APRA cuts Westpac’s capital buffer
APRA cuts Westpac’s capital buffer | Insurance Business Australia
Insurance News
APRA cuts Westpac’s capital buffer
Change reflects improvements in risk governance, culture, and management practices
Insurance News
By
Roxanne Libatique
The Australian Prudential Regulation Authority (APRA) has decreased the operational risk capital add-on for Westpac Banking Corporation (Westpac) by $500 million.
This reduction acknowledges Westpac’s improvements in risk governance, culture, and management practices.
Westpac’s operational risks
In mid-2019, APRA initially imposed a $500 million capital add-on on Westpac due to identified operational risks from the bank’s Risk Governance Self-Assessment. An additional $500 million was added in late 2019 to address heightened operational risks and governance issues.
To tackle these challenges, Westpac agreed to a Court Enforceable Undertaking (CEU) with APRA in December 2020.
The bank committed to resolving weaknesses in its culture, governance, and accountability by implementing the Customer Outcomes and Risk Excellence (CORE) Program and appointing an independent reviewer.
The remaining $500 million add-on will stay in place until Westpac completes its transition work and APRA verifies the sustainability of the improvements in risk governance and accountability.
APRA enhances insurance statistical publications
APRA also recently updated its quarterly insurance statistical publications, following a recent consultation. These updates align with the new Australian Accounting Standards Board 17 Insurance Contracts (AASB 17) and revised capital requirements for private health insurers.
The revised publications will include updated content and enhanced data presentation, featuring dynamic dashboards and charts.
Feedback from the consultation was generally positive, though some participants requested more clarity on data confidentiality and the status of other APRA insurance publications.
The regulator confirmed that confidentiality protections will be maintained, and further consultations will address changes to other insurance publications, including data confidentiality. In response to stakeholder feedback, the regulator has decided to include additional data items beyond the initial proposal.
The enhanced quarterly insurance statistics are scheduled for release in August.
APRA and ASIC finalise FAR guidance for insurers and super funds
Earlier this month, APRA and the Australian Securities and Investments Commission (ASIC) issued final guidance for the Financial Accountability Regime (FAR), which will apply to the insurance and superannuation sectors starting March 15, 2025.
FAR aims to enhance accountability and risk governance among APRA-regulated entities, including their directors and senior executives.
Key updates include amendments to regulator rules outlining key functions for the FAR register of accountable persons, specific to the insurance and superannuation sectors, as detailed in the Financial Accountability Regime Regulator Rules Amendment Instrument No. 1 of 2024 and the Financial Accountability Regime Act (Information for Register) Regulator Rules 2024.
A joint letter from APRA and ASIC summarises key consultation issues, including the application of key functions.
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