Exhibit 1
Pillar 3 ReportDECEMBER 2020 INCORPO RA TING THE REQUIREMEN TS OF APS330 W ESTPA C BANKING CORPOR ATION ABN 33 007 457 141,11estpac GROUP
Pillar 3 report Table of contentsStructure of Pillar 3 reportExecutive summary 3 Introduction 6 Group structure 8 Capital overview 9 Leverage ratio 13 Credit risk exposures 14 Securitisation 18 Liquidity coverage ratio 21 Appendix Appendix I | APS330 Quantitative requirements 22 Disclosure regarding forward-looking statements 23In this report references to ‘Westpac’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its controlled entities (unless the context indicates otherwise). In this report, unless otherwise stated or the context otherwise requires, references to ‘$’, ‘AUD’ or ‘A$’ are to Australian dollars. Any discrepancies between totals and sums of components in tables contained in this report are due to rounding. In this report, unless otherwise stated, disclosures reflect the Australian Prudential Regulation Authority’s (APRA) implementation of Basel III. Information contained in or accessible through the websites mentioned in this report does not form part of this report unless we specifically state that it is incorporated by reference and forms part of this report. All references in this report to websites are inactive textual references and are for information only.2 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Executive summaryKey capital ratiosLevel 2 Regulatory capital structure31 December 202030 September 202031 December 2019Common equity Tier 1 capital after deductions $m 51,048 48,733 47,593 Risk weighted assets $m 430,232 437,905 442,487 Common equity Tier 1 capital ratio % 11.87 11.13 10.76 Additional Tier 1 capital ratio % 2.30 2.10 2.08 Tier 1 capital ratio % 14.17 13.23 12.84 Tier 2 capital % 3.72 3.15 2.65 Total regulatory capital ratio % 17.89 16.38 15.49 APRA leverage ratio % 6.19 5.78 6.04 Level 1 Regulatory capital structure Common equity Tier 1 capital after deductions $m 51,622 49,453 47,997 Risk weighted assets $m 426,566 433,727 433,889 Level 1 Common equity Tier 1 capital ratio % 12.10 11.40 11.06Common equity Tier 1 capital ratio movement for First Quarter 2021 (basis points)Westpac’s Common equity Tier 1 (CET1) capital ratio was 11.87% at 31 December 2020, 74 basis points higher than 30 September 2020. Key movements in the CET1 capital ratio over the quarter were: • First Quarter 2021 cash earnings of $1,971 million (46 basis point increase); • A decline in Risk Weighted Assets (RWA) (18 basis point increase), from decreases in credit risk RWA which were partially offset by an increase in non-credit RWA; • Capital deductions and other capital movements (5 basis point increase) mainly due to lower deferred tax assets consistent with the reduction in impairment provisions, partially offset by movements in the fair value on economic hedges recognised in net profit; • Foreign currency impacts from the appreciation of the A$ against the US$ (3 basis point decrease)1; and • An 8 basis points increase from the sale of Westpac’s stake in Zip Co Limited.Payment of Westpac’s 2020 final dividend had no net impact on capital as the dividend reinvestment plan was fully underwritten. On 18 December 2020 Westpac issued 56.9 million new ordinary shares (Shares) ($1.12 billion) comprising 20.2 million Shares ($401 million) to participants in the dividend reinvestment plan (approximately 36% participation rate) and 36.7 million Shares ($719 million) to the underwriter.¹ Reflecting the net impact of movements in the foreign currency translation reserve and RWA.Westpac Group December 2020 Pillar 3 Report | 3
Pillar 3 report Executive summaryRisk Weighted Assets$m Risk weighted assets at Level 231 December 202030 September 202031 December 2019Credit risk 349,844 359,389 361,400 Market risk 9,607 8,761 9,005 Operational risk 54,090 54,090 54,206 Interest rate risk in the banking book 10,309 9,124 10,989 Other 6,382 6,541 6,888 Total RWA 430,232 437,905 442,487 Total Exposure at Default 1,063,136 1,062,238 1,039,769Total RWA decreased $7.7 billion or 1.8% over the quarter from a reduction in credit risk RWA. The $9.5 billion decline in credit risk RWA included: • A $5.5 billion decrease from improved credit quality comprising: o Mortgage RWAs decreased $3.4 billion primarily from improved asset quality (including lower defaulted loans) driven by a 16bps reduction in 90+ day delinquencies; o Lower stressed assets, mainly across small business and corporate lending reduced RWA by $1.5 billion; o A $0.6 billion reduction in the RWA overlay for corporate, business and specialised lending. This overlay balance is still $1.4 billion and was established to take account of facilities where facility reviews had not been completed following the disruption caused by COVID-19. The overlay will continue to be reassessed as customer reviews are completed. • A $2.2 billion decrease from lower lending, mostly from a further reduction in Trade Finance in Asia, as we consolidate our international operations. This has been partially offset by an increase in off balance sheet exposures, particularly higher undrawn mortgage commitments; • Foreign currency translation impacts which decreased RWA by $0.7 billion mostly from the appreciation of the A$ against the US$; and • A decrease in credit RWA associated with derivative exposures (counterparty credit risk and mark-to- market related credit risk) of $1.1 billion mainly relating to exchange rate movements.Non-credit risk RWA increased by $1.9 billion mainly due to a $1.2 billion increase in Interest Rate Risk in the Banking Book (IRRBB) and a $0.8 billion increase in market risk.Additional Tier 1 Capital On 4 December 2020, Westpac issued $1.72 billion of Additional Tier 1 capital (Westpac Capital Notes 7 (WCN7)), of which approximately $0.9 billion comprised reinvestment by the holders of Westpac Capital Notes 3 (WCN 3) 1. The net impact was an increase in Tier 1 capital of approximately 18 basis points.Tier 2 Capital On 16 November 2020, Westpac issued US$2.5 billion of Tier 2 capital instruments increasing the total capital ratio by approximately 79 basis points. The issuance was in response to APRA’s increased total capital requirements to be met by 1 January 2024.Exposure at Default Exposure at default (EAD) increased $0.9 billion over the quarter, primarily due to an increase in exposure to sovereigns and residential mortgages partially offset by a reduction in Trade Finance in Asia and foreign exchange movements.¹ A t 31 December 2020, approximately $0.4 billion of WCN 3 were outstanding. On 15 February 2021, Westpac announced that it will redeem all WCN 3 on issue on 22 March 2021.4 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Executive summaryLeverage Ratio The leverage ratio represents the amount of Tier 1 capital relative to exposure1. At 31 December 2020, Westpac’s leverage ratio was 6.19%, up 41 basis points since 30 September 2020.Liquidity Coverage Ratio (LCR) Westpac’s average LCR for the quarter ending 31 December 2020 was 152% (quarter ending 30 September 2020: 151%)2, 3.¹ As defined under Attachment D of APS110: Capital Adequacy. ² Calculated as a simple average of the daily observations over the relevant quarter. ³ Effective 1 January 2021, the Group is required by APRA to increase the value of its net cash outflows by 10% for the purpose of calculating LCR. On a pro forma basis, this reduces the 31 December 2020 LCR by 13 percentage points.Westpac Group December 2020 Pillar 3 Report | 5
Pillar 3 report Executive summaryLeverage Ratio The leverage ratio represents the amount of Tier 1 capital relative to exposure1. At 31 December 2020, Westpac’s leverage ratio was 6.19%, up 41 basis points since 30 September 2020.Liquidity Coverage Ratio (LCR) Westpac’s average LCR for the quarter ending 31 December 2020 was 152% (quarter ending 30 September 2020: 151%)2, 3.¹ As defined under Attachment D of APS110: Capital Adequacy. ² Calculated as a simple average of the daily observations over the relevant quarter. ³ Effective 1 January 2021, the Group is required by APRA to increase the value of its net cash outflows by 10% for the purpose of calculating LCR. On a pro forma basis, this reduces the 31 December 2020 LCR by 13 percentage points.Westpac Group December 2020 Pillar 3 Report | 5
Pillar 3 report Group structureAPRA applies a tiered approach to measuring Westpac’s capital adequacy1 by assessing financial strength at three levels: • Level 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved by APRA as being part of a single 'Extended Licensed Entity' (ELE) for the purposes of measuring capital adequacy; • Level 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except those entities specifically excluded by APRA regulations. The head of the Level 2 group is Westpac Banking Corporation; and • Level 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities. Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of Westpac’s financial strength on a Level 2 basis2. The Westpac Group The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory consolidation.Westpac Banking CorporationWestpac Level 1 subsidiariesWestpac New Zealand LtdOther Westpac Level 2 subsidiariesRegulatory non-consolidated subsidiariesLevel 1 ConsolidationLevel 2 Consolidation Level 3 ConsolidationAccounting consolidation3 The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (including structured entities) controlled by Westpac. Westpac and its subsidiaries are referred to collectively as the ‘Group’. The effects of all transactions between entities in the Group are eliminated on consolidation. Control exists when the parent entity is exposed to, or has rights to, variable returns from its involvement with an entity, and has the ability to affect those returns through its power over that entity. Subsidiaries are fully consolidated from the date on which control commences and they are no longer consolidated from the date that control ceases. Group entities excluded from the regulatory consolidation at Level 2 Regulatory consolidation at Level 2 covers the global operations of Westpac and its subsidiary entities, including other controlled banking, securities and financial entities, except for those entities involved in the following business activities: • insurance; • acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management; • non-financial (commercial) operations; or • special purpose entities to which assets have been transferred in accordance with the requirements of APS120 Securitisation. Retained earnings and equity investments in subsidiary entities excluded from the consolidation at Level 2 are deducted from capital, with the exception of securitisation special purpose entities.¹ APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy of an ADI. ² Impaired assets and provisions held in Level 3 entities are excluded from the tables in this report. ³ Refer to Note 31 of Westpac’s 2020 Annual Report for further details.Westpac Group December 2020 Pillar 3 Report | 7
Pillar 3 report Group structureSubsidiary banking entities Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity, is a registered bank incorporated in New Zealand and regulated by the Reserve Bank of New Zealand (RBNZ). WNZL uses the Advanced IRB approach for credit risk and the AMA for operational risk. Other subsidiary banking entities in the Group include Westpac Europe Limited. For the purposes of determining Westpac’s capital adequacy subsidiary banking entities are consolidated at Level 2. Restrictions and major impediments on the transfer of funds or regulatory capital within the Group Minimum capital (‘thin capitalisation’) rules Tax legislation in most jurisdictions in which the Group operates prescribes minimum levels of capital that must be retained in that jurisdiction to avoid a portion of the interest costs incurred in the jurisdiction ceasing to be tax deductible. Capital for these purposes includes both contributed capital and non-distributed retained earnings. Westpac seeks to maintain sufficient capital/retained earnings to comply with these rules. Tax costs associated with repatriation Repatriation of retained earnings (and capital) may result in tax being payable in either the jurisdiction from which the repatriation occurs or Australia on receipt of the relevant amounts. This cost would reduce the amount actually repatriated. Intra-group exposure limits Exposures to related entities are managed within the prudential limits prescribed by APRA in APS222 Associations with Related Entities1. Westpac has an internal limit structure and approval process governing credit exposures to related entities. This limit structure and approval process, combined with APRA’s prudential limits, is designed to reduce the potential for unacceptable contagion risk. Prudential regulation of subsidiary entities Certain subsidiary banking, insurance and trustee entities are subject to local prudential regulation in their own right, including capital adequacy requirements and investment or intra-group exposure limits. Westpac seeks to ensure that its subsidiary entities are adequately capitalised and adhere to regulatory requirements at all times. There are no capital deficiencies in subsidiary entities excluded from the regulatory consolidation at Level 2. On 2 April 2020, a decision was made by the RBNZ to temporarily defer the distribution of dividends on ordinary shares by all banks in New Zealand during the period of economic uncertainty caused by COVID- 19. On 11 November 2020 the RBNZ announced that they will maintain restrictions on dividends and redemption of non-CET1 capital instruments until 31 March 2021, or later if required.¹ For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent ‘related entities’. Prudential and internal limits apply to intra-group exposures between the ELE and related entities, both on an individual and aggregate basis.8 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Capital overviewCapital management strategy Westpac’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI. Westpac evaluates its approach to capital management through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which include: • the development of a capital management strategy, including consideration of regulatory minimums, capital buffers and contingency plans; • consideration of both regulatory and economic capital requirements; • a stress testing framework that challenges the capital measures, coverage and requirements including the impact of adverse economic scenarios; and • consideration of the perspectives of external stakeholders including rating agencies as well as equity and debt investors. During the period of disruption caused by COVID-19, Westpac is operating with the following principles in relation to capital: • prioritise maintaining capital strength; • retain capital to absorb further downside on credit quality and acknowledge a high degree of uncertainty regarding the length and depth of this stress; • allow for capital flexibility to support lending to customers; and • in line with APRA guidance, Westpac will seek to maintain a buffer above the regulatory minimum (currently at least 8% for D-SIBs including Westpac) and may utilise some of the “unquestionably strong” buffer. At 31 December 2020 the CET1 buffer above the regulatory minimum of 8% was $16.6 billion. These principles take into consideration: • current regulatory capital minimums and the capital conservation buffer (CCB), which together are the Total CET1 Requirement. In line with the above, the Total CET1 Requirement for Westpac is at least 8.0%, based upon an industry minimum CET1 requirement of 4.5% plus a capital buffer of at least 3.5% applicable to D-SIBs1, 2; • stress testing to calibrate an appropriate buffer against a downturn; and • quarterly volatility of capital ratios due to the half yearly cycle of ordinary dividend payments. Westpac will revise its target capital levels once the medium to longer term impacts of COVID-19 are clearer and APRA’s review of the capital adequacy framework is finalised.APRA announcements on capital On 15 December 2020 APRA issued revised capital management guidance³. From 1 January 2021 APRA will no longer hold ADIs to a minimum level of earnings retention (previously 50% of net profit after tax). APRA has also stated that it expects banks to moderate dividend payout ratios, consider the use of dividend reinvestment plans (DRPs) and/or other capital management initiatives to offset the impact from distributions and conduct regular stress testing. In addition, APRA has released further guidance on the implementation of Basel III reforms which will embed the “unquestionably strong” level of capital in the framework. On 8 December 2020 APRA outlined its proposals for changes to the capital framework including proposed changes to RWA effective from 1 January 2023⁴ . The proposed changes are not expected to require ADIs to raise additional capital and are currently open for consultation until April 2021.¹ Noting that APRA may apply higher CET1 requirements for an individual ADI. ² If an ADI’s CET1 ratio falls below the Total CET1 Requirement (at least 8%), they face restrictions on the distribution of earnings, such as dividends, distribution payments on AT1 capital instruments and discretionary staff bonuses. ³ Letter to all authorised deposit taking institutions and insurers – “Capital Management” dated 15 December 2020. ⁴ Discussion paper: A more flexible and resilient capital framework for ADIs published 8 December 2020.Westpac Group December 2020 Pillar 3 Report | 9
Pillar 3 report Capital overviewWestpac’s capital adequacy ratios % 31 December 2020 30 September 2020 31 December 2019 The Westpac Group at Level 2 Common equity Tier 1 capital ratio 11.9 11.1 10.8 Additional Tier 1 capital 2.3 2.1 2.1 Tier 1 capital ratio 14.2 13.2 12.8 Tier 2 capital 3.7 3.1 2.7 Total regulatory capital ratio 17.9 16.4 15.5 The Westpac Group at Level 1 Common equity Tier 1 capital ratio 12.1 11.4 11.1 Additional Tier 1 capital 2.3 2.1 2.1 Tier 1 capital ratio 14.4 13.5 13.2 Tier 2 capital 3.8 3.2 2.7 Total regulatory capital ratio 18.2 16.7 15.9Westpac New Zealand Limited’s capital adequacy ratios % 31 December 2020 30 September 2020 31 December 2019 Westpac New Zealand Limited Common equity Tier 1 capital ratio 12.9 12.3 11.4 Additional Tier 1 capital 2.7 2.7 2.6 Tier 1 capital ratio 15.6 15.0 14.0 Tier 2 capital 2.0 2.1 1.9 Total regulatory capital ratio 17.6 17.1 15.910 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Capital overviewCapital requirements This table shows RWA and associated capital requirements1 for each risk type included in the regulatory assessment of Westpac’s capital adequacy. More detailed disclosures on the prudential assessment of capital requirements are presented in the following sections of this report.31 December 2020 IRB Standardised Total Risk Total Capital $m Approach Approach2 Weighted Assets Required1 Credit risk Corporate 69,529 906 70,435 5,635 Business lending 36,141 809 36,950 2,956 Sovereign 2,409 1,010 3,419 273 Bank 5,011 125 5,136 411 Residential mortgages 128,925 4,299 133,224 10,658 Australian credit cards 4,365 - 4,365 349 Other retail 9,769 762 10,531 842 Small business 16,312 - 16,312 1,305 Specialised lending 56,878 404 57,282 4,583 Securitisation 5,291 - 5,291 423 Mark-to-market related credit risk³ - 6,899 6,899 552 Total 334,630 15,214 349,844 27,987 Market risk 9,607 769 Operational risk 54,090 4,327 Interest rate risk in the banking book 10,309 825 Other assets⁴ 6,382 511 Total 430,232 34,41930 September 2020 IRB Standardised Total Risk Total Capital $m Approach Approach2 Weighted Assets Required1 Credit risk Corporate 73,666 976 74,642 5,971 Business lending 36,777 880 37,657 3,013 Sovereign 2,376 1,216 3,592 287 Bank 5,640 144 5,784 463 Residential mortgages 130,787 4,431 135,218 10,818 Australian credit cards 4,405 - 4,405 352 Other retail 10,174 774 10,948 876 Small business 16,977 - 16,977 1,358 Specialised lending 57,019 432 57,451 4,596 Securitisation 5,413 - 5,413 433 Mark-to-market related credit risk³ - 7,302 7,302 584 Total 343,234 16,155 359,389 28,751 Market risk 8,761 701 Operational risk 54,090 4,327 Interest rate risk in the banking book 9,124 730 Other assets⁴ 6,541 523 Total 437,905 35,032¹ Total capital required is calculated as 8% of total risk weighted assets. ² Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories. ³ Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk. ⁴ Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.Westpac Group December 2020 Pillar 3 Report | 11
Pillar 3 report Capital overview31 December 2019 IRB Standardised Total Risk Total Capital $m Approach Approach2 Weighted Assets Required1 Credit risk Corporate 73,249 1,072 74,321 5,946 Business lending 35,096 896 35,992 2,879 Sovereign 1,723 1,073 2,796 224 Bank 7,758 35 7,793 623 Residential mortgages 130,001 4,833 134,834 10,787 Australian credit cards 4,897 - 4,897 392 Other retail 12,222 881 13,103 1,048 Small business 16,535 - 16,535 1,323 Specialised lending 55,771 488 56,259 4,501 Securitisation 5,647 - 5,647 452 Mark-to-market related credit risk³ - 9,224 9,224 738 Total 342,899 18,502 361,400 28,913 Market risk 9,005 720 Operational risk 54,206 4,336 Interest rate risk in the banking book 10,989 879 Other assets⁴ 6,888 551 Total 442,487 35,399¹ Total capital required is calculated as 8% of total risk weighted assets. ² Westpac’s standardised risk weighted assets are categorised based on their equivalent IRB categories. ³ Mark-to-market related credit risk is measured under the standardised approach. It is also known as CVA risk. ⁴ Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.12 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Leverage ratio disclosureLeverage ratio The following table summarises Westpac’s leverage ratio. This has been determined using APRA’s definition of the leverage ratio as specified in APS110 Capital Adequacy.$ billion 31 December 2020 30 September 2020 30 June 2020 31 March 2020 Tier 1 Capital 61.0 57.9 57.9 57.5 Total Exposures 984.3 1,001.8 985.6 1,014.2 Leverage ratio 6.2% 5.8% 5.9% 5.7%Westpac Group December 2020 Pillar 3 Report | 13
Pillar 3 report Credit risk exposuresSummary credit risk disclosureRegulatory Expected Specific Actual Risk Regulatory Loss for Provisions Losses for31 December 2020 Exposure Weighted Expected non-defaulted Impaired for Impaired the 3 months $m at Default Assets Loss1 exposures Loans Loans ended Corporate 123,745 69,529 717 477 472 224 14 Business lending 53,765 36,141 793 510 396 211 8 Sovereign 137,220 2,409 2 2 - - - Bank 20,990 5,011 7 7 - - - Residential mortgages 556,263 128,925 1,883 997 281 80 31 Australian credit cards 16,790 4,365 204 162 74 43 43 Other retail 13,130 9,769 499 327 308 174 35 Small business 32,530 16,312 638 368 627 270 8 Specialised Lending 65,532 56,878 801 650 59 18 (1) Securitisation 26,841 5,291 - - - - - Standardised² 16,330 15,214 - - 51 18 - Total 1,063,136 349,844 5,544 3,500 2,268 1,038 138Regulatory Expected Specific Actual Risk Regulatory Loss for Provisions Losses for 30 September 2020 Exposure Weighted Expected non-defaulted Impaired for Impaired the 12 months $m at Default Assets Loss1 exposures Loans Loans ended Corporate 129,988 73,666 758 514 558 244 95 Business lending 54,542 36,777 809 534 392 208 71 Sovereign 131,857 2,376 1 1 - - - Bank 23,244 5,640 7 7 - - - Residential mortgages 550,133 130,787 1,966 1,033 345 93 125 Australian credit cards 16,944 4,405 214 166 83 48 332 Other retail 13,471 10,174 522 341 326 187 275 Small business 32,758 16,977 685 350 933 328 74 Specialised Lending 65,491 57,019 837 659 86 25 3 Securitisation 26,817 5,413 - - - - - Standardised² 16,993 16,155 - - 56 19 2 Total 1,062,238 359,389 5,799 3,605 2,779 1,152 977Regulatory Expected Specific Actual Risk Regulatory Loss for Provisions Losses for 31 December 2019 Exposure Weighted Expected non-defaulted Impaired for Impaired the 3 months $m at Default Assets Loss1 exposures Loans Loans ended Corporate 136,056 73,249 589 462 198 126 (3) Business lending 54,640 35,096 614 414 317 162 23 Sovereign 89,687 1,723 1 1 - - - Bank 27,120 7,758 16 16 - - - Residential mortgages 553,492 130,001 1,657 1,099 394 122 34 Australian credit cards 19,159 4,897 309 235 118 73 83 Other retail 15,646 12,222 582 411 295 172 54 Small business 33,388 16,535 530 362 380 168 20 Specialised Lending 65,798 55,771 769 576 60 29 - Securitisation 26,935 5,647 - - - - - Standardised² 17,848 18,502 - - 55 20 - Total 1,039,769 361,401 5,067 3,576 1,817 871 211¹ Includes regulatory expected losses for defaulted and non-defaulted exposures. ² Includes mark-to-market related credit risk.14 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Credit risk exposuresExposure at Default by major type 31 December 2020 On balanceOff-balance sheetTotal Exposure Average$m sheet Non-market related Market related at Default 3 months ended1 Corporate 53,908 58,175 11,662 123,745 126,867 Business lending 39,878 13,887 - 53,765 54,154 Sovereign 110,646 1,632 24,942 137,220 134,539 Bank 11,790 1,925 7,275 20,990 22,117 Residential mortgages 482,838 73,425 - 556,263 553,198 Australian credit cards 6,799 9,991 - 16,790 16,867 Other retail 9,939 3,191 - 13,130 13,301 Small business 25,145 7,385 - 32,530 32,644 Specialised lending 53,313 10,182 2,037 65,532 65,512 Securitisation² 20,544 6,174 123 26,841 26,829 Standardised 12,558 1,098 2,674 16,330 16,662 Total 827,358 187,065 48,713 1,063,136 1,062,69030 September 2020 On balanceOff-balance sheetTotal Exposure Average$m sheet Non-market related Market related at Default 12 months ended3 Corporate 57,485 60,099 12,404 129,988 137,385 Business lending 40,989 13,553 - 54,542 54,578 Sovereign 106,524 1,604 23,729 131,857 111,274 Bank 13,161 1,873 8,210 23,244 25,935 Residential mortgages 481,096 69,037 - 550,133 553,586 Australian credit cards 6,652 10,292 - 16,944 17,979 Other retail 10,210 3,261 - 13,471 14,880 Small business 25,463 7,295 - 32,758 33,158 Specialised lending 52,803 10,629 2,059 65,491 65,530 Securitisation² 20,542 6,138 137 26,817 27,152 Standardised 12,911 1,178 2,904 16,993 19,255 Total 827,836 184,959 49,443 1,062,238 1,060,71231 December 2019 On balanceOff-balance sheetTotal Exposure Average$m sheet Non-market related Market related at Default 3 months ended4 Corporate 62,314 60,621 13,121 136,056 137,615 Business lending 42,111 12,529 - 54,640 54,605 Sovereign 79,117 1,773 8,797 89,687 90,323 Bank 15,811 2,133 9,176 27,120 27,940 Residential mortgages 485,438 68,054 - 553,492 556,255 Australian credit cards 8,651 10,508 - 19,159 18,350 Other retail 12,143 3,503 - 15,646 15,799 Small business 26,411 6,977 - 33,388 33,376 Specialised lending 53,903 10,034 1,861 65,798 65,676 Securitisation² 21,740 5,085 110 26,935 26,855 Standardised 12,985 1,123 3,740 17,848 20,180 Total 820,624 182,340 36,805 1,039,769 1,046,974¹ Average is based on exposures as at 30 September 2020 and 31 December 2020. ² The EAD associated with securitisations is for the banking book only. ³ Average is based on exposures as at 30 September 2019, 31 December 2019, 31 March 2020, 30 June 2020, and 30 September 2020. ⁴ Average is based on exposures as at 30 September 2019 and 31 December 2019.Westpac Group December 2020 Pillar 3 Report | 15
Pillar 3 report Credit risk exposuresLoan impairment provisions APS220 Credit Quality requires that Westpac report specific provisions and a General Reserve for Credit Loss (GRCL). All Individually Assessed Provisions (IAP) raised under Australian Accounting Standards (AAS) are classified as specific provisions. All Collectively Assessed Provisions (CAP) raised under AAS are either classified into specific provisions or a GRCL.31 December 2020A-IFRS ProvisionsTotal Regulatory$m IAPs CAPs Provisions Specific Provisions for impaired loans 594 444 1,038 for defaulted but not impaired loans NA 1,004 1,004 For Stage 2 NA 1,972 1,972 Total Specific Provision¹ 594 3,420 4,014 General Reserve for Credit Loss¹ NA 1,516 1,516 Total provisions for ECL 594 4,936 5,53030 September 2020A-IFRS ProvisionsTotal Regulatory$m IAPs CAPs Provisions Specific Provisions for impaired loans 611 541 1,152 for defaulted but not impaired loans NA 1,021 1,021 For Stage 2 NA 2,199 2,199 Total Specific Provision¹ 611 3,761 4,372 General Reserve for Credit Loss¹ NA 1,791 1,791 Total provisions for ECL 611 5,552 6,16331 December 2019A-IFRS ProvisionsTotal Regulatory$m IAPs CAPs Provisions Specific Provisions for impaired loans 483 388 871 for defaulted but not impaired loans NA 558 558 For Stage 2 NA 1,246 1,246 Total Specific Provision¹ 483 2,192 2,675 General Reserve for Credit Loss¹ NA 1,303 1,303 Total provisions for ECL 483 3,495 3,978¹ Provisions classified according to APRA’s letter dated 4 July 2017 “Provisions for regulatory purposes and AASB 9 financial instruments”.16 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Credit risk exposuresImpaired and past due loans The following tables disclose the crystallisation of credit risk as impairment and loss. Analysis of exposures defaulted not impaired, impaired loans, related provisions and actual losses is broken down by concentrations reflecting Westpac’s asset categories.Specific Specific Actual 31 December 2020 Defaulted Impaired Provisions for Provisions to Losses for the $m not impaired1 Loans Impaired Loans Impaired Loans 3 months ended Corporate 213 472 224 47% 14 Business lending 680 396 211 53% 8 Sovereign - - - - - Bank - - - - - Residential mortgages 6,309 281 80 28% 31 Australian credit cards - 74 43 58% 43 Other retail - 308 174 56% 35 Small business 444 627 270 43% 8 Specialised lending 212 59 18 31% (1) Securitisation - - - - - Standardised 85 51 18 35% - Total 7,943 2,268 1,038 46% 138 Specific Specific Actual 30 September 2020 Defaulted Impaired Provisions for Provisions to Losses for the $m not impaired1 Loans Impaired Loans Impaired Loans 12 months ended Corporate 127 558 244 44% 95 Business lending 598 392 208 53% 71 Sovereign - - - - - Bank - - - - - Residential mortgages 7,042 345 93 27% 125 Australian credit cards - 83 48 58% 332 Other retail - 326 187 57% 275 Small business 440 933 328 35% 74 Specialised lending 229 86 25 29% 3 Securitisation - - - - - Standardised 96 56 19 34% 2 Total 8,532 2,779 1,152 41% 977Specific Specific Actual 31 December 2019 Defaulted Impaired Provisions for Provisions to Losses for the $m not impaired¹ Loans Impaired Loans Impaired Loans 3 months ended Corporate 94 198 126 64% (3) Business lending 430 317 162 51% 23 Sovereign - - - - - Bank - - - - - Residential mortgages 3,732 394 122 31% 34 Australian credit cards - 118 73 62% 83 Other retail - 295 172 58% 54 Small business 371 380 168 44% 20 Specialised lending 273 60 29 48% - Securitisation - - - - - Standardised 72 55 20 36% - Total 4,972 1,817 871 48% 211¹ Includes items past 90 days not impaired.Westpac Group December 2020 Pillar 3 Report | 17
Pillar 3 report SecuritisationBanking book summary of securitisation activity by asset type For the 3 months ended 31 December 2020 Amount Recognised gain or $m securitised loss on sale Residential mortgages 4,966 - Credit cards - - Auto and equipment finance 325 - Business lending - - Investments in ABS - - Other - - Total 5,291 -For the 12 months ended 30 September 2020 Amount Recognised gain or $m securitised loss on sale Residential mortgages 76,353 - Credit cards - - Auto and equipment finance 506 - Business lending - - Investments in ABS - - Other - - Total 76,859 -For the 3 months ended 31 December 2019 Amount Recognised gain or $m securitised loss on sale Residential mortgages 370 - Credit cards - - Auto and equipment finance 81 - Business lending - - Investments in ABS - - Other - - Total 451 -18 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report SecuritisationBanking book summary of on and off-balance sheet securitisation by exposure type31 December 2020On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 7,252 32 7,284 Liquidity facilities - - 279 279 Funding facilities 2,255 - 1,281 3,536 Underwriting facilities - - - - Lending facilities 710 - 530 1,240 Warehouse facilities 10,326 - 4,176 14,502 Total 13,291 7,252 6,298 26,84130 September 2020On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 7,650 19 7,669 Liquidity facilities - - 308 308 Funding facilities 2,167 - 1,589 3,756 Underwriting facilities - - - - Lending facilities 551 - 404 956 Warehouse facilities 10,173 - 3,955 14,128 Total 12,892 7,650 6,275 26,81731 December 2019On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 8,806 38 8,844 Liquidity facilities - - 288 288 Funding facilities 2,967 - 1,077 4,043 Underwriting facilities - - - - Lending facilities 512 - 217 729 Warehouse facilities 9,456 - 3,575 13,031 Total 12,935 8,806 5,195 26,935Westpac Group December 2020 Pillar 3 Report | 19
Pillar 3 report SecuritisationTrading book summary of on and off-balance sheet securitisation by exposure type131 December 2020On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 11 - 11 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 112 112 Other derivatives - - 11 11 Total - 11 123 13430 September 2020On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 30 - 30 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 103 103 Other derivatives - - 17 17 Total - 30 120 15031 December 2019On balance sheetOff-balance Total Exposure$m Securitisation retained Securitisation purchased sheet at Default Securities - 55 - 55 Liquidity facilities - - - - Funding facilities - - - - Underwriting facilities - - - - Lending facilities - - - - Warehouse facilities - - - - Credit enhancements - - - - Basis swaps - - 109 109 Other derivatives - - 18 18 Total - 55 127 182¹ EAD associated with trading book securitisation is not included in EAD by major type on page 14. Trading book securitisation exposure is captured and risk weighted under APS116 Capital Adequacy: Market Risk.20 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Liquidity coverage ratioLiquidity Coverage Ratio (LCR) Westpac’s LCR as at 31 December 2020 was 142%1 (30 September 2020: 150%) and the average LCR for the quarter was 152%2 (30 September 2020: 151%)3. Liquid assets included in the LCR comprise High Quality Liquid Assets (HQLA), the Committed Liquidity Facility (CLF) offered by the Reserve Bank of Australia and additional qualifying RBNZ securities. LCR liquid assets also include Westpac’s Supplementary Allowance and Additional Allowance of the Term Funding Facility (TFF). Westpac’s portfolio of HQLA averaged $126.8 billion over the quarter2. Funding is sourced from retail, small business, corporate and institutional customer deposits and wholesale funding. Westpac seeks to minimise the outflows associated with this funding by targeting customer deposits with lower LCR outflow rates and actively manages the maturity profile of its wholesale funding portfolio. Westpac maintains a buffer over the regulatory minimum of 100%.31 December 2020 30 September 2020Total unweightedTotal weightedTotal unweightedTotal weighted$m Liquid assets, of which:value (average)² value (average)²value (average)² value (average)²1 High-quality liquid assets (HQLA) 2 Alternative liquid assets (ALA) 3 Reserve Bank of New Zealand (RBNZ) securities126,801 53,291 7,019116,687 56,804 8,283Cash Outflows 4 Retail deposits and deposits from small business customers, of which:283,038 24,896 270,996 23,8025 Stable deposits 6 Less stable deposits141,806 7,090 135,453 6,773 141,232 17,806 135,543 17,0297 Unsecured wholesale funding, of which: 8 Operational deposits (all counterparties) and deposits in networks for cooperative banks 9 Non-operational deposits (all counterparties) 10 Unsecured debt163,105 75,875 158,397 74,305 75,421 18,773 71,549 17,80975,751 45,169 76,666 46,314 11,933 11,933 10,182 10,18211 Secured wholesale funding - -12 Additional requirements, of which: 13 Outflows related to derivatives exposures and other collateral requirements 14 Outflows related to loss of funding on debt products 15 Credit and liquidity facilities200,526 25,969 196,312 26,567 10,198 10,198 11,275 11,275656 656 516 516 189,672 15,115 184,521 14,77616 Other contractual funding obligations 17 Other contingent funding obligations689 689 185 185 39,735 3,346 39,767 3,37918 Total cash outflows 130,775 128,238Cash inflows 19 Secured lending (e.g. reverse repos) 10,551 - 9,270 - 20 Inflows from fully performing exposures 9,337 5,532 8,831 5,304 21 Other cash inflows 2,206 2,206 2,604 2,604 22 Total cash inflows 22,094 7,738 20,705 7,90823 Total liquid assets 24 Total net cash outflows 25 Liquidity Coverage Ratio (%) Number of data points used187,111 123,037 152% 65181,774 120,330 151% 66¹ Calculated as total liquid assets divided by total net cash outflows. ² Calculated as a simple average of the daily observations over the quarter. ³ Effective 1 January 2021, the Group is required by APRA to increase the value of its net cash outflows by 10% for the purpose of calculating LCR. On a pro forma basis, this reduces the 31 December 2020 LCR by 13 percentage points.Westpac Group December 2020 Pillar 3 Report | 21
Pillar 3 report Appendix I | APS330 quantitative requirementsThe following table cross-references the quantitative disclosure requirements outlined in Attachment C of APS330 to the quantitative disclosures made in this report. APS330 reference Westpac disclosure Page General Requirements Paragraph 49 Summary leverage ratio 13Attachment C Table 3: Capital Adequacy(a) to (e) (f)Capital requirements 11 Westpac’s capital adequacy ratios 10 Capital adequacy ratios of major subsidiary banks 10Table 4: Credit Risk - general disclosures(a) (b) (c)Exposure at Default by major type 15 Impaired and past due loans 17 General reserve for credit loss 16Table 5: Securitisation exposures(a) (b)Banking Book summary of securitisation activity by asset type 18 Banking Book summary of on and off-balance sheet securitisation by exposure type 19 Trading Book summary of on and off-balance sheet securitisation by exposure type 20Attachment F Table 20: Liquidity Coverage Ratio disclosure templateLiquidity Coverage Ratio disclosure 21Exchange rates The following exchange rates were used in this report, and reflect spot rates for the period end.$ 31 December 2020 30 September 2020 31 December 2019 USD 0.7705 0.7108 0.7005 GBP 0.5656 0.5540 0.5340 NZD 1.0665 1.0802 1.0410 EUR 0.6267 0.6060 0.625222 | Westpac Group December 2020 Pillar 3 Report
Pillar 3 report Disclosure regarding forward-looking statementsThis report contains statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US Securities Exchange Act of 1934. Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of places in this report and include statements regarding Westpac’s intent, belief or current expectations with respect to its business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions and financial support to certain borrowers. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘risk’, ‘aim’, ‘outlook’ or other similar words are used to identify forward-looking statements. These forward-looking statements reflect Westpac’s current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond Westpac’s control, and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon Westpac. There can be no assurance that future developments will be in accordance with Westpac’s expectations or that the effect of future developments on Westpac will be those anticipated. Actual results could differ materially from those expected, depending on the outcome of various factors, including, but not limited to: ⚫ the effect of the global COVID-19 pandemic, which has had, and is expected to continue to have, a negative impact on our business and global economic conditions, adversely affected a wide-range of Westpac's key suppliers, third-party contractors and customers, created increased volatility in financial markets and may result in increased impairments, defaults and write-offs; ⚫ the effect of, and changes in, laws, regulations, taxation or accounting standards or practices and government policy, particularly changes to liquidity, leverage and capital requirements; ⚫ regulatory investigations, reviews, and other actions, inquiries, litigation, fines, penalties, restrictions or other regulator imposed conditions, including as a result of our actual or alleged failure to comply with laws (such as financial crime laws), regulations or regulatory policy; ⚫ the failure to comply with financial crime obligations, which has had, and could further have, adverse effects on our business and reputation; ⚫ internal and external events which may adversely impact Westpac's reputation; ⚫ litigation and other legal proceedings and regulator investigations and enforcement actions; ⚫ information security breaches, including cyberattacks; ⚫ reliability and security of Westpac's technology and risks associated with changes to technology systems; ⚫ the stability of Australian and international financial systems and disruptions to financial markets and any losses or business impacts Westpac or its customers or counterparties may experience as a result; ⚫ market volatility, including uncertain conditions in funding, equity and asset markets; ⚫ an increase in defaults in credit exposures because of a deterioration in economic conditions; ⚫ adverse asset, credit or capital market conditions; ⚫ the incidence of inadequate capital levels under stressed conditions; ⚫ the risk that governments will default on their debt obligations or will be unable to refinance their debts as they fall due; ⚫ changes to Westpac's credit ratings or to the methodology used by credit rating agencies; ⚫ levels of inflation, interest rates (including low or negative rates), exchange rates and market and monetary fluctuations and volatility; ⚫ an increase in defaults, write-offs and provisions for credit impairments; ⚫ changes in economic conditions, consumer spending, saving and borrowing habits in Australia, New Zealand and other countries (including as a result of tariffs and protectionist trade measures) in which Westpac or its customers or counterparties conduct their operations and Westpac’s ability to maintain or to increase market share, margins and fees, and control expenses; ⚫ the effects of competition, including from established providers of financial services and from non-financial service entities, in the geographic and business areas in which Westpac conducts its operations; ⚫ poor data quality or poor data retention; ⚫ the effectiveness of Westpac's risk management policies, including internal processes, systems and employees, and operational risks resulting from ineffective processes and controls, as well as breakdowns in processes and procedures requiring remediation activity; ⚫ the incidence or severity of Westpac-insured events; ⚫ the occurrence of environmental change (including as a result of climate change) or external events in countries in which Westpac or its customers or counterparties conduct their operations; ⚫ changes to Westpac’s critical accounting estimates and judgments and changes to the value of Westpac's intangible assets;Westpac Group December 2020 Pillar 3 Report | 23
Pillar 3 report Disclosure regarding forward-looking statements⚫ changes in political, social or economic conditions in any of the major markets in which Westpac or its customers or counterparties operate; ⚫ the inability to syndicate or sell down underwritten securities, particularly during times of heightened market volatility; ⚫ the success of strategic decisions involving diversification or innovation, in addition to business expansion activity, business acquisitions and the integration of new businesses; and ⚫ various other factors beyond Westpac's control. The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac refer to ‘Risk factors’ in Westpac’s 2020 Annual Report. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and events. Westpac is under no obligation to update any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise, after the date of this report.24 | Westpac Group December 2020 Pillar 3 Report