APRA hikes ANZ’s capital buffer to $750 million
APRA hikes ANZ’s capital buffer to $750 million | Insurance Business Australia
Insurance News
APRA hikes ANZ’s capital buffer to $750 million
Amount increased amid persistent non-financial risk concerns
Insurance News
By
Roxanne Libatique
The Australian Prudential Regulation Authority (APRA) has raised the capital add-on applied to the Australia and New Zealand Banking Group (ANZ) to $750 million due to ongoing concerns about the bank’s management of non-financial risks.
Why did APRA increase ANZ’s capital add-on?
Despite the bank’s efforts to address the issues through a remediation program, the regulator has determined that substantial improvements have not been achieved.
APRA said recent incidents within ANZ’s markets division have heightened its concerns. The bank reported inaccuracies in bond trading data submitted to the Australian Office of Financial Management (AOFM) during 2022-23 and acknowledged employee misconduct within the same division.
New requirements to improve ANZ’s non-financial risk management
While ANZ has undertaken internal investigations, APRA remains concerned about the bank’s controls, risk culture, and governance structures.
As a result, the regulator has imposed several new requirements on the bank:
ANZ must increase its operational risk capital add-on by $250 million, bringing the total to $750 million.
An independent review must be conducted to investigate the root causes of the recent issues in the Markets division and assess the potential impacts across the broader organisation.
ANZ is required to develop and implement a remediation plan based on the findings of the independent review.
The increased capital requirement will remain in effect until APRA is satisfied with ANZ’s progress in addressing the identified issues.
APRA chair John Lonsdale emphasised the importance of addressing these governance and risk management concerns, particularly given ANZ’s significant role in the Australian financial system.
“ANZ is financially sound with strong capital and liquidity levels. However, weaknesses in managing non-financial risk can lead to detrimental financial impacts, and APRA has no tolerance for such weaknesses persisting,” he said.
He said recent developments reflect remaining gaps in the bank’s risk management.
“While the bank has implemented actions to improve its risk governance and culture over the past five years, these recent issues suggest there continues to be material gaps that need to be closed as a priority,” he said.
APRA will continue to monitor the situation and may take further action depending on the outcomes of ANZ’s independent review.
These conditions were initially imposed in 2019 following significant governance and risk management failures, highlighted by both APRA’s prudential reviews and the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!
