exposure classes. Under FIRB, an ADI must provide its own estimates of PD and maturity and rely on supervisory estimates of LGD and EAD. 1. Under APS113 the credit conversion factors used to calculate EAD are prescribed for all portfolios other than revolving retail. |
| 20 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MANAGEMENT The below table sets out Westpac credit risk asset classes under APRA’s standards. Credit Asset Classes Asset Class definition Corporate The Corporate asset class covers exposures to corporate counterparties with consolidated annual revenue <$750m, but greater than or equal to $75m. Business Lending Business Lending asset class covers exposures to corporate counterparties with consolidated annual revenue <$75m. Property Finance Property Finance asset class covers Income-producing Real Estate (IPRE) exposures risk-weighted according to the AIRB approach. Property finance represents exposures where repayments depend primarily on the cash flows generated by the asset or other real estate assets owned by the borrower. Large Corporate Large Corporate asset class covers exposures to corporate counterparties with consolidated annual revenue greater than $750m. Credit RWA is measured under FIRB. Sovereign Sovereign asset class covers exposures to central and sub-national governments, central banks, and development banks or institutions eligible for zero risk weights. Credit RWA is measured under FIRB. Financial Institutions Financial Institutions asset class covers exposures to financial institution counterparties. Financial institutions include, but are not limited to, banks, securities firms, insurance companies and leveraged funds. Credit RWA is measured under FIRB. Residential Mortgages Residential Mortgages asset class covers exposures, to individuals and not for business purposes, fully or partially secured by residential property. Non-standard mortgages receive 100% standardised risk weight (rather than the internally-modelled Retail IRB approach). Australian Credit Cards Australian Credit Cards asset class covers exposures, to individuals and not for business purposes, which are revolving, unsecured and unconditionally cancellable. Other Retail Other retail asset class covers retail exposures which do not meet the criteria of any other retail asset class. Small Business Small Business asset class covers exposures where the total exposures are <$1.5m, the customer does not hold a complex product and consolidated annual revenues are <$75m. Exposures are managed as part of a portfolio. Specialised Lending Specialised Lending asset class covers exposures subject to the supervisory slotting approach and includes Project and Object finance. Project finance is defined as exposures where revenues generated by a single project, are both the primary source of repayment and security for the loan. Object finance is defined as lending for the acquisition of equipment where the repayment of the loan is dependent on the cash flows generated by the specific assets that have been financed and pledged or assigned to the lender. Securitisation Securitised portfolios are treated separately under APS120 Securitisation. New Zealand RBNZ regulated exposures are calculated using RBNZ rules and disclosed separately under a New Zealand class. Standardised and Securitised portfolios are separately treated under APS112 Capital Adequacy: Standardised Approach to Credit Risk and APS120 Securitisation respectively. |
| 21 Alignment of Credit risk approach to Basel categories and exposure types Approach APS asset class Types of exposures Transaction-Managed Portfolios Corporate Sovereign Financial Institutions Direct lending Contingent lending Derivative counterparty Asset warehousing Underwriting Secondary market trading Foreign exchange settlement Other intra-day settlement obligations Program-Managed Portfolios Residential mortgage Qualifying revolving retail Other retail Small-and medium-sized enterprise retail Mortgages Equity access loans Australian credit cards Personal loans Overdrafts Auto and equipment finance Business development loans Business overdrafts Other term products |
| 22 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MANAGEMENT Internal ratings process for transaction-managed portfolios The process for assigning and approving individual customer PDs and facility LGDs involves: • Business’ recommend the CRG and facility LGDs under the guidance of criteria set out in established credit policies and with use of internally developed risk grading models where relevant. Each CRG is associated with an estimated PD; • Under controlled circumstances business units can approve model outcomes, where no adjustment or override has been applied to the input data or model produced result; • Authorised credit officers evaluate the recommendations and approve the final CRG and facility LGDs. Authorised credit officers may override line business unit recommendations; • An expert judgement decisioning process is employed to evaluate CRG and the outputs of various risk grading models are used as one of several inputs into that process; and • Authorised credit officers’ decisions are subject to reviews to ensure consistent quality and confirm compliance with approval authority. For ongoing exposures to transaction-managed customers, risk grades and facility LGDs are required to be reviewed at least annually, but also whenever material changes occur. No material deviations from the reference definition of default are permitted. Internal ratings process for program-managed portfolios The process for assigning PDs, LGDs and, where applicable, EADs to the program-managed portfolio involves segmenting or categorising the portfolio into a number of pools per product. These pools are created by analysing risk characteristics that have historically predicted that an account is likely to go into default or loss. No material deviations from the reference definition of default are permitted. Internal credit risk ratings system In addition to using the credit risk estimates as the basis for regulatory capital purposes, they are also used for the purposes described below: Provisioning - Credit provisions are held by Westpac to cover expected credit losses in the loan portfolio. Provisioning includes both individual and collective components, including overlays. Individual provisions are calculated on impaired loans taking into account management’s best estimate of the present value of future cashflows. Collective provisions are established on a portfolio basis using a framework that considers PD, LGD, EAD, total committed exposure, level of arrears, recent past experience and forward looking macro-economic forecasts. This also includes a consideration of overlays. Risk-adjusted performance measurement - Business performance is measured using allocated capital, which incorporates charges for regulatory capital, including credit capital and capital for other risk types. Pricing - Westpac prices loans to produce an acceptable return on the capital allocated to the loan. Returns include interest income and fees after expected credit losses and other costs. Credit approval - For transaction-managed facilities, approval authorities are tiered based on the CRG, with lower limits applicable for customers with a higher PD. Program-managed facilities are approved on the basis of application scorecard outcomes and product based approval authorities. Control mechanisms for the credit risk rating system include: • Westpac’s credit risk rating system is reviewed annually to confirm that the rating criteria and procedures are appropriate given the current portfolio and external conditions; • All models materially impacting the risk rating process are periodically reviewed in accordance with Westpac’s model risk policy; • Specific credit risk estimates (including PD, LGD and EAD levels) are independently assessed annually and noted at Model Risk Committee (a sub-committee of the Group Executive Risk Committee) for approval by Head of Model Risk; • Group Audit undertake an independent annual technical and operational review of the rating system; and • CREDCO, RISKCO and BRiskC monitor the risk profile, performance and management of Westpac’s credit portfolio and the development and review of key credit risk policies. Risk reporting A report on Westpac’s credit risk portfolio is provided to CREDCO, RISKCO and BRiskC quarterly. It includes monitoring of performance against risk appetite. Credit risk and asset quality are also reported to the Board, including details of impairment losses, stressed exposures, delinquency trends and key performance metrics. |
| 23 Summary credit risk disclosure 30 September 2023 $m Exposure at Default Risk Weighted Assets Regulatory Expected Loss1 Regulatory expected loss for non-defaulted exposures Specific Provision for non-performing Exposures Actual losses for the 12 months ended Corporate 40,545 24,818 477 151 93 16 Business Lending 42,327 23,860 529 244 296 39 Property Finance 54,736 30,416 320 162 157 4 Large Corporate 41,328 20,570 84 84 - - Sovereign 175,377 2,143 3 3 - - Financial Institutions 38,426 13,457 66 30 16 9 Residential Mortgages 529,740 112,948 1,166 788 382 32 Australian Credit Cards 13,590 3,712 155 124 31 99 Other Retail 4,848 4,607 193 133 59 122 Small Business 28,232 17,040 509 346 165 57 Specialised Lending 3,981 3,065 25 25 - - Securitisation 37,600 7,661 - - - - Standardised2 29,393 28,813 - - 97 5 New Zealand 133,744 46,648 551 377 120 27 Total 1,173,867 339,758 4,078 2,467 1,416 410 31 March 2023 $m Exposure at Default Risk Weighted Assets Regulatory Expected Loss1 Regulatory expected loss for non-defaulted exposures Specific Provision for non-performing Exposures Actual losses for the 6 months ended Corporate2 37,110 24,309 588 136 147 (26) Business Lending 40,861 25,928 490 263 235 16 Property Finance 52,697 31,234 288 154 134 2 Large Corporate 40,248 21,228 63 63 - - Sovereign 210,868 2,357 2 2 - - Financial Institutions 37,687 15,057 71 31 18 5 Residential Mortgages 518,276 109,164 1,057 731 330 11 Australian Credit Cards 13,675 3,957 172 131 37 44 Other Retail 5,586 5,304 234 151 80 53 Small Business 29,559 18,219 576 374 196 31 Specialised Lending 3,746 2,931 26 26 - - Securitisation 32,831 6,400 - - - - Standardised3 30,253 29,139 - - 98 - New Zealand 134,507 45,331 534 360 118 7 Total 1,187,904 340,558 4,101 2,422 1,393 143 1. Includes regulatory expected losses for defaulted and non-defaulted exposures. 2. Corporate loan losses include the recovery of a previously written off loan of $40m. 3. Includes mark-to-market related credit risk. |
| 24 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MANAGEMENT 30 September 2022 $m Exposure at Default Risk Weighted Assets Regulatory Expected Loss1 Regulatory expected loss for non-defaulted exposures Specific Provision for non-performing Exposures Actual losses for the 12 months ended Corporate 147,497 72,688 900 333 196 384 Business lending 54,390 30,541 626 315 142 84 Sovereign 222,327 2,335 2 2 - - Bank 21,348 4,609 6 6 - - Residential mortgages 596,833 149,208 1,405 1,011 67 30 Australian credit cards 15,068 3,917 153 120 30 104 Other retail 8,972 6,726 292 194 94 105 Small business 28,129 13,991 448 286 136 37 Specialised Lending 68,552 57,338 858 557 10 1 Securitisation 36,322 6,947 - - - - Standardised2 14,603 13,798 - - 51 - Total 1,214,041 362,098 4,690 2,824 726 745 Loan impairment provisions Expected credit losses (ECL) are estimates of the cashflow shortfalls expected to result from defaults over the relevant timeframe. They are determined by evaluating a range of possible outcomes and taking into account the time value of money, past events, current conditions and forecasts of future economic conditions. Westpac calculates provisions for ECL based on a three-stage approach: • Stage 1: 12 months ECL (performing) - For financial assets where there has been no significant increase in credit risk since origination, a provision for 12-month ECL is recognised. • Stage 2: Lifetime ECL (performing) - For financial assets where there has been a significant increase in credit risk since origination and where the asset is still performing, a provision for lifetime ECL is recognised. Determining when a financial asset has experienced a significant increase in credit risk since origination is a critical accounting judgement. The determination of a significant increase in risk is driven by the change in the probability of default (PD) since origination. In determining whether a change in PD represents a significant increase in risk, relative changes in PD and absolute PD thresholds are both considered based on the portfolio of the exposure. • Stage 3: Lifetime ECL (non-performing) - For financial assets that are non-performing a provision for lifetime ECL is recognised. Indicators include a breach of contract with Westpac such as a default on interest or principal payments or a borrower experiencing significant financial difficulties. Collective and individual assessment - Financial assets that are in Stages 1 and 2 are assessed on a collective basis as are financial assets in Stage 3 below specified exposure thresholds. Those financial assets in Stage 3 above the specified exposure thresholds are assessed on an individual basis. Overlays - Where appropriate, adjustments are made to modelled outcomes to reflect reasonable and supportable information not already incorporated in the models. Judgements can change with time as new information becomes available which could result in changes to the provision for ECL. Expected life - Lifetime ECL represents the expected credit losses that result from default events over the expected life of a financial instrument. In considering lifetime ECL, the remaining contractual life is used for non-retail portfolios. For retail portfolios lifetime ECL is calibrated to historically observed portfolio behaviour. Forward looking information - The measurement of ECL for each stage and the assessment of significant increase in credit risk considers information about past events and current conditions as well as reasonable and supportable projections of future events and economic conditions. In order to capture the asymmetry of the losses expected over the range of plausible future events and economic conditions, Westpac considers three future macroeconomic scenarios i.e. base, upside and downside scenarios. The macroeconomic variables used in these scenarios, include (but are not limited to) employment to population ratio, real gross domestic product growth rates and residential and commercial property price indices. The ECL is a weighted average of the credit losses expected under these three scenarios. The scenario weights are based on Westpac’s assessment of upside and downside risks taking into account current trends, forward looking conditions and the degree of uncertainty attached to these projections. Regulatory classification of loan impairment provisions All individually assessed provisions (IAPs) raised under Australian Accounting Standards (AAS) are classified as specific provisions in accordance with APS220 Credit Risk Management. While, only Collectively Assessed Provisions (CAPs) raised under AAS for non-performing exposures are classified as specific provisions. 1. Includes regulatory expected losses for defaulted and non-defaulted exposures. 2. Includes mark-to-market related credit risk. |
| 25 Expected credit loss provision This table provides a summary of expected credit loss provisions. For 30 September 2023 and 31 March 2023 Stage 1 and Stage 2 credit losses are included in the provisions held against performing exposures Line item. Stage 3 credit losses are included in the Total Specific Provision line. 30 September 2023 AAS Provisions Total Regulatory $m IAPs CAPs Provisions Specific Provisions for impaired loans 351 215 566 for defaulted but not impaired loans - 850 850 Total Specific Provision1 351 1,065 1,416 Provisions held against performing exposures - 3,525 3,525 Total provisions for ECL 351 4,590 4,941 31 March 2023 AAS Provisions Total Regulatory $m IAPs CAPs Provisions Specific Provisions for impaired loans 382 269 651 for defaulted but not impaired loans - 742 742 Total Specific Provision1 382 1,011 1,393 Provisions held against performing exposures - 3,530 3,530 Total provisions for ECL 382 4,541 4,923 30 September 2022 AAS Provisions Total Regulatory $m IAPs CAPs Provisions Specific Provisions for impaired loans 452 274 726 for defaulted but not impaired loans - 673 673 For Stage 2 - 2,188 2,188 Total Specific Provision1 452 3,135 3,587 General Reserve for Credit Loss1 - 1,048 1,048 Total provisions for ECL 452 4,183 4,635 1. Provisions classified according to APRA’s letter dated 4 July 2017 “Provisions for regulatory purposes and AASB 9 financial instruments”. |
| 26 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MANAGEMENT Movement in provisions for impairment1 For the 12 months ended 30 September 2023 Performing Non-performing $m Stage 1 Stage 2 Stage 3 Total Balance as at 30 September 2022 for Loans and Credit Commitments 885 2,341 1,399 4,625 Transfers to Stage 1 1,675 (1,546) (129) - Transfers to Stage 2 (640) 1,119 (479) - Transfers to Stage 3 (8) (496) 504 - Business activity during the period 269 140 (296) 113 Net remeasurement of provision for ECL (1,479) 1,239 965 725 Write-offs - - (601) (601) Exchange rate and other adjustments 4 11 53 68 Balance as at 30 September 2023 for Loans and Credit Commitments 706 2,808 1,416 4,930 Balance as at 30 September 2022 for debt securities 4 6 - 10 Provision for ECL on debt securities at amortised cost - - - - Provision for ECL on debt securities at FVOCI1 1 - - 1 Total provision as at 30 September 2023 5 6 - 11 Total provision for ECL as at 30 September 2023 711 2,814 1,416 4,941 For the 6 months ended 31 March 2023 Performing Non-performing $m Stage 1 Stage 2 Stage 3 Total Balance as at 30 September 2022 for Loans and Credit Commitments 885 2,341 1,399 4,625 Transfers to Stage 1 694 (619) (75) - Transfers to Stage 2 (159) 408 (249) - Transfers to Stage 3 (4) (247) 251 - Business activity during the period 136 54 (136) 54 Net remeasurement of provision for ECL (670) 677 456 463 Write-offs - - (271) (271) Exchange rate and other adjustments 9 14 18 41 Balance as at 31 March 2023 for Loans and Credit Commitments 891 2,628 1,393 4,912 Balance as at 30 September 2022 for debt securities 4 6 - 10 Provision for ECL on debt securities at amortised cost - - - - Provision for ECL on debt securities at FVOCI1 1 - - 1 Total provision for ECL as at 31 March 2023 5 6 - 11 Total provision for ECL as at 31 March 2023 896 2,634 1,393 4,923 1. Impairment of debt securities at Fair Value through Other Comprehensive Income (FVOCI) is recognised in the income statement with a corresponding amount in other comprehensive income. There is no reduction of the carrying value of the debt securities which remain at fair value. |
| 27 For the 12 months ended 30 September 2022 Performing Non-performing $m Stage 1 Stage 2 Stage 3 Total Balance as at 30 September 2021 for Loans and Credit Commitments 936 2,091 1,972 4,999 Transfers to Stage 1 912 (792) (120) - Transfers to Stage 2 (235) 1,002 (767) - Transfers to Stage 3 (14) (383) 397 - Business activity during the period 354 (244) (340) (230) Net remeasurement of provision for ECL (1,066) 689 1,129 752 Write-offs - - (934) (934) Exchange rate and other adjustments (2) (22) 62 38 Balance as at 30 September 2022 for Loans and Credit Commitments 885 2,341 1,399 4,625 Balance as at 30 September 2021 for debt securities 3 5 - 8 Provision for ECL on debt securities at amortised cost - 3 - 3 Provision for ECL on debt securities at FVOCI1 1 (2) - (1) Total provision for ECL as at 30 September 2022 4 6 - 10 Total provision for ECL as at 30 September 2022 889 2,347 1,399 4,635 Overlays included in provisions for ECL on loans and credit commitments $m 30 September 2023 31 March 2023 30 September 2022 Modelled provisions for ECL on loans and credit commitments 4,498 3,810 3,925 Overlays 432 720 700 Total provisions for ECL on loans and credit commitments 4,930 4,530 4,625 1. Impairment of debt securities at Fair Value through Other Comprehensive Income (FVOCI) is recognised in the income statement with a corresponding amount in other comprehensive income. There is no reduction of the carrying value of the debt securities which remain at fair value. |
| 28 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Exposure at Default by major type1 The following tables segment the portfolio by characteristics that provide an insight into the assessment of credit risk concentration. 30 September 2023 Off-balance sheet Total Average On balance Non-market Market Exposure 6 months $m sheet related related at Default ended Corporate 27,410 9,835 3,300 40,545 38,676 Business Lending 36,285 5,989 53 42,327 41,833 Property Finance 48,877 5,577 282 54,736 53,779 Large Corporate 22,845 13,686 4,797 41,328 40,356 Sovereign 148,767 297 26,313 175,377 198,239 Financial Institutions 17,001 4,545 16,880 38,426 38,031 Residential Mortgages 464,316 65,424 - 529,740 523,896 Australian Credit Cards 6,170 7,420 - 13,590 13,639 Other Retail 3,886 962 - 4,848 5,232 Small Business 21,200 7,032 - 28,232 29,059 Specialised Lending 2,079 1,803 99 3,981 3,897 Securitisation 29,823 7,723 54 37,600 35,485 Standardised 21,077 5,249 3,067 29,393 29,709 New Zealand 111,491 21,536 717 133,744 132,661 Total 961,227 157,078 55,562 1,173,867 1,184,492 31 March 2023 Off-balance sheet Total On balance Non-market Market Exposure $m sheet related related at Default Corporate 25,900 8,319 2,891 37,110 Business Lending 35,255 5,541 65 40,861 Property Finance 47,275 5,097 325 52,697 Large Corporate 20,818 14,767 4,663 40,248 Sovereign 162,968 188 47,712 210,868 Financial Institutions 17,819 4,106 15,762 37,687 Residential Mortgages 452,592 65,684 - 518,276 Australian Credit Cards 6,149 7,526 - 13,675 Other Retail 4,584 1,002 - 5,586 Small Business 22,280 7,279 - 29,559 Specialised Lending 1,846 1,746 154 3,746 Securitisation 26,254 6,506 71 32,831 Standardised 24,206 3,387 2,660 30,253 New Zealand 112,731 21,302 474 134,507 Total 960,677 152,450 74,777 1,187,904 30 September 2022 Off-balance sheet Total Average On balance Non-market Market Exposure 12 months $m sheet related related at Default ended Corporate 67,749 55,616 24,132 147,497 135,654 Business lending 41,223 13,167 - 54,390 53,473 Sovereign 167,403 1,560 53,364 222,327 217,545 Bank 11,081 1,479 8,788 21,348 21,332 Residential mortgages 515,283 81,550 - 596,833 588,235 Australian credit cards 6,128 8,940 - 15,068 15,246 Other retail 6,434 2,538 - 8,972 10,296 Small business 21,428 6,701 - 28,129 29,576 Specialised lending 56,370 11,902 280 68,552 69,429 Securitisation 28,989 7,288 45 36,322 33,524 Standardised 10,929 974 2,700 14,603 15,275 Total 933,017 191,715 89,309 1,214,041 1,189,585 1. As set out in Appendix I, APRA’s capital framework effective 1 January 2023 introduced new credit risk asset classes. This resulted in exposures moving between asset classes. Given this, for 30 September 2023 the average EAD over 6-months has been shown rather than a 12-month average. For 31 March 2023 the average EAD has not been shown. |
| 29 Exposure at Default by measurement method 30 September 2023 IRB FIRB Standardised Total Exposure $m Approach Approach Approach at Default Corporate 40,545 - 5,348 45,893 Business Lending 42,327 - 261 42,588 Property Finance 54,736 - - 54,736 Large Corporate - 41,328 - 41,328 Sovereign - 175,377 1,805 177,182 Financial Institutions - 38,426 71 38,497 Residential Mortgages 529,740 - 19,386 549,126 Australian Credit Cards 13,590 - - 13,590 Other Retail 4,848 - 1,874 6,722 Small Business 28,232 - 157 28,389 Specialised Lending 3,981 - 491 4,472 Securitisation 37,600 - - 37,600 New Zealand 115,430 - 18,314 133,744 Total 871,029 255,131 47,707 1,173,867 31 March 2023 IRB FIRB Standardised Total Exposure $m Approach Approach Approach at Default Corporate 37,110 - 5,905 43,015 Business Lending 40,861 - 205 41,066 Property Finance 52,697 - - 52,697 Large Corporate - 40,248 - 40,248 Sovereign - 210,868 1,777 212,645 Financial Institutions - 37,687 75 37,762 Residential Mortgages 518,276 - 19,632 537,908 Australian Credit Cards 13,675 - - 13,675 Other Retail 5,586 - 1,972 7,558 Small Business 29,559 - 213 29,772 Specialised Lending 3,746 - 474 4,220 Securitisation 32,831 - - 32,831 New Zealand 114,970 - 19,537 134,507 Total 849,311 288,803 49,790 1,187,904 30 September 2022 IRB Standardised Total Exposure $m Approach Approach at Default Corporate 147,497 5,675 153,172 Business lending 54,390 729 55,119 Sovereign 222,327 1,689 224,016 Bank 21,348 96 21,444 Residential mortgages 596,833 4,358 601,191 Australian credit cards 15,068 - 15,068 Other retail 8,972 1,643 10,615 Small business 28,129 - 28,129 Specialised lending 68,552 413 68,965 Securitisation 36,322 - 36,322 Total 1,199,438 14,603 1,214,041 |
| 30 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Exposure at Default by industry classification 30 September 2023 $m Accommodation, cafes & restaurants Agriculture, forestry & fishing Construction Finance & insurance Government administration & defence Manufacturing Mining Property Property services & business services Services1 Trade2 Transport & storage Utilities3 Retail lending Other Total exposure at default Corporate 2,412 826 1,583 2,161 532 3,266 577 3,078 3,505 7,017 4,496 5,971 4,772 - 349 40,545 Business Lending 5,540 10,434 3,314 431 8 3,707 408 87 5,458 4,475 5,962 1,937 141 - 425 42,327 Property Finance 738 - - 13 - - - 53,653 1 129 23 - - - 179 54,736 Large Corporate 101 273 1,269 295 2 7,170 3,830 4,375 4,247 4,173 7,775 2,589 5,206 - 23 41,328 Sovereign - - - 115,517 59,620 - - - - - - 240 - - - 175,377 Financial Institutions 344 74 64 36,839 1 339 - - 241 180 126 195 14 - 9 38,426 Residential Mortgages - - - - - - - - - - - - - 529,740 - 529,740 Australian Credit Cards - - - - - - - - - - - - - 13,590 - 13,590 Other Retail - - - - - - - - - - - - - 4,848 - 4,848 Small Business 741 1,898 3,866 1,461 478 1,719 656 2,957 4,393 3,302 2,972 1,548 328 - 1,913 28,232 Specialised Lending - - - 295 - 334 192 - 83 200 - 1,092 1,785 - - 3,981 Securitisation - - - 36,619 - - - - 559 - 422 - - - - 37,600 Standardised 105 4 41 4,933 1,882 70 31 483 40 30 333 48 56 21,261 76 29,393 New Zealand 351 9,526 869 16,998 6,719 3,572 229 9,000 1,430 2,790 5,296 1,295 3,290 72,323 56 133,744 Total 10,332 23,035 11,006 215,562 69,242 20,177 5,923 73,633 19,957 22,296 27,405 14,915 15,592 641,762 3,030 1,173,867 1. Includes education, health & community services, cultural & recreational services and personal & other services. 2. Includes wholesale trade and retail trade. 3. Includes electricity, gas &water, and communication services. |
| 31 31 March 2023 $m Accommodation, cafes & restaurants Agriculture, forestry & fishing Construction Finance & insurance Government administration & defence Manufacturing Mining Property Property services & business services Services1 Trade2 Transport & storage Utilities3 Retail lending Other Total exposure at default Corporate 2,497 873 1,242 1,447 534 3,311 549 2,805 3,353 5,876 3,872 6,443 4,008 - 300 37,110 Business Lending 5,107 9,939 3,128 451 6 3,608 401 243 5,354 4,442 5,763 1,797 123 - 499 40,861 Property Finance 589 - - - - - - 51,907 1 1 20 - - - 179 52,697 Large Corporate 101 392 1,150 413 4 7,266 3,929 4,153 4,246 3,110 7,429 3,035 4,999 - 21 40,248 Sovereign - - - 149,376 61,492 - - - - - - - - - - 210,868 Financial Institutions 311 83 68 36,399 - 66 19 2 251 200 131 124 17 - 16 37,687 Residential Mortgages - - - - - - - - - - - - - 518,276 - 518,276 Australian Credit Cards - - - - - - - - - - - - - 13,675 - 13,675 Other Retail - - - - - - - - - - - - - 5,586 - 5,586 Small Business 783 1,984 3,762 1,591 588 1,662 615 3,138 4,568 3,635 3,007 1,532 330 - 2,364 29,559 Specialised Lending - - - - - 298 317 - 56 462 - 1,163 1,450 - - 3,746 Securitisation - - - 31,841 - - - - 424 - 566 - - - - 32,831 Standardised 1 - 10 5,712 - 2 - 21 30 111 7 - - 19,669 4,690 30,253 New Zealand 367 9,834 913 17,352 6,658 3,614 223 9,034 1,612 2,746 4,982 1,690 3,285 72,081 116 134,507 Total 9,756 23,105 10,273 244,582 69,282 19,827 6,053 71,303 19,895 20,583 25,777 15,784 14,212 629,287 8,185 1,187,904 1. Includes education, health & community services, cultural & recreational services and personal & other services. 2. Includes wholesale trade and retail trade. 3. Includes electricity, gas & water, and communication services. |
| 32 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES 30 September 2022 $m Accommodation, cafes & restaurants Agriculture, forestry & fishing Construction Finance & insurance Government administration & defence Manufacturing Mining Property Property services & business services Services1 Trade2 Transport & storage Utilities3 Retail lending Other Total exposure at default Corporate 2,905 10,589 3,405 28,398 351 18,067 6,242 8,804 10,784 13,893 18,253 12,593 12,607 - 606 147,497 Business lending 5,854 10,915 4,201 1,768 7 4,999 494 1,014 6,801 6,162 7,754 2,387 368 - 1,666 54,390 Sovereign - 1 - 152,838 68,266 70 - 539 245 214 - 154 - - - 222,327 Bank - - - 21,224 23 - - - 101 - - - - - - 21,348 Residential mortgages - - - - - - - - - - - - - 596,833 - 596,833 Australian credit cards - - - - - - - - - - - - - 15,068 - 15,068 Other retail - - - - - - - - - - - - - 8,972 - 8,972 Small business 748 1,975 3,469 1,252 705 1,530 545 2,150 4,211 3,664 2,815 1,484 322 - 3,259 28,129 Specialised lending 566 14 29 14 - 1 724 63,021 101 526 32 1,265 1,505 - 754 68,552 Securitisation - - - 35,076 - - - - 806 - 440 - - - - 36,322 Standardised 110 1 182 5,069 1,689 151 39 413 149 35 535 104 59 6,001 66 14,603 Total 10,183 23,495 11,286 245,639 71,041 24,818 8,044 75,941 23,198 24,494 29,829 17,987 14,861 626,874 6,351 1,214,041 1. Includes education, health & community services, cultural & recreational services and personal & other services. 2. Includes wholesale trade and retail trade. 3. Includes electricity, gas &water, and communication services. |
| 33 Exposure at Default by geography1 30 September 2023 Total Exposure $m Australia New Zealand Americas Asia Europe Pacific at Default Corporate 38,864 254 266 462 699 - 40,545 Business Lending 42,327 - - - - - 42,327 Property Finance 54,735 1 - - - - 54,736 Large Corporate 35,517 431 1,387 1,532 2,461 - 41,328 Sovereign 159,827 3,607 10,830 696 417 - 175,377 Financial Institutions 29,042 103 4,611 110 4,560 - 38,426 Residential Mortgages 529,640 - - 100 - - 529,740 Australian Credit Cards 13,590 - - - - - 13,590 Other Retail 4,848 - - - - - 4,848 Small Business 28,231 - - 1 - - 28,232 Specialised Lending 3,980 - 1 - - - 3,981 Securitisation 37,600 - - - - - 37,600 Standardised 25,788 - - 4 - 3,601 29,393 New Zealand - 133,744 - - - - 133,744 Total 1,003,989 138,140 17,095 2,905 8,137 3,601 1,173,867 31 March 2023 Total Exposure $m Australia New Zealand Americas Asia Europe Pacific at Default Corporate 35,422 315 266 525 582 - 37,110 Business Lending 40,861 - - - - - 40,861 Property Finance 52,695 2 - - - - 52,697 Large Corporate 34,198 436 1,524 1,896 2,194 - 40,248 Sovereign 190,563 3,858 15,467 671 309 - 210,868 Financial Institutions 28,857 102 4,845 121 3,762 - 37,687 Residential Mortgages 518,156 - - 120 - - 518,276 Australian Credit Cards 13,675 - - - - - 13,675 Other Retail 5,586 - - - - - 5,586 Small Business 29,558 - - 1 - - 29,559 Specialised Lending 3,506 5 - - 235 - 3,746 Securitisation 32,831 - - - - - 32,831 Standardised 26,710 - - 6 - 3,537 30,253 New Zealand - 134,507 - - - - 134,507 Total 1,012,618 139,225 22,102 3,340 7,082 3,537 1,187,904 30 September 2022 Total Exposure $m Australia New Zealand Americas Asia Europe Pacific at Default Corporate 98,283 22,938 10,222 4,678 11,376 - 147,497 Business lending 49,950 4,440 - - - - 54,390 Sovereign 191,542 18,933 10,522 870 460 - 222,327 Bank 19,788 1,105 10 298 147 - 21,348 Residential mortgages 532,458 64,226 - 149 - - 596,833 Australian credit cards 15,068 - - - - - 15,068 Other retail 6,460 2,512 - - - - 8,972 Small business 26,093 2,035 - 1 - - 28,129 Specialised lending 61,087 7,465 - - - - 68,552 Securitisation 31,730 4,592 - - - - 36,322 Standardised 11,277 - - - - 3,326 14,603 Total 1,043,736 128,246 20,754 5,996 11,983 3,326 1,214,041 1. Geographic segmentation of exposures is based on the location of the office in which these items were booked. |
| 34 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Exposure at Default by residual contractual maturity 30 September 2023 Total Exposure $m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default Corporate 3,087 6,217 16,937 9,204 5,100 40,545 Business Lending 2,527 9,391 18,459 4,487 7,463 42,327 Property Finance 193 16,254 25,349 5,527 7,413 54,736 Large Corporate 4,300 6,339 19,207 9,703 1,779 41,328 Sovereign 434 102,118 38,962 14,239 19,624 175,377 Financial Institutions 2,841 5,752 25,876 2,690 1,267 38,426 Residential Mortgages 24,522 1,255 3,138 768 500,057 529,740 Australian Credit Cards 13,588 - - - 2 13,590 Other Retail 175 177 1,235 1,165 2,096 4,848 Small Business 4,270 2,608 7,401 5,953 8,000 28,232 Specialised Lending - 355 1,121 935 1,570 3,981 Securitisation - 6,637 10,737 2,253 17,973 37,600 Standardised 1,397 2,676 6,813 405 18,102 29,393 New Zealand 5,354 26,258 20,144 8,147 73,841 133,744 Total 62,688 186,037 195,379 65,476 664,287 1,173,867 31 March 2023 Total Exposure $m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default Corporate 3,189 4,829 15,016 9,270 4,806 37,110 Business Lending 2,473 8,958 17,470 4,813 7,147 40,861 Property Finance 207 14,537 24,677 7,029 6,247 52,697 Large Corporate 4,406 6,034 19,246 9,029 1,533 40,248 Sovereign 469 111,183 59,069 14,256 25,891 210,868 Financial Institutions 3,281 5,786 24,379 3,238 1,003 37,687 Residential Mortgages 26,217 1,606 3,648 784 486,021 518,276 Australian Credit Cards 13,675 - - - - 13,675 Other Retail 184 206 1,421 1,526 2,249 5,586 Small Business 4,490 2,525 7,451 6,113 8,980 29,559 Specialised Lending 1 338 821 1,155 1,431 3,746 Securitisation - 10,132 7,022 3,065 12,612 32,831 Standardised 1,467 2,608 6,976 449 18,753 30,253 New Zealand 5,554 27,198 20,503 8,191 73,061 134,507 Total 65,613 195,940 207,699 68,918 649,734 1,187,904 30 September 2022 Total Exposure $m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default Corporate 13,078 24,945 76,523 26,790 6,161 147,497 Business lending 4,458 12,882 24,137 5,998 6,915 54,390 Sovereign 1,304 115,909 69,268 13,010 22,836 222,327 Bank 3,186 3,384 13,845 776 157 21,348 Residential mortgages 29,080 5,422 10,469 2,652 549,210 596,833 Australian credit cards 15,068 - - - - 15,068 Other retail 2,535 290 3,133 1,999 1,015 8,972 Small business 4,241 2,781 7,872 6,451 6,784 28,129 Specialised lending 322 19,318 37,024 8,620 3,268 68,552 Securitisation - 8,502 10,254 4,346 13,220 36,322 Standardised 1,443 1,257 7,029 297 4,577 14,603 Total 74,715 194,690 259,554 70,939 614,143 1,214,041 |
| 35 Non-performing and past due loans by portfolio 30 September 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 12 months $m Impaired - Impaired Exposures Exposures ended Corporate 27 100 127 93 16 Business Lending 823 190 1,013 296 39 Property Finance 716 36 752 157 4 Large Corporate - - - - - Sovereign - - - - - Financial Institutions 51 8 59 16 9 Residential Mortgages 4,117 238 4,355 382 32 Australian Credit Cards - 84 84 31 99 Other Retail - 123 123 59 122 Small Business 667 320 987 165 57 Specialised Lending - - - - - Securitisation - - - - - Standardised 345 124 469 97 5 New Zealand 661 79 740 120 27 Total 7,407 1,302 8,709 1,416 410 31 March 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 6 month $m Impaired - Impaired Exposures Exposures ended Corporate 78 164 242 147 (26) Business Lending 890 164 1,054 235 16 Property Finance 719 23 742 134 2 Large Corporate - - - - - Sovereign - - - - - Financial Institutions 50 15 65 18 5 Residential Mortgages 3,397 232 3,629 330 11 Australian Credit Cards - 100 100 37 44 Other Retail - 160 160 80 53 Small Business 692 429 1,121 196 31 Specialised Lending - - - - - Securitisation - - - - - Standardised 309 137 446 98 - New Zealand 574 97 671 118 7 Total 6,709 1,521 8,230 1,393 143 |
| 36 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES 30 September 2022 Actual Specific Losses Provisions for the Defaulted Impaired for Impaired 12 months $m not impaired1 Loans Loans ended Corporate 150 292 196 384 Business lending 1,175 274 142 84 Sovereign - - - - Bank - - - - Residential mortgages 3,576 248 67 30 Australian credit cards - 60 30 104 Other retail - 182 94 105 Small business 557 326 136 37 Specialised lending 549 29 10 1 Securitisation - - - - Standardised 72 103 51 - Total 6,079 1,514 726 745 Non-performing and past due loans by industry classification 30 September 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 12 months $m Impaired - Impaired Exposures Exposures ended Accommodation, cafes & restaurants 148 40 188 48 10 Agriculture, forestry & fishing 347 43 390 73 (30) Construction 194 75 269 63 9 Finance & insurance 76 28 104 28 10 Government administration & defence - - - - - Manufacturing 183 104 287 109 51 Mining 11 7 18 3 1 Property 864 66 930 184 13 Property services & business services 212 102 314 87 21 Services2 152 82 234 66 11 Trade3 222 125 347 91 29 Transport & storage 56 22 78 15 4 Utilities4 7 4 11 2 - Retail lending 4,898 540 5,438 604 275 Other 37 64 101 43 6 Total 7,407 1,302 8,709 1,416 410 1. Includes items past 90 days not impaired. 2. Includes education, health & community services, cultural & recreational services and personal & other services. 3. Includes wholesale trade and retail trade. 4. Includes electricity, gas &water, and communication services. |
| 37 31 March 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 6 month $m Impaired - Impaired Exposures Exposures ended Accommodation, cafes & restaurants 208 61 269 63 7 Agriculture, forestry & fishing 263 59 322 51 (34) Construction 185 96 281 63 6 Finance & insurance 94 39 133 33 5 Government administration & defence - - - - - Manufacturing 172 112 284 109 1 Mining 12 8 20 4 - Property 892 61 953 158 7 Property services & business services 226 125 351 93 14 Services1 174 92 266 72 8 Trade2 295 170 465 113 9 Transport & storage 63 33 96 18 1 Utilities3 8 5 13 2 - Retail lending 4,059 583 4,642 570 116 Other 58 77 135 44 3 Total 6,709 1,521 8,230 1,393 143 30 September 2022 Actual Specific Losses Provisions for the Defaulted Impaired for Impaired 12 months $m not impaired4 Loans Loans ended Accommodation, cafes & restaurants 273 57 25 5 Agriculture, forestry & fishing 243 55 21 7 Construction 145 88 41 10 Finance & insurance 86 40 23 8 Government administration & defence - - - - Manufacturing 126 186 113 89 Mining 14 9 3 3 Property 801 57 18 28 Property services & business services 202 150 91 17 Services1 181 101 59 310 Trade2 298 172 83 19 Transport & storage 55 37 13 7 Utilities3 6 4 1 1 Retail lending 3,636 503 198 239 Other 13 55 37 2 Total 6,079 1,514 726 745 1. Includes education, health & community services, cultural & recreational services and personal & other services. 2. Includes wholesale trade and retail trade. 3. Includes electricity, gas &water, and communication services. 4. Includes items past 90 days not impaired. |
| 38 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Non-performing and past due loans by geography1 30 September 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 12 months $m Impaired - Impaired Exposures Exposures ended Australia 6,705 1,111 7,816 1,221 379 New Zealand 661 79 740 120 27 Americas - - - - - Asia - 34 34 32 - Europe - - - - - Pacific 41 78 119 43 4 Total 7,407 1,302 8,709 1,416 410 31 March 2023 Non Specific Actual Performing Non Total provisions Losses Exposures Performing Non for Non for the - Not Exposures Performing Performing 6 month $m Impaired - Impaired Exposures Exposures ended Australia 6,078 1,295 7,373 1,205 136 New Zealand 574 98 672 118 7 Americas - - - - - Asia - 33 33 20 - Europe - - - - - Pacific 57 95 152 50 - Total 6,709 1,521 8,230 1,393 143 30 September 2022 Actual Specific Losses Provisions for the Defaulted Impaired for Impaired 12 months $m not impaired2 Loans Loans ended Australia 5,609 1,302 609 685 New Zealand 425 77 34 60 Americas - - - - Asia - 34 32 - Europe - - - - Pacific 45 101 51 - Total 6,079 1,514 726 745 1. Geographic segmentation of exposures is based on the location of the office in which these items were booked. 2. Includes items past 90 days not impaired. |
| 39 Portfolios subject to IRB approaches (AIRB) In the tables below Westpac’s transaction-managed exposures are classified by the external credit rating. Each external credit rating aligns to one or more internally assigned credit risk grades, as outlined in the ‘Credit Risk Management’ section of this report. Westpac’s internal rating scale has more risk grades than does the external rating scale, and as a result, average PD can vary from portfolio to portfolio for the same external grade. Westpac’s program-managed exposures are classified by PD band and the average PD within a band can, likewise, vary from portfolio to portfolio. For both non-defaulted and defaulted exposures, regulatory expected loss is defined at facility level. For non-defaulted exposures, regulatory expected loss is the product of PD, LGD and EAD while for defaulted exposures, this is the best estimates of loss. Total regulatory expected loss as shown in the table below is the sum of both non-defaulted and defaulted regulatory expected loss and given the difference in methodology, regulatory expected loss reported is not equal to the product of the corresponding reported average PD, average LGD and aggregate EAD. From 31 March 2023, the tables below reflect the asset class definitions set out on page 20. Corporate portfolio by external credit rating Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA 108 103 150 0.05% 50% - 23 15% AA 1,495 1,275 2,159 0.05% 50% 1 406 19% A 4,416 2,672 5,570 0.07% 41% 2 1,315 24% BBB 11,652 7,095 15,401 0.27% 38% 16 7,179 47% BB 12,005 6,441 15,852 1.22% 38% 71 13,596 86% B 194 94 248 4.78% 45% 5 394 159% Other 479 542 805 17.58% 44% 56 1,713 213% Subtotal 30,349 18,222 40,185 0.98% 39% 151 24,626 61% Default 127 30 360 100.00% 49% 326 192 53% Total 30,476 18,252 40,545 1.86% 39% 477 24,818 61% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA 100 104 142 0.00% 50% - 20 14% AA 1,430 1,256 2,120 0.05% 47% - 384 18% A 3,250 2,236 4,243 0.07% 44% 1 1,147 27% BBB 11,013 6,559 14,308 0.34% 41% 17 7,259 51% BB 11,999 6,036 15,017 1.19% 39% 70 13,404 89% B 113 69 149 4.70% 47% 3 233 156% Other 334 405 560 19.11% 45% 45 1,233 220% Subtotal 28,239 16,665 36,539 0.94% 41% 136 23,680 65% Default 241 115 571 100.00% 48% 452 629 110% Total 28,480 16,780 37,110 2.47% 41% 588 24,309 66% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA 1,695 9 1,703 0.01% 59% - 179 11% AA 5,425 2,074 7,485 0.03% 47% 1 1,009 13% A 27,763 11,937 39,465 0.07% 51% 14 10,254 26% BBB 36,926 24,660 60,667 0.22% 48% 63 29,743 49% BB 26,680 9,188 35,339 1.05% 37% 138 27,071 77% B 619 45 654 4.78% 42% 13 908 139% Other 1,011 302 1,305 19.45% 42% 104 2,810 215% Subtotal 100,119 48,215 146,618 0.56% 46% 333 71,974 49% Default 407 115 879 N/A 70% 567 714 81% Total 100,526 48,330 147,497 1.15% 46% 900 72,688 49% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 40 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Business lending portfolio by external credit ratings Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - 0% AA - - - 0.00% 0% - - 0% A - 20 8 0.08% 27% - 1 11% BBB 3,674 2,705 4,951 0.45% 29% 7 1,684 34% BB 29,764 9,315 34,280 1.36% 28% 130 18,895 55% B 714 114 778 4.81% 29% 11 635 82% Other 1,233 214 1,356 23.19% 30% 96 2,082 153% Subtotal 35,385 12,368 41,373 2.03% 28% 244 23,297 56% Default 953 107 954 100.00% 27% 285 563 59% Total 36,338 12,475 42,327 4.24% 28% 529 23,860 56% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - 0% AA - - - 0.00% 0% - - 0% A - 22 10 0.00% 30% - 2 20% BBB 3,208 2,407 4,227 0.54% 30% 8 1,604 38% BB 29,360 9,743 33,799 1.50% 30% 160 20,935 62% B 652 117 703 4.84% 31% 11 605 86% Other 1,045 220 1,143 22.92% 32% 84 1,791 157% Subtotal 34,265 12,509 39,882 2.07% 31% 263 24,937 63% Default 976 137 979 100.00% 27% 227 991 101% Total 35,241 12,646 40,861 4.42% 30% 490 25,928 63% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - 0% AA - - - 0.00% 0% - - 0% A 147 50 197 0.08% 43% - 43 22% BBB 2,890 1,501 4,392 0.23% 30% 3 1,138 26% BB 35,858 9,890 45,727 1.39% 29% 182 25,157 55% B 804 114 919 4.78% 29% 13 707 77% Other 1,445 222 1,668 22.74% 31% 117 2,427 146% Subtotal 41,144 11,777 52,903 2.02% 29% 315 29,472 56% Default 1,381 105 1,487 N/A 24% 311 1,069 72% Total 42,525 11,882 54,390 4.70% 29% 626 30,541 56% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 41 Property finance portfolio by external credit ratings1 Property finance (income-producing real estate under APS113) represents exposures where repayments depend primarily on the cash flows generated by the asset or other real estate assets owned by the borrower. Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - 0% AA - - - 0.00% 0% - - 0% A 1,455 591 1,695 0.09% 43% 1 741 44% BBB 11,538 2,676 13,064 0.24% 17% 5 3,642 28% BB 33,741 5,636 37,489 1.27% 22% 105 23,533 63% B 864 40 885 4.78% 22% 10 852 96% Other 816 69 858 20.84% 23% 41 1,475 172% Subtotal 48,414 9,012 53,991 1.36% 21% 162 30,243 56% Default 745 49 745 100.00% 19% 158 173 23% Total 49,159 9,061 54,736 2.70% 21% 320 30,416 56% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - - AA - - - 0.00% 0% - - 0% A 1,470 708 1,754 0.11% 43% 1 771 44% BBB 11,248 2,548 12,529 0.24% 18% 5 3,975 32% BB 33,257 5,497 36,733 1.31% 23% 115 24,704 67% B 392 27 406 4.68% 24% 5 410 101% Other 489 62 531 20.15% 26% 28 989 186% Subtotal 46,856 8,842 51,953 1.23% 23% 154 30,849 59% Default 744 45 744 100.00% 21% 134 385 52% Total 47,600 8,887 52,697 2.63% 23% 288 31,234 59% 1. Property Finance is a separate asset class and subject to the AIRB approach to calculate RWAs. Property Finance was previously categorised as specialised lending and subject to supervisory risk weights in the IRB approach. As Property Finance was a new asset class, 30 September 2022 comparatives have not been included. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 42 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Residential mortgages portfolio by PD band1,2 Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings3 Undrawn4 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 72,233 41,325 112,350 0.06% 13% 8 6,368 6% 0.10 to 0.25 106,671 14,695 120,152 0.16% 14% 27 10,067 8% 0.25 to 1.0 221,712 11,338 232,352 0.45% 16% 163 43,357 19% 1.0 to 2.5 29,636 672 30,214 1.20% 16% 59 11,510 38% 2.5 to 10.0 22,472 1,149 23,055 7.78% 15% 280 24,663 107% 10.0 to 99.99 7,220 24 7,245 21.54% 16% 251 9,963 138% Subtotal 459,944 69,203 525,368 0.95% 15% 788 105,928 20% Default 4,372 28 4,372 100.00% 20% 378 7,020 161% Total 464,316 69,231 529,740 1.77% 15% 1,166 112,948 21% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings3 Undrawn4 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 68,121 42,265 109,324 0.05% 13% 8 6,199 6% 0.10 to 0.25 108,341 15,201 122,339 0.16% 14% 28 10,327 8% 0.25 to 1.0 214,998 11,043 225,545 0.44% 16% 159 42,080 19% 1.0 to 2.5 27,824 669 28,427 1.21% 17% 57 10,919 38% 2.5 to 10.0 21,926 1,327 22,632 7.73% 16% 273 24,250 107% 10.0 to 99.99 6,332 26 6,362 19.82% 16% 206 8,813 139% Subtotal 447,542 70,531 514,629 0.90% 15% 731 102,588 20% Default 3,629 28 3,647 100.00% 20% 326 6,576 180% Total 451,171 70,559 518,276 1.59% 15% 1,057 109,164 21% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings3 Undrawn4 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 139,831 45,839 184,024 0.07% 20% 28 12,446 7% 0.10 to 0.25 27,842 9,372 36,510 0.24% 20% 18 5,641 15% 0.25 to 1.0 285,338 30,499 311,768 0.52% 20% 322 78,447 25% 1.0 to 2.5 34,699 3,384 37,178 1.45% 21% 111 18,546 50% 2.5 to 10.0 12,192 574 12,492 4.84% 20% 122 12,062 97% 10.0 to 99.99 10,840 198 11,020 18.62% 20% 410 15,965 145% Subtotal 510,742 89,866 592,992 0.85% 20% 1,011 143,107 24% Default 3,829 29 3,841 N/A 20% 394 6,101 159% Total 514,571 89,895 596,833 1.49% 20% 1,405 149,208 25% 1. As at 30 September 2023 Residential Mortgages risk weighted assets under the IRB approach totalled $132,238 million. The standardised approach equivalent was $209,292 million. 2. The above table reflects that at 30 September 2022 Westpac applied a floor of 25% to its residential mortgage risk weights. This floor was removed under APRA’s capital framework commencing 1 January 2023. 3. Outstandings are balances that were drawn down as at the reporting date. 4. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 43 Australian credit cards portfolio by PD band1,2 Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 1,245 5,913 4,267 0.08% 81% 3 182 4% 0.10 to 0.25 1,512 4,603 4,047 0.17% 84% 6 345 9% 0.25 to 1.0 1,400 2,155 2,621 0.55% 85% 12 582 22% 1.0 to 2.5 871 581 1,223 1.64% 85% 17 632 52% 2.5 to 10.0 737 405 954 3.58% 84% 29 844 88% 10.0 to 99.99 342 160 415 17.36% 80% 57 901 217% Subtotal 6,107 13,817 13,527 1.11% 83% 124 3,486 26% Default 63 21 63 100.00% 75% 31 226 358% Total 6,170 13,838 13,590 1.57% 83% 155 3,712 27% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 1,231 6,106 4,345 0.07% 80% 3 185 4% 0.10 to 0.25 1,450 4,610 3,981 0.18% 84% 6 338 8% 0.25 to 1.0 1,375 2,130 2,581 0.54% 85% 12 575 22% 1.0 to 2.5 901 593 1,260 1.67% 85% 18 652 52% 2.5 to 10.0 754 439 984 3.56% 84% 29 871 89% 10.0 to 99.99 365 188 451 17.29% 81% 63 983 218% Subtotal 6,076 14,066 13,602 1.16% 83% 131 3,604 26% Default 73 28 73 100.00% 74% 41 353 484% Total 6,149 14,094 13,675 1.69% 83% 172 3,957 29% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 1,835 9,242 7,626 0.05% 79% 3 197 3% 0.10 to 0.25 1,124 3,136 2,911 0.16% 82% 4 225 8% 0.25 to 1.0 1,010 1,017 1,667 0.46% 83% 7 310 19% 1.0 to 2.5 1,025 716 1,536 1.55% 82% 19 699 46% 2.5 to 10.0 825 297 1,001 4.40% 82% 36 932 93% 10.0 to 99.99 237 63 255 25.68% 79% 51 1,061 416% Subtotal 6,056 14,471 14,996 1.00% 81% 120 3,424 23% Default 72 16 72 N/A 80% 33 493 685% Total 6,128 14,487 15,068 1.47% 81% 153 3,917 26% 1. The above table reflects that at 30 September 2022 Westpac applied a floor of 26% to its Australian Credit Cards risk weights. 2. Outstandings are balances that were drawn down as at the reporting date. 3. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 44 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Small business portfolio by PD band Regulatory Risk Average 30 September 2023 Committed Exposure Probability Loss Given Expected Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight 0.0 to 0.10 - - - 0.00% 0% - - 0% 0.10 to 0.25 - - - 0.00% 0% - - 0% 0.25 to 1.0 1,339 2,455 3,822 0.58% 37% 8 1,235 32% 1.0 to 2.5 13,684 3,802 17,482 1.48% 35% 92 8,334 48% 2.5 to 10.0 3,861 508 4,369 4.86% 35% 73 3,018 69% 10.0 to 99.99 1,465 240 1,707 28.16% 35% 173 1,850 108% Subtotal 20,349 7,005 27,380 3.56% 35% 346 14,437 53% Default 851 94 852 100.00% 39% 163 2,603 306% Total 21,200 7,099 28,232 6.47% 35% 509 17,040 60% Regulatory Risk Average 31 March 2023 Committed Exposure Probability Loss Given Expected Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight 0.0 to 0.10 - - - 0.00% 0% - - 0% 0.10 to 0.25 - - - 0.00% 0% - - 0% 0.25 to 1.0 1,145 2,292 3,474 0.60% 37% 8 1,144 33% 1.0 to 2.5 14,408 4,022 18,651 1.47% 35% 98 8,938 48% 2.5 to 10.0 4,054 547 4,672 4.88% 36% 81 3,055 65% 10.0 to 99.99 1,538 209 1,767 28.92% 36% 187 1,923 109% Subtotal 21,145 7,070 28,564 3.62% 36% 374 15,060 53% Default 988 103 995 100.00% 39% 202 3,159 317% Total 22,133 7,173 29,559 6.87% 36% 576 18,219 62% Regulatory Risk Average 30 September 2022 Committed Exposure Probability Loss Given Expected Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight 0.0 to 0.10 201 371 404 0.07% 53% - 46 11% 0.10 to 0.25 125 198 317 0.19% 21% - 27 9% 0.25 to 1.0 4,955 3,444 8,327 0.46% 29% 11 1,785 21% 1.0 to 2.5 12,752 1,605 14,374 1.60% 38% 85 7,243 50% 2.5 to 10.0 2,249 287 2,537 5.10% 35% 47 1,722 68% 10.0 to 99.99 1,311 81 1,395 28.26% 37% 143 1,545 111% Subtotal 21,593 5,986 27,354 2.90% 35% 286 12,368 45% Default 763 65 775 N/A 32% 162 1,623 209% Total 22,356 6,051 28,129 5.57% 35% 448 13,991 50% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 45 Other retail portfolio by PD band Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 1 4 2 0.07% 79% - - 17% 0.10 to 0.25 67 135 199 0.22% 71% - 67 34% 0.25 to 1.0 1,356 454 1,811 0.62% 62% 7 967 53% 1.0 to 2.5 987 303 1,291 1.57% 76% 15 1,263 98% 2.5 to 10.0 1,019 58 1,087 4.79% 77% 41 1,347 124% 10.0 to 99.99 321 12 339 28.73% 71% 70 598 176% Subtotal 3,751 966 4,729 3.84% 70% 133 4,242 90% Default 120 4 119 100.00% 72% 60 365 305% Total 3,871 970 4,848 6.21% 70% 193 4,607 95% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 1 3 2 0.00% 100% - - - 0.10 to 0.25 80 141 218 0.00% 70% - 72 33% 0.25 to 1.0 1,724 466 2,190 0.64% 61% 8 1,154 53% 1.0 to 2.5 1,121 314 1,436 1.53% 74% 17 1,375 96% 2.5 to 10.0 1,098 62 1,169 4.79% 76% 43 1,427 122% 10.0 to 99.99 389 20 416 28.37% 69% 83 715 172% Subtotal 4,413 1,006 5,431 3.87% 68% 151 4,743 87% Default 155 5 155 100.00% 72% 83 561 362% Total 4,568 1,011 5,586 6.53% 69% 234 5,304 95% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight 0.0 to 0.10 214 792 696 0.05% 47% - 52 7% 0.10 to 0.25 336 1,110 1,052 0.20% 59% 2 264 25% 0.25 to 1.0 2,274 824 2,949 0.64% 60% 12 1,490 51% 1.0 to 2.5 1,528 674 2,036 1.64% 70% 25 1,796 88% 2.5 to 10.0 1,381 185 1,531 4.85% 74% 59 1,773 116% 10.0 to 99.99 493 29 534 24.56% 70% 96 840 157% Subtotal 6,226 3,614 8,798 2.96% 64% 194 6,215 71% Default 172 10 174 N/A 70% 98 511 294% Total 6,398 3,624 8,972 4.84% 64% 292 6,726 75% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 46 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Portfolios subject to supervisory risk-weights in the IRB approach1 Exposures subject to supervisory risk-weights in the IRB approach include assets categorised as specialised lending, where a regulatory capital ‘slotting’ approach applies. Specialised lending relates to Project Finance and Object Finance. The ‘Credit Risk Management’ section of this report describes the alignment of Westpac risk grades to both external rating equivalents and regulatory capital ‘slots’. 30 September 2023 Exposure at Regulatory Risk Weighted $m Risk Weight Default Expected Loss Assets Strong 70% 2,909 11 2,036 Good 90% 817 7 736 Satisfactory 115% 255 7 293 Weak 250% - - - Default N/A - - - Total 3,981 25 3,065 31 March 2023 Exposure at Regulatory Risk Weighted $m Risk Weight Default Expected Loss Assets Strong 70% 2,596 10 1,817 Good 90% 837 7 753 Satisfactory 115% 312 9 359 Weak 250% 1 - 2 Default N/A - - - Total 3,746 26 2,931 30 September 2022 Exposure at Regulatory Risk Weighted $m Risk Weight Default Expected Loss Assets Strong 70% 30,512 122 21,360 Good 90% 32,274 259 29,151 Satisfactory 115% 4,539 127 5,260 Weak 250% 627 50 1,567 Default N/A 600 300 - Total 68,552 858 57,338 1. Westpac previously categorised Property Finance and Project Finance (including Object Finance) credit risk exposures under Specialised Lending. The revised capital framework has resulted in Property Finance being recategorised as a separate exposure class using the AIRB approach to calculate RWAs (refer to page 92). |
| 47 Portfolios subject to FIRB1 This table sets out portfolios subject to FIRB. Under FIRB, an ADI must provide its own estimates of PD and maturity and rely on supervisory estimates of LGD and EAD. This includes all Sovereign, Financial Institutions and Large Corporate exposures. Sovereign exposures by external credit rating1 Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight AAA 110,926 6 110,928 0.01% 7% 1 782 1% AA 63,146 213 63,328 0.02% 5% 1 1,038 2% A 778 145 844 0.04% 47% - 158 19% BBB 222 61 246 0.19% 50% - 116 47% BB 4 3 7 1.51% 54% - 8 114% B 4 46 22 4.78% 51% 1 36 164% Other - 3 2 23.74% 39% - 5 250% Subtotal 175,080 477 175,377 0.01% 7% 3 2,143 1% Default - - - - - - - - Total 175,080 477 175,377 0.01% 7% 3 2,143 1% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight AAA 142,152 42 142,169 0.01% 5% 1 780 1% AA 67,986 207 68,172 0.02% 5% 1 1,409 2% A 388 94 430 0.00% 43% - 102 24% BBB 84 1 84 0.00% 51% - 47 56% BB 8 4 11 0.00% 55% - 13 118% B - - - - - - 1 - Other - 3 2 0.00% 50% - 5 250% Subtotal 210,618 351 210,868 0.01% 5% 2 2,357 1% Default - - - 0.00% - - - - Total 210,618 351 210,868 0.01% 5% 2 2,357 1% Risk Average 30 September 2022 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings2 Undrawn3 at Default of Default Default Expected Loss Assets Weight AAA 159,202 311 159,587 0.01% 6% 1 1,040 1% AA 60,550 698 61,544 0.02% 6% 1 1,091 2% A 722 301 1,025 0.05% 33% - 161 16% BBB 138 12 150 0.17% 29% - 25 17% BB 5 13 18 2.10% 35% - 15 83% B - - - - - - - - Other 1 2 3 12.11% 18% - 3 100% Subtotal 220,618 1,337 222,327 0.01% 6% 2 2,335 1% Default - - - N/A - - - - Total 220,618 1,337 222,327 0.01% 6% 2 2,335 1% 1. Prior period comparatives for 30 September 2022 have not been included for Financial Institutions and Large Corporate exposures as these represented a new asset class under APRA’s capital framework as set out in Appendix I. For Sovereign exposures, RWA was previously calculated using AIRB. 2. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 3. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 48 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Financial institution exposures by external credit rating Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA 2,428 - 2,428 0.05% 50% 1 716 29% AA 10,141 442 10,383 0.05% 50% 3 2,529 24% A 16,560 3,559 18,486 0.06% 50% 6 4,648 25% BBB 2,461 3,466 4,416 0.20% 51% 4 2,598 59% BB 2,128 673 2,521 1.08% 44% 10 2,752 109% B 23 18 38 4.73% 39% 1 66 174% Other 53 28 68 22.46% 37% 5 148 218% Subtotal 33,794 8,186 38,340 0.18% 50% 30 13,457 35% Default 86 3 86 100.00% 42% 36 - 0% Total 33,880 8,189 38,426 0.41% 50% 66 13,457 35% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA 3,029 - 3,029 0.07% 50% 1 1,486 49% AA 8,868 482 9,127 0.05% 50% 2 3,279 36% A 16,596 4,045 18,740 0.06% 51% 6 5,019 27% BBB 2,800 2,544 4,125 0.19% 52% 4 2,523 61% BB 2,113 642 2,484 1.13% 47% 12 2,553 103% B 27 15 41 4.88% 46% 1 69 168% Other 53 5 56 23.21% 38% 5 128 229% Subtotal 33,486 7,733 37,602 0.18% 50% 31 15,057 40% Default 85 3 85 100.00% 47% 40 - 0% Total 33,571 7,736 37,687 0.41% 50% 71 15,057 40% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 49 Large corporate exposures by external credit rating Risk Average 30 September 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.05% 0% - - 0% AA 1,286 292 1,405 0.05% 33% - 244 17% A 9,270 7,392 12,767 0.07% 50% 5 3,785 30% BBB 14,201 17,966 22,460 0.21% 50% 25 11,499 51% BB 2,620 3,077 4,236 0.94% 46% 19 3,892 92% B 31 25 52 4.78% 53% 1 91 175% Other 233 329 407 16.76% 50% 34 1,059 260% Subtotal 27,641 29,081 41,327 0.41% 49% 84 20,570 50% Default 1 - 1 100.00% 28% - - 0% Total 27,642 29,081 41,328 0.41% 49% 84 20,570 50% Risk Average 31 March 2023 Committed Exposure Probability Loss Given Regulatory Weighted Risk $m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight AAA - - - 0.00% 0% - - 0% AA 174 261 281 0.00% 50% - 66 23% A 8,056 9,177 12,328 0.07% 55% 5 3,947 32% BBB 14,096 18,316 22,683 0.22% 52% 26 12,152 54% BB 2,960 3,740 4,838 1.01% 48% 24 4,786 99% B 37 26 54 5.56% 59% 2 107 198% Other 19 88 64 17.19% 52% 6 170 266% Subtotal 25,342 31,608 40,248 0.31% 52% 63 21,228 53% Default - - - 0.00% 0% - - 0% Total 25,342 31,608 40,248 0.31% 52% 63 21,228 53% 1. Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2. Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. |
| 50 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Portfolios subject to the standardised approach This table presents exposures subject to the standardised approach for the calculation of RWA. This includes certain mortgages that are prescribed a standardised risk weight including interest-only mortgages greater than five years and mortgages held by self-managed super funds. Other exposures subject to the standardised approach include Westpac Pacific, Asian retail exposures, margin lending and some other small portfolios. Mark-to-market related credit risk and qualifying central clearing counterparties exposure1 is also included in the standardised approach. 30 September 2023 Total Exposure Risk Weighted Risk Weight % at Default $m Assets $m 0% - - 2% 2,983 60 4% 1,739 70 20% 1,811 362 35% - - 50% 393 196 65% 210 137 75% 155 116 85% 269 229 90% 437 393 100% 20,828 20,828 120% 11 13 150% 388 584 1250% - - Default fund contributions1 169 73 Mark-to-market related credit risk - 5,752 Total 29,393 28,813 31 March 2023 Total Exposure Risk Weighted Risk Weight % at Default $m Assets $m 0% - - 2% 2,559 51 4% - - 20% 4,571 914 35% - - 50% 414 207 65% 208 135 75% 201 151 85% 201 171 90% 412 371 100% 20,736 20,736 120% 15 18 150% 681 1,021 1250% - - Default fund contributions1 255 150 Mark-to-market related credit risk - 5,214 Total 30,253 29,139 1. Portfolios subject to the standardised approach include exposures to qualifying central clearing counterparties used to clear derivative transactions. Derivative counterparty exposure and initial margin are risk weighted at 2%. Default fund contributions to qualifying central clearing counterparties are shown separately and are subject to higher risk weights. |
| 51 30 September 2022 Total Exposure Risk Weighted Risk Weight % at Default $m Assets $m 0% 1,762 - 2% 3,051 61 20% 1,159 232 35% 361 126 50% 1,174 587 75% 2,652 1,989 100% 4,240 4,239 150% 54 82 Default fund contributions1 150 105 Mark-to-market related credit risk - 6,377 Total 14,603 13,798 New Zealand portfolio This table presents a summary of the New Zealand asset class. When an overseas banking subsidiary is regulated by the RBNZ, RWA and Expected Losses (EL) are calculated using the RBNZ rules2. The table below summarises Westpac’s New Zealand regulated RWA credit exposures (including securitisations) using RBNZ asset classes used to determine RWA. 30 September 2023 Total Total Risk Regulatory Exposure Weighted Expected $m at Default Assets Loss Residential Mortgages 69,751 17,353 176 Other Retail 2,572 1,223 41 Small Business 1,977 688 11 Corporate/Business Lending 41,130 25,085 323 Standardised 18,314 2,299 - Total 133,744 46,648 551 31 March 2023 Total Total Risk Regulatory Exposure Weighted Expected $m at Default Assets Loss Residential Mortgages 69,440 16,804 166 Other Retail 2,642 1,287 49 Small Business 2,053 711 12 Corporate/Business Lending 40,835 24,499 307 Standardised 19,537 2,030 - Total 134,507 45,331 534 1. Portfolios subject to the standardised approach include exposures to qualifying central clearing counterparties used to clear derivative transactions. Derivative counterparty exposure and initial margin are risk weighted at 2%. Default fund contributions to qualifying central clearing counterparties are shown separately and are subject to higher risk weights. 2. The scaling factor and floor applied to New Zealand exposures is calculated using APRA requirements rather than the RBNZ requirements. |
| 52 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Credit Quality Actual losses 30 Sept 2023 Actual Losses Legal and Write-offs for the Write-offs recovery from 12 months $m direct costs provisions1 Recoveries ended2 Corporate 4 - 53 (41) 16 Business Lending 13 - 29 (3) 39 Property Finance 6 - - (2) 4 Large Corporate - - - - - Sovereign - - - - - Financial Institutions 1 - 8 - 9 Residential Mortgages 6 5 33 (12) 32 Australian Credit Cards 160 - - (61) 99 Other Retail 177 4 - (59) 122 Small Business 40 - 24 (7) 57 Specialised Lending - - - - - Securitisation - - - - - Standardised 2 - 3 - 5 New Zealand 22 - 11 (6) 27 Total 431 9 161 (191) 410 31 March 2023 Actual Losses Legal and Write-offs for the Write-offs recovery from 6 months $m direct costs provisions1 Recoveries ended2 Corporate 2 - 12 (40) (26) Business Lending 7 - 11 (2) 16 Property Finance 3 - - (1) 2 Large Corporate - - - - - Sovereign - - - - - Financial Institutions - - 5 - 5 Residential Mortgages 2 2 13 (6) 11 Australian Credit Cards 82 - - (38) 44 Other Retail 83 2 - (32) 53 Small Business 25 - 11 (5) 31 Specialised Lending - - - - - Securitisation - - - - - Standardised - - - - - New Zealand 10 - 1 (4) 7 Total 214 4 53 (128) 143 1. Write-offs from individually assessed provisions. 2. Loan losses included the recovery of a previously written off loan of $40m within the Corporate asset class. |
| 53 30 Sept 2022 Actual Losses Legal and Write-offs for the Write-offs recovery from 12 months $m direct costs provisions1 Recoveries ended Corporate 1 - 383 - 384 Business lending 45 - 56 (17) 84 Sovereign - - - - - Bank - - - - - Residential mortgages 7 - 25 (2) 30 Australian credit cards 176 - - (72) 104 Other retail 195 8 - (98) 105 Small business 13 1 23 - 37 Specialised lending - - 1 - 1 Securitisation - - - - - Standardised - - - - - Total 437 9 488 (189) 745 1. Write-offs from individually assessed provisions. |
| 54 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK EXPOSURES Regulatory loss estimates and actual losses The table below compares regulatory credit risk estimates used in the calculation of risk weighted assets to the average of actual outcomes observed since the establishment of Advanced IRB accreditation for each portfolio. Predicted parameters represent average internally predicted long-run probabilities of default for non-defaulted obligors at the start of each year, as well as downturn estimates of loss (or the regulatory minimum where required). They are averaged using data from the financial years beginning at the time of Advanced IRB accreditation (2008 for most portfolios) and compared to observed outcomes over the same period. Predicted parameters are reviewed annually utilising observed outcomes from prior periods as a key input. In response to the capital framework performance, information set out in the table below, attached to cohorts of obligors subject to the asset classes and estimates, has been aligned to most comparable classes on a best endeavour basis. Performance information associated with cohorts of obligors subject to the asset classes requires sufficient passage of time to be observed and will start being included in the long-run averages from March 2024 reporting onwards. In the below table these are therefore not disclosed for 30 September 2023. Default rates At the start of each year, a predicted default probability is assigned to all non-defaulted obligors. This is averaged over the portfolio for the period since IRB accreditation and reported as the predicted default rate. The actual default rate reflects the fraction of obligors who start the year not in default but default during the one-year period. The observed annual default rates are averaged over the period since IRB accreditation. Loss Given Default (LGD) The LGD analysis excludes recent defaults in order to allow sufficient time for the full workout of the facility and hence an accurate LGD to be determined. The workout period varies by portfolio: a two-year workout period is assumed for transaction-managed and residential mortgage lending; and a one year period for other program-managed portfolios. Exposure at Default (EAD) The EAD variance compares the observed EAD to the predicted EAD up to one year prior to default. For transaction-managed portfolios, predicted EAD is currently mandated to be 100% of committed exposures. The observed EAD is averaged for all obligors that defaulted over the observation period. 30 Sept 2023 Regulatory Observed EAD Expected Default rate Loss Given Default variance to $m Loss1 Predicted Observed Predicted Observed Predicted2 Corporate 477 2.27% 0.90% 42% 23% (22%) Business lending 529 2.26% 1.65% 35% 14% (13%) Property Finance3 320 N/A N/A N/A N/A N/A Large corporate3 84 N/A N/A N/A N/A N/A Sovereign 3 0.25% 0.00% - - 0.00% Financial institution3 66 0.43% 0.10% - - 0.00% Residential mortgages 1,166 0.77% 0.60% 20% 1% (1%) Australian credit cards 155 1.58% 1.47% 75% 57% (2%) Other retail 193 4.62% 3.46% 69% 40% (7%) Small business 509 3.93% 2.93% 37% 6% (10%) Specialised lending4 25 N/A 2.22% N/A 14% (11%) Securitisation4 - N/A N/A N/A N/A N/A New Zealand5 0 N/A N/A N/A N/A N/A Standardised4 551 N/A N/A N/A N/A N/A Total 4,078 1. Includes regulatory expected losses for defaulted and non-defaulted exposures. 2. A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet items or undrawn limits were not fully drawn prior to default. 3. These are new asset classes under the capital framework. ‘Financial institution’ includes exposures subject to ‘Bank’ under the previous framework. Performance information of exposures reported under Large Corporate and Property Finance requires sufficient passage of time to be observed and thus is currently shown as N/A. 4. Predicted parameters are not available for specialised lending, securitisation or standardised exposures as risk weights for these portfolios do not rely on credit estimates and are shown as N/A in the tables above. 5. Historical Default Rate, Loss Given Default and Observed-to-Predicted EAD are included in the asset classes above, consistent with the historical classification of New Zealand exposures. |
| 55 Regulatory loss estimates and actual losses (continued) 31 March 2023 Regulatory Observed EAD Expected Default rate Loss Given Default variance to $m Loss1 Predicted Observed Predicted Observed Predicted2 Corporate 588 2.27% 0.91% 45% 24% (22%) Business lending 490 2.26% 1.67% 34% 15% (13%) Property Finance3 288 N/A N/A N/A N/A N/A Large corporate3 63 N/A N/A N/A N/A N/A Sovereign 2 0.25% 0.00% 0.00% 0.00% 0.00% Financial institution3 71 0.43% 0.10% 0.00% 0.00% 0.00% Residential mortgages 1,057 0.76% 0.61% 20% 1% (1%) Australian credit cards 172 1.61% 1.49% 75% 57% (2%) Other retail 234 4.65% 3.48% 69% 40% (7%) Small business 576 3.93% 2.92% 37% 6% (10%) Specialised lending4 26 N/A 2.26% N/A 14% (12%) Securitisation4 - N/A N/A N/A N/A N/A New Zealand5 534 N/A N/A N/A N/A N/A Standardised4 - N/A N/A N/A N/A N/A Total 4,101 30 Sept 2022 Regulatory Observed EAD Expected Default rate Loss Given Default variance to $m Loss1 Predicted Observed Predicted Observed Predicted2 Corporate 900 2.30% 0.88% 46% 25% (22%) Business lending 626 2.26% 1.62% 35% 17% (14%) Sovereign 2 0.25% 0.00% 0.00% 0.00% 0.00% Bank 6 0.42% 0.11% 0.00% 0.00% 0.00% Residential mortgages 1,405 0.74% 0.62% 20% 1% (1%) Australian credit cards 153 1.63% 1.52% 74% 58% (2%) Other retail 292 4.69% 3.53% 68% 40% (7%) Small business 448 3.92% 2.91% 38% 7% (9%) Specialised lending 858 N/A 2.14% N/A 17% (11%) Securitisation - N/A N/A N/A N/A N/A Standardised - N/A N/A N/A N/A N/A Total 4,690 1. Includes regulatory expected losses for defaulted and non-defaulted exposures. 2. A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet items or undrawn limits were not fully drawn prior to default. 3. These are new asset classes under the capital framework. ‘Financial institution’ includes exposures subject to ‘Bank’ under the previous framework. Performance information of exposures reported under Large Corporate and Property Finance requires sufficient passage of time to be observed and thus is currently shown as N/A. 4. Predicted parameters are not available for specialised lending, securitisation or standardised exposures as risk weights for these portfolios do not rely on credit estimates and are shown as N/A in the tables above. 5. Historical Default Rate, Loss Given Default and Observed-to-Predicted EAD are included in the asset classes above, consistent with the historical classification of New Zealand exposures. |
| 56 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT CREDIT RISK MITIGATION This section describes the way in which Westpac reduces its credit risk by using financial collateral, guarantees or credit derivatives for the Corporate, Sovereign and Bank asset classes. Approach Westpac recognises credit risk mitigation only when formal legal documentation is held that establishes Westpac’s direct, irrevocable and unconditional recourse to the collateral or to an unrelated credit risk mitigation provider. Minimum standards for recognising credit risk mitigation are set out in Westpac’s credit rules and policies. All proposals for recognising risk mitigation require approval by an authorised credit officer. Authorised credit officer approval is also required for existing risk mitigation to be discontinued or withdrawn. The amount of credit risk mitigation recognised is the face value of the mitigation instrument, adjusted by the application of discounts for any maturity and/or currency mismatch with the underlying obligation, so that a discounted amount is recognised when calculating the residual exposure after mitigation. For regulatory capital purposes: • exposures secured by eligible financial collateral, either cash or certain government or semi-government securities, or where protection is bought via credit linked notes, provided proceeds are invested in eligible financial collateral, are included at the gross value, with risk weighted assets for the portion thus secured calculated by applying a 5% LGD1; • exposures mitigated by eligible guarantees, standby letters of credit or similar instruments, where Westpac has direct recourse to an unrelated third party, or credit protection bought via credit default swaps where Westpac is entitled to recover either full principal or credit losses on occurrence of defined credit events, are treated under double default rules where the protection provider is rated A-/A3 or better. The Group Chief Credit Officer has the authority to approve exceptions to the A-/A3 minimum; and • exposures mitigated by guarantees, letters of credit, credit default swaps or similar instruments, which are not eligible for double default treatment are treated under the substitution approach. When Westpac uses credit risk mitigation techniques to reduce counterparty exposure, limits are applied to both gross (i.e. pre-mitigation) and net exposure. Furthermore, exposure is recorded against the provider of any credit risk mitigation and a limit framework prevents excessive concentration to such counterparties. Netting Risk reduction by way of current account set-offs is recognised for exposures to creditworthy customers domiciled in Australia and New Zealand only. Customers are required to enter into formal agreements giving Westpac the unfettered right to set-off gross credit and debit balances in their nominated accounts to determine Westpac’s net exposure within each of these two jurisdictions. Cross-border set-offs are not permitted. Close-out netting is undertaken for off-balance sheet financial market transactions with counterparties with whom Westpac has entered into master netting agreements which allow such netting in specified jurisdictions. Close-out netting effectively aggregates pre-settlement risk exposure at time of default, thus reducing overall exposure. Collateral valuation and management Westpac revalues financial markets and associated collateral positions on a daily basis to monitor the net risk position, and has formal processes in place so that calls for collateral top-up or exposure reduction are made promptly. An independent operational unit has responsibility for monitoring these positions. The collateralisation arrangements are documented via the Credit Support Annex of the International Swaps and Derivatives Association (ISDA) master agreement for derivatives transactions and Global Master Repurchase Agreement (GMRA) for repurchase transactions and Clearing Agreements for cleared trades. 1. Excludes collateralised derivative transactions. |
| 57 CREDIT RISK MITIGATION Total exposure covered by collateral, credit derivatives and guarantees1 This table sets out Westpac’s exposure to credit risk arising from derivative and treasury products. Corporate exposures before credit mitigation reduced over Full Year 2023 mainly due to APRA’s capital framework commencing 1 January 2023. Key factors included introduction of a new Large Corporate and Financial Institutions asset classes which absorbed Corporate asset class exposure, a change in the annual revenue threshold between Corporate and Business asset classes resulting in a portion of Corporate exposures shifting to Business, and revised Credit Conversion Factors for off balance sheet exposures reducing Corporate exposures. The increase in Second Half 2023 is broadly consistent with volume growth in the asset class. Impact Total exposure for Credit Risk Mitigants 30 Sept 2023 Total before of credit Total after which some credit Eligible Financial Covered by Covered by $m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 40,642 (97) 40,545 617 97 90 - Large Corporate 41,339 (11) 41,328 2,686 1,419 - - Sovereign 175,870 (493) 175,377 1,005 493 240 - Financial Institutions 40,954 (2,528) 38,426 7,362 3,375 402 - Standardised 29,393 - 29,393 - - - - Total 328,198 (3,129) 325,069 11,670 5,384 732 - Impact Total exposure for Credit Risk Mitigants 31 March 2023 Total before of credit Total after which some credit Eligible Financial Covered by Covered by $m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 37,405 (295) 37,110 1,056 295 92 - Large Corporate 40,248 - 40,248 2,926 1,522 - - Sovereign 211,270 (402) 210,868 777 402 17 - Financial Institutions 40,192 (2,505) 37,687 6,802 3,103 394 - Standardised 30,253 - 30,253 - - - - Total 359,368 (3,202) 356,166 11,561 5,322 503 - Impact Total exposure for Credit Risk Mitigants 30 Sept 2022 Total before of credit Total after which some credit Eligible Financial Covered by Covered by $m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 149,324 (1,827) 147,497 8,595 2,224 974 210 Sovereign 223,013 (686) 222,327 1,708 685 68 - Bank 24,151 (2,803) 21,348 9,438 2,803 - - Standardised 14,603 - 14,603 2,499 - - - Total 411,091 (5,316) 405,775 22,240 5,712 1,042 210 1. Impact of credit mitigation under the substitution approach. |
| 58 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT COUNTERPARTY CREDIT RISK Approach Westpac’s process for managing counterparty credit risk is based on its assessment of the potential future credit risk Westpac is exposed to when dealing in derivatives products and securities financing transactions. Westpac quantifies this risk through a daily simulation of future market price and rate shocks and converts the effect of these shocks on the mark-to-market value of Westpac’s positions to a credit exposure using Westpac’s Derivative Risk Equivalent (DRE) methodology. Exposures are loaded into Westpac’s credit limit management system where they are checked against pre-settlement risk limits that are set at the counterparty level. Limit excesses are reported to credit managers and actioned within strict timeframes. Structure and organisation The Financial Markets Credit management team is charged with managing the counterparty credit exposure arising from derivatives and treasury products. Market related credit risk There are two components to the regulatory capital requirements for credit risk arising from derivative products: • capital to absorb losses arising from the default of derivative counterparties; and • capital to absorb losses arising from mark-to-market valuation movements resulting from changes in the credit quality of derivative counterparties. These valuation movements are referred to as credit valuation adjustments (CVA) and this risk is sometimes labelled as CVA risk. Westpac refers to this requirement as mark-to-market related credit risk. Risk mitigation Mitigation is achieved in a number of ways: • the limit system monitors for excesses of the pre-defined limits, with any excesses being notified to authorised credit officers; • Westpac has netting agreements with counterparties to allow the exposure across a portfolio of trades with the same counterparty to be netted; • Westpac has collateral agreements with its largest counterparties. The market value of the counterparty’s portfolio is used to recalculate the credit position at each end of day, with collateral being called for when certain pre-set limits are met or exceeded. Westpac exchanges Initial Margin with eligible counterparties for eligible products as protection against potential future exposure to changes in market value; • Westpac has initial margin agreements with qualifying counterparties subject to relevant international regulations. The exchange of initial margin for eligible products covers the potential future exposure that could arise from changes in the market value of derivative transactions over the close-out period in the event of a counterparty default; • credit derivatives are used to mitigate credit exposure against certain counterparties; and • regular marking to market and settling of the foreign exchange components of foreign exchange reset contracts. Counterparty derivative exposures and limits The risk management methodology for counterparty derivatives exposures is similar to the credit methodology for transaction-managed loans. The main difference is in the estimation of the exposure for derivatives which is based on the DRE methodology. DRE is a credit exposure measure for derivative trades which is calibrated to a ‘loan-equivalent’ exposure. Counterparty credit limits are approved on an uncommitted and unadvised basis by authorised credit officers. This follows an evaluation of each counterparty’s credit worthiness and establishing an agreed credit risk appetite for the nature and extent of prospective business. Wrong-way risk exposures Westpac defines wrong-way risk as exposure to a counterparty which is adversely correlated with the credit quality of that counterparty. With respect to credit derivatives, wrong-way risk refers to credit protection purchased from a counterparty highly correlated to the reference obligation. Wrong-way risk exposures using credit derivatives are controlled by only buying protection from highly rated counterparties. These transactions are assessed by an authorised credit officer who has the right to decline any transaction where they feel there is an unacceptably high correlation between the ability to perform under the trade and the performance of the underlying counterparty. Consequences of a downgrade in Westpac’s credit rating A downgrade in Westpac’s credit rating can have an impact on Westpac’s collateral agreements. Where an outright threshold and minimum transfer amount are agreed, there will not be any impact on the amount of collateral posted by Westpac in the event of a credit rating downgrade. Where the threshold and minimum transfer amount are tiered according to credit rating, the impact of Westpac being downgraded below its current credit rating would be: for a one notch downgrade, postings of $nil, while for a two notch downgrade, postings would be $24 million1 .. 1. Credit rating downgrade postings are cumulative. |
| 59 COUNTERPARTY CREDIT RISK Counterparty credit risk summary The counterparty credit risk exposures below exclude New Zealand exposures at 30 September 2023 and 31 March 2023. These exposures are separately included in the New Zealand credit exposure line item. 30 Sept 31 March 30 Sept $m 2023 2023 2022 Gross positive fair value 21,461 20,598 42,189 Netting and collateral benefits (14,599) (14,946) (29,541) including cash collateral held 1,236 (155) 284 Replacement cost 6,862 5,652 12,647 Potential future exposure 11,938 12,130 11,374 Impact of scaling factor of 1.4 and incurred credit value adjustment 7,381 6,921 9,385 Net derivatives credit exposure under standardised approach to counterparty credit risk 26,181 24,703 33,406 Exposure type Interest rate contracts 4,736 6,391 5,989 Foreign exchange contracts 20,746 17,539 26,860 Equity contracts - - - Credit derivatives 14 13 9 Commodity contracts 685 760 548 Other - - - Total 26,181 24,703 33,406 Credit derivative transactions that create exposures to counterparty credit risk 30 Sept 2023 Westpac Portfolio Intermediation activities Credit derivatives products used ($m) Bought Sold Bought Sold Credit Default Swaps 1 13 - - Total Return Swaps - - - - Credit options - - - - Credit linked notes - - - - Collateralised Loan Obligations - - - - Other - - - - Total 1 13 - - 31 March 2023 Westpac Portfolio Intermediation activities Credit derivatives products used ($m) Bought Sold Bought Sold Credit Default Swaps 2 11 - - Total Return Swaps - - - - Credit options - - - - Credit linked notes - - - - Collateralised Loan Obligations - - - - Other - - - - Total 2 11 - - 30 Sept 2022 Westpac Portfolio Intermediation activities Credit derivatives products used ($m) Bought Sold Bought Sold Credit Default Swaps 7 2 - - Total Return Swaps - - - - Credit options - - - - Credit linked notes - - - - Collateralised Loan Obligations - - - - Other - - - - Total 7 2 - - |
| 60 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT SECURITISATION A securitisation is a financial structure where the cash flow from a pool of assets is used to service obligations to at least two different tranches or classes of creditors (typically holders of debt securities), with each class or tranche reflecting a different degree of credit risk (i.e. one class of creditors is entitled to receive payments from the pool before another class of creditors). Securitisation transactions are generally grouped into two broad categories: • traditional or true sale securitisations, which involve the transfer of ownership of the underlying asset pool to a third party; and • synthetic transactions, where the ownership of the underlying asset pool remains with the originator and only the credit risk of the pool is transferred to a third party, using credit derivatives or guarantees. Covered bond transactions, in which bonds issued by Westpac are guaranteed by assets held in a special purpose vehicle, are not considered to be securitisation transactions. Approach Westpac’s involvement in securitisation activities ranges from a seller of its own assets to an investor in third-party transactions and includes the arranging of transactions, the provision of securitisation services and the provision of funding for clients, including clients requiring access to capital markets. All securitisation activity must follow Westpac’s credit policies and approval processes. Securitisation of Westpac originated assets - Securitisation is used by Westpac to manage funding and liquidity and may also be used for capital management. It allows Westpac the ability to use a pool of assets to increase Westpac’s wholesale funding capacity. Westpac may provide arm’s length facilities and services to the securitisation vehicles. These typically include the provision of financing, redraw facilities and derivative contracts. Westpac has entered into self securitisation transactions for funding and liquidity purposes. These are the same as traditional securitisations, except that Westpac is the holder of all classes of notes issued (other than where senior notes have been pledged as eligible collateral with the RBA). The senior notes qualify as eligible collateral with the RBA, and are pledged against the Term Funding Facility provided by the RBA and used to meet APRA’s contingent liquidity requirements1 .. These ‘self securitisations’ do not change risk weighted assets2. No securitisation transactions for Westpac originated assets are classified as resecuritisation exposures which are deemed to mean a securitisation exposure in which at least one of the underlying exposures in the pool is a securitisation exposure. Securitisation in the management of Westpac’s credit portfolio - Westpac does not use securitisation to manage its corporate and institutional loan and counterparty credit risk portfolios. Single name credit default swaps are not treated as securitisations but as credit risk mitigation facilities. Provision of securitisation services, including funding and arranging asset backed bond issues – Westpac provides services to clients wishing to access asset-backed financing through securitisation. Those services include the provision of warehouse3 and term funding of securitised assets; and arranging and/or lead managing asset backed bond issues. Westpac may also invest in securitised bonds issues and will receive an interest margin for securities held. Securitisation facilities provided by Westpac may include resecuritisation exposures. Westpac also buys and sells securitisation exposures in the secondary market to facilitate portfolio management activity by its institutional customers who hold asset backed bonds. Westpac’s role in the securitisation process Securitisation activity Role played by Westpac Securitisation of Westpac originated assets • Arranger • Asset originator • Bond distributor • Facility provider • Note holder • Trust manager • Swap provider • Servicer Provision of securitisation services including funding and arranging asset backed bond issues • Arranger • Bond distributor • Warehouse financing • Investor - purchaser of securitisation exposures • Liquidity facility provider • Swap provider • Market maker and broker for distributed bonds 1. APS210 updated contingent liquidity guidance requires from 1 March 2022, self securitisations to cover 30% of AUD net cash outflows. 2. The credit exposures of the underlying loans are measured in accordance with APS112 and APS113. 3. Lending facilities provided to securitisation vehicles which enable accumulation of originator assets until a sufficiently large pool is available for issuance of securities in a term securitisation. |
| 61 Key Objectives Securitisation of Westpac originated assets - The securitisation of Westpac’s own assets provides funding diversity and liquidity management. Provision of securitisation services including funding and arranging asset backed bond issues - Westpac receives market-based fees in return for its services as servicer, swap provider, arranger, facility provider and bond distribution fees on warehouse and term funding facilities. Westpac also purchases securitisation exposures in order to earn income. Westpac facilitates portfolio management activity by its institutional customers by buying and selling securitisation exposures in the secondary market and is compensated through an interest margin and bid-offer spread on the transactions. Structure and organisation Securitisation of Westpac originated assets - WestpacTreasury operations are responsible for all Westpac originated securitisation activity including funding and liquidity management. Provision of securitisation services including funding and arranging asset backed bond issues - These services are provided by Westpac Institutional Bank and include the provision of securitisation services including arranger, bond distributor, warehouse financing, liquidity facility provider, swap provider, market-making and broking of asset-backed bonds. Risk reporting Credit exposure - Funding, liquidity, credit enhancement and redraw facilities, swap arrangements and counterparty exposures are captured and monitored in key source systems along with other facilities/derivatives entered into by Westpac. Operational risk exposure - The operational risk review process for Westpac includes the identification of risks, controls and key performance indicators in relation to all securitisation activity and services provided by Westpac or any of its subsidiaries. Market risk exposure - Exposures arising from transactions with counterparties are captured as part of Westpac’s traded and non-traded market risk reporting and limit management framework. Liquidity risk exposure - Exposure to, and the impact of, securitisation transactions are managed under the Liquidity Risk Management Framework and are integrated into routine reporting for capital and liquidity positions, net interest margin analysis, balance sheet forecasting and funding scenario testing. The annual funding plan incorporates consideration of overall liquidity risk limits and the securitisation of Westpac originated assets. Risk mitigation Securitisation of Westpac originated assets - The interest rate and basis risks generated by Westpac’s hedging arrangements to each securitisation trust are captured and managed within Westpac’s asset and liability management framework. The liquidity risk generated by Westpac’s liquidity and redraw facilities to each securitisation trust is captured and managed in accordance with Westpac’s liquidity management policies along with all other contingent liquidity facilities. Provision of securitisation services including funding and arranging asset backed bond issues - All securitisation transactions are approved within the context of a securitisation credit policy that sets detailed transaction-specific guidelines that regulate servicer counterparty risk appetite, transaction tenor, asset class, third party credit support and portfolio quality. This policy is applied in conjunction with other credit and market risk policies that governs the provision of derivative and other services that support securitisation transactions. In particular, credit hedging transactions are subject to Westpac’s credit risk mitigation approach (see pages 57 and 58). Any interest rate or currency hedging is subject to counterparty credit risk management (see pages 59) and market risk management (see pages 70 to 74) policies and processes). |
| 62 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT SECURITISATION Regulatory capital approaches The regulatory capital treatment of all securitisation exposures is measured in accordance with APS120 other than the securitisation exposures of an overseas banking subsidiary that is prudentially regulated by a prescribed New Zealand authority. For these exposures, Westpac must calculate risk-weighted assets using the Reserve Bank of New Zealand’s prudential rules as in force from time to time. These exposures are separately included in the New Zealand credit exposure line item. Westpac must still make deductions from CET1 capital that are required to be deducted under APS120. APS120 also specifies that securitisation exposures held in the trading book are subject to the requirements of Prudential Standard APS 116 Capital Adequacy: Market Risk. Under APS120 the approaches employed include the External Rating Based Approach (ERBA) and the Supervisory Formula Approach (SFA). Under the ERBA, APRA provides risk-weights that are matched to external credit ratings and takes into account tranche maturity and tranche thickness. The SFA applicable to unrated exposures dynamically looks at the type and performance of underlying asset pools funded by the securitisation exposure as well as the structural features of the transaction to determine capital requirements. The Internal Assessment Approach (IAA) is not permitted under APS120. Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust are excluded from Westpac’s calculation of credit risk weighted assets if capital relief is sought and the requirements of APS120 are satisfied1. In instances where insufficient risk transfer is achieved by the transaction for regulatory purposes, the capital calculation is performed on the underlying asset pool while the facilities provided to such securitisation vehicles do not attract regulatory capital charges. Provision of securitisation services including funding - Westpac uses the ERBA and the SFA methodology when determining regulatory capital requirements for warehouse and term funding client facilities. The External Credit Assessment Institutions that can be used by Westpac for securitisations are Standard & Poor’s, Moody’s and Fitch. Westpac’s accounting policies for securitisation activities Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust remain on Westpac’s balance sheet for accounting purposes. Provision of securitisation services including funding and arranging asset backed bond issues - Fee income from these services is recognised on an accrual basis. Liquidity and funding facilities are treated as commitments to provide finance, with fee and margin income recognised on an accrual basis. Warehouse and term funding facilities are treated as loans. For investment in securitisation exposures, if the instrument has been designated on initial recognition at fair value (including instruments containing a credit default swap), the exposure will be measured at fair value through the Income Statement. All other investments in securitisation exposures will be classified and measured at fair value through Other Comprehensive Income (FVOCI) (within the debt securities at FVOCI reserve). 1. Including the requirements to achieve capital relief. |
| 63 Banking book summary of assets securitised by Westpac1 This table shows outstanding banking book securitisation assets and assets intended to be securitised1 for Westpac originated assets by underlying asset type. It includes the amount of impaired and past due assets, along with any losses recognised by Westpac during the current period. Securitised assets are held in securitisation trusts. Trusts which meet requirements to achieve capital relief do not form part of the Level 2 consolidated group. Self securitisation trusts remain consolidated at Level 2 and the assets transferred to these trusts are risk weighted in accordance with APS112 and APS113. Total outstanding securitisations at 30 September 2023 were $132.6 billion, a reduction of $8.4 billion from 31 March 2023. The movement over the half is due to a reduction in the size of internal securitisation programmes, resulting from reduced requirements following the phase-out of the Reserve Bank of Australia’s (RBA) Committed Liquidity Facility on 1 January 2023 and the maturing drawdowns of the Term Funding Facility since June 2023. Non Total outstanding securitised Assets performing Non Total by ADI Intended Exposures performing Non Westpac Traditional Synthetic to be - Not Exposures performing Past due recognised $m Securitisation2 Securitisation securitised Impaired - Impaired Exposures assets losses 30 Sept 2023 Residential mortgages 132,630 - - 1,009 56 1,065 949 - Credit cards - - - - - - - - Auto and equipment finance - - - - - - - - Business lending - - - - - - - - Investments in ABS - - - - - - - - Other - - - - - - - - Total 132,630 - - 1,009 56 1,065 949 - Non Total outstanding securitised Assets performing Non Total by ADI Intended Exposures performing Non Westpac Traditional Synthetic to be - Not Exposures performing Past due recognised $m Securitisation2 Securitisation securitised Impaired - Impaired Exposures assets losses 31 March 2023 Residential mortgages 140,870 - - 902 45 947 814 - Credit cards - - - - - - - - Auto and equipment finance 199 - - 2 6 8 - - Business lending - - - - - - - - Investments in ABS - - - - - - - - Other - - - - - - - - Total 141,069 - - 904 51 955 814 - Total outstanding securitised Assets by ADI intended Westpac Traditional Synthetic to be Impaired Past due recognised $m Securitisation2 Securitisation securitised loans assets losses 30 Sept 2022 Residential mortgages 144,529 - - 41 829 - Credit cards - - - - - - Auto and equipment finance 347 - - 9 - - Business lending - - - - - - Investments in ABS - - - - - - Other - - - - - - Total 144,876 - - 50 829 - 1. Represents securitisation activity from the end of the reporting period to the disclosure date of this report. 2 Includes self-securitisation assets of $127,884 million as at 30 September 2023 ($135,877 million as at 31 March 2023 and $139,117 million as at 30 September 2022). |
| 64 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT SECURITISATION Banking book summary of total Westpac sponsored third party assets securitised This table represents banking book third party assets where Westpac acts as a sponsor. Westpac would be considered as a sponsor if it manages or advises the securitisation program, places securities into the market or provides liquidity and/or credit enhancement. $m 30 Sept 2023 31 March 2023 30 Sept 202 Residential mortgages 149 120 131 Credit cards - - - Auto and equipment finance - - - Business lending - - - Investments in ABS - - - Other - - - Total 149 120 131 Banking book summary of securitisation activity by asset type This table shows assets transferred into securitisation schemes by underlying asset type (ADI originated) for the relevant period. For the 12 months ended Recognised 30 Sept 2023 Amount gain or loss $m securitised on sale Residential mortgages 26,201 - Credit cards - - Auto and equipment finance - - Business lending - - Investments in ABS - - Other - - Total 26,201 - For the 6 months ended Recognised 31 March 2023 Amount gain or loss $m securitised on sale Residential mortgages 14,236 - Credit cards - - Auto and equipment finance - - Business lending - - Investments in ABS - - Other - - Total 14,236 - For the 12 months ended Recognised 30 Sept 2022 Amount gain or loss $m securitised on sale Residential mortgages 46,995 - Credit cards - - Auto and equipment finance - - Business lending - - Investments in ABS - - Other - - Total 46,995 - |
| 65 Banking book summary of on and off-balance sheet securitisation by exposure type As set out in the table on page 27, the table below for 30 September 2023 and on pages 63 to 64 excludes New Zealand exposures. Under the capital framework these exposures are separately included in the New Zealand credit exposure line item. On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 30 Sept 2023 Securities - 7,520 - 7,520 Liquidity facilities - - 329 329 Funding facilities 6,800 - 767 7,567 Underwriting facilities - - - - Lending facilities 1,870 - 220 2,090 Warehouse facilities 13,632 - 6,462 20,094 Total 22,302 7,520 7,778 37,600 On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 31 March 2023 Securities - 7,135 - 7,135 Liquidity facilities - - 292 292 Funding facilities 3,634 - 431 4,064 Underwriting facilities - - - - Lending facilities 1,953 - 125 2,078 Warehouse facilities 13,534 - 5,729 19,263 Total 19,120 7,135 6,577 32,831 On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 30 Sept 2022 Securities - 7,054 35 7,089 Liquidity facilities - - 250 250 Funding facilities 4,816 - 912 5,728 Underwriting facilities - - - - Lending facilities 2,442 - 308 2,750 Warehouse facilities 14,678 - 5,827 20,505 Total 21,936 7,054 7,332 36,322 |
| 66 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT SECURITISATION Banking book securitisation exposure at default by risk weight band Exposure Total Exposure Risk Weighted Assets Total Risk $m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets 30 Sept 2023 Less than or equal to 10% - - - - - - Greater than 10 - 20% 31,440 - 31,440 5,530 - 5,530 Greater than 20 - 30% 3,213 - 3,213 746 - 746 Greater than 30 - 50% 2,540 - 2,540 1,123 - 1,123 Greater than 50 - 75% 356 - 356 217 - 217 Greater than 75 - 100% 38 - 38 35 - 35 Greater than 100 - 250% 9 - 9 10 - 10 Greater than 250 - 425% - - - - - - Greater than 425 - 650% - - - - - - Other - - - - - - Deductions 4 - 4 - - - Total 37,600 - 37,600 7,661 - 7,661 Exposure Total Exposure Risk Weighted Assets Total Risk $m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets 31 March 2023 Less than or equal to 10% 8 - 8 - Greater than 10 - 20% 28,802 - 28,802 4,983 - 4,983 Greater than 20 - 30% 1,605 - 1,605 371 - 371 Greater than 30 - 50% 1,963 - 1,963 760 - 760 Greater than 50 - 75% 415 - 415 248 - 248 Greater than 75 - 100% 22 - 22 21 - 21 Greater than 100 - 250% 15 - 15 16 - 16 Greater than 250 - 425% - - - - - - Greater than 425 - 650% - - - - - - Other - - - - - - Deductions 1 - 1 - - - Total 32,831 32,831 6,400 - 6,400 Exposure Total Exposure Risk Weighted Assets Total Risk $m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets 30 Sept 2022 Less than or equal to 10% 12 - 12 - Greater than 10 - 20% 32,122 - 32,122 5,485 - 5,485 Greater than 20 - 30% 1,687 - 1,687 391 - 391 Greater than 30 - 50% 1,654 - 1,654 599 - 599 Greater than 50 - 75% 826 - 826 453 - 453 Greater than 75 - 100% 9 - 9 8 - 8 Greater than 100 - 250% 10 - 10 11 - 11 Greater than 250 - 425% - - - - - - Greater than 425 - 650% - - - - - - Other - - - - - - Deductions 1 - 1 - - - Total 36,321 36,321 6,947 - 6,947 |
| 67 Securitisation exposure deducted from capital As at 30 September 2023 securitisation exposures deducted from capital was $16.0 million (nil at 31 March 2023) of which $4.1 million related to banking book securitisation exposures for Westpac sponsored third party assets securitised and $11.9 million related to the securitisation of Westpac originated assets. There is no trading book capital deduction for 30 September 2023 (nil at 31 March 2023). Banking book securitisation subject to early amortisation treatment There is no securitisation exposure in the banking book that is subject to early amortisation treatment as at 30 September 2023 (nil as at 31 March 2023). Banking book resecuritisation exposure subject to credit risk mitigation (CRM) As at 30 September 2023 resecuritisation exposures subject to CRM was nil (nil at 31 March 2023). Banking book resecuritisation exposure to guarantors Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments as at 30 September 2023 (nil as at 31 March 2023). Trading book summary of assets securitised by Westpac As at 30 September 2023 there was $0.2 million in outstanding securitisation exposures for Westpac originated assets held in the trading book ($0.3 million as at 31 March 2023). Trading book summary of total Westpac sponsored third party assets securitised There are no third party assets held in the trading book where Westpac is responsible for the establishment of the securitisation program and subsequent management as at 30 September 2023 (nil as at 31 March 2023). Trading book summary of securitisation activity by asset type There was $0.2 million of residential mortgage originated securitisation activity in the trading book for the 12 months to 30 September 2023 ($0.3 million for the 6 months to 31 March 2023). Trading book aggregated amount of exposure securitised by Westpac and subject to APS116 Capital Adequacy: Market Risk As at 30 September 2023 there $0.2 million of Westpac originated outstanding securitisation exposure held in the trading book subject to APS116 Capital Adequacy: Market Risk ($0.3 million as at 31 March 2023). |
| 68 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT SECURITISATION Trading book summary of on and off-balance sheet securitisation by exposure type1 On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 30 Sept 2023 Securities - 447 - 447 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 49 49 Other derivatives - - 5 5 Total - 447 54 501 On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 31 March 2023 Securities - 610 - 610 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 65 65 Other derivatives - - 6 6 Total 610 71 681 On balance sheet Total Securitisation Securitisation Off-balance Exposure $m retained purchased sheet at Default 30 Sept 2022 Securities - 473 - 473 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 32 32 Other derivatives - - 13 13 Total - 473 45 518 Trading book securitisation exposure subject to internal models approach (IMA) for specific risk There is no trading book securitisation exposure subject to IMA for specific risk for 30 September 2023 (nil at 31 March 2023). Trading book securitisation exposure subject to APS120 Securitisation specific risk by risk weight band There is no trading book securitisation exposure subject to APS120 specific risk for 30 September 2023 (nil at 31 March 2023). 1. EAD associated with trading book securitisation is not included in the EAD by major type on page 28. Trading book securitisation exposure is captured and risk weighted under APS116. |
| 69 Trading book capital requirements for securitisation exposures subject to IMA for specific risk by risk classification There is no trading book capital requirement for securitisation subject to IMA for specific risk for 30 September 2023 (nil at 31 March 2023). Trading book capital requirements for securitisation regulatory capital approaches by risk weight band There is no trading book capital requirement for securitisation subject to regulatory capital approaches for 30 September 2023 (nil at 31 March 2023). Trading book securitisation subject to early amortisation treatment There is no securitisation exposure in the trading book that is subject to early amortisation treatment for 30 September 2023 (nil at 31 March 2023). Trading book resecuritisation exposure subject to CRM Westpac has no resecuritisation exposure subject to CRM at 30 September 2023 (nil at 31 March 2023). Trading book resecuritisation by guarantor creditworthiness Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments for 30 September 2023 (nil at 31 March 2023). |
| 70 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT MARKET RISK Westpac’s exposure to traded market risk arises out of its Financial Markets and Treasury trading activities. This is quantified for regulatory capital purposes using both the internal model approach and the standard method, details of which are provided below. Approach Financial Markets trading business supports customers through activities including market making and distribution of capital markets products. The types of market risk arising from these activities include interest rate, foreign exchange, commodity, equity price, credit spread and volatility risk. Treasury’s trading activity includes the management of interest rate, foreign exchange and credit spread risks associated with the wholesale funding book, liquid asset portfolios and foreign exchange repatriations. Treasury also manages banking book risk which is discussed in the IRRBB section. Trading activities are managed within a BRiskC approved market risk framework that incorporates BRiskC approved value at risk (VaR) and stressed value at risk (SVaR) limits. Market risk is managed using VaR, SVaR and structural risk limits (including volume limits and basis point value limits) in conjunction with scenario analysis and stress testing. Market risk limits are allocated to business management based upon Westpac’s risk appetite and business strategies, in addition to the consideration of market liquidity and concentration risk. Trades are fair valued daily using rates that have been captured from an independent market data source that has been approved by the Revaluation Committee (RC). Where there is no source of independent rates, data will either be derived using a methodology approved by the RC or sourced from dealer contributions. Rates that are dealer-sourced or have limited independent sources are reviewed at least on a monthly basis. The RC meets monthly to review the results of independent price verification performed by the Finance valuation function. In addition, valuation adjustments may be made as deductions from CET1 Capital for exposures which are not captured through the fair valuation framework. VaR and SVaR limits Market risk arising from trading book activities is primarily measured using VaR based on an historical simulation methodology. Westpac estimates VaR as the potential loss in earnings from adverse market movements and is calculated to a 99% confidence level using the most recent 12 months of historical market data. SVaR is an additional VaR measure which uses 12 months of historical market data that includes a period of significant financial stress. VaR and SVaR take account of all material market variables that may cause a change in the value of the trading portfolio, including interest rates, foreign exchange rates, price changes, volatility, and the correlation between these variables. The BRiskC approved market risk VaR and SVaR limits for trading activities include separate VaR and SVaR sub-limits for the trading activities of Financial Markets and Treasury. Back-testing Daily back-testing of VaR results is performed to ensure that model integrity is maintained. A review of both the actual and potential profit and loss outcomes is also undertaken to monitor any skew created by the historical data. Stress testing Daily stress testing against pre-determined scenarios is carried out to analyse potential losses beyond the 99% confidence level. A stress test escalation framework is approved by the Head of Market Risk, Liquidity and Capital Risk. Profit and loss notification framework The BRiskC has approved a profit and loss notification framework. Included in this framework are levels of escalation in accordance with the size of the profit or loss. Triggers are applied to both a 1-day and a rolling 20-day cumulative total. Risk reporting Daily monitoring of current exposure and limit utilisation is conducted independently by risk managers in the Market Risk and Treasury Risk teams, who monitor market risk exposures against VaR, SVaR and structural limits. Daily VaR and SVaR position reports are produced by risk type, by product lines and by geographic region. These are supplemented by structural risk reporting, advice of profit and loss trigger levels and stress test escalation trigger points. Model accreditation has been granted by APRA for the use of an internal model for the determination of regulatory capital for the key classes of interest rate (general market), foreign exchange, commodity and equity risks (including equity specific risk). Under the model, regulatory capital is derived from both the current VaR window and a SVaR window, where these VaR measures are calculated over a 10-day time horizon to a 99th percentile, one-tailed confidence interval. Specific risk refers to the variations in individual security prices that cannot be explained by general market movements, and event and default risk. Interest rate specific risk capital (specific issuer risk) is calculated using the Standard method and is added to the VaR regulatory capital measure. Westpac currently holds an industry-wide capital overlay which was introduced from 31 December 2021 and relates to APRA’s revised risks-not-in-VaR framework. This overlay will be applied until the Group’s revised framework is approved by APRA. |
| 71 Structural foreign exchange rate risk Structural foreign exchange rate risk results from the generation of foreign currency denominated earnings and from Westpac’s capital deployed in offshore branches and subsidiaries, where it is denominated in currencies other than Australian dollars. The Australian dollar equivalent of offshore earnings and capital is subject to change as exchange rates fluctuate, which could introduce significant variability to Westpac’s reported financial results. ALCO provides oversight of the appropriateness of foreign exchange hedges on earnings and capital. Risk mitigation Market risk positions are managed by the trading desks consistent with delegated trading and product authorities. Risk management is carried out by qualified personnel with varying levels of seniority commensurate with the nature and scale of market risks under management. The following controls allow monitoring by management: • trading authorities and responsibilities are clearly delineated at all levels; • a structured system of limits and reporting of risk exposures, including stress testing; • surveillance of dealing room conduct; • all new products and significant product variations undergo a rigorous approval process to identify business risks prior to launch; • models that are used to determine risk or profit and loss for Westpac’s accounts are independently reviewed; • duties are segregated so that employees involved in the origination, processing and valuation of transactions operate under separate reporting lines, minimising the opportunity for collusion; and • legal personnel review documentation for compliance with relevant laws and regulations. In addition, Group Audit independently reviews compliance with policies, procedures and limits. Market risk regulatory capital and risk weighted assets The Internal model approach uses VaR and SVaR, while the Standard approach is used for interest rate specific risk. 30 Sept 31 March 30 Sept $m 2023 2023 2022 Internal model approach 808 1,112 661 Standard approach 115 101 82 Total capital required 923 1,213 743 Risk weighted assets 11,538 15,168 9,290 |
| 72 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT MARKET RISK VaR by risk type For the 6 months ended $m High Low Average Period end 30 Sept 2023 Interest rate risk 21.8 7.8 12.8 11.3 Foreign exchange risk 3.8 1.1 2.3 3.0 Equity risk 0.1 0.0 0.0 0.0 Commodity risk 1.8 0.9 1.5 1.5 Other market risks 9.4 6.8 8.0 7.9 Diversification benefit N/A N/A (7.1) (6.5) Net market risk1 31.8 10.4 17.4 17.2 For the 6 months ended $m High Low Average Period end 31 March 2023 Interest rate risk 15.0 7.0 9.0 9.0 Foreign exchange risk 14.0 1.0 6.0 1.0 Equity risk - - - - Commodity risk 4.0 2.0 2.0 2.0 Other market risks 8.0 3.0 4.0 8.0 Diversification benefit N/A N/A (9.0) (7.0) Net market risk1 19.0 9.0 13.0 12.0 For the 6 months ended $m High Low Average Period end 30 Sept 2022 Interest rate risk 20.2 6.2 10.1 8.4 Foreign exchange risk 8.3 0.7 3.5 5.7 Equity risk 0.1 - - - Commodity risk 4.0 2.0 2.8 3.3 Other market risks 5.3 2.6 3.7 3.8 Diversification benefit N/A N/A (7.9) (10.6) Net market risk1 21.2 8.1 12.2 10.7 1. VaR and SVaR measures shown here use a 1 day time horizon. The net market risk measure reflects the aggregate diversified risk position for the period. Therefore, individual risk factors will not sum to this total. |
| 73 Stressed VaR by risk type For the 6 months ended $m High Low Average Period end 30 Sept 2023 Interest rate risk 152.8 48.4 79.0 60.1 Foreign exchange risk 10.2 1.0 3.8 3.9 Equity risk 0.2 0.0 0.0 0.0 Commodity risk 3.6 1.2 1.8 1.9 Other market risks 18.0 12.7 15.7 16.7 Diversification benefit N/A N/A (15.8) (28.8) Net market risk1 157.8 53.8 84.4 53.8 For the 6 months ended $m High Low Average Period end 31 March 2023 Interest rate risk 95.0 36.0 59.0 60.0 Foreign exchange risk 45.0 1.0 15.0 3.0 Equity risk - - - - Commodity risk 3.0 2.0 3.0 2.0 Other market risks 14.0 10.0 12.0 14.0 Diversification benefit N/A N/A (23.0) (13.0) Net market risk1 86.0 42.0 66.0 66.0 For the 6 months ended $m High Low Average Period end 30 Sept 2022 Interest rate risk 55.6 25.8 39.9 40.1 Foreign exchange risk 19.4 1.1 8.1 10.6 Equity risk 0.1 - - - Commodity risk 3.5 2.4 2.8 2.7 Other market risks 17.4 9.7 13.7 11.2 Diversification benefit N/A N/A (19.8) (22.7) Net market risk1 74.4 30.9 44.7 41.9 1. The net market risk measure reflects the aggregate diversified risk position for the period. Therefore, individual risk factors will not sum to this total. |
| 74 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT MARKET RISK Back-testing results The following graph gives a comparison of actual profit and loss to VaR over the 6 months ended 30 September 2023. (50) (40) (30) (20) (10) - 10 20 30 40 50 - 10 20 30 40 50 Actual Profit and Loss ($m) Daily Value at Risk ($m) Traded Risk: Actual Profit and Loss vs. Var 01-Apr-2023 to 29-Sep-2023 Each point on the graph represents 1 day’s trading profit or loss. This result is placed on the graph relative to the associated VaR utilisation. The downward sloping line represents the point where a loss is equal to VaR utilisation. |
| 75 INTEREST RATE RISK IN THE BANKING BOOK (IRRBB) Introduction The Group’s objective is to manage interest rate risk to achieve reasonable earnings stability over time. IRRBB arises from changes in market interest rates that adversely impact the Group’s earnings (net interest income (NII)) or the economic value of the balance sheet. The banking book activities that give rise to this risk include customer lending and deposit taking, balance sheet funding and liquidity management, and capital management. Management IRRBB is managed and governed under the Group’s Market Risk Management Framework which is approved by the BRiskC. This framework is supported by a comprehensive IRRBB measurement system for the quantification of these risks and the potential impact from changes in market interest rates. Key aspects of this framework include: • risk appetite metrics set by the Board which incorporate limits for changes in NII and economic value; • centralisation of the management of the Group’s interest rate risk profile into Treasury via the Funds Transfer Pricing policy and systems; • day to day management of these risks by Treasury in line with approved limits. This includes the development and execution of the interest rate risk strategy for the Group’s choice of its investment term of capital (ITOC); • policies and procedures that support the proactive risk management of IRRBB exposures and the management and performance of models used to capture and measure IRRBB risk; • regular reporting of IRRBB metrics to senior management and the Board; and • independent oversight from the Market Risk and Model Risk functions in line with the Group’s Three Lines of Defense framework. Measurement Westpac has received approval from APRA to use its internal model for the calculation of regulatory capital for IRRBB, under APS117 Capital Adequacy: Interest Rate Risk in the Banking Book. Westpac measures and monitors IRRBB outcomes using the following principal metrics: • Value at Risk (VaR) – potential loss in economic value from adverse market rate movements while maintaining the portfolio for a defined period. Westpac calculates VaR for both internal monitoring and regulatory capital purposes. The regulatory capital VaR measure uses 6 years of historical data with a scaled 1 year holding period and 99% confidence interval. For internal limit monitoring purposes, 1 year of historical data is used with a 1 day holding period and 99% confidence interval; • Interest rate and credit spread sensitivities – the estimate of a change in economic value of the banking book due to a 1 basis point move in interest rates and credit spreads. Structural risk limits are in place to manage these sensitivities; • Embedded Gains or Losses (EGL) – EGL is included in the IRRBB capital requirement and is the economic gain or loss implied by a static balance sheet, being the difference between the book value and current economic value of banking book items accounted for on an accrual basis. Sensitivity metrics are in place to monitor the potential risk of loss in economic value from embedded losses; • NII-at-risk (NaR) – NaR is measured using a net interest income sensitivity model. The NaR model combines the underlying statement of financial position data with assumptions about runoff and new business and expected repricing behaviour. This simulates a series of potential NII outcomes over one-to-three-year time horizons subject to 100 and 200 basis point shifts up and down from the current market interest rates in Australia and New Zealand. A NaR limit is in place to monitor this exposure; and • Scenario analysis and Stress Testing – the potential loss in earnings and economic value from large parallel and non-parallel yield curve shocks. Behavioural assumptions are incorporated in the measurement of IRRBB where appropriate, such as for products that do not have a contractually defined repricing date (e.g., non-maturity deposits) or where there is potential for variation between contractual and actual repricing dates (e.g. prepayments). Risk reporting The IRRBB measurement comprises the systems, data and models used to measure IRRBB and forms part of the Group’s IRRBB management framework. It includes the capture of retail and other business transactions through the transfer pricing system and the relevant balance sheet management activities of Treasury. The IRRBB measurement system provides regular reporting of the key IRRBB metrics described above, with Treasury Risk performing independent monitoring daily of market risk exposures against VaR, structural risk limits and stress testing. Regulatory capital, NaR and EGL sensitivity are monitored on a monthly basis with IRRBB management reports produced for the senior management forums of ALCO, MARCO, RISKCO and BRiskC to provide transparency of compliance with risk appetite and limits and interest rate risk strategy outcomes. |
| 76 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT INTEREST RATE RISK IN THE BANKING BOOK (IRRBB) Risk mitigation Market risk arising in the banking book stems from the ordinary course of banking activities, including structural interest rate risk (the mismatch between the duration of assets and liabilities) and capital management. Hedging Westpac’s exposure to interest rate risk is undertaken using derivatives. The hedge accounting strategy adopted utilises a combination of the cash flow and fair value hedge approaches. Some derivatives held for economic hedging purposes do not meet the criteria for hedge accounting as defined under AASB 139 Financial Instruments: Recognition and Measurement and therefore are accounted for in the same way as derivatives held for trading. Change in economic value of a sudden upward and downward movement in interest rates1 The table below represents the change in economic value of a sudden upward or downward movement in interest rates based on a 200 basis point parallel shift. The sensitivity to upward or downward movements in interest rates has changed significantly over the year as the net interest rate exposure managed by the bank has adjusted with changes in the interest rate environment. 200bp parallel 200bp parallel $m increase decrease 30 Sept 2023 AUD 147.0 (146.5) NZD 6.3 (5.9) USD (3.6) 4.9 Total 149.7 (147.5) 200bp parallel 200bp parallel $m increase decrease 31 March 2023 AUD 40.1 (41.7) NZD (21.3) 22.1 USD (4.3) 4.9 Total 14.5 (14.7) 200bp parallel 200bp parallel $m increase decrease 30 Sept 2022 AUD (7.6) 2.3 NZD (16.3) 16.9 USD (6.4) 6.8 Total (30.3) 26.0 IRRBB regulatory capital and RWA This table presents IRRRB regulatory capital and RWA. IRRBB RWA increased $5.4 billion mainly due to a higher regulatory embedded loss from higher interest rates and ongoing model changes which still require regulatory approval2. 30 Sept 31 March 30 Sept $m 2023 2023 2022 Total capital required 3,211 2,780 3,423 Risk weighted assets 40,138 34,748 42,782 1. Based on measures used for internal management reporting purposes. 2. APRA has approved Westpac’s IRRBB EGL model, however Westpac has applied an overlay pending recalibration of the model. |
| 77 OPERATIONAL RISK Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Approach Westpac is subject to APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk. Westpac’s Operational Risk Management Framework describes the Group’s approach to managing operational risk. Westpac’s Operational Risk Management Framework This Framework implements the nine components in Westpac’s Risk Management Framework. These components are listed below: Business Strategy - Operational Risk Management is an integral part of the Group’s business strategy, planning and management. Both internal and external factors are considered as part of this. Risk Identification – This requires the business to analyse their internal and external business environment and identify areas that either have the potential to prevent achieving current or prospective business objectives or been identified as previous sources of Operational Risk. The Group monitors various internal and external data sources for complete, accurate and timely identification of Operational Risks. The Risk and Control Assessment process, Value Chain Risk Management and Key Indicators are key tools used following risk identification. Risk Appetite – The Board Risk Appetite Statement defines the type and degree of risks that the Group is prepared to accept in pursuit of its strategic objectives and business plans. This includes qualitative and quantitative risk appetite settings for Operational Risks. First Line is responsible for ensuring it operates within the Board approved Risk Appetite Statement with review and challenge by Second Line Operational Risk. Stress and Scenario Analysis – Scenario Analysis is used to provide a forward looking-view of severe but plausible loss events and facilitate a structured and consistent approach for assessing those events in view of the Group’s objectives and operations. It forms part of the Group’s Capital Stress Testing and ICAAP. People and Infrastructure –The Group aims to have sufficient people in defined roles and responsibilities with appropriate expertise to exercise those responsibilities for the management of Operational Risk. Thus, developing capability and awareness is key to the Group. Control Definition and Effectiveness – The Group defines, manages, and continually enhances its control environment to mitigate Operational Risks. Frameworks and policies are used to mitigate risks and manage within acceptable levels. Monitoring and Reporting – Operational Risk monitoring and reporting provides comprehensive and timely information to Board, Risk Committees and Senior Management to support the effective management of Operational Risk. There is a consistent and periodic reporting process in place. Operational Risk Measurement plays a key role in active risk management. This includes measurement of loss data, forward looking scenarios, and Group’s Operational Risk capital adequacy. |
| 78 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT OPERATIONAL RISK Actions and Response – Issue and Action Management is important for identifying systemic problems and ensuring adequate action is undertaken to address the identified control gap/weaknesses. The Group’s Incident Management process allows for consistent identification, recording, escalation and rectification of incidents and related losses in a transparent and practical way. This assists the Group to comply with all legal and regulatory obligations and licensing conditions (including reporting material regulatory breaches to regulatory authorities). Governance and Management Control – The Board Risk Committee, Group Executive Risk Committee, Operational Risk, Compliance and Resilience Committee, Divisional Risk and Compliance Committees support the management and oversight of Operational Risk for the Group. SMA capital overview Westpac applies the SMA to operational risk capital as required by Prudential Standard APS 115 Capital Adequacy: Standardised Measurement Approach to Operational Risk. Westpac is required to calculate operational risk capital annually based on annual audited financial statements. The SMA based operational risk calculation was updated as part of the 31 December 2022 Pillar 3 report. Operational Risk regulatory capital and risk weighted assets 30 Sept 31 March 30 Sept $m 2023 2023 2022 Model based capital 3,414 3,552 3,725 Culture, Governance & Accountability Review overlay 500 500 500 Risk governance overlay1 500 500 500 Total capital required 4,414 4,552 4,725 Risk weighted assets 55,175 56,900 59,063 1. This overlay was applied in response to the magnitude and nature of issues that were the subject of the AUSTRAC proceedings. This overlay has been applied from 31 December 2019. |
| 79 EQUITY RISK Equity risk is defined as the potential for financial loss arising from movements in equity values. The disclosures in this section exclude investments in equities made by Westpac subsidiaries outside the regulatory Level 2 group. Structure and organisation Portfolio and transactional limits for Westpac’s direct equity investments are governed by various supporting policies and delegated approval limits. Where appropriate, the BRiskC (under delegation from the Westpac Board) will consider and approve risks beyond Management’s approval authority. Approach Westpac has established a comprehensive set of policies defining the management of equity risk. These policies are reviewed and approved periodically as required (in most cases annually). Risk mitigation Westpac does not use financial instruments to mitigate its exposure to equities in the banking book. Banking book positions Hybrid equity underwriting and equity warehousing risk – As a financial intermediary Westpac underwrites listed and unlisted hybrid equity securities. Investment securities – Westpac undertakes, as part of the ordinary course of business, certain investments in strategic equity holdings and over time the nature of underlying investments will vary. Measurement of equity securities – Equity securities are generally carried at their fair value. Fair value for equities that have a quoted market price (in an active market) is determined based upon current bid prices. If a market for a financial asset is not active, fair value is determined based upon a valuation technique such as the use of recent arms-length transactions, discounted cash flow analysis, option pricing models or other valuation techniques commonly used by market participants to price similar instruments. Where an investment is held for long term strategic purposes, it is accounted for at fair value through profit and loss, unless the Group makes an irrevocable election to measure them at fair value through other comprehensive income. Where the Group has significant influence, but not control, over the financial and operating policy decisions of the investee, the investment is equity accounted for and recognised as a share in associates. Risk reporting Westpac manages equity risk in two ways, VaR limits and investment limits: • A VaR limit (in conjunction with structural limits) is used to manage traded equity. This limit is a sub-limit of the overall VaR limit for Financial Markets trading activities. Equity trading activity is overseen by the independent Market Risk function applying the same controls used for monitoring other trading book activities in Financial Markets and Treasury; and • Investment exposures are reported annually to MARCO. Gains/losses 30 Sept 31 March 30 Sept $m 2023 2023 2022 Cumulative realised gains (losses) 3 - - Total unrealised gains (losses) through profit & loss (2) (30) 1 Total unrealised gains (losses) through equity - - - Total latent revaluation gains (losses) - - - Book value of equity exposures 30 Sept 31 March 30 Sept $m 2023 2023 2022 Listed equity exposures (publicly traded) - - - Unlisted equity exposures (privately traded) 228 209 187 Total book value of equity exposures 228 209 187 |
| 80 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT FUNDING AND LIQUIDITY RISK MANAGEMENT Funding and liquidity risk is the risk that Westpac cannot meet its payment obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets. Approach Funding and liquidity risk is measured and managed in accordance with the policies and processes defined in the Board-approved Liquidity Risk Management Framework which is part of the Westpac Board-approved Risk Management Strategy. Responsibility for managing Westpac’s liquidity and funding positions in accordance with the Liquidity Risk Management Framework is delegated to Treasury, under the oversight of ALCO and Treasury Risk. Liquidity Risk Management Framework The Liquidity Risk Management Framework sets out Westpac’s funding and liquidity risk appetite, roles and responsibilities of key people managing funding and liquidity risk within Westpac, risk reporting and control processes and limits and targets used to manage Westpac’s balance sheet. Key components of Westpac’s approach to liquidity risk management are listed below. Funding strategy Treasury undertakes an annual funding review that outlines Westpac’s funding strategy over a three year period which is approved by the BRiskC. This review encompasses trends in global markets, peer analysis, wholesale funding capacity, expected funding requirements and a funding risk analysis. This strategy is continuously reviewed to take account of changing market conditions, investor sentiment and estimations of asset and liability growth rates. Westpac monitors the composition and stability of its funding so that it remains within its funding risk appetite. This includes compliance with both the LCR and NSFR. Liquid asset holdings Westpac holds a portfolio of liquid assets for several purposes, including as a buffer against unforeseen funding requirements. The level of liquid assets held takes into account the liquidity requirements of Westpac’s balance sheet under normal and stressed conditions. Liquidity modelling In managing liquidity for Westpac, Treasury utilises balance sheet forecasts and the maturity profile of Westpac’s wholesale funding portfolio to project liquidity outcomes. Local liquidity limits are also used by Westpac in applicable jurisdictions to ensure liquidity is managed efficiently and prudently. In addition, Westpac conducts regular stress testing to assess its ability to meet cash flow obligations under a range of market conditions and scenarios. These scenarios inform liquidity limits and strategic planning. Liquidity transfer pricing Westpac has a liquidity transfer pricing framework which allocates liquidity costs across Westpac. Contingency planning Treasury maintains a contingent funding plan that outlines the steps that should be taken by Westpac in the event of an emerging ‘funding crisis’. The plan is aligned with Westpac’s broader Liquidity Crisis Management Policy which is approved annually by the Board. Liquidity reporting Daily liquidity risk reports are reviewed by Treasury and Treasury Risk. Liquidity reports are presented to ALCO monthly and to the Board quarterly. Committed Liquidity Facility The Committed Liquidity Facility was fully phased-out by 1 January 2023. |
| 81 LIQUIDITY COVERAGE RATIO Liquidity Coverage Ratio Westpac’s average LCR for the quarter was 134% (30 June 2023: 138%) and continues to be above the regulatory minimum of 100%. The decrease in the ratio compared to the quarter ended 30 June 2023 was mainly due to a decrease in holdings of liquid assets reflecting a reduction in cash balances as Term Funding Facility maturities in the period were repaid. Liquid assets included in the LCR comprise High Quality Liquid Assets (HQLA) and additional qualifying RBNZ securities. Westpac’s portfolio of HQLA averaged $177.6 billion over the quarter1 (30 June 2023: $184.1 billion). Funding is sourced from retail, small business, corporate and institutional customer deposits and wholesale funding. Westpac seeks to minimise the outflows associated with this funding by targeting customer deposits with lower LCR outflow rates and actively manages the maturity profile of its wholesale funding portfolio. Westpac maintains a buffer over the regulatory minimum of 100%. 30 Sept 2023 30 June 2023 $m Total unweighted value (average) Total weighted value (average) Total unweighted value (average) Total weighted value (average) Liquid assets, of which: 1 High-quality liquid assets (HQLA) 177,611 184,088 2 Alternative liquid assets (ALA) - - 3 Reserve Bank of New Zealand (RBNZ) securities 4,271 4,533 Cash Outflows 4 Retail deposits and deposits from small business customers, of which: 329,247 29,304 323,225 28,759 5 Stable deposits 159,374 7,969 156,437 7,822 6 Less stable deposits 169,873 21,335 166,788 20,937 7 Unsecured wholesale funding, of which: 170,569 76,953 168,609 78,425 8 Operational deposits (all counterparties) and deposits in networks for cooperative banks 74,815 18,631 71,852 17,893 9 Non-operational deposits (all counterparties) 84,505 47,073 83,643 47,418 10 Unsecured debt 11,249 11,249 13,114 13,114 11 Secured wholesale funding 3,891 2,816 12 Additional requirements, of which: 215,038 30,463 212,234 29,016 13 Outflows related to derivatives exposures and other collateral requirements 12,462 12,462 11,536 11,536 14 Outflows related to loss of funding on debt products 136 136 241 241 15 Credit and liquidity facilities 202,440 17,865 200,457 17,239 16 Other contractual funding obligations 7,606 4,515 8,536 5,754 17 Other contingent funding obligations 46,727 4,082 49,642 4,287 18 Total cash outflows 149,208 149,057 Cash inflows 19 Secured lending (e.g. reverse repos) 7,876 - 6,434 - 20 Inflows from fully performing exposures 9,400 5,020 9,268 4,936 21 Other cash inflows 7,988 7,988 7,552 7,552 22 Total cash inflows 25,264 13,008 23,254 12,488 23 Total liquid assets 181,882 188,621 24 Total net cash outflows 136,200 136,569 24.1 Net cash outflows overlay - - 25 Liquidity Coverage Ratio (%) 134% 138% Number of data points used 65 62 1. Calculated as a simple average of the daily observations over the quarter. |
| 82 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT NET STABLE FUNDING RATIO Net Stable Funding Ratio (NSFR) disclosure The NSFR is a structural measure which requires that a bank has sufficient Available Stable Funding (ASF) to cover its Required Stable Funding (RSF) over a one-year horizon. Westpac’s NSFR as at 30 September 2023 was 115%1 (30 June 2023, 118%). Westpac maintains a buffer over the regulatory minimum of 100%. 30 Sept 2023 Unweighted value by residual maturity $m No maturity < 6 months 6 months to < 1yr > 1 year Weighted value Available Stable Funding (ASF) Item 1 Capital 72,174 - 1,423 34,147 107,744 2 Regulatory capital 72,174 - 1,423 34,147 107,744 3 Other capital instruments - - - - - 4 Retail deposits and deposits from small business customers 319,018 89,614 670 187 377,890 5 Stable deposits 159,056 27,571 7 4 177,306 6 Less stable deposits 159,962 62,043 663 183 200,584 7 Wholesale funding 138,837 174,352 45,683 109,001 222,208 8 Operational deposits 73,474 - - - 36,736 9 Other wholesale funding 65,363 174,352 45,683 109,001 185,472 10 Liabilities with matching interdependent assets - - - - - 11 Other liabilities - 23,781 - 51 51 12 NSFR derivative liabilities 7,562 13 All other liabilities and equity not included in the above categories 16,219 - 51 51 14 Total ASF 707,893 Required Stable Funding (RSF) Item 15a) Total NSFR (High quality liquid assets - HQLA) 3,132 15b) Alternative Liquid Assets (ALA) 1,188 15c) Reserve Bank of New Zealand (RBNZ) securities 573 16 Deposits held at other financial institutions for operational purposes - - - - - 17 Performing loans and securities 1,708 48,699 46,619 685,145 561,261 18 Performing loans to financial institutions secured by Level 1 HQLA 1,634 10,419 - - 2,676 19 Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions 74 2,311 6,022 25,909 29,341 20 Performing loans to nonfinancial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and public sector entities (PSEs), of which: - 27,541 32,747 131,567 141,690 21 With a risk weight of less than or equal to 35% under APS 112 - 5 7 1,430 935 22 Performing residential mortgages, of which: - 6,337 6,060 511,210 371,625 23 With a risk weight equal to 35% under APS 112 - 6,006 5,762 412,796 287,216 24 Securities that are not in default and do not qualify as HQLA, including exchange-traded equities - 2,090 1,791 16,460 15,929 25 Assets with matching interdependent liabilities - - - - - 26 Other assets: 8,841 22,818 230 25,226 38,916 27 Physical traded commodities, including gold 448 448 28 Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) 2,184 1,856 29 NSFR derivative assets 5,278 - 30 NSFR derivative liabilities before deduction of variation margin posted 12,110 2,422 31 All other assets not included in the above categories 8,393 3,246 230 25,226 34,190 32 Off-balance sheet items 197,769 10,271 33 Total RSF 615,341 34 Net Stable Funding Ratio (%) 115% 1. Calculated as total ASF divided by total RSF as at end of the quarter. |
| 83 30 June 2023 Unweighted value by residual maturity $m No maturity < 6 months 6 months to < 1yr > 1 year Weighted value Available Stable Funding (ASF) Item 1 Capital 71,055 - - 35,900 106,955 2 Regulatory capital 71,055 - - 35,900 106,955 3 Other capital instruments - - - - - 4 Retail deposits and deposits from small business customers 311,367 88,708 620 151 369,850 5 Stable deposits 153,474 27,960 6 3 172,372 6 Less stable deposits 157,893 60,748 614 148 197,478 7 Wholesale funding 146,831 170,803 54,264 108,226 226,580 8 Operational deposits 80,823 - - - 40,412 9 Other wholesale funding 66,008 170,803 54,264 108,226 186,168 10 Liabilities with matching interdependent assets - - - - - 11 Other liabilities - 22,893 - 60 60 12 NSFR derivative liabilities 7,608 13 All other liabilities and equity not included in the above categories 15,285 - 60 60 14 Total ASF 703,445 Required Stable Funding (RSF) Item 15a) Total NSFR (High quality liquid assets - HQLA) 3,063 15b) Alternative Liquid Assets (ALA) 2,578 15c) Reserve Bank of New Zealand (RBNZ) securities 607 16 Deposits held at other financial institutions for operational purposes - - - - - 17 Performing loans and securities 1,311 50,728 41,569 656,940 540,514 18 Performing loans to financial institutions secured by Level 1 HQLA 1,215 9,785 - - 2,194 19 Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions 96 3,320 5,056 22,130 25,251 20 Performing loans to nonfinancial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and public sector entities (PSEs), of which: - 29,331 26,676 132,748 140,627 21 With a risk weight of less than or equal to 35% under APS 112 - 5 8 1,058 694 22 Performing residential mortgages, of which: - 6,801 7,014 486,577 357,124 23 With a risk weight equal to 35% under APS 112 - 6,442 6,651 388,089 272,538 24 Securities that are not in default and do not qualify as HQLA, including exchange-traded equities - 1,491 2,823 15,486 15,318 25 Assets with matching interdependent liabilities - - - - - 26 Other assets: 8,713 22,926 317 27,029 40,947 27 Physical traded commodities, including gold 313 313 28 Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) 2,421 2,058 29 NSFR derivative assets 5,895 - 30 NSFR derivative liabilities before deduction of variation margin posted 11,274 2,255 31 All other assets not included in the above categories 8,400 3,336 317 27,029 36,321 32 Off-balance sheet items 199,344 10,316 33 Total RSF 598,026 34 Net Stable Funding Ratio (%) 118% |
| 84 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT REMUNERATION Employees subject to the remuneration disclosure requirements under APS 330 Attachment G are: • Senior managers: There are 22 employees identified by the Westpac Group Fit & Proper Policy as responsible persons. These employees include the most senior executives of Westpac and other senior employees with particular management responsibilities as set out under paragraph 25 of APRA Prudential Standard CPS 520 Fit and Proper; and • Material risk takers: In addition to the senior managers, there are 18 employees who have been assessed as performing activities that have a material potential impact on the risk profile, performance and long term soundness of Westpac as an Authorised Deposit-taking Institution. These are employees with senior accountability and authority who can influence key risks. Qualitative disclosures Westpac Group Remuneration Policy The Group remuneration policy sets out the design and management of remuneration arrangements across Westpac. The policy is supported by an established governance structure, plans and frameworks. The policy supports our compliance with legal and regulatory requirements. The policy applies to all legal entities, business units, employees and contractors of Westpac and its related bodies corporate and connected entities. The Board Remuneration Committee reviews the policy on a regular basis and their latest review was completed for 2023 in September 2022. The Committee made changes to address the requirements of and comply with APRA’s Prudential Standard CPS 511 Remuneration (CPS 511). The key changes included updating remuneration adjustment provisions and updating the set of individuals whose remuneration is subject to Board and Board Remuneration Committee oversight. |
| 85 Reward strategy and 2023 framework Our remuneration strategy is designed to attract and retain talented employees. We reward them for achieving high performance and delivering superior long-term results for our customers and shareholders. Senior managers and material risk takers are rewarded based on a total reward framework which is designed to: • Promote our purpose, values and behaviours; • Align with our strategy and create sustainable shareholder value; • Offer market competitive and equitable pay; • Reward financial and non-financial performance, including customer outcomes and risk excellence; and • Reinforce our risk and conduct expectations. For senior managers and material risk takers at or above the General Manager level, the total reward framework has three components: fixed remuneration, Short Term Variable Reward (STVR) and Long Term Variable Reward (LTVR) as outlined in the table below. The total reward framework is benchmarked against the financial services industry and large corporates in Australia as appropriate. Variable reward Fixed Remuneration STVR LTVR Purpose Provide market competitive remuneration reflecting role scope and accountabilities. Reward for delivering financial and non-financial annual objectives. Reward for creating shareholder value over the long term. Delivery Cash salary and superannuation STVR is awarded in cash and restricted shares1 based on an assessment of performance over the preceding year. Performance is assessed using a scorecard comprising: • a values and behaviours assessment against Westpac’s values; • financial and non-financial measures that support the effective execution of Westpac’s strategy; and • a modifier to allow adjustment upwards or downwards (including to zero), for risk and reputation and people management considerations and any other matters as determined by the Board. Restricted shares vest subject to service conditions and adjustment. Vesting timeframes reflect the scope and nature of an individual’s role and responsibility. The maximum STVR opportunity for these employees is capped. LTVR comprises: • for Group Executives, performance share rights which vest after four years subject to the achievement of a relative Total Shareholder Return (TSR) performance hurdle, service conditions and adjustment; and • for General Managers, restricted shares or share rights without performance hurdles which vest after four years, subject to service conditions and adjustment. Employees may receive an annual award of Westpac ordinary shares up to the value of $1,000 under the Employee Share Plan. Employees who received an equity award during the year, for example, as deferred STVR or LTVR, are not eligible to receive an Employee Share Plan award for that year. Fixed remuneration Fixed remuneration is set with reference to market benchmarks in the financial services industry and large corporates in Australia as appropriate. It takes into account the size, responsibilities and complexity of the role, as well as the skills and experience of the employee. 1. Deferred STVR is awarded in unhurdled share rights to some employees outside Australia. |
| 86 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT REMUNERATION Variable reward The target mix of fixed and variable reward varies across employees and groups of employees. Factors that can influence the mix include the role type, regulatory requirement of the role, level of responsibility of the individual, market benchmarks and performance. Variable reward is discretionary and no employee has a contractual right to receive variable reward. Our variable reward incorporates effective management of financial and non-financial risks, may be subject to deferral and allows for adjustment downward if appropriate for adverse risk, compliance and conduct outcomes or upward to recognise exceptional outcomes. Short Term Variable Reward • Performance is assessed against financial and non-financial measures that support the effective execution of Westpac’s strategy. • STVR is awarded in cash and, if STVR is above the deferral thresholds, or by design for the CEO, Group Executives and General Managers, a portion of the STVR is allocated as restricted shares or unhurdled share rights. Information on deferral arrangements is set out in the table below. Long Term Variable Reward • The CEO and Group Executives receive annual LTVR awards in the form of performance share rights which vest after four years subject to the achievement of a performance hurdle, service conditions and adjustment. • The CEO and Group Executives only receive value from their LTVR awards where vesting occurs. • A performance share right is a right to an ordinary Westpac share in the future. A performance share right does not attract the payment of dividends. • Senior managers and material risk takers at the General Manager level receive annual LTVR awards in the form of restricted shares or unhurdled share rights. The size of the award is set considering a range of factors including market competitiveness and the nature of the role. Employees are required to meet minimum behaviour and risk management gate openers. Deferral All employees who receive an STVR award above a threshold have a portion of the award deferred. Deferral arrangements depend on the value of the award and the level and type of role. The table below sets out the variable reward deferral arrangements for senior managers and material risk takers. STVR deferral periods are set within the context of the market, and the overall Group risk profile. The STVR deferral period for employees in Westpac Institutional Bank and Treasury is longer than the rest of the Group given the nature of the business. STVR is deferred into equity in the form of restricted Westpac ordinary shares (for most employees) or Westpac share rights (for some employees outside Australia). By deferring a portion of the STVR as restricted equity, STVR awards are aligned with the shareholder interests and act as a retention mechanism. All subject to remuneration adjustments for risk, compliance and conduct matters. Role Type Deferral Arrangement1 CEO and Group Executives • 50% of any STVR is deferred equally over two years General Managers • 40% of any STVR is deferred equally over two years General Managers in Westpac Institutional Bank – Financial Markets and Treasury • 40% of any STVR is deferred for four years • 50% deferral for portion of allocation above $500,000, vesting in full after four years Westpac Institutional Bank and Treasury employees • 25% deferral where STVR allocation is $150,000 or greater, vesting equally over three years • 50% deferral for portion of allocation above $500,000, vesting equally over three years • 70% deferral for portion of allocation above $2,000,000, vesting equally over three years Other employees • 25% deferral where STVR allocation is $150,000 or greater, vesting equally over two years • 50% deferral for portion of allocation above $500,000, vesting equally over two years • 70% deferral for portion of allocation above $2,000,000, vesting equally over two years 1. Thresholds amounts shown in dollars apply to Australia and New Zealand in local currency. |
| 87 Remuneration governance Board The Board has overall accountability for the remuneration framework and its application. As set out in the Board Charter, without limiting its role, the Board approves (following recommendation from the Board Remuneration Committee): • the Group remuneration policy; • the size of the annual Group variable reward pool; • performance measures and remuneration outcomes for the CEO; • remuneration arrangements and outcomes for accountable persons, specified roles and any other person the Board determines; and • equity-based plans. The Board has the discretion to defer, adjust or withdraw aggregate and individual variable reward. Further detail is contained in the Board and Committee Charters which are available on Westpac’s website: https://www. westpac.com.au/about-westpac/westpac-group/corporate-governance/constitution-board/ Board Remuneration Committee The Board Remuneration Committee assists the Board to discharge its responsibility by overseeing the design, operation and monitoring of the remuneration framework. Members of the Board Remuneration Committee are independent Non-executive Directors. The Board and the Board Remuneration Committee have free and unfettered access to internal and external personnel in carrying out their respective duties. There were ten Board Remuneration Committee meetings held during the financial year ended 30 September 2023. The 2023 Board Remuneration Committee Chair fee inclusive of superannuation is $60,000. The fee inclusive of superannuation for Board Remuneration Committee members is $29,000. Further detail is contained in the Board Remuneration Committee Charter which is available on Westpac’s website: https://www.westpac.com.au/about-westpac/westpac-group/corporate-governance/constitution-board/ Other Board Committees The Board Remuneration Committee seeks feedback from and considers matters raised by other Board Committees (as appropriate) with respect to remuneration outcomes, adjustments to remuneration in light of relevant matters and alignment of remuneration with the risk management framework. Cross membership of the Board Remuneration Committee and the Board Risk Committee also supports alignment between risk management and remuneration. Independent input is received from the Chief Risk Officer on risk, compliance and conduct matters that may need to be considered in remuneration outcomes. Management remuneration oversight The Board and the Board Remuneration Committee receive support from, but not limited to, the Group Remuneration Oversight Committee and Divisional remuneration oversight committees. |
| 88 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT REMUNERATION Remuneration consultants The Board or the Board Remuneration Committee may engage an independent remuneration consultant to directly provide specialist information on remuneration for key management personnel. The Chair of the Board Remuneration Committee oversees the engagement and associated costs. Use of remuneration consultants: In 2023, the Board engaged Ernst & Young to provide specialist information on executive remuneration. Work undertaken by Ernst & Young during 2023 included the provision of information relating to the review of the executive remuneration framework, benchmarking of CEO and Group Executive remuneration and benchmarking of superannuation practices for Non-executive Directors. In 2023, no remuneration recommendations, as prescribed under the Corporations Act 2001 (Cth) (Corporations Act), were made by Board advisors. Work undertaken by Ernst & Young during 2023 included the provision of information relating to the review of the executive remuneration framework and benchmarking of Non-executive Director, CEO and Group Executive remuneration. Independence of risk and financial control employees The remuneration structure for risk and financial control employees is designed to support independence and avoid conflicts of interest. The remuneration mix for risk and financial control employees generally consists of a higher proportion of fixed pay to variable reward. Performance measures for variable reward are a balanced scorecard with focus on areas relevant to their role and remuneration is determined independently, or with independent input, of the division they oversee or control. Remuneration adjustments The Board has discretion to adjust current year STVR. The Board may also adjust unvested deferred STVR downwards, including to zero, in specified circumstances including serious misconduct, if serious circumstances or new information come to light which mean that in the Board’s view all or part of the award was not appropriate, or where required by law or prudential standards. The Board will typically apply that adjustment against the STVR for the current performance period. Where that adjustment to current year STVR is insufficient or unavailable, the Board may apply the adjustment to unvested deferred variable reward. Clawback may also apply to variable reward, to the extent legally permissible and practicable. Variable reward pool The Board determines the size of the variable reward pool each year. This is based on the Group’s performance as assessed against set criteria, total variable reward opportunity across the eligible employee population and a discretionary risk-based overlay. Non-financial measures are reflected in both the set performance criteria and the risk overlay. |
| 89 STVR Scorecards STVR awards are determined with reference to an assessment of performance. For 2023, the performance of the CEO, Group Executives and General Managers was assessed against a scorecard comprised of three components. • Values and behaviours assessment: demonstration of behaviours in line with Westpac’s values of ‘Helpful, Ethical, Leading Change, Performing and Simple’. • Focus areas: performance is assessed against a balance of financial and non-financial measures that support the effective execution of Westpac’s strategy. • Modifier: allows adjustment upwards or downwards (including to zero), for risk and reputation, people management considerations and any other matters as determined by the Board. The table below sets out the focus areas of the Group STVR scorecard for 2023 which forms part of the CEO’s scorecard. Individual measures will differ for each senior manager. Key priority Weighting Examples of measures Financial performance 40% • Deliver financial performance relative to plan and peers (core earnings, net profit after tax, return on tangible equity) • Maintain a strong balance sheet Risk management 30% • Deliver our Customer Outcomes and Risk Excellence (CORE) program outcomes and critical risk priorities Serving customers 10% • Lift customer advocacy • Improve service speed of key products • Transform using digital and data Strategic execution 10% • Progress on target of being a zero emission bank by 2025 and by 2030 for customers • Profitably grow mortgages at major bank system • Profitably grow target business segments • Progress on our payments strategy including progress on the digital platform build People 10% • Build a high performance culture above global high performing norms • Enhance executive bench strength and succession through targeted development The Group’s priorities are set out in the Group STVR scorecard, which translates into the CEO’s scorecard. Common elements appear in senior manager and material risk taker scorecards together with individual objectives reflecting divisional measures. For 2023, the performance measures and weightings within the CEO scorecard were updated from the ‘Fix, Simplify, Perform’ priorities used in 2022 to align remuneration outcomes with the refreshed strategy and externally orientated purpose of ‘Creating Better Futures Together’. Priority areas for 2023 include financial performance, risk management, serving customers, strategic execution and people. |
| 90 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT REMUNERATION Quantitative Disclosures The tables below provide information in line with the quantitative requirements of APS 330 including Table 22A. • 22 of 22 senior managers and 18 of 18 material risk takers received variable reward in respect of 2023. 28 of 28 senior managers and 7 of 7 material risk takers received variable reward in respect of 2022. • For 2023, two senior managers received payments totalling $1,339,575 and one material risker taker received payment totalling $542,988 reflecting annual incentives foregone from their previous employers on appointment to Westpac. • For 2023, one senior manager received payments totalling $1,187,215 on their termination from Westpac representing contractual requirements. No termination payments were made to material risk takers. • No guaranteed bonuses were awarded to senior managers or material risk takers in 2023. Deferred remuneration 30 Sept 2023 30 Sept 2022 Paid out in Paid out in Total amount financial Explicit Implicit Total amount financial Explicit Implicit $’000 outstanding1 year reductions2 reductions3 outstanding1 year reductions2 reductions3 Senior managers 82,881 4,204 (5,150) - 80,161 4,577 (8,931) (17,250) Material risk takers 18,455 5,542 - - 9,058 3,272 - (1,949) Total value of remuneration awards for senior managers and material risk takers4 30 Sept 2023 30 Sept 2022 Senior Managers Material risk takers Senior Managers Material risk takers $’000 Unrestricted Deferred Unrestricted Deferred Unrestricted Deferred Unrestricted Deferred Fixed remuneration Cash based5 21,678 - 11,478 - 23,238 - 5,169 - Shares and share-linked instruments - - - - - - - - Other6 810 - 782 - 881 - 303 - Variable remuneration Cash based7 7,794 - 9,953 - 7,346 - 4,807 - Shares and share-linked instruments8 - 17,354 - 9,049 - 17,602 - 5,254 Other - - - - - - - - 1. Value of unvested holdings at 30 September. All outstanding deferred remuneration is subject to either explicit or implicit adjustments. 2. The 2023 explicit adjustment reflects testing of the Return on Equity (ROE) and TSR hurdles on 1 October 2022, noting that the ROE hurdle reached the end of its performance period on 30 September 2021 and was subject to an additional one year holding lock through to 30 September 2022. Explicit adjustments may also include malus, clawback or similar reversals or downward revaluations of awards. 3. Implicit adjustments include reductions in the value of shares or performance units during the year. 4. Prepared in accordance with APS330 Table 22A and accounting standard AASB 2, consistent with the process for the Annual Report. 5. Cash based fixed remuneration is the total cost of salary, salary sacrificed benefits (including motor vehicles, parking, etc. and any associated fringe benefits tax) and an accrual for annual leave entitlements. 6. Other fixed remuneration relates to post-employment benefits. Senior managers and material risk takers are provided with Group life and salary continuance insurance cover provided at no cost to the individual. Superannuation benefits have been calculated consistent with AASB 119. 7. Cash based variable reward reflects annual cash performance awards accrued but not yet paid in respect of the year ended 30 September. 8. The value of restricted shares (or share rights where relevant) is amortised over the performance year the award was earned and the applicable vesting period. The amount shown is the amortisation relating to 2023 and the 2022 comparison. |
| 91 APPENDIX I | APRA’S CAPITAL FRAMEWORK APRA’s capital framework (Basel III) became effective on 1 January 2023 and included updated prudential standards for capital adequacy and credit risk capital. The objectives of the capital framework are to provide flexibility for banks to operate in all environments including in times of stress, enhance risk sensitivity and improve comparability with international standards. Revisions on 1 January 2023 include: • Capital requirements: Total CET1 Requirement for D-SIBs (including Westpac), is 10.25% (noting that APRA may apply higher CET1 requirements for an individual ADI). This comprises: – Minimum CET1 of 4.5%; – Capital conservation buffer (CCB) of 4.75%; and – Countercyclical capital buffer of 1.0%. • Calculation of Credit RWA: Several changes with the most significant including: – Asset classifications used to determine RWA; – Greater use of internal modelling within property finance and mortgages which reduced risk weightings; – Higher capital requirements for higher risk segments such as interest only and investor mortgages; – Revised credit conversion factors (CCFs) for the calculation of off-balance sheet exposures which has reduced exposure at default. CCFs are percentage values used to convert an off-balance sheet exposure into an on-balance sheet equivalent; and – New Zealand RWA largely determined by the RBNZ requirements which increased RWA compared to prior periods. • Introduction of a capital floor which limits the capital benefit available to advanced banks to no more than 72.5% of the RWA outcomes available under the standardised approach; and • Introduction of a minimum leverage ratio of 3.5% and amendments of the leverage exposure calculation. • Implementation of the capital framework reduced credit RWA by $23.7 billion. Key drivers were: – Property Finance: Internal modelling has reduced the risk weight of property finance. These exposures were formerly calculated using the IRB slotting approach; – Residential Mortgages: Revisions to mortgage models reduced RWA, although additional capital was required for higher risk segments, including standardised risk weights for some exposures; and – Off-balance sheet exposures: EAD has reduced mainly related to changes in CCFs for non-retail exposures. Changes to credit risk capital APRA’s capital framework included updated prudential standards for credit risk capital (APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk). In line with the revised standard an ADI must categorise banking book exposures into four broad IRB APS113 asset classes (Corporate, Sovereign, Financial Institution and Retail) and apply the prescribed treatment for those classes to each credit exposure within them for the purposes of deriving its regulatory capital requirement. APS113 cascades these asset classes into further sub-asset classes as per below. APRA’s capital framework results in changes to previously reported credit asset classes. This includes changes to credit RWA calculations from AIRB to a foundation IRB approach (FIRB) for some exposure classes. Under FIRB, an ADI must provide its own estimates of PD and maturity and rely on supervisory estimates of LGD and EAD. |
| 92 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX I | APRA’S CAPITAL FRAMEWORK The table below summarises Westpac’s credit risk asset classes under APRA’s capital framework. Credit Asset Classes Previously Reported Credit Asset Classes Corporate Corporate Business Lending Business Lending Small Business Property Finance Specialised Lending Large Corporate Corporate Sovereign Sovereign Financial Institutions Corporate Business Lending Bank Residential Mortgages Residential Mortgages Australian Credit Cards Australian Credit Cards Other Retail Other Retail Small Business Small Business Business Lending Specialised Lending Specialised Lending Securitisation Securitisation New Zealand Corporate Business Lending Sovereign Banks Residential mortgages Other retail Small business Specialised lending Securitisation |
| 93 APPENDIX II | REGULATORY CAPITAL RECONCILIATION Balance Sheet Reconciliation 30 Sept 2023 $m Group Balance Sheet Adjustment Level 2 Regulatory Balance Sheet Reconciliation Table Capital Disclosure Template Assets Cash and balances with central banks 102,522 (2) 102,520 Collateral paid 4,535 - 4,535 Due from subsidiaries - 74 74 Trading securities and financial assets measured at fair value through income statement (FVIS) 30,507 (40) 30,467 Derivative financial instruments 21,343 - 21,343 Investment securities 75,326 (239) 75,087 Loans 773,254 - 773,254 Other financial assets 6,219 (148) 6,071 Current tax assets 5 - 5 Life insurance assets - - - Investments in associates 33 (11) 22 Property and equipment 2,245 - 2,245 Deferred tax assets 2,095 49 2,144 Table a Intangible assets 10,886 - 10,886 Table b Investments in life & general insurance, funds management & securitisation entities - 76 76 Table c Other assets 804 (1) 803 Assets held for sale - - - Total assets 1,029,774 (242) 1,029,532 Liabilities Collateral received 3,525 - 3,525 Due to subsidiaries - 413 413 Deposits and other borrowings 688,168 - 688,168 Other financial liabilities 44,870 (32) 44,838 Derivative financial instruments 24,647 - 24,647 Debt issues 156,573 - 156,573 Current tax liabilities 780 (2) 778 Life insurance liabilities - - - Provisions 2,777 (2) 2,775 Deferred tax liabilities - - - Loan capital 33,176 - 33,176 Table d and e Other liabilities 2,719 - 2,719 Liabilities held for sale - - - Total liabilities 957,235 377 957,612 Equity Ordinary share capital 39,826 - 39,826 Row 1 Treasury shares and RSP treasury shares (702) (57) (759) Table f Reserves 1,935 (193) 1,742 Table g Retained Profits 31,436 (369) 31,067 Row 2 Non-controlling interests 44 - 44 Total equity 72,539 (619) 71,920 |
| 94 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX II | REGULATORY CAPITAL RECONCILIATION $m 30 Sept 2023 Capital Disclosure Template Reference Table a Deferred Tax Assets Total Deferred Tax Assets per Group Balance Sheet 2,095 Add: Net Deferred Tax Assets included in other regulatory adjustments or associated with reserves ineligible for inclusion in regulatory capital 49 Total Deferred Tax Assets per level 2 Regulatory Balance Sheet 2,144 Deferred tax asset adjustment before applying prescribed thresholds 2,144 Row 26e Less: Amounts below prescribed threshold - risk weighted (2,144) Row 75 Total per Capital Disclosure Template - Deferred Tax Asset - Row 21 / 25 Table b Goodwill and other intangible assets Total Goodwill and Intangibles Assets per level 2 Regulatory Balance Sheet 10,886 Less: Capitalised Software Disclosed Under Intangibles (2,797) Row 9 Total per Capital Disclosure Template - Goodwill 8,089 Row 8 Table c Equity Investments Equity Investments in non-consolidated subsidiaries 76 Total Significant Investment in financial entities 76 Row 73 Non-significant Investment in financial entities 152 Row 72 Total Investments in financial institutions 228 Row 26d Investment in commercial entities 76 Row 26g Total Equity Investments before applying prescribed threshold 304 Less: Amounts below prescribed threshold (304) Total per Capital Disclosure Template - Equity Investments - Row 18/ 19/ 23 Table d Additional Tier 1 Capital Total Loan Capital per Level 2 Regulatory Balance Sheet 33,176 Less: Tier 2 Capital Instruments Reported Below (23,370) Add: Capitalised Issue Costs for Additional Tier 1 Capital Instruments1 46 Less: Fair Value Adjustment2 185 Total per Capital Disclosure Template - Tier 1 Capital 10,037 Row 36 Additional Tier 1 Capital included in Regulatory Capital Westpac Capital Notes 5 1,690 Westpac Capital Notes 6 1,423 SEC Registered Capital Securities 1,942 Westpac Capital Notes 7 1,723 Westpac Capital Notes 8 1,750 Westpac Capital Notes 9 1,509 Total Basel III complying instruments 10,037 Row 30 Total Basel III non complying instruments - Row 33 Total per Capital Disclosure Template - Additional Tier 1 Capital Instruments 10,037 Row 36 1. Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments are shown gross of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the capital disclosure template. 2. For regulatory capital purposes, APRA requires these instruments to be included as if they were unhedged. |
| 95 $m 30 Sept 2023 Capital Disclosure Template Reference Table e Tier 2 Capital Total Tier 2 Capital per Level 2 Regulatory Balance Sheet 23,370 Add: Capitalised Issue Costs for Tier 2 Capital Instruments1 66 Less: Fair Value Adjustment2 3,395 Less: Loan capital not recognised for APRA purposes (1,091) Less: Basel III transitional adjustment - Row 56c Provisions 1,051 Row 50 / 76 Total per Capital Disclosure Template - Tier 2 26,791 Row 51 Tier 2 Capital included in Regulatory Capital USD100 million Westpac Subordinated Notes 154 JPY20,000 million Westpac Subordinated Notes 207 JPY10,200 million Westpac Subordinated Notes 106 JPY10,000 million Westpac Subordinated Notes 104 AUD1,500 million Westpac Subordinated Notes 1,498 USD1,500 million Westpac Subordinated Notes 2,315 AUD1,000 million Westpac Subordinated Notes 1,000 AUD350 million Westpac Subordinated Notes 350 AUD185 million Westpac Subordinated Notes 184 AUD130 million Westpac Subordinated Notes 130 AUD300 million Westpac Subordinated Notes 299 AUD1,100 million Westpac Subordinated Notes 1,098 USD1,000 million Westpac Subordinated Notes 1,538 USD1,250 million Westpac Subordinated Notes 1,928 USD1,000 million Westpac Subordinated Notes 1,537 USD1,500 million Westpac Subordinated Notes 2,317 USD1,000 million Westpac Subordinated Notes 1,537 USD1,500 million Westpac Subordinated Notes 2,312 AUD1,250 million Westpac Subordinated Notes 1,249 EUR1,000 million Westpac Subordinated Notes 1,633 USD1,000 million Westpac Subordinated Notes 1,540 USD1,250 million Westpac Subordinated Notes 1,926 JPY26,000 million Westpac Subordinated Notes 269 SGD450 million Westpac Subordinated Notes 509 Total Basel III complying instruments 25,740 Row 46 Total Basel III non complying instruments - Less: Basel III transitional adjustment - Row 85 Total Basel III non complying instruments after transitional adjustment - Row 47 Provisions 1,051 Row 50 / 76 Total per Capital Disclosure Template - Tier 2 Capital Instruments 26,791 Row 51 Table f Treasury Shares and RSP Treasury Shares Total treasury shares per Level 2 Regulatory Balance Sheet (759) Less: Treasury Shares not included for Level 2 Regulatory Capital - Total per Capital Disclosure Template - Treasury Shares (759) Row 26a Table g Accumulated Other Comprehensive Income (and other reserves) Total reserves per Level 2 Regulatory Balance Sheet 1,742 Less: Share Based Payment Reserve not included within capital (53) Total per Capital Disclosure Template - Accumulated Other Comprehensive Income (and other reserves) 1,689 Row 3 1. Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments are shown gross of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the capital disclosure template. 2. For regulatory capital purposes, APRA requires these instruments to be included as if they were unhedged. |
| 96 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX II | REGULATORY CAPITAL RECONCILIATION The capital disclosure template below represents the post 1 January 2018 Basel III template. $m 30 Sept 2023 Table Reference Common Equity Tier 1 capital: instruments and reserves 1 Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital 39,826 2 Retained earnings 31,067 3 Accumulated other comprehensive income (and other reserves) 1,689 Table g 4 Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) - 5 Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) 44 6 Common Equity Tier 1 capital before regulatory adjustments 72,626 Common Equity Tier 1 capital: regulatory adjustments 7 Prudential valuation adjustments - 8 Goodwill (net of related tax liability) (8,089) Table b 9 Other intangibles other than mortgage servicing rights (net of related tax liability) (2,797) Table b 10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) - 11 Cash-flow hedge reserve (152) 12 Shortfall of provisions to expected losses - 13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) - 14 Gains and losses due to changes in own credit risk on fair valued liabilities (222) 15 Defined benefit superannuation fund net assets (217) 16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) - 17 Reciprocal cross-holdings in common equity - 18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) - Table c 19 Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) - Table c 20 Mortgage service rights (amount above 10% threshold) - 21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) - Table a 22 Amount exceeding the 15% threshold - 23 of which: significant investments in the ordinary shares of financial entities - Table c 24 of which: mortgage servicing rights - 25 of which: deferred tax assets arising from temporary differences - Table a 26 National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) (5,264) 26a of which: treasury shares (759) Table f 26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase new ordinary shares issued by the ADI - 26c of which: deferred fee income 334 26d of which: equity investments in financial institutions not reported in rows 18, 19 and 23 (228) Table c 26e of which: deferred tax assets not reported in rows 10, 21 and 25 (2,144) Table a 26f of which: capitalised expenses (2,375) 26g of which: investments in commercial (non-financial) entities that are deducted under APRA prudential requirements (76) Table c 26h of which: covered bonds in excess of asset cover in pools - 26i of which: undercapitalisation of a non-consolidated subsidiary - 26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i (16) 27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions - 28 Total regulatory adjustments to Common Equity Tier 1 (16,741) 29 Common Equity Tier 1 Capital (CET1) 55,885 |
| 97 $m 30 Sept 2023 Table Reference Additional Tier 1 Capital: instruments 30 Directly issued qualifying Additional Tier 1 instruments 10,037 Table d 31 of which: classified as equity under applicable accounting standards - 32 of which: classified as liabilities under applicable accounting standards 10,037 Table d 33 Directly issued capital instruments subject to phase out from Additional Tier 1 - 34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1) - 35 of which: instruments issued by subsidiaries subject to phase out - 36 Additional Tier 1 Capital before regulatory adjustments 10,037 Table d Additional Tier 1 Capital: regulatory adjustments 37 Investments in own Additional Tier 1 instruments (25) 38 Reciprocal cross-holdings in Additional Tier 1 instruments - 39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) - 40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions) (21) 41 National specific regulatory adjustments (sum of rows 41a, 41b and 41c) - 41a of which: holdings of capital instruments in group members by other group members on behalf of third parties - 41b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows 39 and 40 - 41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b - 42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions - 43 Total regulatory adjustments to Additional Tier 1 capital (46) 44 Additional Tier 1 capital (AT1) 9,991 Table d 45 Tier 1 Capital (T1=CET1+AT1) 65,876 Tier 2 Capital: instruments and provisions 46 Directly issued qualifying Tier 2 instruments 25,740 Table e 47 Directly issued capital instruments subject to phase out from Tier 2 - Table e 48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group T2) - 49 of which: instruments issued by subsidiaries subject to phase out - 50 Provisions 1,051 Table e 51 Tier 2 Capital before regulatory adjustments 26,791 Table e Tier 2 Capital: regulatory adjustments 52 Investments in own Tier 2 instruments (100) 53 Reciprocal cross-holdings in Tier 2 instruments - 54 Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) - 55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions - 56 National specific regulatory adjustments (sum of rows 56a, 56b and 56c) (270) 56a of which: holdings of capital instruments in group members by other group members on behalf of third parties - 56b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows 54 and 55 (270) 56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b - 57 Total regulatory adjustments to Tier 2 capital (370) 58 Tier 2 capital (T2) 26,421 59 Total capital (TC=T1+T2) 92,297 60 Total risk-weighted assets based on APRA standards 451,418 |
| 98 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX II | REGULATORY CAPITAL RECONCILIATION $m 30 Sept 2023 Table Reference Capital ratios and buffers 61 Common Equity Tier 1 (as a percentage of risk-weighted assets) 12.38% 62 Tier 1 (as a percentage of risk-weighted assets) 14.59% 63 Total capital (as a percentage of risk-weighted assets) 20.45% 64 Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 3.75% plus any countercyclical buffer requirements expressed as a percentage of risk-weighted assets)1 10.09% 65 of which: capital conservation buffer requirement 3.75% 66 of which: ADI-specific countercyclical buffer requirements 0.84% 67 of which: G-SIB buffer requirement (not applicable) N/A 68 Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 12.38% National minima (if different from Basel III) 69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) N/A 70 National Tier 1 minimum ratio (if different from Basel III minimum) N/A 71 National total capital minimum ratio (if different from Basel III minimum) N/A Amount below thresholds for deductions (not risk-weighted) 72 Non-significant investments in the capital of other financial entities 152 Table c 73 Significant investments in the ordinary shares of financial entities 76 Table c 74 Mortgage servicing rights (net of related tax liability) - 75 Deferred tax assets arising from temporary differences (net of related tax liability) 2,144 Table a Applicable caps on the inclusion of provisions in Tier 2 76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap) 89 Table e 77 Cap on inclusion of provisions in Tier 2 under standardised approach 389 78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) 962 Table e 79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 1,852 Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) 80 Current cap on CET1 instruments subject to phase out arrangements N/A 81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) N/A 82 Current cap on AT1 instruments subject to phase out arrangements N/A 83 Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) N/A 84 Current cap on T2 instruments subject to phase out arrangements N/A 85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) N/A Table e 1. Includes 1% Domestic Systemically Important Bank (D-SIB) requirement. |
| 99 Capital Floor APRA’s capital framework incorporates a capital floor which limits the capital benefit available to advanced banks to no more than 72.5 per cent of the RWA outcomes available under the standardised approach. There was no capital floor adjustment as at 30 September 2023 as shown below. $m Risk-weighted assets under the standardised approach 30 Sept 2023 31 March 2023 Credit risk 509,749 499,267 Market risk 11,538 15,168 Operational risk 55,175 56,900 Interest rate risk in the banking book - - Other risk 4,809 5,572 Total 581,271 576,907 Risk-weighted assets under the IRB Approach Credit risk 339,758 340,558 Market risk 11,538 15,168 Operational risk 55,175 56,900 Interest rate risk in the banking book 40,138 34,748 Other risk 4,809 5,572 Total 451,418 452,946 Capital floor at 72.5% 421,421 418,258 Capital floor adjustment - - Countercyclical buffer (CCyB) This table sets out the ADI specific countercyclical capital buffer. The countercyclical capital buffer is an additional amount of capital that APRA can require banks to hold or release at certain points in the economic and financial cycle. As part of the capital framework, APRA has set a 1.0% default countercyclical capital buffer. The following table provides a geographic breakdown of RWA associated with private sector credit exposures that are used to calculate the countercyclical capital buffer requirement. 30 Sept 2023 Jurisdictional buffer% Risk Weighted Assets ($m) ADI-specific buffer% Australia 1.00% 285,843 0.8269% United Kingdom 2.00% 1,282 0.0074% Netherlands 1.00% 655 0.0019% France 0.50% 346 0.0005% Hong Kong SAR 1.00% 115 0.0003% Germany 0.75% 84 0.0002% Ireland 0.50% 43 0.0001% Denmark 2.50% 20 0.0001% Luxembourg 0.50% 12 0.0000% Sweden 2.00% 10 0.0001% Norway 2.50% 6 0.0000% Other 0.00% 57,242 0.0000% Total N/A 345,658 0.8376% |
| 100 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX III | ENTITIES INCLUDED IN REGULATORY CONSOLIDATION This appendix lists all subsidiaries controlled by Westpac according to their level of regulatory consolidation. Level 1 Entities The following controlled entities have been approved by APRA for inclusion in the Westpac ADI’s ‘Extended Licensed Entity’ (ELE) for the purposes of measuring capital adequacy at Level 1: Westpac Banking Corporation St.George Business Finance Pty Limited 1925 (Commercial) Pty Limited St.George Finance Holdings Limited 1925 (Industrial) Pty Limited St.George Security Holdings Pty Limited Bill Acceptance Corporation Pty Limited Value Nominees Pty Limited Capital Finance Australia Limited Westpac Administration 2 Pty Limited CBA Pty Limited Westpac Administration Pty Limited Challenge Pty Limited Westpac Investment Vehicle Pty Limited Mortgage Management Pty Limited Westpac Leasing Nominees-Vic.-Pty Limited Partnership Pacific Pty Limited Westpac Properties Pty Limited Sallmoor Pty Limited Westpac Securitisation Holdings Pty Limited Sixty Martin Place (Holdings) Pty Limited Level 2 Entities The following controlled entities are included in the Level 2 consolidation (along with the ELE entities) for the purposes of measuring capital adequacy: 1925 Advances Pty Limited RMS Warehouse Trust 2007-1 Altitude Administration Pty Limited Series 2008-1M WST Trust Altitude Rewards Pty Limited Series 2014-1 WST Trust Aotearoa Financial Services Limited Series 2014-2 WST Trust BT (Queensland) Pty Limited Series 2015-1 WST Trust BT Financial Group Holdings Pty Ltd Series 2019-1 WST Trust BT Financial Group (NZ) Limited Series 2020-1 WST Trust BT Financial Group Pty Limited Series 2021-1 WST Trust BT Securities Limited Series 2022-1P WST Trust Crusade Trust No.2P of 2008 Series 2023-1P WST Trust Danaby Pty Limited St.George Finance Limited General Credits Pty Limited St.George Motor Finance Limited Net Nominees Limited The Home Mortgage Company Limited Number 120 Limited Westpac (NZ) Investments Limited Qvalent Pty Limited Westpac Administration 3 Pty Limited RAMS Financial Group Pty Limited Westpac Administration 4 Pty Limited |
| 101 Level 2 Entities (continued) Westpac Altitude Rewards Trust Westpac New Zealand Group Limited Westpac Americas Inc. Westpac New Zealand Limited Westpac Bank-PNG-Limited Westpac Notice Saver PIE Fund Westpac Capital Markets Holding Corp. Westpac NZ Covered Bond Holdings Limited Westpac Capital Markets LLC Westpac NZ Covered Bond Limited Westpac Capital-NZ-Limited Westpac NZ Operations Limited Westpac Cash PIE Fund Westpac NZ Securitisation Holdings Limited Westpac Covered Bond Trust Westpac NZ Securitisation Limited Westpac Equity Holdings Pty Limited Westpac Securitisation Management NZ Limited Westpac Equity Investments NZ Limited Westpac Overseas Holdings Pty Limited Westpac Europe GmbH Westpac Overseas Holdings No. 2 Pty Limited Westpac Europe Limited Westpac Securities Limited Westpac Financial Services Group Pty Limited Westpac Securities NZ Limited Westpac Financial Services Group-NZ-Limited Westpac Securitisation Management Pty Limited Westpac Group Investment-NZ-Limited Westpac Syndications Management Pty Limited Westpac Holdings-NZ-Limited Westpac Term PIE Fund Westpac Investment Capital Corporation Westpac USA Inc. Westpac Investment Vehicle No.2 Pty Limited Level 3 Entities The following controlled entities are included in the Level 2 consolidation (along with the ELE entities) for the purposes of measuring capital adequacy: Asgard Capital Management Limited Reinventure Fund III I.L.P Asgard Wealth Solutions Pty Limited Reinventure Special Purpose Investment Unit Trust BT Funds Management (NZ) Limited Securitor Financial Group Pty Limited BT Funds Management Limited Sydney Capital Corporation Inc. BT Funds Management No.2 Limited Waratah Receivables Corporation Pty Limited BT Portfolio Services Limited Waratah Securities Australia Limited GIS Private Nominees Pty Limited Westpac Financial Services Limited Hyde Potts Insurance Services Pte. Limited Westpac New Zealand Staff Superannuation Scheme Trustee Limited Magnitude Group Pty Limited Westpac Nominees-NZ-Limited Pendal Short Term Income Fund Westpac RE Limited Red Bird Ventures Limited Westpac Securities Administration Limited Reinventure Fund, I.L.P. Westpac Superannuation Nominees-NZ-Limited Reinventure Fund II I.L.P |
| 102 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX IV | LEVEL 3 ENTITIES’ ASSETS AND LIABILITIES The following legal entities are excluded from the regulatory scope of consolidation. The total assets and liabilities should not be aggregated because some of the entities are holding companies for other entities in the table shown below. 30 Sept 2023 Liabilities $m Total Assets (excluding equity) Insurance, funds management and other Asgard Capital Management Limited 30 7 Asgard Wealth Solutions Pty Limited 1 - BT Funds Management (NZ) Limited 61 13 BT Funds Management Limited 225 174 BT Funds Management No.2 Limited 9 2 BT Portfolio Services Limited 105 39 GIS Private Nominees Pty Limited 11 3 Hyde Potts Insurance Services Pte. Limited 50 2 Magnitude Group Pty Limited 4 - Pendal Short Term Income Fund 168 168 Red Bird Ventures Limited 11 - Reinventure Fund, I.L.P. 56 7 Reinventure Fund II I.L.P 67 - Reinventure Fund III I.L.P 88 - Reinventure Special Purpose Investment Unit Trust 36 - Securitor Financial Group Pty Limited 3 - Sydney Capital Corporation Inc. - - Waratah Receivables Corporation Pty Limited - - Waratah Securities Australia Limited - - Westpac Financial Services Limited 20 8 Westpac New Zealand Staff Superannuation Scheme Trustee Limited - - Westpac Nominees-NZ-Limited - - Westpac RE Limited 9 1 Westpac Securities Administration Limited 7 - Westpac Superannuation Nominees-NZ-Limited - - |
| 103 APPENDIX V | REGULATORY EXPECTED LOSS Capital deduction for regulatory expected loss For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible provisions to be deducted from capital. The following table shows how the deduction is calculated. 30 Sept 31 March 30 Sept $m 2023 2023 2022 Provisions associated with eligible portfolios Total provisions for impairment charges 4,941 4,923 4,635 plus provisions associated with partial write-offs 292 381 377 less ineligible provisions1 (192) (181) (143) Total eligible provisions 5,041 5,123 4,869 Regulatory expected downturn loss 4,078 4,101 4,690 Excess/(shortfall) in eligible provisions compared to regulatory expected downturn loss 963 1,022 179 Common equity Tier 1 capital deduction for regulatory expected downturn loss in excess of eligible provisions2 - (2) (144) 1. Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible. 2. Regulatory expected loss is calculated for those portfolios subject to the IRB approach to credit risk. The comparison between regulatory expected loss and eligible provisions is performed separately for defaulted and non-defaulted exposures. |
| 104 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX VI | APS330 QUANTITATIVE REQUIREMENTS The following table cross-references the quantitative disclosure requirements given by Attachments A, C, D and E of APS330 to the quantitative disclosures made in this report. The continuous reporting requirements for capital instruments under Attachment B are satisfied separately and can be found on the regulatory disclosures section on the Westpac website1. In addition to this report, the regulatory disclosures section of the Westpac website contains the reporting requirements for: • Capital instruments under Attachment B of APS330; and • The identification of potential Global-Systemically Important Banks (G-SIB) under Attachment H of APS330 (disclosed annually). APS330 reference Westpac disclosure Page General requirements Paragraph 12 (a) (c) to (d) Balance Sheet Reconciliation 93 Paragraph 13 Level 3 entities’ assets and liabilities 102 Paragraph 49 Leverage ratio 17 Attachment A: Table 1: Capital disclosure template Capital disclosure template 96 Attachment C: Table 3: Capital adequacy (a) to (e) Capital requirements 15 (f) Westpac’s capital adequacy ratios 14 Capital adequacy ratios of major subsidiary banks 14 Table 4: Credit risk (a) Exposure at Default by major type 28 (b) Non-performing and past due loans by portfolio 35 (c) Provisions held against performing exposures 25 Table 5: Securitisation exposures (a) Banking book summary of securitisation activity by asset type 64 (b) Banking book summary of on and off-balance sheet securitisation by exposure type 65 Trading book summary of on and off-balance sheet securitisation by exposure type 68 Attachment D: Table 6: Capital adequacy (b) to (f) Capital requirements 15 (g) Westpac’s capital adequacy ratios 14 Capital adequacy ratios of major subsidiary banks 14 (h) Residential Mortgage capital requirements under IRB and Standardised approaches 42 (i) Capital floor 99 Table 7: Credit risk - general (b) Exposure at Default by major type 28 disclosures (c) Exposure at Default by geography 33 (d) Exposure at Default by industry classification 30 (e) Exposure at Default by residual contractual maturity 34 (f) Non-performing exposures by industry classification 36 (g) Non-performing exposures by geography 38 (h) Movement in provisions for impairment charges 26 (h) Loan impairment provisions 24 (i) Exposure at Default by measurement method 29 (j) Provisions held against performing exposures 25 Table 8: Credit risk - disclosures for (b) Portfolios subject to the standardised approach 50 portfolios subject to the Portfolios subject to supervisory risk weights 46 standardised approach and supervisory risk-weights in the IRB approaches (formerly Table 5) 1. http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/ |
| 105 APS330 reference Westpac disclosure Page Table 9: Credit risk - (d) Corporate portfolio by external credit rating 39 disclosures for portfolios Business lending portfolio by external credit rating 40 subject to IRB approaches Property finance by external credit rating 41 Residential mortgages portfolio by PD band 42 Australian credit cards portfolio by PD band 43 Small business portfolio by PD band 44 Other retail portfolio by PD band 45 Sovereign exposures by external credit rating 47 Financial institution exposures by external credit rating 48 Large Corporate Exposures by external credit rating 49 (e) Actual losses 52 (f) Regulatory loss estimates and actual losses 54 Table 10: Credit risk mitigation disclosures (b) to (c) Total exposure covered by collateral, credit derivatives and guarantees 57 Table 11: General (b) Counterparty credit risk summary 59 disclosure for exposures related to counterparty credit risk (c) Credit derivative transactions that create exposures to counterparty credit risk 59 Table 12: Securitisation exposures Banking Book (g) part i and (h) to (i) Summary of assets securitised by Westpac 63 (g) part ii Summary of total Westpac sponsored third party assets securitised 64 (j) Summary of securitisation activity by asset type 64 (k) Summary of on and off-balance sheet securitisation by exposure type 65 (l) part i Securitisation exposure by risk weight band 66 (l) part ii Securitisation exposures deducted from capital 67 (m) Securitisation subject to early amortisation treatment 67 (n) part i Resecuritisation exposure subject to credit risk mitigation 67 (n) part ii Resecuritisation exposure to guarantors 67 Trading Book (o) part i and (p) Summary of assets securitised by Westpac 67 (o) part ii Summary of total Westpac sponsored third party assets securitised 67 (q) Summary of securitisation activity by asset type 67 (r) Aggregate amount of exposures securitised by Westpac and subject to APS116 Capital Adequacy: Market Risk 67 (s) Summary of on and off-balance sheet securitisation by exposure type 68 (t) part i Securitisation exposure retained or purchase subject to specific risk 68 (t) part ii Securitisation exposure subject to APS120 for Specific risk by risk weight band 68 (u) part i Capital requirements for securitisation exposure subject to internal models approach (IMA) by risk classification 69 (u) part ii Capital requirements for securitisation regulatory capital approaches by risk weight band 69 |
| 106 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT APPENDIX VI | APS330 QUANTITATIVE REQUIREMENTS APS330 reference Westpac disclosure Page Table 12: Securitisation exposures Trading Book (continued) (continued) (u) part iii Securitisation exposures deducted from capital 67 (v) Securitisation subject to early amortisation treatment 69 (w) part i Aggregate resecuritisation exposures retain or purchased subject to credit risk mitigation 69 (w) part ii Resecuritisation exposure to guarantors credit worthiness 69 Table 13: Market risk - disclosures for ADIs using the standard method (b) Market Risk regulatory capital and risk weighted assets 71 Table 14: Market risk - disclosures for ADIs using the IMA for trading portfolios (f) VaR and Stressed VaR by risk type 72 Table 16: Equities - disclosures for banking book positions (b) to (c) Book value of listed equity exposures by industry classification / Book value of unlisted equity exposures by industry classification 79 (d) to (e) Gains/losses 79 (f) Capital requirement1 N/A Table 17: Interest rate risk in the banking book (b) Change in economic value of sudden upward and downward movement in interest rates 76 (b) Capital requirement 76 Attachment E: Table 18: Leverage ratio disclosure template Leverage ratio disclosure 17 Table 19: Summary comparison of accounting assets vs leverage ratio exposure measure Summary comparison of accounting assets vs leverage ratio exposure measure 17 Attachment F: Table 20: Liquidity Coverage Ratio disclosure template Liquidity Coverage Ratio disclosure 81 Table 21: Net Stable Funding Ratio template Net Stable Funding Ratio disclosure 82 Attachment G2: Table 22: Remuneration disclosure requirements (g) Governance structure 87 (h) Quantitative Disclosures 90 (i) Deferred remuneration 90 (j) to (k) Total value of remuneration awards for the current financial year for senior managers and material risk takers 90 1. Equity exposures are not risk weighted at Level 2. 2. Remuneration disclosure is an annual reporting requirement under APS330. |
| 107 APPENDIX VII | EXCHANGE RATES Exchange rates The following exchange rates were used in the Westpac Pillar 3 report, and reflect spot rates for the period end. 30 Sept 31 March 30 Sept $m 2023 2023 2022 USD 0.6469 0.6711 0.6491 GBP 0.5285 0.5418 0.5841 NZD 1.0741 1.0680 1.1355 EUR 0.6110 0.6158 0.6620 |
| 108 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT GLOSSARY Term Description Actual losses Represent direct write-offs and write-offs from provisions after adjusting for recoveries. Additional Tier 1 capital Comprises high quality components of capital that provide a permanent and unrestricted commitment of funds that are freely available to absorb losses but rank behind claims of depositors and other more senior creditors. They also provide for fully discretionary capital distributions. Alternative Liquid Assets (ALA) Assets that qualify for inclusion in the numerator of the LCR in jurisdictions where there is insufficient supply of HQLA. Assets intended to be securitised Represents securitisation activity from the end of the reporting period to the disclosure date of this report. Australian accounting standards (AAS) A set of Australian reporting standards and interpretations issued by the Australian Accounting Standards Board. Australian and New Zealand standard industrial classification (ANZSIC) A code used by the Australian Bureau of Statistics and Statistics New Zealand for classifying businesses. Authorised deposit-taking institution (ADI) ADIs are corporations that are authorised under the Banking Act 1959 to carry on banking business in Australia. Banking book The banking book includes all securities that are not actively traded by Westpac. Collectively assessed provisions (CAPs) Collectively assessed provisions for expected credit loss under AASB 9 represent the Expected Credit Loss (ECL) which is collectively assessed in pools of similar assets with similar risk characteristics. This incorporates forward-looking information and does not require an actual loss event to have occurred for an impairment provision to be recognised. Committed Liquidity Facility (CLF) Facility established with the RBA to cover the shortfall in Australian dollars between the ADI’s holding of HQLA and net cash outflows. The CLF is an ALA for the Group’s LCR calculation. Common equity Tier 1 (CET1) capital The highest form of capital. The key components of common equity are shares, retained earnings and undistributed current year earnings. Credit valuation adjustment (CVA) risk Refer to mark-to-market related credit risk. Default Pre – 1 January 2023: A customer default is deemed to have occurred when Westpac considers that either or both of the following events have taken place: • the customer is unlikely to pay its credit obligations to its financiers in full, without recourse by any of them to actions such as realising security (where held); and • the customer is past due 90 or more calendar days on any material credit obligation to its financiers. Overdrafts will be considered past due once the customer has breached an advised limit, or been advised of a limit smaller than the current outstandings. From 1 January 2023: Refer to Non-Performing Exposures definition Defaulted not impaired Pre – 1 January 2023: Includes facilities where: • contractual payments of interest and/or principal are 90 or more calendar days overdue, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days (including accounts for customers who have been granted hardship assistance); or • an order has been sought for the customer’s bankruptcy or similar legal action has been instituted, which may avoid or delay repayment of its credit obligations; and • the estimated net realisable value of assets/security to which Westpac has recourse is sufficient to cover repayment of all principal and interest, or where there are otherwise reasonable grounds to expect payment in full and interest is being taken to profit on an accrual basis. These facilities, while in default, are not treated as impaired for accounting purposes. From 1 January 2023: Equivalent to Non-Performing Exposures that have not been impaired for accounting purposes. Double default rules Double default applies to exposures where a particular obligor’s exposure has been hedged by the purchase of credit protection from a counterparty and loss will only occur if both obligor and counterparty default. In this instance, capital can be reduced. Exposure at default (EAD) EAD is calculated at facility level and includes outstandings as well as the proportion of committed undrawn that is expected to be drawn in the event of a future default. Expected credit loss (ECL) Expected credit losses are a probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant time frame. They are determined by evaluating a range of possible outcomes and taking into account the time value of money, past events, current conditions and forecasts of future economic conditions. |
| 109 Term Description External credit assessment institution (ECAI) ECAI is an external institution recognised by APRA (directly or indirectly) to provide credit assessment in determining the risk-weights on financial institutions’ rated credit exposures (including securitisation exposures). Extended licensed entity (ELE) An extended licensed entity (ELE) comprises an ADI and any subsidiaries of the ADI that have been approved by APRA as being part of a single ‘stand-alone’ entity. Geography Geographic segmentation of exposures is based on the location of the office in which these items were booked. High-quality liquid assets (HQLA) Assets which meet APRA’s criteria for inclusion as HQLA in the numerator of the LCR. Individually assessed provisions (IAPs) Provisions raised for losses on loans that are known to be impaired and are assessed on an individual basis. The estimated losses on these impaired loans is based on expected future cash flows discounted to their present value and, as this discount unwinds, interest will be recognised in the income statement. Impaired exposures Includes exposures that have deteriorated to the point where full collection of interest and principal is in doubt, based on an assessment of the customer’s outlook, cashflow, and the net realisation of value of assets to which recourse is held: • facilities 90 days or more past due, and full recovery is in doubt: exposures where contractual payments are 90 or more days in arrears and the net realisable value of assets to which recourse is held may not be sufficient to allow full collection of interest and principal, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days; • non-accrual facilities: exposures with individually assessed impairment provisions held against them, excluding restructured loans; • restructured facilities: exposures where the original contractual terms have been formally modified to provide for concessions of interest or principal for reasons related to the financial difficulties of the customer; • other assets acquired through security enforcement (includes other real estate owned): includes the value of any other assets acquired as full or partial settlement of outstanding obligations through the enforcement of security arrangements; and • any other facilities where the full collection of interest and principal is in doubt. Industry Exposures to businesses, government and other financial institutions are classified into industry clusters based upon groups of related ANZSIC codes. Companies that operate in multiple industries are classified according to their primary industry. Consumer customers as classified as “retail” and not further broken down. Interest rate risk in the banking book (IRRBB) The risk of loss in earnings or economic value in the banking book as a consequence of movements in interest rates. Internal ratings-based approach (IRB & Advanced IRB) These approaches allow banks to use internal estimates of the risks of their loans as inputs into the determination of the amount of credit risk capital needed to support the organisation. In the Advanced IRB approach, banks must supply their own estimates for all three credit parameters – Probability of Default, Loss Given Default and Exposure at Default. Leverage ratio The leverage ratio is defined by APRA as Tier 1 capital divided by the “Exposure measure” and is expressed as a percentage. “Exposure measure” includes on-balance sheet exposures, derivatives exposures, securities financing transaction (SFT) exposures, and other off-balance sheet exposures. Liquidity coverage ratio (LCR) An APRA requirement to maintain an adequate level of unencumbered high quality liquid assets, to meet liquidity needs for a 30 calendar day period under an APRA-defined severe stress scenario. Absent a situation of financial stress, the value of the LCR must not be less than 100%. LCR is calculated as the percentage ratio of stock of HQLA, CLF and qualifying Reserve Bank of New Zealand securities over the total net cash out flows in a modelled 30 day defined stressed scenario. Loss given default (LGD) The LGD represents an estimate of the expected severity of a loss to Westpac should a customer default occur during a severe economic downturn. Westpac assigns LGD to each credit facility, assuming an event of default has occurred and taking into account a conservative estimate of the net realisable value of assets to which Westpac has recourse and over which it has security. LGDs also reflect the seniority of exposure in the customer’s capital and debt structure. Maturity The maturity date used is drawn from the contractual maturity date of the customer loans. Mark-to-market related credit risk The risk of mark-to-market losses related to deterioration in the credit quality of a derivative counterparty also referred to as credit valuation adjustment (CVA) risk. Net cash outflows Total expected cash outflows minus total expected cash inflows in the specified LCR stress scenario calculated in accordance with APRA’s liquidity standard. Net interest income at risk (NaR) BRiskC approved limit expressed as a defined basis point shock in interest rates over a one year risk horizon. Net Stable Funding Ratio (NSFR) The NSFR is defined as the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by APRA. The amount of ASF is the portion of an ADI’s capital and liabilities expected to be a reliable source of funds over a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets and off-balance sheet activities. ADI’s must maintain an NSFR of at least 100%. |
| 110 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT GLOSSARY Term Description Non-Performing exposures Credit default exposures, the initial recognition of which under APS220 occurs where either one, or both, of the following has happened: • Westpac considers that the borrower is unlikely to pay its credit obligations to Westpac in full, and without recourse to actions such as realising available security; • the borrower is 90 days or more past-due on a credit obligation to Westpac. Non-Performing Exposures – Impaired Exposures that meet the characteristics of Non-Performing exposures and Impaired exposures (see separate definitions) Off-balance sheet exposure Credit exposures arising from facilities that are not recorded on Westpac's balance sheet (under accounting methodology). Undrawn commitments and the expected future exposure calculated for Westpac's derivative products are included in off-balance sheet exposure. On balance sheet exposure Credit exposures arising from facilities that are recorded on Westpac's balance sheet (under accounting methodology). Potential future credit exposure (PFCE) The PFCE for each transaction is calculated by multiplying the effective notional principal amount by a credit conversion factor specified in APS112. Probability of default (PD) Probability of default is a through-the-cycle assessment of the likelihood of a customer defaulting on its financial obligations within one year. Resecuritisation A resecuritisation exposure is a securitisation exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation exposure. In addition, an exposure to one or more resecuritisation exposures is a resecuritisation exposure. Risks-not-in-VaR (RNIV) The RNIV framework is a component of APRA’s APS 116 internal model approach for market risk regulatory capital. Risk weighted assets (RWA) Assets (both on and off-balance sheet) are risk weighted according to each asset's inherent potential for default and what the likely losses would be in case of default. In the case of non-asset backed risks (i.e. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5. Securitisation purchased The purchase of third party securitisation exposure, for example residential mortgage backed securities. Securitisation retained Securitisation exposures arising through Westpac originated assets or generated by Westpac third party securitisation activity. Securities financing transactions (SFT) APRA defines SFTs as “transactions such as repurchase agreements, reverse repurchase agreements, and security lending and borrowing, and margin lending transactions, where the value of the transactions depends on the market valuation of securities and the transactions are typically subject to margin agreements.” Sponsor An ADI would generally be considered a sponsor if it, in fact or substance, manages or advises the securitisation program, places securities into the market, or provide liquidity and/or credit enhancements. Standard model The standard model for Market risk applies supervisory risk weights to trading positions. Stressed VaR (SVaR) Stressed VaR uses the approved VaR model but applies a period of significant market stress. Market risk capital is estimated by adding Stressed VaR to regular VaR. Substitution approach Substitutions refers to the rules governing the circumstances when capital can be reduced because an obligor’s exposure has been hedged by the purchase of credit protection from a counterparty and the counterparty’s PD is used in place of the obligors’ PD. Supervisory Formula Approach (SFA) The SFA applicable to unrated securitisation exposures dynamically looks at the type and performance of underlying asset pools funded by the securitisation exposure as well as the structural features of the transaction to determine capital requirements. Synthetic securitisation A securitisation whereby the credit risk, or part of the credit risk, of a pool is transferred to a third party which need not be an SPV. The transfer of credit risk can be undertaken through the use of funded (e.g. credit linked notes) or unfunded (e.g. credit default swaps) credit derivatives or guarantees. Tier 2 capital Includes other capital elements, which, to varying degrees, fall short of the quality of Tier 1 capital but still contribute to the overall strength of an entity as a gone concern capital. Trading book Trading book activity represents dealings that encompass book running and distribution activity. The types of market risk arising from trading activity include interest rate risk, foreign exchange risk, commodity risk, equity price risk, credit spread risk and volatility risk. Financial Markets and Treasury are responsible for managing market risk arising from Westpac’s trading activity. Value at risk (VaR) VaR is the potential loss in earnings from adverse market movements and is calculated over a one-day time horizon at a 99% confidence level using a minimum of one year of historical rate data. VaR takes account of all material market variables that may cause a change in the value of the trading portfolio and the banking book including interest rates, foreign exchange rates, price changes, volatility, and the correlation among these variables. |
| 111 Other Term Description AIRB Advanced Internal Rating Based Approach ALCO Asset & Liability Committee APRA Australian Prudential Regulatory Authority BAC Board Audit Committee BRemC Board Remuneration Committee BRiskC Board Risk Committee CCB Capital Conservation Buffer CCFs Credit conversion factors CCP Central counterparty CREDCO Westoac Group Credit Risk Committee CRG Customer Risk Grade CRM Credit risk mitigation CRO Chief Risk Officer DRE Derivative Risk Equivalent DRP Dividend reinvestment plan D-SIBs Domestic Systemically Important Banks EGL Embedded Gains or Losses ERBA External Rating Based Approach ESG Environmental, Social and Governance FIRB Foundation Interest-Ratings Based Approach FVOCI Fair value through other comprehensive income FX Foreign Exchange GMRA Global Master Repurchase Agreement G-SIB Global Systemically Important Banks IAA Internal Assessment Approach ICAAP Internal Capital Adequacy Assessment Process IPRE Income-Producing Real Estate ISDA International Swaps and Derivatives Association ITOC Investment Term of Capital LTVR Long Term Variable Reward MARCO Westpac Group Market Risk Committee NII Net Interest Income ORCR Westpac Group Operational Risk, Compliance and Resilience Committee RBA Reserve Bank of Australia RBNZ Reserve Bank of New Zealand RC Revaluation Committee RISKCO Westpac Group Executive Risk Committee ROC Westpac Group Remuneration Oversight Committee ROE Return on average ordinary equity S&P Standard & Poor’s SMA Standardised Measurement Approach STVR Short Term Variable Reward TSR Total Shareholder Return WNZL Westpac New Zealand Limited |
| 112 WESTPAC GROUP SEPTEMBER 2023 PILLAR 3 REPORT DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS The information contained in this report contains statements that constitute “forward-looking statements” within the meaning of section 21E of the U.S. Securities Exchange Act of 1934. Forward-looking statements are statements that are not historical facts. Forward-looking statements appear in a number of places in this report and include statements regarding Westpac’s intent, belief or current expectations with respect to its business and operations, macro and micro economic and market conditions, results of operations and financial condition, capital adequacy and risk management, including, without limitation, future loan loss provisions and financial support to certain borrowers, forecasted economic indicators and performance metric outcomes, indicative drivers, climate- and other sustainability- related statements, commitments, targets, projections and metrics, and other estimated and proxy data. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘indicative’, ‘risk’, ‘aim’, ‘outlook’, ‘forecast’, ‘f’cast’, ‘f’, ‘assumption’, ‘projection’, ‘target,’ goal’, ‘guidance’, ‘ambition’ or other similar words are used to identify forward-looking statements, or otherwise identify forward-looking statements. These forward-looking statements reflect Westpac’s current views on future events and are subject to change, certain known and unknown risks, uncertainties and assumptions and other factors which are, in many instances, beyond Westpac’s control (and the control of Westpac’s officers, employees, agents and advisors), and have been made based on management’s expectations or beliefs concerning future developments and their potential effect upon Westpac. Forward-looking statements may also be made, verbally or in writing, by members of Westpac’s management or Board in connection with this report. Such statements are subject to the same limitations, uncertainties, assumptions and disclaimers set out in this report. There can be no assurance that future developments or performance will align with Westpac’s expectations or that the effect of future developments on Westpac will be those anticipated. Actual results could differ materially from those we expect or which are expressed or implied in forward-looking statements, depending on various factors including, but not limited to, those described in the section titled ‘Risk factors’ under the section ‘Performance Review’ in Westpac’s 2023 Annual Report. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider such factors and other uncertainties and events. Except as required by law, Westpac assumes no obligation to revise or update any forward-looking statements in this report, whether from new information, future events, conditions or otherwise, after the date of this report. |
| WESTPAC GROUP Registered office Level 18, 275 Kent Street, Sydney NSW 2000 Australia Tel: +61 2 9155 7713 International payments Tel: +61 2 9155 7700 Website: westpac.com.au/westpacgroup Westpac Telephone – Consumer 132 032 Telephone – Business 132 142 From outside Australia: +61 2 9155 7700 Website: westpac.com.au St.George Bank St.George House 4-16 Montgomery Street Kogarah NSW 2217 Australia Mail: Locked Bag 1 Kogarah NSW 1485 Australia Tel: 13 33 30 website: stgeorge.com.au Bank of Melbourne 150 Collins Street Melbourne VIC 3000 Australia Tel: 13 22 66 From outside Australia: +61 3 8536 7870 Website: bankofmelbourne.com.au BankSA Level 8, 97 King William Street, Adelaide SA 5000 Australia Mail: GPO Box 399, Adelaide SA 5001 Australia Tel: 13 13 76 From outside Australia: +61 2 9155 7850 Website: banksa.com.au RAMS RAMS Financial Group Pty Ltd International Towers Tower 2, Level 19, 200 Barangaroo Avenue Barangaroo NSW 2000 Australia Mail: GPO Box 4008, Sydney NSW 2001 Australia Tel: +61 2 8218 7000 Email: communications@rams.com.au Website: rams.com.au BT Level 9, Tower Two, International Towers 200 Barangaroo Avenue Barangaroo NSW 2000 Mail: GPO Box 2861 Adelaide SA 5001 Phone Number: 1300 881 716 From outside Australia: +61 2 9155 4029 Email: support@panorama.com.au Website: bt.com.au Westpac Institutional Bank Tel: 132 032 Website: westpac.com.au Institutional Bank Locations People’s Republic of China – Beijing – Shanghai Republic of Singapore – Singapore United States of America – New York United Kingdom – London Westpac PNG Level 5, Harbourside West Building Stanley Esplanade PO Box 706, Port Moresby, NCD, Papua New Guinea Tel: +675 322 0511 Email: westpacpngcommunication@westpac.com.au Website: westpac.com.pg Westpac Fiji Level 1, Westpac House 1 Thomson Street Suva, Fiji Tel: +67 9 132 032 From overseas: (679) 321 7800 Email: westpacfiji@westpac.com.au Westpac NZ Limited Westpac On Takutai Square 16 Takutai Square Auckland 1010, New Zealand Tel: +64 9 912 8000 Email: customer_support@westpac.co.nz Website: westpac.co.nz Global locations See our website at westpac.com.au for the contact details of our global locations. Share Registrar Link Market Services Limited 680 George Street Sydney NSW 2000 Australia Mail: Locked Bag A6015, Sydney South NSW 1235 Tel: 1800 804 255 Facsimile: +61 2 9287 0303 Email: westpac@linkmarketservices.com.au Website: linkmarketservices.com.au Westpac Group sustainability Email: sustainability@westpac.com.au For further information on Westpac Group’s sustainability approach, policies and performance please visit westpac.com.au/sustainability If you have feedback or a complaint related to sustainability, please visit westpac.com.au/contact-us/feedback-complaints/ CONTACT US |
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