Westpac Pillar 3 Report (December 2021)

ASX Release


3 FEBRUARY 2022

Pillar 3 Report as at 31 December 2021

Westpac Banking Corporation (“Westpac”) today provides the attached Pillar 3
Report (December 2021).










For further information:

Hayden Cooper Andrew Bowden
Group Head of Media Relations Head of Investor Relations
0402 393 619 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

Pillar 3 report
Table of contents


2 | Westpac Group December 2021 Pillar 3 Report

Structure of Pillar 3 report

Executive summary 3
Introduction 5
Group structure 6
Capital overview 8
Leverage ratio 12
Credit risk exposures 13
Securitisation 17
Liquidity coverage ratio 20
Appendix
Appendix I | APS330 Quantitative requirements 21
Disclosure regarding forward-looking statements 22



















In this report references to ‘Westpac’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac
Banking Corporation and its controlled entities (unless the context indicates otherwise).
In this report, unless otherwise stated or the context otherwise requires, references to ‘$’, ‘AUD’ or ‘A$’ are to
Australian dollars.
Any discrepancies between totals and sums of components in tables contained in this report are due to
rounding.
In this report, unless otherwise stated, disclosures reflect the Australian Prudential Regulation Authority’s
(APRA) implementation of Basel III.
Information contained in or accessible through the websites mentioned in this report does not form part of
this report unless we specifically state that it is incorporated by reference and forms part of this report. All
references in this report to websites are inactive textual references and are for information only.

Pillar 3 report
Executive summary


Westpac Group December 2021 Pillar 3 Report | 3
Key capital ratios



Common equity Tier 1 capital ratio movement for First Quarter 2022 (% and basis points)

Westpac’s Common Equity Tier 1 (CET1) capital ratio was 12.20% at 31 December 2021, 12 basis points
lower than 30 September 2021. Key movements in the CET1 capital ratio over the quarter were:
• 1Q22 cash earnings of $1,584 million (35 basis points increase);
• Payment of the 2021 final dividend (50 basis points decrease);
• An increase in Risk Weighted Assets (RWA) (21 basis points decrease) mostly from higher market risk
RWA and higher lending;
• Capital deductions and other capital movements (20 basis points increase) mainly due to lower deferred
tax assets, movements in the fair value on economic hedges recognised in net profit and a decrease in
the capital deduction for regulatory expected losses in excess of provisions; and
• A 4 basis points increase from the impact of divestments.












31 December 202130 September 202131 December 2020
Level 2 Regulatory capital structure
Common equity Tier 1 capital after deductions $m53,976 53,808 51,048
Risk weighted assets $m442,411 436,650 430,232
Common equity Tier 1 capital ratio %12.20 12.32 11.87
Additional Tier 1 capital ratio %2.17 2.33 2.30
Tier 1 capital ratio %14.37 14.65 14.17
Tier 2 capital %4.83 4.21 3.72
Total regulatory capital ratio %19.20 18.86 17.89
APRA leverage ratio %5.80 5.99 6.19
Level 1 Regulatory capital structure
Common equity Tier 1 capital after deductions $m54,220 54,314 51,622
Risk weighted assets $m438,046 431,422 426,566
Level 1 Common equity Tier 1 capital ratio %12.38 12.59 12.10

Pillar 3 report
Executive summary


4 | Westpac Group December 2021 Pillar 3 Report
Risk Weighted Assets



Total RWA increased $5.8 billion or 1.3% over the quarter from both higher credit risk RWA and non-credit
RWA. The $2.5 billion increase in credit risk RWA included:
• A $6.1 billion increase mainly from higher lending across corporates, specialised lending and residential
mortgages, partially offset by;
• A $1.8 billion decrease in credit RWA associated with derivative exposures (counterparty credit risk and
mark-to-market related credit risk);
• A $1.1 billion decrease from the sale of Westpac’s wholesale dealer loan book; and
• A $0.7 billion decrease in RWA for foreign currency translation impacts mostly from the appreciation of
the A$ against the US$ and NZ$.
Non-credit risk RWA was $3.3 billion higher, mainly due to a $2.5 billion increase in market risk RWA. The
increase was mainly driven by the introduction of an industry-wide overlay for updated market risk models
which require regulatory approval.

Additional Tier 1 and Tier 2 Capital movements for First Quarter 2022
On 20 December 2021, Westpac redeemed approximately $0.55 billion Westpac Capital Notes 4 (WCN 4)
that remained on issue
1
. The net impact was a decrease in Tier 1 capital of approximately 12 basis points.
During the quarter, Westpac issued US$2.25 billion Tier 2 capital instruments. The net impact was an increase
in the total regulatory capital ratio of approximately 72 basis points.

Exposure at Default
Exposure at default (EAD) increased $30.1 billion over the quarter, primarily due to an increase in exposure
to sovereigns ($25.2 billion) from higher liquid assets, residential mortgage lending ($3.4 billion) and
specialised lending ($2.0 billion).

Leverage Ratio
The leverage ratio represents the amount of Tier 1 capital relative to exposure
2
. At 31 December 2021,
Westpac’s leverage ratio was 5.8%, down 19 basis points since 30 September 2021 mainly from higher on-
balance sheet liquid asset exposures.

Liquidity Coverage Ratio (LCR)
Westpac’s average LCR for the quarter ending 31 December 2021 was 142% (30 September 2021: 129%)
3
.

1
On 15 September 2021, Westpac issued $1.75 billion of Additional Tier 1 capital (Westpac Capital Notes 8), of which
approximately $1.15 billion comprised reinvestment by the holders of WCN 4. The remaining $0.55 billion of WCN 4 were
redeemed on 20 December 2021.
2
As defined under Attachment D of APS110: Capital Adequacy.
3
Calculated as a simple average of the daily observations over the relevant quarter.
$m31 December 202130 September 202131 December 2020
Risk weighted assets at Level 2
Credit risk359,773357,295349,844
Market risk9,2026,6629,607
Operational risk56,21455,87554,090
Interest rate risk in the banking book12,19011,44610,309
Other 5,0325,3726,382
Total RWA442,411436,650430,232
Total Exposure at Default1,164,1831,134,0831,063,136

Pillar 3 report
Introduction


Westpac Group December 2021 Pillar 3 Report | 5
Westpac Banking Corporation is an Authorised Deposit–taking Institution (ADI) subject to regulation by
APRA. APRA has accredited Westpac to apply advanced models permitted by the Basel III global capital
adequacy regime to the measurement of its regulatory capital requirements. Westpac uses the Advanced
Internal Ratings-Based approach (Advanced IRB) for credit risk and the Advanced Measurement Approach
(AMA) for operational risk
1
.
In accordance with APS330 Public Disclosure, financial institutions that have received this accreditation, such
as Westpac, are required to disclose prudential information about their risk management practices on a semi-
annual basis. A subset of this information must be disclosed quarterly.
In addition to this report, the regulatory disclosures section of the Westpac website
2
contains the reporting
requirements for:
• Capital instruments under Attachment B of APS330; and
• The identification of potential Global-Systemically Important Banks (G-SIB) under Attachment H of
APS330 (disclosed annually).
Capital instruments disclosures are updated when:
• A new capital instrument is issued that will form part of regulatory capital; or
• A capital instrument is redeemed, converted into CET1 capital, written off, or its terms and conditions are
changed.





1
Westpac continues to work with APRA on previously disclosed regulatory breaches in relation to the Advanced Measurement
Approach. From 1 January 2022, Westpac has adopted the Standardised Measurement Approach (SMA) to Operational Risk
Capital as permitted by Prudential Standard APS115 Capital Adequacy: Standardised Measurement Approach to Operational
Risk. As Westpac holds a standardised approach overlay in anticipation of this transition, the impact on Operational Risk Capital
is expected to be minimal and within normal variation. The Culture, Governance & Accountability Review and AUSTRAC related
overlays will continue to apply after the transition.
2
http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/

Pillar 3 report
Group structure


6 | Westpac Group December 2021 Pillar 3 Report
APRA applies a tiered approach to measuring Westpac’s capital adequacy
1
by assessing financial strength
at three levels:
• Level 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved
by APRA as being part of a single 'Extended Licensed Entity' (ELE) for the purposes of measuring capital
adequacy;
• Level 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except those
entities specifically excluded by APRA regulations. The head of the Level 2 group is Westpac Banking
Corporation; and
• Level 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities.
Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of
Westpac’s financial strength on a Level 2 basis
2
.
The Westpac Group
The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory
consolidation.


Accounting consolidation
3

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (including
structured entities) controlled by Westpac. Westpac and its subsidiaries are referred to collectively as the
‘Group’. The effects of all transactions between entities in the Group are eliminated on consolidation. Control
exists when the parent entity is exposed to, or has rights to, variable returns from its involvement with an
entity, and has the ability to affect those returns through its power over that entity. Subsidiaries are fully
consolidated from the date on which control commences and they are no longer consolidated from the date
that control ceases.
Group entities excluded from the regulatory consolidation at Level 2
Regulatory consolidation at Level 2 covers the global operations of Westpac and its subsidiary entities,
including other controlled banking, securities and financial entities, except for those entities involved in the
following business activities:
• insurance;
• acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds
management;
• non-financial (commercial) operations; or
• special purpose entities to which assets have been transferred in accordance with the requirements of
APS120 Securitisation.
Retained earnings and equity investments in subsidiary entities excluded from the consolidation at Level 2
are deducted from capital, with the exception of securitisation special purpose entities.

1
APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy
of an ADI.
2
Impaired assets and provisions held in Level 3 entities are excluded from the tables in this report.
3
Refer to Note 30 of Westpac’s 2021 Annual Report for further details.
Level 1 Consolidation
Level 2 Consolidation
Level 3 Consolidation
Regulatory
non-consolidated
subsidiaries
Westpac
New Zealand Ltd
Other Westpac Level 2
subsidiaries
Westpac Banking
Corporation
Westpac Level 1
subsidiaries

Pillar 3 report
Group structure


Westpac Group December 2021 Pillar 3 Report | 7
Subsidiary banking entities
Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity, is a registered bank incorporated
in New Zealand and regulated by the Reserve Bank of New Zealand (RBNZ). WNZL uses the Advanced IRB
approach for credit risk and the AMA for operational risk. Other subsidiary banking entities in the Group
include Westpac Bank PNG-Limited and Westpac Europe Limited. For the purposes of determining
Westpac’s capital adequacy subsidiary banking entities are consolidated at Level 2.
Restrictions and major impediments on the transfer of funds or regulatory capital within the Group
Minimum capital (‘thin capitalisation’) rules
Tax legislation in most jurisdictions in which the Group operates prescribes minimum levels of capital that
must be retained in that jurisdiction to avoid a portion of the interest costs incurred in the jurisdiction ceasing
to be tax deductible. Capital for these purposes includes both contributed capital and non-distributed retained
earnings. Westpac seeks to maintain sufficient capital/retained earnings to comply with these rules.
Tax costs associated with repatriation
Repatriation of retained earnings (and capital) may result in tax being payable in either the jurisdiction from
which the repatriation occurs or Australia on receipt of the relevant amounts. This cost would reduce the
amount actually repatriated.
Intra-group exposure limits
Exposures to related entities are managed within the prudential limits prescribed by APRA in APS222
Associations with Related Entities
1
. Westpac has an internal limit structure and approval process governing
credit exposures to related entities. This limit structure and approval process, combined with APRA’s
prudential limits, is designed to reduce the potential for unacceptable contagion risk.
Prudential regulation of subsidiary entities
Certain subsidiary banking, insurance and trustee entities are subject to local prudential regulation in their
own right, including capital adequacy requirements and investment or intra-group exposure limits. Westpac
seeks to ensure that its subsidiary entities are adequately capitalised and adhere to regulatory requirements
at all times. There are no capital deficiencies in subsidiary entities excluded from the regulatory consolidation
at Level 2.
On 23 March 2021, the RBNZ issued two notices to WNZL under section 95 of the Reserve Bank of New
Zealand Act 1989 requiring WNZL to supply two external reviews to the RBNZ. The first review is due to the
RBNZ by 29 April 2022 and relates to the effectiveness of WNZL’s actions to improve liquidity risk
management and the associated risk culture, following previously identified breaches of the RBNZ’s Liquidity
Policy (BS13) and non-compliance identified through the RBNZ’s liquidity thematic review.
From 31 March 2021, the RBNZ amended WNZL’s conditions of registration, requiring WNZL to apply an
overlay to liquidity mismatch ratios
2
to discount the value of its liquid assets by approximately 14% which at
31 December 2021 was NZ$2.8 billion
3
. This overlay will apply until the RBNZ is satisfied that:
• the RBNZ’s concerns regarding liquidity risk controls have been resolved; and
• sufficient progress has been made to address risk culture issues in WNZL’s Treasury and Market and
Liquidity Risk functions.
The second review was completed in November 2021 and relates to the effectiveness of WNZL’s risk
governance, with a focus on the role played by the WNZL Board. The review identified deficiencies in WNZL’s
risk governance practices and operations which have impacted the WNZL Board’s effectiveness in governing
risk. These deficiencies are likely to have contributed to issues of non-compliance with some of WNZL’s
conditions of registration, and technology resiliency issues. WNZL has accepted the findings of the review
and is committed to implementing the recommendations identified. WNZL has a programme of work
underway to address the issues raised, which is being overseen by WNZL’s directors.

1
For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent
‘related entities’. Prudential and internal limits apply to intra-group exposures between the ELE and related entities, both on an
individual and aggregate basis.
2
As defined in RBNZ Liquidity Policy (BS13).
3
For the December 2021 1 Month Mismatch Ratio, based on primary and secondary liquid assets.

Pillar 3 report
Capital overview


8 | Westpac Group December 2021 Pillar 3 Report
Capital management strategy
Westpac’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI.
Westpac evaluates its approach to capital management through an Internal Capital Adequacy Assessment
Process (ICAAP), the key features of which include:
• the development of a capital management strategy, including consideration of regulatory minimums,
capital buffers and contingency plans. The current regulatory capital minimums together with the capital
conservation buffer (CCB) are the Total CET1 Requirement. The Total CET1 Requirement for Westpac
is at least 8.0%, based on an industry minimum CET1 requirement of 4.5% plus a capital buffer of at least
3.5% applicable to D-SIBs
12
;
• 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 as well as equity and
debt investors.
On 29 November 2021 APRA announced their final revised standards for capital which indicated that the
Total CET1 Requirement for D-SIBs will be 10.25% from 1 January 2023. This requirement will include a CCB
of 3.75% and a base level for the countercyclical capital buffer of 1.0%. Work on understanding the impacts
of other changes to the standards is ongoing and Westpac intends to provide an update on its operating
range for the CET1 capital ratio with its 1H22 results on 9 May 2022.































1
Noting that APRA may apply higher CET1 requirements for an individual ADI.
2
If an ADI’s CET1 ratio falls below the Total CET1 Requirement (at least 8%), they face restrictions on the distribution of earnings,
such as dividends, distribution payments on AT1 capital instruments and discretionary staff bonuses.

Pillar 3 report
Capital overview


Westpac Group December 2021 Pillar 3 Report | 9
Westpac’s capital adequacy ratios


Westpac New Zealand Limited’s capital adequacy ratios



%31 December 202130 September 202131 December 2020
The Westpac Group at Level 2
Common equity Tier 1 capital ratio12.2 12.3 11.9
Additional Tier 1 capital2.2 2.3 2.3
Tier 1 capital ratio14.4 14.6 14.2
Tier 2 capital4.8 4.2 3.7
Total regulatory capital ratio19.2 18.9 17.9
The Westpac Group at Level 1
Common equity Tier 1 capital ratio12.4 12.6 12.1
Additional Tier 1 capital2.2 2.3 2.3
Tier 1 capital ratio14.6 14.9 14.4
Tier 2 capital4.9 4.3 3.8
Total regulatory capital ratio19.5 19.2 18.2
%31 December 202130 September 202131 December 2020
Common equity Tier 1 capital ratio14.2 13.8 12.9
Additional Tier 1 capital2.8 2.8 2.7
Tier 1 capital ratio17.0 16.6 15.6
Tier 2 capital2.0 2.0 2.0
Total regulatory capital ratio19.0 18.6 17.6

Pillar 3 report
Capital overview


10 | Westpac Group December 2021 Pillar 3 Report
Capital requirements
This table shows risk weighted assets and associated capital requirements
1
for each risk type included in the
regulatory assessment of Westpac’s capital adequacy. More detailed disclosures on the prudential
assessment of capital requirements are presented in the following sections of this report.
234





1
Total capital required is calculated as 8% of total risk weighted assets.
2
Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories.
3
Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation
Adjustment (CVA) risk.
4
Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.
31 December 2021IRBStandardisedTotal Risk Total Capital
$mApproach
Approach
2
Weighted Assets
Required
1
Credit risk
Corporate71,124 882 72,006 5,760
Business lending32,570 698 33,268 2,661
Sovereign2,411 1,382 3,793 303
Bank4,606 80 4,686 375
Residential mortgages146,377 3,500 149,877 11,990
Australian credit cards4,011 - 4,011 321
Other retail7,917 765 8,682 695
Small business14,720 - 14,720 1,178
Specialised lending56,903 376 57,279 4,582
Securitisation5,968 - 5,968 477
Mark-to-market related credit risk
3
- 5,483 5,483 439
Total346,607 13,166 359,773 28,782
Market risk9,202 736
Operational risk56,214 4,497
Interest rate risk in the banking book12,190 975
Other assets
4
5,032
403
Total442,411 35,393
30 September 2021IRBStandardisedTotal Risk Total Capital
$mApproach
Approach
2
Weighted Assets
Required
1
Credit risk
Corporate68,715 870 69,585 5,567
Business lending32,559 699 33,258 2,661
Sovereign2,508 1,312 3,820 306
Bank5,104 135 5,239 419
Residential mortgages145,534 3,731 149,265 11,941
Australian credit cards4,001 - 4,001 320
Other retail8,272 763 9,035 723
Small business15,187 - 15,187 1,215
Specialised lending55,372 374 55,746 4,460
Securitisation5,881 - 5,881 470
Mark-to-market related credit risk
3
- 6,278 6,278 502
Total343,133 14,162 357,295 28,584
Market risk6,662 533
Operational risk55,875 4,470
Interest rate risk in the banking book11,446 916
Other assets
4
5,372
430
Total436,650 34,933

Pillar 3 report
Capital overview


Westpac Group December 2021 Pillar 3 Report | 11
1234




1
Total capital required is calculated as 8% of total risk weighted assets.
2
Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories.
3
Mark-to-market related credit risk is measured under the standardised approach. It is also known as CVA risk.
4
Other assets include cash items, unsettled transactions, fixed assets, and other non-interest earning assets.
31 December 2020IRBStandardisedTotal Risk Total Capital
$mApproach
Approach
2
Weighted Assets
Required
1
Credit risk
Corporate69,529 906
70,435
5,635
Business lending36,141 809
36,950
2,956
Sovereign2,409 1,010
3,419
273
Bank5,011 125
5,136
411
Residential mortgages128,925 4,299
133,224
10,658
Australian credit cards4,365 -
4,365
349
Other retail9,769 762
10,531
842
Small business16,312 -
16,312
1,305
Specialised lending56,878 404
57,282
4,583
Securitisation5,291 -
5,291
423
Mark-to-market related credit risk
3
- 6,899 6,899 552
Total334,630 15,214 349,844 27,987
Market risk9,607 769
Operational risk54,090 4,327
Interest rate risk in the banking book10,309 825
Other assets
4
6,382
511
Total430,232 34,419

Pillar 3 report
Leverage ratio disclosure


12 | Westpac Group December 2021 Pillar 3 Report
Leverage ratio
The following table summarises Westpac’s leverage ratio. This has been determined using APRA’s definition
of the leverage ratio as specified in APS110 Capital Adequacy.
$ billion31 December 202130 September 202130 June 202131 March 2021
Tier 1 Capital63.6 64.0 62.2 62.4
Total Exposures1,096.7 1,068.3 1,049.9 995.8
Leverage ratio5.8%6.0%5.9%6.3%

Pillar 3 report
Credit risk exposures


Westpac Group December 2021 Pillar 3 Report | 13
Summary credit risk disclosure123


1
Westpac continues to apply a floor of 25% to its residential mortgage portfolio risk weight.
2
Includes regulatory expected losses for defaulted and non-defaulted exposures.
3
Includes mark-to-market related credit risk.

Regulatory
Expected
Specific
Actual
Risk
Regulatory
Loss for
Provisions
Losses for
31 December 2021
Exposure
Weighted
Expected
non-defaulted
Impaired
for Impaired
the 3 months
$m
at Default
Assets
1
Loss
2
exposures
Loans
Loans
ended
Corporate
131,007



71,124



851



350



302



218



276



Business lending
53,029



32,570



631



358



303



153



22



Sovereign
201,483



2,411



2



2



-
-
-
Bank
20,580



4,606



6



6



-
-
-
Residential mortgages
585,497



146,377



1,663



1,148



254



73



10



Australian credit cards
15,407



4,011



151



121



56



30



27



Other retail
11,043



7,917



355



238



220



118



18



Small business
30,231



14,720



494



318



370



171



6



Specialised lending
68,749



56,903



816



539



87



18



-
Securitisation
31,185



5,968



-
-
-
-
-
Standardised
3
15,972



13,166



-
-
95



40



-
Total
1,164,183



359,773



4,969



3,080



1,687



821



359



Regulatory
Expected
Specific
Actual
Risk
Regulatory
Loss for
Provisions
Losses for
30 September 2021
Exposure
Weighted
Expected
non-defaulted
Impaired
for Impaired
the 12 months
$m
at Default
Assets
1
Loss
2
exposures
Loans
Loans
ended
Corporate
130,245



68,715



925



382



602



498



67



Business lending
52,420



32,559



658



364



326



160



91



Sovereign
176,238



2,508



2



2



-
-
-
Bank
21,283



5,104



6



6



-
-
-
Residential mortgages
582,136



145,534



1,637



1,055



271



76



71



Australian credit cards
15,394



4,001



167



131



65



37



136



Other retail
11,518



8,272



394



258



245



136



146



Small business
30,877



15,187



544



348



428



196



82



Specialised lending
66,732



55,372



835



535



110



23



1



Securitisation
30,561



5,881



-
-
-
-
-
Standardised
3
16,679



14,162



-
-
95



40



-
Total
1,134,083



357,295



5,168



3,081



2,142



1,166



594



Regulatory
Expected
Specific
Actual
Risk
Regulatory
Loss for
Provisions
Losses for
31 December 2020
Exposure
Weighted
Expected
non-defaulted
Impaired
for Impaired
the 3 months
$m
at Default
Assets
Loss
2
exposures
Loans
Loans
ended
Corporate
123,745



69,529



717



477



472



224



14



Business lending
53,765



36,141



793



510



396



211



8



Sovereign
137,220



2,409



2



2



-
-
-
Bank
20,990



5,011



7



7



-
-
-
Residential mortgages
556,263



128,925



1,883



997



281



80



31



Australian credit cards
16,790



4,365



204



162



74



43



43



Other retail
13,130



9,769



499



327



308



174



35



Small business
32,530



16,312



638



368



627



270



8



Specialised lending
65,532



56,878



801



650



59



18



(1)


Securitisation
26,841



5,291



-
-
-
-
-
Standardised
3
16,330



15,214



-
-
51



18



-
Total
1,063,136



349,844



5,544



3,500



2,268



1,038



138

Pillar 3 report
Credit risk exposures


14 | Westpac Group December 2021 Pillar 3 Report
Exposure at Default by major type
123





1
Average is based on exposures as at 31 December 2021 and 30 September 2021.
2
The EAD associated with securitisations is for the banking book only.
3
Average is based on exposures as at 30 September 2021, 30 June 2021, 31 March 2021, 31 December 2020, and 30 September
2020.
4
Average is based on exposures as at 31 December 2020 and 30 September 2020.
31 December 2021
On balance
Total ExposureAverage
$msheet Non-market relatedMarket relatedat Default
3 months ended
1
Corporate57,899 60,629 12,479 131,007 130,625
Business lending38,535 14,494 -53,029 52,725
Sovereign165,638 1,759 34,086 201,483 188,860
Bank12,248 1,568 6,764 20,580 20,932
Residential mortgages506,258 79,239 -585,497 583,816
Australian credit cards6,245 9,162 -15,407 15,401
Other retail8,117 2,926 -11,043 11,281
Small business23,159 7,072 -30,231 30,554
Specialised lending54,766 12,787 1,196 68,749 67,740
Securitisation
2
23,303 7,792 90 31,185 30,873
Standardised11,742 1,023 3,207 15,972 16,326
Total907,910 198,451 57,822 1,164,183 1,149,133
30 September 2021On balanceTotal ExposureAverage
$msheet Non-market relatedMarket relatedat Default
12 months ended
3
Corporate56,576 59,238 14,431 130,245 127,203
Business lending39,080 13,340 -52,420 53,340
Sovereign141,437 1,524 33,277 176,238 150,012
Bank12,327 1,817 7,139 21,283 22,140
Residential mortgages503,883 78,253 -582,136 565,334
Australian credit cards5,872 9,522 -15,394 16,327
Other retail8,445 3,073 -11,518 12,566
Small business23,804 7,073 -30,877 31,953
Specialised lending53,084 12,234 1,414 66,732 65,723
Securitisation
2
23,428 7,041 92 30,561 28,432
Standardised12,168 1,031 3,480 16,679 16,252
Total880,104 194,146 59,833 1,134,083 1,089,282
31 December 2020On balanceTotal ExposureAverage
$msheet Non-market relatedMarket relatedat Default
3 months ended
4
Corporate53,908 58,175 11,662 123,745 126,867
Business lending39,878 13,887 -53,765 54,154
Sovereign110,646 1,632 24,942 137,220 134,539
Bank11,790 1,925 7,275 20,990 22,117
Residential mortgages482,838 73,425 -556,263 553,198
Australian credit cards6,799 9,991 -16,790 16,867
Other retail9,939 3,191 -13,130 13,301
Small business25,145 7,385 -32,530 32,644
Specialised lending53,313 10,182 2,037 65,532 65,512
Securitisation
2
20,544 6,174 123 26,841 26,829
Standardised12,558 1,098 2,674 16,330 16,662
Total827,358 187,065 48,713 1,063,136 1,062,690
Off-balance sheet
Off-balance sheet
Off-balance sheet

Pillar 3 report
Credit risk exposures


Westpac Group December 2021 Pillar 3 Report | 15
Loan impairment provisions
APS220 Credit Quality requires that Westpac report specific provisions and a General Reserve for Credit
Loss (GRCL). All Individually Assessed Provisions (IAP) raised under Australian Accounting Standards (AAS)
are classified as specific provisions. All Collectively Assessed Provisions (CAP) raised under AAS are either
classified into specific provisions or a GRCL.
1



1
Provisions classified according to APRA’s letter dated 4 July 2017 “Provisions for regulatory purposes and AASB 9 financial
instruments”.
31 December 2021Total Regulatory
$mIAPsCAPs Provisions
Specific Provisions
for impaired loans528 293 821
for defaulted but not impaired loansNA711 711
for Stage 2NA1,780 1,780
Total Specific Provision
1
528 2,784 3,312
General Reserve for Credit Loss
1
NA1,454 1,454
Total provisions for expected credit losses528 4,238 4,766
30 September 2021Total Regulatory
$mIAPsCAPs Provisions
Specific Provisions
for impaired loans832 334 1,166
for defaulted but not impaired loansNA806 806
for Stage 2NA1,877 1,877
Total Specific Provision
1
832 3,017 3,849
General Reserve for Credit Loss
1
NA1,158 1,158
Total provisions for expected credit losses832 4,175 5,007
31 December 2020Total Regulatory
$mIAPsCAPs Provisions
Specific Provisions
for impaired loans594 444 1,038
for defaulted but not impaired loansNA1,004 1,004
for Stage 2NA1,972 1,972
Total Specific Provision
1
594 3,420 4,014
General Reserve for Credit Loss
1
NA1,516 1,516
Total provisions for expected credit losses594 4,936 5,530
AAS Provisions
AAS Provisions
AAS Provisions

Pillar 3 report
Credit risk exposures


16 | Westpac Group December 2021 Pillar 3 Report
Impaired and past due loans
The following tables disclose the crystallisation of credit risk as impairment and loss. Analysis of exposures
defaulted not impaired, impaired loans, related provisions and actual losses is broken down by concentrations
reflecting Westpac’s asset categories.
1 2



1
Includes items past 90 days not impaired.

SpecificSpecific Actual
31 December 2021DefaultedImpairedProvisions forProvisions to Losses for the
$m
not impaired
1
Loans Impaired LoansImpaired Loans3 months ended
Corporate139 302 218 72%276
Business lending1,016 303 153 50%22
Sovereign-----
Bank-----
Residential mortgages4,497 254 73 29%10
Australian credit cards-56 30 54%27
Other retail-220 118 54%18
Small business527 370 171 46%6
Specialised lending436 87 18 21%-
Securitisation-----
Standardised83 95 40 42%-
Total6,698 1,687 821 49%359
SpecificSpecific Actual
30 September 2021DefaultedImpairedProvisions forProvisions to Losses for the
$m
not impaired
1
Loans Impaired LoansImpaired Loans12 months ended
Corporate400 602 498 83%67
Business lending1,106 326 160 49%91
Sovereign-----
Bank-----
Residential mortgages5,053 271 76 28%71
Australian credit cards-65 37 57%136
Other retail-245 136 56%146
Small business518 428 196 46%82
Specialised lending466 110 23 21%1
Securitisation-----
Standardised85 95 40 42%-
Total7,628 2,142 1,166 54%594
SpecificSpecific Actual
31 December 2020DefaultedImpairedProvisions forProvisions to Losses for the
$m
not impaired
1
Loans Impaired LoansImpaired Loans3 months ended
Corporate213 472 224 47%14
Business lending680 396 211 53%8
Sovereign-----
Bank-----
Residential mortgages6,309 281 80 28%31
Australian credit cards-74 43 58%43
Other retail-308 174 56%35
Small business444 627 270 43%8
Specialised lending212 59 18 31%(1)
Securitisation-----
Standardised85 51 18 35%-
Total7,943 2,268 1,038 46%138

Pillar 3 report
Securitisation


Westpac Group December 2021 Pillar 3 Report | 17
Banking book summary of securitisation activity by asset type


For the 3 months ended
31 December 2021AmountRecognised gain or
$msecuritisedloss on sale
Residential mortgages11,800 -
Credit cards--
Auto and equipment finance--
Business lending--
Investments in ABS--
Other--
Total11,800 -
For the 12 months ended
30 September 2021AmountRecognised gain or
$msecuritisedloss on sale
Residential mortgages35,124 -
Credit cards--
Auto and equipment finance325 -
Business lending--
Investments in ABS--
Other--
Total35,449 -
For the 3 months ended
31 December 2020AmountRecognised gain or
$msecuritisedloss on sale
Residential mortgages4,966 -
Credit cards--
Auto and equipment finance325 -
Business lending--
Investments in ABS--
Other--
Total5,291 -

Pillar 3 report
Securitisation


18 | Westpac Group December 2021 Pillar 3 Report
Banking book summary of on and off-balance sheet securitisation by exposure type




31 December 2021Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-7,595 38 7,633
Liquidity facilities--312 312
Funding facilities3,331 -1,218 4,550
Underwriting facilities----
Lending facilities956 -
288
1,244
Warehouse facilities11,420 -6,026 17,446
Total15,708 7,595 7,882 31,185
30 September 2021Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-8,025 38 8,063
Liquidity facilities--251 251
Funding facilities3,870 -1,466 5,336
Underwriting facilities----
Lending facilities791 -
328
1,119
Warehouse facilities10,742 -5,050 15,793
Total15,404 8,025 7,133 30,561
31 December 2020Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-7,252 32 7,284
Liquidity facilities--279 279
Funding facilities2,255 -1,281 3,536
Underwriting facilities----
Lending facilities710 -
530
1,240
Warehouse facilities10,326 -4,176 14,502
Total13,291 7,252 6,298 26,841
On balance sheet
On balance sheet
On balance sheet

Pillar 3 report
Securitisation


Westpac Group December 2021 Pillar 3 Report | 19
Trading book summary of on and off-balance sheet securitisation by exposure type
1






1
EAD associated with trading book securitisation is not included in EAD by major type on page 13. Trading book securitisation
exposure is captured and risk weighted under APS116 Capital Adequacy: Market Risk.
31 December 2021Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-218 -218
Liquidity facilities----
Funding facilities----
Underwriting facilities----
Lending facilities----
Warehouse facilities----
Credit enhancements----
Basis swaps--79 79
Other derivatives--11 11
Total-218 90 308
30 September 2021Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-91 -91
Liquidity facilities----
Funding facilities----
Underwriting facilities----
Lending facilities----
Warehouse facilities----
Credit enhancements----
Basis swaps--83 83
Other derivatives--9 9
Total-91 92 184
31 December 2020Off-balanceTotal Exposure
$mSecuritisation retainedSecuritisation purchasedsheetat Default
Securities-11 -11
Liquidity facilities----
Funding facilities----
Underwriting facilities----
Lending facilities----
Warehouse facilities----
Credit enhancements----
Basis swaps--112 112
Other derivatives--11 11
Total-11 123 134
On balance sheet
On balance sheet
On balance sheet

Pillar 3 report
Liquidity Coverage Ratio


20 | Westpac Group December 2021 Pillar 3 Report
Liquidity Coverage Ratio (LCR)
Westpac’s average LCR for the quarter was 142% (30 September 2021: 129%).
Liquid assets included in the LCR comprise High Quality Liquid Assets (HQLA), the Committed Liquidity
Facility (CLF) offered by the Reserve Bank of Australia and additional qualifying Reserve Bank of New
Zealand securities. In September 2021, APRA announced it expects ADIs subject to the LCR to reduce their
CLF usage to zero by the end of calendar 2022, subject to financial market conditions. The facility reduction
will be phased on a quarterly basis throughout 2022, with the first reduction having occurred on 1 January
2022. Westpac expects to replace its CLF allocation with additional HQLA.
Westpac’s portfolio of HQLA averaged $159.7 billion over the quarter
1
.
Funding is sourced from retail, small business, corporate and institutional customer deposits and wholesale
funding. Westpac seeks to minimise the outflows associated with this funding by targeting customer deposits
with lower LCR outflow rates and actively manages the maturity profile of its wholesale funding portfolio.
Westpac maintains a buffer over the regulatory minimum of 100%.
Effective 1 January 2021, the Group is required by APRA to increase the value of its net cash outflows by
10% for the purpose of calculating LCR. The overlay to the Group’s net cash outflows has been required by
APRA in response to breaches of liquidity requirements. A program is underway to address APRA’s
requirements to remove the overlay.

1
Calculated as a simple average of the daily observations over the quarter.
Total unweighted
value (average)
1
Total weighted
value (average)
1
Total unweighted
value (average)
1
Total weighted
value (average)
1
Liquid assets, of which:
1High-quality liquid assets (HQLA)159,682 132,738
2Alternative liquid assets (ALA)37,000 33,053
3Reserve Bank of New Zealand (RBNZ) securities6,546 7,734

Cash Outflows
4Retail deposits and deposits from small business
customers, of which:
315,576 26,998 304,480 26,031
5Stable deposits156,147 7,807 150,027 7,501
6Less stable deposits159,429 19,191 154,453 18,530
7Unsecured wholesale funding, of which:176,557 79,153 165,831 73,600
8Operational deposits (all counterparties) and
deposits in networks for cooperative banks
83,423 20,762 81,617 20,315
9Non-operational deposits (all counterparties)81,694 46,951 74,211 43,282
10Unsecured debt11,440 11,440 10,003 10,003
11Secured wholesale funding---
12Additional requirements, of which:208,701 27,381 208,752 26,781
13Outflows related to derivatives exposures and other
collateral requirements
10,099 10,099 9,825 9,825
14Outflows related to loss of funding on debt products634 634 539 539
15Credit and liquidity facilities197,968 16,648 198,388 16,417
16Other contractual funding obligations4,418 4,418 2,033 2,033
17Other contingent funding obligations41,439 3,348 44,089 3,633
18Total cash outflows141,298 132,078

Cash inflows
19Secured lending (e.g. reverse repos)3,594 -2,480 -
20Inflows from fully performing exposures9,073 5,314 9,787 5,809
21Other cash inflows5,561 5,561 4,380 4,380
22Total cash inflows18,228 10,875 16,647 10,189

23Total liquid assets203,228 173,525
24Total net cash outflows143,465 134,078
24.1 Net cash outflows overlay13,042 12,189
25Liquidity Coverage Ratio (%)142%129%
Number of data points used6467
$m
30 September 202131 December 2021

Pillar 3 report
Appendix I - APS330 quantitative requirements


Westpac Group December 2021 Pillar 3 Report | 21
The following table cross-references the quantitative disclosure requirements outlined in Attachment C of
APS330 to the quantitative disclosures made in this report.
APS330 reference
• Westpac disclosure
Page
General Requirements
Paragraph 49 Summary leverage ratio 12

Attachment C

Table 3:
Capital Adequacy
(a) to (e)
(f)
Capital requirements
Westpac’s capital adequacy ratios
Capital adequacy ratios of major subsidiary banks
10
9
9

Table 4:
Credit Risk - general
disclosures
(a)
(b)
(c)
Exposure at Default by major type
Impaired and past due loans
General reserve for credit loss

14
16
15

Table 5:
Securitisation exposures
(a)

(b)

Banking Book summary of securitisation activity by asset type
Banking Book summary of on and off-balance sheet
securitisation by exposure type
Trading Book summary of on and off-balance sheet
securitisation by exposure type

17

18

19

Attachment F

Table 20: Liquidity
Coverage Ratio disclosure
template
Liquidity Coverage Ratio disclosure 20




Exchange rates
The following exchange rates were used in this report, and reflect spot rates for the period end.

$31 December 202130 September 202131 December 2020
USD0.7261 0.7205 0.7705
GBP0.5377 0.5359 0.5656
NZD1.0627 1.0477 1.0665
EUR0.6411 0.6211 0.6267

Pillar 3 report
Disclosure regarding forward-looking statements


22 | Westpac Group December 2021 Pillar 3 Report
The information contained in this report contains statements that constitute “forward-looking statements” within the
meaning of section 21E of the U.S. Securities Exchange Act of 1934. Forward-looking statements are statements
about matters that are not historical facts. Forward-looking statements appear in a number of places in this report
and include statements regarding Westpac’s intent, belief or current expectations with respect to its business and
operations, macro and micro economic and market conditions, results of operations and financial condition.
Words such as ‘will’, ‘may’, ‘expect’, ‘indicative’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘aim’,
‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’ or other similar words are used to identify
forward-looking statements. These forward-looking statements reflect Westpac’s current views with respect to future
events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond
Westpac’s control and have been made based upon management’s expectations and beliefs concerning future
developments and their potential effect upon Westpac. There can be no assurance that future developments will be
in accordance with Westpac’s expectations or that the effect of future developments on Westpac will be those
anticipated. Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results could differ materially from the expectations described in this report. Factors that may impact
on the forward-looking statements made include, but are not limited to, those described in the section entitled ‘Risk
factors’ in Westpac’s 2021 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission,
as well as the ongoing impact of COVID-19. When relying on forward-looking statements to make decisions with
respect to Westpac, investors and others should carefully consider such factors and other uncertainties and events.
Westpac is under no obligation, and does not intend, to update any forward-looking statements contained in this
report, whether as a result of new information, future events or otherwise, after the date of this report.