Westpac Group Pillar 3 Report March 2013 - Iguana IR Sites

PILLAR 3 REPORT
APPENDIX II - 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. There
are two changes to the calculation from 1 January 2013. The deferred tax assets associated with certain
provisions are no longer required to be considered when calculating the deduction for regulatory expected loss;
and the capital deduction is 100% from common equity Tier 1, previously it was 50% deducted from Tier 1 capital
and 50% deducted from Tier 2 capital.
31 March 30 September 31 March
$m 2013 2012 2012
Provisions associated with eligible portfolios
Total provisions for impairment charges 4,188 4,241 4,391
plus General reserve for credit losses adjustment (net of DTA) 83 131 119
plus partial w rite-offs 622 706 699
less ineligible provisions 1 (128) (150) (152)
less certain deferred tax assets - (708) (731)
Total eligible provisions 4,765 4,220 4,326
Regulatory expected losses 2 5,617 5,758 5,944
Capital deduction for regulatory expected loss (852) (1,538) (1,618)
Deduction from capital as follows:
Tier 1 (852) (769) (809)
Tier 2 - (769) (809)
1 Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible. The comparison between regulatory
expected loss and eligible provisions is performed separately for defaulted and non-defaulted exposures. Partial write-offs are included as eligible
provisions under APRA standards.
2 Regulatory expected loss is calculated for portfolios subject to the Basel advanced IRB approach to credit risk and for specialised lending.
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