ANZ Bank New Zealand Disclosure Statement

Australia and New Zealand Banking Group Limited ABN 11 005 357 522
ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008

11 November 2022

Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000





ANZ Bank New Zealand Limited
Annual Report and Registered Bank Disclosure Statement

Australia and New Zealand Banking Group Limited (ANZ) today released its ANZ Bank
New Zealand Limited Annual Report and Registered Bank Disclosure Statement for the
year ended 30 September 2022.

It has been approved for distribution by ANZ’s Continuous Disclosure Committee.

Yours faithfully




Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited

ANZ BANK NEW ZEALAND LIMITED
ANNUAL REPORT AND REGISTERED BANK DISCLOSURE STATEMENT




































FOR THE YEAR ENDED 30 SEPTEMBER 2022
NUMBER 98 | ISSUED NOVEMBER 2022

2
CONTENTS

Annual Report and Glossary of terms 2





DISCLOSURE STATEMENT

Financial Statements 3
Consolidated financial statements 4
Notes to the financial statements 8


Registered Bank Disclosures 68

Directors’ Statement 104

Independent Auditor’s Report
105




ANNUAL REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2022

Pursuant to section 211(3) of the Companies Act 1993, the shareholder of the Bank has agreed that the Annual Report of the Banking
Group need not comply with any of the paragraphs (a), and (e) to (j) of subsection (1) and subsection (2) of section 211.
Accordingly, there is no information to be provided in this Annual Report other than the financial statements for the year ended 30
September 2022 and the audit report on those financial statements.
For and on behalf of the Board of Directors:




Rt Hon Sir John Key, GNZM AC Antonia Watson
Chair Executive Director
11 November 2022 11 November 2022



GLOSSARY OF TERMS

In this Registered Bank Disclosure Statement (Disclosure Statement) unless the context otherwise requires:
Bank means ANZ Bank New Zealand Limited.
Banking Group, We or Our means the Bank and all its controlled entities.
Immediate Parent Company means ANZ Holdings (New Zealand) Limited.
Ultimate Parent Bank means Australia and New Zealand Banking Group Limited.
Overseas Banking Group means the worldwide operations of Australia and New Zealand Banking Group Limited including its controlled
entities.
New Zealand business means all business, operations, or undertakings conducted in or from New Zealand identified and treated as if it
were conducted by a company formed and registered in New Zealand.
NZ Branch means the New Zealand business of the Ultimate Parent Bank.
ANZ New Zealand means the New Zealand business of the Overseas Banking Group.
Registered Office is Ground Floor, ANZ Centre, 23-29 Albert Street, Auckland, New Zealand, which is also the Banking Group’s address for
service.
RBNZ means the Reserve Bank of New Zealand.
APRA means the Australian Prudential Regulation Authority.
the Order means the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.
Any term or expression which is defined in, or in the manner prescribed by, the Order shall have the meaning given in or prescribed by
the Order.

3
FINANCIAL
STATEMENTS
Financial statements
Income statement 4
Statement of comprehensive income
4
Balance sheet 5
Cash flow statement
6
Statement of changes in equity 7
Notes to the financial statements
Basis of preparation

Non-financial assets
1. About our financial statements 8 19. Goodwill and other intangible assets 53
Financial performance

Non-financial liabilities
2. Operating income 11 20. Other provisions 56

3. Operating expenses 13
4. Income tax 14
Equity
5. Dividends 15 21. Shareholders' equity 57

6. Segment reporting 15 22. Capital management 59
Financial assets

Consolidation and presentation
7. Cash and cash equivalents 17 23. Controlled entities 60
8. Trading securities 18 24. Structured entities 61
9. Derivative financial instruments 19 25. Transfers of financial assets 63

10. Investment securities 24
11. Net loans and advances 25
Other disclosures
12. Allowance for expected credit losses 26 26. Related party disclosures 63
27. Commitments and contingent liabilities 65
Financial liabilities
28. Auditor fees 67
13. Deposits and other borrowings 32 29. Potential new ultimate holding company 67
14. Debt issuances 33

Financial instrument disclosures
15. Financial risk management 35

16. Fair value of financial assets and financial liabilities 48

17. Assets charged as security for liabilities 51

and collateral accepted as security for assets
18. Offsetting 52

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 67 form an integral part of these financial statements
4
INCOME STATEMENT
2022 2021
For the year ended 30 September Note NZ$m NZ$m
Interest income
5,811
4,600
Interest expense
(2,035)
(1,176)
Net interest income 2
3,776 3,424
Other operating income 2
1,087
765
Operating income
4,863
4,189
Operating expenses 3 (1,653) (1,621)
Profit before credit impairment and income tax
3,210
2,568
Credit impairment release / (charge) 12
(39)
114
Profit before income tax
3,171
2,682
Income tax expense 4
(882)
(743)
Profit for the year
2,289 1,939
STATEMENT OF COMPREHENSIVE INCOME
2022 2021
For the year ended 30 September NZ$m NZ$m
Profit for the year
2,289
1,939
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gain on defined benefit schemes 10 56
Items that may be reclassified subsequently to profit or loss
Reserve movements:
Unrealised losses recognised directly in equity (3)(75)
Realised losses / (gains) transferred to the income statement
(28)
8
Income tax attributable to the above items 6
3
Other comprehensive income after tax
(15)
(8)
Total comprehensive income for the year 2,274
1,931

FINANCIAL STATEMENTS




The notes appearing on pages 8 to 67 form an integral part of these financial statements

5
BALANCE SHEET


2022 2021
As at 30 September Note NZ$m NZ$m
Assets



Cash and cash equivalents 7 12,575 7,844
Settlement balances receivable
785
237
Collateral paid 1,672 537
Trading securities 8
7,228
9,585
Derivative financial instruments 9
15,481
9,304
Investment securities 10 11,357 11,926
Net loans and advances 11
147,067
140,756
Deferred tax assets 4
362
390
Goodwill and other intangible assets 19 3,099 3,091
Premises and equipment
450
509
Other assets 1,058 590
Total assets

201,134
184,769
Liabilities



Settlement balances payable 4,933 2,704
Collateral received
1,962
738
Deposits and other borrowings 13
139,642
133,139
Derivative financial instruments 9 13,785 7,727
Current tax liabilities
310
170
Payables and other liabilities 1,345 1,464
Employee entitlements
128
138
Other provisions 20
222
295
Debt issuances 14 21,023 21,502
Total liabilities

183,350
167,877
Net assets

17,784
16,892
Shareholders' equity



Share capital 21
12,438
11,888
Reserves 21 48 70
Retained earnings 21
5,298
4,934
Total shareholders' equity
21
17,784
16,892


For and on behalf of the Board of Directors:






Rt Hon Sir John Key, GNZM AC Antonia Watson
Chair Executive Director
11 November 2022 11 November 2022

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT
FINANCIAL STATEMENTS
The notes appearing on pages 8 to 67 form an integral part of these financial statements
6
CASH FLOW STATEMENT
2022 2021
For the year ended 30 September NZ$m NZ$m
Profit after income tax
2,289 1,939
Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortisation
125
124
Loss on sale and impairment of premises and equipment
4
7
Net derivatives/foreign exchange adjustment
633 (940)
Other non-cash movements
(42)
151
Net (increase)/decrease in operating assets:
Collateral paid (1,135) 857
Trading securities
2,357
3,212
Net loans and advances
(6,311)
(8,058)
Other assets
(988)113
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings (excluding items included in financing activities)
5,003
6,778
Settlement balances payable
2,229 (246)
Collateral received
1,224
(537)
Other liabilities
(29)
205
Total adjustments
3,070 1,666
Net cash flows from operating activities
1
5,359
3,605
Cash flows from investing activities
Investment securities:
Purchases
(3,898)
(5,528)
Proceeds from sale or maturity
3,839 2,833
Other assets
(65)
(39)
Net cash flows from investing activities
(124)
(2,734)
Cash flows from financing activities
Deposits and other borrowings
2

1,500
1,300
Debt issuances:
3

Issue proceeds 3,452 3,278
Redemptions
(4,028)
(4,899)
Proceeds from issue of preference shares
542 -
Repayment of lease liabilities
(46)
(46)
Dividends paid
(1,924)
(908)
Net cash flows from financing activities
(504)(1,275)
Net change in cash and cash equivalents
4,731
(404)
Cash and cash equivalents at beginning of year
7,844
8,248
Cash and cash equivalents at end of year
12,575
7,844
1 Net cash provided by operating activities includes income taxes paid of NZ$708 million (2021: NZ$884 million).
2 Movement in deposits and other borrowings includes repurchase transactions entered into with RBNZ under the Funding for Lending Programme of NZ$1,500 million (2021: NZ$1,000
million under the Funding for Lending Programme and NZ$300 million under the Term Lending Facility).
3 Movement in debt issuances (Note 14 debt issuances) also includes a NZ$1,631 million increase (2021: NZ$958 million decrease) from the effect of foreign exchange rates, a NZ$1,550
million decrease (2021: NZ$398 million decrease) from changes in fair value hedging instruments and a NZ$16 million increase (2021: NZ$40 million increase) from other changes.

FINANCIAL STATEMENTS
The notes appearing on pages 8 to 67 form an integral part of these financial statements
7
STATEMENT OF CHANGES IN EQUITY
Share
capital Reserves
Retained
earnings
Total
shareholders'
equity
NZ$m NZ$m NZ$m NZ$m
As at 1 October 2020
11,888 118 3,863 15,869
Profit for the year - - 1,939 1,939
Other comprehensive income for the year
- (48) 40 (8)
Total comprehensive income for the year
- (48) 1,979 1,931
Transactions with equity holders in their capacity as equity owners:
Ordinary dividends paid - - (900) (900)
Preference dividends paid
- - (8) (8)
As at 30 September 2021
11,888 70 4,934 16,892
Profit for the year
- - 2,289 2,289
Other comprehensive income for the year
-(22)7 (15)
Total comprehensive income for the year -(22)2,296 2,274
Transactions with equity holders in their capacity as equity owners:
Ordinary dividends paid
- - (1,915) (1,915)
Preference shares issued (net of issue costs)
550 -(8)542
Preference dividends paid - - (9)(9)
As at 30 September 2022 12,438 48 5,298 17,784

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


8
1. ABOUT OUR FINANCIAL STATEMENTS
These are the financial statements for ANZ Bank New Zealand Limited (the Bank) and its controlled entities (together, the ‘Banking Group’) for the year
ended 30 September 2022. The Bank is incorporated and domiciled in New Zealand. The address of the Bank’s registered office and its principal place
of business is ANZ Centre, 23-29 Albert Street, Auckland, New Zealand.
On 11 November 2022, the Directors resolved to authorise the issue of these financial statements.
Information in the financial statements is included only to the extent we consider it material and relevant to the understanding of the financial
statements. A disclosure is considered material and relevant if, for example:
• the amount is significant in size (quantitative factor);
• the in formation is significant by nature (qualitative factor);
• the user cannot understand the Banking Group’s results without the specific disclosure (qualitative factor);
• the information is critical to a user’s understanding of the impact of significant changes in the Banking Group’s business during the period – for
example: business acquisitions or disposals (qualitative factor);
• the information relates to an aspect of the Banking Group’s operations that is important to its future performance (qualitative factor) ; or
• the information is required under legislative requirements of the Financial Markets Conduct Act 2013 or by the Banking Group’s principal
regulator, RBNZ.
This section of the financial statements:
• outlines the basis upon which the Banking Group’s financial statements have been prepared; and
• discusses any new accounting standards or regulations that directly impact the financial statements.
BASIS OF PREPARATION
These financial statements are general purpose (Tier 1) financial statements prepared by a ‘for profit’ entity, in accordance with the requirements of
the Financial Markets Conduct Act 2013. These financial statements comply with:
• New Zealand Generally Accepted Accounting Practice (NZ GAAP), as defined in the Financial Reporting Act 2013;
• New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as
appropriate for publicly accountable for-profit entities; and
• International Financial Reporting Standards (IFRS).
We present the financial statements of the Banking Group in New Zealand dollars, which is the Banking Group’s functional and presentation currency.
We have rounded values to the nearest million dollars (NZ$m), unless otherwise stated.
BASIS OF MEASUREMENT
We have prepared the financial information in accordance with the historical cost basis - except for the following assets and liabilities which we have
stated at their fair value:
• derivative financial instruments;
• financial instruments measured at fair value through other comprehensive income (FVOCI); and
• financial instruments measured at fair value through profit and loss.
BASIS OF CONSOLIDATION
The consolidated financial statements of the Banking Group comprise the financial statements of the Bank and all its subsidiaries. An entity, including
a structured entity, is considered a subsidiary of the Banking Group when we determine that the Banking Group has control over the entity. Control
exists when the Banking Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. We assess power by examining existing rights that give the Banking Group the current ability to direct the
relevant activities of the entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Banking Group.
FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items at fair value through profit or loss and report them as part of the fair value gain or loss on
these items. For non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other
comprehensive income.
FIDUCIARY ACTIVITIES
The Banking Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Banking Group
holding assets on behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If the Banking Group is not the
beneficial owner or does not control the assets, then we do not recognise these transactions in these financial statements, except when required by
accounting standards or another legislative requirement.

NOTES TO THE FINANCIAL STATEMENTS




9

1. ABOUT OUR FINANCIAL STATEMENTS (continued)

KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Banking Group’s accounting policies, management has made a number of judgements and applied estimates
and assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the
financial statements are contained within each relevant note to the financial statements.
Whilst the course of the COVID-19 pandemic is moderating and the management of its impact on the populace, businesses and economic
activity is better understood, the responses of consumers, business and governments remain uncertain. Compounding the effects of the
pandemic are mounting geopolitical tensions, global supply chain disruptions, the conflict in Ukraine, commodity price pressures, and
increasing inflation and interest rates impacting the economy. Thus, there remains an elevated level of estimation uncertainty involved in the
preparation of these financial statements.
The Banking Group has made various accounting estimates in these financial statements based on forecasts of economic conditions which
reflect expectations and assumptions at 30 September 2022 about future events considered reasonable in the circumstances. There is a
considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and
associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed further in the relevant notes of these financial
statements. Readers should consider these disclosures in light of the inherent uncertainties described above.


INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) have played a critical role in global financial markets, serving as reference rates for derivatives, loans and securities, and
in the valuation of financial instruments. The IBOR reforms have a wide-ranging impact for the Banking Group and our customers given the
fundamental differences between IBORs and risk-free rates (RFRs). The key difference between IBORs and RFRs is that IBOR rates include a term and
bank credit risk premium, whereas RFRs do not. As a result of these differences, adjustments are required to an RFR to ensure contracts referencing an
IBOR rate transition on an economically comparable basis.
Update on the Banking Group’s approach to interest rate benchmark reform
In line with the regulatory announcements made in 2021, the majority of IBOR rates, including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF),
Japanese Yen (JPY), and the US Dollar (USD) 1-week and 2-month LIBOR rate settings ceased on 31 December 2021 and have been replaced by
alternative RFRs. This transition had an immaterial impact to the Banking Group’s profit and loss. Through its loan and derivative transactions with
customers, issuance of debt and its asset and liability management activities the Banking Group continues to have exposure to the remaining US
dollar LIBOR settings and other IBOR-related benchmarks that are due to largely cease by 30 June 2023.
The Banking Group continues to manage the transition from the remaining US dollar LIBOR tenors and other remaining IBOR settings to RFRs through
a Benchmark Transition Programme (the programme). The programme is responsible for managing the risks associated with the transition including
operational, market, legal, conduct and financial reporting risks that may arise.
Exposures subject to benchmark reform as at 30 September 2022
The table below shows the Banking Group’s exposures to interest rate benchmarks subject to IBOR reform. These are financial instruments that
contractually reference an IBOR benchmark planned to transition to an RFR, and have a contractual maturity date beyond the planned IBOR cessation
date.


US dollar LIBOR
As at 30 September 2022

NZ$m
Loan and advances
1

39
Derivative asset (notional value)
2

72,878
Derivative liability (notional value)
2

72,059
Loan commitments
1,3

169
1 Excludes expected credit losses (ECL).
2 For cross-currency swaps, where both the receive and pay legs are in currencies subject to reform, the Banking Group discloses the New Zealand dollar-equivalent notional amounts for both. Where
one leg of a swap is subject to reform, the Banki ng Group discloses the notional amount of the receive leg.
3 For multi-currency IBOR referenced facilities, the undrawn balance has been allocated to the pricing currency of the facility or where there are multiple pricing currencies impacted by cessation, the
most likely currency of drawdown.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


10
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
Hedge accounting exposures subject to IBOR reform
The Banking Group has hedge-accounted relationships referencing US dollar LIBOR, primarily due to the Banking Group’s fixed rate debt issuances
denominated in US dollars that are designated in fair value hedge accounting relationships. The table below details the carrying values of the Banking
Group's US dollar exposures designated in hedge accounting relationships referencing LIBOR that will be impacted by reform. The nominal value of
the associated hedging instruments is also included:


As at 30 September 2022
Hedged items NZ$m
Debt issuances
6,950

Notional designated up to
30 June 2023
Notional designated
beyond 30 June 2023
Total notional amount
Hedging instruments NZ$m NZ$m NZ$m
Fair value hedges 1,312 6,210 7,522
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
There were no new accounting standards or interpretations adopted in 2022 that had a significant effect on the Banking Group. Accounting policies
have been consistently applied unless otherwise noted.
ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2022, and have not been applied by the Banking Group in preparing these financial statements. Further details of
these are set out below.
GENERAL HEDGE ACCOUNTING
NZ IFRS 9 Financial Instruments (NZ IFRS 9) introduces new hedge accounting requirements which more closely align accounting with risk
management activities undertaken when hedging both financial and non-financial risks. NZ IFRS 9 provides the Banking Group with an accounting
policy choice to continue to apply the NZ IAS 39 Financial Instruments: Recognition and Measurement (NZ IAS 39) hedge accounting requirements until
the IASB’s ongoing project on macro hedge accounting is completed. The Banking Group continues to apply the hedge accounting requirements of
NZ IAS 39.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
Amendments to New Zealand Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction amends NZ IAS 12
Income Taxes and clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a liability and that
give rise to equal taxable and deductible temporary differences. This may include transactions such as leases and decommissioning or restoration
obligations. This amendment is effective for the Banking Group from 1 October 2023 and is not expected to have a significant impact.

NOTES TO THE FINANCIAL STATEMENTS




11
2. OPERATING INCOME
2022 2021
NZ$m NZ$m
Net interest income


Interest income by type of financial asset


Financial assets at amortised cost

5,489 4,355
Trading securities 149 106
Investment securities
173
139
Interest income 5,811
4,600
Interest expense by type of financial liability

Financial liabilities at amortised cost
(1,927)
(1,148)
Financial liabilities designated at fair value through profit or loss

(108)
(28)
Interest expense (2,035) (1,176)
Net interest income 3,776 3,424




Other operating income
(i) Fee and commission income

Lending fees
25
30
Non-lending fees
731
678
Commissions

32
35
Funds management income

253 271
Fee and commission income

1,041 1,014
Fee and commission expense

(502) (459)
Net fee and commission income 539
555
(ii) Other income

Net foreign exchange earnings and other financial instruments income
1

525
179
Loss on sale of mortgages to the NZ Branch
(2)
-
Sale of legacy insurance portfolio
2


-
14
Release of provisions for UDC Finance Ltd and Paymark Ltd disposal costs

14 -
Other

11 17
Other income

548 210
Other operating income

1,087
765




Operating income

4,863
4,189
1 Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange
risk, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit or loss.
2 The Bank sold and transferred its rights and obligations relating to servicing a legacy portfolio of insurance underwritten by Tower Limited (Tower) to Tower in March 2021.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


12

2. OPERATING INCOME (continued)
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
Interest income and expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,
assets measured at FVOCI
and at fair value through profit or loss. We use the effective interest rate method to calculate the amortised cost of
assets held at amortised cost and to recognise interest income on financial assets measured at FVOCI. The effective interest rate is the rate that
discounts the stream of estimated future cash receipts or payments over the expected life of the financial instrument or, when appropriate, a
shorter period, to the net carrying amount of
the financial asset or liability. For assets subject to prepayment, we determine their expected life
on the basis of historical behaviour of the particular asset portfolio - taking into account contractual obligations and prepayment experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using the
effective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
OTHER OPERATING INCOME
Fee and commission income
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is satisfied across
more than one reporting period or (b) at a point in time when the performance obligation is satisfied immediately or is satisfied within one reporting
period.
• lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee and
commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct good
or service that are recognised separately from the underlying lending product.
• non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customer
transactions such as international money transfers. Where the Banking Group provides multiple goods or services to a customer under the
same contract, the Banking Group allocates the transaction price of the contract to distinct performance obligations based on the relative
stand-alone selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
• commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to provide
goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service to the
customer. If the Banking Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission it
retains as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
• funds management income represents fees earned from customers for providing financial advice and fees for asset management services and
advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or over the period in which the
asset management services are delivered.
Net foreign exchange earnings and other financial instruments income
We recognise the following as net foreign exchange earnings and other financial instruments income:
• exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised;
• fair value movements (excluding realised and accrued interest) on derivatives that we use to manage interest rate and foreign exchange risk
on funding instruments not designated as accounting hedges;
• the ineffective portions of fair value hedges and cash flow hedges;
• immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges and
amounts accumulated in equity related to designated cash flow hedges;
• fair value movements on financial assets and financial liabilities designated at fair value through profit or loss or held for trading;
• amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and
• the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.

NOTES TO THE FINANCIAL STATEMENTS




13

3. OPERATING EXPENSES
2022 2021
NZ$m NZ$m
Personnel



Salaries and related costs 947 891
Superannuation costs 30 29
Other 19 15
Personnel

996
935
Premises



Rent
16
18
Depreciation
81
79
Other
38
37
Premises 135 134
Technology
Depreciation and amortisation 44 45
Subscription licences and outsourced services
157
140
Other
27
36
Technology

228
221
Other



Advertising and public relations
37
43
Professional fees 64 58
Freight, stationery, postage and communication 41 42
Charges from the Overseas Banking Group 107 120
Other
45
68
Other

294
331
Operating expenses

1,653
1,621

RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
Operating expenses are recognised as services are provided to the Banking Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS – ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave, and other employee entitlements expected to be paid or settled within twelve months of employees rendering
service are measured at their nominal amounts using remuneration rates that the Banking Group expects to pay when the liabilities are settled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff departures,
leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market yields are determined
from a blended rate of government bonds with terms to maturity that closely match the estimated future cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Banking Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


14

4. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
2022 2021
NZ$m NZ$m
Profit before income tax

3,171
2,682
Prima facie income tax expense at 28%
888
751
Tax effect of permanent differences:
Sale of legacy insurance portfolio - (4)
Tax provisions no longer required (3) (3)
Non-assessable income and non-deductible expenditure
(3)
3
Subtotal

882
747
Income tax over provided in previous years
-
(4)
Income tax expense

882
743
Current tax expense
925
770
Adjustments recognised in the current year in relation to the current tax of prior years (64) (4)
Deferred tax expense/(income) relating to the origination and reversal of temporary differences 21 (23)
Income tax expense 882
743
Effective tax rate

27.8%
27.7%

RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the accounting and
tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when the tax relates to items
recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in equity or other comprehensive
income respectively.
CURRENT TAX EXPENSE
Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting date. We
recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIES
We account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as the
taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax asset, or liability,
on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset is realised, or the liability
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
We offset current and deferred tax assets and liabilities only to the extent that:
• they relate to income taxes imposed by the same taxation authority;
• there is a legal right and intention to settle on a net basis; and
• it is allowed under the tax law of the relevant jurisdiction.

NOTES TO THE FINANCIAL STATEMENTS




15
5. DIVIDENDS
ORDINARY SHARE DIVIDENDS


Amount
per share
Total
dividend
NZ$m
Dividends

Financial Year 2021


Dividend paid in June 2021 14.2 cents 900
Dividends paid during the year ended 30 September 2021


900
Financial Year 2022



Dividend paid in March 2022
14.2 cents 900
Dividend paid in September 2022
16.0 cents 1,015
Dividends paid during the year ended 30 September 2022
1,915

IMPUTATION CREDIT ACCOUNT




Banking Group Bank
1



2022 2021 2022 2021

NZ$m NZ$m NZ$m NZ$m
Imputation credits available as at 30 September
8,106
7,221
8,106
7,221
Effect of changes to imputation groups
-
-
(7,672)
-
Imputation credits available as at 1 October
8,106
7,221
434
7,221
1 Imputation credits available to the Bank are shown separately as this is relevant for holders of perpetual preference shares (PPS, refer to Note 21 shareholders’ equity) issued by the Bank.
The imputation credit balance for the Banking Group includes the imputation credit balance in relation to both the New Zealand resident imputation
group and other companies in the Banking Group that are not in the New Zealand resident imputation group. The imputation credit balance available
includes imputation credits that will arise from the payment of the amount of provision for income tax as at the reporting date.
The Bank, including other entities in the same income tax consolidated group as the Bank (Bank consolidated imputation group) exited the New
Zealand resident imputation group from 1 October 2022. The imputation credit balance available to the Bank consolidated imputation group includes
imputation credits that will arise from the payment of the amount of provision for income tax as at the reporting date.


6. SEGMENT REPORTING
DESCRIPTION OF SEGMENTS
The Banking Group is organised into three major business segments for segment reporting purposes - Personal, Business and Institutional. Centralised
back office and corporate functions support these segments. These segments are consistent with internal reporting provided to the chief operating
decision maker, being the Bank’s Chief Executive Officer.
During the year ended 30 September 2021, the Banking Group reorganised into the following business segments: Personal (comprising the Personal
and Funds Management business units), Business, and Institutional. These are intended to better align the Banking Group’s internal business with the
needs of its primary customer groups, home owners and business owners. These changes were implemented from August 2021 and have been
accounted for prospectively. During the year ended 30 September 2022, there were net movements of approximately NZ$2.1 billion of loans and
advances and NZ$1.6 billion of customer deposits from Business to Personal. Comparative amounts have not been restated because the overall
impact on the financial performance and financial position of the affected segments, Personal and Business, is not considered material.
Personal
Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services via
our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
Business
Business provides a full range of banking services including small business banking, through our digital, branch and contact centre channels, and
traditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium and
large enterprises, the agricultural business segment, government and government related entities.
Institutional
The Institutional division services governments, global institutional and corporate customers via the following business units:
• Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,
commodity financing as well as cash management solutions, deposits, payments and clearing.
• Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
• Markets provides customers with risk management services on foreign exchange, interest rates, credit, commodities and debt capital markets in
addition to managing the Banking Group’s interest rate exposure and high quality liquid asset portfolio.
Other
Other includes treasury and back office support functions, none of which constitutes a separately reportable segment.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


16
6. SEGMENT REPORTING (continued)
OPERATING SEGMENTS
Personal Business Institutional Other Total
For the year
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
ended 30 September NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net interest income
2,210
1,990
1,206
1,064
308
333
52
37
3,776
3,424
Net fee and commission income
- Lending fees
7
9
1
3
17
18
-
-
25
30
- Non-lending fees
426
612
249
10
56
56
-
-
731
678
- Commissions 31 34 - - 1 1 - - 32 35
- Funds management income
253
271
-
-
-
-
-
-
253
271
- Fee and commission expense
(306)
(459)
(196)
-
-
-
-
-
(502)
(459)
Net fee and commission income
411
467
54
13
74
75
-
-
539
555
Other income
3
19
(1)
-
185
160
361
31
548
210
Other operating income 414 486 53 13 259 235 361 31 1,087 765
Operating income
2,624
2,476
1,259
1,077
567
568
413
68
4,863
4,189
Operating expenses
(1,165)
(1,147)
(263)
(262)
(193)
(185)
(32)
(27)
(1,653)
(1,621)
Profit before credit impairment
and income tax
1,459 1,329 996 815 374 383 381 41 3,210 2,568
Credit impairment release /
(charge)
(74) 18 35 62 - 34 - - (39) 114
Profit before income tax 1,385
1,347
1,031
877
374
417
381
41
3,171
2,682
Income tax expense
(388)
(373)
(289)
(246)
(105)
(117)
(100)
(7)
(882)
(743)
Profit after income tax 997
974
742
631
269
300
281
34
2,289
1,939
Financial position









Goodwill 1,042 1,042 895 895 1,069 1,069 - - 3,006 3,006
Net loans and advances
102,709
95,061
37,431
39,158
6,927
6,535
-
2
147,067
140,756
Customer deposits
85,391
78,592
22,566
23,744
22,373
22,793
-
-
130,330
125,129

OTHER SEGMENT
The Other segment profit after income tax comprises:

2022 2021
For the year ended 30 September

NZ$m NZ$m
Personal and Business central functions 22 (2)
Group Centre
47
20
Economic hedges
212
16
Total

281
34

NOTES TO THE FINANCIAL STATEMENTS




17


FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to subsequent note disclosures.

CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under NZ IFRS 9: amortised cost, fair value through profit or loss (FVTPL) and fair value
through other comprehensive income (FVOCI). Financial assets are classified into these measurement classifications on the basis of two criteria:
• the business model within which the financial asset is managed; and
• the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments of
principal and interest).
The resultant financial asset classifications are as follows:
• Amortised cost: financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a
business model whose objective is to collect their cash flows;
• FVOCI: financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a business
model whose objective is to collect their cash flows or to sell the assets; and
• FVTPL: any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:
• at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or
• at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognised by an
acquirer in a business combination.



7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk of
changes in value and with remaining maturities of three months or less, including reverse repurchase agreements.

2022 2021
NZ$m NZ$m
Coins, notes and cash at bank
154
163
Securities purchased under agreements to resell in less than 3 months
1,248
610
Balances with central banks
9,980
6,697
Settlement balances receivable within 3 months
1,193
374
Cash and cash equivalents 12,575
7,844

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


18


8. TRADING SECURITIES


2022 2021
NZ$m NZ$m
Government securities
6,051
7,985
Corporate and financial institution securities
1,177
1,600
Trading securities 7,228 9,585

RECOGNITION AND MEASUREMENT
Trading securities are financial instruments we either:
• acquire principally for the purpose of selling in the short-term; or
• hold as part of a portfolio we manage for short-term profit making.
We recognise purchases and sales of trading securities on trade date:
• initially, we measure them at fair value; and
• subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.




KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 16 fair value of financial assets and financial liabilities for further details.

NOTES TO THE FINANCIAL STATEMENTS




19
9. DERIVATIVE FINANCIAL INSTRUMENTS

Assets Liabilities Assets Liabilities

2022 2022 2021 2021
Fair value NZ$m NZ$m NZ$m NZ$m
Derivative financial instruments - held for trading 14,117 (11,948) 8,504 (7,001)
Derivative financial instruments - designated in hedging relationships 1,364 (1,837) 800 (726)
Derivative financial instruments
15,481 (13,785) 9,304 (7,727)
FEATURES
Derivative financial instruments are contracts:
• whose value is derived from an underlying price index (or other variable) defined in the contract – sometimes the value is derived from more
than one variable;
• that require little or no initial net investment; and
• that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.
PURPOSE
The Banking Group’s derivative financial instruments have been categorised as follows:
Trading
Derivatives held in order to:
• meet customer needs for managing their own risks.
• manage risks in the Banking Group that are not in a designated hedge accounting relationship (some elements
of balance sheet management).
• undertake market making and positioning activities to generate profits from short-term fluctuations in prices or
margins.
Designated in hedging
relationships
Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching
movements in underlying positions relating to:
• hedges of the Banking Group’s exposures to interest rate risk and currency risk.
• hedges of other exposures relating to non-trading positions.
TYPES
The Banking Group offers or uses four different types of derivative financial instruments:
Forwards
A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional
principal amount at a future date.
Futures
An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on the
transaction date, with a net settlement in cash paid on the future date without physical delivery of the asset.
Swaps
A contract in which two parties exchange one series of cash flows for another.
Options
A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a ‘call option’)
or to sell (known as a ‘put option’) an asset or instrument at a set price on a future date. The seller has the
corresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises the
option.
RISKS MANAGED
The Banking Group offers and uses the instruments described above to manage fluctuations in the following market factors:
Foreign exchange
Currencies at current or determined rates of exchange.
Interest rate
Fixed or variable interest rates applying to money lent, deposited or borrowed.
Commodity
Soft commodities (that is, agricultural products such as wheat, coffee, cocoa, and sugar) and hard commodities (that
is, mined products such as gold, oil and gas).
Credit
Risk of default by customers or third parties.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


20
9. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The Banking Group uses central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting of
collateral exist with these exchanges:
• some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
• other transactions are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative
instruments by the amount paid or received.
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING
The majority of the Banking Group’s derivative financial instruments are held for trading. The fair values of derivative financial instruments held for
trading are:
Assets Liabilities Assets Liabilities
2022 2022 2021 2021
Fair value NZ$m NZ$m NZ$m NZ$m
Interest rate contracts

Forward rate agreements
6 (2)
1 (1)
Futures contracts
109 (8)
19 (5)
Swap agreements
1,174 (1,038)
4,465 (3,368)
Options purchased
- -
1 -
Options sold
- (12) - -
Total 1,289 (1,060) 4,486 (3,374)
Foreign exchange contracts
Spot and forward contracts
5,832 (4,028)
2,217 (1,862)
Swap agreements
6,825 (6,701)
1,762 (1,716)
Options purchased
126 (10)
24 (2)
Options sold
10 (115)
2 (23)
Total
12,793 (10,854)
4,005 (3,603)
Commodity contracts and credit default swaps 35 (34) 13 (24)
Derivative financial instruments - held for trading 14,117 (11,948) 8,504 (7,001)

DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS
The Banking Group uses two types of hedge accounting relationships:
Fair value hedge Cash flow hedge
Objective of this
hedging
arrangement
To hedge our exposure to changes to the fair value of a
recognised asset or liability or unrecognised firm
commitment caused by interest rate or foreign currency
movements.
To hedge our exposure to variability in cash flows of a
recognised asset or liability, a firm commitment or a
highly probable forecast transaction caused by interest
rate, foreign currency and other price movements.
Recognition of
effective hedge
portion
The following are recognised in profit or loss at the same
time:
• all changes in the fair value of the underlying item
relating to the hedged risk; and
• the change in the fair value of the derivatives.
We recognise the effective portion of changes in the fair
value of derivatives designated as a cash flow hedge in
the cash flow hedge reserve.
Recognition of ineffective
hedge portion
Recognised immediately in other operating income.
If a hedging instrument
expires, or is sold,
terminated, or exercised;
or no longer qualifies for
hedge accounting
When we recognise the hedged item in profit or loss, we
recognise the related unamortised fair value adjustment
in profit or loss. This may occur over time if the hedged
item is amortised to profit or loss as part of the effective
yield over the period to maturity.
Only when we recognise the hedged item in profit or
loss is the amount previously deferred in the cash flow
hedge reserve transferred to profit or loss.
Hedged item sold or
repaid
We recognise the unamortised fair value adjustment
immediately in profit or loss.
Amounts accumulated in equity are transferred
immediately to profit or loss.
Under the policy choice provided by NZ IFRS 9, the Banking Group has continued to apply the hedge accounting requirements of NZ IAS 39.

NOTES TO THE FINANCIAL STATEMENTS




21
9. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The fair value of derivative financial instruments designated in hedging relationships are:


2022 2021
Nominal Nominal
amount Assets Liabilities amount Assets Liabilities

NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Fair value hedges
Interest rate swap agreements 29,725 920 (1,381) 28,024 572 (512)
Cash flow hedges
Interest rate swap agreements
34,202 444 (456)
27,820 228 (214)
Derivative financial instruments - designated in
hedging relationships
63,927 1,364 (1,837) 55,844 800 (726)

The maturity profile of the nominal amounts of our hedging instruments held is:
Average Less than 3 3 to 12 1 to 5 After 5
interest months months years years Total
Nominal amount
rate NZ$m NZ$m NZ$m NZ$m NZ$m
As at 30 September 2022

Fair value hedges

Interest rate
1.53% - 2,600 14,315 12,810 29,725
Cash flow hedges
Interest rate
2.26% 1,826 7,454 24,079 843 34,202

As at 30 September 2021

Fair value hedges
Interest rate 1.47% 247 3,556 13,718 10,503 28,024
Cash flow hedges

Interest rate 1.51% 2,585 5,226 18,981 1,028 27,820

The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:

Ineffectiveness Amount reclassified

Change in value Hedge ineffectiveness from the cash flow
of hedging Change in value recognised in profit hedge reserve
instrument
2
of hedged item and loss to profit and loss
2022 2021 2022 2021 2022 2021 2022 2021

NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Fair value hedges
1








Interest rate
(930)
295
929
(289)
(1)
6
-
-
Cash flow hedges
1







.
Interest rate
22
(153)
(23)
152
(1)
(1)
3
10
1 All instruments are classified as derivative financial instruments.
2 Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
Hedge ineffectiveness recognised is classified within other operating income. Amounts reclassified to profit or loss are recognised within net interest
income or other operating income.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


22
9. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The hedged items in relation to the Banking Group’s fair value hedges are:

Accumulated fair value

hedge adjustments on

Carrying amount the hedged item
Balance sheet Assets Liabilities Assets Liabilities
presentation Hedged risk NZ$m NZ$m NZ$m NZ$m
As at 30 September 2022
Fixed rate debt issuances Debt issuances Interest rate - (18,341) - 1,305
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 11,506 - (976) -
Total

11,506 (18,341) (976) 1,305

As at 30 September 2021

Fixed rate debt issuances Debt issuances Interest rate - (16,307) - (245)
Fixed rate investment securities at FVOCI
1
Investment securities Interest rate 11,915 - (361) -
Total


11,915 (16,307) (361) (245)
1 The carrying amount of debt instruments at FVOCI does not include the fair value hedge adjustment since accounting for the hedge relationship results in the transfer of the hedge
adjustment out of other comprehensive income to the income statement to match the profit or loss on the hedging instrument.
There is no cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the balance sheet as at 30
September 2022 (2021: NZ$2 million).

The hedged items in relation to the Banking Group’s cash flow hedges are:

Continuing Discontinued
hedges hedges
2022 2021 2022 2021
Hedged risk NZ$m NZ$m NZ$m NZ$m
Floating rate loans and advances Interest rate
(437)
48
-
(1)
Floating rate customer deposits Interest rate
475
(36)
1
2

All cash flow hedges relate to hedges of interest rate risk and the movements in the cash flow hedge reserve are shown in the statement of changes
in equity on page 7.

NOTES TO THE FINANCIAL STATEMENTS




23


9. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
RECOGNITION AND MEASUREMENT
Recognition
Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a derivative is
positive, then we carry it as an asset, but if its value is negative, then we carry it as a liability.
Valuation adjustments are integral in determining the fair value of derivatives. This includes:
• a credit valuation adjustment (CVA) to reflect the counterparty risk and/or event of default; and
• a funding valuation adjustment (FVA) to account for funding costs and benefits in the derivatives portfolio.
Derecognition of
assets and liabilities
We remove derivative assets from our balance sheet when the contracts expire or we have transferred
substantially all the risks and rewards of ownership. We remove derivative liabilities from our balance sheet
when the Banking Group’s contractual obligations are discharged, cancelled or expired.

With respect to derivatives cleared through a central clearing counterparty or exchange, derivative assets or
liabilities may be derecognised in accordance with the principle above when collateral is settled, depending
on the legal arrangements in place for each instrument.
Impact on the
income statement
The recognition of gains or losses on derivative financial instruments depends on whether the derivative is
held for trading or is designated into a hedging relationship. For derivative financial instruments held for
trading, gains or losses from changes in the fair value are recognised in profit or loss.

For an instrument designated in a hedging relationship, the recognition of gains or losses depends on the
nature of the item being hedged. Refer to the table on page 20 for details of the recognition approach applied
for each type of hedge accounting relationship.
Sources of hedge ineffectiveness may arise from differences in the interest rate reference rate, margins, or rate
set differences and differences in discounting between the hedged items and the hedging instruments.
Hedge effectiveness
To qualify for hedge accounting under NZ IAS 39, a hedge relationship is expected to be highly effective. A
hedge relationship is highly effective only if the following conditions are met:
• the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows
attributable to the hedged risk during the period for which the hedge is designated (prospective
effectiveness); and
• the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).
The Banking Group monitors hedge effectiveness on a regular basis but at a minimum at least at each
reporting date.




KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection
of valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 16
fair value of financial assets and financial liabilities for further details.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


24


10. INVESTMENT SECURITIES



2022 2021

NZ$m NZ$m
Investment securities measured at fair value through other comprehensive income


Debt securities 11,356 11,925
Equity securities
1
1
Total 11,357
11,926



The maturity profile of investment securities is as follows:

Less than 3 3 to 12 After No
months months 1 to 5 years 5 years maturity Total
As at 30 September 2022 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Government securities
115 1,430 7,103 2,274 - 10,922
Corporate and financial institution securities
3 69 362 - - 434
Equity securities
- - - - 1 1
Total

118 1,499 7,465 2,274 1 11,357

As at 30 September 2021
Government securities 272 363 7,704 3,171 - 11,510
Corporate and financial institution securities 2 123 290 - - 415
Equity securities - - - - 1 1
Total

274 486 7,994 3,171 1 11,926

RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Banking Group’s
customer lending activities are classified as loans and advances (rather than investment securities) to better reflect the substance of the
arrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is made, gains or
losses are not reclassified from other comprehensive income to profit or loss on disposal of the investment. However, gains or losses may be
reclassified within equity.
Assets disclosed as investment securities are subject to the general classification and measurement policy for financial assets outlined on page 17.
Additionally, expected credit losses associated with ‘Investment securities - debt securities at fair value through other comprehensive income’ are
recognised and measured in accordance with the accounting policy outlined in Note 12 allowance for expected credit losses, and the allowance for
expected credit loss is recognised in the FVOCI reserve in equity with a corresponding charge to profit or loss.




KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 16 fair value of financial assets and
financial liabilities for further details.

NOTES TO THE FINANCIAL STATEMENTS




25

11. NET LOANS AND ADVANCES
The following table provides details of net loans and advances for the Banking Group:
2022 2021
Note NZ$m NZ$m
Overdrafts

968 799
Credit cards

1,238 1,127
Term loans - housing

103,872 98,513
Term loans - non-housing
41,234
40,528
Subtotal 147,312
140,967
Unearned income
(32)
(29)
Capitalised brokerage and other origination costs
433
403
Gross loans and advances

147,713
141,341
Allowance for expected credit losses 12
(646)
(585)
Net loans and advances

147,067 140,756
Residual contractual maturity:


Within one year
31,939
32,708
More than one year
115,128
108,048
Net loans and advances 147,067
140,756

The Banking Group has reviewed the historic accounting treatment of a transaction product arrangement comprised of both overdraft and deposit
balances and concluded that, under NZ IAS 32 Financial Instruments: Presentation, the deposit amounts cannot be netted against the overdraft
balances drawn under the arrangement. The application of netting reduced the amounts presented for overdrafts (above) and customer deposits
(Note 13 deposits and other borrowings) by NZ$178 million as at 30 September 2021. Comparative amounts have not been restated as the impact is
not considered material.
The Bank has sold residential mortgages to the NZ Branch with a net carrying value of NZ$306 million as at 30 September 2022 (2021: NZ$318 million).
These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets.

RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are facilities
the Banking Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance, which are
primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then measure loans and
advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses.
The Banking Group enters into transactions in which it transfers financial assets that are recognised on its balance sheet. When the Banking Group
retains substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Banking Group’s balance sheet,
however if substantially all the risks and rewards are transferred, the Banking Group derecognises the asset. If the risks and rewards are partially
retained and control over the asset is lost, then the Banking Group derecognises the asset. If control over the asset is not lost, then the Banking
Group continues to recognise the asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as net loans and advances are subject to the general classification and measurement policy for financial assets outlined on page 17.
Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in accordance with the
accounting policy outlined in Note 12 allowance for expected credit losses.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


26
12. ALLOWANCE FOR EXPECTED CREDIT LOSSES

2022 2021
Collectively Individually Collectively Individually
assessed assessed Total assessed assessed Total
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net loans and advances at amortised cost 569 77 646 525 60 585
Off-balance sheet commitments
100 5 105
107 15 122
Total 669 82 751
632 75 707
The following tables present the movement in the allowance for expected credit losses (ECL).


Net loans and advances

Allowance for ECL is included in net loans and advances.



Stage 3

Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 1 October 2020 162 347 79 106 694
Transfer between stages 16 (14) (2) - -
New and increased provisions (net of collective provision releases) (23) (19) (21) 67 4
Write-backs - - - (63) (63)
Bad debts written-off (excluding recoveries) - - - (47) (47)
Discount unwind reversal - - - (3) (3)
As at 30 September 2021
155 314 56 60 585
Transfer between stages 18 (10) (3) (5) -
New and increased provisions (net of collective provision releases) 26 7 6 87 126
Write-backs - - - (33) (33)
Bad debts written-off (excluding recoveries)
- - - (37) (37)
Discount unwind reversal
- - - 5 5
As at 30 September 2022 199 311 59 77 646
Off-balance sheet credit related commitments - undrawn and contingent facilities
Allowance for ECL is included in other provisions.


As at 1 October 2020 79 55 3 22 159
Transfer between stages 3 (4) 1 - -
New and increased provisions (net of collective provision releases) (18) (12) - (7) (37)
As at 30 September 2021
64 39 4 15 122
Transfer between stages
7 (6) (1) - -
New and increased provisions (net of collective provision releases)
(5) (2) - (10) (17)
As at 30 September 2022 66 31 3 5 105

The collectively assessed allowance for ECL increased by NZ$37 million attributable to: increases of NZ$24 million for downside risks associated with
the economic outlook, NZ$42 million due to portfolio credit risk profile changes reflecting the revised economic scenario weightings and enhanced
model methodology, partially offset by reductions of NZ$8 million in lower management temporary adjustments and NZ$21 million in large exposure
and model risk allowances.

CREDIT IMPAIRMENT CHARGE – INCOME STATEMENT
2022 2021
NZ$m NZ$m
New and increased provisions


- Collectively assessed
37
(93)
- Individually assessed
72
60
Write-backs
(33)
(63)
Recoveries of amounts previously written-off
(37)
(18)
Total credit impairment charge / (release)

39
(114)

NOTES TO THE FINANCIAL STATEMENTS




27

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT
EXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and takes
into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit deterioration since
origination, according to the following three-stage approach:
• Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination, an
allowance equivalent to 12 months ECL is recognised reflecting the expected credit losses resulting from default events that are possible
within the next 12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit
losses are estimated based on default events that are possible over the remaining time to maturity.
• Stage 2: Where there has been a SICR since origination, an allowance equivalent to lifetime ECL is recognised reflecting expected credit
losses resulting from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent
period such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1
classification with ECL measured accordingly.
• Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis when
transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSS
ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:
• Probability of default (PD) – the estimate of the likelihood that a borrower will default over a given period;
• Exposure at default (EAD) – the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; and
• Loss given default (LGD) – the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility’s EAD, taking
into account direct and indirect recovery costs.
These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Banking Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Banking Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For
non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Banking Group’s contractual right to withdraw a
facility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour and
events that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all portfolios.
This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor is unlikely to fully
satisfy contractual credit obligations to the Banking Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the Banking
Group’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of amounts
previously written-off are recorded as a release to the credit impairment charge in the income statement.
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial
reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered substantial. This assessment
considers both changes in cash flows arising from the modified terms as well as changes in the overall instrument risk profile; for example,
changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is considered non-substantial, the existing
financial asset is not derecognised and its date of origination continues to be used to determine SICR. Where a modification is considered
substantial, the existing financial asset is derecognised and a new financial asset is recognised at its fair value on the modification date, which also
becomes the date of origination used to determine SICR for this new asset.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


28

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Banking Group considers
both qualitative and quantitative information:
i. Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date to
the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates both
borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least annually or
more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at the
reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime probability
of default may increase significantly if:
• there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
• there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.
ii. Backstop criteria
The Banking Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since origination
and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Banking Group considers four probability-weighted
forecast economic scenarios as follows:
i. Base case scenario
The base case scenario is our view of future macroeconomic conditions. It reflects management’s assumptions used for strategic
planning and budgeting, and also informs the Banking Group’s Internal Capital Adequacy Assessment Process (ICAAP) which is the
process the Banking Group applies in strategic and capital planning over a 3-year time horizon;
ii. Upside and iii. Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the
economic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) and
pessimistic (in the case of the downside) economic events and uncertainty over long term horizons; and
iv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Banking Group has altered the severe downside
scenario in 2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for
stress testing.
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)
depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates, GDP
growth rates, house price indices, commercial property price indices and consumer price indices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario, as well as specific portfolio considerations where required.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process.

NOTES TO THE FINANCIAL STATEMENTS




29

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Banking Group makes judgements and assumptions in relation to:
• the selection of an estimation technique or modelling methodology; and
• the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between those
inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made within the context of the uncertainty of how various factors might impact the
global economy, and reflect historical experience and other factors that are considered to be relevant, including expectations of future events that
are believed to be reasonable under the circumstances. The Banking Group’s ECL estimates are inherently uncertain and, as a result, actual results
may differ from these estimates.
Judgement /
assumption

Description
Considerations for the year ended
30 September 2022
Determining
when a SICR
has occurred
In the measurement of ECL, judgement is involved in
setting the rules and trigger points to determine
whether there has been a SICR since initial
recognition of a loan, which would result in the
financial asset moving from Stage 1 to Stage 2. This is
a key area of judgement since transition from Stage 1
to Stage 2 increases the ECL from an allowance based
on the probability of default in the next 12 months, to
an allowance for lifetime expected credit losses.
Subsequent decreases in credit risk resulting in
transition from Stage 2 to Stage 1 may similarly result
in significant changes in the ECL allowance.
The setting of precise trigger points requires
judgement which may have a material impact upon
the size of the ECL allowance. The Banking Group
monitors the effectiveness of SICR criteria on an
ongoing basis.
The Banking Group has adjusted the ECL this period
to account for expected deterioration in credit-
worthiness of certain customer segments which are
considered particularly vulnerable to economic
pressures such as higher interest rates, increasing
inflation and low wage growth.
Measuring
both 12-month
and lifetime
credit losses
The probability of default (PD), loss given default
(LGD) and exposure at default (EAD) credit risk
parameters used in determining ECL are point-in -time
measures reflecting the relevant forward-looking
information determined by management. Judgement
is involved in determining which forward-looking
information variables are relevant for particular
lending portfolios and for determining each
portfolio’s point-in -time sensitivity.
The modelled outcome as at 30 September 2021
included a model adjustment to recognise increased
model uncertainties as a result of COVID-19. With
these uncertainties largely being appropriately
reflected in the underlying models, the COVID-19
adjustments have been removed.

In addition, judgement is required where behavioural
characteristics are applied in estimating the lifetime of
a facility to be used in measuring ECL.
There were no material changes to the policies during
the year ended 30 September 2022.
Base case
economic
forecast
The Banking Group derives a forward-looking “base
case” economic scenario which reflects our view of
the most likely future macroeconomic conditions.
There have been no changes to the types of forward-
looking variables (key economic drivers) used as
model inputs in the current year.
As at 30 September 2022, the base case assumptions
have been updated to reflect the relaxation of COVID-
19 related restrictions, continuing supply chain and
labour market pressures, and rapidly increasing global
inflation and interest rate rises globally, as well as
lower growth in key economies.
The expected outcomes of key economic drivers for
the base case scenario as at 30 September 2022 are
described below under the heading “Base case
economic forecast assumptions”.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


30

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (CONTINUED)

KEY JUDGEMENTS AND ESTIMATES
Judgement /
assumption

Description
Considerations for the year ended
30 September 2022
Probability
weighting of
each economic
scenario (base
case, upside,
downside

and
severe
downside
scenarios)
1

Probability weighting of each economic scenario is
determined by management considering the risks
and uncertainties surrounding the base case
economic scenario at each measurement date.
The assigned probability weightings are subject to a
high degree of inherent uncertainty and therefore the
actual outcomes may be significantly different to
those projected.
To better reflect the current economic conditions and
geopolitical environment, the Banking Group has
altered the severe downside scenario from a scenario
fixed by reference to average economic cycle
conditions to one which aligns with the scenario used
for stress testing.
The key considerations for probability weightings in
the current period include the emergence from
COVID-19 restrictions, how customers will respond to
interest rate rises and higher inflation, and potential
impacts of lower growth prospects globally.
Weightings for current and prior periods are as
detailed in the section on ‘Probability weightings’
below.
Management
temporary
adjustments
Management temporary adjustments to the ECL
allowance are used in circumstances where it is
judged that our existing inputs, assumptions and
model techniques do not capture all the risk factors
relevant to our lending portfolios. Emerging local or
global macroeconomic, microeconomic or political
events, and natural disasters that are not incorporated
into our current parameters, risk ratings, or forward-
looking information are examples of such
circumstances. The use of management temporary
adjustments may impact the amount of ECL
recognised.
As at 30 September 2022, Management no longer
consider that a separate management temporary
adjustment is necessary for the uncertainty associated
with COVID-19. Management have however included
adjustments to accommodate uncertainty associated
with rising inflation, rapidly increasing interest rates,
and ongoing supply chain and labour market
pressures.
In addition, management overlays have been made
for risks particular to personal and business banking.
Management temporary adjustments total NZ$169
million (2021: NZ$177 million).

1 The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are based
on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.

Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of the ECL
balance.
The economic drivers of the base case economic forecasts, reflective of our view of future macroeconomic conditions, used at 30 September 2022
are set out below. For the years following the near term forecasts below, the ECL models project future year economic conditions which include
an assumption of eventual reversion to mid-cycle economic conditions.

Forecast calendar year
New Zealand 2022 2023 2024
Gross domestic product (GDP) (annual % change) 1.9% 1.8% 1.7%
Unemployment rate 3.3% 3.9% 4.9%
Residential property prices (annual % change) -11.3% -3.1% 2.6%
Consumer price index (CPI) (annual % change) 6.8% 3.6% 1.9%
The base case economic forecasts reflect the expected slow down in economic activity globally from higher interest rates and increasing inflation,
along with declining residential property prices until 2024. Tight labour markets are expected to persist until central banks’ monetary policies have
the intended impact of reducing demand and bringing inflation down.

NOTES TO THE FINANCIAL STATEMENTS




31

12. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)

KEY JUDGEMENTS AND ESTIMATES
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base case
economic scenario including the uncertainties described above.
The base case scenario represents an overall deterioration in the forecasts since September 2021. Given the uncertainties associated with how the
economy may respond to rapidly moving factors including inflation and lower economic growth globally, the base case weighting has been
reduced to 45.0% (2021: 50.0%), the upside scenario reduced to 0.0% (2021: 4.5%), the downside scenario reduced to 40.0% (2021:40.5%), and the
severe downside scenario increased to 15.0% (2021: 5.0%).
The assigned probability weightings are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly
different to those projected. The Banking Group considers these weightings to provide estimates of the possible loss outcomes and taking into
account short and long term inter-relationships within the Banking Group’s credit portfolios. The weightings applied are set out below:

2022 2021
Base 45.0% 50.0%
Upside 0.0% 4.5%
Downside 40.0% 40.5%
Severe downside 15.0% 5.0%
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in future
periods, expected credit losses reported by the Banking Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2022:


ECL
NZ$m

Impact
NZ$m
If 1% of Stage 1 facilities were included in Stage 2
679 10
If 1% of Stage 2 facilities were included in Stage 1
668 (1)


100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario
195
250
501
1,251
(474)
(419)
(168)
582

Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Banking Group makes judgements and assumptions in relation to expected repayments, the realisable
value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process. Judgements
and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties described above.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


32



FINANCIAL LIABILITIES
Outlined below is a description of how we classify and measure financial liabilities relevant to the subsequent note disclosures.

CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or fair value through profit or loss (FVTPL) when they are held for trading. Additionally, financial
liabilities can be designated at FVTPL where:
• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
• a group of financial liabilities are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk
management strategy; or
• the financial liability contains one or more embedded derivatives unless:
a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or
b) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity’s own credit risk are included in
other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.



13. DEPOSITS AND OTHER BORROWINGS
2022 2021
Note NZ$m NZ$m
Term deposits
46,746
40,668
On demand and short term deposits
62,203
62,648
Deposits not bearing interest
21,381
21,813
Total customer deposits 130,330 125,129
Certificates of deposit 1,639 1,875
Commercial paper 2,955 4,433
Securities sold under repurchase agreements
4,642
1,663
Deposits from Immediate Parent Company and NZ Branch 26
76
39
Deposits and other borrowings

139,642
133,139
Residual contractual maturity:



Within one year 133,858 129,726
More than one year 5,784 3,413
Deposits and other borrowings

139,642
133,139
Carried on balance sheet at:



Amortised cost
136,687
128,706
Fair value through profit or loss (designated on initial recognition)
2,955
4,433
Deposits and other borrowings 139,642 133,139

RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
• are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the effective
interest rate method; and
• are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them as
measured at fair value through profit or loss.
Refer to Note 16 fair value of financial assets and financial liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in the Banking
Group’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise directly
in profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since the risks
and rewards of ownership remain with the Banking Group. Over the life of the repurchase agreement, we recognise the difference between the
sale price and the repurchase price and charge it to interest expense in the income statement.

NOTES TO THE FINANCIAL STATEMENTS




33
14. DEBT ISSUANCES
The Banking Group uses a variety of funding programmes to issue unsubordinated debt (including senior debt and covered bonds) and subordinated
debt. The difference between unsubordinated debt and subordinated debt is that holders of unsubordinated debt take priority over holders of
subordinated debt owed by the relevant issuer and subordinated debt will be repaid by the relevant issuer only after the repayment of claims of
depositors, other creditors and the senior debt holders.

2022 2021

NZ$m NZ$m
Senior debt
13,577
14,220
Covered bonds
4,082
4,248
Total unsubordinated debt

17,659
18,468
Subordinated debt


- Additional Tier 1 capital
1,941
2,441
- Tier 2 capital 1,423 593
Total subordinated debt 3,364 3,034
Total debt issued 21,023 21,502
Residual contractual maturity:

Within one year
4,464
4,334
More than one year
16,559
17,168
Total debt issued 21,023
21,502
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Banking Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.
2022 2021

NZ$m NZ$m
AUD Australian dollars
44
45
EUR Euro 6,668 8,055
NZD New Zealand dollars 3,735 4,494
CHF Swiss Francs 1,083 984
USD United States dollars
9,493
7,924
Total debt issued 21,023
21,502
Covered bonds are guaranteed by ANZNZ Covered Bond Trust Limited (the Covered Bond Guarantor), solely in its capacity as trustee of ANZNZ
Covered Bond Trust (the Covered Bond Trust). The Covered Bond Trust is a member of the Banking Group, whereas the Covered Bond Guarantor is not
a member of the Banking Group.
SUBORDINATED DEBT
All subordinated debt is issued by the Bank and qualifies as regulatory capital for the Banking Group. Each subordinated debt instrument is classified
as either Additional Tier 1 (AT1) capital, in the case of the ANZ NZ Internal Capital Notes 1 (ANZ NZ ICN) and ANZ NZ Internal Capital Notes 2 (ANZ NZ
ICN2), or Tier 2 capital for RBNZ’s capital adequacy purposes depending on the terms and conditions of the instruments.
In any liquidation event impacting the Bank, Tier 2 capital instruments rank ahead of AT1 capital instruments. AT1 capital instruments rank equally with
each other and with the Bank’s preference shares and only rank ahead of ordinary shares.
AT1 capital notes
AT1 capital notes are fully paid convertible non-cumulative perpetual subordinated notes. Holders of AT1 capital notes do not have any right to vote
in general meetings of the Bank.
AT1 capital notes are classified as debt given there are circumstances beyond the Bank’s control where the principal is converted into a variable
number of ordinary shares of the Bank.
Interest payments on the AT1 capital notes are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
(including regulatory requirements).
Where specified, AT1 capital notes provide the Bank with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). Early redemption is subject to RBNZ’s prior written approval.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


34

14. DEBT ISSUANCES (continued)
Each of the AT1 capital notes will immediately convert into a variable number of ordinary shares of the Bank (based on the net assets per share in the
Bank’s most recently published Disclosure Statement) if:
• the Banking Group’s, common equity tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
• RBNZ directs the Bank to convert or write-off the notes or a statutory manager is appointed to the Bank and decides that the Bank must convert
or write-off the notes.
Where specified, AT1 capital notes mandatorily convert into a variable number of ordinary shares of the Bank (based on the net assets per share in the
Bank’s most recently published Disclosure Statement):
• on a specified mandatory conversion date; or
• on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
RBNZ released new capital adequacy requirements for New Zealand banks, which are being implemented from October 2021 to July 2028. Under the
new requirements, from 1 January 2022, the AT1 capital notes are subject to a progressive reduction in their regulatory capital recognition. As a result,
the Bank has determined that a regulatory event has occurred in respect of these notes. The occurrence of a regulatory event means that the Bank
may choose to redeem any of the AT1 capital notes at its discretion. Any redemption of AT1 capital notes is subject to certain conditions, including
regulatory approvals. NZ$500 million of AT1 capital notes were redeemed on 31 December 2021. As at 11 November 2022, no decision has been
made on whether the Bank will redeem the AT1 capital notes that were outstanding at 30 September 2022.
The table below show the key details of the AT1 capital notes on issue at 30 September 2022:
ANZ NZ ICN ANZ NZ ICN2
Issue date 5 March 2015 15 June 2016
Issue and carrying amount NZ$1,003 million NZ$938 million
Face value NZ$100 NZ$100
Interest frequency Semi-annually in arrears Semi-annually in arrears
Interest rate
Floating rate:
(New Zealand 6 month
Bank Bill rate + 3.8%)
Floating rate:
(New Zealand 6 month
Bank Bill rate + 6.29%)
Issuer's early redemption or conversion option 24 March 2023
15 June 2026 and each 5th
anniversary
Mandatory conversion date 24 March 2025 n/a
Common equity capital trigger event Yes Yes
Non-viability trigger event Yes Yes
TIER 2 CAPITAL
Tier 2 capital notes are fully paid unsecured subordinated notes. Interest payments are subject to the Bank being solvent at the time of, and
immediately following, the payment. Unpaid interest accumulates, and will be paid at the earlier of when the Bank is solvent again or at maturity. The
Bank may repay the notes early on the dates specified below, or in certain other circumstances (such as a tax or regulatory event). Early repayment is
subject to certain conditions, including approval from RBNZ.
The table below shows the Tier 2 capital subordinated notes the Banking Group holds at 30 September in both the current and prior year:

Next optional call date - Interest Interest Credit
2022 2021
Currency Face value Issue date Maturity subject to RBNZ's approval rate reset date rating
2
NZ$m NZ$m
NZD 600m Sep 2021 Sep 2031 Sep 2026 2.999% Sep 2026 A-
594
593
USD 500m Aug 2022 Aug 2032 Aug 2027 5.548% Aug 2027 A-
829
-
Total Tier 2 capital
1


1,423
593
1 Carrying amounts are net of issuance costs and fair value hedging adjustments.
2 Credit rating assigned by S&P Global Ratings.

RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at fair value through
profit or loss. Interest expense on debt issuances is recognised using the effective interest rate method. Where the Banking Group enters into a fair
value hedge accounting relationship, the fair value attributable to the hedge risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are considered
to contain embedded derivatives that we account for separately at fair value through profit or loss. The embedded derivatives arise because the
amount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they have no
significant value as of the reporting date given the remote nature of those trigger events.

NOTES TO THE FINANCIAL STATEMENTS




35
15. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Banking Group’s businesses of providing banking and other financial services to our customers.
The associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Banking Group’s key material risks.
This note details the Banking Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks:
Key material financial risks Key sections applicable to this risk
Credit risk
The risk of financial loss resulting from:
• a counterparty failing to fulfil its obligations; or
• a decrease in credit quality of a counterparty resulting in a financial loss.
Credit risk incorporates the risks associated with us lending to customers
who could be impacted by climate change or by changes to laws,
regulations, or other policies adopted by governments or regulatory
authorities, including carbon pricing and climate change adaptation or
mitigation policies.
• Credit risk overview, management and control responsibilities
• Maximum exposure to credit risk
• Credit quality
• Concentrations of credit risk
• Collateral management
Market risk
The risk to the Banking Group’s earnings arising from:
• changes in interest rates, foreign exchange rates, credit spreads, volatility
and correlations; or
• fluctuations in bond, commodity or equity prices.
• Market risk overview, management and control responsibilities
• Measurement of market risk
• Traded and non-traded market risk
• Foreign currency risk – structural exposure
Liquidity and funding risk
The risk that the Banking Group is unable to meet its payment obligations as
they fall due, including:
• repaying depositors or maturing wholesale debt; or
• the Banking Group having insufficient capacity to fund increases in
assets.
• Liquidity risk overview, management and control responsibilities
• Key areas of measurement for liquidity risk
• Liquidity portfolio management
• Funding position
• Residual contractual maturity analysis of the Banking Group’s
liabilities
OVERVIEW
AN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORK
This overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under NZ IFRS
7 Financial Instruments: Disclosures.
The Board is responsible for establishing and overseeing the Banking Group’s Risk Management Framework (RMF). The Board has delegated authority
to the Bank’s Board Risk Committee (BRC) to develop and monitor compliance with the Banking Group’s risk management policies. The BRC reports
regularly to the Board on its activities.
The Board approves the strategic objectives of the Banking Group including:
• the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that the Banking Group is prepared to
accept in pursuit of its strategic objectives and business plan; and
• the Risk Management Strategy (RMS), which describes the Banking Group’s strategy for managing risks and the key elements of the RMF that
give effect to this strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference
to the relevant policies, standards and procedures. It also includes information on how the Banking Group identifies, measures, evaluates,
monitors, reports and controls or mitigates material risks.
The Banking Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment
in which all employees understand their roles and obligations. At the Banking Group, risk is everyone’s responsibility.
The Banking Group has an independent risk management function, headed by the Chief Risk Officer who:
• is responsible for overseeing the risk profile and the risk management framework;
• can effectively challenge activities and decisions that materially affect the Banking Group’s risk profile; and
• has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
Internal Audit Function
Internal Audit is a function independent of management whose role is to provide the Board and management with an effective and independent
appraisal of the internal controls established by management. Operating under a Board approved Charter, the reporting line for the outcomes of work
conducted by Internal Audit is direct to the Chair of the Audit Committee, with a direct communication line to the Chief Executive Officer and the
external auditor. The Internal Audit Plan is developed using a risk based approach and is reviewed quarterly. The Audit Committee approves the plan.
All audit activities are conducted in accordance with international internal auditing standards, and the results of the activities are reported to the Audit
Committee and management. These results influence the performance assessment of business heads. Furthermore, Internal Audit monitors the
remediation of audit issues and reports the current status of any outstanding audits.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


36
15. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Banking Group’s major sources of income. As this activity is also a key material risk, the Banking
Group dedicates considerable resources to its management. The Banking Group assumes credit risk in a wide range of lending and other activities in
diverse markets and in many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and
capital markets activities.
Our credit risk management framework ensures we apply a consistent approach across the Banking Group when we measure, monitor and manage
the credit risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
• sets the credit risk appetite and credit strategies; and
• approves policies and control frameworks for the management of the Banking Group’s credit risk.
The BRC delegates responsibility for day-to-day management of credit risk and compliance with credit risk policies to the Bank’s Credit Risk
Management Committee (CRMC).
We quantify credit risk through an internal credit rating system (Master Scale) to ensure consistency across exposure types and to provide a consistent
framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
Probability of Default (PD) Expressed by a Customer Credit Rating (CCR), reflecting the Banking Group’s assessment of a customer’s
ability to service and repay debt.
Exposure at Default (EAD) The expected balance sheet exposure at default taking into account repayments of principal and
interest, expected additional drawdowns and accrued interest at the time of default.
Loss Given Default (LGD) Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the
percentage of loan covered by security which the Banking Group can realise if a customer defaults. The
A-G scale is supplemented by a range of other SIs which cover such factors as cash cover and sovereign
backing. For retail and some small business lending, we group exposures into large homogeneous
pools – and the LGD is assigned at the pool level.
Our specialist credit risk teams develop and validate the Banking Group’s PD and LGD rating models. The outputs from these models drive our day-to-
day credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, internal capital allocation, and credit
provisioning.
All customers with whom the Banking Group has a credit relationship are assigned a CCR at origination via either of the following assessment
approaches:
Large and more complex lending Retail and some small business lending
Rating models provide a consistent and structured assessment, with
judgement required around the use of out-of-model factors. We
handle credit approval on a dual approval basis, jointly with the
business writer and an independent credit officer.
Automated assessment of credit applications using a combination of
scoring (application and behavioural), policy rules and external credit
reporting information. If the application does not meet the automated
assessment criteria, then it is subject to manual assessment.
We use the Banking Group’s internal CCR to manage the credit quality of financial assets. To enable wider comparisons, the Banking Group’s CCRs are
mapped to external rating agency scales as follows:
Credit quality
description

Internal CCR

The Banking Group customer requirements
Moody’s
Rating
S&P Global
Ratings
Strong CCR 0+ to 4- Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity is
not significantly vulnerable to foreseeable events.
Aaa – Baa3 AAA – BBB-
Satisfactory CCR 5+ to 6- Demonstrated sound operational and financial stability over the
medium to long-term even though some may be susceptible to
cyclical trends or variability in earnings.
Ba1 – B1 BB+ – B+
Weak CCR 7+ to 8= Demonstrated some operational and financial instability, with
variability and uncertainty in profitability and liquidity projected to
continue over the short and possibly medium term.
B2 – Caa B - CCC
Defaulted CCR 8- to 10 When doubt arises as to the collectability of a credit facility, the
financial instrument (or ‘the facility’) is classified as defaulted.
n/a n/a

NOTES TO THE FINANCIAL STATEMENTS




37
15. FINANCIAL RISK MANAGEMENT (continued)
MAXIMUM EXPOSURE TO CREDIT RISK
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may
be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these
differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum
exposure to credit risk is the maximum amount the Banking Group would have to pay if the instrument is called upon.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.

Reported Excluded
1

Maximum exposure
to credit risk


2022 2021 2022 2021 2022 2021

NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
On-balance sheet positions





Net loans and advances
147,067
140,756
-
-
147,067
140,756
Other financial assets:






Cash and cash equivalents
12,575
7,844
154
163
12,421
7,681
Settlement balances receivable
785
237
-
-
785
237
Collateral paid 1,672 537 - - 1,672 537
Trading securities
7,228 9,585 - - 7,228 9,585
Derivative financial instruments
15,481
9,304
-
-
15,481
9,304
Investment securities
11,357
11,926
-
-
11,357
11,926
Other financial assets
2

955
496
-
-
955
496
Total other financial assets 50,053
39,929
154
163
49,899
39,766
Subtotal 197,120
180,685
154
163
196,966
180,522
Off-balance sheet commitments





Undrawn and contingent facilities
3
30,187 30,030 - - 30,187 30,030
Total 227,307 210,715 154 163 227,153 210,552
1 Coins, notes and cash at bank within cash and cash equivalents were excluded as they do not have credit risk exposure.
2 Other financial assets mainly comprise accrued interest and acceptances.
3 Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected
credit losses.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


38
15. FINANCIAL RISK MANAGEMENT (continued)
CREDIT QUALITY
An analysis of the Banking Group’s credit risk exposure is presented in the following tables based on the Banking Group’s internal credit quality rating
by stage without taking account of the effects of any collateral or other credit enhancements.


Net loans and advances
Stage 3

Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 30 September 2022 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong
123,097 2,678 - - 125,775
Satisfactory
16,327 3,018 - - 19,345
Weak
257 1,201 - - 1,458
Defaulted
- - 588 146 734
Subtotal 139,681 6,897 588 146 147,312
Allowance for ECL
(199) (311) (59) (77) (646)
Net loans and advances at amortised cost 139,482 6,586 529 69 146,666
Coverage ratio 0.14% 4.51% 10.03% 52.74% 0.44%
Unearned income
(32)
Capitalised brokerage and other origination costs
433
Net carrying amount 147,067


As at 30 September 2021
Strong 116,578 1,620 - - 118,198
Satisfactory 17,122 3,134 - - 20,256
Weak 293 1,447 - - 1,740
Defaulted - - 618 155 773
Subtotal
133,993 6,201 618 155 140,967
Allowance for ECL (155) (314) (56) (60) (585)
Net loans and advances at amortised cost 133,838 5,887 562 95 140,382
Coverage ratio
0.12% 5.06% 9.06% 38.71% 0.41%
Unearned income (29)
Capitalised brokerage and other origination costs 403
Net carrying amount
140,756


Other financial assets


2022 2021
NZ$m NZ$m
Strong
49,833
39,702
Satisfactory 62 49
Weak 4 15
Defaulted
- -
Total carrying amount

49,899
39,766

NOTES TO THE FINANCIAL STATEMENTS




39
15. FINANCIAL RISK MANAGEMENT (continued)
Off-balance sheet commitments - undrawn and contingent facilities
Stage 3

Stage 1 Stage 2
Collectively
assessed
Individually
assessed Total
As at 30 September 2022 NZ$m NZ$m NZ$m NZ$m NZ$m
Strong 25,901 224 - - 26,125
Satisfactory 3,368 682 - - 4,050
Weak
8 89 - - 97
Defaulted
- - 14 6 20
Gross undrawn and contingent facilities 29,277 995 14 6 30,292
Allowance for ECL included in other provisions (refer to Note 20)
(66) (31) (3) (5) (105)
Net undrawn and contingent facilities 29,211 964 11 1 30,187
Coverage ratio 0.23% 3.12% 21.43% 83.33% 0.35%


As at 30 September 2021
Strong 25,072 142 - - 25,214
Satisfactory 3,734 1,037 - - 4,771
Weak 12 100 - - 112
Defaulted - - 32 23 55
Gross undrawn and contingent facilities
28,818 1,279 32 23 30,152
Allowance for ECL included in other provisions (refer to Note 20) (64) (39) (4) (15) (122)
Net undrawn and contingent facilities
28,754 1,240 28 8 30,030
Coverage ratio
0.22% 3.05% 12.50% 65.22% 0.40%

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


40
15. FINANCIAL RISK MANAGEMENT (continued)
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region – therefore, they may be similarly affected by changes in economic or other conditions. The Banking
Group monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Banking Group also applies single customer
counterparty limits to protect against unacceptably large exposures to one single customer.
Analysis of financial assets by industry sector is based on Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. The significant
categories shown are the level one New Zealand Standard Industry Output Categories (NZSIOC), except that Agriculture is shown separately as
required by the Order.

Composition of financial instruments that give rise to credit risk by industry group are presented below:

Loans and
advances
Other
financial
assets
Off-balance
sheet credit
related commitments Total
2022 2021 2022 2021 2022 2021 2022 2021
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
New Zealand residents







Agriculture
15,616
16,316
55
43
831
854
16,502
17,213
Forestry and fishing, agriculture services
624
659
16
5
113
137
753
801
Mining
123
95
20
6
350
428
493
529
Manufacturing
2,591
2,342
849
162
1,876
2,126
5,316
4,630
Electricity, gas, water and waste services
810
946
267
337
1,508
1,828
2,585
3,111
Construction
1,235
1,165
4
9
959
909
2,198
2,083
Wholesale trade
1,542
1,264
128
51
2,132
1,790
3,802
3,105
Retail trade and accommodation
2,713
2,473
12
12
735
848
3,460
3,333
Transport, postal and warehousing 993 943 40 55 860 708 1,893 1,706
Finance and insurance services 972 1,040 17,085 10,969 1,955 1,774 20,012 13,783
Rental, hiring & real estate services 38,797 37,441 1,915 1,627 2,610 2,357 43,322 41,425
Professional, scientific, technical,
administrative and support services
880 830 12 5 397 480 1,289 1,315
Public administration and safety
199
305
9,924
12,453
855
808
10,978
13,566
Health care and social assistance
950
716
24
12
474
479
1,448
1,207
Households
75,948
71,274
250
156
13,426
13,564
89,624
84,994
Other
1

1,096
1,094
133
78
1,122
962
2,351
2,134
Subtotal 145,089 138,903 30,734 25,980 30,203 30,052 206,026 194,935
Overseas

Finance and insurance services
103
104
19,048
13,755
89
100
19,240
13,959
Households
1,402
1,259
5
3
-
-
1,407
1,262
All other non-residents
718
701
112
28
-
-
830
729
Subtotal 2,223 2,064 19,165 13,786 89 100 21,477 15,950
Gross subtotal 147,312 140,967 49,899 39,766 30,292 30,152 227,503 210,885
Allowance for ECL
(646)
(585)
-
-
(105)
(122)
(751)
(707)
Subtotal 146,666
140,382
49,899
39,766
30,187
30,030
226,752
210,178
Unearned income
(32)
(29)
-
-
-
-
(32)
(29)
Capitalised brokerage and other origination
costs
433
403
-
-
-
-
433
403
Maximum exposure to credit risk 147,067 140,756 49,899 39,766 30,187 30,030 227,153 210,552
1 Other includes exposures to information media and telecommunications; education and training; arts and recreation services; and other services.

NOTES TO THE FINANCIAL STATEMENTS




41
15. FINANCIAL RISK MANAGEMENT (continued)
COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there is
sufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers is
fundamental to the product’s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables is
typically repaid by the collection of those receivables. During the period there was no change in our collateral policies.
The nature of collateral or security held for the relevant classes of financial assets is as follows:
Net loans and advances
Loans – housing and personal Housing loans are secured by mortgage(s) over property and additional security may take the form of
guarantees and deposits.
Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take
security, then it is restricted to eligible vehicles, motor homes and other assets.
Loans – business Business loans may be secured, partially secured or unsecured. Typically, we take security by way of a
mortgage over property and/or a charge over the business or other assets.
If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters
of credit or derivative protection.
Other financial assets
Trading securities, investment
securities, derivatives and other
financial assets
For trading securities, we do not seek collateral directly from the issuer or counterparty. However, the
collateral may be implicit in the terms of the instrument (for example, with an asset-backed security).
The terms of debt securities may include collateralisation.
For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at
market levels current at the time of a counterparty default under International Swaps and Derivatives
Association (ISDA) Master Agreements.
Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative
positions with the counterparty are aggregated and cash collateral (or other forms of eligible collateral)
is exchanged daily. The collateral is provided by the counterparty when their position is out of the
money (or provided to the counterparty by the Banking Group when our position is out of the money).
Off-balance sheet positions
Undrawn and contingent facilities Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically
performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured
by mortgages over residential property and business lending secured by commercial real estate and/or
charges over business assets.
The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:

Maximum exposure
to credit risk Total value of collateral
Unsecured portion of
credit exposure

2022 2021 2022 2021 2022 2021

NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Net loans and advances 147,067 140,756 139,154 133,801 7,913 6,955
Other financial assets
49,899
39,766
4,453
1,878
45,446
37,888
Off-balance sheet positions
30,187
30,030
15,758
16,241
14,429
13,789
Total
227,153
210,552
159,365
151,920
67,788
58,632

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


42
15. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Banking Group’s trading and balance sheet management activities and the impact of changes and correlations between
interest rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
The BRC delegates responsibility for day-to-day management of both market risk and compliance with market risk policies to the Bank’s Asset &
Liability Committee (ALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Banking Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at
various levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk
factors and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
Traded market risk Non-traded market risk
Risk of loss from changes in the value of financial instruments due
to movements in price factors for both physical and derivative
trading positions. Principal risk categories monitored are:
• Currency risk – potential loss arising from changes in foreign
exchange rates or their implied volatilities.
• Interest rate risk – potential loss from changes in market
interest rates or their implied volatilities.
• Credit spread risk – potential loss arising from a movement
in margin or spread relative to a benchmark.
• Commodity risk – potential loss arising from changes in
commodity prices or their implied volatilities.
• Equity risk – potential loss arising from changes in equity
prices.
Risk of loss associated with the management of non-traded interest rate risk,
liquidity risk and foreign exchange exposures. This includes interest rate risk
in the banking book. This risk of loss arises from adverse changes in the
overall and relative level of interest rates for different tenors, differences in
the actual versus expected net interest margin, and the potential valuation
risk associated with embedded options in financial instruments and bank
products.

MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Banking Group’s possible daily loss based on historical market movements.
The Banking Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices and
volatilities over:
• the previous 500 business days, to calculate standard VaR; and
• a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using a one-day holding period. For stressed VaR we use a ten-day period. Back testing is used to ensure our
VaR models remain accurate.
The Banking Group measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant
holding period.

NOTES TO THE FINANCIAL STATEMENTS




43
15. FINANCIAL RISK MANAGEMENT (continued)
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:

2022 2021
High for Low for Average High for Low for Average
As at year year for year As at year year for year
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Traded value at risk 99% confidence

Foreign exchange
1.0 1.5 0.2 0.7
0.6 2.3 0.2 1.0
Interest rate
3.1 4.8 1.2 2.5
2.9 7.4 2.0 4.4
Credit
0.9 1.1 0.4 0.7
0.5 1.5 0.3 0.8
Diversification benefit
1

(1.3) n/a n/a (1.3)
(1.0) n/a n/a (1.3)
Total VaR 3.7 5.9 1.3 2.6 3.0 9.4 2.2 4.9
1 The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for
the Banking Group as a whole. Consequently, a diversification benefit for high and low would not be meani ngful and is therefore omitted from the table.

Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Banking Group’s banking book, while ensuring the Banking Group
maintains sufficient liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Banking Group’s future net interest
income. This risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the
investment of capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the
impact of a 1% rate shock). The table below shows VaR figures for non-traded interest rate risk for the Banking Group.

2022 2021
As at
High for
year
Low for
year
Average
for year As at
High for
year
Low for
year
Average
for year
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Non-traded value at risk 99% confidence
Total VaR 30.0 30.9 20.9 26.0 22.5 38.4 22.3 30.5

We undertake scenario analysis to stress test the impact of extreme events on the Banking Group’s market risk exposures. We model a 1% overnight
parallel positive shift in the yield curve to determine the potential impact on our net interest income over the next 12 months. This is a standard risk
measure which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported net
interest income.

2022 2021
Impact of 1% rate shock on 12 months of net interest income


As at period end
-0.5%
-1.4%
Maximum exposure
0.5% 0.2%
Minimum exposure
-2.2%
-2.0%
Average exposure (in absolute terms)
-0.7% -1.0%
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Where it is considered appropriate, the Banking Group takes out economic hedges against larger foreign exchange denominated revenue streams
(primarily Australian Dollar, US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in
foreign exchange rates on the consolidated capital ratios are minimised.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


44
15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Banking Group is either:
• unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
• does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding is overseen by ALCO following delegation from the BRC. Within an overall framework established by the BRC,
Treasury and Market Risk have responsibility for the control of funding and liquidity risk at the Banking Group level. Liquidity and funding risks are
governed by a set of principles approved by the Risk Committees of the Bank’s and Ultimate Parent Bank’s Boards and include:
• maintaining the ability to meet all payment obligations in the immediate term;
• ensuring that the Banking Group has the ability to meet ‘survival horizons’ under Banking Group specific and general market liquidity stress
scenarios to meet cash flow obligations over the short to medium term;
• maintaining strength in the Banking Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
• ensuring the liquidity management framework is compatible with local regulatory requirements;
• preparing daily liquidity reports and scenario analysis to quantify the Banking Group’s positions;
• targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
• holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
• establishing a detailed contingency plan to cover different liquidity crisis events.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY AND FUNDING RISK
Supervision and regulation
RBNZ requires the Bank to have a comprehensive Board approved liquidity strategy defining: policy, systems and procedures for measuring, assessing,
reporting and managing liquidity. This also includes a formal contingency plan for dealing with a liquidity crisis. The Banking Group is required to meet
one week and one month liquidity mismatch ratios and a one year core funding ratio each day.
Scenario modelling
A key component of the Banking Group’s liquidity management framework is scenario modelling of a range of regulatory and internal liquidity
metrics.
Potential severe liquidity crisis scenarios which model the behaviour of cash flows where there is a problem (real or perceived) may include, but are
not limited to, operational issues, doubts about the solvency of the Banking Group, or adverse rating changes. Under these scenarios the Banking
Group may have significant difficulty rolling over or replacing funding. The Banking Group’s liquidity policy requires sufficient high quality liquid assets
to be held to meet its liquidity needs for the following one month under the modelled scenarios.
As of 30 September 2022 the Banking Group was operating above the required minimums with the above scenarios.
Structural balance sheet metrics
The Banking Group’s liquidity management framework also encompasses structural balance sheet metrics such as the RBNZ core funding ratio. The
core funding ratio is designed to limit the amount of wholesale funding required to be rolled over within a one year timeframe and so interact with
the liquidity scenarios to maintain the Banking Group‘s liquidity position.
Wholesale funding
The Banking Group’s wholesale funding strategy is designed to deliver a sustainable portfolio of wholesale funds that balances cost efficiency with
targeting diversification by markets, investors, currencies, maturities and funding structures. Short-term and long-term wholesale funding is managed
and executed by Treasury.
The Banking Group also uses maturity concentration limits under the wholesale funding and liquidity management framework. Maturity
concentration limits ensure that the Banking Group is not required to issue large volumes of new wholesale funding within a short time period to
replace maturing wholesale funding. Funding instruments used to meet the wholesale borrowing requirement must be on a pre-established list of
approved products.
Funding capacity and debt issuance planning
The Banking Group adopts a conservative approach to determine its funding capacity. Annually, a funding plan is approved by the Bank’s Board. The
plan is supplemented by regular updates and is linked to the Banking Group’s three-year strategic planning cycle.

NOTES TO THE FINANCIAL STATEMENTS




45
15. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY PORTFOLIO MANAGEMENT
The Banking Group holds a diversified portfolio of cash and high quality liquid securities primarily to support liquidity risk management. The size of the
Banking Group’s liquidity portfolio is determined with consideration of the amount required to meet the requirements of its internal and regulatory
liquidity scenario metrics.
2022 2021
NZ$m NZ$m
Central and local government bonds 8,316 10,312
Government treasury bills 829 899
Certificates of deposit 656 959
Other bonds
8,372
8,913
Securities eligible to be accepted as collateral in repurchase transactions
18,173
21,083
Cash and balances with central banks
10,267
7,013
Total liquidity portfolio 28,440
28,096

Assets held in the Banking Group’s liquidity portfolio include short term cash held with RBNZ, New Zealand Government securities, securities issued by
supranational agencies, securities issued by highly rated banks and securities issued by State Owned Enterprises, Local Authorities and highly rated
New Zealand domestic corporates.
The Bank also held unencumbered internal residential mortgage backed securities (RMBS) which would be accepted as collateral by RBNZ in
repurchase transactions. These holdings would entitle the Bank to enter into repurchase transactions with RBNZ with a value of NZ$10,800 million at
30 September 2022 (2021: NZ$9,647 million).
RBNZ Term Lending Facility (TLF) and Funding for Lending Programme (FLP)
• Between May 2020 and July 2021, RBNZ made funds available under the TLF to promote lending to businesses. The TLF is a five-year secured
funding facility for New Zealand banks at a fixed rate of 0.25%.
• In November 2020, RBNZ announced the FLP which aimed to lower the cost of borrowing for New Zealand businesses and households. The FLP
is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash Rate (OCR). New Zealand banks
were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial businesses and non-profit
institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An additional allocation of up
to 2% of eligible loans is available, subject to certain conditions until 6 December 2022.
As at 30 September 2022, the Bank had drawn NZ$300 million (2021: NZ$300 million) under the TLF and NZ$2,500 million (2021: NZ$1,000 million)
under the FLP. These amounts are included in securities sold under repurchase agreements in Note 13 deposits and other borrowings.
Liquidity crisis contingency planning
The Banking Group maintains a liquidity crisis contingency plan to define an approach for analysing and responding to a liquidity-threatening event.
The framework includes:
• the establishment of crisis severity/stress levels;
• clearly assigned crisis roles and responsibilities;
• early warning signals indicative of an approaching crisis, and mechanisms to monitor and report these signals;
• action plans, and courses of action for altering asset and liability behaviour;
• procedures for crisis management reporting, and covering cash-flow shortfalls; and
• assigned responsibilities for internal and external communications.

FUNDING POSITION
The Banking Group actively uses balance sheet disciplines to prudently manage the funding mix. The Banking Group employs funding metrics to
ensure that an appropriate proportion of its assets are funded from stable sources, including customer liabilities, longer-dated wholesale debt (with
remaining term exceeding one year) and equity.

2022 2021
Note NZ$m NZ$m
Funding composition



Customer deposits 13
130,330
125,129
Wholesale funding

Debt issuances
21,023
21,502
Certificates of deposit and commercial paper
4,594 6,308
Other borrowings

4,718
1,702
Total wholesale funding

30,335
29,512
Total deposits and wholesale funding

160,665
154,641

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


46
15. FINANCIAL RISK MANAGEMENT (continued)
Analysis of funding liabilities by industry is based on ANZSIC codes. The significant categories shown are the level one NZSIOC.

2022 2021
NZ$m NZ$m
Customer deposits by industry - New Zealand residents



Agriculture, forestry and fishing
4,843
4,485
Mining
257 216
Manufacturing

2,808
2,707
Construction
2,800 2,884
Wholesale trade

2,808
2,688
Retail trade and accommodation

2,197
2,177
Transport, postal and warehousing
1,347 894
Financial and insurance services

13,516
13,836
Rental, hiring and real estate services

3,851
4,260
Professional, scientific, technical, administrative and support services
6,741 6,560
Public administration and safety

1,258
1,813
Health care and social assistance
1,397 1,544
Arts, recreation and other services

2,120
2,226
Households

71,752
67,196
Other
1
2,783 2,153
Subtotal

120,478
115,639
Customer deposits by industry - overseas



Households 8,852 8,693
All other non-residents

1,000
797
Subtotal
9,852 9,490
Total customer deposits
130,330
125,129
Wholesale funding (financial and insurance services industry)



New Zealand 8,251 7,891
Overseas

22,084
21,621
Total wholesale funding
30,335 29,512
Total deposits and wholesale funding

160,665
154,641

Concentrations of funding by geography



New Zealand
128,729
123,530
Australia
1,563 983
United States

12,986
12,791
Europe

10,389
10,369
Other countries
6,998 6,968
Total deposits and wholesale funding

160,665
154,641
1 Other includes electricity, gas, water and waste services; information media and telecommunications; and education and training.

NOTES TO THE FINANCIAL STATEMENTS




47
15. FINANCIAL RISK MANAGEMENT (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE BANKING GROUP’S FINANCIAL LIABILITIES
The tables below provide residual contractual maturity analysis of financial liabilities at 30 September 2022 and 30 September 2021 within relevant
maturity groupings. All outstanding debt issuances are profiled on the earliest date on which the Banking Group may be required to pay. The amounts
represent principal and interest cash flows – so they may differ from equivalent amounts reported on the balance sheet.
It should be noted that this is not how the Banking Group manages its liquidity risk. The management of this risk is detailed on page 44.

On
demand
Less than
3 months
3 to 12
months
1 to 5
years
After
5 years Total
2022 NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Settlement balances payable
4,677 299 - - - 4,976
Collateral received - 1,962 - - - 1,962
Deposits and other borrowings
83,587 24,318 26,899 6,335 - 141,139
Derivative financial liabilities (trading)
- 13,494 - - - 13,494
Debt issuances
1
- 173 4,886 15,404 3,243 23,706
Lease liabilities
- 13 39 155 42 249
Other financial liabilities
- 148 8 273 215 644
Derivative financial instruments
(balance sheet management)

- gross inflows
- 1,224 4,390 6,391 458 12,463
- gross outflows
- (1,229) (4,688) (6,482) (482) (12,881)

2021
Settlement balances payable 2,383 323 - - - 2,706
Collateral received - 738 - - - 738
Deposits and other borrowings 84,461 21,444 24,175 3,604 - 133,684
Derivative financial liabilities (trading) - 7,665 - - - 7,665
Debt issuances
1
- 26 4,594 12,863 4,907 22,390
Lease liabilities - 13 39 165 70 287
Other financial liabilities - 192 48 382 268 890
Derivative financial instruments
(balance sheet management)

- gross inflows - 447 3,098 4,559 296 8,400
- gross outflows - (468) (3,106) (4,572) (251) (8,397)
1 Any callable wholesale debt instruments have been included at their next call date. Refer to Note 14 debt issuances for subordinated debt call dates.

At 30 September 2022, NZ$30,292 million (2021: NZ$30,152 million) of its credit related commitments and contingent liabilities mature in less than 1
year, based on the earliest date on which the Banking Group may be required to pay.

ANZ BANK NEW ZEALAND LIMITED 2022 ANNUAL REPORT

NOTES TO THE FINANCIAL STATEMENTS


48
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Banking Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial
instruments on the balance sheet at fair value.
Fair value is the best estimate of 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.
The following tables set out the classification of financial assets and financial liabilities according to measurement bases together with their carrying
amounts as recognised on the balance sheet.
2022 2021



At
amortised
cost
At fair
value Total
At
amortised
cost
At fair
value Total
Note NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial assets

Cash and cash equivalents 7 12,575 - 12,575 7,844 - 7,844
Settlement balances receivable 785 - 785 237 - 237
Collateral paid
1,672 - 1,672 537 - 537
Trading securities 8

- 7,228 7,228
- 9,585 9,585
Derivative financial instruments 9

- 15,481 15,481
- 9,304 9,304
Investment securities 10
- 11,357 11,357
- 11,926 11,926
Net loans and advances 11
147,067 - 147,067
140,756 - 140,756
Other financial assets

955 - 955
496 - 496
Total 163,054 34,066 197,120 149,870 30,815 180,685
Financial liabilities
Settlement balances payable 4,933 - 4,933 2,704 - 2,704
Collateral received

1,962 - 1,962
738 - 738
Deposits and other borrowings 13

136,687 2,955 139,642
128,706 4,433 133,139
Derivative financial instruments 9
- 13,785 13,785
- 7,727 7,727
Debt issuances 14
21,023 - 21,023
21,502 - 21,502
Other financial liabilities

741 364 1,105
572 676 1,248
Total 165,346 17,104 182,450 154,222 12,836 167,058
FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Banking Group holds offsetting risk positions, then we use the portfolio exemption in NZ IFRS 13 Fair Value Measurement (NZ IFRS 13) to measure
the fair value of such groups of financial assets and financial liabilities. We measure the portfolio based on the price that would be received to sell a net
long position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
We designate commercial paper (included in deposits and other borrowings) as fair value through profit or loss where they are managed on a fair
value basis to align the measurement with how the instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUES
We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
Asset or liability Fair value approach
Financial instruments classified as:
- Trading securities
- Derivative financial assets and financial liabilities
- Investment securities
Valuation techniques are used that incorporate observable market inputs for financial
instruments with similar credit risk, maturity and yield characteristics.
Financial instruments classified as:
- Net loans and advances
- Deposits and other borrowings
- Debt issuances
Discounted cash flow techniques are used whereby contractual future cash flows of the
instrument are discounted using wholesale market interest rates, or market borrowing rates
for debt with similar maturities or with a yield curve appropriate for the remaining term to
maturity.

NOTES TO THE FINANCIAL STATEMENTS




49
16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
FAIR VALUE HIERARCHY
The Banking Group categorises assets and liabilities carried at fair value into a fair value hierarchy as required by NZ IFRS 13 based on the observability
of inputs used to measure the fair value:
• Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly
or indirectly; and
• Level 3 – valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:

Fair value measurements

Quoted market price
(Level 1)
Using observable inputs
(Level 2)
Using unobservable
inputs (Level 3)
Total
2022 2021 2022 2021 2022 2021 2022 2021
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Assets







Trading securities
5,565
8,276
1,663
1,309
-
-
7,228
9,585
Derivative financial instruments
109
19
15,372
9,284
-
1
15,481
9,304
Investment securities
10,895 11,925 461 - 1 1 11,357 11,926
Total 16,569 20,220 17,496 10,593 1 2 34,066 30,815
Liabilities
Deposits and other borrowings
-
-
2,955
4,433
-
-
2,955
4,433
Derivative financial instruments
8
5
13,765
7,722
12
-
13,785
7,727
Other financial liabilities
364
676
-
-
-
-
364
676
Total 372
681
16,720
12,155
12
-
17,104
12,836
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed in the table below are carried at amortised cost on the Banking Group’s balance sheet. While this is the
value at which we expect the assets will be realised and the liabilities settled, the Banking Group provides an estimate of the fair value of the financial
assets and financial liabilities at balance date in the table below.


Categorised into fair value hierarchy

Carrying amount
Quoted market price
(Level 1)
Using observable
inputs
(Level 2)
With significant non-
observable inputs
(Level 3) Fair value (total)
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m NZ$m
Financial assets


Net loans and advances 147,067 140,756 - - 136 129 145,323 140,574 145,459 140,703
Total 147,067
140,756
-
-
136
129
145,323
140,574
145,459
140,703
Financial liabilities









Deposits and other
borrowings
136,687 128,706 - - 136,493 128,726 - - 136,493 128,726
Debt issuances
21,023
21,502
2,561
2,626
18,391
19,276
-
-
20,952
21,902
Total 157,710
150,208
2,561
2,626
154,884
148,002
-
-
157,445
150,628