17. Risk Management

Market risk
The management of market risk will be discussed in detail in the Group's annual financial report 2003, at Risk Management and Note 46 Derivative Financial Instruments. Please refer to that report for detailed information regarding the management of risk.

Trading risk
The following table shows the Group's Value at Risk (VaR) for all member banks' trading portfolios, including both physical and derivative positions. The figures reflect the potential losses across products and regions in which the Group operates.

	Average value Year to	Minimum value Year to (1)	Maximum value Year to (1)
Value at risk at 99% confidence level	Sep 03   Sep 02     $m   $m	Sep 03   Sep 02     $m   $m	Sep 03   Sep 02     $m   $m
Foreign exchange risk	7   7	2   2	20   26
Interest rate risk	17   15	9   9	25   23
Volatility risk	4   4	2   2	7   5
Commodities risk	1		1   1
Diversification benefit	(7)   (7)	n/a   n/a	n/a   n/a
Total	22   19	14   11	35   34
	Average value half year to	Minimum value half year to (1)	Maximum value half year to (1)
Value at risk at 99% confidence level	Sep 03   Sep 02     $m   $m	Sep 03   Sep 02     $m   $m	Sep 03   Sep 02     $m   $m
Foreign exchange risk	8   7	2   3	20   19
Interest rate risk	14   20	9   16	22   25
Volatility risk	4   3	2   2	7   5
Commodities risk	1		1   1
Diversification benefit	(7)   (5)	n/a   n/a	n/a   n/a
Total	20   25	14   20	28   25
(1) Value at risk is measured individually according to foreign exchange risk, interest rate risk, volatility risk and commodities risk. The individual risk categories do not sum up to the total risk number due to portfolio effect. Risk limits are applied in these categories separately, and against the total risk position.
VaR measures the adverse changes in the trading portfolio value brought about by daily changes in market rates at a 99% confidence level for the year to 30 September 2003. VaR is measured individually according to interest rate risk, foreign exchange risk and volatility risk. The individual risk categories do not sum to the total risk number due to portfolio effect. Risk limits are applied in these categories separately, and against the total risk position.

Balance sheet risk
a) Structural interest rate risk
This table presents a summary of the aggregated structural earnings at risk relating to non-trading assets and liabilities that are sensitive to changes in interest rates. Based on the structural interest rate risk position at balance date, the table shows the possible impact on net income for the 12 months ending September 30, 2004 under a rising or declining interest rate environment.

	Forecast effect on net income 2004(1)	Forecast effect on net income 2003
	Rising rates $m   Declining rates $m	Rising rates $m   Declining rates $m
Australian dollars	39   (18)	67   (44)
Non-Australian dollars	(23)   12	21   (8)

⁽¹⁾ Represents the forecast effect on net interest income for the year ending 30 September 2004 and the prior year comparative.

b) Structural foreign exchange rate risk
Refer table below.

c) Liquidity risk
Refer to the Group's annual financial report 2003 at Risk Management for a detailed discussion of the management of these risks.

Operational, credit & country risk
Refer to the Group's annual financial report 2003 at Risk Management for a detailed discussion of the management of these risks.

Derivatives fair values
This table shows the fair value of all derivative instruments held or issued by the Group. It includes trading and other than trading contracts.

	As at Sep 03	As at Sep 02
	Notional principal $m   Credit equivalent $m   Fair value $m	Notional principal $m   Credit equivalent $m   Fair value $m
Foreign exchange rate-related contracts
Spot and forward contracts	266,535   7,365   (1,262)	312,513   7,072   304
Cross currency swaps	90,249   6,863   (522)	64,326   4,512   (31)
Futures	89	191
Options	253,481   4,655   127	297,306   4,002   369
	610,354   18,883   (1,657)	674,336   15,586   642
Interest rate-related contracts
Forward rate agreements	86,308   39   1	41,602   53   38
Swaps	598,155   14,155   236	504,306   7,915   959
Futures	306,649     (3)	101,015     (34)
Options	100,193   582   24	56,808   680   701
	1,091,305   14,776   258	703,731   8,648   1,664
Other contracts	13,385   899   (143)	6,930   464   392
Total derivative financial     instruments	1,715,044   34,558   (1,542)	1,384,997   24,698   2,698
Deduct: Non consolidated     controlled entities	4,515   182   234	5,114   261   311
Total derivative financial     instruments reported for     Capital Adequacy	1,710,529   34,376   (1,776)	1,379,883   24,437   2,387