WBC – NZ Banking Group Disclosure Statement – 30 Sep 2020

ASX Release


26 November 2020

Westpac Banking Corporation – New Zealand Banking Group Disclosure
Statement

Westpac Banking Corporation (“Westpac”) today provides the attached Westpac
New Zealand Banking Group Disclosure Statement for the year ended 30
September 2020.










For further information:

David Lording Andrew Bowden
Group Head of Media Relations Head of Investor Relations
0419 683 411 0438 284 863


This document has been authorised for release by Tim Hartin, General Manager & Company
Secretary.



Level 18, 275 Kent Street
Sydney, NSW, 2000

Westpac
Banking
Corporation -
New Zealand
Ba
nking Group
Disclosure Statement
For the year ended 30 September 2020

This page has been intentionally left blank

Westpac Banking Corporation - New Zealand Banking Group 3
Contents
Directors’ and the Chief Executive Officer, NZ Branch’s statement5
Financial statements
Income statement6Note 16 Intangible assets35
Statement of comprehensive income6Note 17 Deposits and other borrowings
Note 19 Debt issues
36
38
Balance sheet7Note 18 Other financial liabilities37
Statement of changes in equity8Note 19 Debt issues38
Statement of cash flows9Note 20 Provisions39
Note 1 Financial statements preparation10Note 21 Loan capital39
Note 2 Net interest income16Note 22 Related entities41
Note 3 Non-interest income17Note 23 Derivative financial instruments44
Note 4 Operating expenses19Note 24 Fair values of financial assets and financial liabilities50
Note 5 Auditor’s remuneration19Note 25 Offsetting financial assets and financial liabilities55
Note 6 Impairment charges/(benefits)20Note 26 Lessee disclosures57
Note 7 Income tax expense21
Note 8 Imputation credit account21
Note 27 Credit related commitments, contingent assets and
contingent liabilities
58
Note 28 Segment reporting60
Note 9 Trading securities and financial assets measured at
FVIS
22
Note 10 Investment securities22
Note 29 Securitisation, covered bonds and other transferred
assets
62
Note 11 Loans23Note 30 Structured entities63
Note 12 Provision for expected credit losses24Note 31 Capital management65
Note 13 Other financial assets33Note 32 Financial risk66
Note 14 Life insurance assets33Note 33 Notes to the statement of cash flows83
Note 15 Deferred tax assets34
Registered bank disclosures
i. General information84
ii. Additional financial disclosures91
iii. Asset quality94
v. Insurance, securitisation, funds management, other
fiduciary activities, and marketing and distribution of
insurance products
97
iv. Credit and market risk exposures and capital adequacy96vi. Risk management policies98
Conditions of registration101
Independent auditor’s report103

4 Westpac Banking Corporation - New Zealand Banking Group
Glossary of terms
Certain information contained in this Disclosure Statement is required by the Registered Bank Disclosure Statements (Overseas Incorporated
Registered Banks) Order 2014 (as amended) (‘Order’).
In this Disclosure Statement, reference is made to five main reporting groups:
– Overseas Bank – refers to Westpac Banking Corporation;
– Overseas Banking Group – refers to the Overseas Bank and all other entities included in the Overseas Bank’s group for the purposes of public
reporting of the group financial statements in Australia;
– NZ Branch – refers to the New Zealand business (as defined in the Order) of the Overseas Bank;
– Westpac New Zealand – refers to Westpac New Zealand Limited; and
– NZ Banking Group – refers to the financial reporting group (as defined in the Order) of the Overseas Bank. Controlled entities of the NZ Banking
Group as at 30 September 2020 are set out in Note 22 Related entities.
Words and phrases not defined in this Disclosure Statement, but defined by the Order, have the meaning given by the Order when used in this
Disclosure Statement.

Westpac Banking Corporation - New Zealand Banking Group 5
Directors’ and the Chief Executive Officer, NZ
Branch’s statement
Each Director of the Overseas Bank and the Chief Executive Officer, NZ Branch, believe, after due enquiry, that, as at the date on which this
Disclosure Statement is signed, the Disclosure Statement:
(a) contains all the information that is required by the Order; and
(b) is not false or misleading.
Each Director of the Overseas Bank and the Chief Executive Officer, NZ Branch, believe, after due enquiry, that, over the year ended 30
September 2020:
(a) the Overseas Bank has complied with all conditions of registration that applied during that period, except as noted on page 101; and
(b) the NZ Branch and other members of the NZ Banking Group had systems in place to monitor and control adequately the material risks of relevant
members of the NZ Banking Group, including credit risk, concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and
other business risks, and that those systems were being properly applied. For this purpose, a relevant member of the NZ Banking Group means a
member of the NZ Banking Group that is not a member of Westpac New Zealand’s banking group. Refer to Note 32 of the financial statements for
further detail regarding the entities which had systems in place to monitor and control the material risks of relevant members of the NZ
Banking Group.
The Disclosure Statement has been signed on behalf of all of the Directors by David Alexander McLean, Chief Executive, Westpac New Zealand,
and by Simon James Power as Chief Executive Officer, NZ Branch.
David McLean
Simon Power
Dated this 24
th
day of November 2020

Income statement for the year ended 30 September 2020
6 Westpac Banking Corporation - New Zealand Banking Group
NZ BANKING GROUP
$ millionsNote20202019
Interest income:
Calculated using the effective interest rate method23,5464,029
Other25090
Total Interest income23,5964,119
Interest expense2(1,703)(2,121)
Net interest income1,8931,998
Net fees and commissions income3157201
Net wealth management and insurance income3169197
Trading income3116115
Other income31849
Net operating income before operating expenses and impairment charges2,3532,560
Operating expenses4(1,082)(1,018)
Impairment (charges)/benefits6(320)10
Profit before income tax9511,552
Income tax expense7(270)(423)
Net profit attributable to the owners of the NZ Banking Group6811,129
The above income statement should be read in conjunction with the accompanying notes.
Statement of comprehensive income for the year ended 30 September 2020
NZ BANKING GROUP
$ millions20202019
Net profit attributable to the owners of the NZ Banking Group 681 1,129
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Gains/(losses) recognised in equity on:
Investment securities
74 (8)
Cash flow hedging instruments
(68) (86)
Transferred to income statement:
Cash flow hedging instruments
73 74
Income tax on items taken to or transferred from equity:
Investment securities
(21) 3
Cash flow hedging instruments
(1) 3
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit obligation recognised in equity (net of tax)
(4) (10)
Other comprehensive income for the year (net of tax)
53 (24)
Total comprehensive income attributable to the owners of the NZ Banking Group
734 1,105
The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Balance sheet as at 30 September 2020
Westpac Banking Corporation - New Zealand Banking Group 7
NZ BANKING GROUP
$ millionsNote20202019
Assets
Cash and balances with central banks33 4,488 2,002
Collateral paid 397 417
Trading securities and financial assets measured at fair value through income statement ('FVIS')9 4,224 4,871
Derivative financial instruments 23 5,660 6,257
Investment securities10 5,021 4,469
Loans11 88,354 84,626
Other financial assets13 555 400
Life insurance assets14 375 335
Due from related entities22 2,713 2,367
Property and equipment 398 137
Deferred tax assets15 242 138
Intangible assets16 696 685
Other assets 73 58
Total assets 113,196 106,762
Liabilities
Collateral received 508 623
Deposits and other borrowings17 73,970 65,606
Other financial liabilities18 1,979 1,748
Derivative financial instruments 23 5,417 5,825
Due to related entities22 2,560 2,892
Debt issues19 15,799 17,846
Current tax liabilities 88 91
Provisions20 210 150
Other liabilities 400 139
Loan capital21 3,220 3,185
Total liabilities 104,151 98,105
Net assets 9,045 8,657
Head office account
Branch capital 1,300 1,300
Retained profits 1,078 989
Total head office account 2,378 2,289
NZ Banking Group equity
Share capital 143 143
Reserves (12) (69)
Retained profits 6,536 6,294
Total NZ Banking Group equity 6,667 6,368
Total equity attributable to the owners of the NZ Banking Group 9,045 8,657
The above balance sheet should be read in conjunction with the accompanying notes.
Signed on behalf of the Board of Directors.
DirectorDirector
24 November 202024 November 2020

Statement of changes in equity for the year ended 30 September 2020
8 Westpac Banking Corporation - New Zealand Banking Group
NZ BANKING GROUP
NZ BRANCHOTHER MEMBERS OF THE NZ BANKING GROUP
Head Office AccountReserves
Available-
for-saleInvestmentCash Flow
BranchRetained Share SecuritiesSecuritiesHedgeRetainedTotal
$ millionsCapital ProfitsCapital ReserveReserveReserveProfitsEquity
As at 30 September 2018 1,300 869 143 9 - (64) 6,126 8,383
Impact on adoption of new accounting
standards
- - - (9) 9 - (24) (24)
As at 1 October 2018 (restated) 1,300 869 143 - 9 (64) 6,102 8,359
Year ended 30 September 2019
Net profit attributable to the owners of the
NZ Banking Group - 120 - - - - 1,009 1,129
Net gains/(losses) from changes in fair
value - - - - (8) (86) - (94)
Income tax effect - - - - 3 24 - 27
Transferred to income statement - - - - - 74 - 74
Income tax effect - - - - - (21) - (21)
Remeasurement of defined benefit
obligations - - - - - - (14) (14)
Income tax effect - - - - - - 4 4
Total comprehensive income for the
year ended 30 September 2019 - 120 - - (5) (9) 999 1,105
Transactions with owners:
Dividends paid on ordinary shares (refer to
Note 22)
- - - - - - (807) (807)
As at 30 September 2019 1,300 989 143 - 4 (73) 6,294 8,657
Year ended 30 September 2020
Net profit attributable to the owners of the
NZ Banking Group - 89 - - - - 592 681
Net gains/(losses) from changes in fair
value - - - - 74 (68) - 6
Income tax effect - - - - (21) 19 - (2)
Transferred to income statement - - - - - 73 - 73
Income tax effect - - - - - (20) - (20)
Remeasurement of defined benefit
obligations - - - - - - (5) (5)
Income tax effect - - - - - -
1
1
Total comprehensive income for the
year ended 30 September 2020 - 89 - - 53 4 588 734
Transactions with owners:
Dividends paid on ordinary shares (refer to
Note 22)
- - - - - - (346) (346)
As at 30 September 2020 1,300 1,078 143 - 57 (69) 6,536 9,045
The above statement of changes in equity should be read in conjunction with the accompanying notes.

Statement of cash flows for the year ended 30 September 2020
Westpac Banking Corporation - New Zealand Banking Group 9
NZ BANKING GROUP
$ millionsNote20202019
Cash flows from operating activities
Interest received 3,571 4,148
Interest paid (1,894) (2,140)
Non-interest income received
1
114 711
Operating expenses paid (901) (868)
Income tax paid (398) (435)
Cash flows from operating activities before changes in operating assets and liabilities 492 1,416
Net (increase)/decrease in:
Collateral paid 20 (237)
Trading securities and financial assets measured at FVIS 450 (1,841)
Loans (3,946) (3,687)
Other financial assets 10 (19)
Due from related entities (148) 184
Other assets (7) -
Net increase/(decrease) in:
Collateral received (115) 32
Deposits and other borrowings 8,364 2,501
Other financial liabilities 308 237
Due to related entities (15) 38
Other liabilities 1 1
Net movement in external and related entity derivative financial instruments
1
134 (4)
Net cash provided by/(used in) operating activities33 5,548 (1,379)
Cash flows from investing activities
Purchase of investment securities (2,418) (2,009)
Proceeds from investment securities 1,909 1,387
Net movement in life insurance assets (40) (25)
Proceeds from disposal of associates - 48
Purchase of capitalised computer software (83) (62)
Purchase of property and equipment (29) (35)
Net cash provided by/(used in) investing activities (661) (696)
Cash flows from financing activities
Net movement in due to related entities (8) (279)
Proceeds from debt issues19 5,175 8,707
Repayments of debt issues19 (7,193) (5,001)
Payments for the principal portion of lease liabilities (46) -
Dividends paid to ordinary shareholders22 (346) (807)
Net cash provided by/(used in) financing activities (2,418) 2,620
Net increase/(decrease) in cash and cash equivalents 2,469 545
Cash and cash equivalents at the beginning of the year 2,074 1,529
Cash and cash equivalents at the end of the year33 4,543 2,074
1
Comparatives have been restated to correctly reflect cash flows of $233m in ‘other cash items’ relating to realised gains on FX trading derivatives which were
previously presented in ‘net movement in external and related entity derivative financial instruments’.
The above statement of cash flows should be read in conjunction with the accompanying notes. Details of the reconciliation of net cash provided
by/(used in) operating activities to net profit are provided in Note 33.

Notes to the financial statements
10 Westpac Banking Corporation - New Zealand Banking Group
Note 1 Financial statements preparation
In this Disclosure Statement, reference is made to five main reporting groups:
– Overseas Bank – refers to Westpac Banking Corporation;
– Overseas Banking Group – refers to the Overseas Bank and all other entities included in the Overseas Bank’s group for the purposes of public
reporting of the group financial statements in Australia;
– NZ Branch – refers to the New Zealand business (as defined in the Registered Bank Disclosure Statements (Overseas Incorporated Registered
Banks) Order 2014 (as amended) (‘Order’)) of the Overseas Bank;
– Westpac New Zealand – refers to Westpac New Zealand Limited; and
– NZ Banking Group – refers to the financial reporting group (as defined in the Order) of the Overseas Bank. Controlled entities of the NZ Banking
Group as at 30 September 2020 are set out in Note 22.
The Overseas Bank is registered as a public company limited by shares under the Australian Corporations Act 2001 and is entered on the register
maintained under the Reserve Bank of New Zealand Act 1989 (‘Reserve Bank Act’). The Overseas Bank provides a broad range of banking and
financial services, including consumer, business and institutional banking and wealth management services.
The NZ Branch’s head office is situated at Westpac on Takutai Square, 16 Takutai Square, Auckland 1010, New Zealand and the address for service of
process on the NZ Branch is Westpac on Takutai Square, 53 Galway Street, Auckland 1010, New Zealand.
The financial statements are for the NZ Banking Group.
These financial statements were authorised for issue by the Overseas Bank’s Board of Directors (the ‘Board’) on 24 November 2020. The Board has
the power to amend and reissue the financial statements.
The principal accounting policies are set out below and in the relevant notes to the financial statements. These accounting policies provide details of
the accounting treatments adopted for complex balances and where accounting standards provide policy choices. These policies have been
consistently applied to all the years presented, unless otherwise stated.
a.Basis of preparation
(i) Basis of accounting
These financial statements are general purpose financial statements prepared in accordance with:
the requirements of the Financial Markets Conduct Act 2013; and
the requirements of the Order.
These financial statements comply with Generally Accepted Accounting Practice, applicable New Zealand equivalents to International Financial
Reporting Standards (‘NZ IFRS’) and other authoritative pronouncements of the External Reporting Board, as appropriate for for-profit entities.
These financial statements also comply with International Financial Reporting Standards, as issued by the International Accounting Standards Board
(‘IASB’).
All amounts in these financial statements have been rounded to the nearest million dollars unless otherwise stated.
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by applying fair value accounting to financial
assets and financial liabilities (including derivative instruments) measured at FVIS, or in other comprehensive income (‘OCI’).
(iii) Comparative revisions
Comparative information has been restated where appropriate to conform to changes in presentation in the current year and to enhance
comparability. Where there has been a material restatement of comparative information the nature of, and the reason for, the restatement is
disclosed in the relevant note.
(iv) Standards adopted during the year ended 30 September 2020
NZ IFRS 16 Leases
NZ IFRS 16 Leases (‘NZ IFRS 16’) was adopted by the NZ Banking Group on 1 October 2019. NZ IFRS 16 requires all operating leases of greater than 12
months duration to be presented on balance sheet by the lessee as a right-of-use (‘ROU’) asset and lease liability. There are no significant changes
to lessor accounting.
The NZ Banking Group adopted the standard using the simplified approach to transition with no restatement of comparative information and no
effect on retained earnings.
The lease liabilities are measured at the present value of the remaining lease payments, discounted at the lessee’s incremental borrowing rate at 1
October 2019. On transition to the new standard, the lease liability recognised in other liabilities was $292 million. The associated ROU assets were
measured at an amount equal to the lease liability. The ROU assets are recognised in property and equipment.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 11
Note 1 Financial statements preparation (continued)
All leases on balance sheet give rise to a combination of interest expense on the lease liability and depreciation of the ROU asset. Interest expense is
recognised in net interest income on an effective yield basis. Depreciation expense is recognised in operating expenses on a straight-line basis over
the lease term.
Extension options are included in a number of lease contracts. The extension options are only included in the lease term if the lease is reasonably
certain to be extended, which is assessed by the NZ Banking Group at the lease commencement date. The assessment is reviewed if a significant
event or significant change in circumstances occurs which affects this assessment and is within the control of the NZ Banking Group. The NZ Banking
Group considered the impact of COVID-19 on our assessment of extension options and concluded that they were unchanged. The NZ Banking Group
also considered the impact of COVID-19 on the carrying value of the ROU asset and determined there was no impairment.
The NZ Banking Group used the incremental borrowing rate based on the remaining maturity of leases at the date of transition as the discount rate
when determining present value. The weighted average incremental borrowing rate applied was 2.40%.
The table below shows the reconciliation of operating lease commitments disclosed as at 30 September 2019 to the lease liability recognised on 1
October 2019:
NZ BANKING GROUP
$ millions
Operating lease commitments at 30 September 2019 306
Recognition exemption for short-term leases
(2)
Adjustment for extension options reasonably certain to be exercised
21
Undiscounted lease payments as at 30 September 2019 325
Effect of discounting (weighted average incremental borrowing rate of 2.40%) (33)
Lease liability as at 1 October 2019 292
NZ IFRIC Interpretation 23 Uncertainty over Income Tax Treatments
NZ IFRIC Interpretation 23 Uncertainty over Income Tax Treatments (‘NZ IFRIC 23’) was adopted by the NZ Banking Group on 1 October 2019 and
clarifies the recognition and measurement criteria in NZ IAS 12 Income Taxes where there is uncertainty over income tax treatments, and requires an
assessment of each uncertain tax position as to whether it is probable that a taxation authority will accept the position.
Where it is not considered probable, the effect of the uncertainty will be reflected in determining the relevant taxable profit or loss, tax bases,
unused tax losses and unused tax credits or tax rates. The amount will be determined as either the single most likely amount or the sum of the
probability weighted amounts in a range of possible outcomes, whichever better predicts the resolution of the uncertainty. Judgements will be
reassessed as and when new facts and circumstances are presented.
NZ IFRIC 23 did not have a material impact on the NZ Banking Group.
Interest Rate Benchmark Reform
Interest Rate Benchmark Reform - amendments to NZ IFRS 9 Financial Instruments (‘NZ IFRS 9’), NZ IAS 39 Financial Instruments: Recognition and
Measurement (‘NZ IAS 39’) and NZ IFRS 7 Financial Instruments: Disclosures (‘NZ IFRS 7’) was early adopted, as permitted by the standard, by the NZ
Banking Group on 1 October 2019. These amendments allow the NZ Banking Group to apply certain exceptions to the standard hedging requirements
in respect of hedge relationships that are impacted by a market-wide interest rate benchmark reform. Specifically the exceptions allow the NZ Banking
Group to:
Assume that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the reform when determining
whether a forecast transaction is highly probable;
Assume that the interest rate benchmark of the hedged item/instrument is not altered for the life of the hedge when assessing whether a hedge
is expected to continue to be highly effective;
A hedge relationship impacted by uncertainty arising from benchmark interest rate reform is not required to pass the 80%-125% effectiveness
test, however any actual ineffectiveness must be recorded in the income statement; and
The determination of a designated component of an exposure in portfolio hedges is only required to be made the first time that component is
designated, and not when the portfolio is de-designated and re-designated.
The exceptions allowed by the amendments are being applied to the NZ Banking Group’s London Interbank Offered Rate (‘LIBOR’) linked hedge
relationships that mature after the LIBOR discontinuance date of 31 December 2021. Last year the NZ Banking Group established an enterprise-wide
Interbank Offered Rates (‘IBORs’) Transition Programme to manage the impacts of Interest Rate Benchmark Reform (‘IBOR reform’). The scope of the
programme is to address the impact of transition from IBORs to alternative reference rates (‘ARRs’) including business, compliance, customer and
technology impacts. The Governance structure of the programme is well established to include a Steering Committee with its key responsibility being
the governance of the programme. The Committee includes senior executives from Finance, Legal, Technology, Compliance, Risk and all impacted
business units. The programme is executing against transition timelines with regulatory guidance in relation to COVID-19 indicating LIBOR is still
expected to cease by end of December 2021. Significant activities underway include development of ARR product variations, changes required for
adopting the International Swaps and Derivatives Association (‘ISDA’) Protocol, customer outreach including management of conduct risk in customer
transition and technology .Changes required for both euro short-term rate (‘ESTR’) and secured overnight funding rate (‘SOFR’) LCH discounting have
been implemented.

Notes to the financial statements
12 Westpac Banking Corporation - New Zealand Banking Group
Note 1 Financial statements preparation (continued)
A key assumption made when performing hedge accounting at the reporting date is that both the hedged item and instrument will be amended from
existing LIBOR linked floating rates to new ARRs on the same date. Where actual differences between those dates arise hedge ineffectiveness will be
recorded in the income statement.
Note 23 provides further information regarding the hedging relationships affected by the IBOR reform.
Refer to Note 1 (e) – Future developments in accounting standards for details of the accounting standard issued but not yet effective dealing with
phase 2 of the IBOR reform.
b. Basis of aggregation
The NZ Banking Group as at 30 September 2020 has been aggregated by combining the sum of the capital and reserves of the NZ Branch, and the
consolidated capital and reserves of Westpac New Zealand Group Limited, BT Financial Group (NZ) Limited, Westpac Financial Services Group-NZ-
Limited, Westpac Group Investment-NZ-Limited, Capital Finance New Zealand Limited and their subsidiaries (including structured entities). For
New Zealand entities acquired by the Overseas Banking Group, capital and reserves at acquisition are netted and recognised as capital contributed
to the NZ Banking Group.
Subsidiaries (including structured entities) are those entities over which the members of the NZ Banking Group have control. Control exists when it
is exposed to, or has rights to, variable returns from the subsidiaries, and has the ability to affect those returns through its power over the entities.
All transactions between entities within the NZ Banking Group are eliminated. Subsidiaries are fully consolidated from the date on which control
commences and are de-consolidated from the date that control ceases.
(i) Business combinations
Business combinations are accounted for using the acquisition method of accounting. Acquisition cost is measured as the aggregate of the fair value
at the date of acquisition of the assets given, equity instruments issued or liabilities incurred or assumed. Acquisition-related costs are expensed as
incurred (except for those costs arising on the issue of equity instruments which are recognised directly in equity).
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at fair value on the acquisition
date. Goodwill is measured as the excess of the acquisition cost, the amount of any non-controlling interest and the fair value of any previous NZ
Banking Group’s equity interest in the acquiree, over the fair value of the identifiable net assets acquired.
(ii) Foreign currency translation
Functional and presentational currency
The consolidated financial statements are presented in New Zealand dollars which is the NZ Banking Group’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange (‘FX’) gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in OCI for
qualifying cash flow hedges.
(iii) Head office account, share capital and reserves
Head office account - Branch capital
Branch capital comprises funds provided by the Overseas Bank. It is non-interest bearing and there is no fixed date for repatriation.
Ordinary shares
Ordinary shares are recognised at the amount paid up per ordinary share, net of directly attributable issue costs.
Investment securities reserve
This comprises the changes in the fair value of debt securities measured at fair value through other comprehensive income (‘FVOCI’) (except for
interest income, impairment charges and FX gains and losses which are recognised in the income statement), net of any related hedge accounting
adjustments and tax. These changes are transferred to non-interest income in the income statement when the asset is disposed.
Cash flow hedge reserve
This comprises the fair value gains and losses associated with the effective portion of designated cash flow hedging instruments, net of tax.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 13
Note 1 Financial statements preparation (continued)
c.Financial assets and financial liabilities
(i) Recognition
Purchases and sales by regular way of financial assets, except for loans and receivables, are recognised on trade-date; the date on which the NZ
Banking Group commits to purchase or sell the asset. Loans and receivables are recognised on settlement date, when cash is advanced to the
borrowers.
Financial liabilities are recognised when an obligation arises.
(ii) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the asset have expired, or when the NZ Banking Group has either
transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full under a ‘pass through’
arrangement and transferred substantially all the risks and rewards of ownership.
There may be situations where the NZ Banking Group has partially transferred the risks and rewards of ownership but has neither transferred nor
retained substantially all the risks and rewards of ownership. In such situations, the asset continues to be recognised in the balance sheet to the
extent of the NZ Banking Group’s continuing involvement in the asset.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, the exchange or
modification is treated as a derecognition of the original liability and the recognition of a new liability, with the difference in the respective carrying
amounts recognised in the income statement.
The terms are deemed to be substantially different if the discounted present value of the cashflows under the new terms (discounted using the
original effective interest rate) is at least 10% different from the discounted present value of the remaining cash flows of the original financial
liability. Qualitative factors such as a change in the currency the instrument is denominated in, a change in the interest rate from fixed to floating
and conversion features are also considered.
(iii) Classification and measurement
Financial assets are grouped into the following classes: cash and balances with central banks, collateral paid, trading securities and financial assets
measured at FVIS, derivative financial instruments, investment securities, loans, other financial assets, life insurance assets and due from related
entities.
Financial assets
Financial assets are classified based on a) the business model within which the assets are managed, and b) whether the contractual cash flows of
the instrument represent solely payments of principal and interest (‘SPPI’).
The NZ Banking Group determines the business model at the level that reflects how groups of financial assets are managed. When assessing the
business model the NZ Banking Group considers factors including how performance and risks are managed, evaluated and reported and the
frequency and volume of, and reason for, sales in previous periods and expectations of sales in future periods.
When assessing whether contractual cash flows are SPPI, interest is defined as consideration primarily for the time value of money and the credit
risk of the principal outstanding. The time value of money is defined as the element of interest that provides consideration only for the passage of
time and not consideration for other risks or costs associated with holding the financial asset. Terms that could change the contractual cash flows
so that they may not meet the SPPI criteria include contingent and leverage features, non-recourse arrangements, and features that could modify
the time value of money.
Debt instruments
If the debt instruments have contractual cash flows which represent SPPI on the principal balance outstanding they are classified at:
amortised cost if they are held within a business model whose objective is achieved through holding the financial asset to collect these cash
flows; or
FVOCI if they are held within a business model whose objective is achieved both through collecting these cash flows or selling the financial asset;
or
FVIS if they are held within a business model whose objective is achieved through selling the financial asset.
Debt instruments are measured at FVIS where the contractual cash flows do not represent SPPI on the principal balance outstanding or where it is
designated at FVIS to eliminate or reduce an accounting mismatch.
Debt instruments at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
rate method. They are presented net of provision for expected credit losses (‘ECL’) determined using the ECL model. Refer to Notes 6 and 12 for
further details.
Debt instruments at FVOCI are measured at fair value with unrealised gains and losses recognised in OCI except for interest income, impairment
charges and FX gains and losses, which are recognised in the income statement. Impairment on debt instruments at FVOCI is determined using the
ECL model and is recognised in the income statement with a corresponding amount in OCI. There is no reduction of the carrying value of the debt
security which remains at fair value.

Notes to the financial statements
14 Westpac Banking Corporation - New Zealand Banking Group
Note 1 Financial statements preparation (continued)
The cumulative gain or loss recognised in OCI is subsequently recognised in the income statement when the instrument is derecognised.
Debt instruments at FVIS are measured at fair value with subsequent changes in fair value recognised in the income statement.
Financial liabilities
Financial liabilities are grouped into the following classes: collateral received, deposits and other borrowings, other financial liabilities, derivative
financial instruments, due to related entities, debt issues and loan capital.
Financial liabilities are measured at amortised cost if they are not held for trading or designated at FVIS, otherwise they are measured at FVIS.
Financial assets and financial liabilities measured at FVIS are recognised initially at fair value. All other financial assets and financial liabilities are
recognised initially at fair value plus or minus directly attributable transaction costs respectively.
Further details of the accounting policy for each category of financial asset or financial liability mentioned above is set out in the note for the relevant
item.
The NZ Banking Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note 24.
d.Critical accounting assumptions and estimates
Applying the NZ Banking Group’s accounting policies requires the use of judgement, assumptions and estimates which impact the financial
information. The significant assumptions and estimates used are discussed in the relevant notes below.
Note 7Income tax expense
Note 12Provision for expected credit losses
Note 14Life insurance assets
Note 15Deferred tax assets
Note 16Intangible assets
Note 24Fair value of financial assets and financial liabilities
Impact of COVID-19
The COVID-19 pandemic and the measures put in place domestically and globally to control the spread of the virus have had a significant impact on
global economies and financial markets. As a result, this has increased the uncertainty and judgement required in relation to our critical accounting
assumptions and estimates, primarily relating to:
ECL; and
recoverable amount assessments of intangible assets.
As there is a higher than usual degree of uncertainty associated with these assumptions and estimates, the actual economic conditions are likely to
be different from those forecast which may significantly impact accounting estimates included in these financial statements. The impact of COVID-
19 is discussed further in each of the related notes.
e.Future developments in accounting standards
The following new standards and interpretations which may have a material impact on the NZ Banking Group have been issued but are not yet
effective, and unless otherwise stated, have not been early adopted by the NZ Banking Group:
NZ IFRS 17 Insurance Contracts (‘NZ IFRS 17’) was issued in August 2017 with an amendment issued in August 2020. The standard will be effective for
the 30 September 2024 year end unless early adopted. This will replace NZ IFRS 4 Insurance Contracts. The main changes under the standard are:
the scope of the standard may result in some contracts that are currently “unbundled”, i.e. accounted for separately as insurance and
investment contracts being required to be “bundled” and accounted for as an insurance contract;
portfolios of contracts (with similar risks which are managed together) will be required to be disaggregated to a more granular level by both
the age of a contract and the likelihood of the contract being onerous in order to determine the recognition of profit over the contract period
(i.e. the contractual service margin). The contractual service margin uses a different basis to recognise profit to the current Margin on Services
approach for life insurance and therefore the pattern of profit recognition is likely to differ;
risk adjustments, which reflect uncertainties in the amount and timing of future cash flows, are required for both general and life insurance
contracts rather than just general insurance contracts under the current accounting standards;
the contract boundary, which is the period over which profit is recognised, differs and is determined based on the ability to compel the
policyholder to pay premiums or the substantive obligation to provide coverage/ services. For some general insurance contracts (e.g. some
lender mortgage insurance and reinsurance contracts) this may result in the contract boundary being longer. For life insurance, in particular
term renewable contracts, the contract boundary is expected to be shorter. Both will be impacted by different patterns of profit recognition
compared to the current standards;
a narrower definition of what acquisition costs may be deferred;
an election to recognise changes in assumptions regarding discount rate in OCI rather than in income statement;

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 15
Note 1 Financial statements preparation (continued)
an election to recognise changes in the fair value of assets supporting policy liabilities in OCI rather than through the income statement;
reinsurance contracts and the associated liability are to be determined separately to the gross contract liability and may have different
contract boundaries; and
additional disclosure requirements.
Amendments to NZ IFRS 17 issued in August 2020 include:
deferral of acquisition costs for anticipated renewals outside of the initial contract boundary;
further clarity on the contractual service margin;
ability to recognise a gain in the income statement for reinsurance contracts, to offset losses from onerous contracts on initial recognition;
additional transitional relief;
simplified presentation requirements; and
deferral of the initial effective date by 2 years (to annual reporting periods beginning on or after 1 January 2023).
Current project implementation efforts are focused on assessing the impact of the standard for the NZ Banking Group.
On 17 September 2020, the External Reporting Board issued Interest Rate Benchmark Reform – Phase 2 which makes further amendments to NZ
IFRS 9, NZ IAS 39, and NZ IFRS 7 resulting from IBOR reform. The standard is effective for the 30 September 2022 year end unless early adopted. The
amendments:
allow the NZ Banking Group to account for a change in contractual cash flows of a financial instrument that result specifically from IBOR reform
by updating the effective interest rate rather than recognising a modification gain or loss;
allow the NZ Banking Group to continue hedge accounting and not trigger a de-designation when the following occurs specific to IBOR reform:
changes to hedge documentation to update the hedged risk, item and instrument;
changes to the method of assessing hedge ineffectiveness;
once the hedge relationship has been converted from LIBOR to ARR the cumulative change in fair value for ineffectiveness testing could
be reset to zero if this would improve the retrospective effectiveness test;
this amendment can apply to macro cash flow and fair value hedges where subgroups can be formed within the portfolio of hedges where
some are under the existing LIBOR rate and others have already changed to the ARR;
require additional disclosures including:
quantitative information regarding all financial instruments linked to LIBOR which have not been yet converted to ARR;
changes to the entity’s risk management strategy arising from IBOR reform; and
the management of the NZ Banking Group’s transition to ARR.
These amendments will impact the NZ Banking Group’s financial instruments that reference a LIBOR rate as they transition to an ARR. The NZ
Banking Group is currently assessing the impact of the standard and considering whether to early adopt the amendments as permitted by the
standard.
A revised Conceptual Framework (‘Framework’) was issued on 10 May 2018. This will be effective for the NZ Banking Group for the 30 September
2021 financial year. The revised Framework includes new definitions and recognition criteria for assets, liabilities, income and expenses and other
relevant financial reporting concepts. The changes are not expected to have a material impact on the NZ Banking Group.
Other amendments to existing standards that are not yet effective are not expected to have a material impact on the NZ Banking Group.

Notes to the financial statements
16 Westpac Banking Corporation - New Zealand Banking Group
Note 2 Net interest income
Accounting policy
Interest income and interest expense for all interest earning financial assets and interest bearing financial liabilities at amortised cost or FVOCI,
detailed within the following table, are recognised using the effective interest rate method. Net income from Treasury’s interest rate and liquidity
management activities is included in net interest income.
The effective interest rate method calculates the amortised cost of a financial instrument by discounting the financial instrument’s estimated
future cash receipts or payments to their present value and allocates the interest income or interest expense, including any fees, costs, premiums
or discounts integral to the instrument, over its expected life.
Interest income is calculated based on the gross carrying amount of financial assets in stages 1 and 2 of the NZ Banking Group’s ECL model and on
the carrying amount net of the provision for ECL for financial assets in stage 3. Refer to Note 12 for further details of the NZ Banking Group’s ECL
model.
NZ BANKING GROUP
$ millionsNote20202019
Interest income
Calculated using the effective interest rate method
Cash and balances with central banks 13 21
Collateral paid 3 7
Investment securities 102 138
Loans 3,408 3,832
Due from related entities22 18 27
Other interest income 2 4
Total interest income calculated using the effective interest rate method 3,546 4,029
Other
Trading securities and financial assets measured at FVIS 50 90
Total other 50 90
Total interest income 3,596 4,119
Interest expense
Calculated using the effective interest rate method
Collateral received 4 8
Deposits and other borrowings 918 1,289
Due to related entities22 25 46
Debt issues 244 285
Loan capital 139 147
Other interest expense 9 15
Total interest expense calculated using the effective interest rate method 1,339 1,790
Other
Deposits and other borrowings 18 18
Debt issues 33 21
Other interest expense
1, 2
313 292
Total other 364 331
Total interest expense 1,703 2,121
Net interest income 1,893 1,998
1
Included in other interest expense for 30 September 2020 is $7 million relating to interest expense on lease liabilities due to the adoption of NZ IFRS 16 from 1
October 2019. Comparatives have not been restated. Refer to Notes 1 and 26 for further details.
2
Includes the net impact of Treasury's interest rate and liquidity management activities.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 17
Note 3 Non-interest income
Accounting policy
Non-interest income includes net fees and commissions income, net wealth management and insurance income, trading income and other
income.
Net fees and commissions income
When another party is involved in providing goods or services to a NZ Banking Group customer, the NZ Banking Group assesses whether the
nature of the arrangement with its customer is as a principal provider or an agent of another party. Where the NZ Banking Group is acting as an
agent for another party, the income earned by the NZ Banking Group is the net consideration received (i.e. the gross amount received from the
customer less amounts paid to a third party provider). As an agent, the net consideration represents fees and commissions income for facilitating
the transaction between the customer and the third party provider with primary responsibility for fulfilling the contract.
Fees and commissions income
Fees and commissions income is recognised when the performance obligation is satisfied by transferring the promised good or service to the
customer. Fees and commissions income includes facility fees, transaction fees and commissions and other non-risk fee income.
Facility fees include certain line fees, annual credit card fees and fees for providing customer bank accounts. They are recognised over the term of
the facility/period of service on a straight line basis.
Transaction fees and commissions are earned for facilitating banking transactions such as FX fees, telegraphic transfers and issuing bank cheques.
Fees and commissions for these one-off transactions are recognised once the transaction has been completed. Transaction fees and commissions
are also recognised for credit card transactions including interchange fees net of scheme charges. These are recognised once the transaction has
been completed, however, a component of interchange fees received is deferred as unearned income as the NZ Banking Group has a future
service obligation to customers under the NZ Banking Group’s credit card reward programmes.
Other non-risk fee income includes advisory and underwriting fees which are recognised when the related service is completed.
Income which forms an integral part of the effective interest rate of a financial instrument is recognised using the effective interest method and
recorded in interest income (for example, loan origination fees).
Fees and commissions expenses
Fees and commissions expenses include incremental external costs that vary directly with the provision of goods or services to customers. An
incremental cost is one that would not have been incurred if a specific good or service had not been provided to a specific customer. Fees and
commissions expenses which form an integral part of the effective interest rate of a financial instrument are recognised using the effective interest
method and recorded in net interest income. Fees and commissions expenses include the costs associated with credit card loyalty programmes
which are recognised as an expense when the services are provided on the redemption of points as well as merchant transaction costs.
Net wealth management and insurance income
Wealth management income
Wealth management fees earned for the ongoing management of customer funds and investments are recognised when the performance
obligation is satisfied which is over the period of management.
Net life insurance income and change in policy liabilities
Net insurance policy assets relating to life insurance contracts are calculated by using the margin on service methodology in accordance with New
Zealand Society of Actuaries Professional Standard 20 Determination of Life Insurance Policy Liabilities. Under this methodology, planned profit
margins and an estimate of future liabilities are calculated separately for each major product line using applied assumptions at each reporting
date. Profit margins are released in line with the service that has been provided.
Life insurance premiums with a regular due date are recognised as revenue on an accrual basis. Premiums with no due date are recognised on a
cash received basis.
Life insurance contract claims are recognised as an expense when the liability has been established.
Trading income
realised and unrealised gains or losses from changes in the fair value of trading assets, liabilities and derivatives are recognised in the period
in which they arise (except day one profits or losses which are deferred, refer to Note 24);
net income related to Treasury’s interest rate and liquidity management activities is included in net interest income.

Notes to the financial statements
18 Westpac Banking Corporation - New Zealand Banking Group
Note 3 Non-interest income (continued)
NZ BANKING GROUP
$ millions20202019
Net fees and commissions income
Facility fees 54 50
Transaction fees and commissions 135 182
Other non-risk fee income 27 30
Fees and commissions income 216 262
Credit card loyalty programmes (33) (32)
Transaction fees and commissions related expenses (26) (29)
Fees and commissions expenses (59) (61)
Net fees and commissions income 157 201
Net wealth management and insurance income
Wealth management income 51 59
Net life insurance income and change in policy liabilities 118 138
Net wealth management and insurance income 169 197
Trading income 116 115
Other income
Net ineffectiveness on qualifying hedges 10 2
Other non-interest income 8 47
Total other income 18 49
Total non-interest income 460 562
Deferred income in relation to the credit card loyalty programmes for the NZ Banking Group was $31 million as at 30 September 2020 (30 September
2019: $31 million). This will be recognised as fees and commissions income as the credit card reward points are redeemed.
There were no other material contract assets or contract liabilities for the NZ Banking Group.
Non-interest income in scope of NZ IFRS 15 Revenue from Contracts with Customers can be further disaggregated into the following operating
segments and is consistent with the segment descriptions detailed in Note 28.
NZ BANKING GROUP
$ millions
Consumer
Banking and
Wealth
Commercial,
Corporate and
Institutional
Financial
Markets,
International
Trade and
Payments
1
Investments
and Insurance
Reconciling
ItemsTotal
Year ended 30 September 2020
Fees and commissions income
Facility fees 33 16 - - 5 54
Transaction fees and commissions 74 55 2 - 4 135
Other non-risk fee income 11 14 12 - (10) 27
Fees and commissions income 118 85 14 - (1) 216
Fees and commissions expenses (59) - - - - (59)
Net fees and commissions income 59 85 14 - (1) 157
Wealth management income 14 - - 37 - 51
Year ended 30 September 2019 (restated)
Fees and commissions income
Facility fees 28 15 - - 7 50
Transaction fees and commissions 117 61 3 - 1 182
Other non-risk fee income 13 14 13 - (10) 30
Fees and commissions income 158 90 16 - (2) 262
Fees and commissions expenses (62) - - - 1 (61)
Net fees and commissions income 96 90 16 - (1) 201
Wealth management income 15 - - 44 - 59
1
In 2020, the NZ Banking Group has separately presented the Financial Markets, International Trade and Payments operating segment to more accurately reflect
management’s view of the operations. Previously, these amounts were included in the Commercial, Corporate and Institutional operating segment.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 19
Note 4 Operating expenses5967-2 04-18
NZ BANKING GROUP
$ millionsNote20202019
Staff expenses 544 523
Operating lease rentals 26 58
Depreciation
1
99 39
Technology services and telecommunications 71 94
Purchased services 134 123
Software amortisation costs 66 59
Related entities - management fees22 14 8
Other 128 114
Total operating expenses 1,082 1,018
1
These balances include depreciation of ROU assets of $61 million due to the adoption of NZ IFRS 16 from 1 October 2019. Comparatives have not been restated.
Refer to Notes 1 and 26 for further details.
Note 5 Auditor’s remuneration5967-2 04-18
NZ BANKING GROUP
$'000s20202019
Audit and audit related services
Audit and review of financial statements
1
3,5063,146
Other audit related services
2
381241
Total remuneration for audit and other audit related services3,8873,387
Other services--
Total remuneration for non-audit services--
Total remuneration for audit, other audit related services and non-audit services3,8873,387
1
Fees for the annual audit of the financial statements, the review or other procedures performed on the interim financial statements and Sarbanes-Oxley reporting
undertaken in the role of auditor.
2
Assurance or agreed upon procedures provided on certain financial information performed in the role of auditor (or where most appropriate to be performed by
the auditor), being the issue of comfort letters and agreed procedures reports in relation to debt issuance programmes, solvency projections, net tangible assets
return and solvency return.
It is the NZ Banking Group’s policy to engage the external auditor on assignments additional to their statutory audit duties only if their independence is
not either impaired or seen to be impaired, and where their expertise and experience with the NZ Banking Group is important.
The external auditor also provides audit and non-audit services to non-consolidated entities, including non-consolidated trusts and non-consolidated
superannuation funds or pension funds of which a member of the NZ Banking Group is manager or responsible entity. During the year ended 30
September 2020, the fees in respect of these services were $ 449,025 (30 September 2019: $ 513,895).

Notes to the financial statements
20 Westpac Banking Corporation - New Zealand Banking Group
Note 6 Impairment charges/(benefits)
Accounting policy
Impairment charges are based on an expected loss model which measures the difference between the current carrying amount and the present value
of expected future cash flows taking into account past experience, current conditions and multiple probability-weighted macroeconomic scenarios for
reasonably supportable future economic conditions. Further details of the calculation of ECL and the critical accounting assumptions and estimates
relating to impairment charges are included in Note 12.
Impairment charges are recognised in the income statement, with a corresponding amount recognised as follows:
Loans at amortised cost: as a reduction of the carrying value of the financial asset through an offsetting provision account (refer to Note 12);
Investment securities: in reserves in OCI with no reduction of the carrying value of the debt security (refer to the statement of changes in equity);
and
Credit commitments: as a provision (refer to Note 20).
Uncollectable loans
A loan may become uncollectable in full or part if, after following the NZ Banking Group’s loan recovery procedures, the NZ Banking Group remains
unable to collect that loan’s contractual repayments. Uncollectable amounts are written off against their related provision for ECL, after all possible
repayments have been received.
Where loans are secured, amounts are generally written off after receiving the proceeds from the security, or in certain circumstances, where the net
realisable value of the security has been determined and this indicates that there is no reasonable expectation of full recovery, write-off may be earlier.
Unsecured consumer loans are generally written off after 180 days past due.
The NZ Banking Group may subsequently be able to recover cash flows from loans written off. In the period which these recoveries are made, they are
recognised in the income statement.
NZ BANKING GROUP
$ millions20202019
Provisions raised/(released):
Performing 205 (35)
Non-performing 105 (3)
Bad debts written-off/(recovered) directly to the income statement 10 28
Impairment charges/(benefits) 320 (10)
of which relates to:
Loans and credit commitments 320 (10)
Impairment charges/(benefits) 320 (10)
Impairment charges/(benefits) on all other financial assets are not material to the NZ Banking Group. Refer to Note 12 for details on the impact of
COVID-19 on the provision for ECL.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 21
Note 7 Income tax expense
Accounting policy
The income tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised directly in OCI, in which case it is recognised in the statement of comprehensive income.
Current tax is the tax payable for the year using enacted or substantively enacted tax rates and laws. Current tax also includes adjustments to tax
payable for previous years.
Goods and services tax (‘GST’)
Revenue, expenses and assets are recognised net of GST except to the extent that GST is not recoverable from the New Zealand Inland Revenue.
In these circumstances, GST is recognised as part of the expense or the cost of the asset.
Critical accounting assumptions and estimates
Significant judgement is required in determining the current tax liability. There may be transactions with uncertain tax outcomes and provisions
are determined based on the expected outcomes.
NZ BANKING GROUP
$ millions
2020
2019
Income tax expense
Current tax:
Current year374414
Prior year adjustments-4
Deferred tax (refer to Note 15):
Current year (105)10
Prior year adjustments
1(5)
Total income tax expense
270
423
Profit before income tax9511,552
Tax calculated at tax rate of 28%
266435
Income not subject to tax
-(11)
Expenses not deductible for tax purposes
3-
Prior year adjustments
1(1)
Total income tax expense270423
The effective tax rate for the year ended 30 September 2020 was 28.4% (30 September 2019: 27.3%).
Note 8 Imputation credit account
NZ BANKING GROUP
$ millions20202019
Imputation credits available for use in subsequent reporting periods
1,3811,235

Notes to the financial statements
22 Westpac Banking Corporation - New Zealand Banking Group
Note 9 Trading securities and financial assets measured at FVIS
Accounting policy
Trading securities
Trading securities include actively traded debt (government, semi-government and other) and those acquired for sale in the near term and are
held at fair value.
Reverse repurchase agreements
Securities purchased under these agreements are not recognised in the balance sheet, as the NZ Banking Group has not obtained the risks and
rewards of ownership. The cash consideration paid is recognised as a reverse repurchase agreement, which forms part of a trading portfolio that
is measured at fair value.
Gains and losses on these financial assets are recognised in the income statement. Interest earned from debt securities is recognised in interest
income (refer to Note 2).
NZ BANKING GROUP
$ millions20202019
Government and semi-government securities
2,6841,421
Other debt securities
993
2,409
Reverse repurchase agreements
547
1,041
Total trading securities and financial assets measured at FVIS4,2244,871
Note 10 Investment securities
Accounting policy
Investment securities include debt securities (government and other) that are measured at FVOCI. These instruments are classified based on the
criteria disclosed under the heading “Financial assets and financial liabilities” in Note 1.
Debt securities measured at FVOCI
Include debt instruments that have contractual cash flows which represent SPPI on the principal balance outstanding and they are held within a
business model whose objective is achieved both through collecting these cash flows or selling the financial asset.
These securities are measured at fair value with gains and losses recognised in OCI except for interest income, impairment charges and FX gains
and losses which are recognised in the income statement.
Impairment is measured using the same ECL model applied to financial assets measured at amortised cost. Impairment is recognised in the
income statement with a corresponding amount in OCI with no reduction of the carrying value of the debt security which remains at fair value.
Refer to Note 12 for further details.
The cumulative gain or loss recognised in OCI is subsequently recognised in the income statement when the instrument is disposed.
NZ BANKING GROUP
$ millions20202019
Government and semi-government securities3,8442,599
Other debt securities1,1771,870
Total investment securities5,0214,469

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 23
Note 11 Loans
Accounting policy
Loans are financial assets initially recognised at fair value plus directly attributable transaction costs and fees.
Loans are subsequently measured at amortised cost using the effective interest rate method where they have contractual cash flows which
represent SPPI on the principal balance outstanding and they are held within a business model whose objective is achieved through holding the
loans to collect these cash flows. They are presented net of any provision for ECL.
Loan products that have both mortgage and deposit facilities are presented gross in the balance sheet, segregating the asset and liability
component, because they do not meet the criteria to be offset. Interest earned on these products is presented on a net basis in the income
statement as this reflects how the customer is charged.
The following table shows loans disaggregated by types of credit exposure:
NZ BANKING GROUP
$ millions20202019
Residential mortgages 55,230 51,504
Other retail 3,299 3,753
Corporate 30,340 29,579
Other
92 111
Total gross loans 88,961 84,947
Provision for ECL on loans (refer to Note 12) (607) (321)
Total net loans 88,354 84,626

Notes to the financial statements
24 Westpac Banking Corporation - New Zealand Banking Group
Note 12 Provision for expected credit losses
Accounting policy
Note 6 provides details of impairment charges.
Impairment under NZ IFRS 9 applies to all financial assets at amortised cost, investment securities and credit commitments.
The ECL determined under NZ IFRS 9 is recognised as follows:
Loans at amortised cost: as a reduction of the carrying value of the financial asset through an offsetting provision account (refer to Note 11);
Investment securities: in reserves in OCI with no reduction of the carrying value of the debt security itself (refer to the statement of changes
in equity); and
Credit commitments: as a provision (refer to Note 20).
Measurement
The NZ Banking Group calculates the provision for ECL based on a three stage approach. ECL are a probability-weighted estimate of the cash
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.
The models use three main components to determine the ECL (as well as the time value of money) including:
Probability of default (‘PD’): the probability that a counterparty will default;
Loss given default (‘LGD’): the loss that is expected to arise in the event of a default; and
Exposure at default (‘EAD’): the estimated outstanding amount of credit exposure at the time of the default.
Model stages
The three stages are as follows:
Stage 1: 12 months ECL - performing
For financial assets where there has been no significant increase in credit risk since origination a provision for 12 months ECL is recognised.
Stage 2: Lifetime ECL – performing
For financial assets where there has been a significant increase in credit risk since origination but where the asset is still performing a provision for
lifetime ECL is recognised. The indicators of a significant increase in credit risk are described on the following page.
Stage 3: Lifetime ECL – non-performing
For financial assets that are non-performing a provision for lifetime ECL is recognised. Indicators include a breach of contract with the NZ Banking
Group such as a default on interest or principal payments, a borrower experiencing significant financial difficulties or observable economic
conditions that correlate to defaults on an individual basis.
Financial assets in Stage 3 are those that are in default. A default occurs when the NZ Banking Group considers that the customer is unable to
repay its credit obligations in full, irrespective of recourse by the NZ Banking Group to actions such as realising security, or the customer is more
than 90 days past due on any material credit obligation. This definition is aligned to the Reserve Bank regulatory definition of default.
Collective and individual assessment
Financial assets that are in Stages 1 and 2 are assessed on a collective basis. This means that they are grouped in pools of similar assets with
similar credit risk characteristics including the type of product and the customer risk grade. Financial assets in Stage 3 are assessed on an
individual basis and calculated collectively for those below a specified threshold.
Expected life
In considering the lifetime timeframe for ECL in Stages 2 and 3, the standard generally requires use of the remaining contractual life adjusted,
where appropriate, for prepayments, extension and other options. For certain revolving credit facilities which include both a drawn and undrawn
component (e.g. credit cards and revolving lines of credit), the NZ Banking Group’s contractual ability to demand repayment and cancel the
undrawn commitment does not limit the exposure to credit losses to the contractual notice period. For these facilities, lifetime is based on
historical behaviour.
Movement between stages
Assets may move in both directions through the stages of the impairment model. Assets previously in Stage 2 may move back to Stage 1 if it is no
longer considered that there has been a significant increase in credit risk. Similarly, assets in Stage 3 may move back to Stage 1 or Stage 2 if they
are no longer assessed to be non-performing.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 25
Note 12 Provision for expected credit losses (continued)
Accounting policy (continued)
Critical accounting assumptions and estimates
Key judgements include when a significant increase in credit risk has occurred and estimation of forward-looking macroeconomic information.
Other factors which can impact the provision include the borrower’s financial situation, the realisable value of collateral, the NZ Banking Group’s
position relative to other claimants, the reliability of customer information and the likely cost and duration of recovering the loan.
Significant increase in credit risk
Determining when a financial asset has experienced a significant increase in credit risk since origination is a critical accounting judgement which is
primarily based on changes in internal customer risk grades since origination of the facility. A change in an internal customer risk grade is based
on both quantitative and qualitative factors. The change in the internal customer risk grade that the NZ Banking Group uses to represent a
significant increase in credit risk is based on a sliding scale. This means that a higher credit quality exposure at origination would require a more
significant downgrade compared to a lower credit quality exposure before it is considered to have experienced a significant increase in credit risk.
The NZ Banking Group does not rebut the presumption that instruments that are 30 days past due have experienced a significant increase in risk
but this is used as a backstop rather than the primary indicator.
The deferral of payments by customers in hardship arrangements is generally treated as an indication of a significant increase in credit risk
(‘SICR’) but the deferral of payments under the current COVID-19 support packages for mortgages and business loans has not, in isolation, been
treated as an indication of SICR.
The NZ Banking Group does not apply the low credit risk exemption which assumes investment grade facilities do not have a significant increase in
credit risk.
Forward-looking macroeconomic information
The measurement of ECL for each stage and the assessment of significant increase in credit risk consider information about past events and
current conditions as well as reasonable and supportable projections of future events and economic conditions. The estimation of forward-
looking information is a critical accounting judgement. The NZ Banking Group considers three future macroeconomic scenarios including a base
case scenario along with upside and downside scenarios.
The macroeconomic variables used in these scenarios, based on current economic forecasts, include (but are not limited to) unemployment
rates, real gross domestic product growth rates, base interest rates and residential property price indices.
Base case scenario
This scenario utilises the internal Westpac economics forecast used for strategic decision making and forecasting.
Upside scenario
This scenario represents a modest improvement on the base case scenario.
Downside scenario
The downside scenario is a more severe scenario with ECL higher than those under the current base case scenario. The more severe loss
outcome for the downside is generated under a recession scenario in which the combination of negative GDP growth, declines in residential
property prices and an increase in the unemployment rate simultaneously impact ECL across all portfolios from the reporting date.
The macroeconomic scenarios are weighted based on the NZ Banking Group’s best estimate of the relative likelihood of each scenario. The
weighting applied to each of the three macroeconomic scenarios takes into account historical frequency, current trends, and forward-looking
conditions.
The macroeconomic variables and probability weightings of the three macroeconomic scenarios are subject to the approval of the NZ Banking
Group’s Chief Financial Officer and Chief Risk Officer with oversight from the Board of Directors (and its Committees).
Where appropriate, adjustments will be made to modelled outcomes to reflect reasonable and supportable information not already incorporated
in the models.
Judgements can change with time as new information becomes available which could result in changes to the provision for ECL.

Notes to the financial statements
26 Westpac Banking Corporation - New Zealand Banking Group
Note 12 Provision for expected credit losses (continued)
Loans and credit commitments
The reconciliation of the provision for ECL tables for loans and credit commitments has been determined by an aggregation of monthly
movements over the year. The key line items in the reconciliation represent the following:
The “transfers between stages” lines represent transfers between Stage 1, Stage 2 and Stage 3 prior to remeasurement of the provision for
ECL.
The “other charges/(credits) to the income statement” line represents the impact on the provision for ECL due to changes in credit quality
during the year (including transfers between stages), changes due to forward-looking economic scenarios, and partial repayments and
additional drawdowns on existing facilities over the year.
“Write-offs” represent a reduction in the provision for ECL as a result of derecognition of exposures where there is no reasonable expectation
of full recovery.
The following table shows the collectively assessed provisions (‘CAP’) and individually assessed provisions (‘IAP’) for loans and credit
commitments.
NZ BANKING GROUP
20202019
PerformingNon-performingPerformingNon-performing
Stage 1Stage 2Stage 3Stage 3Stage 1Stage 2Stage 3Stage 3
$ millions
CAPCAPCAPIAP
Total
CAPCAPCAPIAP
Total
Provision for ECL on loans
Residential mortgages 44 121 70 6 241 19 18 31 6 74
Other retail 21 70 31 2 124 37 51 19 - 107
Corporate 31 140 6 65 242 20 95 3 22 140
Total provision for ECL on
loans (refer to Note 11)
96 331 107 73 607 76 164 53 28 321
Provision for ECL on credit
commitments
Residential mortgages 5 2 - - 7 3 1 - - 4
Other retail 7 11 - 1 19 9 4 - - 13
Corporate 8 16 - - 24 3 11 - - 14
Total provision for ECL on
credit commitments (refer to
Note 20)
20 29 - 1 50 15 16 - - 31
Total provision for ECL on
loans and credit commitments
116 360 107 74 657 91 180 53 28 352
Gross carrying amount 81,172 7,079 573 137 88,961 80,435 4,064 379 69 84,947
Coverage ratio (%)
1
0.14 5.09 18.67 54.01 0.74 0.11 4.43 13.98 40.58 0.41
1
Coverage ratio is calculated using total provision for ECL on loans and credit commitments over gross carrying amount (excluding credit commitments).

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 27
Note 12 Provision for expected credit losses (continued)
Movements in components of loss allowance – total
The following table reconciles the provision for ECL on loans and credit commitments for the NZ Banking Group.
NZ BANKING GROUP
PerformingNon-performing
Stage 1Stage 2Stage 3Stage 3
$ millions
CAPCAPCAPIAP
Total
Provision for ECL on loans and credit commitments as at 30
September 2019
91 180 53 28 352
Due to changes in credit quality:
Transfers to Stage 1 425 (400) (25) - -
Transfers to Stage 2 (53) 143 (87) (3) -
Transfers to Stage 3 CAP - (85) 86 (1) -
Transfers to Stage 3 IAP - (21) (7) 28 -
Reversals of previously recognised impairment charges - - - (11) (11)
New financial assets originated 23 - - - 23
Financial assets derecognised during the year (14) (40) (19) - (73)
Changes in CAP due to amounts written off - - (33) - (33)
Other charges/(credits) to the income statement (356) 583 139 38 404
Total charges/(credits) to the income statement for ECL 25 180 54 51 310
Amounts written off from IAP - - - (5) (5)
Total provision for ECL on loans and credit commitments as
at 30 September 2020
116 360 107 74 657
NZ BANKING GROUP
PerformingNon-performing
Stage 1Stage 2Stage 3Stage 3
$ millions
CAPCAPCAPIAP
Total
Provision for ECL on loans and credit commitments as at 1
October 2018
103 203 53 36 395
Due to changes in credit quality:
Transfers to Stage 1 261 (245) (16) - -
Transfers to Stage 2 (16) 43 (26) (1) -
Transfers to Stage 3 CAP - (38) 42 (4) -
Transfers to Stage 3 IAP - - (8) 8 -
Reversals of previously recognised impairment charges - - - (15) (15)
New financial assets originated 24 - - - 24
Financial assets derecognised during the year (19) (41) (21) - (81)
Changes in CAP due to amounts written off - - (53) - (53)
Other charges/(credits) to the income statement (262) 258 82 9 87
Total charges/(credits) to the income statement for ECL (12) (23) - (3) (38)
Amounts written off from IAP - - - (5) (5)
Total provision for ECL on loans and credit commitments as
at 30 September 2019
91 180 53 28 352

Notes to the financial statements
28 Westpac Banking Corporation - New Zealand Banking Group
Note 12 Provision for expected credit losses (continued)
Movements in components of loss allowance – by types of credit exposure
The provision for ECL on loans and credit commitments can be further disaggregated into the following types of credit exposure:
NZ BANKING GROUP
PerformingNon-performing
Stage 1Stage 2Stage 3Stage 3
$ millions
CAPCAPCAPIAP
Total
Residential mortgages
Provision for ECL as at 30 September 2019 22 19 31 6 78
Due to changes in credit quality:
Transfers to Stage 1 200 (186) (14) - -
Transfers to Stage 2 (26) 86 (60) - -
Transfers to Stage 3 CAP - (46) 47 (1) -
Transfers to Stage 3 IAP - - (2) 2 -
Reversals of previously recognised impairment charges - - - (3) (3)
New financial assets originated 11 - - - 11
Financial assets derecognised during the year (4) (10) (14) - (28)
Changes in CAP due to amounts written off - - (1) - (1)
Other charges/(credits) to the income statement (154) 260 83 3 192
Total charges/(credits) to the income statement for ECL 27 104 39 1 171
Amounts written off from IAP - - - (1) (1)
Total provision for ECL on loans and credit commitments as
at 30 September 2020
49 123 70 6 248
Other retail
Provision for ECL as at 30 September 2019 46 55 19 - 120
Due to changes in credit quality:
Transfers to Stage 1 213 (202) (11) - -
Transfers to Stage 2 (25) 49 (24) - -
Transfers to Stage 3 CAP - (32) 32 - -
Transfers to Stage 3 IAP - - - - -
Reversals of previously recognised impairment charges - - - (1) (1)
New financial assets originated 6 - - - 6
Financial assets derecognised during the year (6) (19) (5) - (30)
Changes in CAP due to amounts written off - - (32) - (32)
Other charges/(credits) to the income statement (206) 230 52 4 80
Total charges/(credits) to the income statement for ECL (18) 26 12 3 23
Amounts written off from IAP - - - - -
Total provision for ECL on loans and credit commitments as
at 30 September 2020
28 81 31 3 143
Corporate
Provision for ECL as at 30 September 2019 23 106 3 22 154
Due to changes in credit quality:
Transfers to Stage 1 12 (12) - - -
Transfers to Stage 2 (2) 8 (3) (3) -
Transfers to Stage 3 CAP - (7) 7 - -
Transfers to Stage 3 IAP - (21) (5) 26 -
Reversals of previously recognised impairment charges - - - (7) (7)
New financial assets originated 6 - - - 6
Financial assets derecognised during the year (4) (11) - - (15)
Changes in CAP due to amounts written off - - - - -
Other charges/(credits) to the income statement 4 93 4 31 132
Total charges/(credits) to the income statement for ECL 16 50 3 47 116
Amounts written off from IAP - - - (4) (4)
Total provision for ECL on loans and credit commitments as
at 30 September 2020
39 156 6 65 266
The above movements in components of loss allowance table does not include ‘Other’ credit exposures on the basis that the provision for ECL is
nil.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 29
Note 12 Provision for expected credit losses (continued)
NZ BANKING GROUP
PerformingNon-performing
Stage 1Stage 2Stage 3Stage 3
$ millions
CAPCAPCAPIAP
Total
Residential mortgages
Provision for ECL as at 1 October 2018 33 25 25 7 90
Due to changes in credit quality:
Transfers to Stage 1 22 (16) (6) - -
Transfers to Stage 2 (3) 11 (8) - -
Transfers to Stage 3 CAP - (4) 5 (1) -
Transfers to Stage 3 IAP - - (3) 3 -
Reversals of previously recognised impairment charges - - - (3) (3)
New financial assets originated 5 - - - 5
Financial assets derecognised during the year (3) (3) (14) - (20)
Changes in CAP due to amounts written off - - (2) - (2)
Other charges/(credits) to the income statement (32) 6 34 2 10
Total charges/(credits) to the income statement for ECL (11) (6) 6 1 (10)
Amounts written off from IAP - - - (2) (2)
Total provision for ECL on loans and credit commitments as
at 30 September 2019
22 19 31 6 78
Other retail
Provision for ECL as at 1 October 2018 50 64 18 3 135
Due to changes in credit quality:
Transfers to Stage 1 232 (223) (9) - -
Transfers to Stage 2 (10) 26 (16) - -
Transfers to Stage 3 CAP - (30) 31 (1) -
Transfers to Stage 3 IAP - - - - -
Reversals of previously recognised impairment charges - - - (4) (4)
New financial assets originated 12 - - - 12
Financial assets derecognised during the year (13) (21) (4) - (38)
Changes in CAP due to amounts written off - - (51) - (51)
Other charges/(credits) to the income statement (225) 239 50 5 69
Total charges/(credits) to the income statement for ECL (4) (9) 1 - (12)
Amounts written off from IAP - - - (3) (3)
Total provision for ECL on loans and credit commitments as
at 30 September 2019
46 55 19 - 120
Corporate
Provision for ECL as at 1 October 2018 20 114 10 26 170
Due to changes in credit quality:
Transfers to Stage 1 7 (6) (1) - -
Transfers to Stage 2 (3) 6 (2) (1) -
Transfers to Stage 3 CAP - (4) 6 (2) -
Transfers to Stage 3 IAP - - (5) 5 -
Reversals of previously recognised impairment charges - - - (8) (8)
New financial assets originated 7 - - - 7
Financial assets derecognised during the year (3) (17) (3) - (23)
Changes in CAP due to amounts written off - - - - -
Other charges/(credits) to the income statement (5) 13 (2) 2 8
Total charges/(credits) to the income statement for ECL 3 (8) (7) (4) (16)
Amounts written off from IAP - - - - -
Total provision for ECL on loans and credit commitments as
at 30 September 2019
23 106 3 22 154
The above movements in components of loss allowance table does not include ‘Other’ credit exposures on the basis that the provision for ECL is
nil.

Notes to the financial statements
30 Westpac Banking Corporation - New Zealand Banking Group
Note 12 Provision for expected credit losses (continued)
Impact of Overlays on the provision for ECL
The following table attributes the breakup between modelled ECL and other economic overlays.
Where there is increased uncertainty regarding the required forward-looking economic conditions under NZ IFRS 9, or limitations of the historical
data used to calibrate the models to current stressed environments, overlays are typically used to address areas of potential risk not captured in
the underlying modelled ECL.
NZ BANKING GROUP
$ millions20202019
Modelled provision for ECL 522 313
Overlays
1
135 39
Total provision for ECL 657 352
1
Included in 2020 is $128 million related to COVID-19.
Details of these changes, which are based on reasonable and supportable information up to the date of this disclosure statement are provided
below.
Modelled provision for ECL
The modelled provision for ECL is a probability weighted estimate based on three scenarios which together are representative of the NZ Banking
Group’s view of the forward-looking distribution of potential loss outcomes. The increase in provisions as a result of changes in modelled ECL are
reflected through the “Other charges/(credits) to the income statement” line in the “Movements in components of loss allowance” table.
The base case scenario uses current Westpac Economics forecasts and reflects the latest available macroeconomic view which shows a
deterioration in the short term, with a subsequent recovery. The latest view considers both the economic and societal impacts of COVID-19 and
the government stimulus measures implemented to cushion the impacts. The NZ Banking Group’s economic forecast assumes the following:
Key macroeconomic assumptions
for base case scenario
30 Sep 2030 Sep 19
Annual GDPForecasted growth of 6.7% over the next 12 monthsForecasted growth of 3.2% over the next 12 months
Residential property pricesForecasted growth of 6.8% over the next 12 monthsForecasted growth of 7% over the next 12 months
Cash rateReduction of 50 bps in the next 12 monthsRBNZ bill rate of 1.1% in the next 12 months
Unemployment rate
1
Forecast to peak at 7% (December 2020) and then
fall to 6.6% at September 2021
N/A (not used in NZ IFRS 9 models)
1
In this financial year, Credit Cards have moved from a Simplified approach to an Advanced model using Unemployment rate in the modelled ECL outcome.
The downside scenario is a more severe scenario with ECL higher than the base case scenario. The more severe loss outcome for the downside is
generated under a recession scenario in which the combination of negative GDP growth, declines in residential property prices and an increase in
the unemployment rate simultaneously impact ECL across all portfolios from the reporting date. The assumptions in this scenario and relativities
to the base case scenario will be monitored having regard to the emerging economic conditions and updated where necessary. The upside
scenario represents a modest improvement to the base case.
The following sensitivity table shows the reported provision for ECL based on the probability weighted scenarios and what the provision for ECL
would be assuming a 100% weighting is applied to the base case scenario and to the downside scenario (with all other assumptions, including
customer risk grades, held constant).
NZ BANKING GROUP
$ millions20202019
Reported probability-weighted ECL 657 352
100% base case ECL 492 259
100% downside ECL 902 596
If 1% of the stage 1 gross exposure from loans and credit commitments (calculated on a 12 month ECL) was reflected in stage 2 (calculated on a
lifetime ECL) the provision for ECL would increase by $33 million (2019: $26 million) based on applying the average provision coverage ratios by
stage to the movement in the gross exposure by stage.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 31
Note 12 Provision for expected credit losses (continued)
The following table indicates the weightings applied by the NZ Banking Group.
NZ BANKING GROUP
Macroeconomic scenario weightings (%)20202019
Upside510
Base5562.5
Downside4027.5
The increase in weighting to the downside scenario since 30 September 2019 reflects the continuing uncertainty around the economic
assumptions used in the base case and the asymmetric impact of downside tail risk on ECL. In particular, the current base case economic forecast
indicates a relatively short and sharp economic impact followed by a subsequent recovery. There is a risk that the economic impacts of COVID-19
could be deeper or more prolonged which would result in higher credit losses than those modelled under the base case.
The COVID-19 pandemic is leading to material structural shifts in the behaviour of the economy and customers, and unprecedented actions by
banks, governments and regulators in response. ECL models are expected to be subject to a higher than usual level of uncertainty during this
period. In this environment, there is a heightened need for the application of judgement in order to reflect these evolving relationships and risks.
This judgement has been applied in the form of the revision to scenario weightings and a COVID-19 overlay.
COVID-19 overlay
Where there is increased uncertainty regarding the required forward-looking economic conditions under NZ IFRS 9, or limitations of the historical
data used to calibrate the models to current stressed environments, overlays are typically used to address areas of potential risk not captured in
the underlying modelled ECL.
The COVID-19 pandemic has had, and continues to have, an impact on businesses around the world and the economic environments in which they
operate. There also exists significant uncertainty regarding the duration and severity of COVID-19 impacts and the associated disruption to the
economy and our customers. While the impacts on the broader economy are included in the assumptions used in the economic scenarios and the
weightings applied to these scenarios, these general economy wide impacts may not fully reflect the specific impact on individual customers, and
therefore the potential risk is not captured in the underlying modelled ECL. As overlays require the application of expert judgment, they are
documented and subject to comprehensive internal governance and oversight. The NZ Banking Group’s COVID-19 overlay as of September 2020 is
$128 million, of which, $8 million relates to COVID-19 deferral packages.
The deferral of payments by customers in hardship arrangements is generally treated as an indication of a SICR but the deferral of payments
under the current COVID-19 support packages for mortgages and business loans has not, in isolation, been treated as an indication of SICR. As
highlighted by the IASB in its guidance document ‘IFRS 9 and COVID-19’ issued on 27 March 2020, in these changed circumstances it is not
appropriate to apply previously established approaches to assessing SICR for payment holidays in a mechanistic manner.
These relief packages are available to customers who require assistance because of COVID-19 and who otherwise had up to date payment status
prior to the onset of COVID-19. The earlier relief packages allow for a deferral of payments for up to 6 months. During this period, the deferred
interest will be capitalised and the deferred principal along with the capitalised interest, will be repaid over the remaining term of the loan. These
packages have been designed to provide short-term cash flow support while the most significant COVID-19 restrictions are in place. A further
extension allowing for up to an additional 6 month deferral up to 31 March 2021 has been announced. The extension will not be automatic and will
require up-to-date financial information on each borrower to confirm that there is a reasonable prospect to repay the loan.
As the situation has evolved since March 2020, the NZ Banking Group has classified the deferral packages into medium and high risk based on
how these customers are expected to perform following the expiry of the relief packages. The NZ Banking Group has identified a proportion of
deferral packages as higher credit risk and has identified a SICR event to have occurred on these customers. An overlay estimation has been done
on this base of customers.
We continue to monitor our lending portfolios closely and reassess our provisioning levels as the situation around COVID-19 evolves. At the
cessation of the COVID-19 support packages, it is likely that some customers will move into general hardship arrangements (Stage 2). Exposures
allocated to Stage 3 relies only on individual evidence of default at September 2020.
Business lending (including institutional)
The business lending overlay relates to the increase in credit risk due to uncertainties including the effects of Government support to the business
community, suggesting that credit deterioration is yet to be seen in the underlying portfolios.
Based on this judgement, we have identified $0.8 billion of business exposures on which a lifetime ECL overlay has been determined. This has
resulted in a $58 million overlay which is included in stage 2 provisions. An additional overlay of $8 million has been calculated on a 12 month ECL
and included in stage 1 provisions.
Retail lending
The retail lending overlay relates to SICR events given the expected medium-term structural change in unemployment rate by 2.6% along with the
emerging credit risk from the residential mortgage and other retail customers who are currently on COVID-19 relief packages.

Notes to the financial statements
32 Westpac Banking Corporation - New Zealand Banking Group
Note 12 Provision for expected credit losses (continued)
For customers not on relief packages, we have identified $1.3 billion of retail exposures on which a lifetime ECL overlay has been determined. This
has resulted in a $53 million overlay which is included in stage 2 provisions.
Customers with packages have been segmented into medium and high risk based on how these customers are expected to perform following the
expiry of the relief packages, on which a lifetime ECL overlay has been determined. We have identified $260 million of retail exposures on which a
lifetime ECL overlay has been determined. This has resulted in an $8 million overlay which is included in stage 2 provisions.
The judgements and assumptions used in estimating the above overlays will be reviewed and refined as both the COVID-19 pandemic and
portfolio evolves.
Impact of changes in credit exposures on the provision for ECL
Stage 1 exposures had a net increase of $0.8 billion (2019: net increase of $3.5 billion) for the NZ Banking Group primarily driven by residential
mortgage and business segments. This increase is calculated after adjusting $2.3 billion transferred to Stage 2 to account for gross carrying
amounts (‘GCA’) associated with COVID-19 overlays. Stage 1 ECL has increased mainly from impacts from revised macro-economic forecasts and
weightings.
Stage 2 credit exposures increased by $3 billion (2019: increased by $0.3 billion) for the NZ Banking Group mainly driven by the residential
mortgage segment and the impact of additional $2.3 billion transferred to Stage 2 to account for GCA associated with COVID-19 overlays. The
Stage 2 underlying exposure increase has been driven by the residential mortgage segment resulting from increases from hardship segment.
Stage 2 ECL has increased driven by the COVID-19 overlay, impacts from revised macro-economic forecasts/weightings and underlying increase in
Stage 2 exposures.
Stage 3 credit exposures had a net increase of $253 million (2019: decrease $15 million) for the NZ Banking Group driven by net transfers to Stage 3
from Stage 1 and Stage 2 with the increase mainly driven by residential mortgage and business portfolios. The increase in Stage 3 exposures is in
line with increase in 90 days past due for home loans, and business loans downgrades to impaired. Stage 3 ECL has increased in line with the
increase in Stage 3 exposures.
Accordingly, as at 30 September 2020, the provision for ECL as a proportion of GCA has increased compared to 30 September 2019 for all types of
credit exposures across all stages, except for Stage 1 and Stage 2 for other retail which has decreased, primarily due to the impact associated with
the move from a Simplified approach to an Advanced model for Credit Cards.
Refer to Section iii. Asset quality of the Registered bank disclosures for further details on the impact of changes in gross financial assets on loss
allowances.
COVID-19 deferral packages
The customers with deferral of payments under COVID-19 support packages for retail and business loans at 30 September 2020 is $4.7 billion.
These loans and the related provision for ECL can be disaggregated as follows:
NZ BANKING GROUP
2020
$ millionsGross loansProvision for ECL on loans
Residential mortgages
Stage 13,1887
Stage 21,35349
Stage 3539
Total residential mortgages4,59465
Other retail
Stage 1491
Stage 23514
Stage 353
Total other retail loans8918
Corporate
Stage 15-
Stage 2--
Stage 3--
Total corporate loans5-
Total loans
Stage 13,2428
Stage 21,38863
Stage 35812
Total loans4,68883
If the balance of COVID-19 support packages in Stage 1 moved to Stage 2 the NZ Banking Group estimates that the provision for ECL would
increase by $126 million.
Considering all COVID-19 support packages provided to customers, $470 million were in Stage 2/3 at the time of the modification, of which $77
million have since moved to Stage 1.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 33
Note 12 Provision for expected credit losses (continued)
Business Finance Guarantee Scheme
The Bank has entered into a deed of indemnity with the New Zealand Government to implement the New Zealand Government’s business finance
guarantee scheme (‘Scheme’), whereby the New Zealand Government undertakes to indemnify the Bank for up to 80% of any loss incurred by the
Bank on a loan it makes under the Scheme, after the Bank has exhausted its recoveries procedures. As at 30 September 2020, the Banking Group
had advanced $15 million to customers under the Scheme.
Write-offs still under enforcement activity
The amount of current year write-offs which remain subject to enforcement activity was $27 million for the NZ Banking Group (30 September 2019:
$43 million).
Note 13 Other financial assets
NZ BANKING GROUP
$ millions20202019
Accrued interest receivable 113 137
Trade debtors 4 5
Securities sold not delivered 288 79
Interbank lending 55 72
Other 95 107
Total other financial assets 555 400
Note 14 Life insurance assets
Accounting policy
The NZ Banking Group conducts insurance business through one of its controlled entities, Westpac Life-NZ-Limited (‘Westpac Life’), which is
licensed under the Insurance (Prudential Supervision) Act 2010 (‘IPSA’).
Life insurance assets include investments held by the NZ Banking Group’s life insurance company and net insurance policy assets relating to life
insurance contracts.
Investments held by the NZ Banking Group's life insurance company, including investments in funds managed by the NZ Banking Group and other
debt securities, are designated at FVIS. Changes in the fair value are recognised in non-interest income. The determination of fair value involves
the same judgements as other financial assets, which are described in the critical accounting assumptions and estimates in Note 24.
The value of net insurance policy assets is calculated using the margin on services methodology ('MoS'), in accordance with New Zealand
Societies of Actuaries Professional Standard 20 Determination of Life Insurance Policy Liabilities.
MoS accounts for the associated risks and uncertainties of each type of life insurance contract written. At each reporting date, planned profit
margins and an estimate of future liabilties are calculated. Profit margins are released to non-interest income over the period that life insurance is
provided to the policyholders. The cost incurred in acquiring specific insurance contracts is deferred provided that these amounts are recoverable
out of planned profit margins. The deferred amounts are recognised as a reduction in life insurance policy liabilties and are amortised to non-
interest income over the same period as the planned profit margins.
It is a requirement of the IPSA that a life insurance company must have at least one statutory fund in respect of its life insurance business. A
statutory fund was established by Westpac Life on 1 October 2012. The statutory fund is subject to restrictions imposed under IPSA. The main
restrictions are:
that the assets in the statutory fund are only available to meet the liabilities and expenses of the life insurance business and cannot be used to
support any other business of the life insurance company; and
distribution of the retained profits of a statutory fund may only be made when certain solvency and other requirements are met.
Refer to Note 3 for details on the accounting policy related to net life insurance income and change in policy liabilities.
Critical accounting assumptions and estimates
The key factors that affect the estimation of net insurance policy assets are:
the cost of providing benefits and administering contracts;
mortality and morbidity experience which includes policyholder benefit enhancements;
discontinuance rates, which affects the NZ Banking Group’s ability to recover the cost of acquiring new business over the life of the contracts;
and
the discount rate of projected future cash flows.
Regulation, competition, interest rates, taxes, securities market conditions and general economic conditions also affect the estimation of net
insurance policy assets.
NZ BANKING GROUP
$ millions20202019
Investment assets
214193
Net insurance policy assets
161142
Total life insurance assets
375335

Notes to the financial statements
34 Westpac Banking Corporation - New Zealand Banking Group
Note 15 Deferred tax assets
Accounting policy
Deferred tax accounts for temporary differences between the carrying amounts of assets and liabilities in the financial statements and their values
for taxation purposes.
Deferred tax is determined using the enacted or substantively enacted tax rates and laws which are expected to apply when the assets will be
realised or the liabilities settled.
Deferred tax assets and liabilities have been offset where they relate to the same taxation authority, the same taxable entity or group and where
there is a legal right and intention to settle on a net basis.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available to utilise the assets.
Deferred tax is not recognised for the following temporary differences:
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither the accounting nor
taxable profit or loss; and
the initial recognition of goodwill in a business combination.
Critical accounting assumptions and estimates
On a similar basis to that described in Note 7, determining deferred tax assets and liabilities is considered one of the NZ Banking Group’s critical
accounting assumptions and estimates.
NZ BANKING GROUP
$ millions20202019
Deferred tax assets/(liabilities) comprise the following temporary differences:
Provision for ECL on loans
170 90
Provision for ECL on credit commitments
14 9
Cash flow hedges
28 29
Provision for employee entitlements
28 22
Compliance, regulation and remediation provisions
12 13
Software, property and equipment
(56) 11
Lease liabilities
1
79 -
Net insurance policy assets
(47) (43)
Financial instruments
13 8
Other temporary differences
1 (1)
Net deferred tax assets
242 138
The deferred tax (charge)/credit in income tax expense comprises the following temporary
differences:
Provision for ECL on loans
80 (12)
Provision for ECL on credit commitments
5 (3)
Provision for employee entitlements
5 2
Compliance, regulation and remediation provisions
(1) 8
Software, property and equipment
(67) 1
Lease liabilities
1
79 -
Net insurance policy assets
(4) (8)
Financial instruments
5 4
Other temporary differences
2 3
Total deferred tax (charge)/credit in income tax expense
104 (5)
The deferred tax (charge)/credit in OCI comprises the following temporary differences:
Cash flow hedges
(1) 3
Provision for employee entitlements
1 4
Total deferred tax (charge)/credit in OCI
- 7
The deferred tax adjustment to opening retained earnings comprises the following temporary
differences:
Provision for ECL on loans
- 8
Provision for ECL on credit commitments
- 2
Other temporary differences
- (1)
Total deferred tax adjustment to opening retained earnings
- 9
1
The NZ Banking Group adopted NZ IFRS 16 on 1 October 2019. Comparatives have not been restated. Refer to Note 1 for further details.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 35
Note 16 Intangible assets
Accounting policy
Indefinite life intangible assets
Goodwill
Goodwill acquired in a business combination is initially measured at cost, generally being the excess of:
i. the consideration paid; over
ii. the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Subsequently, goodwill is not amortised but rather tested for impairment. Impairment is tested at least annually or whenever there is an
indication of impairment. An impairment charge is recognised when a cash generating unit’s (‘CGU’) carrying value exceeds its recoverable
amount. Recoverable amount means the higher of the CGU’s fair value less costs to sell and its value-in-use.
The NZ Banking Group’s CGUs represent the smallest identifiable group of assets that generate cash inflows that are largely independent of the
cash inflows from other assets or group of assets. They reflect the level at which the NZ Banking Group monitors and manages its operations.
Finite life intangible assets
Finite life intangibles include computer software which are recognised initially at cost and subsequently at amortised cost less any impairment.
IntangibleUseful lifeDepreciation method
GoodwillIndefiniteNot applicable
Computer software3 to 8 yearsStraight-line or diminishing balance method (using the Sum of the Years Digits)
Critical accounting assumptions and estimates
Judgement is required in determining the fair value of assets and liabilities acquired in a business combination. A different assessment of fair
values would have resulted in a different goodwill balance and different post-acquisition performance of the acquired entity.
When assessing impairment of intangible assets, significant judgement is needed to determine the appropriate cash flows and discount rates to
be applied to the calculations. The significant assumptions applied to the value-in-use calculations are outlined below.
NZ BANKING GROUP
$ millions20202019
Goodwill525525
Computer software
171160
Total intangible assets
696685
Goodwill has been allocated to the following CGUs:
Consumer Banking and Wealth512512
BT New Zealand
1
1313
Net carrying amount of goodwill
525525
1
BT New Zealand forms part of the Investments and Insurance operating segment, as described in Note 28.
Impairment testing and results
Impairment testing is performed at least once a year, or whenever there is an indication of impairment, by comparing the recoverable amount of
each CGU with the carrying amount. The primary test for the recoverable amount is determined based on value-in-use which refers to the present
value of expected cash flows under its current use.
Impairment testing in the current year confirmed that the NZ Banking Group continues to have considerable headroom when determining whether
goodwill is recoverable, and no impairment should be recognised.

Notes to the financial statements
36 Westpac Banking Corporation - New Zealand Banking Group
Note 16 Intangible assets (continued)
Significant assumptions used in recoverable amount calculations
The assumptions made for goodwill impairment testing for each relevant significant CGU are provided in the following table and are based on past
experience and management’s expectations for the future. In the current year and given the present economic environment, the NZ Banking
Group has reassessed these assumptions and revised them where necessary in order to provide a reasonable estimate of the value-in-use of the
CGUs.
Discount rateCash flows
Equity rate / adjusted pre-tax equity rateForecast period / terminal growth rate
2020201920202019
Consumer Banking and Wealth11.0% / 14.5%11.0% / 15.3%3 years / 2%2 years / 0%
BT New Zealand11.0% / 14.5%11.0% / 15.3%3 years / 2%2 years / 0%
The NZ Banking Group discounts the projected cash flows by the adjusted pre-tax equity rate.
The cash flows used are based on management approved forecasts. These forecasts utilise information about current and future economic
conditions, observable historical information and management expectations of future business performance. The terminal value growth rate
represents the growth rate applied to extrapolate cash flows beyond the forecast period and reflects the midpoint of RBNZ’s inflation target over
the medium term.
There are no reasonably possible changes in assumptions for any significant CGU that would result in an indication of impairment or have a
material impact on the NZ Banking Group’s reported results.
Note 17 Deposits and other borrowings
Accounting policy
Deposits and other borrowings are initially recognised at fair value and subsequently either measured at amortised cost using the effective
interest rate method or at fair value.
Deposits and other borrowings are designated at fair value if they are managed on a fair value basis, reduce or eliminate an accounting mismatch,
or contain an embedded derivative.
Where they are measured at fair value, any changes in fair value (except those due to changes in credit risk) are recognised as non-interest
income.
The change in the fair value that is due to changes in credit risk is recognised in OCI except where it would create an accounting mismatch, in
which case it is also recognised in the income statement.
Interest expense incurred is recognised in net interest income using the effective interest rate method.
NZ BANKING GROUP
$ millions
20202019
Certificates of deposit 2,996 1,142
Non-interest bearing, repayable at call 11,571 6,871
Other interest bearing:
At call 28,412 24,053
Term 30,991 33,540
Total deposits and other borrowings 73,970 65,606
Deposits at fair value 2,996 1,142
Deposits at amortised cost 70,974 64,464
Total deposits and other borrowings 73,970 65,606

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 37
Note 18 Other financial liabilities
Accounting policy
Other financial liabilities include liabilities measured at amortised cost as well as liabilities which are measured at FVIS. Financial liabilities
measured at FVIS include:
trading liabilities (i.e. securities sold short); and
liabilities designated at fair value through income statement (i.e. certain repurchase agreements)
Repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised in the balance sheet in their
original category (i.e. trading securities and financial assets measured at FVIS or investment securities).
The cash consideration received is recognised as a liability (repurchase agreements). Repurchase agreements are designated at fair value as they
are managed as part of a trading portfolio and recognised as part of other financial liabilities.
Where a repurchase agreement is designated at fair value, subsequent to initial recognition, these liabilities are measured at fair value with
changes in fair value (except credit risk) recognised through the income statement as they arise. The change in fair value that is attributable to
credit risk is recognised in OCI except where it would create an accounting mismatch, in which case it is also recognised through the income
statement.
NZ BANKING GROUP
$ millions20202019
Accrued interest payable213337
Securities purchased not delivered
133
92
Trade creditors and other accrued expenses
71
65
Interbank placements
1,1941,032
Securities sold short
316
188
Repurchase agreements
33
19
Other1915
Total other financial liabilities1,9791,748
Other financial liabilities at fair value
349207
Other financial liabilities at amortised cost1,6301,541
Total other financial liabilities1,9791,748

Notes to the financial statements
38 Westpac Banking Corporation - New Zealand Banking Group
Note 19 Debt issues
Accounting policy
Debt issues are bonds, notes and commercial paper that have been issued by the NZ Banking Group.
Debt issues are initially measured at fair value and subsequently either measured at amortised cost using the effective interest rate method or at
fair value.
Debt issues are designated at fair value if they reduce or eliminate an accounting mismatch.
The change in the fair value that is due to credit risk is recognised in OCI except where it would create an accounting mismatch, in which case it is
also recognised in non-interest income.
Interest expense incurred is recognised within net interest income using the effective interest rate method.
In the following table, the distinction between short-term (12 months or less) and long-term (greater than 12 months) debt is based on the original
maturity of the underlying security.
NZ BANKING GROUP
$ millions20202019
Short-term debt
Commercial paper 2,502 2,312
Total short-term debt 2,502 2,312
Long-term debt
Non-domestic medium-term notes 5,329 7,343
Covered bonds 4,457 5,263
Domestic medium-term notes 3,511 2,928
Total long-term debt 13,297 15,534
Total debt issues 15,799 17,846
Debt issues at fair value 2,502 2,312
Debt issues at amortised cost 13,297 15,534
Total debt issues 15,799 17,846
NZ BANKING GROUP
$ millions20202019
Movement reconciliation
Balance at beginning of the year 17,846 13,725
Issuances 5,175 8,707
Maturities, repayments, buy backs and reductions (7,193) (5,001)
Total cash movements (2,018) 3,706
FX translation impact 5 273
Fair value hedge accounting adjustments (41) 144
Other
1
7 (2)
Total non-cash movements (29) 415
Balance at end of the year 15,799 17,846
1
Includes items such as amortisation of issue costs.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 39
Note 20 Provisions
Accounting policy
Provisions are recognised for present obligations arising from past events where a payment (or other economic transfer) is likely to be necessary
to settle the obligation and can be reliably estimated.
Employee benefits – annual leave and other employee benefits
The provision for annual leave and other employee benefits (including long service leave, wages and salaries, inclusive of non-monetary benefits,
and any associated on-costs (e.g. payroll tax)) is calculated based on expected payments.
Provision for ECL on credit commitments
The NZ Banking Group is committed to provide facilities and guarantees as explained in Note 27. If it is probable that a facility will be drawn and
the resulting asset will be less than the drawn amount then a provision for impairment is recognised. The provision for impairment is calculated
using the same methodology as the provision for ECL (refer to Note 12).
Compliance, regulation and remediation provisions
The compliance, regulation and remediation provisions relate to matters pertaining to the provision of services to our customers identified both as
a result of regulatory action and internal reviews. An assessment of the likely cost to the NZ Banking Group of these matters (including applicable
customer refunds) is made on a case-by-case basis and specific provisions are made where appropriate.
NZ BANKING GROUP
$ millions20202019
Annual leave and other employee benefits 69 69
Provision for ECL on credit commitments (refer to Note 12) 50 31
Compliance, regulation and remediation provisions
1
43 48
Lease restoration obligations
2
31 -
Other 17 2
Total provisions 210 150
1
The NZ Banking Group has raised an additional provision of $16 million during the year ended 30 September 2020 (30 September 2019: $44 million). This reflects
an increase in the identified number of instances where issues requiring remediation had occurred, together with associated interest and programme costs. $18
million has been paid to customers (30 September 2019: $11 million) and $3 million of unutilised provisions were reversed during the year ended 30 September
2020 (30 September 2019: $2 million).
2
The addition to the lease restoration provision reflects a reassessment of the cost of making good leasehold premises at the end of the NZ Banking Group’s
property leases. The increase in the expected make-good cost has been treated as an addition to the cost of the ROU asset and is being depreciated over the
remaining life of those assets.
Note 21 Loan capital
Accounting policy
Loan capital are instruments which qualify for inclusion as regulatory capital under either the Reserve Bank Capital Adequacy Framework or, in
relation to the Overseas Bank, the Australian Prudential Regulation Authority (‘APRA’) Prudential Standards. Loan capital is initially measured at
fair value and subsequently measured at amortised cost using the effective interest rate method. Interest expense incurred is recognised in net
interest income.
NZ BANKING GROUP
$ millions20202019
Additional Tier 1 loan capital - USD AT1 securities
1
2,097 2,064
Tier 2 loan capital - Convertible subordinated notes
1
1,123 1,121
Total loan capital 3,220 3,185
1
Net of capitalised transaction costs.
NZ BANKING GROUP
$ millions20202019
Movement reconciliation
Balance at beginning of the year
3,185 2,866
Total cash movements -
-
FX translation impact (97) 89
Fair value hedge accounting adjustments 129 229
Other
1
3 1
Total non-cash movements 35 319
Balance at end of the year 3,220 3,185
1
Includes items such as amortisation of issue costs.

Notes to the financial statements
40 Westpac Banking Corporation - New Zealand Banking Group
Note 21 Loan capital (continued)
Additional Tier 1 loan capital
A summary of the key terms and features of the Additional Tier 1 loan capital (‘USD AT1 securities’) is provided below.
$Issue dateInterest rateOptional redemption date
US$1,250 million securities
1
21 September 20175.00% p.a.
2
21 September 2027 and every fifth anniversary thereafter
1
The USD AT1 securities are issued by the Overseas Bank acting through its NZ Branch.
2
Fixed interest rate of 5.00% p.a., until, but excluding 21 September 2027 (the ‘first reset date’). Every fifth anniversary thereafter is a reset date. If the USD AT1
securities are not redeemed, converted or written-off by the first reset date, the interest rate from, and including, each reset date thereafter to, but excluding the
next succeeding reset date, will be a fixed rate per annum equal to the prevailing 5-year USD mid-market swap rate plus 2.888% per annum.
Interest payable
Semi-annual interest payments on the USD AT1 securities are at the absolute discretion of the Overseas Bank and will only be paid if the payment
conditions are satisfied, including that the interest payment will not result in a breach of the Overseas Bank’s capital requirements under APRA’s
prudential standards; not result in the Overseas Bank becoming, or being likely to become, insolvent; and if APRA does not object to the payment.
Broadly, if for any reason an interest payment has not been paid in full on the relevant payment date, the Overseas Bank must not determine or
pay any dividends on Overseas Bank ordinary shares or undertake a discretionary buy back or capital reduction of Overseas Bank ordinary shares,
unless the unpaid interest is paid in full within 20 business days of the relevant payment date or in certain other circumstances.
Redemption
The Overseas Bank may redeem all (but not some) USD AT1 securities on 21 September 2027 and every fifth anniversary thereafter, or for certain
taxation or regulatory reasons, subject to APRA’s prior written approval.
Conversion
If a capital trigger event or non-viability trigger event occurs, the Overseas Bank must convert some or all of the USD AT1 securities into a variable
number of Overseas Bank ordinary shares calculated using the formula described in the terms of the USD AT1 securities but subject to a maximum
conversion number. The conversion number of the Overseas Bank’s ordinary shares will be calculated using the outstanding principal amount of
each USD AT1 security translated into Australian dollars and the Overseas Bank ordinary share price determined over the five business day period
prior to the capital trigger event date or non-viability trigger event date and includes a 1% discount. The maximum conversion number is
calculated using the outstanding principal amount of each USD AT1 security translated into Australian dollars at the time of issue and the Overseas
Bank share price which is broadly equivalent to 20% of the Overseas Bank ordinary share price at the time of issue of the USD AT1 securities.
A capital trigger event occurs when the Overseas Bank determines, or APRA notifies the Overseas Bank in writing that it believes, the Overseas
Bank’s Common Equity Tier 1 Capital ratio is equal to or less than 5.125% (on a level 1 or level 2 basis). A non-viability trigger event will occur when
APRA notifies the Overseas Bank in writing that it believes conversion of all or some USD AT1 securities (or conversion or write-down of relevant
capital instruments of the Overseas Banking Group), or public sector injection of capital (or equivalent support), in each case is necessary
because without it, the Overseas Bank would become non-viable. No conversion conditions apply in these circumstances.
If conversion of the USD AT1 securities does not occur within five business days, holders’ rights in relation to the USD AT1 securities will be
immediately and irrevocably terminated.
Tier 2 loan capital
A summary of the key terms and features of the Tier 2 loan capital (‘Tier 2 notes’) is provided below.
$Issue dateCounterpartyInterest rateMaturity dateOptional redemption date
AU$1,040 million
notes
8 September
2015
London Branch of the
Overseas Bank
Australian 90 day bank bill
rate + 2.87% p.a.
22 March 2026
22 March 2021 and every interest
payment date thereafter
Interest payable
Interest payments on the Tier 2 notes are subject to Westpac New Zealand being solvent at the time of, and immediately following the interest
payment. Refer to Note 22.
Early redemption
Westpac New Zealand may elect to redeem all or some of the Tier 2 notes for their face value together with accrued interest (if any) on 22 March
2021 or any interest payment date thereafter, subject to the Reserve Bank’s prior written approval. Early redemption of all of the Tier 2 notes for
certain tax or regulatory reasons is permitted on an interest payment date subject to the Reserve Bank’s prior written approval.
Conversion
If a non-viability trigger event occurs, Westpac New Zealand must convert such number of the Tier 2 notes into a variable number of ordinary
shares issued by Westpac New Zealand (calculated with reference to the net assets of Westpac New Zealand and the total number of ordinary
shares on issue on the conversion date) that is sufficient to satisfy the direction of the Reserve Bank or the decision of the statutory manager. A
non-viability trigger event occurs when the Reserve Bank or the statutory manager (appointed pursuant to section 117 of the Reserve Bank Act)
directs Westpac New Zealand to convert or write off all or some of Westpac New Zealand’s Tier 2 notes. If conversion of the Tier 2 notes fails to
take effect within five business days, holders’ rights in relation to the Tier 2 notes will be immediately and irrevocably terminated.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 41
Note 22 Related entities
Related entities
The NZ Banking Group’s related parties are those it controls or can exert significant influence over. Examples include subsidiaries, associates, joint
ventures and superannuation plans as well as key management personnel and their related parties.
NZ Banking Group
The NZ Banking Group consists of the New Zealand operations of the Overseas Banking Group including the NZ Branch and the following
controlled entities as at 30 September 2020 whose business is required to be reported in the financial statements of the Overseas Banking
Group’s New Zealand business:
Name of entityPrincipal activityNotes
BT Financial Group (NZ) Limited (‘BTFGNZL’)Holding company
BT Funds Management (NZ) Limited (‘BTNZ’)Funds management company
Capital Finance New Zealand LimitedNon-active company
Sie-Lease (New Zealand) Pty LimitedNon-active company
Westpac Financial Services Group-NZ-Limited (‘WFSGNZL’)Holding company
Westpac Life-NZ-Limited (‘Westpac Life’)Life insurance company
Westpac Nominees-NZ-Limited (‘WNNZL’)Nominee company
Westpac Superannuation Nominees-NZ-Limited (‘WSNNZL’)Nominee company
Westpac Group Investment-NZ-Limited (‘WGINZL’)Holding company
Westpac Holdings-NZ-Limited (‘WHNZL’)Holding company
Westpac Capital-NZ-Limited (‘WCNZL’)Finance company
Westpac Equity Investments NZ LimitedNon-active company
Westpac New Zealand Group Limited (‘WNZGL’)Holding company
Westpac New Zealand LimitedRegistered bank
Westpac NZ Operations Limited (‘WNZOL’)Holding company
Aotearoa Financial Services LimitedNon-active company
Number 120 LimitedFinance company
Red Bird Ventures LimitedCorporate venture capital companyEstablished on 5 August 2020
1
The Home Mortgage Company LimitedResidential mortgage company
Westpac New Zealand Staff Superannuation Scheme Trustee
Limited
Trustee company
Westpac (NZ) Investments Limited (‘WNZIL’)Property company
Westpac Securities NZ Limited (‘WSNZL’)Funding company
Westpac NZ Covered Bond Holdings Limited (‘WNZCBHL’)Holding company19% owned
2
Westpac NZ Covered Bond Limited (‘WNZCBL’)Guarantor19% owned
2
Westpac NZ Securitisation Holdings Limited (‘WNZSHL’)Holding company19% owned
3
Westpac NZ Securitisation Limited (‘WNZSL’)Funding company19% owned
3
Westpac NZ Securitisation No.2 Limited (‘WNZSL2’)Non-active company19% owned
3
Westpac Cash PIE FundPortfolio investment entityNot owned
4
Westpac Notice Saver PIE FundPortfolio investment entityNot owned
4
Westpac Term PIE FundPortfolio investment entityNot owned
4
1
Red Bird Ventures Limited was incorporated on 5 August 2020 through the issue of 5,000 ordinary shares to WNZOL and is a wholly-owned subsidiary of WNZOL.
2
The NZ Banking Group, through WNZOL (9.5%) and WHNZL (9.5%), has a total qualifying interest of 19% in WNZCBHL and its wholly-owned subsidiary company,
WNZCBL. Westpac New Zealand is considered to control both WNZCBHL and WNZCBL based on contractual arrangements in place, and as such both WNZCBHL
and WNZCBL are consolidated within the financial statements of the NZ Banking Group.
3
The NZ Banking Group, through WNZOL (9.5%) and WHNZL (9.5%), has a total qualifying interest of 19% in WNZSHL and its wholly-owned subsidiaries, WNZSL and
WNZSL2. Westpac New Zealand is considered to control WNZSHL, WNZSL and WNZSL2 based on contractual arrangements in place, and as such WNZSHL, WNZSL
and WNZSL2 are consolidated within the financial statements of the NZ Banking Group.
4
Westpac Term PIE Fund, Westpac Cash PIE Fund and Westpac Notice Saver PIE Fund (collectively referred to as the ‘PIE Funds’) were established as unit trusts.
The PIE Funds are Portfolio Investment Entities (‘PIE’), where BTNZ is the manager and issuer. The manager has appointed Westpac New Zealand to perform all
customer management and account administration for the PIE Funds. Westpac New Zealand is the PIE Funds’ registrar and administration manager. Westpac New
Zealand does not hold any units in the PIE Funds, however is considered to control them based on contractual arrangements in place, and as such the PIE Funds are
consolidated in the financial statements of the NZ Banking Group.
There have been no changes in the ownership percentages since 30 September 2019.
All entities in the NZ Banking Group are 100% owned unless otherwise stated. All the entities within the NZ Banking Group have a balance date of
30 September and are incorporated in New Zealand except the PIE Funds which have a balance date of 31 March.
Other significant related entities of the NZ Banking Group include the Overseas Bank and branches of the Overseas Bank based in London and New
York.

Notes to the financial statements
42 Westpac Banking Corporation - New Zealand Banking Group
Note 22 Related entities (continued)
Nature of transactions
The NZ Banking Group has transactions with members of the Overseas Banking Group on commercial terms, including the provision of
management, distribution and administrative services and data processing facilities.
Loan finance and current account banking facilities are provided by the NZ Branch and the Overseas Bank to members of the NZ Banking Group on
normal commercial terms. The interest earned on these loans and the interest paid on deposits are at market rates.
The NZ Banking Group enters into derivative transactions with the Overseas Bank (refer to Note 23). They are accounted for as trading derivatives
except for cross currency swaps in place with the Overseas Bank, which are designated in a cash flow hedge relationship to hedge the currency
risk exposure of funding from the London Branch and Tier 2 notes issued to the London Branch (refer to Note 21).
Transactions with related entities
NZ BANKING GROUP
$ millionsNote20202019
Overseas Bank
Interest income2 18 27
Interest expense:
Loan capital
1
39 51
Other
2
2 25 46
Operating expenses - management fees4 14 8
Funding repaid
18 263
Other controlled entities of the Overseas Bank
WGINZL dividend paid to Westpac Overseas Holdings Pty Limited and Westpac Custodian
Nominees Pty Limited 2 4
WFSGNZL dividend paid to Westpac Equity Holdings Pty Limited (‘WEHPL’) 6 38
BTFGNZL dividend paid to WEHPL 23 25
WNZGL dividend paid to Westpac Overseas Holdings No. 2 Pty Limited
315 735
Capital Finance New Zealand Limited dividend paid to Capital Finance Australia Limited
- 5
1
Interest expense paid on the Tier 2 notes issued by the NZ Banking Group and held by related parties.
2
Includes interest expense incurred on funding from the Overseas Banking Group.
Due from and to related entities
NZ BANKING GROUP
$ millions20202019
Due from related entities
Overseas Bank2,7132,366
Other controlled entities of the Overseas Banking Group-1
Total due from related entities2,7132,367
Due from related entities at fair value
1
1,179985
Due from related entities at amortised cost1,5341,382
Total due from related entities2,7132,367
Due to related entities
Overseas Bank2,5602,890
Other controlled entities of the Overseas Banking Group-2
Total due to related entities2,5602,892
Due to related entities at fair value
2
1,0201,334
Due to related entities at amortised cost1,5401,558
Total due to related entities2,5602,892
1
Consists of derivative financial instruments of $1,179 million (30 September 2019: $981 million) (refer to Note 23) and nil trading securities (30 September 2019: $4
million).
2
Consists of derivative financial instruments of $1,020 million (30 September 2019: $1,334 million) (refer to Note 23).

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 43
Note 22 Related entities (continued)
Key management personnel compensation
Key management personnel are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the
activities of the NZ Banking Group. This includes all Executive/Non-Executive Directors and members of the executive team.
NZ BANKING GROUP
$'000s20202019
Salaries and other short-term benefits 6,536 7,970
Post-employment benefits 705 521
Share-based payments 2,923 3,526
Total key management personnel compensation 10,164 12,017
Loans to key management personnel 27,763 26,876
Deposits from key management personnel 12,492 7,623
Interest income on amounts due from key management personnel 930 896
Interest expense on amounts due to key management personnel 155 67
Where the Directors of the Overseas Bank have received remuneration from the NZ Banking Group, the amounts are included above. Details of
Directors’ remuneration are disclosed in the Overseas Banking Group’s 30 September 2020 Annual Financial Report.
Loans and deposits with key management personnel
All loans and deposits are made in the ordinary course of business of the NZ Banking Group. Loans are on terms that range between variable, fixed
rate up to five years and interest only loans, all of which are in accordance with the NZ Banking Group’s lending policies.
As at 30 September 2020, no individual provision has been recognised in respect of loans given to key management personnel and their related
parties (30 September 2019: nil). These loans have been included within the loan portfolio when determining collectively assessed provisions.
Other key management personnel transactions
All other transactions with key management personnel, their related entities and other related parties are conducted in the ordinary course of
business. These transactions principally involve the provision of financial, investment and insurance services.

Notes to the financial statements
44 Westpac Banking Corporation - New Zealand Banking Group
Note 23 Derivative financial instruments
Accounting policy
Derivative financial instruments are instruments whose values are derived from the value of an underlying asset, reference rate or index and
include forwards, futures, swaps and options. Derivatives with related parties are included in due from/due to related entities.
The NZ Banking Group uses derivative financial instruments for meeting customers’ needs; our asset and liability risk management (‘ALM’)
activities, and undertaking market making and positioning activities.
Trading derivatives
Derivatives which are used in our ALM activities but are not designated into a hedge accounting relationship are considered economic hedges.
These derivatives, along with derivatives used for meeting customers’ needs and undertaking market making and positioning activities are
measured at FVIS and are disclosed as trading derivatives.
Hedging derivatives
Hedging derivatives are those which are used in our ALM activities and have also been designated into one of two hedge accounting relationships:
fair value hedge; or cash flow hedge. These derivatives are measured at fair value. These hedge designations and the associated accounting
treatment are detailed below.
For more details regarding the NZ Banking Group’s ALM activities, refer to Note 32.
Fair value hedges
Fair value hedges are used to hedge the exposure to changes in the fair value of an asset or liability.
Changes in the fair value of derivatives and the hedged asset or liability in fair value hedges are recognised in non-interest income. The carrying
value of the hedged asset or liability is adjusted for the changes in fair value related to the hedged risk.
If a hedge is discontinued, any fair value adjustments to the carrying value of the asset or liability are amortised to net interest income over the
period to maturity. If the asset or liability is sold, any unamortised adjustment is immediately recognised in net interest income.
Cash flow hedges
Cash flow hedges are used to hedge the exposure to variability of cash flows attributable to an asset, liability or future forecast transaction.
For effective hedges, changes in the fair value of derivatives are recognised in the cash flow hedge reserve through OCI and subsequently
recognised in net interest income when the cash flows attributable to the asset or liability that was hedged impact the income statement.
For hedges with some ineffectiveness, the changes in the fair value of the derivatives relating to the ineffective portion are immediately recognised
in non-interest income.
If a hedge is discontinued, any cumulative gain or loss remains in OCI. It is amortised to net interest income over the period which the asset or
liability that was hedged also impacts the income statement.
If a hedge of a forecast transaction is no longer expected to occur, any cumulative gain or loss in OCI is immediately recognised in net interest
income.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 45
Note 23 Derivative financial instruments (continued)
The carrying values of derivative instruments are set out in the tables below:
NZ BANKING GROUP
2020
TradingHedging
Total derivatives carrying
value
$ millions
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements10,108(9,431)383(566)10,491(9,997)
Total interest rate contracts10,108(9,431)383(566)10,491(9,997)
FX contracts
Spot and forward contracts642(640)--642(640)
Cross currency swap agreements (principal and
interest)781(1,261)594(208)1,375(1,469)
Total FX contracts1,423(1,901)594(208)2,017(2,109)
Total of gross derivatives11,531(11,332)977(774)12,508(12,106)
Impact of netting arrangements(5,669)5,669--(5,669)5,669
Total of net derivatives5,862(5,663)977(774)6,839(6,437)
Consisting of:
Derivatives held with external counterparties4,683(4,708)977(709)5,660(5,417)
Derivatives held with related parties1,179(955)-(65)1,179(1,020)
NZ BANKING GROUP
2019
TradingHedging
Total derivatives carrying
value
$ millions
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements7,622(7,242)198(594)7,820(7,836)
Total interest rate contracts7,622(7,242)198(594)7,820(7,836)
FX contracts
Spot and forward contracts730(721)--730(721)
Cross currency swap agreements (principal and
interest)2,015(2,395)604(138)2,619(2,533)
Total FX contracts2,745(3,116)604(138)3,349(3,254)
Total of gross derivatives10,367(10,358)802(732)11,169(11,090)
Impact of netting arrangements(3,931)3,931--(3,931)3,931
Total of net derivatives6,436(6,427)802(732)7,238(7,159)
Consisting of:
Derivatives held with external counterparties5,455(5,163)802(662)6,257(5,825)
Derivatives held with related parties981(1,264)-(70)981(1,334)

Notes to the financial statements
46 Westpac Banking Corporation - New Zealand Banking Group
Note 23 Derivative financial instruments (continued)
Hedge accounting
The NZ Banking Group designates derivatives into hedge accounting relationships in order to manage the volatility in earnings and capital that
would otherwise arise from interest rate and FX risks that may result from differences in the accounting treatment of derivatives and underlying
exposures. These hedge accounting relationships and the risks they are used to hedge are described below.
The NZ Banking Group enters into one-to-one hedge relationships to manage specific exposures where the terms of the hedged item significantly
match the terms of the hedging instrument. The NZ Banking Group also uses dynamic hedge accounting where the hedged items are part of a
portfolio of assets and/or liabilities that frequently change. In this hedging strategy, the exposure being hedged and the hedging instruments may
change frequently rather than there being a one-to-one hedge accounting relationship for a specific exposure.
Fair value hedges
Interest rate risk
The NZ Banking Group hedges its interest rate risk to reduce exposure to changes in fair value due to interest rate fluctuations over the hedging
period. Interest rate risk arising from fixed rate debt issuances and fixed rate bonds classified as investment securities at FVOCI is hedged with
single currency fixed to floating interest rate derivatives. The NZ Banking Group also hedges its benchmark interest rate risk from fixed rate foreign
currency denominated debt issuances using cross currency swaps. In applying fair value hedge accounting the NZ Banking Group primarily uses
one-to-one hedge accounting to manage specific exposures.
The NZ Banking Group also uses a dynamic hedge accounting strategy for fair value portfolio hedge accounting of some fixed rate mortgages to
reduce exposure to changes in fair value due to interest rate fluctuations over the hedging period. These fixed rate mortgages are allocated to
time buckets based on their expected repricing dates and the fixed-to-floating interest rate derivatives are designated according to the capacity
in the relevant time buckets.
The NZ Banking Group hedges the benchmark interest rate which generally represents the most significant component of the changes in fair
value. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for example, LIBOR for
USD interest rates and Bank Bill Benchmark Rate (‘BKBM’) for NZD interest rates. Ineffectiveness may arise from timing or discounting differences
on repricing between the hedged item and the derivative. For portfolio hedge accounting, ineffectiveness also arises from prepayment risk (i.e. the
difference between actual and expected prepayment of loans). In order to manage the ineffectiveness from early repayments and accommodate
new originations the portfolio hedges are de-designated and redesignated periodically.
Cash flow hedges
Interest rate risk
The NZ Banking Group’s exposure to the volatility of interest cash flows from customer deposits and loans is hedged with interest rate derivatives
using a dynamic hedge accounting strategy called macro cash flow hedges. Customer deposits and loans are allocated to time buckets based on
their expected repricing dates. The interest rate derivatives are designated according to the gross asset or gross liability positions for the relevant
time buckets. The NZ Banking Group hedges the benchmark interest rate which generally represents the most significant component of the
changes in fair value. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for
example, Bank Bill Swap Rate for AUD interest rates, LIBOR for USD interest rates and BKBM for NZD interest rates. Ineffectiveness may arise from
timing or discounting differences on repricing between the hedged item and the interest rate derivative. Ineffectiveness also arises if the notional
values of the interest rate derivatives exceed the aggregate notional exposure for the relevant time buckets. The hedge accounting relationship is
reviewed on a monthly basis and the hedging relationships are de-designated and redesignated if necessary.
FX risk
The NZ Banking Group’s exposure to foreign currency principal and credit margin cash flows from fixed rate foreign currency debt issuances is
hedged through the use of cross currency derivatives in a one-to-one hedging relationship to manage the changes between the foreign currency
and NZD. In addition, for floating rate foreign currency debt issuances, the NZ Banking Group hedges from foreign floating to NZD floating interest
rates. Ineffectiveness may arise from timing or discounting differences on repricing between the hedged item and the cross currency derivative.
Economic hedges
As part of the NZ Banking Group’s ALM activities, economic hedges may be entered into to hedge long-term funding transactions.
Interest Rate Benchmark Reform
The NZ Banking Group’s hedging relationships include hedged items and hedging instruments that are impacted by IBOR reform. As described in
Note 1, the NZ Banking Group has early adopted Interest Rate Benchmark Reform - amendments to NZ IFRS 9, NZ IAS 39 and NZ IFRS 7 which
allows certain exceptions to the standard hedging requirements in respect of hedge relationships that are impacted by this benchmark reform.
The following table summarises the NZ Banking Group’s current exposures in hedging relationships maturing after 31 December 2021 that will be
impacted by the IBOR reform and the quantum of those risks expressed in NZD equivalent values. The extent of the risk exposure also reflects the
notional amounts of related hedging instruments.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 47
Note 23 Derivative financial instruments (continued)
NZ BANKING GROUP
30 Sep 20
$ millionsNotional hedged exposure
Benchmark
USD LIBOR 1,896
Hedging instruments
The following tables show the carrying value of hedging instruments and a maturity analysis of the notional amounts of the hedging instruments in
one-to-one hedge relationships categorised by the types of hedge relationships and the hedged risk.
NZ BANKING GROUP
2020
Notional amounts Carrying value
$ millions
Hedging
instrument Hedged risk
Within
1 year
Over 1 year
to 5 years
Over 5
years TotalAssetsLiabilities
One-to-one hedge relationships
Fair value hedges Interest rate swap
Interest rate risk
673 1,761 1,896 4,330 208 (179)
Cross currency swap Interest rate risk 1,823 4,426 356 6,605 111 19
Cash flow hedges Cross currency swap FX risk 3,128 7,162 356 10,646 483 (227)
Total one-to-one hedge relationships 5,624 13,349 2,608 21,581 802 (387)
Macro hedge relationships
Portfolio fair value hedges Interest rate swap Interest rate risk N/AN/AN/A 21,505 - (202)
Macro cash flow hedges Interest rate swap Interest rate risk N/AN/AN/A 13,587 175 (185)
Total macro hedge relationships N/AN/AN/A 35,092 175 (387)
Total of gross hedging derivatives N/AN/AN/A 56,673 977 (774)
Impact of netting arrangements N/AN/AN/AN/A - -
Total of net hedging derivatives N/AN/AN/AN/A 977 (774)
NZ BANKING GROUP
2019
Notional amounts Carrying value
$ millionsHedging instrument Hedged risk
Within 1
year
Over 1 year to
5 years
Over 5
years TotalAssetsLiabilities
One-to-one hedge relationships
Fair value hedges Interest rate swap
Interest rate risk
2,157 2,013 2,416 6,586 84 (214)
Cross currency swap Interest rate risk 1,251 6,134 349 7,734 155 (100)
Cash flow hedges Cross currency swap FX risk 1,251 10,278 349 11,878 449 (38)
Total one-to-one hedge relationships 4,659 18,425 3,114 26,198 688 (352)
Macro hedge relationships
Portfolio fair value hedges Interest rate swap Interest rate risk N/AN/AN/A 20,301 - (209)
Macro cash flow hedges Interest rate swap Interest rate risk N/AN/AN/A 10,629 114 (171)
Total macro hedge relationships N/AN/AN/A 30,930 114 (380)
Total of gross hedging derivatives N/AN/AN/A 57,128 802 (732)
Impact of netting arrangements N/AN/AN/AN/A - -
Total of net hedging derivatives N/AN/AN/AN/A 802 (732)

Notes to the financial statements
48 Westpac Banking Corporation - New Zealand Banking Group
Note 23 Derivative financial instruments (continued)
The following table shows the weighted average exchange rate related to significant hedging instruments in one-to-one hedge relationships:
NZ BANKING GROUP
Currency /Weighted average rate
$ millionsHedging instrumentHedged risk Currency pair20202019
Cash flow hedges Cross currency swapFX riskCHF:NZD
0.67300.7001
EUR:NZD
0.61600.6079
GBP:NZD
0.45380.4538
NZD:AUD
1.12721.1272
HKD:NZD
4.96704.9670
Impact of hedge accounting in the balance sheet and reserves
The following tables show the carrying amount of hedged items in a fair value hedge relationship and the component of the carrying amount
related to accumulated fair value hedge accounting ('FVHA') adjustments.
NZ BANKING GROUP
20202019
$ millions
Carrying amount of
hedged item
Accumulated FVHA
adjustment included
in carrying amount
Carrying amount of
hedged item
Accumulated FVHA
adjustment included in
carrying amount
Interest rate risk
Investment securities2,5201194,469120
Loans
1
21,64714220,440139
Debt issues and loan capital
(8,923)(342)(10,279)(254)
1
Comparatives have been restated to correctly present the carrying amount for loans in a fair value hedge relationship to include the accumulated FVHA
adjustment. The revision increases the carrying amount of hedged item balance for loans by $139m from $20,301m to $20,440m.
There were no (30 September 2019: nil) accumulated FVHA adjustments included in the above carrying amounts relating to hedged items that
have ceased to be adjusted for hedging gains and losses.
The pre-tax impact of cash flow hedges on reserves is detailed below:
NZ BANKING GROUP
20202019
$ millions
Interest rate
riskFX risk Total
Interest rate
riskFX risk Total
Cash flow hedge reserve
Balance at beginning of the year(29)(72)(101)(48)(41)(89)
Net gains/(losses) from changes in fair value
(18)(50)(68)(28)(58)(86)
Transferred to net interest income
383573472774
Balance at end of year
(9)(87)(96)(29)(72)(101)
There were no (30 September 2019: nil) balances remaining in the cash flow hedge reserve relating to hedge relationships for which hedge
accounting is no longer applied.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 49
Note 23 Derivative financial instruments (continued)
Hedge effectiveness
Hedge effectiveness is tested prospectively at inception and during the lifetime of hedge relationships. For one-to-one hedge relationships this testing uses a
qualitative assessment of matched terms where the critical terms of the derivatives used as the hedging instrument match the terms of the hedged item. In
addition, a quantitative effectiveness test is performed for all hedges which could include regression analysis, dollar offset and/or sensitivity analysis.
Retrospective testing is also performed to determine whether the hedge relationship remains highly effective so that hedge accounting can continue to be
applied and also to determine any ineffectiveness. These tests are performed using regression analysis and the dollar offset method.
The following tables provide information regarding the determination of hedge effectiveness:
NZ BANKING GROUP
2020
$ millions
Hedging
instrument Hedged risk
Change in fair value of
hedging instrument
used for calculating
ineffectiveness
Change in value of
the hedged item
used for calculating
ineffectiveness
Hedge
ineffectiveness
recognised in non-
interest income
Fair value hedges
Interest rate swap Interest rate risk
124(124)-
Cross currency swap Interest rate risk
(40)39(1)
Cash flow hedges
Interest rate swap Interest rate risk
31(20)11
Cross currency swap FX risk
(15)15-
Total
100(90)10
NZ BANKING GROUP
2019
$ millionsHedging instrument Hedged risk
Change in fair value of
hedging instrument used
for calculating
ineffectiveness
Change in value of the
hedged item used for
calculating
ineffectiveness
Hedge
ineffectiveness
recognised in non-
interest income
Fair value hedges
Interest rate swap Interest rate risk
67(66)1
Cross currency swap Interest rate risk
146(143)3
Cash flow hedges
Interest rate swap Interest rate risk
17(19)(2)
Cross currency swap FX risk
(31)31-
Total
199(197)2

Notes to the financial statements
50 Westpac Banking Corporation - New Zealand Banking Group
Note 24 Fair values of financial assets and financial liabilities
Accounting policy
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
On initial recognition, the transaction price generally represents the fair value of the financial instrument unless there is observable information
from an active market to the contrary. Where unobservable information is used, the difference between the transaction price and the fair value
(day one profit or loss) is recognised in the income statement over the life of the instrument when the inputs become observable.
Critical accounting assumptions and estimates
The majority of valuation models used by the NZ Banking Group employ only observable market data as inputs. However, for certain financial
instruments, data may be employed which is not readily observable in current markets.
The availability of observable inputs is influenced by factors such as:
–product type;
–depth of market activity;
–maturity of market models; and
–complexity of the transaction.
Where unobservable market data is used, more judgement is required to determine fair value. The significance of these judgements depends on
the significance of the unobservable input to the overall valuation. Unobservable inputs are generally derived from other relevant market data and
adjusted against:
–standard industry practice;
–economic models; and
–observed transaction prices.
In order to determine a reliable fair value for a financial instrument, management may apply adjustments to the techniques previously described.
These adjustments reflect the NZ Banking Group’s assessment of factors that market participants would consider in setting the fair value.
These adjustments incorporate bid/offer spreads, credit valuation adjustments (‘CVA’) and funding valuation adjustments (‘FVA’).
Fair Valuation Control Framework
The NZ Banking Group uses a Fair Valuation Control Framework where the fair value is either determined or validated by a function independent of
the transaction. This framework formalises the policies and procedures used to achieve compliance with relevant accounting, industry and
regulatory standards. The framework includes specific controls relating to:
– the revaluation of financial instruments;
– independent price verification;
– fair value adjustments; and
– financial reporting.
A key element of the framework is the Revaluation Committee, comprising senior valuation specialists from within the Overseas Banking Group. The
Revaluation Committee reviews the application of the agreed policies and procedures to assess that a fair value measurement basis has been
applied.
The method of determining fair value differs depending on the information available.
Fair value hierarchy
A financial instrument’s categorisation within the valuation hierarchy is based on the lowest level input that is significant to the fair value
measurement.
The NZ Banking Group categorises all fair value instruments according to the hierarchy described below.
Valuation techniques
The NZ Banking Group applies market accepted valuation techniques in determining the fair valuation of over-the-counter (‘OTC’) derivatives. This
includes CVA and FVA, which incorporate credit risk and funding costs and benefits that arise in relation to uncollateralised derivative positions,
respectively.
The specific valuation techniques, the observability of the inputs used in valuation models and the subsequent classification for each significant
product category are outlined as follows:

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 51
Note 24 Fair values of financial assets and financial liabilities (continued)
Financial instruments measured at fair value
Level 1 instruments
The fair value of financial instruments traded in active markets is based on recent unadjusted quoted prices. These prices are based on actual arm’s
length basis transactions.
The valuations of Level 1 instruments require little or no management judgement.
InstrumentBalance sheet categoryIncludes:Valuation
Exchange traded
products
Derivative financial
instruments
Due from related entities
Due to related entities
Exchange traded
interest rate futures -
derivative financial
instruments
FX products
Derivative financial
instruments
FX spot contracts
Non-asset
backed debt
instruments
Trading securities and
financial assets measured at
FVIS
Investment securities
Other financial liabilities
New Zealand
Government bonds
These instruments are traded in liquid, active markets where
prices are readily observable. No modelling or assumptions are
used in the valuation.
Level 2 instruments
The fair value for financial instruments that are not actively traded is determined using valuation techniques which maximise the use of observable
market prices. Valuation techniques include:
– the use of market standard discounting methodologies;
– option pricing models; and
– other valuation techniques widely used and accepted by market participants.
InstrumentBalance sheet categoryIncludes:Valuation
Interest rate
products
Derivative financial instruments
Due from related entities
Due to related entities
Interest rate swaps,
forwards and options
– derivative financial
instruments
Industry standard valuation models are used to calculate the
expected future value of payments by product, which is
discounted back to a present value. The model’s interest rate
inputs are benchmark interest rates and active broker quoted
interest rates in the swap, bond and futures markets. Interest
rate volatilities are sourced from brokers and consensus data
providers. If consensus prices are not available, these are
classified as Level 3 instruments.
FX products
Derivative financial instruments
Due from related entities
Due to related entities
FX swaps and FX
forward contracts -
derivative financial
instruments
Derived from market observable inputs or consensus pricing
providers using industry standard models.
Asset backed
debt
instruments
Trading securities and financial
assets measured at FVIS
Investment securities
Asset backed securities
Valued using an industry approach to value floating rate debt
with prepayment features. The main inputs to the model are the
trading margin and the weighted average life of the security.
These inputs are sourced from a consensus data provider. If
consensus prices are not available these are classified as Level 3
instruments.

Notes to the financial statements
52 Westpac Banking Corporation - New Zealand Banking Group
Note 24 Fair values of financial assets and financial liabilities (continued)
InstrumentBalance sheet categoryIncludes:Valuation
Non-asset backed
debt instruments
Trading securities and financial
assets measured at FVIS
Investment securities
Other financial liabilities
Local authority and
NZ public securities,
other bank issued
certificates of deposit,
commercial paper,
other government
securities, off-shore
securities and
corporate bonds
Repurchase
agreements and reverse
repurchase agreements
over non-asset backed
debt securities
Valued using observable market prices which are sourced from
independent pricing services, broker quotes or inter-dealer
prices.
Deposits and
other borrowings
at fair value
Deposits and other borrowingsCertificates of deposit
Discounted cash flow using market rates offered for
deposits of similar remaining maturities.
Debt issues at fair
value
Debt issuesCommercial paper
Discounted cash flows, using a discount rate which reflects the
terms of the instrument and the timing of cash flows adjusted
for market observable changes in the applicable credit rating of
the NZ Banking Group.
Life insurance
assets
Life insurance assets
Local authority securities,
investment grade
corporate bonds, life
insurance contract
liabilities and units in
unlisted unit trusts
Valued using observable market prices or other widely used
and accepted valuation techniques utilising observable
market inputs.
Level 3 instruments
Financial instruments valued where at least one input that could have a significant effect on the instrument’s valuation is not based on observable
market data due to illiquidity or complexity of the product. These inputs are generally derived and extrapolated from other relevant market data and
calibrated against current market trends and historical transactions.
These valuations are calculated using a high degree of management judgement.
InstrumentBalance sheet categoryIncludes:Valuation
Interest rate
derivatives
Derivative financial instruments
Non-vanilla interest rate
(inflation indexed)
derivatives and long
dated NZD caps
Valued using industry standard valuation models utilising
observable market inputs which are determined separately
for each parameter. Where unobservable, inputs will be set
with reference to an observable proxy.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 53
Note 24 Fair values of financial assets and financial liabilities (continued)
The following table summarises the attribution of financial instruments measured at fair value to the fair value hierarchy:
NZ BANKING GROUP
20202019
$ millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
1
Total
Financial assets measured at fair value on a
recurring basis
Trading securities and financial assets measured at FVIS 1,188 3,036 - 4,224 29 4,842 - 4,871
Derivative financial instruments - 5,660 - 5,660 - 6,256 1 6,257
Investment securities 2,504 2,517 - 5,021 1,049 3,420 - 4,469
Life insurance assets - 375 - 375 - 335 - 335
Due from related entities 3 1,176
-
1,179 - 985 - 985
Total financial assets measured at fair value 3,695 12,764 - 16,459 1,078 15,838 1 16,917
Financial liabilities measured at fair value on a
recurring basis
Deposits and other borrowings at fair value - 2,996 - 2,996 - 1,142 - 1,142
Other financial liabilities 282 67 - 349 180 27 - 207
Derivative financial instruments 1 5,416 - 5,417 - 5,807 18 5,825
Due to related entities 4 1,016 - 1,020 - 1,334 - 1,334
Debt issues at fair value - 2,502 - 2,502 - 2,312 - 2,312
Total financial liabilities measured at fair value 287 11,997 - 12,284 180 10,622 18 10,820
1
Balances within this category of the fair value hierarchy are not considered material to the total derivative financial instruments balances.
There were no material amounts of changes in fair value estimated using a valuation technique incorporating significant non-observable inputs that
were recognised in the income statement or the statement of comprehensive income of the NZ Banking Group during the year ended 30 September
2020 (30 September 2019: no material changes in fair value).
Analysis of movements between fair value hierarchy levels
During the year, there were no material transfers between levels of the fair value hierarchy (30 September 2019: no material transfers between
levels).

Notes to the financial statements
54 Westpac Banking Corporation - New Zealand Banking Group
Note 24 Fair values of financial assets and financial liabilities (continued)
Financial instruments not measured at fair value
For financial instruments not measured at fair value on a recurring basis, fair value has been derived as follows:
InstrumentValuation
Loans
Where available, the fair value of loans is based on observable market transactions; otherwise fair value is estimated
using discounted cash flow models. For variable rate loans, the discount rate used is the current effective interest
rate. The discount rate applied for fixed rate loans reflects the market rate for the maturity of the loan and the credit
worthiness of the borrower.
Deposits and other
borrowings
Fair values of deposit liabilities payable on demand (interest free, interest bearing and savings deposits) approximate
their carrying value. Fair values for term deposits are estimated using discounted cash flows, applying market rates
offered for deposits of similar remaining maturities.
Debt issues and
loan capital
Fair values are calculated using a discounted cash flow model. The discount rates applied reflect the terms of the
instruments, the timing of the estimated cash flows and are adjusted for any changes in the NZ Banking Group’s
credit spreads.
Due to related entities
Fair values are calculated in respect of long-term debt using a discounted cash flow model. The discount rate applied
reflects the terms of the loan and the timing of the estimated cash flows. The carrying value of all other balances due
to related entities approximates the fair value. These items are either short-term in nature or re-price frequently and
are of a high credit rating.
All other financial assets
and financial liabilities
For all other financial assets and financial liabilities, the carrying value approximates the fair value. These items are
either short-term in nature or re-price frequently and are of a high credit rating.
The following table summarises the estimated fair value and fair value hierarchy of the NZ Banking Group’s financial instruments not measured at fair
value:
NZ BANKING GROUP
2020
Fair Value
$ millions
Carrying
Amount
Level 1Level 2Level 3Total
Financial assets not measured at fair value
Cash and balances with central banks 4,488 4,488 - - 4,488
Collateral paid 397 397 - - 397
Loans 88,354 - - 88,693 88,693
Other financial assets 555 - 55 500 555
Due from related entities
1,534 - 1,534 -
1,534
Total financial assets not measured at fair value 95,328 4,885 1,589 89,193 95,667
Financial liabilities not measured at fair value
Collateral received 508 508 - - 508
Deposits and other borrowings 70,974 - 69,937 1,179 71,116
Other financial liabilities 1,630 - 1,630 - 1,630
Due to related entities 1,540 - 1,542 -
1,542
Debt issues
1
13,297 - 13,517 - 13,517
Loan capital
1
3,220 - 1,928 1,137 3,065
Total financial liabilities not measured at fair value 91,169 508 88,554 2,316 91,378
1
The estimated fair value of debt issues and loan capital include the impact of changes in the NZ Banking Group's credit spreads since origination.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 55
Note 24 Fair values of financial assets and financial liabilities (continued)
NZ BANKING GROUP
2019
Fair Value
$ millions
Carrying
Amount
Level 1Level 2Level 3Total
Financial assets not measured at fair value
Cash and balances with central banks 2,002 2,002 - - 2,002
Collateral paid 417 417 - - 417
Loans 84,626 - - 84,880 84,880
Other financial assets
1
400 - 72 328 400
Due from related entities
1,382 - 1,381 1
1,382
Total financial assets not measured at fair value 88,827 2,419 1,453 85,209 89,081
Financial liabilities not measured at fair value
Collateral received 623 623 - - 623
Deposits and other borrowings 64,464 - 63,974 563 64,537
Other financial liabilities 1,541 - 1,541 - 1,541
Due to related entities 1,558 - 1,565 -
1,565
Debt issues
2
15,534 - 15,701 - 15,701
Loan capital
2
3,185 - 1,954 1,158
3,112
Total financial liabilities not measured at fair value 86,905 623 84,735 1,721 87,079
1
Comparatives have been restated to correctly reflect Other financial assets of $72m relating to Interbank lending in Level 2 of the fair value hierarchy (previously
presented in Level 3).
2
The estimated fair value of debt issues and loan capital include the impact of changes in the NZ Banking Group's credit spreads since origination.
Note 25 Offsetting financial assets and financial liabilities
Accounting policy
Financial assets and financial liabilities are presented net in the balance sheet when the NZ Banking Group has a legally enforceable right to offset
them in all circumstances and there is an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability
simultaneously. The gross assets and liabilities behind the net amounts reported in the balance sheet are disclosed in the following table.
Some of the NZ Banking Group’s offsetting arrangements are not enforceable in all circumstances. The amounts in the tables below may not tie
back to the balance sheet if there are balances which are not subject to offsetting or enforceable netting arrangements. The amounts presented in
this note do not represent the credit risk exposure of the NZ Banking Group. Refer to Note 32.2 for information on credit risk management. The
offsetting and collateral arrangements and other credit risk mitigation strategies used by the NZ Banking Group are further explained in the
‘Management of risk mitigation’ section under Note 32.2.

Notes to the financial statements
56 Westpac Banking Corporation - New Zealand Banking Group
Note 25 Offsetting financial assets and financial liabilities (continued)
NZ BANKING GROUP
2020
Amounts Subject to Enforceable Netting Arrangements
Amounts Offset on the Balance SheetAmounts Not Offset on the Balance Sheet
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported
in the
Balance Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
CollateralNet Amount
Assets
Reverse repurchase agreements
1
547 - 547 - - (547) -
Derivative financial instruments
2
10,877 (5,669) 5,208 (3,106) (472) - 1,630
Due from related entities - derivative
financial instruments
3
1,179 - 1,179 (1,020) - - 159
Total assets 12,603 (5,669) 6,934 (4,126) (472) (547) 1,789
Liabilities
Repurchase agreements
4
33 - 33 - - (33) -
Derivative financial instruments
2
10,814 (5,669) 5,145 (3,106) (359) - 1,680
Due to related entities - derivative
financial instruments
5
1,020 - 1,020 (1,020) - - -
Total liabilities 11,867 (5,669) 6,198 (4,126) (359) (33) 1,680
NZ BANKING GROUP
2019
Amounts Subject to Enforceable Netting Arrangements
Amounts Offset on the Balance SheetAmounts Not Offset on the Balance Sheet
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported
in the
Balance Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
CollateralNet Amount
Assets
Reverse repurchase agreements
1
1,041 - 1,041 - - (1,041) -
Derivative financial instruments
2
9,390 (3,931) 5,459 (3,057) (569) - 1,833
Due from related entities - derivative
financial instruments
3
981 - 981 (981) - - -
Total assets 11,412 (3,931) 7,481 (4,038) (569) (1,041) 1,833
Liabilities
Repurchase agreements
4
19 - 19 - - (19) -
Derivative financial instruments
2
9,360 (3,931) 5,429 (3,057) (393) - 1,979
Due to related entities - derivative
financial instruments
5
1,334 - 1,334 (981) - - 353
Total liabilities 10,713 (3,931) 6,782 (4,038) (393) (19) 2,332
1
Forms part of trading securities and financial assets measured at FVIS (refer to Note 9).
2
$452 million (2019: $798 million) of derivative financial assets and $272 million (2019: $396 million) of derivative financial liabilities are not subject to enforceable
netting arrangements. 2019 gross amounts, net amounts reported on the balance sheet and net amount were restated to exclude amounts not subject to
enforceable netting arrangements.
3
Forms part of due from related entities in the balance sheet (refer to Note 22).
4
Forms part of other financial liabilities in the balance sheet (refer to Note 18).
5
Forms part of due to related entities in the balance sheet (refer to Note 22).

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 57
Note 25 Offsetting financial assets and financial liabilities (continued)
Other recognised financial instruments
These financial assets and financial liabilities are subject to master netting agreements which are not enforceable in all circumstances, so they are
recognised gross in the balance sheet. The offsetting rights of the master netting arrangements can only be enforced if a predetermined event
occurs in the future, such as a counterparty defaulting.
Cash collateral and financial instrument collateral
These amounts are received or pledged under master netting arrangements against the gross amounts of assets and liabilities. Financial
instrument collateral typically comprises securities which can be readily liquidated in the event of counterparty default. The offsetting rights of the
master netting arrangement can only be enforced if a predetermined event occurs in the future, such as a counterparty defaulting.
Note 26 Lessee disclosures
Accounting policy
Accounting policy for 30 September 2020 under NZ IFRS 16
At the lease commencement date (or the inception date for certain leases), a right-of-use asset and a lease liability are recognised in the balance
sheet for all leases with the exception of short term leases (12 months or less) and low value leases (underlying asset is less than $10,000).
ROU asset
The ROU asset is initially measured at cost being the amount of the initial measurement of the lease liability, plus any payments made at or before
the commencement date, initial direct costs and estimated make-good costs, less any lease incentives received. It is subsequently measured at
cost less accumulated depreciation and impairment losses. The asset is also adjusted for any subsequent remeasurement of the lease liability
(refer below).
Depreciation expense is recognised in operating expenses on a straight-line basis over the lease term.
Lease liability
The lease liability is initially measured at the present value of the future lease payments using a discount rate based on the NZ Banking Group’s
incremental borrowing rate. It is subsequently increased by interest, reduced by principal payments and remeasured for any reassessment or
lease modification.
The lease liability may be remeasured in certain circumstances. For the NZ Banking Group’s leases, it is expected that the lease liability will only be
required to be remeasured to reflect a change in the NZ Banking Group’s assessment of the exercise of an extension option (refer below) or for a
change in future lease payments for a change in rate or index.
Interest expense is recognised in net interest income on an effective yield basis.
Lease term
Extension options are included in a number of lease contracts. The extension options are only included in the lease term if the lease is reasonably
certain to be extended, which is assessed by the NZ Banking Group at the lease commencement date. The assessment is reviewed if a significant
event or significant change in circumstances occurs which affects this assessment and is within the control of the NZ Banking Group.
A reassessment of the lease term (to determine whether it has become ‘reasonably certain’ that an extension option will be exercised) must be
undertaken for each of the NZ Banking Group’s property and technology leases at a specific point prior to the lease expiry date.
Scope exemptions
For certain short-term and low value leases, lease payments are recognised in operating expenses on a straight-line basis over the lease term.
Accounting policy for 30 September 2019 under NZ IAS 17
An operating lease under NZ IAS 17 is a lease where substantially all of the risks and rewards of the leased assets remain with the lessor.
Where the NZ Banking Group is the lessee, lease rentals payable are recognised as an expense in the income statement on a straight-line basis
over the lease term unless another systematic basis is more appropriate.

Notes to the financial statements
58 Westpac Banking Corporation - New Zealand Banking Group
Note 26 Lessee disclosures (continued)
The NZ Banking Group leases various commercial and retail premises and related property and equipment. The ROU asset recognised as a result
of these lease arrangements is included in property and equipment in the balance sheet and detailed in the following table:
ROU assets
NZ BANKING GROUP
$ millionsPropertyOtherTotal
Balance at 30 September 2019---
Impact on adoption of NZ IFRS 1625438292
Restated opening balance as at 1 October 201925438292
Additions41-41
Depreciation (48)(13)(61)
Other(5)-(5)
Balance as at 30 September 202024225267
Lease liabilities
Lease liabilities included in other liabilities in the balance sheet were:
NZ BANKING GROUP
$ millions2020
Lease liabilities – property227
Lease liabilities - other 26
Total lease liabilities as at 30 September 2020253
The following table presents the future contractual undiscounted cash flows relating to lease liabilities by remaining contractual maturity based
on the requirements of NZ IFRS 16 applicable for the current period:
NZ BANKING GROUP
$ millions2020
Due within 1 year52
Due after 1 year but not later than 5 years121
Due after 5 years107
Total undiscounted lease liabilities as at 30 September 2020280
As comparatives have not been restated on the adoption of NZ IFRS 16, the table below presents the operating lease commitments by remaining
contractual maturity based on the requirements of NZ IAS 17 applicable for the prior year:
NZ BANKING GROUP
$ millions2019
Due within 1 year52
Due after 1 year but not later than 5 years130
Due after 5 years124
Total undiscounted lease liabilities as at 30 September 2019306
The total cash outflow for the year ended 30 September 2020 for leases was $114 million, of which $52 million relate to expenses recognised for
variable lease payments not included in the measurement of lease liabilities.
Note 27 Credit related commitments, contingent assets and contingent liabilities
Accounting policy
Undrawn credit commitments
The NZ Banking Group enters into various arrangements with customers which are only recognised in the balance sheet when called upon. These
arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting facilities.
Contingent assets
Contingent assets are possible assets whose existence will be confirmed only by uncertain future events. Contingent assets are not recognised in
the balance sheet but are disclosed if an inflow of economic benefits is probable.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 59
Note 27 Credit related commitments, contingent assets and contingent liabilities (continued)
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where
the transfer of economic resources is not probable or cannot be reliably measured. Contingent liabilities are not recognised in the balance sheet
but are disclosed unless the outflow of economic resources is remote.
Undrawn credit commitments
Undrawn credit commitments expose the NZ Banking Group to liquidity risk when called upon and also to credit risk if the customer fails to repay
the amounts owed at the due date. The maximum exposure to credit loss is the contractual or notional amount of the instruments disclosed
below. Some of the arrangements can be cancelled by the NZ Banking Group at any time. The actual liquidity and credit risk exposure varies in line
with drawings and may be less than the amounts disclosed. The NZ Banking Group uses the same credit policies when entering into these
arrangements as it does for on-balance sheet instruments. Refer to Note 32 for further details on liquidity risk and credit risk management.
Westpac New Zealand is obliged to repurchase any loan sold to and held by:
(a) WNZSL (pursuant to its securitisation programme) where the loan does not meet certain terms and conditions of the WNZSL securitisation
programme;
(b) WNZCBL (pursuant to Westpac New Zealand’s Global Covered Bond Programme (‘CB Programme’)) where:
(i) it is discovered that there has been a material breach of a sale warranty (or any such sale warranty is materially untrue);
(ii) the loan becomes materially impaired or is enforced prior to the second monthly covered bond payment date falling after the assignment of
the loan; or
(iii) at the cut-off date relating to the loan, there were arrears of interest and that loan subsequently becomes a delinquent loan prior to the
second monthly covered bond payment date falling after the assignment of the loan.
It is not envisaged that any liability resulting in material loss to the NZ Banking Group will arise from these obligations.
NZ BANKING GROUP
$ millions
20202019
Letters of credit and guarantees
1
968964
Commitments to extend credit
2
27,89725,881
Total undrawn credit commitments28,86526,845
1
Standby letters of credit and guarantees are undertakings to pay, against presentation documents, an obligation in the event of a default by a customer.
Guarantees are unconditional undertakings given to support the obligations of a customer to third parties. The NZ Banking Group may hold cash as collateral for
certain guarantees issued.
2
Commitments to extend credit include all obligations on the part of the NZ Banking Group to provide credit facilities. As facilities may expire without being drawn
upon, the notional amounts do not necessarily reflect future cash requirements.
Contingent assets
The credit commitments shown in the table above also constitute contingent assets. These commitments would be classified as loans in the balance
sheet on the contingent event occurring.
Contingent liabilities
The NZ Banking Group is exposed to contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the NZ
Banking Group’s likely loss in respect of these matters has been made on a case-by-case basis and provision has been made in these financial
statements where appropriate and is probable.
Compliance, regulation and remediation
The NZ Banking Group is subject to continued regulatory action and internal reviews relating to matters pertaining to the provision of services to our
customers. Contingent liabilities may exist in respect of actual or potential claims, compensation payments and/or refunds identified as part of
these reviews. An assessment of the NZ Banking Group’s likely loss has been made on a case-by-case basis for the purpose of the Disclosure
Statement but cannot always be reliably estimated. As at 30 September 2020, appropriate provision has been made in Note 20.

Notes to the financial statements
60 Westpac Banking Corporation - New Zealand Banking Group
Note 28 Segment reporting
Accounting policy
Operating segments are presented on a basis that is consistent with information provided internally to the NZ Banking Group’s chief operating
decision-maker and reflects the management of the business, rather than the legal structure of the NZ Banking Group. The chief operating
decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The NZ
Banking Group has determined that the NZ Banking Group executive team is its chief operating decision-maker.
Inter-segment revenue and costs are eliminated at head office. Income and expenses directly associated with each segment are included in
determining business segment performance.
The NZ Banking Group operates predominantly in the consumer banking and wealth, commercial, corporate and institutional banking, and
investments and insurance sectors within New Zealand. On this basis, no geographical segment reporting is provided.
The operating segment results have been presented on a management reporting basis and consequently internal charges and transfer pricing
adjustments have been reflected in the performance of each operating segment. Intersegment pricing is determined on a cost recovery basis.
The NZ Banking Group does not rely on any single major customer for its revenue base.
In 2020, the NZ Banking Group has separately presented the Financial Markets, International Trade and Payments operating segment to more
accurately reflect management’s view of the operations. Previously, these amounts were included in the Commercial, Corporate and Institutional
operating segment. Segment comparative information for the year 30 September 2019 has been restated to ensure consistent presentation with the
current reporting period.
The NZ Banking Group’s operating segments are defined by the customers they serve and the services they provide. The NZ Banking Group has
identified the following main operating segments:
– Consumer Banking and Wealth provides financial services predominantly for individuals;
– Commercial, Corporate and Institutional Banking provides a broad range of financial services for commercial, corporate, property finance,
agricultural, institutional and government customers;
– Financial Markets provides foreign exchange, interest rate derivatives, government and credit products, commodities, carbon and energy
capabilities. International Trade and Payments provide international trade solutions, payments products and services to consumer, business and
institutional customers; and
– Investments and Insurance provides funds management and insurance services.
Reconciling items primarily represent:
– business units that do not meet the definition of operating segments under NZ IFRS 8 Operating Segments;
– elimination entries on consolidation/aggregation of the results, assets and liabilities of the NZ Banking Group’s controlled entities in the
preparation of the aggregated financial statements of the NZ Banking Group; and
– results of certain business units excluded for management reporting purposes but included within the aggregated financial statements of the NZ
Banking Group for statutory financial reporting purposes.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 61
Note 28 Segment reporting (continued)
NZ BANKING GROUP
$ millions
Consumer
Banking and
Wealth
Commercial,
Corporate
and
Institutional
Financial
Markets,
International
Trade and
Payments
Investments
and
Insurance
Reconciling
Items
Total
Year ended 30 September 2020
Net interest income1,002908331(51)
1,893
Non-interest income120
115128109(12)460
Net operating income before operating expenses and
impairment charges
1,1221,023161110(63)2,353
Operating expenses(772)(250)(30)(33)3
(1,082)
Impairment (charges)/benefits(165)(155)---
(320)
Profit before income tax18561813177(60)951
Year ended 30 September 2019 (restated)
Net interest income1,03288746-33
1,998
Non-interest income
16412410112647562
Net operating income before operating expenses and
impairment charges
1,1961,011147126802,560
Operating expenses(724)(238)(30)(29)3
(1,018)
Impairment (charges)/benefits(17)27---
10
Profit before income tax45580011797831,552
As at 30 September 2020
Total gross loans48,97939,457383-14288,961
Total deposits and other borrowings38,63732,337--2,99673,970
As at 30 September 2019 (restated)
Total gross loans45,73038,624455-13884,947
Total deposits and other borrowings
1
35,12529,340--1,14165,606
1
Comparatives have been restated by $499m to correctly reflect the total deposits and other borrowings balance in the Commercial, Corporate and Institutional
operating segment which were previously overstated. Total deposits and other borrowings have decreased from $29,839m to $29,340m and “reconciling items”
have increased from $758m to $1,141m as a result of the restatement.

Notes to the financial statements
62 Westpac Banking Corporation - New Zealand Banking Group
Note 29 Securitisation, covered bonds and other transferred assets
The NZ Banking Group enters into transactions in the normal course of business by which financial assets are transferred to counterparties or
structured entities. Depending on the circumstances, these transfers may result in derecognition of the assets in their entirety, partial derecognition or
no derecognition of the assets subject to the transfer. For the NZ Banking Group’s accounting policy on derecognition of financial assets, refer to Note
1.
Securitisation
Securitisation is the transferring of assets (or an interest in either the assets or the cash flows arising from the assets) to a structured entity which then
issues interest bearing debt securities to third party investors.
Own assets securitised
Securitisation of its own assets is used by the NZ Banking Group as a funding and liquidity tool.
For securitisation structured entities which the NZ Banking Group controls, as defined in Note 30, the structured entities are classified as subsidiaries
and consolidated. When assessing whether the NZ Banking Group controls a structured entity, it considers its exposure to and ability to affect variable
returns. The NZ Banking Group may have variable returns from a structured entity through ongoing exposures to the risks and rewards associated with
the assets, the provision of derivatives, liquidity facilities, trust management and operational services.
In October 2008, WNZSL was set up as part of Westpac New Zealand’s internal residential mortgage-backed securitisation programme. Under this
programme Westpac New Zealand sold the rights (but not the obligations) of a pool of housing loans to WNZSL. The purchase was funded by WNZSL’s
issuance of residential mortgage-backed securities (‘RMBS’). The RMBS and an equivalent liability in the form of a deemed loan from Westpac New
Zealand to WNZSL are fully eliminated in the NZ Banking Group’s financial statements. Refer to Note 27 for a description of the NZ Banking Group’s
obligation to repurchase certain housing loans sold to WNZSL.
Covered bonds
The NZ Banking Group has a covered bond programme whereby selected pools of housing loans it originates are assigned to a bankruptcy remote
structured entity. WNZCBL is a special purpose entity established to purchase from time to time, and hold the rights, but not the obligations, of a pool
of housing loans (‘cover pool’) and to provide a financial guarantee (in addition to that of Westpac New Zealand) in respect of obligations under the
covered bonds issued from time to time by WSNZL under the CB Programme. That financial guarantee is supported by WNZCBL granting security in
favour of the covered bondholders over the cover pool.
The intercompany loan made by Westpac New Zealand to WNZCBL to fund the initial purchase (and subsequent further purchases which increased
the cover pool) and the liability representing the deemed loan from WNZCBL to Westpac New Zealand are fully eliminated in the NZ Banking Group’s
financial statements. Refer to Note 27 for a description of the NZ Banking Group’s obligation to repurchase certain housing loans sold to WNZCBL.
Repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised in the balance sheet in their
original category (i.e. trading securities and financial assets measured at FVIS or investment securities).
The cash consideration received is recognised as a liability (repurchase agreements). Refer to Note 18 for further details.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 63
Note 29 Securitisation, covered bonds and other transferred assets (continued)
The following table presents the NZ Banking Group’s assets transferred and their associated liabilities:
NZ BANKING GROUP
For those liabilities that only have recourse to
the transferred assets:
$ millions
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair value of
transferred
assets
Fair value of
associated
liabilities
Net fair value
position
2020
Securitisation - own assets
1
14,437 14,403 14,404 14,403 1
Covered bonds
2
7,524 4,468 n/an/an/a
Repurchase agreements 33 33 n/an/an/a
Total 21,994 18,904 14,404 14,403 1
2019
Securitisation - own assets
1
7,537 7,518 7,522 7,518 4
Covered bonds
2
7,530 5,274 n/an/an/a
Repurchase agreements 19 19 n/an/an/a
Total 15,086 12,811 7,522 7,518 4
1
The most senior rated securities at 30 September 2020 of $13,186 million (30 September 2019: $6,900 million) qualify as eligible collateral for repurchase
agreements with the Reserve Bank. Westpac New Zealand complies with the Reserve Bank’s guidelines for its overnight reverse repurchase agreement facility and
open market operations, which allows banks in New Zealand to offer RMBS as collateral for the Reserve Bank’s repurchase agreements.
2
The difference between the carrying values of the covered bonds and the assets pledged allows for the immediate issuance of additional covered bonds if required.
These additional assets can be repurchased by Westpac New Zealand at its discretion, subject to the conditions set out in the transaction documents. The cover
pool is comprised of housing loans up to a value of $7,500 million as at 30 September 2020 (30 September 2019: $7,500 million). Over time, the composition of the
cover pool will include, in addition to housing loans, accrued interest (representing accrued and unpaid interest on the outstanding housing loans) and cash
(representing collections of principal and interest from the underlying housing loans).
Note 30 Structured entities
Accounting policy
Structured entities are generally created to achieve a specific, defined objective and their operations are restricted such as only purchasing
specific assets. Structured entities are commonly financed by debt or equity securities that are collateralised by and/or indexed to their
underlying assets. The debt and equity securities issued by structured entities may include tranches with varying levels of subordination.
Structured entities are classified as subsidiaries and consolidated if they meet the definition in Note 1. If the NZ Banking Group does not control a
structured entity then it will not be consolidated.
The NZ Banking Group engages in various transactions with both consolidated and unconsolidated structured entities that are mainly involved in
securitisations, asset backed structures and managed funds.
Consolidated structured entities
Securitisation and covered bonds
The NZ Banking Group uses structured entities to securitise its financial assets through the CB Programme and Westpac New Zealand’s internal
residential mortgage-backed securitisation programme. Refer to Note 29 for further details.
NZ Banking Group managed funds
As disclosed in Note 22, the PIE Funds are consolidated within the financial statements of the NZ Banking Group.
Non-contractual financial support
The NZ Banking Group does not provide non-contractual financial support to these consolidated structured entities.

Notes to the financial statements
64 Westpac Banking Corporation - New Zealand Banking Group
Note 30 Structured entities (continued)
Unconsolidated structured entities
The NZ Banking Group has interests in various unconsolidated structured entities including debt instruments, guarantees, liquidity arrangements,
lending, loan commitments, certain derivatives and investment management agreements.
Interests exclude non-complex derivatives (e.g. interest rate swap agreements) and lending to a structured entity with recourse to a wider
operating entity, not just the structured entity.
The NZ Banking Group’s main interests in unconsolidated structured entities, which arise in the normal course of business, are:
Loans and other
credit commitments
The NZ Banking Group lends to unconsolidated structured entities, subject to the NZ Banking Group’s collateral
and credit approval processes, in order to earn interest and fees and commissions income. The structured entities
are mainly securitisation entities.
Investment
management
agreements
The NZ Banking Group manages funds that provide customers with investment opportunities. The NZ Banking
Group also manages superannuation funds for its employees. The NZ Banking Group earns management fee
income which is recognised in non-interest income.
The NZ Banking Group may also retain units in these investment management funds, primarily through its
consolidated life insurance entity. The NZ Banking Group earns fund distribution income and recognises fair value
movements through non-interest income.
The following table shows the NZ Banking Group’s interests in unconsolidated structured entities and its maximum exposure to loss in relation to
those interests. The maximum exposure does not take into account any collateral or hedges that will reduce the risk of loss.
For on-balance sheet instruments, including debt instruments in and loans to unconsolidated structured entities, the maximum exposure to loss
is the carrying value; and
For off-balance sheet instruments, including liquidity facilities and loan and other credit commitments and guarantees, the maximum exposure
to loss is the notional amounts.
NZ BANKING GROUP
20202019
$ millions
Financing to
Securitisation
Vehicles
Group Managed
FundsTotal
Financing to
Securitisation
Vehicles
Group Managed
FundsTotal
Assets
Loans 3,321 - 3,321 2,784-2,784
Life insurance assets - 213 213 -188188
Total on-balance sheet
exposures
3,321 213 3,534 2,7841882,972
Total notional amounts of
off-balance sheet exposures
1,319 69 1,388 1,104871,191
Maximum exposure to
loss
4,640 282 4,922 3,8882754,163
Size of structured entities
1
4,640 11,969 16,609 3,88811,25115,139
1
Represented by the total assets or market capitalisation of the entity, or if not available, the NZ Banking Group’s total committed exposure (for lending
arrangements and external debt holdings), funds under management (for Group managed funds).
Non-contractual financial support
The NZ Banking Group does not provide non-contractual financial support to these unconsolidated structured entities.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 65
Note 31 Capital Management
The Overseas Bank is a registered bank in New Zealand and conducts business in New Zealand through the NZ Banking Group. The capital held by
the NZ Banking Group comprises of the head office account, NZ Banking Group equity and loan capital.
Most of the NZ Banking Group’s capital is held in, and managed by Westpac New Zealand. Westpac New Zealand’s Board is responsible for
ensuring that capital adequacy of Westpac New Zealand is maintained and complies with the regulatory capital requirements prescribed by the
Reserve Bank.
There are no regulatory capital requirements that apply specifically to the NZ Branch or the NZ Banking Group. NZ Banking Group capital is
managed as part of the Overseas Banking Group’s Internal Capital Adequacy Process (‘ICAAP’). The Overseas Bank’s Board is responsible for
ensuring that capital adequacy of the Overseas Banking Group and the Overseas Bank is maintained.
Under APRA’s Prudential Standards, Australian authorised deposit-taking institutions (‘ADI’), including the Overseas Banking Group and the
Overseas Bank are required to maintain minimum ratios of capital to risk weighted assets, as determined by APRA. For the calculation of risk
weighted assets, the Overseas Banking Group and the Overseas Bank is accredited by APRA to apply advanced models permitted by the Basel III
global capital adequacy regime. The Overseas Banking Group uses the Advanced Internal Ratings Based (‘Advanced IRB’) approach for credit risk,
the Advanced Measurement Approach (‘AMA’) for operational risk and the internal model approach for interest rate risk in the banking book for
calculating regulatory capital. APRA’s prudential standards are generally consistent with the International Regulatory Framework for Banks, also
known as Basel III, issued by the Basel Committee on Banking Supervision (‘BCBS’), except where APRA has exercised certain discretions.
The Overseas Banking Group (excluding entities specifically excluded by APRA regulations), and the Overseas Bank (Extended Licensed Entity as
defined by APRA), exceeded the minimum capital adequacy requirements as specified by APRA as at 30 September 2020.
The Overseas Banking Group’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI.
The Overseas Banking Group evaluates its approach to capital management through an ICAAP, the key features of which include:
the development of a capital management strategy, including consideration of regulatory minimums, capital buffers and contingency plans;
consideration of both regulatory and economic capital requirements;
a stress testing framework that challenges the capital measures, coverage and requirements, including the impact of adverse economic
scenarios; and
consideration of the perspectives of external stakeholders including rating agencies and equity and debt investors.
The table below represents the capital adequacy calculation for the Overseas Banking Group and Overseas Bank as at 30 September 2020 based on
APRA’s application of the Basel III capital adequacy framework.
30 Sep 2030 Sep 19
%
UnauditedUnaudited
Overseas Banking Group (excluding entities specifically excluded by APRA regulations)
1, 2
Common Equity Tier 1 capital ratio 11.1 10.7
Additional Tier 1 capital ratio 2.1 2.2
Tier 1 capital ratio 13.2 12.8
Tier 2 capital ratio 3.2 2.8
Total regulatory capital ratio 16.4 15.6
Overseas Bank (Extended Licensed Entity)
1, 3
Common Equity Tier 1 capital ratio 11.4 11.0
Additional Tier 1 capital ratio 2.1 2.2
Tier 1 capital ratio 13.5 13.2
Tier 2 capital ratio 3.2 2.9
Total regulatory capital ratio 16.7 16.1
1
The capital ratios represent information mandated by APRA. The capital ratios of the Overseas Banking Group are publicly available in the Overseas Banking
Group’s Pillar 3 report. This information is made available to users via the Overseas Bank’s website (www.westpac.com.au).
2
Overseas Banking Group (excluding entities specifically excluded by APRA regulations) comprises the consolidation of the Overseas Bank and its subsidiary
entities except those entities specifically excluded by APRA regulations for the purposes of measuring capital adequacy (Level 2). The head of the Level 2 group is
the Overseas Bank.
3
Overseas Bank (Extended Licensed Entity) comprises the Overseas Bank and its subsidiary entities that have been approved by APRA as being part of a single
Extended Licensed Entity for the purpose of measuring capital adequacy (Level 1).
Freeze on dividends and restrictions on the distributions of additional Tier 1 capital instruments by NZ Banks
On 2 April 2020, a decision was made by the Reserve Bank to freeze the distribution of dividends on ordinary shares and to restrict the extent to
which distributions on additional Tier 1 capital instruments are permitted by all locally incorporated banks in New Zealand (including Westpac New
Zealand) during the period of economic uncertainty caused by COVID-19. On 11 November 2020, the Reserve Bank announced that these restrictions
will be retained until at least 31 March 2021. Non-payment of dividends from Westpac New Zealand only affects the Overseas Bank’s Level 1 CET1
capital ratio.
The Overseas Bank is well capitalised and at 30 September 2020 had a Level 1 CET1 capital ratio of 11.40%.

Notes to the financial statements
66 Westpac Banking Corporation - New Zealand Banking Group
Note 32 Financial risk
Financial instruments are fundamental to the NZ Banking Group’s business of providing banking and financial services. The associated financial risks
(including credit risk, funding and liquidity risk and market risk) are a significant proportion of the total risks faced by the NZ Banking Group.
This note details the financial risk management policies, practices and quantitative information of the NZ Banking Group’s principal financial risk
exposures.
Principal risksNote nameNote number
OverviewRisk management frameworks32.1
Credit risk ratings system32.2.1
Credit risk mitigation, collateral and other credit enhancements32.2.2
Credit risk concentrations32.2.3
Credit quality of financial assets32.2.4
Non-performing loans and credit commitments32.2.5
Credit risk
The risk of financial loss where a customer or counterparty
fails to meet their financial obligations.
Collateral held32.2.6
Funding and liquidity risk
The risk that the NZ Banking Group 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.
Liquidity modelling
Sources of funding
Assets pledged as collateral
Contractual maturity of financial liabilities
Expected maturity
32.3.1
32.3.2
32.3.3
32.3.4
32.3.5
Value-at-Risk (‘VaR’)
Traded market risk
32.4.1
32.4.2
Market risk
The risk of an adverse impact on earnings resulting from
changes in market factors, such as FX rates, interest rates,
commodity prices and equity prices.
Non-traded market risk32.4.3
Note 32.1 Risk management frameworks
The Board is responsible for approving the Overseas Banking Group’s Risk Management Framework, Risk Management Strategy and Risk Appetite
Statement and monitoring the effectiveness of risk management by the Overseas Banking Group.
The Board has delegated to the Overseas Bank’s Board Risk and Compliance Committee (‘Group BRCC’) responsibility to:
review and recommend the Overseas Banking Group’s Risk Management Framework, Risk Management Strategy and Risk Appetite Statement
to the Board for approval;
review and monitor the risk profile and controls of the NZ Banking Group consistent with the Overseas Banking Group’s Risk Appetite
Statement;
approve frameworks, policies and processes for managing risk (consistent with the Overseas Banking Group’s Risk Management Framework
and Risk Appetite Statement); and
review and, where appropriate, approve risks beyond the approval discretion provided to management.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 67
Note 32 Financial risk (continued)
For each of its primary financial risks, the NZ Banking Group maintains risk management frameworks and a number of supporting policies that
define roles and responsibilities, acceptable practices, limits and key controls:
RiskRisk management framework and controls
Credit risk
 The Overseas Bank’s Credit Risk Management Framework
describes the principles, methodologies, systems, roles and
responsibilities, reports and key controls for managing credit
risk. Within the Credit Risk Management Framework, the NZ
Banking Group has its own credit approval limits approved by
Westpac New Zealand’s Board as delegated by the Overseas
Banking Group’s Chief Risk Officer.
 The Group BRCC and the WBC NZ Banking Group Executive
Risk Committee (‘ERC’) monitor the risk profile, performance
and management of the NZ Banking Group’s credit portfolio
and the development and review of key credit risk policies on
at least a quarterly basis; other management reviews occur
monthly or more frequently.
 The NZ Banking Group’s Credit Risk Rating System Policy
describes the credit risk rating system philosophy, design, key
features, IT systems and uses of rating outcomes.
 All models materially impacting the risk rating process are
periodically reviewed in accordance with the NZ Banking
Group’s model risk policies.
 An annual review is performed of the Credit Risk Rating
System by the Westpac New Zealand Board Risk and
Compliance Committee (‘WNZL BRCC’) and ERC.
 Specific credit risk estimates (including PD, LGD and EAD) are
overseen, reviewed annually and supported by the Overseas
Bank’s Credit Risk Estimates Committee (a subcommittee of
the Group BRCC).
 In determining the provision for ECL, the macroeconomic
variables and the probability weightings of the forward-
looking scenarios as well as any adjustments made to the
modelled outcomes are subject to the approval of the NZ
Banking Group’s Chief Financial Officer and Chief Risk Officer
with oversight from the Board of Directors (and its
Committees).
 Policies for delegating credit approval authorities and formal
limits for the extension of credit are established throughout
the NZ Banking Group. These include those for the approval
and management of all credit risk arising from other banks
and related entities.
 Credit policies are established throughout the NZ Banking
Group including policies governing the origination, evaluation,
approval, documentation, settlement and ongoing
management of credit risks.
 Sector policies guide credit extension where industry-specific
guidelines are considered necessary (e.g. acceptable financial
ratios or permitted collateral).
 The Related Entity Risk Management Framework and
supporting policies govern credit exposures to related entities
to minimise the spread of credit risk between Overseas
Banking Group entities and to comply with prudential
requirements prescribed by APRA.
Funding and
liquidity
risk
 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 Overseas Banking Group’s Board-
approved Risk Management Strategy.
 Responsibility for managing the NZ Banking Group's liquidity
and funding positions in accordance with the Liquidity Risk
Management Framework is delegated to Treasury, both under
the oversight of the Overseas Banking Group’s Asset and
Liability Committee (‘Group ALCO’) as regards APRA APS 210
obligations and under Westpac New Zealand’s Asset and
Liability Committee (‘WNZL ALCO’) as regards Reserve Bank’s
BS13 prudential standard. Group BRCC oversees Group ALCO
with regard to APRA APS 210 obligations and WNZL BRCC
oversees WNZL ALCO’s reporting and monitoring of BS13
liquidity measures.
 Treasury undertakes an annual funding review that outlines
the NZ Banking Group'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. This review is subsequently
submitted to WNZL BRCC for approval.
 The Overseas Banking Group monitors the composition and
stability of its funding so that it remains within its funding risk
appetite. This includes compliance with both the Liquidity
Coverage Ratio (‘LCR’) and Net Stable Funding Ratio (‘NSFR’).
 Treasury also maintains a contingent funding plan that
outlines the steps that should be taken by the NZ Banking
Group in the event of an emerging ‘funding crisis’. The plan is
aligned with the Overseas Banking Group’s broader Liquidity
Crisis Management Policy and is submitted annually to WNZL
BRCC for approval.
 Daily liquidity risk reports are reviewed by Treasury and the
Overseas Banking Group’s Liquidity Risk teams. Liquidity
reports are presented to Group ALCO monthly and to the
Group BRCC quarterly, as well as WNZL ALCO and WNZL
BRCC on a similar schedule.

Notes to the financial statements
68 Westpac Banking Corporation - New Zealand Banking Group
Note 32 Financial risk (continued)
RiskRisk management framework and controls
Market risk
 The Market Risk Framework describes the Overseas Banking
Group’s approach to managing traded and non-traded
market risk and is approved by the Group BRCC. Westpac
New Zealand operates its own Market Risk Management
Framework that is closely aligned with that of the Overseas
Banking Group. The Westpac New Zealand Framework is
approved by the WNZL BRCC.
 Traded market risk includes interest rate, FX, commodity,
equity price, credit spread and volatility risks. Non-traded
market risk includes interest rate and FX risks.
 Market risk is managed using VaR limits, Net interest income
at risk (‘NaR’) and structural risk limits (including credit
spread and interest rate basis point value limits) as well as
scenario analysis and stress testing.
 The Group BRCC approves the risk appetite for traded and
non-traded risks through the use of VaR, NaR and specific
structural risk limits.
 The Overseas Banking Group’s RISKCO (‘Group RISKCO’) has
approved separate VaR sub-limits for the trading activities of
the Overseas Banking Group’s Financial Markets and Treasury
units.
 Market risk limits are assigned to business management
based upon the Overseas Banking Group’s risk appetite and
business strategies in addition to the consideration of market
liquidity and concentration of risks.
 Market risk positions are managed by the trading desks and
ALM unit consistent with their delegated authorities and the
nature and scale of the market risks involved.
 Daily monitoring of current exposure and limit utilisation is
conducted independently by the Overseas Banking Group’s
Market Risk unit, which monitors market risk exposures
against VaR and structural risk limits. Oversight of risk specific
to the NZ Banking Group is monitored by the NZ Branch’s
Trading Risk Management Unit. Daily VaR position reports are
produced by risk type, by product lines and by geographic
region. Quarterly reports are produced for the Overseas
Banking Group’s Market Risk Committee (‘Group MARCO’),
Group RISKCO and Group BRCC.
 Daily stress testing and backtesting of VaR results are
performed to support model integrity and to analyse extreme
or unexpected movements. A review of the potential profit
and loss outcomes is also undertaken to monitor any skew
created by the historical data.
 The Group BRCC has approved a framework for profit or loss
escalation which considers both single day and 20 day
cumulative results.
 Treasury’s ALM unit is responsible for managing the non-
traded interest rate risk including risk mitigation through
hedging using derivatives. This is overseen by the Market Risk
unit and reviewed by the Group MARCO, Group RISKCO and
Group BRCC.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 69
Note 32 Financial risk (continued)
32.2 Credit risk
32.2.1 Credit risk ratings system
The principal objective of the credit risk rating system is to reliably assess the credit risk to which the NZ Banking Group is exposed. The NZ
Banking Group has two main approaches to this assessment.
Transaction-managed customers
Transaction managed customers are generally customers with business lending exposures. They are individually assigned a Customer Risk Grade
(‘CRG’), corresponding to their expected PD. Each facility is assigned an LGD. The NZ Banking Group’s risk rating system has a tiered scale of risk
grades for both non-defaulted customers and defaulted customers. Non-defaulted CRGs are mapped to Moody’s Investor Service (‘Moody’s’) and
S&P Global Ratings (‘S&P’) external senior ranking unsecured ratings.
The following table shows the NZ Banking Group’s high level CRG’s for transaction-managed portfolios mapped to the NZ Banking Group’s credit
quality disclosure categories and to their corresponding external rating.
Transaction-managed
Financial Statement DisclosureNZ Banking Group’s CRGMoody’s RatingS&P Rating
StrongAAaa – Aa3AAA – AA-
BA1 – A3A+ – A-
CBaa1 – Baa3BBB+ – BBB-
Good/satisfactoryDBa1 – B1BB+ – B+
NZ Banking Group Rating
WeakEWatchlist
FSpecial Mention
Weak/default/non-performingGSubstandard/Default
HDefault
Program-managed portfolio
The program-managed portfolio generally includes retail products including mortgages, personal lending (including credit cards) as well as Small and
Medium-sized Enterprises (‘SME’) lending. These customers are grouped into pools of similar risk. Pools are created by analysing similar risk
characteristics that have historically predicted that an account is likely to go into default. Customers grouped according to these predictive
characteristics are assigned a PD and LGD relative to their pool. The credit quality of these pools is based on a combination of behavioural factors,
delinquency trends, PD estimates and loan to valuation ratio (housing loans only).
Program-managed
Financial Statement DisclosureAdvanced PM Model
1
Simplified PM Approach
2
StrongStage 1 facilities with PM Risk Grade between 13 and 10-
Good/satisfactoryStage 1 facilities with PM Risk Grade between 9 and 6Stage 1
Stage 2 facilities with PM Risk Grade between 13 and 6Stage 2 and 0 - 29 days past due
WeakAll facilities with PM Risk Grade between 5 and 1Stage 2 and 30 or more days past due
Weak/default/non-performingAll facilities with PM Risk Grade equal to 0Stage 3
1
Used for Residential Mortgages, Credit Cards & SME.
2
Used for Personal Lending.
32.2.2 Credit risk mitigation, collateral and other credit enhancements
The NZ Banking Group uses a variety of techniques to reduce the credit risk arising from its lending activities.
This includes the NZ Banking Group establishing that it has direct, irrevocable and unconditional recourse to collateral and other credit
enhancements through obtaining legally enforceable documentation.

Notes to the financial statements
70 Westpac Banking Corporation - New Zealand Banking Group
Note 32 Financial risk (continued)
Collateral
The table below describes the nature of collateral or security held for each relevant class of financial asset:
Financial assetsNature of collateral
Loans – residential
mortgages
1
Housing loans are secured by a mortgage over property and additional security may take the form of guarantees
and deposits.
Loans – other retail
1
Personal lending (including credit cards and overdrafts) is predominantly unsecured. Where security is taken, it
is restricted to eligible motor vehicles, caravans, campers, motor homes and boats.
SME loans may be secured, partially secured or unsecured. Security is typically taken by way of a mortgage over
property and/or a general security agreement over business assets or other assets.
Loans – corporate
1
Business loans may be secured, partially secured or unsecured. Security is typically taken by way of a mortgage
over property and/or a general security agreement over business assets or other assets.
Other security such as guarantees or standby letters of credit may also be taken as collateral, if appropriate.
Trading securities and
financial assets measured
at FVIS and derivative
financial instruments
These exposures are carried at fair value which reflects the credit risk.
For trading securities, no collateral is sought directly from the issuer or counterparty; however this may be implicit
in the terms of the instrument (such as an asset-backed security). The terms of debt securities may include
collateralisation.
Master netting agreements are typically used to enable the effects of derivative assets and derivative liabilities with
the same counterparty to be offset when measuring these exposures. Additionally, collateralisation agreements
are also typically entered into with major institutional counterparties to avoid the potential build-up of excessive
mark-to-market positions. Derivative transactions are increasingly being cleared through central clearers.
1
This includes collateral held in relation to associated credit commitments.
Management of risk mitigation
The NZ Banking Group mitigates credit risk through controls covering:
Collateral and valuation
management
The Overseas Bank manages collateral under collateralisation agreements centrally for all branches of the
Overseas Bank and Westpac New Zealand.
The estimated realisable value of collateral held in support of loans is based on a combination of:
formal valuations currently held for such collateral; and
management’s assessment of the estimated realisable value of all collateral held.
This analysis also takes into consideration any other relevant knowledge available to management at the time.
Updated valuations are obtained when appropriate.
The NZ Banking Group revalues collateral related to financial markets positions on a daily basis and has formal
processes in place to promptly call for collateral top-ups, if required. These processes include margining for
non-centrally cleared customer derivatives where required under APRA’s Prudential Standard CPS226. The
collateralisation arrangements are documented via the Credit Support Annex of the ISDA dealing agreements
and Global Master Repurchase Agreements for repurchase transactions.
Other credit enhancements
The NZ Banking Group only recognises guarantees, standby letters of credit, or credit derivative protection
from the following entities (provided they are not related to the entity with which the NZ Banking Group has a
credit exposure):
Sovereign;
Australia and New Zealand public sector;
Authorised deposit-taking institutions and overseas banks with a minimum risk grade equivalent of A3 / A-;
and
Other entities with a minimum risk grade equivalent of A3 / A-.
Offsetting
Creditworthy customers domiciled in New Zealand may enter into formal agreements with the NZ Banking
Group, permitting the NZ Banking Group to set-off gross credit and debit balances in their nominated
accounts. Cross-border set-offs are not permitted.
Close-out netting is undertaken with counterparties with whom the NZ Banking Group has entered into a legally
enforceable master netting agreement for their off-balance sheet financial market transactions in the event of
default.
Further details of offsetting are provided in Note 25.
Central clearing
The NZ Banking Group increasingly executes derivative transactions through central clearing counterparties.
Central clearing counterparties mitigate risk through stringent membership requirements, the collection of
margin against all trades placed, the default fund, and an explicitly defined order of priority of payments in the
event of default.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 71
Note 32 Financial risk (continued)
32.2.3 Credit risk concentrations
Credit risk is concentrated when a number of counterparties are engaged in similar activities, have similar economic characteristics and thus may
be similarly affected by changes in economic or other conditions.
The NZ Banking Group monitors its credit portfolio to manage risk concentrations and rebalance the portfolio.
Individual customers or groups of related customers
The NZ Banking Group has large exposure limits governing the aggregate size of credit exposure normally acceptable to individual customers and
groups of related customers. These limits are tiered by customer risk grade.
Specific industries
Exposures to businesses, governments and other financial institutions are classified into a number of industry clusters based on related Australian
and New Zealand Standard Industrial Classification (‘ANZSIC’) codes and are monitored against the NZ Banking Group’s industry risk appetite
limits.
Individual countries
The NZ Banking Group has limits governing risks related to individual countries, such as political situations, government policies and economic
conditions that may adversely affect either a customer’s ability to meet its obligations to the NZ Banking Group, or the NZ Banking Group’s ability
to realise its assets in a particular country.
Maximum exposure to credit risk
The maximum exposure to credit risk (excluding collateral received) is represented by the carrying amount of on-balance sheet financial assets
and undrawn credit commitments as set out in the following table. Life insurance assets held as an investment in unit trusts are excluded as the
unit price is affected by movements in equity prices which are a market risk.
NZ BANKING GROUP
$ millions
20202019
Financial assets
Cash and balances with central banks
4,488 2,002
Collateral paid
397 417
Trading securities and financial assets measured at FVIS
4,224 4,871
Derivative financial instruments
5,660 6,257
Investment securities
5,021 4,469
Loans
88,354 84,626
Other financial assets
555
400
Life insurance assets
- 4
Due from related entities
2,713 2,367
Total financial assets 111,412 105,413
Undrawn credit commitments
Letters of credit and guarantees
968 964
Commitments to extend credit
27,897 25,881
Total undrawn credit commitments 28,865 26,845
Total maximum credit risk exposure 140,277 132,258

Notes to the financial statements
72 Westpac Banking Corporation - New Zealand Banking Group
Note 32 Financial risk (continued)
Concentration of credit exposures
NZ BANKING GROUP
$ millions20202019
On-balance sheet credit exposures
Analysis of on-balance sheet credit exposures by geographical areas
New Zealand 103,335 97,283
Australia 3,857 3,685
United Kingdom 2,520 2,459
United States of America 135 154
China 874 936
Other 691 896
Total on-balance sheet credit exposures 111,412 105,413
Analysis of on-balance sheet credit exposures by industry sector
Accommodation, cafes and restaurants 480 465
Agriculture 9,379 8,836
Construction 604 572
Finance and insurance 9,541 10,687
Forestry and fishing 513 444
Government, administration and defence 12,629 9,044
Manufacturing 1,947 2,229
Mining 226 311
Property 8,072 7,512
Property services and business services 1,170 1,451
Services 2,283 2,125
Trade 2,121 2,554
Transport and storage 1,321 1,280
Utilities 2,130 2,297
Retail lending 56,790 53,446
Other 1 2
Subtotal 109,207 103,255
Provision for ECL on loans (607) (321)
Due from related entities 2,713 2,367
Other financial assets 99 112
Total on-balance sheet credit exposures 111,412 105,413
Off-balance sheet credit exposures consists of
Credit risk-related instruments 28,865 26,845
Total off-balance sheet credit exposures 28,865 26,845
Analysis of off-balance sheet credit exposures by industry sector
Accommodation, cafes and restaurants 104 116
Agriculture 837 624
Construction 554 502
Finance and insurance 1,926 1,636
Forestry and fishing 235 204
Government, administration and defence 905 891
Manufacturing 1,932 1,870
Mining 111 35
Property 1,215 1,986
Property services and business services 930 705
Services 861 592
Trade 2,086 1,682
Transport and storage 955 812
Utilities 1,987 1,720
Retail lending 14,227 13,470
Total off-balance sheet credit exposures 28,865 26,845
ANZSIC has been used as the basis for disclosing industry sectors.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 73
Note 32 Financial risk (continued)
32.2.4 Credit quality of financial assets
The following table shows the credit quality of gross credit risk exposures measured at amortised cost or at FVOCI to which the impairment
requirements of NZ IFRS 9 apply. The credit quality is determined by reference to the credit risk ratings system (refer to Note 32.2.1) and
expectations of future economic conditions under multiple scenarios:
NZ BANKING GROUP
20202019
$ millions
Stage 1Stage 2Stage 3Total
1
Stage 1Stage 2Stage 3Total
1
Loans - Residential Mortgages
Strong
42,916 - - 42,916 42,096 - - 42,096
Good/satisfactory
7,713 3,578 - 11,291 7,629 1,201 - 8,830
Weak
49 501 473 1,023 28 248 302 578
Total Loans - Residential Mortgages
50,678 4,079 473 55,230 49,753 1,449 302 51,504
Loans - Other retail
2
Strong
1,206 - - 1,206 610 - - 610
Good/satisfactory
1,646 203 - 1,849 2,881 56 - 2,937
Weak
18 152 74 244 19 134 53 206
Total Loans - Other retail
2,870 355 74 3,299 3,510 190 53 3,753
Loans - Corporate
Strong
11,613 - - 11,613 11,437 - - 11,437
Good/satisfactory
15,919 993 - 16,912 15,624 1,126 - 16,750
Weak
- 1,652 163 1,815 - 1,299 93 1,392
Total Loans - Corporate
27,532 2,645 163 30,340 27,061 2,425 93 29,579
Loans - Other
Strong
92 - - 92 111 - - 111
Good/satisfactory
- - - - - - - -
Weak
- - - - - - - -
Total Loans - Other
92 - - 92 111 - - 111
Investment Securities
Strong
5,021 - - 5,021 4,469 - - 4,469
Good/satisfactory
- - - - - - - -
Weak
- - - - - - - -
Total Investment Securities
5,021 - - 5,021 4,469 - - 4,469
All other financial assets
Strong
6,927 - - 6,927 4,151 - - 4,151
Good/satisfactory
37 6 - 43 42 4 - 46
Weak
- 3 1 4 - 3 1 4
Total all other financial assets
6,964 9 1 6,974 4,193 7 1 4,201
Undrawn credit commitments
Strong
21,900 - - 21,900 18,567 - - 18,567
Good/Satisfactory
6,482 281 - 6,763 7,832 237 - 8,069
Weak
12 146 44 202 10 179 20 209
Total undrawn credit commitments
28,394 427 44 28,865 26,409 416 20 26,845
Total strong
89,675 - - 89,675 81,441 - - 81,441
Total good/satisfactory
31,797 5,061 - 36,858 34,008 2,624 - 36,632
Total weak
79 2,454 755 3,288 57 1,863 469 2,389
Total on and off balance sheet
121,551 7,515 755 129,821 115,506 4,487 469 120,462
1
This credit quality disclosure differs to that of credit risk concentration as it relates only to financial assets measured at amortised costs or at FVOCI and
therefore excludes trading securities and financial assets measured at FVIS, and derivative financial instruments.
2
Comparatives have been restated to correctly classify Stage 2 credit exposures of $116m related to ‘Loans – Other retail’ from ‘Good/satisfactory' to ‘Weak’.
Details of collateral held in support of these balances are provided in Note 32.2.6.

Notes to the financial statements
74 Westpac Banking Corporation - New Zealand Banking Group
Note 32 Financial risk (continued)
32.2.5 Non-performing loans and credit commitments
The loans and credit commitments balance in stage 3 (non-performing) is represented by those loans and credit commitments which are in
default. A default occurs when the NZ Banking Group considers that the customer is unlikely to repay its credit obligations in full, irrespective of
recourse by the NZ Banking Group to actions such as realising security, or the customer is more than 90 days past due on any material credit
obligation. This definition of default is aligned to the Reserve Bank regulatory definition of default except for customers’ exposures availing COVID-
19 assistance, which follow the supplementary guidelines provided by the Reserve Bank for regulatory capital and the IASB guidance for
provisioning.
The determination of the provision for ECL is one of the NZ Banking Group’s critical accounting assumptions and estimates. Details of this and the
NZ Banking Group’s accounting policy for the provision for ECL are discussed in Notes 6 and 12 along with the total provision for ECL on loans and
credit commitments and the total for those loans and credit commitments that are considered non-performing (i.e. stage 3).
32.2.6 Collateral held
Loans
The NZ Banking Group analyses the coverage of the loan portfolio which is secured by the collateral that it holds. Coverage is measured as follows:
CoverageSecured loan to collateral value ratio
Fully securedLess than or equal to 100%
Partially securedGreater than 100% but not more than 150%
Unsecured
Greater than 150%, or no security held (e.g. can include credit cards, personal loans, and exposure to highly rated
corporate entities)
The NZ Banking Group's loan portfolio has the following coverage from collateral held:
NZ BANKING GROUP
20202019
%
Residential
Mortgages
1
Other
Retail
Corporate Other Total
Residential
Mortgages
1
Other
Retail
Corporate Other Total
Performing Loans
Fully secured
100 44 63 44 85 100 39 61 37 84
Partially secured
- 4 19 1 7 - 4 20 11 7
Unsecured
- 52 18 55 8 - 57 19 52 9
Total 100 100 100 100 100 100 100 100 100 100
Non-performing loans
Fully secured
96 39 13 - 70 94 53 10 - 72
Partially secured
4 7 13 - 7 6 4 50 - 15
Unsecured
- 54 74 - 23 - 43 40 - 13
Total 100 100 100 - 100 100 100 100 - 100
1
For the purposes of collateral classifications, residential mortgages are classified as fully secured, unless they are non-performing in which case they may be
classified as partially secured. Refer to Section iv ‘Additional mortgage information’ of the Registered bank disclosures for loan-to-value ratio ('LVR') analysis of
residential mortgages.
Details of the carrying value and associated provision for ECL are disclosed in Note 11, Section iii. of the Registered bank disclosures and Note 12
respectively. The credit quality of loans is disclosed in Note 32.2.4.
Collateral held against financial assets other than loans
NZ BANKING GROUP
$ millions20202019
Cash, primarily for derivatives 508 623
Securities under reverse repurchase agreements
1
547
1,041
Total other collateral held 1,055 1,664
1
Securities received as collateral are not recognised on the NZ Banking Group's balance sheet.

Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group 75
Note 32 Financial risk (continued)
32.3 Funding and liquidity risk
32.3.1 Liquidity modelling
Westpac New Zealand is subject to the conditions specified in the Reserve Bank document ‘Liquidity Policy’ (‘BS13’). The following metrics are
calculated and reported on a daily basis by Westpac New Zealand in accordance with BS13:
the level of liquid assets held;
the one-week mismatch ratio;
the one-month mismatch ratio; and
the one-year core funding ratio.
In addition, the NZ Banking Group calculates the following liquidity ratios in accordance with the Overseas Bank’s liquidity risk framework under APRA
Prudential Standard APS 210 Liquidity:
liquidity coverage ratio; and
net stable funding ratio.
32.3.2 Sources of funding
Sources of funding are regularly reviewed to maintain a wide diversification by currency, geography, product and term. Sources include, but are not
limited to:
deposits;
debt issues;
proceeds from sale of marketable securities;
repurchase agreements with central banks;
principal repayments on loans;
interest income; and
fees and commissions income.
Liquid assets
The NZ Banking Group holds a portfolio of high-quality liquid assets as a buffer against unforeseen funding requirements. These assets are eligible
for repurchase agreements with the Reserve Bank and are held in cash, government, local government and highly rated investment grade
securities. The level of liquid asset holdings is reviewed frequently and is consistent with both the requirements of the balance sheet and market
conditions.
The following table shows the NZ Banking Group’s holding of liquid assets and represents the key liquidity information provided to management.
Liquid assets include high quality assets readily convertible to cash to meet the NZ Banking Group’s liquidity requirements. In management’s
opinion, liquidity is sufficient to meet the NZ Banking Group’s present requirements.
NZ BANKING GROUP
$ millions20202019
Cash and balances with central banks4,4882,002
Interbank lending5572
Supranational securities1,0201,712
NZ Government securities3,8562,022
NZ public securities2,5632,614
NZ corporate securities1,0602,220
Residential mortgage-backed securities11,0815,798
Total liquid assets24,12316,440