BASEL Pillar 3 - Bank of China Public Disclosure of...BASEL Pillar 3 Public Disclosure of Prudential Information Part 1 under APS 330 – Dec 2015 Bank of China (Australia) Limited

BASEL Pillar 3

Public Disclosure of Prudential Information under APS 330As at 31 Dec 2015

Bank of China (Australia) Limited

BASEL Pillar 3Public Disclosure of Prudential Information Part 1under APS 330 – Dec 2015Bank of China (Australia) Limited

A$mReconciliation

Table Reference

1Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital 80.0 Table 1: E19

2 Retained earnings 17.3 Table 1: E213 Accumulated other comprehensive income (and other reserves) 0.0 Table 1: E20

4Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) -

5Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) -

6 Common Equity Tier 1 capital before regulatory adjustments 97.4

7 Prudential valuation adjustments - 8 Goodwill (net of related tax liability) -

9 Other intangibles other than mortgage servicing rights (net of related tax liability) -

10Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability)

11 Cash-flow hedge reserve - 12 Shortfall of provisions to expected losses - 13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) - 14 Gains and losses due to changes in own credit risk on fair valued liabilities - 15 Defined benefit superannuation fund net assets -

16Investments in own shares (if not already netted off paid-in capital on reported balance sheet) -

17 Reciprocal cross-holdings in common equity -

18Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) -

19Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) -

20 Mortgage service rights (amount above 10% threshold) -

21Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) (0.8)

22 Amount exceeding the 15% threshold - 23 of which: significant investments in the ordinary shares of financial entities - 24 of which: mortgage servicing rights - 25 of which: deferred tax assets arising from temporary differences (0.8) Table 1: A8, L15

26National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) (2.2)

26a of which: treasury shares -

26bof which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase new ordinary shares issued by the ADI -

26c of which: deferred fee income -

26dof which: equity investments in financial institutions not reported in rows 18, 19 and 23 -

26e of which: deferred tax assets not reported in rows 10, 21 and 25 - 26f of which: capitalised expenses (2.2) Table 2

26gof which: investments in commercial (non-financial) entities that are deducted under APRA prudential requirements -

26h of which: covered bonds in excess of asset cover in pools - 26i of which: undercapitalisation of a non-consolidated subsidiary -

26jof which: other national specific regulatory adjustments not reported in rows 26a to 26i -

27Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions -

28 Total regulatory adjustments to Common Equity Tier 1 (3.0)

Table 1 Common Equity Tier 1 capital: instruments and reserves

Common Equity Tier 1 capital : regulatory adjustments

Bank of China (Australia) Limited is using the post 1 January 2018 capital disclosure template because it is fully applying the Basel III regulatory adjustments as implemented by APRA.

Page 2


29 Common Equity Tier 1 Capital (CET1) 94.4

30 Directly issued qualifying Additional Tier 1 instruments - 31 of which: classified as equity under applicable accounting standards - 32 of which: classified as liabilities under applicable accounting standards - 33 Directly issued capital instruments subject to phase out from Additional Tier 1 -

34Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1) -

35 of which: instruments issued by subsidiaries subject to phase out - 36 Additional Tier 1 Capital before regulatory adjustments - 37 Investments in own Additional Tier 1 instruments - 38 Reciprocal cross-holdings in Additional Tier 1 instruments -

39Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) -

40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions) -

41 National specific regulatory adjustments (sum of rows 41a, 41b and 41c) -

41aof which: holdings of capital instruments in group members by other group members on behalf of third parties -

41bof which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows 39 and 40 -

41cof which: other national specific regulatory adjustments not reported in rows 41a and 41b -

42Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -

43 Total regulatory adjustments to Additional Tier 1 capital - 44 Additional Tier 1 capital (AT1) - 45 Tier 1 Capital (T1=CET1+AT1) 94.4

46 Directly issued qualifying Tier 2 instruments - 47 Directly issued capital instruments subject to phase out from Tier 2 -

48Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group T2) -

49 of which: instruments issued by subsidiaries subject to phase out - 50 Provisions 1.7 Table 351 Tier 2 Capital before regulatory adjustments 1.7

52 Investments in own Tier 2 instruments - 53 Reciprocal cross-holdings in Tier 2 instruments -

54Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) -

55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions -

56National specific regulatory adjustments(sum of rows 56a, 56b and 56c) -

56aof which: holdings of capital instruments in group members by other group members on behalf of third parties -

56bof which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows 54 and 55 -

56cof which: other national specific regulatory adjustments not reported in rows 56a and 56b -

57 Total regulatory adjustments to Tier 2 capital - 58 Tier 2 capital (T2) 1.7 59 Total capital (TC=T1+T2) 96.1 60 Total risk-weighted assets based on APRA standards 634.5

61 Common Equity Tier 1 (as a percentage of risk-weighted assets) 14.9%

Tier 2 Capital: regulatory adjustments

Additional Tier 1 Capital: instruments

Tier 2 Capital: instruments and provisions

Capital ratios and buffers

Page 3


62 Tier 1 (as a percentage of risk-weighted assets) 14.9%63 Total capital (as a percentage of risk-weighted assets) 15.1%

64Buffer requirement (minimum CET1 requirement of 5% plus capital conservation buffer of 2% plus any countercyclical buffer requirements expressed as a percentage of risk-weighted assets) 7.0%

65 of which: capital conservation buffer requirement 2.0%66 of which: ADI-specific countercyclical buffer requirements 0.0%67 of which: G-SIB buffer requirement (not applicable) n/a

68Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 14.9%

69National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) -

70 National Tier 1 minimum ratio (if different from Basel III minimum) - 71 National total capital minimum ratio (if different from Basel III minimum) -

72 Non-significant investments in the capital of other financial entities - 73 Significant investments in the ordinary shares of financial entities - 74 Mortgage servicing rights (net of related tax liability) -

75Deferred tax assets arising from temporary differences (net of related tax liability) -

76Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap) 1.7

77 Cap on inclusion of provisions in Tier 2 under standardised approach 7.2

78Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) -

79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach -

80 Current cap on CET1 instruments subject to phase out arrangements n/a

81Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities n/a

82 Current cap on AT1 instruments subject to phase out arrangements n/a

83Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) n/a

84 Current cap on T2 instruments subject to phase out arrangements n/a

85Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) n/a

Applicable caps on the inclusion of provisions in Tier 2

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)

Amount below thresholds for deductions (not risk-weighted)

National minima (if different from Basel III)

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Reconciliation Table 1. Audited Financial Statement Ref Financial Statement Balance Sheet under Regulatory Scope of

Consolidation A$m A$m

per audited accounts

AssetsCash and liquid assets A1 12.8 12.8

Receivables due from financial institutions A2 198.9 198.9

Financial assets at fair value through income statement A3 - -

Derivative assets A4 0.2 0.2 Available-for-sale financial assets A5 217.7 217.7 Loans and advances A6 918.8 918.8 Tax recoverable A7 - - Deferred tax assets A8 0.8 0.8 Other assets A9 4.7 4.7

Total assets A10 1,353.8 1,353.8

Liability Payables due to financial institutions L11 14.2 14.2 Derivative liabilities L12 2.2 2.2 Customer deposits L13 1,227.0 1,227.0 Current tax liabilities L14 0.6 0.6 Deferred tax liabilities L15 0.0 0.0

Other liabilities L16 12.5 12.5

Total liabilities L17 1,256.6 1,256.6 - -

Net assets L18 97.2 97.2 - -

Equity - Contributed equity E19 80.0 80.0 Reserves E20 0.0 0.0 Retained profits E21 17.2 17.2

Total contributed equity E22 97.2 97.2

Reconciliation Table 2. Other assets Ref Consolidated A$m

11. Other assets per audited accounts

Accrued interest receivable 2.7 Prepaid expenses and other receivables 2.3 Total Other Assets 4.9

Prepaid expenses and other receivables 2.3 Exlucde other receivables 0.1 Capitalised expenses Row 26f 2.2

Reconciliation Table 3. Provision Ref Consolidated $'000,000


10. Loan and advances per audited accounts

Housing loans 855.9 Personal loans 23.4 Corporate loans 41.2 Overdrafts 0.9 Total 921.3

Provision for impairment: - Collective provision (2.5)Individually assessed provisions (0.1)Total (2.6)

- Total Loan and advances 918.8

Provision

Collective provision 2.5 Adjusted for tax effect (0.7)

Provisions Raw 50 1.7


Ordinary Shares1 Issuer Bank of China (Austrlia) Limited2 N/A3 Governing law(s) of the instrument Australia

Regulatory treatment4 Transitional Basel III rules Common Equity Tier 15 Post-transitional Basel III rules Common Equity Tier 16 Eligible at solo/group/group & solo Solo

7 Ordinary Shares

8 AUD 80M

9 Par value of instrument N/A10 Accounting classification Shareholder's Equity11 Original date of issuance 22/09/200512 Perpetual or dated Perpetual13 Original maturity date No Maturity14 Issuer call subject to prior supervisory approval No15 Optional call date, contingent call dates and redemption amount N/A16 Subsequent call dates, if applicable N/A

Coupons/dividends17 Fixed or floating dividend/coupon N/A18 Coupon rate and any related index N/A19 Existence of a dividend stopper No20 Fully discretionary, partially discretionary or mandatory Fully discretionary21 Existence of step up or other incentive to redeem No22 Noncumulative or cumulative Noncumulative23 Convertible or non-convertible Nonconvertible24 If convertible, conversion trigger (s) N/A25 If convertible, fully or partially N/A26 If convertible, conversion rate N/A27 If convertible, mandatory or optional conversion N/A28 If convertible, specify instrument type convertible into N/A29 If convertible, specify issuer of instrument it converts into N/A30 Write-down feature No31 If write-down, write-down trigger(s) N/A32 If write-down, full or partial N/A33 If write-down, permanent or temporary N/A34 If temporary write-down, description of write-up mechanism N/A

35

Ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any residual proceeds of liquidation

36 Non-compliant transitioned features No37 If yes, specify non-compliant features N/A

Bank of China (Australia) Limited is using the post 1 January 2018 capital disclosure template because it is fully applying the Basel III regulatory adjustments as implemented by APRA.

Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)

Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private placement)

Instrument type (ordinary shares/preference shares/subordinated notes/other)

Amount recognised in Regulatory Capital (Currency in mil, as of most recent reporting date)

Table 2. Disclosure template for main features of Regulatory Capital instruments

BASEL Pillar 3Public Disclosure of Prudential Information Part 3under APS 330 – DEC 2015Bank of China (Australia) Limited

Table 3: Capital Adequacy2015 Dec

Quarter2015 Sep

Quarter(A$m) (A$m)

(a) Capital requirements (in terms of risk-weighted assets) for:• Credit Risk 572.4 567.1

Residential mortgage 299.3 277.9 Other retail 44.0 46.5 Corporate 43.1 34.6 Bank 86.6 102.5 Government - - Other risk assets 0.9 0.8 Perfomance-related Contingencies 27.1 27.2 Loan commitment 70.3 75.0 Market related derivatives 1.0 2.5

• Securitisation - -

(b) - -

(c) 0.8 1.0

(d) 61.2 55.0

(e) - -

(f)

• Common Equity Tier 1 Ratio

14.9% 14.9%• Tier 1 Ratio 14.9% 14.9%• Total Capital Ratio 15.1% 15.2%

Capital requirements (in terms of risk-weighted assets) for equity exposures in the IRB approach (simple risk-weighted method).

Capital requirements (in terms of risk-weighted assets) for market risk.

Capital requirements (in terms of risk-weighted assets) for operational risk.

Capital requirements (in terms of risk-weighted assets) for interest rate risk in the banking book (IRRBB) (IRB/AMA approved Asutralian-owned ADIs only).Common Equity Tier 1, Tier 1 and Total Capital ratio for the consolidated banking group.


Table 4: Credit Risk2015 Dec Quarter

2015 Sep Quarter

Average Balance for the Quarter

( Credit Risk Exposure in

A$m)


A$m)


A$m)(a)

Debt securities and Due from ADIs 318.5 393.2 355.8Loans 923.3 856.3 889.8Loan commitments 153.2 152.9 153.0Performance-related contingencies 27.1 27.2 27.1Market related derivatives 1.9 4.9 3.4All other 111.6 29.8 70.7

Total gross credit risk exposures, broken down by portfolioClaims secured by residential mortgage 989.4 928.1 958.7Other retail 44.0 46.5 45.3Corporate 43.1 34.6 38.9Banks and other ADIs 318.5 393.2 355.8Government - - All other 140.6 61.8 101.2

(b) Amount of impaired facilities, provision and write-offs, by portfolioAmount of impaired facilities, by portfolio

Claims secured by residential mortgage 4.3 4.6 4.4Other retail - - - Corporate - - - Banks and other ADIs - - - Government - - - All other - - -

Total gross credit exposures, plus average gross exposure over the period, broken down by:

Total gross credit risk exposures, broken down by


Table 4: Credit Risk (Continued)2015 Dec Quarter

2015 Sep Quarter

Average Balance for the Quarter


A$m)


A$m)


A$m)Amount of past due items, by portfolio*

Claims secured by residential mortgage - - - Other retail - - - Corporate - - - Banks and other ADIs - - - Government - - - All other - - -

Amount of specific provision, by portfolioClaims secured by residential mortgage 0.1 0.3 0.2 Other retail - - - Corporate - - - Banks and other ADIs - - - Government - - - All other - - -

Charges for specific provisions and write-offs during the periodClaims secured by residential mortgage - - Other retail - - - Corporate - - - Banks and other ADIs - - - Government - - - All other - - -

(c) General reserves for credit losses 2.5 2.3 2.4 *Amount of past due but not impaired items


Table 5: Securitisation exposures

2015 Q4 2015 Q3 2015 Q4 2015 Q3Residential Mortgage - - - -

- - - -

(b)On balance sheet securitisation exposure

Total on balance sheet exposure

Funding facilitiesCredit enhancementsDerivatives - Basis swapsTotal off balance sheet exposures

(a)

The Bank had successfully completed a self securitisation for China Dragon Trust Series 2013-1R on 3 October 2013. The transaction is a securitisation of a portfolio of Australian prime loans backed by residential mortgage originated by the Bank. Total amount of mortgage transferred amounted to AUD 121.9 million. The Bank holds notes issued by this Trust. This Trust is a special purpose entity consolidated by the Bank.

Moody's Investors Service has assigned the following definitive long-term rating to notes issued by Perpetual Corporate Trust Limited in its capacity as trustee of the China Dragon Trust Series 2013-1R (Trust).

The complete rating action is as follows:— AUD 112 million of Class A Notes, rated Aaa

The AUD 13 million Class B Notes are not rated.

The self securitisation transaction is entered by the Bank for the purpose of generating extra contingency funding channel during liquidity crisis.

Securitisation activity of current period(AUD million)

Exposure securitized

2015 Q4

Recognized gain(or loss) on sale

2015 Q3

Total exposure securitized during the period

Securities held in the banking book 62.80 58.23 58.23 62.80

13.00 63.59

86.679.756.7

10.00 13.00

10.00

BASEL Pillar 3 Public Disclosure of Prudential Information Part 4

under APS 330 – Dec 2015 Bank of China (Australia) Limited

Liquidity Risk

Liquidity Coverage Ratio Disclosure

The Bank manages its LCR position on a daily basis, ensuring a buffer is maintained over

the minimum regulatory requirement and the Board’s risk tolerance. Any methodologies

used to determine LCR treatment are reviewed regularly.

The Bank holds a simple mix of High Quality Liquid Assets, consisting of cash and

deposits with central banks, together with securities eligible for repo with the Reserve

Bank of Australia under the Committed Liquidity Facility (CLF). In addition to the

approved CLF amount of AUD 85 Million, the Band holds extra repo eligible securities

as liquid assets to support regulatory and internal requirements. The composition of the

liquid asset portfolio has remained relatively stable and commensurate with its business

size, characteristics and complexity of the Bank over 2015.

The Bank follows a simple retail-based business model, with the major funding sourced

from retail deposits, together with short term funding support from Bank of China

Sydney Branch. In terms of currency mismatch, majority of the Bank’s funding is AUD

denominated, together with a small portion of USD and CNY, to support its AUD based

mortgage lending and repo eligible securities.

The Bank follows the principle of prudence in its liquidity management strategy, and

manages its funding maturity profile, deposit product diversification and customer

relationships to minimize Net Cash Outflows. The relatively strong deposit growth

compared to mortgage lending is main driver of the LCR results throughout 2015.

Despite of the strong deposit growth, the cash outflows associated with the Bank's retail

funding base were relatively stable, which has provided the Bank sufficient liquidity to

support the mortgage growth.

APS 330 Table 20 - LCR disclosure template 2015Q4

2015-12-31 2015-12-31

Total unweighted

value (average)

Total weighted

value (average)

$M $M Liquid assets, of which:

1 High-quality liquid assets (HQLA) 93 2 Alternative liquid assets (ALA) 85

3 Reserve Bank of New Zealand (RBNZ) securities -

Cash outflows 4 Retail deposits and deposits from small

business customers, of which: 1,170 174

5 Stable deposits 570 28 6 Less stable deposits 601 145 7 Unsecured wholesale funding, of which: 16 16

8 Operational deposits (all counterparties) and deposits in networks for cooperative banks 0 0

9 Non-operational deposits (all counterparties) 16 16 10 Unsecured debt - - 11 Secured wholesale funding - - 12 Additional requirements, of which: 334 75

13 Outflows related to derivatives exposures and other collateral requirements 61 61

14 Outflows related to loss of funding on debt products - -

15 Credit and liquidity facilities 273 14 16 Other contractual funding obligations 2 2 17 Other contingent funding obligations - - 18 Total cash outflows 1,523 267

Cash inflows 19 Secured lending - - 20 Inflows from fully performing exposures 83 83 21 Other cash inflows 84 84 22 Total cash inflows 166 166 23 Total liquid assets 178 24 Total net cash outflows 105 25 Liquidity Coverage Ratio (%) 176

Number of data points used (Business Days) 92


2015-09-30 2015-09-30

Total unweighted

value (average)

Total weighted

value (average)















2015-06-30 2015-06-30

Total unweighted

value (average)

Total weighted

value (average)















2015-03-31 2015-03-31

Total unweighted

value (average)

Total weighted

value (average)











15 Credit and liquidity facilities 261 13 16 Other contractual funding obligations - - 17 Other contingent funding obligations - - 18 Total cash outflows 1,344 234



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BASEL Pillar 3 - Bank of China Public Disclosure of...BASEL Pillar 3 Public Disclosure of Prudential Information Part 1 under APS 330 – Dec 2015 Bank of China (Australia) Limited