Westpac Group Pillar 3 Report March 2013 - Iguana IR Sites

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PILLAR 3 REPORT GROUP STRUCTURE Westpac seeks to ensure that it is adequately capitalised at all times, both on a stand-alone and Group basis. APRA applies a tiered approach to measuring Westpac’s capital adequacy 1 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; and Level 3, the conglomerate group at the widest level. Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of Westpac’s financial strength on a Level 2 basis 2 . The Westpac Group The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory consolidation. Westpac Banking Corporation Westpac Level 1 subsidiaries Westpac New Zealand Ltd Other Westpac Level 2 subsidiaries Regulatory non-consolidated subsidiaries Level 1 Consolidation Level 2 Consolidation Level 3 Consolidation Accounting consolidation 3 The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (including special purpose 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. Control exists when the parent entity has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. 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. With the exception of securitisation special purpose entities, equity investments in subsidiary entities excluded from the consolidation at Level 2 are deducted from capital. 1 APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy of an ADI. 2 Impaired Asset and Provisions held in level 3 entities are excluded from the tables in this report. 3 Refer to Note 1 of Westpac’s 2012 Annual Report for further details. 12
PILLAR 3 REPORT GROUP STRUCTURE Westpac New Zealand Limited Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity 1 , is a registered bank incorporated in New Zealand and regulated by the Reserve Bank of New Zealand. WNZL uses the Advanced IRB approach for credit risk and the Advanced Measurement Approach for operational risk. For the purposes of determining Westpac’s capital adequacy, Westpac New Zealand Limited is consolidated at Level 2. Restrictions and major impediments on the transfer of funds or regulatory capital within the Group Minimum capital (‘thin capitalisation’) rules Tax legislation in most jurisdictions in which the Group operates (including Australia, New Zealand and the United Kingdom) 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 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 Entities 2 . Westpac has an internal limit structure and approval process governing credit exposures to related entities. This 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 Certain subsidiary banking and insurance 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 limits at all times. There are no capital deficiencies in subsidiary entities excluded from the regulatory consolidation at Level 2. 1 Other subsidiary banking entities in the Group include Westpac Bank of Tonga, Westpac Bank-PNG-Limited, Westpac Bank Samoa Limited and Westpac Europe Limited. 2 For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent ‘related entities’. Prudential limits apply to intra-group exposures between the ELE and related entities, both on an individual and aggregate basis. 13
Page 1 and 2: WESTPAC GROUP PILLAR 3 REPORT MARCH
Page 3 and 4: PILLAR 3 REPORT EXECUTIVE SUMMARY B
Page 5 and 6: PILLAR 3 REPORT INTRODUCTION Westpa
Page 7 and 8: PILLAR 3 REPORT CONTROLLING AND MAN
Page 9 and 10: PILLAR 3 REPORT CONTROLLING AND MAN
Page 11: PILLAR 3 REPORT CONTROLLING AND MAN
Page 15 and 16: PILLAR 3 REPORT CAPITAL OVERVIEW Ca
Page 17 and 18: PILLAR 3 REPORT CAPITAL OVERVIEW 12
Page 19 and 20: PILLAR 3 REPORT CREDIT RISK MANAGEM
Page 25 and 26: PILLAR 3 REPORT CREDIT RISK EXPOSUR
Page 51 and 52: PILLAR 3 REPORT CREDIT RISK MITIGAT
Page 53 and 54: PILLAR 3 REPORT COUNTERPARTY CREDIT
Page 55 and 56: PILLAR 3 REPORT SECURITISATION A se
Page 57 and 58: PILLAR 3 REPORT SECURITISATION Cons
Page 59 and 60: PILLAR 3 REPORT SECURITISATION Bank
Page 61 and 62: PILLAR 3 REPORT SECURITISATION Bank
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PILLAR 3 REPORT SECURITISATION Trad
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PILLAR 3 REPORT SECURITISATION Trad
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PILLAR 3 REPORT MARKET RISK Risk mi
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PILLAR 3 REPORT MARKET RISK Back-te
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PILLAR 3 REPORT OPERATIONAL RISK We
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PILLAR 3 REPORT EQUITY RISK Book va
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PILLAR 3 REPORT INTEREST RATE RISK
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PILLAR 3 REPORT APPENDIX I - APS330
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PILLAR 3 REPORT APPENDIX II - REGUL
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PILLAR 3 REPORT APPENDIX III - CAPI
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PILLAR 3 REPORT APPENDIX IV - REGUL
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PILLAR 3 REPORT APPENDIX IV - REGUL
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PILLAR 3 REPORT GLOSSARY Term Actua
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PILLAR 3 REPORT GLOSSARY Internal a
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PILLAR 3 REPORT GLOSSARY Trading bo
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Westpac Group Pillar 3 Report March 2013 - Iguana IR Sites

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