Westpac Group Pillar 3 Report March 2013 - Iguana IR Sites

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 the most 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 Advanced Measurement Approach for operational
risk.
In accordance with APS330 Capital Adequacy: Public Disclosure of Prudential Information, financial institutions
that have received this 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.
The Structure of Westpac’s Pillar 3 Report as at 31 March 2013
This report describes Westpac’s risk management practices and presents the prudential assessment of
Westpac’s 1 capital adequacy as at 31 March 2013. The sections are arranged as follows:
‘Risk Appetite and Risk Types’ defines the risks that Westpac manages;
‘Controlling and Managing Risk’ outlines the responsibilities of the Board of Directors of Westpac and Executive
risk management committees;
‘Group Structure’ defines the bases of measurement adopted by APRA and describes the principles of
consolidation used for the purposes of determining Westpac’s capital adequacy;
‘Capital Overview’ describes Westpac’s capital management strategy and presents the capital adequacy ratios
for the Westpac Group;
‘Credit Risk Management’ describes Westpac’s approach to managing credit risk;
‘Credit Risk Exposures’ tabulates Westpac’s credit risk exposures, including impaired and past due loans and
loan impairment provisions;
‘Credit Risk Mitigation’ describes how Westpac reduces its credit risk by using collateral, guarantees or credit
derivatives;
‘Counterparty Credit Risk’ describes Westpac’s exposure to credit risk arising from its management of
derivatives and securities financing transactions;
‘Securitisation’ explains how Westpac participates in the securitisation market;
‘Market Risk’ describes Westpac’s approach to managing market risk;
‘Operational Risk’ describes Westpac’s operational risk management framework;
‘Equity Risk’ describes Westpac’s equity positions 2 ;
‘Interest Rate Risk in the Banking Book’ describes Westpac’s approach to managing the structural interest rate
risk incurred in its banking book; and
‘Liquidity Risk’ describes Westpac’s approach to managing liquidity risk.
A cross-reference between the quantitative disclosures in this report and the quantitative disclosures required by
Attachment A of APS330 is provided in Appendix I on page 77.
1 Westpac also takes risk in subsidiaries that are outside the scope of the Level 2 regulatory consolidation of the Westpac Group and this risk is not
described in this report.
2 Since Basel III requires equity investments to be deducted from capital, a table detailing investments by regulatory risk weight is no longer required.
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