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Westpac Banking Corp 6-K, filed May 3, 2021

Westpac Banking Corp (WEBNF)

6-K 2021-05-03 For: 2021-05-03
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Added on July 04, 2026

About this 6-K

Westpac Banking Corp filed this 6-K on May 3, 2021.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

May3, 2021

CommissionFile Number 1-10167

WESTPAC BANKING CORPORATION

(Translation of registrant’s name into English)

275 KENT STREET, SYDNEY, NEW SOUTH WALES 2000, AUSTRALIA

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports

under cover of Form 20-F or Form 40-F.

Form 20-F       ____x____                      Form 40-F        ________

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Incorporationby Reference

The information contained in Exhibit 1 to this Report on Form 6-K shall be incorporated by reference in the prospectuses relating to the Registrant’s securities contained in the Registrant’s Registration Statements on Form F-3 (File Nos. 333-228295 and 333-228294), as such prospectuses may be amended or supplemented from time to time.

Indexto Exhibits

Exhibit<br><br> No. Description
1 Westpac Group March 2021 Pillar 3 Report

Disclosureregarding forward-looking statements

The information contained in this Report on Form 6-K 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 about matters that are not historical facts. Forward-looking statements appear in a number of places in this Report and include statements regarding our intent, belief or current expectations with respect to our business and operations, macro and micro economic and market conditions, results of operations and financial condition.

We use words such as ‘will’, ‘may’, ‘expect’, ‘indicative’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘aim’, ‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’ or other similar words to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations or that the effect of future developments on us will be those anticipated. Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could differ materially from the expectations described in this Report. Factors that may impact on the forward-looking statements made include, but are not limited to, those described in the section entitled ‘Risk factors’ in Westpac’s 2020 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission, as well as the ongoing impact of COVID-19. When relying on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this Report, whether as a result of new information, future events or otherwise, after the date of this Report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTPAC<br> BANKING CORPORATION
(Registrant)
Date: May<br> 3, 2021 By: /s/<br> Yvette Adiguzel
Yvette<br> Adiguzel
Tier<br> One Attorney

Exhibit 1

Pillar<br> 3 report<br><br> <br>Table<br> of contents
Structure<br> of Pillar 3 report
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Executive summary 3
Introduction 6
Risk appetite<br> and risk types 7
Controlling<br> and managing risk 8
Group structure 15
Capital overview 17
Leverage<br> ratio 22
Credit risk<br> management 24
Credit risk<br> exposures 34
Credit risk<br> mitigation 58
Counterparty<br> credit risk 60
Securitisation 63
Market risk 73
Interest<br> rate risk in the banking book 77
Operational<br> risk 79
Equity risk 81
Funding and<br> liquidity risk management 83
Liquidity<br> coverage ratio 84
Net stable<br> funding ratio 85
Appendices
Appendix<br> I – Regulatory capital reconciliation 87
Appendix<br> II – Entities included in regulatory consolidation 93
Appendix<br> III – Level 3 entities’ assets and liabilities 96
Appendix<br> IV – Regulatory expected loss 97
Appendix<br> V – APS330 quantitative requirements 98
Glossary 101
Disclosure<br> regarding forward-looking statements 106

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.

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.

2 Westpac Group March 2021 Pillar 3 report
Pillar<br> 3 report<br><br> <br>Executive<br> summary
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Key capital ratios

31 March 2021 30 September 2020 31 March 2020
Level 2 Regulatory capital structure
Common<br> equity Tier 1 capital after deductions $m 52,932 48,733 47,982
Risk<br> weighted assets $m 428,899 437,905 443,905
Common<br> equity Tier 1 capital ratio % 12.34 11.13 10.81
Additional<br> Tier 1 capital ratio % 2.21 2.10 2.13
Tier<br> 1 capital ratio % 14.55 13.23 12.94
Tier<br> 2 capital % 3.88 3.15 3.35
Total<br> regulatory capital ratio % 18.43 16.38 16.29
APRA<br> leverage ratio % 6.27 5.78 5.66
Level 1 Regulatory capital structure
Common<br> equity Tier 1 capital after deductions $m 53,313 49,453 48,482
Risk<br> weighted assets $m 424,656 433,727 437,137
Level<br> 1 Common equity Tier 1 capital ratio % 12.55 11.40 11.09

Common equity Tier 1 capital ratio movement for FirstHalf 2021 (basis points)

Westpac’s Common Equity Tier 1 (CET1) capital ratio was 12.34% at 31 March 2021, 121 basis points higher than 30 September 2020. Key movements in the CET1 capital ratio over the half were:

• First<br> Half 2021 cash earnings of $3,537 million (82 basis point increase);
• A<br> decline in Risk Weighted Assets (RWA) (20 basis point increase) mostly from a decrease in<br> credit risk RWA from a reduction in lending and an improvement in credit metrics;
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• Capital<br> deductions and other capital movements (12 basis point increase) from lower deferred tax<br> assets and from higher other comprehensive income from a revaluation of debt securities.<br> This was partly offset by higher earnings held in entities that are not consolidated for<br> regulatory purposes which are deducted from capital;
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• Foreign<br> currency impacts from the appreciation of the A$ against the US$ and NZ$ (1 basis point decrease)^1^;<br> and
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• An<br> 8 basis points increase from the sale of Westpac’s stake in Zip Co Limited.
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Payment of Westpac’s 2020 final dividend had no net impact on capital as the dividend reinvestment plan was fully underwritten. On 18 December 2020 Westpac issued 56.9 million new ordinary shares (Shares) ($1.12 billion) comprising 20.2 million Shares ($401 million) to participants in the dividend reinvestment plan (approximately 36% participation rate) and 36.7 million Shares ($719 million) to the underwriter.

^1^ Reflecting the net impact of movements in the foreign<br> currency translation reserve and RWA
Westpac<br> Group March 2021 Pillar 3 report 3
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Pillar<br> 3 report<br><br> <br>Executive<br> summary
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Risk Weighted Assets (RWA)

$m 31 March 2021 30 September 2020 31 March 2020
Risk weighted assets at Level 2
Credit<br> risk 347,127 359,389 369,142
Market<br> risk 9,490 8,761 8,396
Operational<br> risk 54,090 54,090 54,093
Interest<br> rate risk in the banking book 11,998 9,124 5,305
Other 6,194 6,541 6,969
Total<br> RWA 428,899 437,905 443,905
Total<br> Exposure at Default 1,076,503 1,062,238 1,089,104

Total RWA decreased $9.0 billion or 2.1% over the half from lower credit risk RWA partially offset by an increase in non-credit RWA.

The $12.3 billion decline in credit risk RWA included:

• A<br> $1.6 billion decrease from lower lending, mostly from the further reduction in Trade Finance<br> in Asia, as we consolidated our international operations along with lower personal, auto<br> and business lending. This was partially offset by an increase in residential mortgage exposure<br> over the half;
• A<br> $4.4 billion decrease from improved credit metrics driven by lower stressed assets, mainly<br> across small business and corporate lending;
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• A<br> $1.6 billion reduction in the RWA overlay for corporate, business and specialised lending.<br> This overlay balance is currently $0.4 billion and was established in June 2020 to take account<br> of facilities where reviews had not been completed. The overlay will be reassessed as customer<br> reviews are completed;
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• A<br> methodology change within business lending which decreased RWA by $1.0 billion;
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• Foreign<br> currency translation impacts which decreased RWA by $1.4 billion mostly from the appreciation<br> of the A$ against the US$ and NZ$; and
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• A<br> decrease in credit RWA associated with derivative exposures (counterparty credit risk and<br> mark-to-market related credit risk) of $2.3 billion mainly due to market and collateral movements.
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At 31 March 2021 Westpac applied a floor of 23.8% to its mortgage risk weights in response to the temporary positive effects of COVID-19 stimulus and support measures on customer account behaviours. The floor is consistent with the mortgage risk weight at 30 September 2020 and has resulted in a $3.7 billion increase in mortgage RWA.

Non-credit risk RWA increased by $3.3 billion mainly due to a $2.9 billion increase in Interest Rate Risk in the Banking Book (IRRBB). IRRBB has increased as the embedded gain balance has declined over the period as historical interest rate hedges that were entered into at higher interest rates have matured.

Additional Tier 1 and Tier 2 Capital movementsfor first half 2021

On 4 December 2020, Westpac issued $1.72 billion of Additional Tier 1 capital (Westpac Capital Notes 7), of which approximately $0.87 billion comprised reinvestment by the holders of Westpac Capital Notes 3 (WCN 3). On 22 March 2021, Westpac redeemed approximately $0.46 billion WCN 3 that remained on issue. The net impact was an increase in Tier 1 capital of approximately 9 basis points.

During the half, Westpac issued US$2.5 billion and A$1.25 billion of Tier 2 capital. Westpac also redeemed A$0.7 billion of Tier 2 capital instruments. The net impact was an increase in the total regulatory capital ratio of approximately 90 basis points. These issues will assist to meet APRA’s increased total capital requirements that must be achieved by 1 January 2024.

Exposure at Default

Exposure at default (EAD) increased $14.3 billion over the half, primarily due to an increase in exposure to sovereigns and residential mortgages. This was partly offset by further reduction in Trade Finance in Asia, as we consolidated our international operations along with lower personal, auto and business lending.

Leverage Ratio

The leverage ratio represents the amount of Tier 1 capital relative to exposure^1^. At 31 March 2021, Westpac’s leverage ratio was 6.27%, up 49 basis points since 30 September 2020.

^1^ As defined under Attachment D of APS110: Capital Adequacy.
4 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report<br><br> <br>Executive<br> summary
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Liquidity Coverage Ratio (LCR)

Westpac’s average LCR for the quarter ending 31 March 2021 was 124% (quarter ending 30 September 2020: 151%)^1, 2^.

Net Stable Funding Ratio (NSFR)

Westpac had an NSFR of 122.5%^3^ as at 31 March 2021 (31 December 2020: 122.3%).

^1^ Calculated as a simple average of the daily observations over the relevant quarter.
^2^ Effective 1 January 2021, the Group is required<br> by APRA to increase the value of its net cash outflows by 10% for the purpose of calculating<br> LCR. As of 31 March 2021, the average impact over the quarter to the LCR is a reduction by<br> 12.4 percentage points.
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^3^ Calculated as total<br> available stable funding divided by total required stable funding as at end of the quarter.
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Westpac<br> Group March 2021 Pillar 3 report 5
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Pillar<br> 3 report<br><br> <br>Introduction
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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 Advanced Measurement Approach (AMA) for operational risk.

In accordance with APS330 Public Disclosure, 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.

This report describes Westpac’s risk management practices and presents the prudential assessment of Westpac’s capital adequacy as at 31 March 2021.

In addition to this report, the regulatory disclosures section of the Westpac website1 contains the reporting requirements for:

• Capital<br> instruments under Attachment B of APS330; and
• The<br> identification of potential Global-Systemically Important Banks (G-SIB) under Attachment<br> H of APS330 (disclosed annually).
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Capital instruments disclosures are updated when:

• A<br> new capital instrument is issued that will form part of regulatory capital; or
• A<br> capital instrument is redeemed, converted into CET1 capital, written off, or its terms and<br> conditions are changed.
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^1^ http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/
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6 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report<br><br> <br>Risk<br> appetite and risk types
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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 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 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<br> culture – the risk that our culture does not promote and reinforce behavioural expectations<br> or structures to identify, understand, discuss and act on risks. This leads to ineffective<br> risk management, poor risk awareness, risk-taking outside of risk appetite that is tolerated<br> and a culture where key learnings are not integrated into Group-wide and customer outcomes,<br> impeding continuous improvement;
• strategic<br> risk – the risk that Westpac makes incomplete strategic choices, does not implement<br> its strategies successfully, or does not respond effectively to changes in the operating<br> environment;
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• capital<br> adequacy risk – the risk that Westpac has an inadequate level or composition of capital<br> to support its normal business activities and to meet its regulatory capital requirements<br> under normal operating environments or stressed conditions;
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• funding<br> and liquidity risk – the risk that Westpac cannot meet its payment obligations or that<br> it does not have the appropriate amount, tenor and composition of funding and liquidity to<br> support its assets;
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• credit<br> risk – the risk of financial loss where a customer or counterparty fails to meet their<br> financial obligations to Westpac;
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• market<br> risk – the risk of an adverse impact on earnings resulting from changes in the value<br> of Westpac’s positions as a result of a change in financial market factors, such as<br> foreign exchange rates, interest rates, commodity prices and equity prices. This includes<br> interest rate risk in the banking book - the risk to interest income from a mismatch between<br> the duration of assets and liabilities that arises in the normal course of business activities;
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• operational<br> risk – the risk of loss resulting from inadequate or failed internal processes, people<br> and systems or from external events. The definition excludes strategic risk. While legal<br> risk and regulatory risk arise through inadequate or failed processes, people and systems<br> or from external events, these are reflected primarily in compliance and conduct risk;
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• cyber<br> risk – the risk that Westpac or its third parties’ data or technology are inappropriately<br> accessed, manipulated or damaged from cybersecurity threats or vulnerabilities;
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• compliance<br> and conduct risk – the risk of failing to abide by compliance obligations required<br> of us or otherwise failing to have behaviours and practices that deliver suitable, fair and<br> clear outcomes for our customers and that support market integrity;
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• reputational<br> and sustainability risk − the risk that an action, inaction, transaction, investment<br> or event will reduce trust in Westpac’s integrity and competence by clients, counterparties,<br> investors regulators, employees or the public; and
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• financial<br> crime risk – the risk that Westpac fails to prevent financial crime and comply with<br> applicable global financial crime regulatory obligations.
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Westpac<br> Group March 2021 Pillar 3 report 7
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Pillar<br> 3 report<br><br> <br>Controlling<br> and managing risk
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We have adopted and continue to embed a Three Lines of Defence model to aid in end-to-end management of risk, within which all employees play an active role. We have put in place a risk management framework that seeks to:

• deliver<br> suitable, fair and clear outcomes for our customers that support market integrity;
• protect<br> Westpac’s depositors, policyholders and investors by maintaining a balance sheet with<br> sound credit quality and buffers over regulatory minimums; and
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• meet<br> our regulatory and statutory obligations.
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The Board is responsible for approving Westpac’s overall Risk Management Framework for managing financial and non-financial risk, including the Westpac Group Risk Management Strategy and the Westpac Group Risk Appetite Statement and for monitoring the effectiveness of risk management by Westpac.

The Board has delegated to the Board Risk Committee responsibility to: establish a view of the Group’s current and future risk position relative to its risk appetite and capital strength; review and approve frameworks and policies for managing risk; and review and, where appropriate, approve risks beyond the approval discretion provided to management.

In June 2020, the Board Legal, Regulatory & Compliance Committee was established as a sub-committee of the Board Risk Committee to assist with overseeing financial crime risk, material litigation and regulatory investigations, customer remediation activities and customer complaints, compliance and conduct risk and material legal and regulatory change relevant to the Group.

Risk management governance structure as at 31 March 2021

Board • approves<br> our overall risk management framework – the Westpac Group Risk Management Framework,<br> the Westpac Group Risk Management Strategy and the Westpac Group Risk Appetite Statement<br> and monitors the effectiveness of risk management by Westpac; and
• makes<br> an annual declaration to APRA on risk management in accordance with regulatory requirements.
Board Risk Committee (BRiskC) • assists<br> the Board to consider and approve Westpac’s overall risk framework for managing financial<br> and non-financial risks;
• reviews<br> and oversees the risk culture across Westpac;
• reviews<br> and recommends the Westpac Group Risk Management Framework, the Westpac Group Risk Management<br> Strategy and the Westpac Group Risk Appetite Statement to the Board for approval on an annual<br> basis;
• reviews<br> and monitors Westpac’s risk profile and controls for consistency with the Westpac Group Risk Appetite Statement and assists<br> the Board to set the risk appetite for material risks;
• reviews<br> and approves material frameworks, policies and processes for managing risk;
• oversees<br> and approves the Group’s Recovery Plan;
• reviews<br> and approves the limits and conditions that apply to credit risk approval authority delegated<br> to the CEO, CFO, CRO and any other officers of Westpac to whom the Board has delegated credit<br> approval authority;
• monitors<br> changes anticipated for the economic and business environment including consideration of<br> emerging risks, and other factors considered relevant to our risk profile and risk appetite;
• assists<br> the Board to make its annual declaration to APRA on risk management under APRA prudential<br> standard CPS220 Risk Management;
• reviews<br> and where appropriate approves risks beyond the approval discretion provided to management; and
• assists<br> the Board to oversee compliance management within Westpac.
8 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report

Controlling and managing risk

Risk management governancestructure (continued)

From<br> the perspective of specific types of risk, the Board Risk Committee’s role includes:
• credit risk –<br> reviewing and approving material policies and limits supporting the Westpac Group Credit Risk Management Framework, approving credit<br> provisioning, and monitoring the risk profile, performance and management of our credit portfolio;
• funding and liquidity risk<br> – reviewing and approving key policies and limits supporting the Westpac Group Liquidity Risk Management Framework including<br> our annual funding strategy, liquidity targets and limits and monitoring the liquidity position and requirements;
• capital adequacy risk –<br> reviewing and approving the Capital Adequacy Risk Management Framework along with supporting key policies. Oversee and approve the<br> Internal Capital Adequacy Assessment Process (ICAAP);
• market risk – reviewing<br> and approving key policies and limits supporting the Westpac Group Market Risk Management Framework and reviewing and monitoring<br> the market risk performance, exposures and risk positions;
• operational risk –<br> reviewing and approving key policies supporting the Westpac Group Operational Risk Management Framework, and monitoring the performance<br> of operational risk management and controls; and
• reputation and sustainability<br> risk – reviewing and approving the Westpac Group Reputation Risk and Sustainability Risk Management Frameworks, and monitoring<br> the associated management of these risks.
The<br> Board Risk Committee also:
• oversees and approves the<br> Internal Capital Adequacy Assessment Process and in doing so reviews and recommends the target capital ranges for regulatory capital<br> and reviews and monitors capital levels for consistency with Westpac’s risk appetite;
• oversees and approves Westpac’s<br> stress testing, including review and approval of the material scenarios adopted and monitors material stress testing results and<br> management responses;
• provides relevant periodic assurances and reports (as<br> appropriate) to the Board Audit Committee;
• reviews and approves other<br> risk management frameworks and/or the monitoring of performance under those frameworks (as appropriate);
• forms a view on Westpac’s<br> risk culture and the extent to which it supports the ability of Westpac to operate consistently within the Westpac Group’s<br> Risk Management Framework and the Westpac Group Risk Appetite Statement and oversees the identification of, and steps taken to address,<br> any desirable changes to risk culture and periodically reports to the Board;
• refers or recommends to the<br> Board and any other Board Committees (as appropriate) any matters that have come to the attention of the Board Risk Committee that<br> are relevant for the Board or the respective Board Committee; and
• in its capacity as the Westpac<br> Group’s US Risk Committee, oversees the key risks, risk management framework and policies of Westpac’s US operations.
Westpac<br> Group March 2021 Pillar 3 report 9
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Pillar 3 report

Controlling and managing risk

Riskmanagement governance structure (continued)
Board Legal, Regulatory and Compliance Committee (BLRCC) Assist<br> the Board Risk Committee as it oversees:
• material<br> legal and regulatory change relevant to Westpac;
• Westpac’s<br> management of:
○ material<br> litigation (including class actions) and regulatory investigations;
○ compliance;
○ conduct<br> risk;
○ financial<br> crime risk;
○ customer<br> remediation activities and customer complaints; and
○ such<br> other operational risk activities as are delegated to the Board Legal, Regulatory & Compliance Committee by the Board Risk Committee.
From the perspective of specific types of<br> risk, the BLRCC role includes:
• financial crime<br> risk – reviewing and approving the Financial Crime Risk Management Framework and key supporting policies and standards, including<br> receiving information regarding material breaches of Westpac’s Anti-Bribery and Corruption (ABC) Policy and monitoring Westpac’s<br> financial crime risk performance and controls; and
• compliance and<br> conduct risk - reviewing and approving Westpac’s Compliance and Conduct Risk Management Framework and key supporting policies<br> and standards, and reviewing and monitoring Westpac’s risk performance and controls.
Board Committees with a Risk Focus Board Audit Committee (BAC)
• oversees the<br> integrity of the financial statements, financial reporting systems, and the Group’s corporate reporting including the Group’s<br> financial reporting, and compliance with prudential regulatory reporting and professional accounting requirements and matters relating<br> to taxation risks.
Board Remuneration Committee (BRC)
• oversees remuneration<br> policies and practices of Westpac, in the context that these policies and practices reflect Westpac’s risk management framework,<br> including making recommendations to the Board for the reduction or lapsing of incentive-based equity grants to employees as a result<br> of risk or compliance failures.
Board Technology Committee (BTC)
• oversees the<br> implementation of Westpac’s technology and data strategy and oversees the implementation of programs within the Enterprise<br> Change Portfolio including monitoring the delivery of the major technology related transformation programs.
Executive Team Westpac Executive Team (ET)
• executes the<br> Board-approved strategy;
• delivers Westpac’s<br> various strategic and performance goals within the approved risk appetite;
• approves position<br> statements that guide Westpac’s response to sustainability issues; and
• monitors key<br> risks within each business unit, capital adequacy and Westpac’s reputation.
10 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report

Controlling and managing risk

Risk managementgovernance structure (continued)

Executive risk committees Westpac Group Executive Risk Committee (RISKCO)
• leads<br> the management and oversight of material risks across Westpac within the context of the risk appetite approved by the Board;
• oversees<br> the effectiveness of the Risk Management Framework and the execution of the Risk Management Strategy;
• monitors<br> and reviews Westpac’s risk profile for all identified material risks;
• shapes<br> and promotes a strong risk culture; and
• oversees<br> emerging risks and allocates responsibility for assessing impacts and implementing appropriate actions to address these;
Westpac Group Executive Technical Risk Committee
• reviews,<br> supports, approves and monitors risk class risk management frameworks and key supporting policies;
• monitors<br> the review of risk models, model risk and capital measurements and methodologies; and
• monitors<br> and reviews stress testing and scenario analysis; and
• supports<br> the Internal Capital Adequacy Assessment Process and Recovery Plan for approval by the Board Risk Committee.
Westpac Group Asset & Liability Committee (ALCO)
• leads<br> the optimisation of funding and liquidity risk-reward across Westpac;
• reviews<br> the level and quality of capital to ensure that it is commensurate with Westpac’s risk profile, business strategy and risk<br> appetite;
• oversees<br> the Liquidity Risk Management Framework and key policies;
• oversees<br> the funding and liquidity risk profile and balance sheet risk profile; and
• identifies<br> emerging funding and liquidity risks and appropriate actions to address these.
Westpac Group Credit Risk Committee (CREDCO)
• reviews<br> and oversees the Credit Risk Management Framework and key supporting policies;
• oversees<br> Westpac’s credit risk profile;
• oversees<br> the Climate Change Financial Risk Committee, which is chaired by the Group Chief Credit Officer and is responsible for the oversight<br> of climate-related credit risk, including the potential impact on credit exposures from climate change-related transition and physical<br> risks; and
• identifies<br> emerging credit risks, allocates responsibility for assessing impacts, and responds as appropriate.
Westpac Group Market Risk Committee (MARCO)
• reviews<br> and oversees the Market Risk Management Framework and key market risk management policies;
• reviews<br> policies and limits for managing traded and non-traded market risk; and
• reviews<br> and oversees the market risk, equity risk and insurance risk profile.
Westpac Group Operational and Compliance Risk Committee (OPCO)
• reviews<br> and oversees the Operational Risk Management Framework and the Compliance and Conduct Risk Management Framework, and key supporting<br> policies;
• oversees<br> Westpac’s operational risk and conduct and compliance risk profiles; and
• identifies<br> emerging operational, conduct and compliance risks and appropriate actions to address these.
Westpac<br> Group March 2021 Pillar 3 report 11
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Pillar 3 report

Controlling and managing risk

Risk managementgovernance structure (continued)

Westpac Group Remuneration Oversight Committee (ROC)
• supporting the CEO, BRC and<br> the Board by reviewing and approving remuneration frameworks, guidelines and short term variable reward plans underpinning the Board-approved<br> Westpac Group Remuneration Policy from a Human Resources, Risk (including Compliance), Finance and Legal perspective and in line<br> with external requirements;
• assisting the BRC and the<br> Board in fulfilling its responsibility to oversee remuneration policies and practices of Westpac in the context that these policies<br> and practices fairly and responsibly reward individuals having regard to customer and shareholder interests, long term financial<br> soundness and prudent risk management;
• recommending to the CEO for<br> recommendation to the BRC remuneration arrangements including remuneration review and remuneration adjustment outcomes for Responsible<br> Persons, risk and financial control employees, Material Risk Takers and other individuals whose activities may impact the financial<br> soundness of Westpac below the Group Executive level; and
• recommending to the CEO for<br> recommendation to the BRC the criteria and rationale for determining the total quantum of Westpac’s variable reward pool.
Prudential Reporting and Compliance Committee
• oversees from a Group-wide<br> perspective, Westpac’s compliance with prudential requirements and regulatory reporting;
• oversees the effective management<br> of prudential compliance breaches, incidents and issues including remediation actions; and
• monitors and reviews ongoing<br> prudential governance activities, including changes to prudential standards.
Reputation Risk Committee
• reviews issues with material<br> reputation risk that arise in the operations of Westpac’s business to mitigate reputation risk and detrimental customer impacts.
Westpac Group Financial Crime Risk and Compliance Committee
• oversees Anti-Money Laundering<br> and Counter-Terrorism Financing, Anti-Bribery and Corruption, Sanctions and Tax Transparency within the context of the risk appetite<br> approved by the Board;
• reviews and oversees the<br> Financial Crime Risk Management Framework, key supporting policies, programs and standards;
• monitors and oversees Westpac’s<br> financial crime risk profile; and
• identifies emerging financial<br> crime risks, and appropriate actions to address these.
12 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report

Controlling and managing risk

Risk managementgovernance structure (continued)

Risk function Risk Function
• promotes<br> a strong risk culture;
• owns<br> the design and content of the Risk Management Framework;
• defines<br> the structure and coverage of risk appetite;
• defines<br> the annual risk strategy to execute the Risk Management Framework ensuring that the management of risks is in alignment with risk<br> appetite and business strategy;
• establishes<br> risk policies, procedures and limits;
• measures<br> and reports on risk levels; and
• provides<br> oversight of and direction on the management of risks.
Independent internal review Group Audit
• reviews<br> the adequacy and effectiveness of management controls over risk.
Divisional business units and Functions Business Units and Functions
• responsible<br> for identifying, evaluating and managing the risks that they originate within approved risk appetite and policies; and
• establish<br> and maintain appropriate risk management and compliance controls, resources and self-assessment processes.
Westpac<br> Group March 2021 Pillar 3 report 13
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Controlling and managing risk

Rolesand responsibilities

Our Three Lines of Defence approach is designed on a functional basis and covers all employees within Westpac.

The1^st^ Line of Defence – Business: manages the risks they originate

The 1^st^ Line proactively identifies, evaluates, owns and manages the risks in their business/domain. It also seeks to ensure that business activities are within approved risk appetite and policies. This accountability cannot be abrogated. The 1^st^Line of defence is accountable for ‘self-certification’.

In managing its risk, the 1^st^ Line is required to establish and maintain appropriate governance structures, controls, resources and self-assessment processes, including issue identification, recording and escalation procedures.

The2^nd^ Line of Defence – Risk: provides oversight, insight and control of 1^st^ Line activities

The 2^nd^ Line sets frameworks, controls (including policies and limits), and standards for use across the Group. The 2^nd^Line can require remediation or cessation of activity where these are not adhered to. Their approach is intended to be risk-based and proportionate to 1^st^ Line activities.

The 2^nd^ Lines role is to review and challenge 1^st^ Line activities and decisions that may materially affect Westpac’s risk position, and independently evaluates the effectiveness of the 1^st^ Line’s controls, monitoring, compliance, and monitors progress towards mitigating risks. In addition, the 2^nd^ Line provides insight to the 1^st^ Line, assisting in developing, maintaining and enhancing the Business’ approach to risk management.

The 2^nd^ Line considers and reports the aggregated risk profile of the Group to facilitate end-to-end oversight of risk.

The3^rd^ Line of Defence – Audit: provides independent audit

Group Audit is Westpac’s internal 3rd Line assurance function that provides Board and Executives with independent and objective evaluation of the adequacy and effectiveness of the Group’s governance, risk management and internal controls.

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Group Structure

APRA applies a tiered approach to measuring Westpac’s capital adequacy1 by assessing financial strength at three levels:

• Level<br> 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved<br> by APRA as being part of a single ‘Extended Licensed Entity’ (ELE) for the purposes<br> of measuring capital adequacy;
• Level<br> 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except<br> those entities specifically excluded by APRA regulations. The head of the Level 2 group is<br> Westpac Banking Corporation; and
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• Level<br> 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities.
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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.

Accountingconsolidation^3^

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (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.

Groupentities 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<br> as manager, responsible entity, approved trustee, trustee or similar role in relation to<br> funds management;
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• non-financial<br> (commercial) operations; or
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• special<br> purpose entities to which assets have been transferred in accordance with the requirements<br> of APS120 Securitisation.
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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<br> Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing<br> the capital adequacy of an ADI.
^2^ Impaired<br> assets and provisions held in Level 3 entities are excluded from the tables in this report.
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^3^ Refer<br> to Note 31 of Westpac’s 2020 Annual Report for further details.
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Westpac<br> Group March 2021 Pillar 3 report 15
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Group structure

Subsidiarybanking entities

Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity, is a registered bank incorporated in New Zealand and regulated by the Reserve Bank of New Zealand (RBNZ). WNZL uses the Advanced IRB approach for credit risk and the AMA for operational risk. Other subsidiary banking entities in the Group include Westpac Europe Limited. For the purposes of determining Westpac’s capital adequacy subsidiary banking entities are consolidated at Level 2.

Restrictionsand major impediments on the transfer of funds or regulatory capital within the Group

Minimumcapital (‘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 to comply with these rules.

Taxcosts 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-groupexposure 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.

Prudentialregulation of subsidiary entities

Certain subsidiary banking, insurance 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. There are no capital deficiencies in subsidiary entities excluded from the regulatory consolidation at Level 2.

On 23 March 2021, the RBNZ issued two notices to WNZL under section 95 of the Reserve Bank of New Zealand Act 1989 requiring WNZL to supply two external reviews to the RBNZ. The reports are required to address concerns raised by the RBNZ around WNZL’s risk governance processes following various compliance issues reported over recent years. Those issues include non-compliance with the RBNZ’s liquidity, capital adequacy and outsourcing requirements (as previously reported in WNZL’s RBNZ disclosure statements) and IT outages. While work has been underway to address these areas for some time, more work is required to meet WNZL’s expectations and those of the regulator.

With effect from 31 March 2021, the RBNZ amended WNZL’s conditions of registration to apply an overlay to WNZL’s mismatch ratios. The overlay requires WNZL to discount the value of its liquid assets by approximately NZ$2.3 billion. This overlay will apply until the RBNZ is satisfied that:

• the<br> RBNZ’s concerns regarding liquidity risk controls have been resolved; and
• sufficient<br> progress has been made to address risk culture issues in WNZL’s Treasury and Market<br> and Liquidity Risk functions.
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WNZL is currently engaging with Westpac and the RBNZ in relation to potential experts to prepare the independent reports.

^1^ For<br> the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that<br> form part of the ELE, represent ‘related entities’. Prudential and internal limits<br> apply to intra-group exposures between the ELE and related entities, both on an individual<br> and aggregate basis.
16 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report

Capital overview

Capital Structure

This table shows Westpac’s capital resources under APS111 Capital Adequacy: Measurement of Capital.

31 March 30 September 31 March
m 2021 2020 2020
Common<br> equity Tier 1 capital
Paid<br> up ordinary capital 41,604 40,509 40,503
Treasury shares (660 ) (620 ) (619 )
Equity based<br> remuneration 1,731 1,661 1,645
Foreign currency<br> translation reserve (519 ) (309 ) 59
Accumulated<br> other comprehensive income 507 126 (190 )
Non-controlling<br> interests - other 49 57 61
Retained earnings 29,097 26,533 25,985
Less retained<br> earnings in life and general insurance, funds management and securitisation entities (1,680 ) (1,132 ) (1,326 )
Deferred<br> fees 230 214 229
Total<br> common equity Tier 1 capital 70,359 67,039 66,347
Deductions<br> from common equity Tier 1 capital
Goodwill (excluding<br> funds management entities) (8,529 ) (8,532 ) (8,673 )
Deferred tax<br> assets (2,260 ) (2,963 ) (2,610 )
Goodwill in<br> life and general insurance, funds management and securitisation entities (451 ) (535 ) (935 )
Capitalised<br> expenditure (1,749 ) (1,576 ) (1,656 )
Capitalised<br> software (2,049 ) (2,137 ) (2,029 )
Investments<br> in subsidiaries not consolidated for regulatory purposes (2,063 ) (1,941 ) (1,633 )
Regulatory<br> expected loss in excess of eligible provisions1 (93 ) (40 ) -
Defined benefit<br> superannuation fund surplus (69 ) (71 ) (80 )
Equity investments (162 ) (492 ) (327 )
Regulatory adjustments<br> to fair value positions (1 ) (18 ) (407 )
Other<br> Tier 1 deductions (1 ) (1 ) (15 )
Total<br> deductions from common equity Tier 1 capital (17,427 ) (18,306 ) (18,365 )
Total<br> common equity Tier 1 capital after deductions 52,932 48,733 47,982
Additional<br> Tier 1 capital
Basel<br> III complying instruments 9,493 9,206 9,473
Total<br> Additional Tier 1 capital 9,493 9,206 9,473
Deductions<br> from Additional Tier 1 capital
Holdings<br> of own and other financial institutions Additional Tier 1 capital instrument (25 ) - -
Total<br> deductions from Additional Tier 1 capital (25 ) - -
Net<br> Addititional Tier 1 regulatory capital 9,468 9,206 9,473
Net<br> Tier 1 regulatory capital 62,400 57,939 57,455
Tier 2<br> capital
Basel III complying<br> instruments 16,373 13,161 14,455
Basel III transitional<br> instruments 462 494 567
Eligible<br> general reserve for credit loss 161 397 79
Total<br> Tier 2 capital 16,996 14,052 15,101
Deductions<br> from Tier 2 capital
Investments<br> in subsidiaries not consolidated for regulatory purposes (140 ) (140 ) (140 )
Holdings<br> of own and other financial institutions Tier 2 capital instruments (199 ) (121 ) (102 )
Total<br> deductions from Tier 2 capital (339 ) (261 ) (242 )
Net<br> Tier 2 regulatory capital 16,657 13,791 14,859
Total<br> regulatory capital 79,057 71,730 72,314

All values are in US Dollars.

^1^ An<br> explanation of the relationship between this deduction, regulatory expected loss and provisions<br> for impairment charges is contained in Appendix IV.
Westpac<br> Group March 2021 Pillar 3 report 17
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Pillar 3 report

Capital overview

Capital managementstrategy

Westpac’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI. Westpac evaluates its approach to capital management through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which include:

• the<br> development of a capital management strategy, including consideration of regulatory minimums,<br> capital buffers and contingency plans;
• consideration<br> of both regulatory and economic capital requirements;
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• a<br> stress testing framework that challenges the capital measures, coverage and requirements<br> including the impact of adverse economic scenarios; and
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• consideration<br> of the perspectives of external stakeholders including rating agencies as well as equity<br> and debt investors.
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During the period of disruption caused by COVID-19, Westpac is operating with the following principles in relation to capital:

• prioritise<br> maintaining capital strength;
• retain<br> capital to absorb further downside on credit quality and acknowledge a high degree of uncertainty<br> regarding the length and depth of this stress;
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• allow<br> for capital flexibility to support lending to customers; and
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• in<br> line with APRA guidance, Westpac will seek to maintain a buffer above the regulatory requirement<br> including buffers (currently at least 8% for D-SIBs including Westpac).
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These principles take into consideration:

• current<br> regulatory capital minimums and the capital conservation buffer (CCB), which together are<br> the Total CET1 Requirement. In line with the above, the Total CET1 Requirement for Westpac<br> is at least 8.0%, based upon an industry minimum CET1 requirement of 4.5% plus a capital<br> buffer of at least 3.5% applicable to D- SIBs^1, 2^;
• stress<br> testing to calibrate an appropriate buffer against a downturn; and
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• quarterly<br> volatility of capital ratios due to the half yearly cycle of ordinary dividend payments.
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Westpac will revise its capital management preferred range once APRA’s review of the capital adequacy framework is finalised.

APRA announcementson capital

On 15 December 2020 APRA issued revised capital management guidance^3^. From 1 January 2021 APRA will no longer hold banks to a minimum level of earnings retention (previously 50% of net profit after tax in 2020). APRA has also stated that it expects banks to moderate dividend payout ratios, consider the use of dividend reinvestment plans (DRPs) and/or other capital management initiatives to offset the impact from dividends and conduct regular stress testing.

In addition, APRA has released further guidance on the implementation of Basel III reforms which will embed the “unquestionably strong” level of capital in the framework. On 8 December 2020 APRA outlined its proposals for changes to the capital framework including proposed changes to RWA effective from 1 January 2023^4^.

^1^ Noting<br> that APRA may apply higher CET1 requirements for an individual ADI.
^2^ If<br> an ADI’s CET1 ratio falls below the Total CET1 Requirement (at least 8%), they face<br> restrictions on the distribution of earnings, such as dividends, distribution payments on<br> AT1 capital instruments and discretionary staff bonuses.
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^3^ Letter<br> to all authorised deposit taking institutions and insurers – “Capital Management”<br> dated 15 December 2020.
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^4^ Discussion<br> paper: A more flexible and resilient capital framework for ADIs published 8 December 2020.
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18 Westpac Group March 2021 Pillar 3 report
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Capital overview

Westpac’scapital adequacy ratios

% 31<br> March 2021 30<br> September 2020 31<br> March 2020
The Westpac<br> Group at Level 2
Common<br> equity Tier 1 capital ratio 12.3 11.1 10.8
Additional<br> Tier 1 capital 2.2 2.1 2.1
Tier 1 capital<br> ratio 14.5 13.2 12.9
Tier<br> 2 capital 3.9 3.1 3.4
Total<br> regulatory capital ratio 18.4 16.4 16.3
The Westpac<br> Group at Level 1
Common equity<br> Tier 1 capital ratio 12.6 11.4 11.1
Additional<br> Tier 1 capital 2.2 2.1 2.2
Tier 1 capital<br> ratio 14.8 13.5 13.3
Tier<br> 2 capital 4.0 3.2 3.4
Total<br> regulatory capital ratio 18.8 16.7 16.7

WestpacNew Zealand Limited’s capital adequacy ratios

% 31<br> March 2021 30<br> September 2020 31<br> March 2020
Westpac New<br> Zealand Limited
Common<br> equity Tier 1 capital ratio 13.4 12.3 11.4
Additional<br> Tier 1 capital 2.8 2.7 2.7
Tier 1 capital<br> ratio 16.2 15.0 14.1
Tier 2 capital 2.0 2.1 1.8
Total<br> regulatory capital ratio 18.2 17.1 15.9
Westpac<br> Group March 2021 Pillar 3 report 19
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Capital overview

Capitalrequirements

This table shows risk weighted assets and associated capital requirements^1^ for each risk type included in the regulatory assessment of Westpac’s capital adequacy. Westpac’s approach to managing these risks, and more detailed disclosures on the prudential assessment of capital requirements, are presented in the following sections of this report.

31<br> March 2021 IRB Standardised Total<br> Risk Total<br> Capital
m Approach Approach^2^ Weighted<br> Assets Required^1^
Credit<br> risk
Corporate 66,086 849 66,935 5,355
Business<br> lending 34,061 774 34,835 2,787
Sovereign 2,355 1,081 3,436 275
Bank 5,708 132 5,840 467
Residential<br> mortgages 133,938 4,090 138,028 11,042
Australian<br> credit cards 4,279 - 4,279 342
Other<br> retail 9,266 779 10,045 804
Small<br> business 16,097 - 16,097 1,288
Specialised<br> lending 55,314 386 55,700 4,456
Securitisation 5,513 - 5,513 441
Mark-to-market<br> related credit risk3 - 6,419 6,419 514
Total 332,617 14,510 347,127 27,771
Market<br> risk 9,490 759
Operational<br> risk 54,090 4,327
Interest<br> rate risk in the banking book 11,998 960
Other<br> assets4 6,194 496
Total 428,899 34,313

All values are in US Dollars.

30 September 2020 IRB Standardised Total Risk Total Capital
m Approach Approach^2^ Weighted Assets Required^1^
Credit risk
Corporate 73,666 976 74,642 5,971
Business lending 36,777 880 37,657 3,013
Sovereign 2,376 1,216 3,592 287
Bank 5,640 144 5,784 463
Residential mortgages 130,787 4,431 135,218 10,818
Australian credit cards 4,405 - 4,405 352
Other retail 10,174 774 10,948 876
Small business 16,977 - 16,977 1,358
Specialised lending 57,019 432 57,451 4,596
Securitisation 5,413 - 5,413 433
Mark-to-market<br> related credit risk3 - 7,302 7,302 584
Total 343,234 16,155 359,389 28,751
Market risk 8,761 701
Operational risk 54,090 4,327
Interest rate risk in the banking book 9,124 730
Other<br> assets4 6,541 523
Total 437,905 35,032

All values are in US Dollars.

^1^ Total<br> capital required is calculated as 8% of total risk weighted assets.
^2^ Westpac’s<br> standardised risk weighted assets are categorised based on their equivalent IRB categories.
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^3^ Mark-to-market<br> related credit risk is measured under the standardised approach. It is also known as Credit<br> Valuation Adjustment (CVA) risk.
--- ---
^4^ Other<br> assets include cash items, unsettled transactions, fixed assets and other non-interest earning<br> assets.
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20 Westpac Group March 2021 Pillar 3 report
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Capital overview

31 March 2020 IRB Standardised Total Risk Total Capital
m Approach Approach^2^ Weighted Assets Required^1^
Credit risk
Corporate 78,288 1,087 79,375 6,350
Business lending 34,493 993 35,486 2,839
Sovereign 2,192 1,354 3,546 284
Bank 6,956 51 7,007 561
Residential mortgages 131,424 4,714 136,138 10,891
Australian credit cards 4,837 - 4,837 387
Other retail 11,594 805 12,399 992
Small business 16,812 - 16,812 1,345
Specialised lending 56,004 503 56,507 4,521
Securitisation 5,747 - 5,747 460
Mark-to-market<br> related credit risk3 - 11,289 11,289 903
Total 348,347 20,795 369,142 29,533
Market risk 8,396 672
Operational risk 54,093 4,327
Interest rate risk in the banking book 5,305 424
Other<br> assets4 6,969 558
Total 443,905 35,514

All values are in US Dollars.

^1^ Total<br> capital required is calculated as 8% of total risk weighted assets.
^2^ Westpac’s<br> standardised risk weighted assets are categorised based on their equivalent IRB categories.
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^3^ Mark-to-market<br> related credit risk is measured under the standardised approach. It is also known as Credit<br> Valuation Adjustment (CVA) risk.
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^4^ Other<br> assets include cash items, unsettled transactions, fixed assets and other non-interest earning<br> assets.
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Westpac<br> Group March 2021 Pillar 3 report 21
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Leverage ratio

Leverageratio

The following table summarises Westpac’s leverage ratio. This has been determined using APRA’s definition of the leverage ratio as specified in APS110 Capital Adequacy.

billion 31 March 2021 **** **** 31 December 2020 **** **** 30 September 2020 **** **** 30 June 2020 ****
Tier 1 Capital 62.4 61.0 57.9 57.9
Total Exposures 995.8 984.3 1,001.8 985.6
Leverage<br> ratio **** 6.3% **** **** **** 6.2% **** **** **** 5.8% **** **** **** 5.9% ****

All values are in US Dollars.

Leverageratio disclosure

m 31<br> March 2021
On-balance<br> sheet exposures
1 On-balance sheet items (excluding derivatives<br> and securities financing transactions (SFTs), but including collateral) 861,191
2 (Asset amounts deducted in determining Tier 1 capital) (17,427 )
3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of rows 1 and 2) **** **** 843,764 ****
Derivative<br> exposures
4 Replacement cost associated with all derivatives transactions<br> (i.e. net of eligible cash variation margin) 7,813
5 Add-on amounts for potential future credit exposure (PFCE)<br> associated with all derivatives transactions 14,753
6 Gross-up for derivatives collateral provided where deducted<br> from the balance sheet assets pursuant to the 3,336
Australian Accounting Standards -
7 (Deductions of receivables assets for cash variation<br> margin provided in derivatives transactions) (6,258 )
8 (Exempted central counterparty (CCP) leg of client-cleared<br> trade exposures) -
9 Adjusted effective notional amount of written credit<br> derivatives 1,209
10 (Adjusted effective notional offsets and add-on deductions<br> for written credit derivatives) (1,189 )
11 Total derivative exposures (sum of rows 4 to 10) **** **** 19,664 ****
SFT<br> exposures
12 Gross SFT assets (with no recognition of netting), after<br> adjusting for sales accounting transactions 37,385
13 (Netted amounts of cash payables and cash receivables<br> of gross SFT assets) -
14 Counterparty credit risk exposure for SFT assets 15,164
15 Agent transaction exposures -
16 Total SFT exposures (sum of rows 12 to 15) **** **** 52,549 ****
Other<br> off-balance sheet exposures -
17 Off-balance sheet exposure at gross notional amount 207,942
18 (Adjustments for conversion to credit equivalent amounts) (128,082 )
19 Other off-balance sheet exposures (sum of rows 17 and 18) **** **** 79,860 ****
Capital<br> and total exposures **** **** **** ****
20 Tier 1 Capital **** **** 62,400 ****
21 Total exposures (sum of rows 3, 11, 16 and 19) **** **** 995,837 ****
Leverage<br> ratio %
22 Leverage ratio **** **** 6.27 %

All values are in US Dollars.

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Leverage ratio

Summarycomparison of accounting assets versus leverage ratio exposure measure

m **** 31 March 2021 ****
1 Total consolidated assets as per published<br> financial statements 889,459
2 Adjustment for investments in banking, financial, insurance<br> or commercial entities that are consolidated for (3,060 )
accounting purposes but outside the scope of regulatory<br> consolidation -
3 Adjustment for assets held on the balance sheet in a<br> fiduciary capacity pursuant to the Australian Accounting -
Standards but excluded from the leverage ratio exposure<br> measure -
4 Adjustments for derivative financial instruments (2,715 )
5 Adjustment for SFTs (i.e. repos and similar secured lending) 49,721
6 Adjustment for off-balance sheet exposures (i.e. conversion<br> to credit equivalent amounts of off-balance sheet 79,859
exposures) -
7 Other adjustments (17,427 )
8 Leverage ratio exposure **** **** 995,837 ****

All values are in US Dollars.

Westpac<br> Group March 2021 Pillar 3 report 23

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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 a number 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.

Structureand 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. Line business 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.

Creditrisk 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 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 manuals embed the Group’s framework requirements for application in line businesses. These manuals include policies covering 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 govern the extension of credit and represent the formal delegation of credit approval authority to responsible individuals throughout the organisation.

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Credit risk management

Approach

Westpac adopts two approaches to managing credit risk depending upon the nature of the customer and the product.

Transaction-managedapproach

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 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.

Mappingof 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<br> customer<br><br> risk grade Standard<br> & Poor’s<br><br> rating Moody’s<br><br> rating
A AAA<br> to AA– Aaa<br> to Aa3
B A+<br> to A– A1 to A3
C BBB+<br> to BBB– Baa1 to Baa3
D BB+<br> to B+ Ba1 to B1
Westpac<br> Rating
E Watchlist
F Special<br> mention
G Substandard/default
H Default

For Specialised Lending Westpac maps exposures to the appropriate supervisory slot based on an assessment that takes into account borrower strength and security quality, as required by APS 113.

Program-managedapproach

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 to a consumer customer may exceed $1 million. Business customer exposures may be program managed for exposure up to $3 million. Quantitative scorecards are used to assign application and behavioural scores to enable risk-based decision making within these portfolios. The scorecard outcomes and decisions are regularly monitored and validated against subsequent customer performance and scorecards are recalibrated or rebuilt when required. For capital estimation and other purposes, risk-based customer segments are created based upon modelled expected PD, Exposure At Default (EAD) and LGD. 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, CRGs, PDs and LGDs are reviewed at least annually.

Westpac<br> Group March 2021 Pillar 3 report 25

Pillar 3 report

Credit risk management

Mappingof Basel categories to Westpac portfolios

APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk, states that under the Advanced IRB approach to credit risk, an ADI must categorise banking book exposures into six broad IRB asset classes and apply the prescribed treatment for those classes to each credit exposure within them for the purposes of deriving its regulatory capital requirement. Standardised and Securitised portfolios are subject to treatment under APS112 Capital Adequacy: Standardised Approach to Credit Risk and APS120 Securitisation respectively.

APS<br> Asset Class Sub-asset<br> class Westpac<br> category Segmentation<br> criteria
Corporate Corporate Corporate All<br> transaction-managed customers not elsewhere classified where annual turnover exceeds $50 million^1^.
SME<br> Corporate Business<br> Lending All<br> transaction-managed customers not elsewhere classified where annual turnover is $50 million or less.
Project<br> Finance (including Object Finance) Specialised<br> Lending-Project Finance Applied<br> to transaction-managed customers where the primary source of debt service, security and repayment is derived from the revenue generated<br> by a completed project (e.g. infrastructure such as toll roads or railways).
Income-producing<br> Real Estate Specialised<br> Lending-Property Finance Applied<br> to transaction-managed customers where the primary source of debt service, security and repayment is derived from either the sale<br> of a property development or income produced by one or more investment properties^2^.
Sovereign Sovereign Applied<br> to transaction-managed exposures backed by governments.
Bank Bank Applied<br> to transaction-managed exposures to deposit-taking institutions and foreign equivalents.
Residential<br> Mortgages Residential<br> Mortgages Exposures<br> secured by residential mortgages not elsewhere classified.
Qualifying<br> Revolving Retail Australian<br> Credit Cards Program-managed<br> credit cards with low volatility in loss rates. The New Zealand cards portfolio is not eligible for Qualifying Revolving Retail treatment<br> and is classified in Other Retail.
Other<br> Retail Small<br> Business Program-managed<br> business lending exposures under $1 million where complex products are not utilised by the customer.
Other<br> Retail All<br> other program-managed lending to retail customers, including New Zealand credit cards.
^1^ Includes<br> all NZ agribusiness loans, regardless of turnover.
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^2^ Excludes<br> large diversified property groups and property trusts, which appear in the Corporate asset<br> class.
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26 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report

Credit risk management

Mappingof Credit risk approach to Basel categories and exposure types

Approach APS<br> asset class Types<br> of exposures
Transaction-Managed<br> Portfolios Corporate<br><br> <br>Sovereign<br><br> <br>Bank Direct<br> lending<br><br> <br>Contingent<br> lending<br><br> <br>Derivative<br> counterparty<br><br> <br>Asset<br> warehousing<br><br> <br>Underwriting<br><br> <br>Secondary<br> market trading<br><br> <br>Foreign<br> exchange settlement<br><br> <br>Other<br> intra-day settlement<br><br> <br>obligations
Program-Managed<br> Portfolios Residential<br> mortgage Mortgages<br><br> <br>Equity<br> access loans
Qualifying<br> revolving retail Australian<br> credit cards
Other<br> retail Personal<br> loans<br><br> <br>Overdrafts<br><br> <br>New<br> Zealand credit cards<br><br> <br>Auto<br> and equipment finance<br><br> <br>Business<br> development loans<br><br> <br>Business<br> overdrafts<br><br> <br>Other<br> term products

Internalratings process for transaction-managed portfolios

The process for assigning and approving individual customer PDs and facility LGDs involves:

• Business<br> unit representatives recommend the CRG and facility LGDs under the guidance of criteria set<br> out in established credit policies. Each CRG is associated with an estimated PD;
• Authorised<br> credit officers evaluate the recommendations and approve the final CRG and facility LGDs.<br> Authorised credit officers may override line business unit recommendations;
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• An<br> expert judgement decisioning process is employed to evaluate CRG and the outputs of various<br> risk grading models are used as one of several inputs into that process; and
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• Authorised<br> credit officers’ decisions are subject to reviews to ensure consistent quality and<br> confirm compliance with approval authority.
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For on-going 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.

Internalratings process for program-managed portfolios

The process for assigning PDs, LGDs and EADs to the program-managed portfolio involves dividing 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.

Internalcredit 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:

Economiccapital - Economic capital includes both credit and non-credit components. Economic credit capital is calculated using a framework that considers estimates of PD, LGD, EAD, total committed exposure and loan tenor, as well as measures of portfolio composition not reflected in regulatory capital formulae.

Provisioning- Credit provisions are held by Westpac to cover expected credit losses in the loan portfolio. Provisioning includes both individual and collective components. Individual provisions are calculated on impaired loans taking into account management’s best estimate of the present value of future cashflows.

Westpac<br> Group March 2021 Pillar 3 report 27

Pillar 3 report

Credit risk management

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.

Risk-adjustedperformance measurement - Business performance is measured using allocated capital, which incorporates charges for economic capital and 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.

Creditapproval - 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<br> credit risk rating system is reviewed annually to confirm that the rating criteria and procedures<br> are appropriate given the current portfolio and external conditions;
• All<br> models materially impacting the risk rating process are periodically reviewed in accordance<br> with Westpac’s model risk policy;
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• Specific<br> credit risk estimates (including PD, LGD and EAD levels) are overseen, reviewed annually<br> and supported by the Credit Risk Estimates Committee (a sub-committee of CREDCO) for approval<br> by General Manager, Enterprise Risk;
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• Credit<br> Risk Assurance undertake an independent annual end-to-end technical and operational review<br> of the overall process; and
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• CREDCO,<br> RISKCO and BRiskC monitor the risk profile, performance and management of Westpac’s<br> credit portfolio and the development and review of key credit risk policies.
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Riskreporting

A comprehensive report on Westpac’s credit risk portfolio is provided to CREDCO, RISKCO and BRiskC quarterly. It details the current level of impairment losses, stressed exposures, delinquency trends, provisions, impaired assets and key performance metrics. It also reports on portfolio concentrations and large exposures.

Credit risk and asset quality are also reported to the Board including details of impairment losses, stressed exposures, delinquency trends and key performance metrics.

Responseto COVID-19

Westpac remains focused on supporting customers. In response to the COVID-19 pandemic Westpac introduced a range of support packages such as lowering interest rates on certain products, waiving certain fees and providing impacted customers with an option to defer repayments. APRA permitted customers approved for deferrals to be excluded from traditional stress metrics while part of these support packages but customers were to be closely monitored, particularly once the deferral period ended.

APRA also revised prudential standard APS 220 Credit Quality to provide temporary capital relief where an eligible borrower’s ability to repay according to loan terms had been, or was likely to be, affected by the COVID-19 pandemic, subject to defined criteria. This temporary capital treatment ceased to be available on 31 March 2021. Westpac no longer offers COVID-19 related support packages.

The Australian Government has announced further government stimulus packages to support the economic recovery and those companies still in receipt of JobKeeper stimulus in the quarter ended 31 March 2021 under the SME Recovery Loan Scheme (SMERLS). Westpac has confirmed to the Australian Government Federal Treasury our participation to the scheme.

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Pillar<br> 3 report<br><br> <br>Credit<br> risk management
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Summary creditrisk disclosure

Regulatory
Expected Specific Actual
Risk Regulatory Loss<br> for Provisions Losses<br> for
31 March 2021<br><br> <br>$m Exposure<br><br> at Default Weighted<br><br> Assets Expected<br><br> Loss^1^ non-defaulted<br><br> exposures Impaired<br><br> Loans for<br> Impaired<br><br> Loans the<br> 6 months<br><br> ended
Corporate 124,567 66,086 654 431 319 220 56
Business<br> lending 53,052 34,061 750 475 388 198 25
Sovereign 143,237 2,355 2 2 - - -
Bank 23,404 5,708 7 7 - - -
Residential<br> mortgages 562,798 133,938 1,919 1,126 263 78 44
Australian<br> credit cards 16,459 4,279 202 154 82 49 71
Other<br> retail 12,579 9,266 459 301 277 158 78
Small<br> business 31,941 16,097 613 373 639 229 24
Specialised<br> Lending 64,867 55,314 813 598 39 12 1
Securitisation 28,299 5,513 - - - - -
Standardised^2^ 15,300 14,510 - - 64 30 -
Total 1,076,503 347,127 5,419 3,467 2,071 974 299
Regulatory
Expected Specific Actual
Risk Regulatory Loss<br> for Provisions Losses<br> for
30 September 2020<br><br> $m Exposure<br><br> at Default Weighted<br><br> Assets Expected<br><br> Loss^1^ non-defaulted<br><br> exposures Impaired<br><br> Loans for<br> Impaired<br><br> Loans the<br> 12 months<br><br> ended
Corporate 129,988 73,666 758 514 558 244 95
Business<br> lending 54,542 36,777 809 534 392 208 71
Sovereign 131,857 2,376 1 1 - - -
Bank 23,244 5,640 7 7 - - -
Residential<br> mortgages 550,133 130,787 1,966 1,033 345 93 125
Australian<br> credit cards 16,944 4,405 214 166 83 48 332
Other<br> retail 13,471 10,174 522 341 326 187 275
Small<br> business 32,758 16,977 685 350 933 328 74
Specialised<br> Lending 65,491 57,019 837 659 86 25 3
Securitisation 26,817 5,413 - - - - -
Standardised^2^ 16,993 16,155 - - 56 19 2
Total 1,062,238 359,389 5,799 3,605 2,779 1,152 977
Regulatory
Expected Specific Actual
Risk Regulatory Loss<br> for Provisions Losses<br> for
31 March 2020<br><br> $m Exposure<br><br> at Default Weighted<br><br> Assets Expected<br><br> Loss^1^ non-defaulted<br><br> exposures Impaired<br><br> Loans for<br> Impaired<br><br> Loans the<br> 6 months<br><br> ended
Corporate 146,529 78,288 787 547 363 232 (4)
Business<br> lending 54,428 34,493 669 413 347 195 35
Sovereign 127,064 2,192 2 2 - - -
Bank 26,633 6,956 9 9 - - -
Residential<br> mortgages 553,866 131,424 1,788 1,229 404 114 67
Australian<br> credit cards 18,601 4,837 314 238 123 92 164
Other<br> retail 15,223 11,594 601 419 312 218 135
Small<br> business 33,181 16,812 557 378 501 183 39
Specialised<br> Lending 65,866 56,004 813 583 52 26 1
Securitisation 28,097 5,747 - - - - -
Standardised^2^ 19,616 20,795 - - 52 19 -
Total 1,089,104 369,142 5,540 3,818 2,154 1,079 437

^1^  Includes regulatory expected losses for defaulted and non-defaulted exposures.

^2^  Includes mark-to-market related credit risk.

Westpac<br> Group March 2021 Pillar 3 report 29
Pillar<br> 3 report<br><br> <br>Credit<br> risk management
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Loan impairmentprovisions

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<br> 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<br> increase in credit risk since origination and where the asset is still performing, a provision<br> for lifetime ECL is recognised.
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Determining when a financial asset has experienced a significant increase in credit risk is primarily based on changes in internal risk grades since origination of the financial asset. An internal risk grade assessed using both quantitative and qualitative factors. The number of notches (changes) in the internal risk grade that Westpac uses to represent a significant increase in credit risk is determined on a sliding scale where the number of notches will generally be greater for a financial asset with a lower credit risk compared to a financial asset with a higher credit risk.

• Stage 3: Lifetime ECL (non-performing) - For financial assets that are non-performing a provision<br> for lifetime ECL is recognised. Indicators include a breach of contract with Westpac such<br> as a default on interest or principal payments, a borrower experiencing significant financial<br> difficulties.

Collective andindividual 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.

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 classificationof loan impairment provisions

APS220 Credit Quality requires that Westpac report specific provisions and a General Reserve for Credit Loss (GRCL). All IAPs raised under Australian Accounting Standards (AAS) are classified as specific provisions. All Collectively Assessed Provisions (CAPs) raised under AAS are either classified into specific provisions or a GRCL.

30 Westpac Group March 2021 Pillar 3 report
Pillar<br> 3 report<br><br> <br>Credit<br> risk management
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Expectedcredit loss provision

31 March 2021 A-IFRS<br> Provisions Total<br> Regulatory
$m IAPs CAPs Provisions
Specific<br> Provisions
for<br> impaired loans 564 410 974
for<br> defaulted but not impaired loans NA 918 918
For<br> Stage 2 NA 2,051 2,051
Total Specific Provision^1^
564 3,379 3,943
General<br> Reserve for Credit Loss^1^ NA 1,565 1,565
Total provisions for ECL 564 4,944 5,508
30 September 2020 A-IFRS<br> Provisions Total<br> Regulatory
$m IAPs CAPs Provisions
Specific<br> Provisions
for<br> impaired loans 611 541 1,152
for<br> defaulted but not impaired loans NA 1,021 1,021
For<br> Stage 2 NA 2,199 2,199
Total Specific Provision^1^
611 3,761 4,372
General<br> Reserve for Credit Loss^1^ NA 1,791 1,791
Total provisions for ECL 611 5,552 6,163
31 March 2020 A-IFRS<br> Provisions Total<br> Regulatory
$m IAPs CAPs Provisions
Specific<br> Provisions
for<br> impaired loans 606 473 1,079
for<br> defaulted but not impaired loans NA 628 628
For<br> Stage 2 NA 2,184 2,184
Total Specific Provision^1^
606 3,285 3,891
General<br> Reserve for Credit Loss^1^ NA 1,900 1,900
Total provisions for ECL 606 5,185 5,791

^1^ Provisions classified according to APRA’s letter dated 4 July 2017 “Provisions for regulatory purposes and AASB 9 financial instruments”.

Westpac<br> Group March 2021 Pillar 3 report 31
Pillar<br> 3 report<br><br> <br>Credit<br> risk management
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Movementin provisions for impairment

For the 6 months ended Non- Collectively Individually
31 March 2021 Performing performing assessed assessed
$m Stage<br> 1 Stage<br> 2 Stage<br> 3 provisions provisions Total
Balance as at 30 September 2020 for Loans and Credit 1,084 2,875 2,173 6,132
Commitments
Transfers<br> to Stage 1 695 (662) (33) -
Transfers<br> to Stage 2 (112) 719 (607) -
Transfers<br> to Stage 3 (3) (244) 247 -
Business<br> activity during the period 52 (107) (171) (226)
Net<br> remeasurement of provision for ECL (689) (8) 688 (9)
Write-offs - - (431) (431)
Exchange<br> rate and other adjustments (5) (5) 26 16
Balance as at 31 March 2021 for Loans and Credit Commitments 1,022 2,568 1,892 5,482
Balance as at 30 September 2020 for debt securities 2 29 - 31
Provision for ECL on debt securities at amortised cost 1 (7) - (6)
Provision for ECL on debt securities at FVOCI^1^ 1 - - 1
Total provision for ECL as at 31 March 2021 4 22 - 26
Total provision for ECL as at 31 March 2021
1,026 2,590 1,892 5,508
For the 12 months ended Non- Collectively Individually
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30 September 2020 Performing performing assessed assessed
$m Stage<br> 1 Stage<br> 2 Stage<br> 3 provisions provisions Total
Balanceas at 30 September 2019 for Loans and Credit Commitments 884 1,674 1,355 - - 3,913
Transfers<br> to Stage 1 1,577 (1,528) (49) - - -
Transfers<br> to Stage 2 (344) 1,161 (817) - - -
Transfers<br> to Stage 3 (8) (955) 963 - - -
Business<br> activity during the period 212 60 (77) - - 195
Net<br> remeasurement of provision for ECL (1,232) 2,475 1,914 - - 3,157
Write-offs - - (1,170) - - (1,170)
Exchange<br> rate and other adjustments (5) (12) 54 - - 38
Balance as at 30 September 2020 for Loans and Credit Commitments 1,084 2,875 2,173 - - 6,132
Balance as at 30 September 2019 for debt securities 11 - - 11
Provision for ECL on debt securities at amortised cost (9) 27 - 18
Provision for ECL on debt securities at FVOCI^1^ 2 - - 2
Total provision for ECL as at 30 September 2020 4 27 - - - 31
Total provision for ECL as at 30 September 2020
1,088 2,902 2,173 - - 6,163
^1^ Impairment of debt securities<br> at Fair Value through Other Comprehensive Income (FVOCI) is recognised in the income statement with a corresponding amount in other<br> comprehensive income. There is no reduction of the carrying value of the debt securities which remain at fair value.
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Pillar<br> 3 report<br><br> <br>Credit<br> risk management
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For the 6 months ended Non- Collectively Individually
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31 March 2020 Performing performing assessed assessed
m Stage 1 Stage 2 Stage 3 provisions provisions Total
Balance as at 30 September 2019 for Loans and Credit Commitments 884 1,674 1,355 - - 3,913
Transfers to Stage 1 600 (583 ) (17 ) - - -
Transfers to Stage 2 (131 ) 466 (335 ) - - -
Transfers to Stage 3 (2 ) (334 ) 336 - - -
Business activity during the period 120 114 (50 ) - - 184
Net remeasurement of provision for ECL (297 ) 1,527 911 - - 2,141
Write-offs - - (537 ) - - (537 )
Exchange rate and other adjustments 7 14 44 - - 65
Balance<br> as at 31 March 2020 for Loans and Credit Commitments 1,181 2,878 1,707 - - 5,766
Balance as at 30 September 2019 for debt securities 11 - - 11
Provision for ECL on debt securities at amortised<br> cost 10 3 - 13
Provision for ECL<br> on debt securities at FVOCI1 1 - - 1
Total provision for<br> ECL as at 31 March 2020 22 3 - - - 25
Total provision for<br> ECL as at 31 March 2020 1,203 2,881 1,707 - - 5,791

All values are in US Dollars.

^1^ Impairment of debt securities<br> at Fair Value through Other Comprehensive Income (FVOCI) is recognised in the income statement with a corresponding amount in other<br> comprehensive income. There is no reduction of the carrying value of the debt securities which remain at fair value.
Westpac<br> Group March 2021 Pillar 3 report 33
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Pillar<br> 3 report<br><br> <br>Credit<br> risk exposures
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The following tables segment the portfolio by characteristics that provide an insight into the assessment of credit risk concentration.

Exposureat Default by major type

31 March 2021 On<br> balance Off-balance<br> sheet Total<br> Exposure Average
$m sheet Non-market<br> related Market<br> related at<br> Default 6<br> months ended^1^
Corporate 52,808 57,449 14,310 124,567 126,100
Business<br> lending 39,220 13,832 - 53,052 53,786
Sovereign 109,514 1,490 32,233 143,237 137,438
Bank 14,085 1,829 7,490 23,404 22,546
Residential<br> mortgages 486,802 75,996 - 562,798 556,398
Australian<br> credit cards 6,664 9,795 - 16,459 16,731
Other<br> retail 9,467 3,112 - 12,579 13,060
Small<br> business 24,730 7,211 - 31,941 32,410
Specialised<br> lending 52,619 10,598 1,650 64,867 65,297
Securitisation^2^ 20,145 8,033 121 28,299 27,319
Standardised 12,192 1,048 2,060 15,300 16,208
Total 828,246 190,393 57,864 1,076,503 1,067,293
30 September 2020 On<br> balance Off-balance<br> sheet Total<br> Exposure Average
$m sheet Non-market<br> related Market<br> related at<br> Default 12<br> months ended^3^
Corporate 57,485 60,099 12,404 129,988 137,385
Business<br> lending 40,989 13,553 - 54,542 54,578
Sovereign 106,524 1,604 23,729 131,857 111,274
Bank 13,161 1,873 8,210 23,244 25,935
Residential<br> mortgages 481,096 69,037 - 550,133 553,586
Australian<br> credit cards 6,652 10,292 - 16,944 17,979
Other<br> retail 10,210 3,261 - 13,471 14,880
Small<br> business 25,463 7,295 - 32,758 33,158
Specialised<br> lending 52,803 10,629 2,059 65,491 65,530
Securitisation^2^ 20,542 6,138 137 26,817 27,152
Standardised 12,911 1,178 2,904 16,993 19,255
Total 827,836 184,959 49,443 1,062,238 1,060,712
31 March 2020 On<br> balance Off-balance<br> sheet Total<br> Exposure Average
$m sheet Non-market<br> related Market<br> related at<br> Default 6<br> months ended^4^
Corporate 69,038 57,950 19,541 146,529 140,586
Business<br> lending 42,083 12,345 - 54,428 54,546
Sovereign 119,847 1,857 5,360 127,064 102,570
Bank 14,899 2,415 9,319 26,633 27,505
Residential<br> mortgages 486,270 67,596 - 553,866 555,459
Australian<br> credit cards 8,218 10,383 - 18,601 18,434
Other<br> retail 11,881 3,342 - 15,223 15,607
Small<br> business 26,181 7,000 - 33,181 33,311
Specialised<br> lending 54,066 9,750 2,050 65,866 65,739
Securitisation^2^ 22,690 5,276 131 28,097 27,269
Standardised 13,476 1,162 4,978 19,616 19,992
Total 868,649 179,076 41,379 1,089,104 1,061,017
^1^ Average is based on exposures<br> as at 31 March 2021, 31 December 2020, and 30 September 2020.
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^2^ EAD associated with securitisations<br> is for the banking book only.
^3^ Average is based on exposures<br> as at 30 September 2020, 30 June 2020, 31 March 2020, 31 December 2019, and 30 September 2019.
^4^ Average is based on exposures<br> as at 31 March 2020, 31 December 2019, and 30 September 2019.
34 Westpac Group March 2021 Pillar 3 report
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Exposureat Default by measurement method

31 March 2021 IRB Standardised Total<br> Exposure
$m Approach Approach at<br> Default
Corporate 124,567 5,113 129,680
Business<br> lending 53,052 766 53,818
Sovereign 143,237 1,081 144,318
Bank 23,404 140 23,544
Residential<br> mortgages 562,798 6,006 568,804
Australian<br> credit cards 16,459 - 16,459
Other<br> retail 12,579 1,812 14,391
Small<br> business 31,941 - 31,941
Specialised<br> lending 64,867 382 65,249
Securitisation 28,299 - 28,299
Total 1,061,203 15,300 1,076,503
30 September 2020 IRB Standardised Total<br> Exposure
$m Approach Approach at<br> Default
Corporate 129,988 6,131 136,119
Business<br> lending 54,542 866 55,408
Sovereign 131,857 1,216 133,073
Bank 23,244 152 23,396
Residential<br> mortgages 550,133 6,471 556,604
Australian<br> credit cards 16,944 - 16,944
Other<br> retail 13,471 1,735 15,206
Small<br> business 32,758 - 32,758
Specialised<br> lending 65,491 422 65,913
Securitisation 26,817 - 26,817
Total 1,045,245 16,993 1,062,238
31 March 2020 IRB Standardised Total<br> Exposure
$m Approach Approach at<br> Default
Corporate 146,529 8,133 154,662
Business<br> lending 54,428 975 55,403
Sovereign 127,064 1,354 128,418
Bank 26,633 60 26,693
Residential<br> mortgages 553,866 6,844 560,710
Australian<br> credit cards 18,601 - 18,601
Other<br> retail 15,223 1,758 16,981
Small<br> business 33,181 - 33,181
Specialised<br> lending 65,866 492 66,358
Securitisation 28,097 - 28,097
Total 1,069,488 19,616 1,089,104
Westpac<br> Group March 2021 Pillar 3 report 35
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Pillar 3 report

Credit risk exposures

Exposureat Default by industry classification

31 March 2021 $m Accommodation,<br><br> cafes &<br><br> restaurants Agriculture,<br><br> forestry &<br><br> fishing Construction Finance<br> &<br><br> insurance Government<br> <br><br> administration <br><br> & defence Manufacturing Mining Property Property<br><br> services &<br><br> business<br><br> services Services^1^ Trade^2^ Transport<br> <br><br> & storage Utilities^3^ Retail<br> <br><br> lending Other Total<br> <br><br> Exposure <br><br> at Default
Corporate 2,560 10,933 2,909 14,355 153 16,569 6,056 7,460 9,975 11,582 18,105 10,284 12,778 - 848 124,567
Business lending 5,830 9,724 4,230 2,035 19 4,553 476 1,098 6,451 5,901 8,173 2,318 434 - 1,810 53,052
Sovereign - 1 - 60,118 82,411 55 64 388 6 192 - 2 - - - 143,237
Bank - - - 23,354 - - - - 50 - - - - - - 23,404
Residential<br> mortgages - - - - - - - - - - - - - 562,798 - 562,798
Australian credit<br> cards - - - - - - - - - - - - - 16,459 - 16,459
Other retail - - - - - - - - - - - - - 12,579 - 12,579
Small business 950 2,263 3,921 1,612 788 1,747 574 2,131 5,011 3,931 3,186 1,720 359 - 3,748 31,941
Specialised<br> lending 435 17 35 9 - 3 757 55,562 203 1,467 21 3,535 2,323 - 500 64,867
Securitisation - - - 27,305 - - - - 788 - 206 - - - - 28,299
Standardised 117 12 150 4,581 1,081 158 56 383 107 34 536 173 53 7,818 41 15,300
Total 9,892 22,950 11,245 133,369 84,452 23,085 7,983 67,022 22,591 23,107 30,227 18,032 15,947 599,654 6,947 1,076,503
^1^   Includes<br> education, health & community services, cultural & recreational services and personal & other services.
---
^2^   Includes wholesale trade and<br> retail trade.
^3^  Includes<br> electricity, gas & water, and communication services.
36 Westpac Group September 2020 Pillar 3 report
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Pillar 3 report

Credit risk exposures

30 September 2020 $m Accommodation,<br><br> cafes &<br><br> restaurants Agriculture,<br><br> forestry &<br><br> fishing Construction Finance<br> &<br><br> insurance Government<br> <br><br> administration <br><br> & defence Manufacturing Mining Property Property<br><br> services &<br><br> business<br><br> services Services^1^ Trade^2^ Transport<br> <br><br> & storage Utilities^3^ Retail<br> <br><br> lending Other Total<br> <br><br> Exposure <br><br> at Default
Corporate 2,517 11,148 2,977 12,292 625 18,833 7,101 6,607 11,678 11,808 19,896 10,383 13,260 - 863 129,988
Business lending 5,894 9,456 4,488 2,225 24 4,757 556 1,021 6,704 6,010 8,685 2,343 508 - 1,871 54,542
Sovereign - 1 - 46,537 84,464 7 69 602 9 151 - 4 13 - - 131,857
Bank - - - 23,194 - - - - 50 - - - - - - 23,244
Residential<br> mortgages - - - - - - - - - - - - - 550,133 - 550,133
Australian<br> credit cards - - - - - - - - - - - - - 16,944 - 16,944
Other retail - - - - - - - - - - - - - 13,471 - 13,471
Small business 966 2,297 4,065 1,698 748 1,786 574 2,138 5,163 3,812 3,296 1,804 364 - 4,047 32,758
Specialised<br> lending 393 18 34 17 - 4 1,004 55,681 59 1,747 16 3,649 2,326 - 543 65,491
Securitisation - - - 25,777 - - - - 827 - 213 - - - - 26,817
Standardised 121 12 161 5,504 1,216 222 58 425 121 46 625 215 12 8,206 49 16,993
Total 9,891 22,932 11,725 117,244 87,077 25,609 9,362 66,474 24,611 23,574 32,731 18,398 16,483 588,754 7,373 1,062,238
^1^   Includes<br> education, health & community services, cultural & recreational services and personal & other services.
---
^2^   Includes wholesale trade and<br> retail trade.
^3^   Includes electricity, gas &<br> water, and communication services.
Westpac<br> Group September 2020 Pillar 3 report 37
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Pillar 3 report

Credit risk exposures

31 March 2020 $m Accommodation,<br><br> cafes &<br><br> restaurants Agriculture,<br><br> forestry &<br><br> fishing Construction Finance<br> &<br><br> insurance Government<br> <br><br> administration <br><br> & defence Manufacturing Mining Property Property<br><br> services &<br><br> business<br><br> services Services^1^ Trade^2^ Transport<br> <br><br> & storage Utilities^3^ Retail<br> <br><br> lending Other Total<br> <br><br> Exposure <br><br> at Default
Corporate 2,458 11,349 3,320 17,822 1,170 23,828 8,341 7,092 10,550 11,845 21,970 13,018 12,866 - 900 146,529
Business lending 5,853 8,759 4,280 2,437 19 4,842 544 1,230 6,794 5,914 8,929 2,435 505 - 1,887 54,428
Sovereign - 1 - 47,479 79,069 8 95 146 6 187 - 60 13 - - 127,064
Bank - - - 26,582 - - - - 50 - - 1 - - - 26,633
Residential<br> mortgages - - - - - - - - - - - - - 553,866 - 553,866
Australian<br> credit cards - - - - - - - - - - - - - 18,601 - 18,601
Other retail - - - - - - - - - - - - - 15,223 - 15,223
Small business 973 2,378 4,111 1,779 699 1,776 568 2,176 5,242 3,650 3,354 1,840 363 - 4,272 33,181
Specialised<br> lending 489 19 32 22 - 4 823 56,845 26 1,272 17 3,340 2,426 - 551 65,866
Securitisation - - - 26,432 - 162 - - 1,236 - 267 - - - - 28,097
Standardised 132 27 176 7,358 1,354 240 62 494 142 60 694 198 23 8,601 55 19,616
Total 9,905 22,533 11,919 129,911 82,311 30,860 10,433 67,983 24,046 22,928 35,231 20,892 16,196 596,291 7,665 1,089,104
^1^   Includes<br> education, health & community services, cultural & recreational services and personal & other services.
---
^2^   Includes wholesale trade and<br> retail trade.
^3^   Includes electricity, gas &<br> water, and communication services.
38 Westpac Group September 2020 Pillar 3 report
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Pillar 3 report
--- ---
Credit<br>risk exposures

Exposureat Default by geography^1^

31 March 2021<br><br> $m Australia New<br> Zealand Americas Asia Europe Pacific Total<br> Exposure <br><br> at Default
Corporate 81,694 22,429 7,281 6,121 7,042 - 124,567
Business<br> lending 48,255 4,797 - - - - 53,052
Sovereign 124,825 12,824 4,721 462 405 - 143,237
Bank 22,165 574 106 531 28 - 23,404
Residential<br> mortgages 501,445 61,160 - 193 - - 562,798
Australian<br> credit cards 16,459 - - - - - 16,459
Other<br> retail 9,626 2,953 - - - - 12,579
Small<br> business 29,582 2,358 - 1 - - 31,941
Specialised<br> lending 56,748 8,119 - - - - 64,867
Securitisation 23,923 4,376 - - - - 28,299
Standardised 12,504 - - 14 - 2,782 15,300
Total 927,226 119,590 12,108 7,322 7,475 2,782 1,076,503
30 September 2020<br><br> $m Australia New<br> Zealand Americas Asia Europe Pacific Total<br> Exposure <br><br> at Default
--- --- --- --- --- --- --- ---
Corporate 83,682 23,058 7,662 10,111 5,475 - 129,988
Business<br> lending 49,557 4,985 - - - - 54,542
Sovereign 107,694 11,611 11,060 1,064 428 - 131,857
Bank 20,834 793 130 1,462 25 - 23,244
Residential<br> mortgages 491,418 58,497 - 218 - - 550,133
Australian<br> credit cards 16,944 - - - - - 16,944
Other<br> retail 10,409 3,062 - - - - 13,471
Small<br> business 30,364 2,393 - 1 - - 32,758
Specialised<br> lending 57,388 8,103 - - - - 65,491
Securitisation 22,522 4,295 - - - - 26,817
Standardised 13,872 - - 19 - 3,102 16,993
Total 904,684 116,797 18,852 12,875 5,928 3,102 1,062,238
31 March 2020<br><br> $m Australia New<br> Zealand Americas Asia Europe Pacific Total<br> Exposure <br><br> at Default
--- --- --- --- --- --- --- ---
Corporate 86,984 24,577 10,991 16,829 7,148 - 146,529
Business<br> lending 49,307 5,121 - - - - 54,428
Sovereign 97,932 10,359 16,633 1,655 485 - 127,064
Bank 20,388 2,408 139 3,646 52 - 26,633
Residential<br> mortgages 494,238 59,404 - 224 - - 553,866
Australian<br> credit cards 18,601 - - - - - 18,601
Other<br> retail 11,784 3,439 - - - - 15,223
Small<br> business 30,646 2,534 - 1 - - 33,181
Specialised<br> lending 57,147 8,673 46 - - - 65,866
Securitisation 23,627 4,106 - 364 - - 28,097
Standardised 16,207 - - 42 - 3,367 19,616
Total 906,861 120,621 27,809 22,761 7,685 3,367 1,089,104
^1^ Geographic<br> segmentation of exposures is based on the location of the office in which these items were<br> booked.
--- ---
Westpac<br> Group March 2021 Pillar 3 report 39
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Pillar 3 report
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Credit<br>risk exposures

Exposureat Default by residual contractual maturity

31 March 2021<br><br> $m On<br> demand <<br> 12 months 1<br> to < 3 years 3<br> to < 5 years ><br> 5 years Total<br> Exposure <br><br> at Default
Corporate 13,056 24,564 64,353 19,072 3,522 124,567
Business<br> lending 4,693 15,186 23,029 4,407 5,737 53,052
Sovereign 1,409 34,033 49,207 19,787 38,801 143,237
Bank 3,026 3,641 15,956 643 138 23,404
Residential<br> mortgages 29,630 4,104 13,415 2,665 512,984 562,798
Australian<br> credit cards 16,459 - - - - 16,459
Other<br> retail 2,848 357 4,376 3,316 1,682 12,579
Small<br> business 4,490 3,291 8,950 7,643 7,567 31,941
Specialised<br> lending 421 21,633 32,317 6,917 3,579 64,867
Securitisation - 3,860 11,183 2,011 11,245 28,299
Standardised 1,604 381 6,793 252 6,270 15,300
Total 77,636 111,050 229,579 66,713 591,525 1,076,503
30 September 2020<br><br> $m On<br> demand <<br> 12 months 1<br> to < 3 years 3<br> to < 5 years ><br> 5 years Total<br> Exposure <br><br> at Default
--- --- --- --- --- --- ---
Corporate 14,419 27,059 64,555 19,980 3,975 129,988
Business<br> lending 3,102 13,635 24,154 5,699 7,952 54,542
Sovereign 1,452 29,198 32,192 25,851 43,164 131,857
Bank 3,697 4,102 14,328 1,106 11 23,244
Residential<br> mortgages 29,233 4,315 12,766 2,734 501,085 550,133
Australian<br> credit cards 16,944 - - - - 16,944
Other<br> retail 2,899 351 4,718 3,570 1,933 13,471
Small<br> business 4,481 2,949 8,923 8,044 8,361 32,758
Specialised<br> lending 377 20,479 31,409 9,017 4,209 65,491
Securitisation - 7,074 7,217 1,625 10,901 26,817
Standardised 1,522 472 7,900 281 6,818 16,993
Total 78,126 109,634 208,162 77,907 588,409 1,062,238
31 March 2020<br><br> $m On<br> demand <<br> 12 months 1<br> to < 3 years 3<br> to < 5 years ><br> 5 years Total<br> Exposure <br><br> at Default
--- --- --- --- --- --- ---
Corporate 18,087 27,376 71,404 23,057 6,605 146,529
Business<br> lending 3,081 13,297 23,945 5,912 8,193 54,428
Sovereign 1,899 44,635 18,625 22,685 39,220 127,064
Bank 5,188 4,025 15,961 1,390 69 26,633
Residential<br> mortgages 28,723 4,658 13,725 2,760 504,000 553,866
Australian<br> credit cards 18,601 - - - - 18,601
Other<br> retail 3,218 388 5,206 4,267 2,144 15,223
Small<br> business 4,658 2,786 9,028 8,224 8,485 33,181
Specialised<br> lending 408 19,699 32,119 9,198 4,442 65,866
Securitisation - 1,706 12,585 2,075 11,731 28,097
Standardised 1,574 398 10,150 252 7,242 19,616
Total 85,437 118,968 212,748 79,820 592,131 1,089,104
40 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report
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Credit<br>risk exposures

Impairedand past due loans

The following tables disclose the crystallisation of credit risk as impairment and loss. Analysis of exposures defaulted not impaired, impaired loans, related provisions and actual losses are broken down by concentrations reflecting Westpac’s asset categories, industry and geography.

Impairedand past due loans by portfolio

31 March 2021 $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
Corporate 155 319 220 69% 56
Business<br> lending 793 388 198 51% 25
Sovereign - - - - -
Bank - - - - -
Residential<br> mortgages 5,298 263 78 30% 44
Australian<br> credit cards - 82 49 60% 71
Other<br> retail - 277 158 57% 78
Small<br> business 423 639 229 36% 24
Specialised<br> lending 367 39 12 31% 1
Securitisation - - - - -
Standardised 73 64 30 47% -
Total 7,109 2,071 974 47% 299
30 September 2020 $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br><br> Provisions for <br><br> Impaired Loans Specific<br><br> Provisions to <br><br> Impaired Loans Actual<br><br> Losses for the <br><br> 12 months ended
--- --- --- --- --- ---
Corporate 127 558 244 44% 95
Business<br> lending 598 392 208 53% 71
Sovereign - - - - -
Bank - - - - -
Residential<br> mortgages 7,042 345 93 27% 125
Australian<br> credit cards - 83 48 58% 332
Other<br> retail - 326 187 57% 275
Small<br> business 440 933 328 35% 74
Specialised<br> lending 229 86 25 29% 3
Securitisation - - - - -
Standardised 96 56 19 34% 2
Total 8,532 2,779 1,152 41% 977
31 March 2020 $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
--- --- --- --- --- ---
Corporate 91 363 232 64% (4)
Business<br> lending 474 347 195 56% 35
Sovereign - - - - -
Bank - - - - -
Residential<br> mortgages 4,050 404 114 28% 67
Australian<br> credit cards - 123 92 75% 164
Other<br> retail - 312 218 70% 135
Small<br> business 359 501 183 37% 39
Specialised<br> lending 357 52 26 50% 1
Securitisation - - - - -
Standardised 78 52 19 37% -
Total 5,409 2,154 1,079 50% 437
^1^ Includes<br> items past 90 days not impaired.
--- ---
Westpac<br> Group March 2021 Pillar 3 report 41
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Pillar 3 report
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Credit<br>risk exposures

Impairedand past due loans by industry classification

31 March 2021<br><br> $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
Accommodation,<br> cafes & restaurants 187 65 32 49% 2
Agriculture,<br> forestry & fishing 281 71 27 38% 13
Construction 108 123 51 41% 3
Finance<br> & insurance 71 55 39 71% 16
Government<br> administration & defence - - - -
Manufacturing 91 200 135 68% 43
Mining 13 20 6 30% 3
Property 489 96 30 31% -
Property<br> services & business services 142 266 130 49% 3
Services^2^ 121 97 48 49% 7
Trade^3^ 165 252 126 50% 4
Transport<br> & storage 23 84 31 37% 7
Utilities^4^ 3 8 2 25% -
Retail<br> lending 5,365 634 293 46% 195
Other 50 100 24 24% 3
Total 7,109 2,071 974 47% 299
30 September 2020<br><br> $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 12 months ended
--- --- --- --- --- ---
Accommodation,<br> cafes & restaurants 132 71 34 48% 5
Agriculture,<br> forestry & fishing 242 95 38 40% 13
Construction 69 188 71 38% 12
Finance<br> & insurance 39 68 43 63% -
Government<br> administration & defence - - - - -
Manufacturing 92 302 188 62% 61
Mining 5 44 14 32% 2
Property 335 103 29 28% 49
Property<br> services & business services 113 452 120 27% 14
Services^2^ 129 145 67 46% 5
Trade^3^ 148 274 112 41% 56
Transport<br> & storage 30 143 52 36% 17
Utilities^4^ 2 12 3 25% 4
Retail<br> lending 7,122 770 336 44% 735
Other 74 112 45 41% 4
Total 8,532 2,779 1,152 41% 977
31 March 2020<br><br> $m Defaulted<br> <br><br> not impaired^1^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
--- --- --- --- --- ---
Accommodation,<br> cafes & restaurants 109 37 18 49% 7
Agriculture,<br> forestry & fishing 233 90 34 38% 3
Construction 50 107 45 42% 9
Finance<br> & insurance 29 62 44 71% 5
Government<br> administration & defence - - - - -
Manufacturing 81 221 149 67% 7
Mining 6 17 6 35% (1)
Property 284 77 39 51% 10
Property<br> services & business services 83 130 67 52% 9
Services^2^ 243 72 38 53% 4
Trade^3^ 124 327 152 46% 6
Transport<br> & storage 27 72 25 35% 9
Utilities^4^ 2 7 2 29% -
Retail<br> lending 4,097 851 431 51% 366
Other 41 84 29 35% 3
Total 5,409 2,154 1,079 50% 437
^1^ Includes<br> items past 90 days not impaired.
--- ---
^2^ Includes<br> education, health & community services, cultural & recreational services and personal<br> & other services.
--- ---
^3^ Includes<br> wholesale trade and retail trade.
--- ---
^4^ Includes<br> electricity, gas & water, and communication services.
--- ---
42 Westpac Group March 2021 Pillar 3 report
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Pillar 3 report
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Credit<br>risk exposures

Impairedand past due loans by geography^1^

31 March 2021<br><br> $m Defaulted<br> <br><br> not impaired^2^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
Australia 6,601 1,671 756 45% 234
New<br> Zealand 471 159 85 53% 23
Americas - - - - -
Asia 1 178 112 63% 42
Europe - - - - -
Pacific 36 63 21 33% -
Total 7,109 2,071 974 47% 299
30 September 2020<br><br> $m Defaulted<br> <br><br> not impaired^2^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 12 months ended
--- --- --- --- --- ---
Australia 7,989 2,253 903 40% 859
New<br> Zealand 502 193 96 50% 21
Americas - - - - -
Asia 1 280 134 48% 95
Europe - - - - -
Pacific 40 53 19 36% 2
Total 8,532 2,779 1,152 41% 977
31 March 2020<br><br> $m Defaulted<br> <br><br> not impaired^2^ Impaired<br> <br><br> Loans Specific<br> <br><br> Provisions for <br><br> Impaired Loans Specific<br> <br><br> Provisions to <br><br> Impaired Loans Actual<br> <br><br> Losses for the <br><br> 6 months ended
--- --- --- --- --- ---
Australia 4,964 1,681 818 49% 423
New<br> Zealand 390 208 99 48% 13
Americas - - - - -
Asia 2 216 145 67% -
Europe - - - - -
Pacific 53 49 17 35% 1
Total 5,409 2,154 1,079 50% 437
^1^ Geographic<br> segmentation of exposures is based on the location of the office in which these items were<br> booked.
--- ---
^2^ Includes<br> items past 90 days not impaired.
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Westpac<br> Group March 2021 Pillar 3 report 43
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Pillar 3 report
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Credit<br>risk exposures

Portfoliossubject to the standardised approach

This table presents exposures subject to the standardised approach for the calculation of risk weighted assets.

As at 31 March 2021, exposures subject to the standardised approach and categorised by risk weight are primarily Westpac Pacific, Asian retail exposures, the margin lending portfolio, self-managed superannuation fund exposures and some other small portfolios. Mark-to-market related credit risk and qualifying central clearing counterparties exposure^1^ is also included in the standardised approach.

31 March 2021 Total<br> Exposure Risk<br> Weighted
Risk<br> Weight % at<br> Default $m Assets<br> $m
0% 2,013 -
2% 2,253 45
20% 1,289 258
35% 382 134
50% 1,311 655
75% 4,053 3,041
100% 3,826 3,826
150% 26 39
Default<br> fund contributions^1^ 147 94
Mark-to-market<br> related credit risk - 6,419
Total 15,300 14,510
30 September 2020<br><br> Risk Weight % Total<br> Exposure <br><br> at Default $m Risk<br> Weighted <br><br> Assets $m
--- --- ---
0% 1,780 -
2% 3,406 68
20% 1,200 240
35% 415 145
50% 1,328 664
75% 4,451 3,338
100% 4,239 4,239
150% 54 81
Default<br> fund contributions^1^ 120 78
Mark-to-market<br> related credit risk - 7,302
Total 16,993 16,155
31 March 2020<br><br> Risk Weight % Total<br> Exposure <br><br> at Default $m Risk<br> Weighted <br><br> Assets $m
--- --- ---
0% 1,650 -
2% 5,481 110
20% 1,190 238
35% 478 167
50% 1,340 670
75% 4,631 3,473
100% 4,651 4,651
150% 67 100
Default<br> fund contributions^1^ 128 98
Mark-to-market<br> related credit risk - 11,289
Total 19,616 20,795
^1^ Portfolios<br> subject to the standardised approach include exposures to qualifying central clearing counterparties<br> used to clear derivative transactions. Derivative counterparty exposure and initial margin<br> are risk weighted at 2%. Default fund contributions to qualifying central clearing counterparties<br> are shown separately and are subject to higher risk weights.
--- ---
44 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report
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Credit<br> risk exposures

Portfoliossubject to supervisory risk-weights in the IRB approach

Exposures subject to supervisory risk-weights in the IRB approach include assets categorised as specialised lending, where a regulatory capital ‘slotting’ approach applies.

Westpac has property finance and project finance credit risk exposures categorised as specialised lending. The ‘Credit Risk Management’ section of this report describes the mapping of Westpac risk grades to both external rating equivalents and regulatory capital ‘slots’.

Propertyfinance^1^

31 March 2021 Exposure<br> at Regulatory Risk<br> Weighted
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 24,621 98 17,234
Good 90% 25,264 207 22,840
Satisfactory 115% 5,099 143 5,864
Weak 250% 1,195 96 2,987
Default NA 430 215 -
Total 56,609 759 48,925
30 September 2020 Exposure<br> at Regulatory Risk<br> Weighted
--- --- --- --- ---
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 23,604 94 16,523
Good 90% 26,218 251 24,359
Satisfactory 115% 5,224 146 6,008
Weak 250% 1,344 107 3,359
Default NA 339 170 -
Total 56,729 768 50,249
31 March 2020 Exposure<br> at Regulatory Risk<br> Weighted
--- --- --- --- ---
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 23,013 92 16,110
Good 90% 29,436 236 26,491
Satisfactory 115% 4,479 125 5,151
Weak 250% 795 64 1,988
Default NA 297 148 -
Total 58,020 665 49,740
^1^ The<br> above table reflects that at 31 March 2021 and 30 September 2020 Westpac applied an overlay<br> for property finance to take into account facilities where reviews had not been completed.<br> The overlay is reassessed as customer reviews are completed. This has resulted in a $0.1<br> billion increase in RWA at 31 March 2021 and a $0.6 billion increase in RWA at 30 September<br> 2020.
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Westpac<br> Group March 2021 Pillar 3 report 45
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Pillar<br> 3 report
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Credit<br> risk exposures

Projectand object finance

31 March 2021 Exposure<br> at Regulatory Risk<br> Weighted
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 6,341 25 4,439
Good 90% 1,521 12 1,369
Satisfactory 115% 303 8 348
Weak 250% 93 7 233
Default NA - - -
Total 8,258 54 6,389
30 September 2020 Exposure<br> at Regulatory Risk<br> Weighted
--- --- --- --- ---
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 6,769 27 4,738
Good 90% 1,183 9 1,065
Satisfactory 115% 751 21 864
Weak 250% 41 3 103
Default NA 18 9 -
Total 8,762 69 6,770
31 March 2020 Exposure<br> at Regulatory Risk<br> Weighted
--- --- --- --- ---
$m Risk<br> Weight Default Expected<br> Loss Assets
Strong 70% 5,803 23 4,063
Good 90% 1,064 9 957
Satisfactory 115% 589 16 677
Weak 250% 227 18 567
Default NA 163 82 -
Total 7,846 148 6,264
46 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report
--- ---
Credit<br> risk exposures

Portfoliossubject to IRB approaches

In the table 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.

Corporateportfolio by external credit rating^1^

31 March 2021<br><br> $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
AAA 56 4 60 0.01% 41% - 7 12%
AA 3,380 1,884 5,238 0.03% 48% 1 721 14%
A 16,564 12,110 28,566 0.07% 51% 10 7,192 25%
BBB 26,975 24,710 50,951 0.22% 48% 53 24,436 48%
BB 24,581 11,278 35,667 1.13% 37% 151 26,775 75%
B 1,174 157 1,328 4.78% 41% 26 1,787 135%
Other 1,688 412 2,095 23.70% 39% 190 4,383 209%
Subtotal 74,418 50,555 123,905 0.89% 45% 431 65,301 53%
Default 509 154 662 NA 40% 223 785 119%
Total 74,927 50,709 124,567 1.41% 45% 654 66,086 53%
30 September 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 189 - 189 0.01% 50% - 20 11%
AA 2,424 2,461 4,884 0.03% 52% 1 883 18%
A 15,987 12,099 28,039 0.07% 52% 10 7,463 27%
BBB 29,416 25,139 54,099 0.22% 49% 57 26,466 49%
BB 26,213 11,255 37,328 1.14% 38% 167 28,739 77%
B 1,305 209 1,515 4.78% 41% 30 2,067 136%
Other 2,396 658 3,054 21.07% 39% 249 6,160 202%
Subtotal 77,930 51,821 129,108 0.99% 46% 514 71,798 56%
Default 699 182 880 NA 42% 244 1,868 212%
Total 78,629 52,003 129,988 1.66% 46% 758 73,666 57%
31 March 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 101 - 101 0.01% 50% - 28 28%
AA 7,126 2,490 9,611 0.03% 50% 1 1,487 15%
A 19,424 13,330 32,702 0.07% 52% 12 8,898 27%
BBB 39,261 22,664 61,632 0.22% 49% 64 29,637 48%
BB 28,062 8,919 36,876 1.13% 37% 152 27,522 75%
B 1,554 209 1,719 4.78% 44% 36 2,671 155%
Other 2,765 616 3,382 21.23% 41% 282 7,083 209%
Subtotal 98,293 48,228 146,023 0.94% 46% 547 77,326 53%
Default 365 142 506 NA 65% 240 962 190%
Total 98,658 48,370 146,529 1.29% 47% 787 78,288 53%
^1^ The<br> above table reflects that at 31 March 2021 and 30 September 2020 Westpac applied an overlay<br> for corporate to take into account facilities where reviews had not been completed. The overlay<br> is reassessed as customer reviews are completed. This has resulted in a $0.1 billion increase<br> in RWA at 31 March 2021 and a $0.3 billion increase in RWA at 30 September 2020.
--- ---
^2^ Outstandings<br> are balances that were drawn down as at the reporting date and include certain off-balance<br> sheet items.
--- ---
^3^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
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Westpac<br> Group March 2021 Pillar 3 report 47
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Pillar<br> 3 report
--- ---
Credit<br> risk exposures

Businesslending portfolio by external credit rating^1^

31 March 2021 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
AAA - - - - - - - -
AA - - - - - - - -
A 187 89 276 0.08% 43% - 56 20%
BBB 1,274 574 1,844 0.21% 27% 1 384 21%
BB 34,034 11,292 45,205 1.60% 29% 218 26,031 58%
B 1,569 267 1,836 4.78% 32% 28 1,547 84%
Other 2,410 307 2,716 22.45% 36% 228 4,445 164%
Subtotal 39,474 12,529 51,877 2.75% 30% 475 32,463 63%
Default 1,116 59 1,175 NA 31% 275 1,598 136%
Total 40,590 12,588 53,052 4.90% 30% 750 34,061 64%
30 September 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA - - - - - - - -
AA - - - - - - - -
A 188 74 261 0.08% 42% - 53 20%
BBB 1,224 625 1,845 0.21% 26% 1 383 21%
BB 36,088 10,955 46,914 1.59% 30% 261 28,799 61%
B 1,384 226 1,612 4.78% 32% 25 1,369 85%
Other 2,569 354 2,924 22.12% 37% 247 4,929 169%
Subtotal 41,453 12,234 53,556 2.75% 30% 534 35,533 66%
Default 952 32 986 NA 34% 275 1,244 126%
Total 42,405 12,266 54,542 4.51% 30% 809 36,777 67%
31 March 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA - - - - - - - -
AA - - - - - - - -
A 218 65 282 0.08% 42% - 60 21%
BBB 1,469 502 1,969 0.21% 26% 1 430 22%
BB 38,131 10,024 48,015 1.56% 30% 221 28,438 59%
B 1,063 142 1,206 4.78% 33% 19 1,036 86%
Other 1,833 266 2,099 21.74% 37% 172 3,516 168%
Subtotal 42,714 10,999 53,571 2.37% 30% 413 33,480 62%
Default 828 26 857 NA 35% 256 1,013 118%
Total 43,542 11,025 54,428 3.90% 30% 669 34,493 63%
^1^ The<br> above table reflects that at 31 March 2021 and 30 September 2020 Westpac applied an overlay<br> for business lending to take into account facilities where reviews had not been completed.<br> The overlay is reassessed as customer reviews are completed. This has resulted in a $0.2<br> billion increase in RWA at 31 March 2021 and a $0.9 billion increase in RWA at 30 September<br> 2020.
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^2^ Outstandings<br> are balances that were drawn down as at the reporting date and include certain off-balance<br> sheet items.
--- ---
^3^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
--- ---
48 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report
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Credit<br> risk exposures

Sovereignportfolio by external credit rating

31 March 2021 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
AAA 79,518 106 82,215 0.01% 6% 1 1,086 1%
AA 55,760 968 60,446 0.02% 7% 1 1,163 2%
A 295 146 443 0.05% 25% - 54 12%
BBB 106 10 116 0.22% 35% - 37 32%
BB 3 14 17 2.30% 35% - 15 88%
B - - - - - - - -
Other - - - - - - - -
Subtotal 135,682 1,244 143,237 0.01% 7% 2 2,355 2%
Default - - - NA - - - -
Total 135,682 1,244 143,237 0.01% 7% 2 2,355 2%
30 September 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 71,383 157 77,107 0.01% 6% - 1,135 1%
AA 49,201 984 54,057 0.02% 8% 1 1,121 2%
A 352 117 479 0.05% 27% - 50 10%
BBB 191 7 198 0.20% 33% - 57 29%
BB 5 11 16 2.23% 33% - 13 81%
B - - - - - - - -
Other - - - - - - - -
Subtotal 121,132 1,276 131,857 0.01% 7% 1 2,376 2%
Default - - - NA - - - -
Total 121,132 1,276 131,857 0.01% 7% 1 2,376 2%
31 March 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 56,238 150 60,998 0.01% 6% - 718 1%
AA 59,725 1,160 64,805 0.02% 7% 2 1,220 2%
A 594 233 828 0.05% 27% - 84 10%
BBB 407 7 414 0.21% 33% - 154 37%
BB 8 11 19 2.07% 36% - 16 84%
B - - - - 0% - - -
Other - - - - - - - -
Subtotal 116,972 1,561 127,064 0.02% 7% 2 2,192 2%
Default - - - NA 0% - - -
Total 116,972 1,561 127,064 0.02% 7% 2 2,192 2%
^1^ Outstandings<br> are balances that were drawn down as at the reporting date and include certain off-balance<br> sheet items.
--- ---
^2^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
--- ---
Westpac<br> Group March 2021 Pillar 3 report 49
--- ---
Pillar<br> 3 report
--- ---
Credit<br> risk exposures

Bankportfolio by external credit rating

31 March 2021 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
AAA 2,413 - 2,463 0.01% 11% - 101 4%
AA 9,013 211 9,258 0.03% 59% 2 1,903 21%
A 9,297 576 9,690 0.05% 58% 3 2,522 26%
BBB 1,745 302 1,962 0.19% 60% 2 1,150 59%
BB 15 17 30 0.92% 57% - 28 90%
B - - - - - - - -
Other 1 - 1 22.50% 60% - 4 400%
Subtotal 22,484 1,106 23,404 0.05% 54% 7 5,708 24%
Default - - - NA - - - -
Total 22,484 1,106 23,404 0.05% 54% 7 5,708 24%
30 September 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 2,324 - 2,351 0.01% 10% - 90 4%
AA 7,917 152 8,078 0.03% 59% 1 1,543 19%
A 10,391 490 10,731 0.05% 58% 4 2,708 25%
BBB 1,884 243 2,048 0.19% 59% 2 1,263 62%
BB 17 17 34 0.74% 53% - 29 85%
B - - - - - - - -
Other 2 - 2 18.77% 60% - 7 350%
Subtotal 22,535 902 23,244 0.05% 54% 7 5,640 24%
Default - - - NA - - - -
Total 22,535 902 23,244 0.05% 54% 7 5,640 24%
31 March 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
AAA 625 55 680 0.01% 11% - 24 4%
AA 8,861 173 9,015 0.03% 58% 2 1,762 20%
A 14,412 473 14,800 0.05% 54% 4 4,057 27%
BBB 1,984 173 2,110 0.19% 54% 3 1,091 52%
BB 15 12 27 0.60% 48% - 19 70%
B - - - - - - - -
Other 1 - 1 12.11% 60% - 3 300%
Subtotal 25,898 886 26,633 0.05% 54% 9 6,956 26%
Default - - - NA - - - -
Total 25,898 886 26,633 0.05% 54% 9 6,956 26%
^1^ Outstandings<br> are balances that were drawn down as at the reporting date and include certain off-balance<br> sheet items.
--- ---
^2^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
--- ---
50 Westpac Group March 2021 Pillar 3 report
--- ---
Pillar<br> 3 report
--- ---
Credit<br> risk exposures

Residentialmortgages portfolio by PD band^1^

31 March 2021 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
0.0<br> to 0.10 143,271 42,989 184,454 0.06% 20% 23 10,643 6%
0.10<br> to 0.25 75,814 14,566 89,695 0.22% 20% 39 13,149 15%
0.25<br> to 1.0 199,560 22,352 217,749 0.56% 20% 244 55,617 26%
1.0<br> to 2.5 35,525 3,779 38,296 1.44% 21% 115 18,110 47%
2.5<br> to 10.0 13,032 624 13,351 4.62% 20% 126 12,276 92%
10.0<br> to 99.99 13,467 235 13,656 21.18% 20% 579 18,956 139%
Subtotal 480,669 84,545 557,201 1.00% 20% 1,126 128,751 23%
Default 5,586 28 5,597 NA 20% 793 5,187 93%
Total 486,255 84,573 562,798 1.99% 20% 1,919 133,938 24%
30 September 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 143,626 42,300 184,084 0.06% 20% 23 10,339 6%
0.10<br> to 0.25 72,665 11,777 83,738 0.22% 20% 36 11,936 14%
0.25<br> to 1.0 192,438 19,166 207,435 0.57% 20% 235 51,848 25%
1.0<br> to 2.5 37,467 3,583 39,993 1.43% 21% 120 18,368 46%
2.5<br> to 10.0 15,125 668 15,470 4.52% 20% 143 13,657 88%
10.0<br> to 99.99 11,794 232 11,968 19.93% 20% 476 16,328 136%
Subtotal 473,115 77,726 542,688 0.95% 20% 1,033 122,476 23%
Default 7,430 30 7,445 NA 20% 933 8,311 112%
Total 480,545 77,756 550,133 2.29% 20% 1,966 130,787 24%
31 March 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 145,843 40,976 185,030 0.06% 20% 23 10,384 6%
0.10<br> to 0.25 75,031 11,716 86,067 0.22% 20% 37 12,272 14%
0.25<br> to 1.0 194,476 19,051 209,423 0.57% 20% 237 52,333 25%
1.0<br> to 2.5 36,418 3,655 38,978 1.44% 21% 118 17,782 46%
2.5<br> to 10.0 15,317 669 15,657 4.69% 21% 150 14,043 90%
10.0<br> to 99.99 14,062 200 14,215 23.35% 20% 664 19,141 135%
Subtotal 481,147 76,267 549,370 1.11% 20% 1,229 125,955 23%
Default 4,486 30 4,496 NA 20% 559 5,469 122%
Total 485,633 76,297 553,866 1.91% 20% 1,788 131,424 24%
^1^ The<br> above table reflects that at 31 March 2021 Westpac applied a floor of 23.8% to its mortgage<br> risk weights to offset the temporary positive effects of COVID-19 stimulus and support measures<br> on customer account behaviours. The floor is consistent with the mortgage risk weight at<br> 30 September 2020 and has resulted in a $3.7 billion increase in mortgage RWA.
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^2^ Outstandings<br> are balances that were drawn down as at the reporting date.
--- ---
^3^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
--- ---
Westpac<br> Group March 2021 Pillar 3 report 51
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Pillar<br> 3 report
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Credit<br> risk exposures

Australiancredit cards portfolio by PD band^1^

31 March 2021 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
0.0<br> to 0.10 1,730 9,636 7,739 0.05% 70% 3 180 2%
0.10<br> to 0.25 1,058 3,929 3,219 0.16% 73% 4 221 7%
0.25<br> to 1.0 1,047 1,193 1,792 0.47% 74% 6 300 17%
1.0<br> to 2.5 1,233 867 1,843 1.56% 74% 21 765 42%
2.5<br> to 10.0 1,158 376 1,384 4.53% 73% 46 1,173 85%
10.0<br> to 99.99 370 89 388 26.90% 71% 74 1,344 346%
Subtotal 6,596 16,090 16,365 1.30% 72% 154 3,983 24%
Default 94 14 94 NA 71% 48 296 315%
Total 6,690 16,104 16,459 1.87% 72% 202 4,279 26%
30 September 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 1,596 9,952 7,755 0.05% 70% 3 181 2%
0.10<br> to 0.25 987 4,388 3,400 0.16% 73% 4 233 7%
0.25<br> to 1.0 1,024 1,367 1,871 0.45% 73% 7 307 16%
1.0<br> to 2.5 1,826 1,103 2,529 1.67% 74% 31 1,099 43%
2.5<br> to 10.0 725 211 850 6.18% 73% 38 895 105%
10.0<br> to 99.99 424 99 446 26.52% 70% 83 1,401 314%
Subtotal 6,582 17,120 16,851 1.37% 72% 166 4,116 24%
Default 93 16 93 NA 71% 48 289 311%
Total 6,675 17,136 16,944 1.91% 72% 214 4,405 26%
31 March 2020 $m Outstandings^2^ Committed<br> <br><br> Undrawn^3^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 1,704 9,799 7,793 0.05% 70% 3 181 2%
0.10<br> to 0.25 1,146 4,397 3,603 0.16% 73% 4 247 7%
0.25<br> to 1.0 1,260 1,335 2,109 0.46% 73% 7 346 16%
1.0<br> to 2.5 2,350 1,146 3,124 1.70% 74% 39 1,373 44%
2.5<br> to 10.0 1,060 245 1,222 6.22% 73% 55 1,295 106%
10.0<br> to 99.99 608 95 629 29.22% 70% 130 1,186 189%
Subtotal 8,128 17,017 18,480 1.80% 72% 238 4,628 25%
Default 121 17 121 NA 72% 76 209 173%
Total 8,249 17,034 18,601 2.44% 72% 314 4,837 26%
^1^ The<br> above table reflects that at 31 March 2021 and 30 September 2020 Westpac applied a floor<br> of 26% to its Australian Credit Cards risk weights. This has resulted in a $0.6 billion increase<br> in RWA at 31 March 2021 and 30 September 2020.
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^2^ Outstandings<br> are balances that were drawn down as at the reporting date.
--- ---
^3^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
--- ---
52 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report
--- ---
Credit<br> risk exposures

Otherretail portfolio by PD band

31 March 2021 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
0.0<br> to 0.10 224 911 781 0.05% 47% - 59 8%
0.10<br> to 0.25 335 1,202 1,128 0.20% 59% 2 288 26%
0.25<br> to 1.0 3,186 1,002 4,035 0.66% 58% 15 2,024 50%
1.0<br> to 2.5 2,458 830 3,109 1.63% 66% 35 2,613 84%
2.5<br> to 10.0 2,108 291 2,359 4.79% 70% 85 2,555 108%
10.0<br> to 99.99 838 46 897 26.05% 67% 164 1,347 150%
Subtotal 9,149 4,282 12,309 3.47% 63% 301 8,886 72%
Default 267 11 270 NA 67% 158 380 141%
Total 9,416 4,293 12,579 5.54% 63% 459 9,266 74%
30 September 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 217 878 750 0.05% 47% - 57 8%
0.10<br> to 0.25 339 1,263 1,177 0.20% 60% 3 306 26%
0.25<br> to 1.0 3,301 1,080 4,210 0.66% 59% 16 2,121 50%
1.0<br> to 2.5 2,690 904 3,386 1.63% 66% 39 2,854 84%
2.5<br> to 10.0 2,329 320 2,603 4.78% 69% 92 2,822 108%
10.0<br> to 99.99 968 52 1,032 27.02% 67% 191 1,582 153%
Subtotal 9,844 4,497 13,158 3.72% 63% 341 9,742 74%
Default 310 10 313 NA 66% 181 432 138%
Total 10,154 4,507 13,471 5.95% 63% 522 10,174 76%
31 March 2020 $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 215 940 786 0.05% 48% - 59 8%
0.10<br> to 0.25 365 1,376 1,307 0.19% 60% 2 329 25%
0.25<br> to 1.0 3,469 961 4,252 0.67% 56% 16 2,068 49%
1.0<br> to 2.5 3,114 919 3,837 1.66% 66% 45 3,232 84%
2.5<br> to 10.0 3,197 340 3,486 4.90% 67% 121 3,630 104%
10.0<br> to 99.99 1,185 46 1,254 27.19% 66% 235 1,854 148%
Subtotal 11,545 4,582 14,922 4.07% 62% 419 11,172 75%
Default 298 11 301 NA 67% 182 422 140%
Total 11,843 4,593 15,223 5.96% 62% 601 11,594 76%
^1^ Outstandings<br> are balances that were drawn down as at the reporting date.
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^2^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
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Westpac<br> Group March 2021 Pillar 3 report 53
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Credit<br> risk exposures

Smallbusiness portfolio by PD band

31 March 2021<br><br> $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
0.0<br> to 0.10 222 378 430 0.07% 51% - 46 11%
0.10<br> to 0.25 148 206 346 0.19% 21% - 29 8%
0.25<br> to 1.0 5,969 3,721 9,600 0.46% 29% 13 2,008 21%
1.0<br> to 2.5 13,940 1,908 15,808 1.63% 38% 96 7,982 50%
2.5<br> to 10.0 2,561 282 2,844 5.09% 35% 53 1,909 67%
10.0<br> to 99.99 1,837 82 1,921 29.07% 38% 211 2,168 113%
Subtotal 24,677 6,577 30,949 3.25% 35% 373 14,142 46%
Default 982 36 992 NA 36% 240 1,955 197%
Total 25,659 6,613 31,941 6.26% 35% 613 16,097 50%
30 September 2020<br><br> $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
--- --- --- --- --- --- --- --- ---
0.0<br> to 0.10 222 395 431 0.07% 51% - 46 11%
0.10<br> to 0.25 125 192 310 0.19% 21% - 27 9%
0.25<br> to 1.0 6,041 3,723 9,667 0.47% 29% 13 2,024 21%
1.0<br> to 2.5 14,216 1,976 16,145 1.63% 39% 100 8,195 51%
2.5<br> to 10.0 2,936 332 3,270 5.09% 35% 61 2,198 67%
10.0<br> to 99.99 1,573 78 1,652 28.10% 38% 176 1,864 113%
Subtotal 25,113 6,696 31,475 2.99% 35% 350 14,354 46%
Default 1,273 29 1,283 NA 39% 335 2,623 204%
Total 26,386 6,725 32,758 6.79% 36% 685 16,977 52%
31 March 2020 <br><br> $m Outstandings^1^ Committed<br> <br><br> Undrawn^2^ Exposure<br> <br><br> at Default Probability<br> <br><br> of Default Loss<br> Given <br><br> Default Regulatory<br> <br><br> Expected Loss Risk<br> <br><br> Weighted <br><br> Assets Average<br> <br><br> Risk <br><br> Weight
0.0<br> to 0.10 241 361 435 0.07% 50% - 46 11%
0.10<br> to 0.25 131 191 314 0.19% 21% - 27 9%
0.25<br> to 1.0 6,267 3,602 9,770 0.47% 28% 13 2,039 21%
1.0<br> to 2.5 14,668 1,805 16,447 1.64% 39% 104 8,476 52%
2.5<br> to 10.0 3,331 309 3,643 5.25% 36% 71 2,534 70%
10.0<br> to 99.99 1,762 66 1,831 27.83% 38% 190 2,039 111%
Subtotal 26,400 6,334 32,440 3.14% 35% 378 15,161 47%
Default 731 19 741 NA 37% 179 1,651 223%
Total 27,131 6,353 33,181 5.30% 35% 557 16,812 51%
^1^ Outstandings<br> are balances that were drawn down as at the reporting date and include certain off-balance<br> sheet items.
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^2^ Committed<br> undrawn balances are committed exposures that were not drawn down as at the reporting date.
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54 Westpac Group March 2021 Pillar 3 report
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Credit<br>risk exposures

CreditQuality

Actuallosses

31 March 2020 Write-offs Legal and Write-offs from Actual Losses for the
$m direct recovery costs provisions^1^ Recoveries 6 months ended
Corporate - - 56 - 56
Business lending 30 - 3 (8 ) 25
Sovereign - - - - -
Bank - - - - -
Residential mortgages 8 - 37 (1 ) 44
Australian credit cards 121 - - (50 ) 71
Other retail 142 4 - (68 ) 78
Small business 10 1 14 (1 ) 24
Specialised lending - 2 3 (4 ) 1
Securitisation - - - - -
Standardised - - - - -
Total 311 7 113 (132 ) 299
30 September 2020 Write-offs Legal and Write-offs from Actual Losses for the
--- --- --- --- --- --- ---
$m direct recovery costs provisions^1^ Recoveries 12 months ended
Corporate - - 101 (6 ) 95
Business lending 44 2 34 (9 ) 71
Sovereign - - - - -
Bank - - - - -
Residential mortgages 18 - 108 (1 ) 125
Australian credit cards 392 - - (60 ) 332
Other retail 373 10 - (108 ) 275
Small business 27 2 48 (3 ) 74
Specialised lending 1 4 4 (6 ) 3
Securitisation - - - - -
Standardised 2 - - - 2
Total 857 18 295 (193 ) 977
31 March 2020 Write-offs Legal and Write-offs from Actual Losses for the
--- --- --- --- --- --- --- ---
$m direct recovery costs provisions^1^ Recoveries 6 months ended
Corporate 1 - 1 (6 ) (4 )
Business lending 21 - 19 (5 ) 35
Sovereign - - - - -
Bank - - - - -
Residential mortgages 8 - 59 - 67
Australian credit cards 197 - - (33 ) 164
Other retail 181 7 1 (54 ) 135
Small business 20 - 19 - 39
Specialised lending 1 2 - (2 ) 1
Securitisation - - - - -
Standardised - - - - -
Total 429 9 99 (100 ) 437
^1^ Write-offs<br> from individually assessed provisions.
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Westpac<br> Group March 2021 Pillar 3 report 55
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Credit<br>risk exposures

Regulatoryloss 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 time 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^1^.

Predicted parameters are reviewed annually utilising observed outcomes from prior periods as a key input.

Defaultrates

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.

LossGiven 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.

Exposureat 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.

Observed EAD
31 March 2021 Regulatory Default rate Loss Given Default variance to
$m Expected<br> Loss^2^ Predicted Observed Predicted Observed Predicted^3^
Corporate 654 2.26% 0.93% 47% 35% (23%)
Business lending 750 2.25% 1.65% 35% 16% (13%)
Sovereign 2 0.22% - - - -
Bank 7 0.42% 0.12% - - -
Residential mortgages 1,919 0.70% 0.59% 20% 1% (1%)
Australian credit cards 202 1.69% 1.61% 75% 59% (2%)
Other retail 459 4.75% 3.65% 68% 43% (7%)
Small business 613 3.61% 2.67% 38% 9% (10%)
Specialised lending 813 NA 2.13% NA 20% (9%)
Securitisation - NA NA NA NA NA
Standardised - NA NA NA NA NA
Total 5,419
^1^ Predicted<br> parameters are not available for specialised lending, securitisation or standardised exposures<br> because risk weights for these portfolios do not rely on credit estimates and are shown as<br> NA in the tables above.
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^2^ Includes<br> regulatory expected losses for defaulted and non-defaulted exposures.
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^3^ A<br> negative outcome indicates observed EAD was lower than predicted EAD, which can happen because<br> exposures were managed down prior to default or off-balance sheet items or undrawn limits<br> were not fully drawn prior to default.
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56 Westpac Group March 2021 Pillar 3 report
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Credit<br>risk exposures
Observed EAD
--- --- --- --- --- --- ---
30 September 2020 Regulatory Default rate Loss Given Default variance to
$m Expected<br> Loss^1^ Predicted Observed Predicted Observed Predicted^2^
Corporate 758 2.25% 0.92% 47% 35% (23%)
Business lending 809 2.24% 1.54% 35% 17% (13%)
Sovereign 1 0.23% - - - -
Bank 7 0.43% 0.13% - - -
Residential mortgages 1,966 0.68% 0.54% 20% 1% (1%)
Australian credit cards 214 1.70% 1.63% 75% 59% (2%)
Other retail 522 4.79% 3.71% 69% 44% (7%)
Small business 685 3.55% 2.52% 38% 11% (9%)
Specialised lending 837 NA 1.90% NA 20% (9%)
Securitisation - NA NA NA NA NA
Standardised - NA NA NA NA NA
Total 5,799
Observed EAD
--- --- --- --- --- --- ---
31 March 2020 Regulatory Default rate Loss Given Default variance to
$m Expected<br> Loss^1^ Predicted Observed Predicted Observed Predicted^2^
Corporate 787 2.25% 0.93% 47% 36% (23%)
Business lending 669 2.24% 1.56% 34% 17% (13%)
Sovereign 2 0.23% - - - -
Bank 9 0.43% 0.13% - - -
Residential mortgages 1,788 0.66% 0.53% 20% 1% (1%)
Australian credit cards 314 1.68% 1.63% 75% 59% (2%)
Other retail 601 4.83% 3.80% 69% 45% (8%)
Small business 557 3.28% 2.21% 39% 12% (9%)
Specialised lending 813 NA 1.93% NA 22% (9%)
Securitisation - NA NA NA NA NA
Standardised - NA NA NA NA NA
Total 5,540
^1^ Includes<br> regulatory expected losses for defaulted and non-defaulted exposures
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^2^ A<br> negative outcome indicates observed EAD was lower than predicted EAD, which can happen because<br> exposures were managed down prior to default or off-balance sheet items or undrawn limits<br> were not fully drawn prior to default.
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Westpac<br> Group March 2021 Pillar 3 report 57
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Credit<br>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<br> secured by eligible financial collateral, either cash or certain government or semi-government<br> securities, or where protection is bought via credit linked notes, provided proceeds are<br> invested in eligible financial collateral, are included at the gross value, with risk weighted<br> assets for the portion thus secured calculated by applying a 5% LGD^1^;
• exposures<br> mitigated by eligible guarantees, standby letters of credit or similar instruments, where<br> Westpac has direct recourse to an unrelated third party, or credit protection bought via<br> credit default swaps where Westpac is entitled to recover either full principal or credit<br> losses on occurrence of defined credit events, are treated under double default rules where<br> the protection provider is rated A-/A3 or better. The GCCO has the authority to approve exceptions<br> to the A-/A3 minimum; and
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• exposures<br> mitigated by guarantees, letters of credit, credit default swaps or similar instruments,<br> which are not eligible for double default treatment are treated under the substitution approach.
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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.

Collateralvaluation 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<br> collateralised derivative transactions.
58 Westpac Group March 2021 Pillar 3 report
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Credit<br>risk mitigation

Totalexposure covered by collateral, credit derivatives and guarantees

Impact Total exposure for Credit Risk Mitigants
31 March 2021 Total before of credit Total after which some credit Eligible Financial Covered by Covered by
$m mitigation mitigation^1^ mitigation risk is mitigated Collateral Guarantees Credit Derivatives
Corporate 124,955 (388 ) 124,567 3,642 902 436 -
Sovereign 143,292 (55 ) 143,237 712 56 120 -
Bank 24,899 (1,495 ) 23,404 7,991 1,495 - -
Standardised 15,300 - 15,300 1,794 - - -
Total 308,446 (1,938 ) 306,508 14,139 2,453 556 -
Impact Total exposure for Credit Risk Mitigants
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
30 September 2020 Total before of credit Total after which some credit Eligible Financial Covered by Covered by
$m mitigation mitigation^1^ mitigation risk is mitigated Collateral Guarantees Credit Derivatives
Corporate 130,473 (485 ) 129,988 4,357 1,879 295 -
Sovereign 132,020 (163 ) 131,857 757 164 79 -
Bank 24,458 (1,214 ) 23,244 7,981 1,214 - -
Standardised 16,993 - 16,993 2,797 - - -
Total 303,944 (1,862 ) 302,082 15,892 3,257 374 -
Impact Total exposure for Credit Risk Mitigants
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
31 March 2020 Total before of credit Total after which some credit Eligible Financial Covered by Covered by
$m mitigation mitigation^1^ mitigation risk is mitigated Collateral Guarantees Credit Derivatives
Corporate 150,294 (3,765 ) 146,529 8,562 5,617 305 -
Sovereign 127,690 (626 ) 127,064 1,422 626 103 -
Bank 34,129 (7,496 ) 26,633 15,088 7,496 - -
Standardised 19,616 - 19,616 4,932 - - -
Total 331,729 (11,887 ) 319,842 30,004 13,739 408 -
^1^ Impact<br> of credit mitigation under the substitution approach.
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Westpac<br> Group March 2021 Pillar 3 report 59
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Counterparty<br>credit risk

This section describes Westpac’s exposure to credit risk arising from derivative and treasury products.

Approach

Westpac actively assesses and manages the derivative and treasury credit risk (known collectively as counterparty credit risk) arising from its derivatives business. 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.

Structureand organisation

The Financial Markets Credit management team is charged with managing the counterparty credit exposure arising from derivatives and treasury products.

Marketrelated credit risk

There are two components to the regulatory capital requirements for credit risk arising from derivative products:

• capital<br> to absorb losses arising from the default of derivative counterparties; and
• capital<br> to absorb losses arising from mark-to-market valuation movements resulting from changes in<br> the credit quality of derivative counterparties. These valuation movements are referred to<br> as credit valuation adjustments (CVA) and this risk is sometimes labelled as CVA risk. Westpac<br> refers to this requirement as mark-to-market related credit risk.
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Riskmitigation

Mitigation is achieved in a number of ways:

• the<br> limit system monitors for excesses of the pre-defined limits, with any excesses being notified<br> to authorised credit officers;
• Westpac<br> has netting agreements with counterparties to allow the exposure across a portfolio of trades<br> with the same counterparty to be netted;
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• Westpac<br> has collateral agreements with its largest counterparties. The market value of the counterparty’s<br> portfolio is used to recalculate the credit position at each end of day, with collateral<br> being called for when certain pre-set limits are met or exceeded. Westpac exchanges Initial<br> Margin with eligible counterparties for eligible products as protection against potential<br> future exposure to changes in market value;
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• Westpac<br> has initial margin agreements with qualifying counterparties subject to relevant international<br> regulations. The exchange of initial margin for eligible products covers the potential future<br> exposure that could arise from changes in the market value of derivative transactions over<br> the close-out period in the event of a counterparty default;
--- ---
• credit<br> derivatives are used to mitigate credit exposure against certain counterparties; and
--- ---
• regular<br> marking to market and settling of the foreign exchange components of foreign exchange reset<br> contracts.
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Counterpartyderivative 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.

60 Westpac Group March 2021 Pillar 3 report
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Counterparty<br>credit risk

Wrong-wayrisk 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.

Consequencesof 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 $81 million; while for a two notch downgrade, postings would be $90 million^1^.

Counterpartycredit risk summary

31 March 30 September 31 March
$m 2021 2020 2020
Gross<br> positive fair value 23,141 24,320 58,420
Netting<br> and collateral benefits (14,978 ) (16,086 ) (45,783 )
including<br> cash collateral held 875 1,850 (7,463 )
Replacement<br> cost 8,163 8,234 12,637
Potential<br> future exposure 9,853 9,613 11,755
Impact<br> of scaling factor of 1.4 and incurred credit 7,036 6,923 9,500
value adjustment
Net<br> derivatives credit exposure under SA-CCR 25,052 24,770 33,891
Exposure type
Interest<br> rate contracts 8,930 10,320 12,144
Foreign<br> exchange contracts 15,590 13,772 20,397
Equity<br> contracts 5 5 5
Credit<br> derivatives 5 8 141
Commodity<br> contracts 521 665 1,201
Other - 1 4
Total 25,052 24,770 33,891

The format and content this table (including the comparative disclosures for prior periods) has been revised to align to the Standardised Approach – Counterparty Credit Risk (SA-CCR) applicable under the Prudential Standard APS 180 Capital Adequacy: Counterparty Credit Risk (July 2019). This change does not impact SA-CCR capital.

Creditderivative transactions that create exposures to counterparty credit risk

31 March 2021 Westpac<br> Portfolio Intermediation<br> activities
Credit<br> derivatives products used ($m) Bought Sold Bought Sold
Credit<br> Default Swaps - 5 - -
Total<br> Return Swaps - - - -
Credit<br> options - - - -
Credit<br> linked notes - - - -
Collateralised<br> Loan Obligations - - - -
Other - - - -
Total - 5 - -
^1^ Credit<br> rating downgrade postings are cumulative.
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Counterparty<br>credit risk
30 September 2020 Westpac Portfolio Intermediation activities
--- --- --- --- --- --- --- --- ---
Credit<br> derivatives products used ($m) Bought Sold Bought Sold
Credit Default Swaps - 8 - -
Total Return Swaps - - - -
Credit options - - - -
Credit linked notes - - - -
Collateralised Loan Obligations - - - -
Other - - - -
Total - 8 - -
31 March 2020 Westpac Portfolio Intermediation activities
--- --- --- --- --- --- --- --- ---
Credit<br> derivatives products used ($m) Bought Sold Bought Sold
Credit Default Swaps 69 72 - -
Total Return Swaps - - - -
Credit options - - - -
Credit linked notes - - - -
Collateralised Loan Obligations - - - -
Other - - - -
Total 69 72 - -
62 Westpac Group March 2021 Pillar 3 report
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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<br> or true sale securitisations, which involve the transfer of ownership of the underlying asset<br> pool to a third party; and
• synthetic<br> transactions, where the ownership of the pool remains with the originator and only the credit<br> risk of the pool is transferred to a third party, using credit derivatives or guarantees.
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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.

Securitisationof Westpac originated assets - Securitisation is a funding, liquidity and capital management tool. It allows Westpac the ability to liquefy a pool of assets and increase Westpac’s wholesale funding capacity. Westpac may provide arm’s length facilities to the securitisation vehicles. The facilities entered into typically include the provision of liquidity, funding, underwriting and derivative contracts.

Westpac has entered into on balance sheet securitisation transactions whereby loans originated by Westpac are transformed into stocks of saleable mortgage backed securities and held in the originating bank’s liquid asset portfolio. These ‘self securitisations’ do not change risk weighted assets^1^. No securitisation transactions for Westpac originated assets are classified as a resecuritisation.

Securitisationin the management of Westpac’s credit portfolio - Westpac uses securitisation, including portfolio credit default swaps, 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. Transactions are entered into to manage counterparty credit risk or concentration risks.

Provision of securitisationservices, 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 warehouse and term funding of securitised assets and arranging asset backed bond issues.

Securitisation facilities provided by Westpac include resecuritisation exposures which are securitisation exposures in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is itself a securitisation exposure. 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 securitisationprocess

Securitisation activity Role played by Westpac
Securitisation<br> of Westpac originated assets • Arranger • Note<br> holder
• Asset originator • Trust manager
• Bond distributor • Swap provider
• Facility<br> provider • Servicer
Securitisation<br> in the management of Westpac’s credit portfolio • Hedger<br> - protection purchaser
• Investor - protection<br> seller
• Investor<br> - purchaser of securitisation exposures
Provision<br> of securitisation services including funding and arranging asset backed bond issues • Arranger • Liquidity<br> facility
• Bond distributor provider
• Credit enhancement • Swap counterparty
provider servicer
• Funder • Market maker and
broker for distributed
bonds
^1^ The<br> credit exposures of the underlying loans are measured in accordance with APS113.
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Westpac<br> Group March 2021 Pillar 3 report 63
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Securitisation

Key Objectives

Securitisationof Westpac originated assets - The securitisation of Westpac’s own assets provides funding diversity, and is a core tool of liquidity management.

Securitisationin the management of Westpac’s credit portfolio - Westpac acts as principal in transactions and will buy and sell protection in order to meet its portfolio management objectives. Westpac also purchases securitisation exposures in order to earn income. All securitisation activity must follow Westpac’s credit policies and approval processes.

Provision of securitisationservices, including funding and arranging asset backed bond issues - Westpac receives market-based fees in return for its services as servicer, swap counterparty, arranger and facility provider and program fees, interest margins and bond distribution fees on warehouse and term funding facilities. 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 andorganisation

Securitisationof Westpac originated assets - Westpac’s Treasury operations are responsible for all Westpac originated securitisation activity including funding, liquidity and capital management.

Securitisationin the management of Westpac’s credit portfolio - Westpac’s exposure arising from securitisation, including portfolio hedging, is managed by Westpac Institutional Bank (WIB) and integrated within Westpac’s standard risk reporting and management systems.

Provision of securitisationservices including funding and arranging asset backed bond issues - These services are provided by WIB and include the provision of liquidity, credit enhancement, funding and derivative facilities, servicer and arranger services, and 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 riskexposure - 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 the securitisation conduit and other counterparties are captured as part of Westpac’s traded and non-traded market risk reporting and limit management framework.

Liquidity riskexposure - 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

Securitisationof 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.

Securitisationin the management of Westpac’s credit portfolio - Transactions are approved in accordance with Westpac’s credit risk mitigation approach (see pages 58 and 59).

Provision of securitisationservices 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 58 and 59). Any interest rate or currency hedging is subject to counterparty credit risk management (see pages 60 and 61) and market risk management (see pages 73 and 74) policies and processes.

64 Westpac Group March 2021 Pillar 3 report

Pillar 3 report

Securitisation

Regulatory capital approaches

The regulatory capital treatment of all securitisation exposures is measured in accordance with APS120. APS120 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.

Securitisationof 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 satisfied^1^. Westpac cannot rely on external rating when risk weighting its exposure to these trusts and must use the SFA instead.

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.

Securitisationin the management of Westpac’s credit portfolio - Securitisation exposures are assessed using either the ERBA or SFA approaches.

Provision of securitisationservices including funding - Westpac uses the ERBA and the SFA methodology when determining regulatory capital requirements for warehouse and term funding facilities related to securitised assets on Westpac’s balance sheet.

The External Credit Assessment Institutions that can be used by Westpac for securitisations are Standard & Poor’s, Moody’s and Fitch.

Westpac’saccounting policies for securitisation activities

Securitisationof Westpac originated assets - The assets sold by Westpac to a securitisation trust remain on Westpac’s balance sheet for accounting purposes.

Securitisationin the management of Westpac’s credit portfolio - For risk mitigation using synthetic securitisation, the underlying assets remain on Westpac’s balance sheet for accounting purposes. The accounting treatment of the assets will depend on their nature. They could include loans and receivables, available for sale securities or derivatives. The most common form of synthetic securitisation is via a credit default swap, which is treated as a derivative and recognised in the profit and loss statement at fair value.

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 as available-for-sale (AFS) and measured at fair value through Other Comprehensive Income (within the AFS securities reserve).

Provision of securitisationservices 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.

^1^ Including<br> the requirements to achieve capital relief.
Westpac<br> Group March 2021 Pillar 3 report 65
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Securitisation

Banking book summary of assets securitisedby Westpac

This table shows outstanding banking book securitisation assets and assets intended to be securitised**^1^**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 APS113.

Total outstanding securitised by ADI Assets Westpac
31 March 2021 Traditional Synthetic intended to be Impaired Past due recognised
$m Securitisation ^2^ Securitisation securitised loans assets losses
Residential mortgages 137,681 - - 42 1,068 -
Credit cards - - - - - -
Auto and equipment finance 1,483 - - 34 - -
Business lending - - - - - -
Investments in ABS - - - - - -
Other - - - - - -
Total 139,164 - - 76 1,068 -
Total<br> outstanding securitised by ADI Assets Westpac
30 September 2020 Traditional Synthetic intended<br> to be Impaired Past<br> due recognised
m Securitisation ^2^ Securitisation securitised loans assets losses
Residential mortgages 145,384 - - 56 1,407 -
Credit cards - - - - - -
Auto and equipment finance 1,735 - - 53 - -
Business lending - - - - - -
Investments in ABS - - - - - -
Other - - - - - -
Total 147,119 - - 109 1,407 -
Total<br> outstanding securitised by ADI Assets Westpac
31 March 2020 Traditional Synthetic intended<br> to be Impaired Past<br> due recognised
m Securitisation ^2^ Securitisation securitised loans assets losses
Residential mortgages 106,523 - - 68 838 -
Credit cards - - - - - -
Auto and equipment finance 2,306 - - 38 - -
Business lending - - - - - -
Investments in ABS - - - - - -
Other - - - - - -
Total 108,829 - - 106 838 -

All values are in US Dollars.

Banking book summary of total Westpacsponsored third party assets securitised

This table represents banking book third party assets where Westpac acts as a sponsor.

31 March 30 September 31 March
m 2021 2020 2020
Residential<br> mortgages 95 113 122
Credit cards - - -
Auto and equipment<br> finance - - -
Business lending - - -
Investments<br> in ABS - - -
Other - - -
Total 95 113 122

All values are in US Dollars.

^1^ Represents<br> securitisation activity from the end of the reporting period to the disclosure date of this<br> report.
^2^ Includes<br> self-securitisation assets of $131,646 million as at 31 March 2021 ($138,333 million as at<br> 30 September 2020 and $98,212 million as at 31 March 2020).
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66 Westpac Group March 2021 Pillar 3 report
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Banking book summary of securitisationactivity by asset type

This table shows assets transferred into securitisation schemes by underlying asset type (ADI originated) for the relevant period.

For the 6 months ended
31 March 2021 Amount Recognised gain or
m securitised loss<br> on sale
Residential<br> mortgages 9,925 -
Credit cards - -
Auto and equipment<br> finance 325 -
Business lending - -
Investments<br> in ABS - -
Other - -
Total 10,250 -
For the 12 months ended
30 September 2020 Amount Recognised<br> gain or
m securitised loss<br> on sale
Residential<br> mortgages 76,353 -
Credit cards - -
Auto and equipment<br> finance 506 -
Business lending - -
Investments<br> in ABS - -
Other - -
Total 76,859 -
For the 6 months ended
31 March 2020 Amount Recognised<br> gain or
m securitised loss<br> on sale
Residential<br> mortgages 19,547 -
Credit cards - -
Auto and equipment<br> finance 318 -
Business lending - -
Investments<br> in ABS - -
Other - -
Total 19,865 -

All values are in US Dollars.

Westpac<br> Group March 2021 Pillar 3 report 67

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Securitisation

Banking book summary of on and off-balancesheet securitisation by exposure type

31 March 2021 On balance sheet Off-balance Total Exposure
m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 7,303 37 7,340
Liquidity facilities - - 273 273
Funding facilities 2,951 - 1,451 4,402
Underwriting<br> facilities - - - -
Lending facilities 625 - 540 1,165
Warehouse<br> facilities 9,265 - 5,854 15,119
Total 12,841 7,303 8,155 28,299
30 September 2020 On<br> balance sheet Off-balance Total<br> Exposure
m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 7,650 19 7,669
Liquidity facilities - - 308 308
Funding facilities 2,167 - 1,589 3,756
Underwriting<br> facilities - - - -
Lending facilities 551 - 404 956
Warehouse<br> facilities 10,173 - 3,955 14,128
Total 12,892 7,650 6,275 26,817
31 March 2020 On<br> balance sheet Off-balance Total<br> Exposure
m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 8,583 39 8,622
Liquidity facilities - - 306 306
Funding facilities 3,163 - 783 3,946
Underwriting<br> facilities - - - -
Lending facilities 536 - 299 835
Warehouse<br> facilities 10,408 - 3,980 14,388
Total 14,107 8,583 5,407 28,097

All values are in US Dollars.

68 Westpac Group March 2021 Pillar 3 report

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Securitisation

Banking book securitisation exposureat default by risk weight band

31 March 2021 Exposure Total Exposure Risk Weighted Assets Total Risk
m Securitisation Resecuritisation at<br> Default Securitisation Resecuritisation Weighted<br> Assets
Less<br> than or equal to 10% 15 - 15 - - -
Greater than<br> 10 - 20% 24,511 - 24,511 4,205 - 4,205
Greater than<br> 20 - 30% 2,117 - 2,117 540 - 540
Greater than<br> 30 - 50% 946 - 946 351 - 351
Greater than<br> 50 - 75% 664 - 664 370 - 370
Greater than<br> 75 - 100% 15 - 15 15 - 15
Greater than<br> 100 - 250% 30 - 30 33 - 33
Greater than<br> 250 - 425% - - - - - -
Greater than<br> 425 - 650% - - - - - -
Other - - - - - -
Deductions - - - - - -
Total 28,299 - 28,299 5,513 - 5,513
30 September 2020 Exposure Total<br> Exposure Risk<br> Weighted Assets Total<br> Risk
m Securitisation Resecuritisation at<br> Default Securitisation Resecuritisation Weighted<br> Assets
Less than or<br> equal to 10% 7 - 7 - - -
Greater than<br> 10 - 20% 22,686 - 22,686 3,892 - 3,892
Greater than<br> 20 - 30% 1,804 - 1,804 451 - 451
Greater than<br> 30 - 50% 1,639 - 1,639 659 - 659
Greater than<br> 50 - 75% 599 - 599 329 - 329
Greater than<br> 75 - 100% 54 - 54 54 - 54
Greater than<br> 100 - 250% 26 - 26 29 - 29
Greater than<br> 250 - 425% - - - - - -
Greater than<br> 425 - 650% - - - - - -
Other - - - - - -
Deductions - - - - - -
Total 26,817 - 26,817 5,413 - 5,413
31 March 2020 Exposure Total<br> Exposure Risk<br> Weighted Assets Total<br> Risk
m Securitisation Resecuritisation at<br> Default Securitisation Resecuritisation Weighted<br> Assets
Less than or<br> equal to 10% 5 - 5 - - -
Greater than<br> 10 - 20% 22,579 - 22,579 3,887 - 3,887
Greater than<br> 20 - 30% 2,787 - 2,787 680 - 680
Greater than<br> 30 - 50% 2,109 - 2,109 814 - 814
Greater than<br> 50 - 75% 554 - 554 306 - 306
Greater than<br> 75 - 100% 2 - 2 2 - 2
Greater than<br> 100 - 250% 48 - 48 57 - 57
Greater than<br> 250 - 425% - - - - - -
Greater than<br> 425 - 650% - - - - - -
Other - - - - - -
Deductions 14 - 14 - - -
Total 28,097 - 28,097 5,747 - 5,747

All values are in US Dollars.

Banking book securitisation exposurededucted from capital

m 31 March<br> 2021 30 September<br> 2020 31 March<br> 2020
Securities - - -
Liquidity<br> facilities - - -
Funding<br> facilities - - 14
Underwriting<br> facilities - - -
Credit<br> enhancements - - -
Derivative<br> transactions - - -
Total - - 14

All values are in US Dollars.

Westpac<br> Group March 2021 Pillar 3 report 69

Pillar 3 report

Securitisation

Banking book securitisationsubject to early amortisation treatment

There is no securitisation exposure in the banking book that is subject to early amortisation treatment as at 31 March 2021 (nil as at 30 September 2020).

Banking book resecuritisationexposure subject to credit risk mitigation (CRM)

As at 31 March 2021 resecuritisation exposures subject to CRM was nil (nil as at 30 September 2020).

Banking book resecuritisationexposure to guarantors

Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments as at 31 March 2021 (nil as at 30 September 2020).

Trading book summaryof assets securitised by Westpac

As at 31 March 2021 there was nil in outstanding securitisation exposures for Westpac originated assets held in the trading book (nil as at 30 September 2020).

Trading book summaryof 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 31 March 2021 (nil as at 30 September 2020).

Trading book summaryof securitisation activity by asset type

There is no originated securitisation activity in the trading book for the 12 months to 31 March 2021 (nil for the 6 months to 30 September 2020).

Trading book aggregatedamount of exposure securitised by Westpac and subject to APS116 Capital Adequacy: Market Risk

As at 31 March 2021 there is no Westpac originated outstanding securitisation exposure held in the trading book subject to APS116 Capital Adequacy: Market Risk (nil as at 30 September 2020).

70 Westpac Group March 2021 Pillar 3 report
Pillar<br> 3 report
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Securitisation

Trading book summary of on and off-balancesheet securitisation by exposure type^1^

31 March 2021 On<br> balance sheet Off-balance Total<br> Exposure
$m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 29 - 29
Liquidity<br> facilities - - - -
Funding<br> facilities - - - -
Underwriting<br> facilities - - - -
Lending<br> facilities - - - -
Warehouse<br> facilities - - - -
Credit<br> enhancements - - - -
Basis<br> swaps - - 112 112
Other<br> derivatives - - 11 11
Total - 29 123 152
30 September 2020 On<br> balance sheet Off-balance Total<br> Exposure
$m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 30 - 30
Liquidity<br> facilities - - - -
Funding<br> facilities - - - -
Underwriting<br> facilities - - - -
Lending<br> facilities - - - -
Warehouse<br> facilities - - - -
Credit<br> enhancements - - - -
Basis<br> swaps - - 103 103
Other<br> derivatives - - 17 17
Total - 30 120 150
31 March 2020 On<br> balance sheet Off-balance Total<br> Exposure
$m Securitisation<br> retained Securitisation<br> purchased sheet at<br> Default
Securities - 92 - 92
Liquidity<br> facilities - - - -
Funding<br> facilities - - - -
Underwriting<br> facilities - - - -
Lending<br> facilities - - - -
Warehouse<br> facilities - - - -
Credit<br> enhancements - - - -
Basis<br> swaps - - 116 116
Other<br> derivatives - - 16 16
Total - 92 132 224

Trading booksecuritisation exposure subject to specific risk

There is no trading book securitisation exposure subject to specific risk for 31 March 2021 (nil for 30 September 2020).

Trading booksecuritisation exposure subject to APS120 Securitisation specific risk by risk weight band

There is no trading book securitisation exposure subject to APS120 specific risk for 31 March 2021 (nil for 30 September 2020).

Trading bookcapital requirements for securitisation exposures subject to internal models approach (IMA) by risk classification

There is no trading book capital requirement for securitisation subject to IMA for 31 March 2021 (nil for 30 September 2020).

Trading bookcapital 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 31 March 2021 (nil for 30 September 2020).

^1^ EAD<br> associated with trading book securitisation is not included in the EAD by Major Type on page<br> 34. Trading book securitisation exposure is captured and risk weighted under APS116.
Westpac<br> Group March 2021 Pillar 3 report 71
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Pillar<br> 3 report
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Securitisation

Tradingbook securitisation exposure deducted from capital

There is no trading book capital deduction for 31 March 2021 (nil for 30 September 2020).

Tradingbook securitisation subject to early amortisation treatment

There is no securitisation exposure in the trading book that is subject to early amortisation treatment for 31 March 2021 (nil for 30 September 2020).

Tradingbook resecuritisation exposure subject to CRM

Westpac has no resecuritisation exposure subject to CRM at 31 March 2021 (nil for 30 September 2020).

Tradingbook resecuritisation by guarantor creditworthiness

Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments for 31 March 2021 (nil for 30 September 2020).

72 Westpac Group March 2021 Pillar 3 report
Pillar<br> 3 report<br><br> <br>Market<br> risk
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Westpac’s exposure to market risk arises out of its Financial Markets and Treasury trading activities. This is quantified for regulatory capital purposes using both the standard method and the internal model approach, details of which are provided below.

Approach

Financial Markets’ trading activity includes dealings that encompass book running and distribution activity. 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 Interest Rate Risk in the Banking Book 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. VaR and SVaR are the primary mechanisms for measuring and managing market risk. 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 will meet 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 Common Equity Tier 1 Capital for exposures which are not be captured through the fair valuation framework.

VaR andSVaR 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.

Backtesting

Daily backtesting 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.

Stresstesting

Daily stress testing against pre-determined scenarios is carried out to analyse potential losses beyond the 99% confidence level. An escalation framework around selective stress tests is approved by the Head of Market Risk.

Profitand 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.

Westpac<br> Group March 2021 Pillar 3 report 73
Pillar<br> 3 report<br><br> <br>Market<br> risk
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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 (based upon the most recent 12 months of historical market data) and a SVaR window (12 months of market data that includes a period of significant financial stress), 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.

Risk mitigation

Market risk positions are managed by the trading desks consistent with delegated trading and product authorities. Risks are consolidated into portfolios based on product and risk type. 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<br> responsibilities are clearly delineated at all levels;
• a structured system of<br> limits and reporting of risk exposures, including stress testing;
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• surveillance of dealing<br> room conduct;
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• all new products and<br> significant product variations undergo a rigorous approval process to identify business risks<br> prior to launch;
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• models that are used<br> to determine risk or profit and loss for Westpac’s accounts are independently reviewed;
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• duties are segregated<br> so that employees involved in the origination, processing and valuation of transactions operate<br> under separate reporting lines, minimising the opportunity for collusion; and
--- ---
• legal personnel review<br> documentation for compliance with relevant laws and regulations.
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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 Stressed VaR, while the Standard approach is used for interest rate specific risk.

$m 31 March 2021 30 September 2020 31 March 2020
Internal<br> model approach 680 630 571
Standard<br> approach 79 71 101
Total<br> capital required 759 701 672
Risk<br> weighted assets 9,490 8,761 8,396
74 Westpac Group March 2021 Pillar 3 report
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Pillar<br> 3 report<br><br> <br>Market<br> risk
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VaR by risk type

31 March 2021 For<br> the 6 months ended
$m High Low Average Period<br> end
Interest<br> rate risk 28.7 8.1 18.4 8.1
Foreign<br> exchange risk 6.3 0.7 2.2 1.3
Equity<br> risk 3.2 0.0 0.4 0.4
Commodity<br> risk 7.9 0.5 1.5 0.7
Other<br> market risks 23.8 3.9 17.7 4.0
Diversification<br> benefit NA NA (13.7) (5.1)
Net<br> market risk^1^
41.5 9.5 26.5 9.5
30 September 2020 For<br> the 6 months ended
$m High Low Average Period<br> end
Interest<br> rate risk 25.5 14.2 19.2 16.6
Foreign<br> exchange risk 11.7 0.8 4.0 2.4
Equity<br> risk 0.7 0.1 0.3 0.3
Commodity<br> risk 3.4 0.6 1.6 0.9
Other<br> market risks 28.2 14.7 22.7 20.0
Diversification<br> benefit NA NA (18.5) (14.9)
Net<br> market risk^1^
42.0 20.5 29.3 25.2
31 March 2020 For<br> the 6 months ended
$m High Low Average Period<br> end
Interest<br> rate risk 21.7 7.0 9.9 15.4
Foreign<br> exchange risk 11.2 0.5 3.9 1.5
Equity<br> risk 0.4 0.0 0.1 0.4
Commodity<br> risk 3.4 1.2 2.2 2.7
Other<br> market risks 32.9 2.4 6.5 28.1
Diversification<br> benefit NA NA (10.9) (25.1)
Net<br> market risk^1^
31.8 7.1 11.6 23.0

Stressed VaR by risk type

31 March 2021 For<br> the 6 months ended
$m High Low Average Period<br> end
Interest<br> rate risk 76.5 35.1 58.7 59.8
Foreign<br> exchange risk 10.3 0.9 3.9 3.3
Equity<br> risk 3.5 0.1 0.4 1.0
Commodity<br> risk 3.5 0.6 1.5 1.7
Other<br> market risks 15.2 11.2 12.5 13.9
Diversification<br> benefit NA NA (105.6) (20.7)
Net<br> market risk^1^ 80.8 35.6 62.4 59.0
30 September 2020 For<br> the 6 months ended
$m High Low Average Period<br> end
Interest<br> rate risk 76.0 41.0 58.7 42.5
Foreign<br> exchange risk 17.4 1.5 6.3 2.5
Equity<br> risk 0.9 0.1 0.2 0.2
Commodity<br> risk 5.1 0.8 2.4 1.1
Other<br> market risks 19.2 12.2 14.9 12.9
Diversification<br> benefit NA NA (72.5) (10.3)
Net<br> market risk^1^
94.0 40.9 68.6 49.0
^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.^
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Westpac<br> Group March 2021 Pillar 3 report 75
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Pillar<br> 3 report<br><br> <br>Market<br> risk
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31 March 2020 For<br> the 6 months ended
--- --- --- --- ---
$m High Low Average Period<br> end
Interest<br> rate risk 85.7 39.5 58.0 55.5
Foreign<br> exchange risk 34.3 0.9 10.8 2.4
Equity<br> risk 0.3 0.0 0.1 0.2
Commodity<br> risk 13.1 2.2 5.0 5.9
Other<br> market risks 23.3 16.2 18.8 19.0
Diversification<br> benefit NA NA (66.6) (22.5)
Net<br> market risk^1^ 89.4 34.0 56.0 60.6

Back-testing results

The following graph gives a comparison of actual profit and loss to VaR over the 6 months ended 31 March 2021.

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.

^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.

76 Westpac Group March 2021 Pillar 3 report
Pillar 3 report
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Interest<br>Rate Risk in the Banking Book (IRRBB)
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Interest Rate Risk in the Banking Book (IRRBB) is the risk to interest income arising from a mismatch between the duration of assets and liabilities that arises in the normal course of banking activities.

Approach

The banking book activities that give rise to market risk include lending activities, balance sheet funding and capital management. Interest rate risk, basis risk, currency risk and funding and liquidity risk are inherent in these activities. Treasury’s Asset & Liability Management (ALM) unit is responsible for managing market risk arising from Westpac’s banking book activity.

All material regions, business lines and legal entities are included in Westpac’s IRRBB framework.

Model accreditation has been granted by APRA for the use of an internal model for the determination of IRRBB regulatory capital. Under the model, regulatory capital is primarily derived from a VaR measure using 6 years of historical data with a scaled 1 year, 99th percentile, one-tailed confidence interval.

Asset and liabilitymanagement

The ALM unit manages the structural interest rate mismatch associated with the transfer priced balance sheet, including the investment of Westpac’s capital to its agreed benchmark duration. A key risk management objective is to achieve reasonable stability of Net Interest Income (NII) over time. These activities are performed under the oversight of ALCO and the Treasury Risk team.

Net InterestIncome sensitivity

NII sensitivity is managed in terms of the net interest income-at-risk (NaR) modelled over a set time horizon using defined scenarios for movements in wholesale market interest rates. The NII measurement framework combines the underlying statement of financial position data with assumptions about runoff and new business, expected repricing behaviour and changes in wholesale market interest rates. The interest rate scenarios modelled include those projected using 100 and 200 basis point shifts up and down from current market yield curves.

A comparison between the NII outcomes from these modelled scenarios indicates the sensitivity to interest rate changes. On and off-balance sheet instruments are then used to manage this interest rate risk.

NaR limit

The BRiskC has approved a NaR limit. This limit is managed by the Group Treasurer and is expressed as a defined basis point shock over a one year risk horizon. This limit is monitored by the Treasury Risk team.

VaRlimit

The BRiskC has also approved an interest rate VaR limit for ALM activities. This limit is managed by the Group Treasurer and monitored by the Treasury Risk team. Additionally, the BRiskC and the Treasury Risk team set structural risk limits to prevent undue concentration of risk.

Structural foreignexchange 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 reporting

Interest rate risk in the banking book risk measurement systems include front office product systems, which capture all treasury funding and derivative transactions; the transfer pricing system, which captures all retail and other business transactions; and non-traded Interest Rate Risk systems, which calculate amongst other things, ALM VaR and NaR.

Daily monitoring of market risk exposure against VaR and structural risk limits is conducted independently by the Treasury Risk team, with NaR monitored on a monthly basis. Management reports detailing structural positions and VaR are produced and distributed daily for use by dealers and management across all stakeholder groups. Quarterly reports are produced for the senior management market risk forums of RISKCO and BRiskC to provide transparency of material market risks and issues.

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Interest<br>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, fair value and net investment 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.

The same controls used to monitor traded market risk allow for continuous monitoring by management.

Change in economic value of a sudden upwardand downward movement in interest rates

31 March 2021 200bp<br> parallel 200bp<br> parallel
$m increase decrease
AUD (470.2) 511.5
NZD 4.7 (4.2)
USD 32.5 (38.8)
Total (433.0) 468.5
30 September 2020 200bp<br> parallel 200bp<br> parallel
$m increase decrease
AUD (290.1) 237.4
NZD (10.0) 12.3
USD 45.8 (54.9)
Total (254.3) 194.8
31 March 2020 200bp<br> parallel 200bp<br> parallel
$m increase decrease
AUD 7.7 5.6
NZD 10.2 10.6
USD 71.1 (38.9)
Total 89.0 (22.7)
VaR results for non-traded interest rate risk^1^
--- --- --- --- ---
For the For the For the
6 months ended 6 months ended 6 months ended
31 March 30 September 31 March
$m 2021 2020 2020
High 224.3 219.7 169.2
Low 69.9 166.9 31.0
Average 190.1 207.0 45.7
Period<br> end 69.9 202.4 169.2
Interest rate risk in the banking book regulatory capital and risk weighted assets
31 March 30 September 31 March
$m 2021 2020 2020
Total<br> capital required 960 730 424
Risk<br> weighted assets 11,998 9,124 5,305
^1^ IRRBB<br> VaR includes interest rate risk, credit spread risk in liquid assets and other basis risks<br> as used for internal management reporting purposes.
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78 Westpac Group March 2021 Pillar 3 report
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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. This definition includes legal and regulatory risk but excludes strategic risk. Westpac’s operational risk definition is aligned to APS115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk (AMA).

Approach

Westpac has been accredited to use the AMA in accordance with APS115. Westpac’s operational risk is measured and managed in accordance with the policies and processes defined in its Operational Risk Management Framework.

Westpac’s Operational Risk Management Framework

The Operational Risk Management Framework outlines our approach to the:

• identification,<br> measurement and management of operational risks that may impede Westpac’s ability to<br> achieve its strategic objectives and vision;
• identification<br> and escalation of operational risk incidents in order to mitigate potential financial loss,<br> regulatory impacts and reputational damage that may impact shareholders, the community, and<br> employees; and
--- ---
• calculation<br> of operational risk capital.
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The key components of Westpac’s operational risk management framework are listed below:

Governance - The governance structure provides clearly defined roles and responsibilities for overseeing and reviewing operational risk exposure and its management.

The Board and BRiskC are supported by committees, including RISKCO, that monitor the Group’s operational risk profile and the effectiveness of operational risk management practices, including operational risk capital.

Risk and Control Assessment (RCA)- The RCA process provides a structured and consistent approach for the Business to develop risk profiles and thereby supports them in implementing appropriate actions where the risk is outside the defined Risk Appetite.

Issue and Action Management - The Issue and Action Management process encompasses the identification and management of issues, which relate to control deficiencies or gaps, to ensure that they are effectively addressed through action plans.

Key Indicators (KIs) - are objective measures used by management to monitor the current risk and control environment, inform the assessment of risk and to assist in prompting management action when the metrics indicate that the level of risk is increasing.

Incident Management – The Incident Management process assists in implementing 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).

Data - The framework includes principles and processes to ensure the integrity of operational risk data used to support management decision-making and calculate and allocate capital. The principles apply to the governance, input and capture, reconciliation and validation, reporting and storage of operational risk data. Operational risk data is subject to independent validation on a regular basis.

Scenario Analysis - is used to provide a forward looking-view and facilitate a structured and consistent approach to assess the impacts of severe but plausible loss events on the Group’s objectives and operations. Scenario Analysis is also an input to the calculation of operational risk capital.

Reporting - Regular reporting of operational risk information to governance bodies and senior management is used to support timely and proactive management of operational risk and enable transparent and formal oversight of the risk and control environment.

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Operational risk

AMA capital model overview

Operational risk regulatory capital is calculated on a quarterly basis. Westpac’s operational risk capital is based on three data sources:

• Internal<br> Loss Data – operational risk losses experienced by Westpac;
• External<br> Loss Data – operational risk losses experienced by other financial institutions; and
--- ---
• Scenario<br> Data – potential losses from severe but plausible events relevant to Westpac.
--- ---

These data sources together represent the internal and external operational risk profile, across the spectrum of operational risk losses, from both historical and forward-looking perspectives. The model combines these data sources to produce a loss distribution.

Expected loss offsets and risk mitigation

No adjustments or deductions are currently made to Westpac’s measurement of operational risk regulatory capital for the mitigating impacts of insurance or expected operational risk losses.

Operational Risk regulatory capital and risk weighted assets

31 March 30 September 31 March
$m 2021 2020 2020
Advanced<br> measurement approach 2,562 2,562 2,562
Standardised<br> approach overlay 765 765 765
Culture,<br> Governance & Accountability Review overlay 500 500 500
AUSTRAC<br> related overlay 500 500 500
Total<br> capital required 4,327 4,327 4,327
Risk<br> weighted assets 54,090 54,090 54,093
80 Westpac Group March 2021 Pillar 3 report
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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 andorganisation

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 (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 equityunderwriting 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 ofequity 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. This includes the use of recent arms-length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants to price similar instruments. In the event that the fair value of an unlisted security cannot be measured reliably, these investments are measured at cost.

Where the investment is held for long term strategic purposes, these investments are accounted for either at fair value through other comprehensive income (OCI), fair values through profit and loss, or equity accounted for and recognised as a share in associates.

Other relatedmatters

• Fair<br> value should not differ to the listed stock price. Should a listed stock price not be available,<br> fair value is estimated using the valuation techniques referred to above. The book value<br> of certain unlisted investments for which active markets do not exist are measured at cost<br> because cost is considered to be a reasonable approximation of fair value.
• The<br> equity method of accounting is used for investments in Associates. Associates are entities<br> in which the Group has significant influence, but not control, over the operating and financial<br> policies.
--- ---

Riskreporting

Westpac manages equity risk in two ways, VaR limits and investment limits:

• A<br> VaR limit (in conjunction with structural limits) is used to manage traded equity. This limit<br> is a sub-limit of the overall VaR limit for Financial Markets trading activities. Equity<br> trading activity is overseen by the independent Market Risk function applying the same controls<br> used for monitoring other trading book activities in Financial Markets and Treasury; and
• Investment<br> exposures are reported annually to MARCO.
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Westpac<br> Group March 2020 Pillar 3 report 81
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Equity risk

Book value of equity exposures

31 March 30 September 31 March
$m 2021 2020 2020
Listed equity exposures (publicly<br> traded) 40 365 199
Unlisted<br> equity exposures (privately traded) 122 127 128
Total<br> book value of equity exposures 162 492 327
Gains/losses
31 March 30 September 31 March
$m 2021 2020 2020
Cumulative realised gains (losses) 32 47 -
Total unrealised gains (losses)<br> through profit & loss - 303 (91)
Total unrealised gains (losses)<br> through equity - - -
Total<br> latent revaluation gains (losses) - - ^-^
82 Westpac Group March 2021 Pillar 3 report
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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 Group ALCO and Treasury Risk.

Liquidity RiskManagement 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 balance sheet funding strategy over a three year period. 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 stress 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 transferpricing

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 the Group’s Treasury and Treasury Risk teams. Liquidity reports are presented to ALCO monthly and to the Board quarterly.

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Liquidity coverage ratio

Liquidity Coverage Ratio

Westpac’s average LCR for the quarter was 124%^1^ (31 December 2020: 152%).

Liquid assets included in the LCR comprise High Quality Liquid Assets (HQLA), the Committed Liquidity Facility (CLF) offered by the Reserve Bank of Australia and additional qualifying Reserve Bank of New Zealand securities. LCR liquid assets also includes Westpac’s Additional Allowance of the Term Funding Facility (TFF).

Westpac’s portfolio of HQLA averaged $117.3 billion over the quarter^2^.

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%.

Effective 1 January 2021, the Group is required by APRA to increase the value of its net cash outflows by 10% for the purpose of calculating LCR.

31 March 2021 31 December<br> 2020
Total unweighted Total weighted Total unweighted Total weighted
m value<br> (average)^2^ value<br> (average)^2^ value<br> (average)^2^ value<br> (average)^2^
Liquid<br> assets, of which:
1 High-quality liquid<br> assets (HQLA) 117,280 126,801
2 Alternative liquid assets (ALA) 39,604 53,291
3 Reserve Bank of New Zealand (RBNZ)<br> securities 8,196 7,019
Cash<br> Outflows
4 Retail deposits<br> and deposits from small business customers, of which: 287,212 25,064 283,038 24,896
5 Stable deposits 142,384 7,119 141,806 7,090
6 Less stable deposits 144,828 17,945 141,232 17,806
7 Unsecured<br> wholesale funding, of which: 161,362 73,242 163,105 75,875
8 Operational deposits (all counterparties)<br> and deposits in networks for cooperative banks 79,933 19,898 75,421 18,773
9 Non-operational deposits (all counterparties) 68,405 40,320 75,751 45,169
10 Unsecured debt 13,024 13,024 11,933 11,933
11 Secured wholesale funding 1 -
12 Additional<br> requirements, of which: 204,259 27,461 200,526 25,969
13 Outflows related to derivatives<br> exposures and other collateral requirements 10,882 10,882 10,198 10,198
14 Outflows related to loss of funding<br> on debt products 1,365 1,365 656 656
15 Credit and liquidity facilities 192,012 15,214 189,672 15,115
16 Other contractual funding obligations 251 251 689 689
17 Other contingent funding obligations 37,718 3,185 39,735 3,346
18 Total<br> cash outflows 129,204 130,775
Cash<br> inflows
19 Secured lending (e.g. reverse repos) 5,891 - 10,551 -
20 Inflows from fully performing exposures 8,817 5,202 9,337 5,532
21 Other cash<br> inflows 2,559 2,559 2,206 2,206
22 Total cash inflows 17,267 7,761 22,094 7,738
23 Total liquid assets 165,080 187,111
24 Total<br> net cash outflows 133,587 123,037
24.1 Of which: Net cash outflows<br> overlay 12,144 -
25 Liquidity Coverage Ratio (%) 124 % 152 %
Number<br> of data points used 64 65

All values are in US Dollars.

^1^ Calculated as a simple<br> average of the daily observations over the quarter.
Westpac<br> Group March 2020 Pillar 3 report 84
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Net stable funding ratio

Net Stable Funding Ratio

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 31 March 2021 was 122.5%^1^ (31 December 2020 122.3%). Westpac maintains a buffer over the regulatory minimum of 100%.

Unweighted value<br> by residual maturity
31 March 2021 No maturity < 6 months 6 months<br> to > 1 year Weighted
m <<br> 1yr value
Available<br> Stable Funding (ASF) Item
1 Capital 70,338 - 1,702 23,371 95,411
2 Regulatory<br> capital 70,338 - 1,702 23,371 95,411
3 Other capital<br> instruments - - - - -
4 Retail deposits<br> and deposits from small business customers 275,760 77,621 322 129 326,631
5 Stable deposits 140,094 23,293 5 8 155,231
6 Less stable<br> deposits 135,666 54,328 316 120 171,400
7 Wholesale<br> funding 130,620 126,051 29,295 110,121 202,544
8 Operational<br> deposits 80,437 - - - 40,218
9 Other wholesale<br> funding 50,183 126,051 29,295 110,121 162,326
10 Liabilities with matching interdependent<br> assets - - - - -
11 Other<br> liabilities - 21,214 445 377 600
12 NSFR derivative<br> liabilities 3,746
13 All other<br> liabilities and equity not included in the above categories - 17,467 445 377 600
14 Total ASF 625,185
Required<br> Stable Funding (RSF) Item
15a) Total NSFR (High quality liquid<br> assets - HQLA) 4,082
15b) Alternate Liquid Assets (ALA) 6,678
15c) Reserve Bank of New Zealand (RBNZ)<br> securities 186
16 Deposits held at other financial<br> institutions for operational purposes - - - - -
17 Performing<br> loans and securities 1,041 49,101 37,602 554,116 451,546
18 Performing<br> loans to financial institutions secured by Level 1 HQLA 649 2,178 - - 867
19 Performing<br> loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions 392 3,972 1,938 13,826 15,784
20 Performing<br> loans to nonfinancial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and<br> public sector entities (PSEs), of which: - 34,457 26,970 114,962 128,341
21 With a risk<br> weight of less than or equal to 35% under APS 112 - 29 219 451 417
22 Performing<br> residential mortgages, of which: - 7,867 8,172 421,220 302,512
23 With a risk<br> weight equal to 35% under APS 112 - 7,275 7,562 376,600 263,410
24 Securities<br> that are not in default and do not qualify as HQLA, including exchange-traded equities - 627 522 4,108 4,043
25 Assets with matching interdependent<br> liabilities - - - - -
26 Other assets: 11,205 18,649 482 18,627 37,892
27 Physical<br> traded commodities, including gold - -
28 Assets posted<br> as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) 2,294 1,950
29 NSFR derivative<br> assets 6,897 3,151
30 NSFR derivative<br> liabilities before deduction of variation margin posted 7,298 1,460
31 All other<br> assets not included in the above categories 11,205 2,159 482 18,627 31,332
32 Off-balance sheet items 194,928 9,902
33 Total RSF 510,287
34 Net<br> Stable Funding Ratio (%) 122.5 %

All values are in US Dollars.

^1^ Calculated<br> as total available stable funding divided by total required stable funding as at end of the<br> quarter.
Westpac<br> Group March 2020 Pillar 3 report 85
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Net stable funding ratio

Unweighted value<br> by residual maturity
31 December 2020 No maturity < 6 months 6 months<br> to > 1 year Weighted
m <<br> 1yr value
Available<br> Stable Funding (ASF) Item
1 Capital 68,655 458 1,702 22,368 93,184
2 Regulatory<br> capital 68,655 458 1,702 22,368 93,184
3 Other capital<br> instruments - - - - -
4 Retail deposits<br> and deposits from small business customers 271,845 81,331 311 149 326,458
5 Stable deposits 139,057 24,349 8 10 155,253
6 Less stable<br> deposits 132,788 56,982 304 139 171,205
7 Wholesale funding 129,135 132,476 16,193 116,956 202,400
8 Operational<br> deposits 80,677 - - - 40,339
9 Other wholesale<br> funding 48,458 132,476 16,193 116,956 162,061
10 Liabilities with matching interdependent<br> assets - - - - -
11 Other liabilities - 25,787 475 727 964
12 NSFR derivative<br> liabilities 7,186
13 All other<br> liabilities and equity not included in the above categories - 18,601 475 727 964
14 Total ASF 623,005
Required<br> Stable Funding (RSF) Item
15a) Total NSFR (High quality liquid<br> assets - HQLA) 4,181
15b) Alternate Liquid Assets (ALA) 6,678
15c) Reserve Bank of New Zealand (RBNZ)<br> securities 173
16 Deposits held at other financial<br> institutions for operational purposes - - - - -
17 Performing<br> loans and securities 1,458 48,859 41,479 548,105 449,621
18 Performing<br> loans to financial institutions secured by Level 1 HQLA 1,138 3,417 - - 1,479
19 Performing<br> loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions 320 5,309 2,719 11,698 14,174
20 Performing<br> loans to nonfinancial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and<br> public sector entities (PSEs), of which: - 31,632 29,835 118,531 131,262
21 With a risk<br> weight of less than or equal to 35% under APS 112 - 29 31 1,115 755
22 Performing<br> residential mortgages, of which: - 7,905 8,315 414,486 299,245
23 With a risk<br> weight equal to 35% under APS 112 - 7,282 7,657 368,518 258,871
24 Securities<br> that are not in default and do not qualify as HQLA, including exchange-traded equities - 596 610 3,390 3,460
25 Assets with<br> matching interdependent liabilities - - - - -
26 Other assets: 11,197 26,042 738 20,571 38,673
27 Physical<br> traded commodities, including gold - -
28 Assets posted<br> as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) 2,372 2,016
29 NSFR derivative<br> assets 7,473 287
30 NSFR derivative<br> liabilities before deduction of variation margin posted 14,998 3,000
31 All<br> other assets not included in the above categories 11,197 1,199 738 20,571 33,370
32 Off-balance sheet items 194,021 9,879
33 Total RSF 509,206
34 Net<br> Stable Funding Ratio (%) 122.3 %

All values are in US Dollars.

86 Westpac Group March 2021 Pillar 3 report

Pillar 3 report

Appendix I | Regulatory capital reconciliation

Balance Sheet Reconciliation

Reconciliation<br> Table
31 March 2021 Group Balance Level 2 Regulatory Capital<br> Disclosure
m Sheet Adjustment Balance<br> Sheet Template
Assets
Cash<br> and balances with central banks 33,877 (12 ) 33,865
Collateral paid 3,917 - 3,917
Due from subsidiaries - 532 532
Trading<br> securities and financial assets measured at  fair value through income statement (FVIS) 20,928 (670 ) 20,258
Derivative financial<br> instruments 22,373 - 22,373
Investment securities 91,303 (139 ) 91,164
Loans 688,218 - 688,218
Other financial<br> assets 3,312 149 3,461
Current tax<br> assets 221 - 221
Life insurance<br> assets 3,416 (3,416 ) -
Investments<br> in associates 78 - 78
Property and<br> equipment 3,337 (1 ) 3,336
Deferred tax<br> assets 2,335 (94 ) 2,241 Table<br> a
Intangible assets 10,997 32 11,029 Table<br> b
Investments<br> in life & general insurance, funds management & securitisation entities - 2,063 2,063 Table<br> c
Other assets 788 (200 ) 588
Assets<br> held for sale 4,359 (1,245 ) 3,114
Total<br> assets 889,459 (3,001 ) 886,458
Liabilities
Collateral received 2,504 - 2,504
Due to subsidiaries - 1,187 1,187
Deposits and<br> other borrowings 585,401 - 585,401
Other financial<br> liabilities 42,996 (196 ) 42,800
Derivative financial<br> instruments 20,303 - 20,303
Debt issues 127,850 - 127,850
Current tax<br> liabilities 26 (20 ) 6
Life insurance<br> liabilities 1,070 (1,070 ) -
Provisions 3,820 (54 ) 3,766
Deferred tax<br> liabilities 107 (41 ) 66
Loan capital 26,294 - 26,294 Table<br> d and e
Other liabilities 3,938 (190 ) 3,748
Liabilities<br> held for sale 3,049 (844 ) 2,205
Total<br> liabilities 817,358 (1,228 ) 816,130
Equity
Ordinary share capital 41,604 - 41,604 Row<br> 1
Treasury shares<br> and RSP treasury shares (603 ) - (603 ) Table<br> f
Reserves 1,954 (93 ) 1,861 Table<br> g
Retained Profits 29,097 (1,680 ) 27,417 Row<br> 2
Non-controlling<br> interests 49 - 49
Total<br> equity 72,101 (1,773 ) 70,328

All values are in US Dollars.

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Appendix I | Regulatory capital reconciliation

Capital
Disclosure
Template
$m 31 March 2021 Reference
Table a
Deferred Tax Assets
Total Deferred Tax Assets per<br> level 2 Regulatory Balance Sheet 2,241
Add: Held for sale deferred tax assets (per<br> Level 2) 19
Deferred tax asset adjustment before applying<br> prescribed thresholds 2,260 Row<br> 26e
Less: Amounts<br> below prescribed threshold - risk weighted (2,260 ) Row<br> 75
Total<br> per Capital Disclosure Template - Deferred Tax Asset - Row<br> 21 / 25
Capital
Disclosure
Template
m 31 March 2021 Reference
Table b
Goodwill and other intangible assets
Total Goodwill and Intangibles Assets per<br> level 2 Regulatory Balance Sheet 11,029
Less: Capitalised<br> Software Disclosed Under Intangibles (2,049 ) Row<br> 9
Total<br> per Capital Disclosure Template - Goodwill 8,980 Row<br> 8
Capital
Disclosure
Template
m 31 March 2021 Reference
Table c
Equity Investments
Significant Investment in financial entities 56
Equity Investments in non-consolidated subsidiaries 2,063
Total Significant Investment in financial<br> entities 2,119 Row<br> 73
Non-significant Investment in financial entities 66 Row<br> 72
Total Investments in financial institutions 2,185 Row<br> 26d
Investment in commercial entities 40 Row<br> 26g
Total Equity Investments before applying<br> prescribed threshold 2,225
Less: Amounts<br> below prescribed threshold (2,225 )
Total<br> per Capital Disclosure Template - Equity Investments - Row<br> 18/ 19/ 23
Capital
Disclosure
Template
m 31 March 2021 Reference
Table d
Additional Tier 1 Capital
Total Loan Capital per Level 2 Regulatory<br> Balance Sheet 26,294
Less: Tier 2 Capital Instruments Reported<br> Below (16,766 )
Add:<br> Capitalised Issue Costs for Additional Tier 1 Capital Instruments1 45
Less:<br> Fair Value Adjustment2 (80 )
Total<br> per Capital Disclosure Template - Tier 1 Capital 9,493 Row<br> 36
Additional Tier 1 Capital included in<br> Regulatory Capital
Westpac Capital Notes 2 1,311
Westpac Capital Notes 4 1,702
Westpac Capital Notes 5 1,690
Westpac Capital Notes 6 1,423
SEC Registered Capital Securities 1,644
Westpac Capital Notes 7 1,723
Total Basel III complying instruments 9,493 Row<br> 30
Total<br> Basel III non complying instruments - Row<br> 33
Total<br> per Capital Disclosure Template - Additional Tier 1 Capital Instruments 9,493 Row<br> 36

All values are in US Dollars.

^1^ Unamortised<br> issue costs relating to capital instruments are netted off against each instrument in the<br> Balance Sheet. For regulatory capital purposes, these capital instruments are shown gross<br> of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of<br> capitalised expenses in Row 26f in the capital disclosure template.
^2^ For<br> regulatory capital purposes, APRA requires these instruments to be included as if they were<br> unhedged.
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Appendix I | Regulatory capital reconciliation

Capital
Disclosure
Template
m 31<br> March 2021 Reference
Table e
Tier 2<br> Capital
Total<br> Tier 2 Capital per Level 2 Regulatory Balance Sheet 16,766
Add:<br> Capitalised Issue Costs for Tier 2 Capital Instruments1 39
Less:<br> Fair Value Adjustment2 30
Less: Cumulative<br> amortisation of Tier 2 Capital Instruments -
Less: Basel<br> III transitional adjustment - Row<br> 56c
Provisions 161 Row<br> 50 / 76
Total<br> per Capital Disclosure Template - Tier 2 16,996 Row<br> 51
Tier 2<br> Capital included in Regulatory Capital
AUD350 million<br> Westpac Subordinated Notes 350
SDG325 million<br> Westpac Subordinated Notes 317
USD100 million<br> Westpac Subordinated Notes 131
JPY20,000 million<br> Westpac Subordinated Notes 238
JPY10,200 million<br> Westpac Subordinated Notes 121
JPY10,000 million<br> Westpac Subordinated Notes 119
AUD175 million<br> Westpac Subordinated Notes 175
NZD400 million<br> Westpac Subordinated Notes 368
USD1,500 million<br> Westpac Subordinated Notes 1,969
JPY8,000 million<br> Westpac Subordinated Notes 95
JPY13,500 million<br> Westpac Subordinated Notes 160
JPY12,000 million<br> Westpac Subordinated Notes 143
HKD 600 million<br> Westpac Subordinated Notes 102
AUD350 million<br> Westpac Subordinated Notes 350
AUD185 million<br> Westpac Subordinated Notes 185
AUD250 million<br> Westpac Subordinated Notes 250
AUD130 million<br> Westpac Subordinated Notes 130
AUD725 million<br> Westpac Subordinated Notes II 725
USD1,000 million<br> Westpac Subordinated Notes 1,309
USD1,250 million<br> Westpac Subordinated Notes 1,640
AUD1,000 million<br> Westpac Subordinated Notes 1,000
USD1,500 million<br> Westpac Subordinated Notes 1,970
USD1,000 million<br> Westpac Subordinated Notes 1,308
USD1,500 million<br> Westpac Subordinated Notes 1,967
AUD1,250 million<br> Westpac Subordinated Notes 1,250
Total<br> Basel III complying instruments 16,373 Row<br> 46
USD352<br> million Perpetual Floating Rate Notes 462
Total<br> Basel III non complying instruments 462
Less:<br> Basel III transitional adjustment - Row<br> 85
Total<br> Basel III non complying instruments after transitional adjustment 462 Row<br> 47
Provisions 161 Row<br> 50 / 76
Total<br> per Capital Disclosure Template - Tier 2 Capital Instruments 16,996 Row<br> 51
Capital
Disclosure
Template
m 31 March 2021 Reference
Table f
Treasury<br> Shares and RSP Treasury Shares
Total treasury<br> shares per Level 2 Regulatory Balance Sheet (603 )
Less:<br> Treasury Shares not included for Level 2 Regulatory Capital (57 )
Total<br> per Capital Disclosure Template - Treasury Shares (660 ) Row<br> 26a
Capital
Disclosure
Template
m 31 March 2021 Reference
Table g
Accumulated<br> Other Comprehensive Income (and other reserves)
Total reserves<br> per Level 2 Regulatory Balance Sheet 1,861
Less:<br> Share Based Payment Reserve not included within capital (47 )
Total<br> per Capital Disclosure Template - Accumulated Other Comprehensive Income (and other reserves) 1,814 Row<br> 3

All values are in US Dollars.

^1^ For regulatory capital<br> purposes, APRA requires these instruments to be included as if they were unhedged.
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Appendix<br> I Regulatory capital reconciliation

The capital disclosure template below represents the post 1 January 2018 Basel III template.

m 31 March <br><br> 2021 Table <br><br> Reference
Common Equity Tier 1 capital: instruments and reserves
1 Directly<br> issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital 41,604
2 Retained<br> earnings 27,417
3 Accumulated<br> other comprehensive income (and other reserves) 1,814 Table<br> g
4 Directly<br> issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) -
5 Ordinary<br> share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) 49
6 Common Equity Tier 1 capital before regulatory adjustments 70,884
Common Equity Tier 1 capital : regulatory adjustments
7 Prudential<br> valuation adjustments -
8 Goodwill<br> (net of related tax liability) (8,980) Table<br> b
9 Other<br> intangibles other than mortgage servicing rights (net of related tax liability) (2,049) Table<br> b
10 Deferred<br> tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) -
11 Cash-flow<br> hedge reserve (95)
12 Shortfall<br> of provisions to expected losses (93)
13 Securitisation<br> gain on sale (as set out in paragraph 562 of Basel II framework) -
14 Gains<br> and losses due to changes in own credit risk on fair valued liabilities (1)
15 Defined<br> benefit superannuation fund net assets (69)
16 Investments<br> in own shares (if not already netted off paid-in capital on reported balance sheet) -
17 Reciprocal<br> cross-holdings in common equity -
18 Investments<br> in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible<br> short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) - Table<br> c
19 Significant<br> investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation,<br> net of eligible short positions (amount above 10% threshold) - Table<br> c
20 Mortgage<br> service rights (amount above 10% threshold) -
21 Deferred<br> tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) - Table<br> a
22 Amount<br> exceeding the 15% threshold -
23 of<br> which: significant investments in the ordinary shares of financial entities - Table<br> c
24 of<br> which: mortgage servicing rights -
25 of<br> which: deferred tax assets arising from temporary differences - Table<br> a
26 National<br> specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) (6,665)
26a of<br> which: treasury shares (660) Table<br> f
26b of<br> which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase<br> new ordinary shares issued by the ADI -
26c of<br> which: deferred fee income 230
26d of<br> which: equity investments in financial institutions not reported in rows 18, 19 and 23 (2,185) Table<br> c
26e of<br> which: deferred tax assets not reported in rows 10, 21 and 25 (2,260) Table<br> a
26f of<br> which: capitalised expenses (1,749)
26g of<br> which: investments in commercial (non-financial) entities that are deducted under APRA prudential requirements (40) Table<br> c
26h of<br> which: covered bonds in excess of asset cover in pools -
26i of<br> which: undercapitalisation of a non-consolidated subsidiary -
26j of<br> which: other national specific regulatory adjustments not reported in rows 26a to 26i (1)
27 Regulatory<br> 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 (17,952)
29 Common Equity Tier 1 Capital (CET1) 52,932

All values are in US Dollars.

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Appendix<br> I Regulatory capital reconciliation
m 31 March <br><br> 2021 Table <br><br> Reference
--- --- ---
Additional Tier 1 Capital: instruments
30 Directly<br> issued qualifying Additional Tier 1 instruments 9,493 Table<br> d
31 of<br> which: classified as equity under applicable accounting standards -
32 of<br> which: classified as liabilities under applicable accounting standards 9,493 Table<br> d
33 Directly<br> issued capital instruments subject to phase out from Additional Tier 1 -
34 Additional<br> Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed<br> in group AT1) -
35 of<br> which: instruments issued by subsidiaries subject to phase out -
36 Additional Tier 1 Capital before regulatory adjustments 9,493 Table<br> d
Additional Tier 1 Capital: regulatory adjustments
37 Investments<br> in own Additional Tier 1 instruments (25)
38 Reciprocal<br> cross-holdings in Additional Tier 1 instruments -
39 Investments<br> in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible<br> short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) -
40 Significant<br> investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net<br> of eligible short positions) -
41 National<br> specific regulatory adjustments (sum of rows 41a, 41b and 41c) -
41a of<br> which: holdings of capital instruments in group members by other group members on behalf of third parties -
41b of<br> which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported<br> in rows 39 and 40 -
41c of<br> which: other national specific regulatory adjustments not reported in rows 41a and 41b -
42 Regulatory<br> adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -
43 Total regulatory adjustments to Additional Tier 1 capital (25)
44 Additional Tier 1 capital (AT1) 9,468 Table<br> d
45 Tier 1 Capital (T1=CET1+AT1) 62,400
Tier 2 Capital: instruments and provisions
46 Directly<br> issued qualifying Tier 2 instruments 16,373 Table<br> e
47 Directly<br> issued capital instruments subject to phase out from Tier 2 462 Table<br> e
48 Tier<br> 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount<br> allowed in group T2) -
49 of<br> which: instruments issued by subsidiaries subject to phase out -
50 Provisions 161 Table<br> e
51 Tier 2 Capital before regulatory adjustments 16,996 Table<br> e
Tier 2 Capital: regulatory adjustments
52 Investments<br> in own Tier 2 instruments (100)
53 Reciprocal<br> cross-holdings in Tier 2 instruments -
54 Investments<br> in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of<br> eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) -
55 Significant<br> investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation,<br> net of eligible short positions (140)
56 National<br> specific regulatory adjustments (99)
(sum<br> of rows 56a, 56b and 56c)
56a of<br> which: holdings of capital instruments in group members by other group members on behalf of third parties -
56b of<br> which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in<br> rows 54 and 55 (99)
56c of<br> which: other national specific regulatory adjustments not reported in rows 56a and 56b -
57 Total regulatory adjustments to Tier 2 capital (339)
58 Tier 2 capital (T2) 16,657
59 Total capital (TC=T1+T2) 79,057
60 Total risk-weighted assets based on APRA standards 428,899

All values are in US Dollars.

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m 31 March <br><br> 2021 Table <br><br> Reference
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Capital ratios and buffers
61 Common<br> Equity Tier 1 (as a percentage of risk-weighted assets) 12.3%
62 Tier<br> 1 (as a percentage of risk-weighted assets) 14.5%
63 Total<br> capital (as a percentage of risk-weighted assets) 18.4%
64 Buffer<br> requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 2.5% plus any countercyclical buffer requirements<br> expressed as a percentage of risk-weighted assets)^1^ 8.0%
65 of which:<br> capital conservation buffer requirement^1^ 3.5%
66 of which:<br> ADI-specific countercyclical buffer requirements 0.0%
67 of which:<br> G-SIB buffer requirement (not applicable) NA
68 Common<br> Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 12.3%
National minima (if different from Basel III)
69 National<br> Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 4.5%
70 National<br> Tier 1 minimum ratio (if different from Basel III minimum) 6.0%
71 National<br> total capital minimum ratio (if different from Basel III minimum) 8.0%
Amount below thresholds for deductions (not risk-weighted)
72 Non-significant<br> investments in the capital of other financial entities 66 Table<br> c
73 Significant<br> investments in the ordinary shares of financial entities 2,119 Table<br> c
74 Mortgage<br> servicing rights (net of related tax liability) -
75 Deferred<br> tax assets arising from temporary differences (net of related tax liability) 2,260 Table<br> a
Applicable caps on the inclusion of provisions in Tier 2
76 Provisions<br> eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach  (prior to application of cap) 65 Table<br> e
77 Cap on<br> inclusion of provisions in Tier 2 under standardised approach 181
78 Provisions<br> eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) 96 Table<br> e
79 Cap<br> for inclusion of provisions in Tier 2 under internal ratings-based approach 1,961
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)
80 Current<br> cap on CET1 instruments subject to phase out arrangements NA
81 Amount<br> excluded from CET1 due to cap (excess over cap after redemptions and maturities NA
82 Current<br> cap on AT1 instruments subject to phase out arrangements 557
83 Amount<br> excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) -
84 Current<br> cap on T2 instruments subject to phase out arrangements 569
85 Amount<br> excluded from T2 due to cap (excess over cap after redemptions and maturities) - Table<br> e

All values are in US Dollars.

Countercyclicalbuffer

The table below details Westpac’s countercyclical buffer requirement.

Exposure<br> at <br><br> default Risk<br> Weighted <br><br> Assets^2^ Jurisdictional<br> <br><br> buffer ADI-specific<br> buffer
Hong<br> Kong 1,518 660 1.000% 0.00187%
Luxembourg 53 44 0.500% 0.00006%
Norway 1 5 1.000% 0.00002%
Other 1,074,931 352,826 0.000% 0.00000%
Total 1,076,503 353,535 0.00195%
Total<br> Risk Weighted Assets 428,899
Countercyclical<br> capital buffer 8
1 Includes<br> 1% Domestic Systemically Important Bank (D-SIB) requirement.
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2 Represents<br> total private sector (excludes Banks and Sovereigns) credit and specific market risk weighted<br> assets.
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Appendix II | Entities included in regulatory consolidation

This appendix lists all subsidiaries controlled by Westpac according to their level of regulatory consolidation.

Level1 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 Westpac Capital-NZ-Limited
1925 (Commercial) Pty Limited Westpac Debt Securities Pty<br> Limited
1925 (Industrial) Pty Limited Westpac Direct Equity Investments<br> Pty Limited
Belliston Pty Limited Westpac Equity Investments NZ<br> Limited
Bill Acceptance Corporation<br> Pty Limited Westpac Finance (HK) Limited
Capital Finance Australia Limited Westpac Financial Holdings Pty<br> Limited
CBA Limited Westpac Group Investment-NZ-Limited
Challenge Limited Westpac Holdings-NZ-Limited
Mortgage Management Pty Limited Westpac Investment Capital Corporation
Partnership Pacific Pty Limited Westpac Investment Vehicle No.2<br> Pty Limited
Partnership Pacific Securities<br> Pty Limited Westpac Investment Vehicle Pty<br> Limited
Pashley Investments Pty Limited Westpac Leasing Nominees-Vic.-Pty<br> Limited
Sallmoor Pty Limited Westpac New Zealand Group Limited
Sixty Martin Place (Holdings)<br> Pty Limited Westpac Overseas Holdings No.<br> 2 Pty Limited
St.George Business Finance Pty<br> Limited Westpac Overseas Holdings Pty<br> Limited
St.George Equity Finance Limited Westpac Properties Limited
St.George Finance Holdings Limited Westpac Securitisation Holdings<br> Pty Limited
St.George Security Holdings<br> Pty Limited Westpac Structured Products<br> Limited
Value Nominees Pty Limited Westpac TPS Trust
Westpac Administration 2 Pty<br> Limited Westpac Unit Trust
Westpac Administration Pty Limited Westpac USA Inc.
Westpac Americas<br> Inc.

Level2 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 Capital Fleetlease Pty Limited
Altitude Administration Pty<br> Limited Capital Motor Finance Pty Limited
Altitude Rewards Pty Limited Capital Rent Group Pty Limited
Aotearoa Financial Services<br> Limited Crusade ABS Series 2017-1 Trust
BT (Queensland) Pty Limited Crusade ABS Series 2017-1P Trust
BT Australia Pty Limited Crusade ABS Series 2018-1P Trust
BT Financial Group (NZ) Limited Crusade Trust No.2P of 2008
BT Financial Group Pty Limited Danaby Pty Limited
BT Securities Limited General Credits Pty Limited
Capital Corporate Finance Limited Hastings Management Pty Limited
Capital Finance (NZ) Pty Limited Net Nominees Limited
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Appendix II | Entities included in regulatory consolidation

Level2 Entities (Continued)

Number 120 Limited Westpac Capital Markets LLC
Oniston Pty Limited Westpac Cash PIE Fund
Qvalent Pty Limited Westpac Covered Bond Trust
RAMS Financial Group Pty Limited Westpac Digital Partnerships<br> Pty Ltd
RMS Warehouse Trust 2007-1 Westpac Equity Holdings Pty<br> Limited
Series 2008-1M WST Trust Westpac Europe Limited
Series 2012-1 WST Trust Westpac Financial Consultants<br> Pty Limited
Series 2013-1 WST Trust Westpac Financial Services Group<br> Limited
Series 2013-2 WST Trust Westpac Financial Services Group-NZ-Limited
Series 2014-1 WST Trust Westpac Global Capital Markets<br> Pty Limited
Series 2014-2 WST Trust Westpac Investment Vehicle No.3<br> Pty Limited
Series 2015-1 WST Trust Westpac New Zealand Limited
Series 2019-1 WST Trust Westpac Notice Saver PIE Fund
Series 2020-1 WST Trust Westpac NZ Covered Bond Holdings<br> Limited
SIE-LEASE (Australia) Pty Limited Westpac NZ Covered Bond Limited
St.George Commercial Credit<br> Corporation Pty Limited Westpac NZ Operations Limited
St.George Finance Limited Westpac NZ Securitisation Holdings<br> Limited
St.George Motor Finance Limited Westpac NZ Securitisation Limited
The Home Mortgage Company Limited Westpac NZ Securitisation No.2<br> Limited
W2 Investments Pty Limited Westpac Securities Limited
Westpac (NZ) Investments Limited Westpac Securities NZ Limited
Westpac Administration 3 Pty<br> Limited Westpac Securitisation Management<br> Pty Limited
Westpac Administration 4 Pty<br> Limited Westpac Singapore Limited
Westpac Altitude Rewards Trust Westpac Syndications Management<br> Pty Limited
Westpac Asian Lending Pty Limited Westpac Term PIE Fund
Westpac Bank-PNG-Limited Westpac Europe GmbH
Westpac Capital Markets Holding<br> Corp.
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Appendix II | Entities included in regulatory consolidation

Level3 Entities

The following controlled entities are excluded from the Level 2 consolidation but form part of the conglomerate group at Level 3:

Advance Asset Management Limited Reinventure Special Purpose Investment<br> Unit Trust
Asgard Capital Management Limited Securitor Financial Group Pty<br> Limited
Asgard Wealth Solutions Limited Sydney Capital Corporation Inc.
BT Funds Management (NZ) Limited Waratah Receivables Corporation<br> Pty Limited
BT Funds Management Limited Waratah Securities Australia<br> Limited
BT Funds Management No.2 Limited Westpac Custodian Nominees Pty<br> Limited
BT Portfolio Services Limited Westpac Financial Services Limited
eQR Securities Pty. Limited Westpac General Insurance Limited
GIS Private Nominees Pty Limited Westpac General Insurance Services<br> Limited
Hastings Funds Management Pty<br> Limited Westpac Lenders Mortgage Insurance<br> Limited
Magnitude Group Pty Limited Westpac Life Insurance Services<br> Limited
Pendal Long Term Income Fund Westpac Life-NZ-Limited
Pendal Short Term Income Fund Westpac<br> New Zealand Staff Superannuation Scheme Trustee Limited
Planwise AU Pty<br> Ltd
Red Bird Ventures Limited Westpac Nominees-NZ-Limited
Reinventure Fund II I.L.P Westpac RE Limited
Reinventure Fund III I.L.P Westpac Securities Administration<br> Limited
Reinventure Fund, I.L.P. Westpac Superannuation Nominees-NZ-Limited
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Appendix III | 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.

31 March 2021 Liabilities (excluding
m Total Assets equity)
a) Securitisation
Sydney Capital Corporation Inc. - -
Waratah Receivables Corporation Pty Limited - 1
Waratah Securities Australia Limited - -
b) Insurance, funds management and<br> other
Advance Asset Management Limited 56 30
Asgard Capital Management Limited 56 19
Asgard Wealth Solutions Limited 54 7
BT Funds Management (NZ) Limited 82 18
BT Funds Management Limited 362 311
BT Funds Management No.2 Limited 10 1
BT Portfolio Services Limited 190 111
eQR Securities Pty. Limited - -
GIS Private Nominees Pty Limited 5 2
Hastings Funds Management Pty Limited - -
Magnitude Group Pty Limited 4 -
Pendal Long Term Income Fund 499 499
Pendal Short Term Income Fund 409 409
Planwise AU Pty Ltd 5 2
Red Bird Ventures Limited 5 3
Reinventure Fund II I.L.P 45 -
Reinventure Fund III I.L.P 22 -
Reinventure Fund, I.L.P. 632 122
Reinventure Special Purpose Investment Unit Trust 39 -
Securitor Financial Group Pty Limited 3 -
Westpac Custodian Nominees Pty Limited - -
Westpac Financial Services Limited 29 14
Westpac General Insurance Limited 918 765
Westpac General Insurance Services Limited 62 6
Westpac Lenders Mortgage Insurance Limited 1,152 836
Westpac Life Insurance Services Limited 3,075 1,127
Westpac Life-NZ-Limited 223 (28 )
Westpac New Zealand Staff Superannuation Scheme Trustee<br> Limited - -
Westpac Nominees-NZ-Limited 4 -
Westpac RE Limited 9 1
Westpac Securities Administration Limited 7 -
Westpac Superannuation<br> Nominees-NZ-Limited - -

All values are in US Dollars.

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Appendix IV | Regulatory expected loss

Capitaldeduction 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.

m 31 March<br> <br>2021 **** 30 September<br> <br>2020 **** 31 March<br> <br>2020
Provisions<br> associated with eligible portfolios **** **** **** **** **** **** **** ****
Total<br> provisions for impairment charges 5,508 6,163 5,791
plus<br> general reserve for credit losses adjustment - - -
plus<br> provisions associated with partial<br> write-offs 20 26 41
less<br> ineligible provisions1 (106 ) (118 ) (129 )
Total<br> eligible provisions 5,422 6,071 5,703
Regulatory<br> expected downturn loss 5,419 5,801 5,540
Excess/(shortfall)<br> in eligible provisions compared to
regulatory<br> expected downturn loss 3 270 163
Common<br>  equity Tier 1 capital deduction for regulatory expected
downturn<br> loss in excess of eligible provisions2 (93 ) (40 ) -

All values are in US Dollars.

1 Provisions<br> associated with portfolios subject<br> to<br> the Basel standardised approach to credit risk are not eligible.
2 Regulatory<br> expected<br> loss<br> is calculated for portfolios subject<br> to<br> the Basel advanced<br> IRB<br> approach<br> to<br> credit risk.<br> The<br> comparison between regulatory expected loss and eligible provisions is performed separately<br> for defaulted and non-defaulted exposures. As at 31 March 2021,<br> there<br> was $93 million excess of<br> eligible provisions<br> compared<br> to<br> regulatory expected loss for defaulted exposures (30<br> September 2020:<br> $40<br> million).
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Appendix V | 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 website.

In addition to this report, the regulatory disclosures section of the Westpac website1 contains the reporting requirements for:

● Capital<br> instruments under Attachment B of APS330; and
● The<br> identification of potential Global-Systemically Important Banks (G-SIB) under Attachment<br> H of APS330 (disclosed annually).
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APS330 reference Westpac disclosure Page
--- --- --- --- --- --- ---
General Requirements
Paragraph 12 (a) (c) to (d) Balance Sheet Reconciliation 87
Paragraph 13 Level 3 entities’ assets and liabilities 96
Paragraph 49 Summary leverage ratio 22
Attachment A:
Table 1: Capital disclosure<br> template Capital disclosure template 90
Attachment C:
Table 3: Capital adequacy (a) to (e) Capital requirements 20
(f) Westpac’s capital adequacy ratios 19
Capital adequacy ratios of major subsidiary banks 19
Table 4: Credit risk (a) Exposure at Default by major type 34
(b) Impaired and past due loans by portfolio 41
(c) General reserve for credit losses 31
Table 5: Securitisation exposures (a) Banking book summary of securitisation activity by asset<br> type 67
(b) Banking book summary of on and off-balance sheet securitisation<br> by exposure type 68
Trading book summary of on and off-balance sheet securitisation<br> by exposure type 73
Attachment D:
Table 6: Capital adequacy (b) to (f) Capital requirements 20
(g) Westpac’s capital adequacy ratios 19
Capital adequacy<br> ratios of major subsidiary banks 19
Table 7: Credit risk - general<br> disclosures (b) Exposure at Default by major type 34
(c) Exposure at Default by geography 39
(d) Exposure at Default by industry classification 36
(e) Exposure at Default by residual contractual maturity 40
(f) Impaired and past due loans by industry classification 42
(g) Impaired and past due loans by geography 43
(h) Movement in provisions for impairment charges 32
(h) Loan impairment provisions 31
(i) Exposure at Default by measurement method 35
(j) General reserve<br> for credit losses 31
Table<br> 8: Credit risk - disclosures for portfolios subject to the standardised approach and supervisory risk-weights in the IRB approaches<br> (formerly Table 5) (b) Portfolios subject to the standardised approach 44
Property finance 45
Project finance 46

1 http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/

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Appendix V | APS330 quantitative requirements

APS330 reference Westpac disclosure Page
Table<br> 9: Credit risk - disclosures for portfolios subject to IRB approaches (d) Corporate portfolio by external credit rating 47
Business lending portfolio by external credit rating 48
Sovereign portfolio by external credit rating 49
Bank portfolio by external credit rating 50
Residential mortgages portfolio by PD band 51
Australian credit cards portfolio by PD band 52
Other retail portfolio by PD band 53
Small business portfolio by PD band 54
(e) Actual losses 55
(f) Comparison of regulatory<br> expected and actual loss rates 56
Table<br> 10: Credit risk mitigation disclosures (b)<br> to (c) Total exposure<br> covered by collateral, credit derivatives and guarantees 59
Table<br> 11: General disclosure for exposures related to counterparty credit risk (b) Counterparty credit risk summary 61
(c) Credit derivative<br> transactions that create exposures to counterparty credit risk 61
Table 12: Securitisation exposures Banking Book
(g) part i and (h) to (i) Summary of assets securitised by Westpac 66
(g) part ii Summary of total Westpac sponsored third party assets  securitised 66
(j) Summary of securitisation activity by asset type 67
(k) Summary of on and off-balance sheet securitisation by<br> exposure type 68
(l) part i Securitisation exposure by risk weight band 69
(l) part ii Securitisation exposures deducted from capital 69
(m) Securitisation subject to early amortisation treatment 70
(n) part i Resecuritisation exposure subject to credit risk mitigation 70
(n) part ii Resecuritisation exposure to guarantors 70
Trading Book
(o) part i and (p) Summary of assets securitised by Westpac 70
(o) part ii Summary of total Westpac sponsored third party assets  securitised 70
(q) Summary of securitisation activity by asset type 70
(r) Aggregate amount of exposures securitised by Westpac  and<br> subject to APS116 Capital Adequacy: Market Risk 70
(s) Summary of on and off-balance sheet securitisation by<br> exposure type 71
(t) part i Securitisation exposure retained or purchase subject<br> to specific risk 71
(t) part ii Securitisation exposure subject to APS120 for Specific<br> risk by risk weight band 71
(u) part i Capital requirements for securitisation exposure subject<br> to internal models approach (IMA) by risk classification 71
(u) part ii Capital requirements for securitisation regulatory capital  approaches<br> by risk weight band 71
(u) part iii Securitisation exposures deducted from capital 72
(v) Securitisation subject to early amortisation treatment 72
(w) part i Aggregate resecuritisation exposures retain or purchased<br> subject to credit risk mitigation 72
(w)<br> part ii Resecuritisation<br> exposure to guarantors credit worthiness 72
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Appendix V | APS330 quantitative requirements

APS330 reference Westpac disclosure Page
Table<br> 13: Market risk - disclosures for ADIs using the standard method (b) Market Risk regulatory<br> capital and risk weighted assets 74
Table<br> 14: Market risk - disclosures for ADIs using the IMA for trading portfolios (d) VaR and Stressed<br> VaR by risk type 75
Table<br> 16: Equities - disclosures for banking book positions (b) to (c) Book value of listed equity exposures by industry classification<br> / Book value of unlisted equity exposures by industry classification 82
(d) to (e) Gains/losses 82
(f) Capital requirement^1^ NA
Table<br> 17: Interest rate risk in the banking book (b) Change in economic value of sudden upward and downward<br> movement in interest rates 78
(b) Capital requirement 78
Attachment E
Table<br> 18: Leverage ratio disclosure template Leverage ratio<br> disclosure 22
Table<br> 19: Summary comparison of accounting assets vs leverage ratio exposure measure Summary comparison<br> of accounting assets vs leverage ratio exposure measure 23
Attachment F
Table 20: Liquidity Coverage<br> Ratio disclosure template Liquidity Coverage Ratio disclosure 84
Table<br> 21: Net Stable Funding Ratio template Net Stable Funding<br> Ratio disclosure 85
Attachment G^2^
Table<br> 21: Remuneration disclosure requirements (g) Governance structure NA
(h) Quantitative Disclosures NA
(i) Deferred remuneration NA
(j)<br> to (k) Total<br> value of remuneration awards for the current financial year for senior managers and material risk takers NA

1 Equity exposures are not risk weighted at Level 2.

2 Remuneration disclosure is an annual reporting requirement under APS330.

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Glossary
Term Description
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Actual<br> losses Represent<br> direct write-offs and write-offs from provisions after adjusting for recoveries.
Additional<br> Tier 1 capital Comprises<br> high quality components of capital that provide a permanent and unrestricted commitment of funds that are freely available to absorb<br> losses but rank behind claims of depositors and other more senior creditors. They also provide for fully discretionary capital distributions.
Alternate<br> Liquid Assets (ALA) Assets<br> that qualify for inclusion in the numerator of the LCR in jurisdictions where there is insufficient supply of HQLA.
Advanced<br> measurement approach (AMA) The<br> capital requirement using the AMA is based on a bank’s internal operational risk systems, which must both measure and manage<br> operational risk.
Assets<br> intended to be securitised Represents<br> securitisation activity from the end of the reporting period to the disclosure date of this report.
Australian<br> accounting standards (AAS) A<br> set of Australian reporting standards and interpretations issued by the Australian Accounting Standards Board.
Australian<br> and New Zealand standard industrial classification (ANZSIC) A<br> code used by the Australian Bureau of Statistics and Statistics New Zealand for classifying businesses.
Authorised<br> deposit-taking institution (ADI) ADIs<br> are corporations that are authorised under the Banking Act 1959 to carry on banking business in Australia.
Banking<br> book The<br> banking book includes all securities that are not actively traded by Westpac.
Committed<br> Liquidity Facility (CLF) Facility<br> established with the RBA to cover the shortfall in Australian dollars between the ADI’s holding of HQLA and net cash outflows.<br> The CLF is an ALA for the Group’s LCR calculation.
Common<br> equity Tier 1 (CET1) capital The<br> highest form of capital. The key components of common equity are shares, retained earnings and undistributed current year earnings.
Credit<br> valuation adjustment (CVA) risk Refer<br> to mark-to-market related credit risk.
Default A<br> customer default is deemed to have occurred when Westpac considers that either or both of the following events have taken place:
•<br>      the customer is unlikely<br> to pay its credit obligations to its financiers in full, without recourse by any of them to actions such as realising security (where<br> held); and
•      the<br> customer is past due 90 or more calendar days on any material credit obligation to its financiers. Overdrafts will be considered<br> past due once the customer has breached an advised limit, or been advised of a limit smaller than the current outstandings.
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Term Description
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Defaulted<br> not impaired Includes<br> facilities where:
•      contractual<br> payments of interest and/or principal are 90 or more calendar days overdue, including overdrafts or other revolving facilities that<br> remain continuously outside approved limits by material amounts for 90 or more calendar days (including accounts for customers who<br> have been granted hardship assistance); or
•      an<br> order has been sought for the customer’s bankruptcy or similar legal action has been instituted, which may avoid or delay repayment<br> of its credit obligations; and
•<br>      the estimated net realisable<br> value of assets/security to which Westpac has recourse is sufficient to cover repayment of all principal and interest, or where there<br> are otherwise reasonable grounds to expect payment in full and interest is being taken to profit on an accrual basis.
These<br> facilities, while in default, are not treated as impaired for accounting purposes.
Double<br> default rules Double<br> default applies to exposures where a particular obligor’s exposure has been hedged by the purchase of credit protection from<br> a counterparty and loss will only occur if both obligor and counterparty default. In this instance, capital can be reduced.
Exposure<br> at default (EAD) EAD<br> is calculated at facility level and includes outstandings as well as the proportion of committed undrawn that is expected to be drawn<br> in the event of a future default.
Extended<br> licensed entity (ELE) An<br> extended licensed entity (ELE) comprises an ADI and any subsidiaries of the ADI that have been approved by APRA as being part of<br> a single ‘stand- alone’ entity.
External<br> credit assessment institution (ECAI) ECAI<br> is an external institution recognised by APRA (directly or indirectly) to provide credit assessment in determining the risk-weights<br> on financial institutions’ rated credit exposures (including securitisation exposures).
Geography Geographic<br> segmentation of exposures is based on the location of the office in which these items were booked.
High-quality<br> liquid assets (HQLA) Assets<br> which meet APRA’s criteria for inclusion as HQLA in the numerator of the LCR.
Impaired<br> exposures Includes<br> exposures that have deteriorated to the point where full collection of interest and principal is in doubt, based on an assessment<br> of the customer’s outlook, cashflow, and the net realisation of value of assets to which recourse is held:
•      facilities<br> 90 days or more past due, and full recovery is in doubt: exposures where contractual payments are 90 or more days in arrears and<br> the net realisable value of assets to which recourse is held may not be sufficient to allow full collection of interest and principal,<br> including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or<br> more calendar days;
•<br>      non-accrual facilities:<br> exposures with individually assessed impairment provisions held against them, excluding restructured loans;
•<br>      restructured facilities:<br> exposures where the original contractual terms have been formally modified to provide for concessions of interest or principal for<br> reasons related to the financial difficulties of the customer;
•<br>      other assets acquired<br> through security enforcement (includes other real estate owned): includes the value of any other assets acquired as full or partial<br> settlement of outstanding obligations through the enforcement of security arrangements; and
•<br>      any other facilities<br> where the full collection of interest and principal is in doubt.
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Term Description
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Industry Exposures<br> to businesses, government and other financial institutions are classified into industry clusters based upon groups of related ANZSIC<br> codes. Companies that operate in multiple industries are classified according to their primary industry. Consumer customers as classified<br> as “retail” and not further broken down.
Interest<br> rate risk in the banking book (IRRBB) The<br> risk to current and future year interest income arising from a mismatch between the duration of assets and liabilities that arises<br> in the normal course of banking activities.
Internal<br> ratings-based approach (IRB & Advanced IRB) These<br> approaches allow banks to use internal estimates of the risks of their loans as inputs into the determination of the amount of credit<br> risk capital needed to support the organisation. In the Advanced IRB approach, banks must supply their own estimates for all three<br> credit parameters – Probability of Default, Loss Given Default and Exposure at Default.
Leverage<br> ratio The<br> leverage ratio is defined by APRA as Tier 1 capital divided by the “Exposure measure” and is expressed as a percentage.<br> “Exposure measure” includes on-balance sheet exposures, derivatives exposures, securities financing transaction (SFT)<br> exposures, and other off-balance sheet exposures.
Liquidity<br> coverage ratio (LCR) An<br> APRA requirement to maintain an adequate level of unencumbered high quality liquid assets, to meet liquidity needs for a 30 calendar<br> day period under an APRA-defined severe stress scenario. Absent a situation of financial stress, the value of the LCR must not be<br> less than 100%. LCR is calculated as the percentage ratio of stock of HQLA, CLF and qualifying Reserve Bank of New Zealand securities<br> over the total net cash out flows in a modelled 30 day defined stressed scenario.
Loss<br> given default (LGD) The<br> LGD represents an estimate of the expected severity of a loss to Westpac should a customer default occur during a severe economic<br> downturn. Westpac assigns LGD to each credit facility, assuming an event of default has occurred and taking into account a conservative<br> estimate of the net realisable value of assets to which Westpac has recourse and over which it has security. LGDs also reflect the<br> seniority of exposure in the customer’s capital and debt structure.
Maturity The<br> maturity date used is drawn from the contractual maturity date of the customer loans.
Mark-to-market<br> related credit risk The<br> risk of mark-to-market losses related to deterioration in the credit quality of a derivative counterparty also referred to as credit<br> valuation adjustment (CVA) risk.
Monte<br> Carlo simulation A<br> method of random sampling to achieve numerical solutions to mathematical problems.
Net<br> cash outflows Total<br> expected cash outflows minus total expected cash inflows in the specified LCR stress scenario calculated in accordance with APRA’s<br> liquidity standard.
Net<br> interest income at risk (NaR) BRiskC-approved<br> limit expressed as a defined basis point shock in interest rates over a one year risk horizon.
Net<br> Stable Funding Ratio (NSFR) The<br> NSFR is defined as the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined<br> 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<br> a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s<br> assets and off-balance sheet activities. ADI’s must maintain an NSFR of at least 100%.
Off-balance<br> sheet exposure Credit<br> exposures arising from facilities that are not recorded on Westpac’s balance sheet (under accounting methodology). Undrawn<br> commitments and the expected future exposure calculated for Westpac’s derivative products are included in off-balance sheet<br> exposure.
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Glossary
Term Description
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On<br> balance sheet exposure Credit<br> exposures arising from facilities that are recorded on Westpac’s balance sheet (under accounting methodology).
Potential<br> future credit exposure (PFCE) The<br> PFCE for each transaction is calculated by multiplying the effective notional principal amount by a credit conversion factor specified<br> in APS112.
Probability<br> of default (PD) Probability<br> of default is a through-the-cycle assessment of the likelihood of a customer defaulting on its financial obligations within one year.
Resecuritisation A<br> resecuritisation exposure is a securitisation exposure in which the risk associated with an underlying pool of exposures is tranched<br> and at least one of the underlying exposures is a securitisation exposure. In addition, an exposure to one or more resecuritisation<br> exposures is a resecuritisation exposure;
Risk<br> weighted assets (RWA) Assets<br> (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default and what the likely<br> 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<br> multiplying the capital requirements for those risks by 12.5.
Securitisation<br> purchased The<br> purchase of third party securitisation exposure, for example residential mortgage backed securities.
Securitisation<br> retained Securitisation<br> exposures arising through Westpac originated assets or generated by Westpac third party securitisation activity.
Securities<br> financing transactions (SFT) APRA<br> defines SFTs as “transactions such as repurchase agreements, reverse repurchase agreements, and security lending and borrowing,<br> and margin lending transactions, where the value of the transactions depends on the market valuation of securities and the transactions<br> are typically subject to margin agreements.”
Sponsor An<br> ADI would generally be considered a sponsor if it, in fact or substance, manages or advises the securitisation program, places securities<br> into the market, or provide liquidity and/or credit enhancements.
Standard<br> model The<br> standard model for Market risk applies supervisory risk weights to trading positions.
Stressed<br> VaR (SVaR) Stressed<br> VaR uses the approved VaR model but applies a period of significant market stress. Market risk capital is estimated by adding Stressed<br> VaR to regular VaR.
Substitution<br> approach Substitutions<br> refers to the rules governing the circumstances when capital can be reduced because an obligor’s exposure has been hedged by<br> the purchase of credit protection from a counterparty and the counterparty’s PD is used in place of the obligors’ PD.
Supervisory<br> Formula Approach (SFA) The<br> SFA applicable to unrated exposures dynamically looks at the type and performance of underlying asset pools funded by the securitisation<br> exposure as well as the structural features of the transaction to determine capital requirements
Tier<br> 2 capital Includes<br> other capital elements, which, to varying degrees, fall short of the quality of Tier 1 capital but still contribute to the overall<br> strength of an entity as a gone concern capital.
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Term Description
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Trading<br> book Trading<br> book activity represents dealings that encompass book running and distribution activity. The types of market risk arising from trading<br> activity include interest rate risk, foreign exchange risk, commodity risk, equity price risk, credit spread risk and volatility<br> risk. Financial Markets and Treasury are responsible for managing market risk arising from Westpac’s trading activity.
Value<br> at risk (VaR) VaR<br> is the potential loss in earnings from adverse market movements and is calculated over a one-day time horizon at a 99% confidence<br> level using a minimum of one year of historical rate data. VaR takes account of all material market variables that may cause a change<br> in the value of the trading portfolio and the banking book including interest rates, foreign exchange rates, price changes, volatility,<br> and the correlation among these variables.

Exchangerates

The following exchange rates were used in the Westpac Pillar 3 report, and reflect spot rates for the period end.

$ 31 March 2021 30 September 2020 31 March 2020
USD 0.7596 0.7108 0.6191
GBP 0.5536 0.5540 0.5017
NZD 1.0892 1.0802 1.0264
EUR 0.6487 0.6060 0.5620
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Disclosure<br>regarding forward-looking statements

This report contains statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US Securities Exchange Act of 1934.

Forward-looking statements are statements about matters 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, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions and financial support to certain borrowers. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘risk’, ‘aim’, ‘outlook’ or other similar words are used to identify forward-looking statements. These forward-looking statements reflect Westpac’s current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond Westpac’s control, and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon Westpac. There can be no assurance that future developments will be in accordance with Westpac’s expectations or that the effect of future developments on Westpac will be those anticipated. Actual results could differ materially from those expected, depending on the outcome of various factors, including, but not limited to:

● information<br> security breaches, including cyberattacks;
● the<br> effect of the global COVID-19 pandemic, which has had, and may continue to have, a negative<br> impact on our business and global economic conditions, adversely affect a wide-range of Westpac’s<br> key suppliers, third-party contractors and customers, create increased volatility in financial<br> markets and result in increased impairments, defaults and write-offs;
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● the<br> effect of, and changes in, laws, regulations, taxation or accounting standards or practices<br> and government policy, particularly changes to liquidity, leverage and capital requirements;
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● regulatory<br> investigations, reviews and other actions, inquiries, litigation, fines, penalties, restrictions<br> or other regulator imposed conditions, including as a result of our actual or alleged failure<br> to comply with laws (such as financial crime laws), regulations or regulatory policy;
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● the<br> effectiveness of Westpac’s risk management policies, including internal processes,<br> systems and employees, and operational risks resulting from ineffective processes and controls,<br> as well as breakdowns in processes and procedures requiring remediation activity;
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● the<br> failure to comply with financial crime obligations, which has had, and could further have,<br> adverse effects on our business and reputation;
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● the<br> occurrence of environmental change (including as a result of climate change) or external<br> events in countries in which Westpac or its customers or counterparties conduct their operations;
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● internal<br> and external events which may adversely impact Westpac’s reputation;
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● litigation<br> and other legal proceedings and regulator investigations and enforcement actions;
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● reliability<br> and security of Westpac’s technology and risks associated with changes to technology<br> systems;
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● the<br> stability of Australian and international financial systems and disruptions to financial<br> markets and any losses or business impacts Westpac or its customers or counterparties may<br> experience as a result;
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● market<br> volatility, including uncertain conditions in funding, equity and asset markets;
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● an<br> increase in defaults in credit exposures because of a deterioration in economic conditions;
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● adverse<br> asset, credit or capital market conditions;
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● the<br> incidence of inadequate capital levels under stressed conditions;
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● the<br> risk that governments will default on their debt obligations or will be unable to refinance<br> their debts as they fall due;
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● changes<br> to Westpac’s credit ratings or the methodology used by credit rating agencies;
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● levels<br> of inflation, interest rates (including low or negative interest rates), exchange rates and<br> market and monetary fluctuations and volatility;
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● an<br> increase in defaults, write-offs and provisions for credit impairments;
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● changes<br> in economic conditions, consumer spending, saving and borrowing habits in Australia, New<br> Zealand and other countries (including as a result of tariffs and other protectionist trade<br> measures) in which Westpac or its customers or counterparties conduct their operations and<br> Westpac’s ability to maintain or to increase market share, margins and fees, and control<br> expenses;
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● the<br> effects of competition, including from established providers of financial services and from<br> non-financial services entities, in the geographic and business areas in which Westpac conducts<br> its operations;
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● poor<br> data quality or poor data retention;
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● the<br> incidence or severity of Westpac-insured events;
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● changes<br> to Westpac’s critical accounting estimates and judgements and changes to the value<br> of Westpac’s intangible assets;
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Disclosure<br>regarding forward-looking statements
● changes<br> in political, social or economic conditions in any of the major markets in which Westpac<br> or its customers or counterparties operate;
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● the<br> inability to syndicate or sell down underwritten securities, particularly during times of<br> heightened market volatility;
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● strategic<br> decisions including diversification, innovation, divestment, acquisitions or business expansion<br> activity, including the integration of new businesses; and
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● various<br> other factors beyond Westpac’s control.
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The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac, refer to ‘Risk factors’ in the Directors’ report the 2021 Interim Financial Results Announcement. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and events.

Westpac is under no obligation to update any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise, after the date of this report.

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