The Australian Prudential Regulation Authority (APRA) had been due to review a A$500 million ($335 million) capital add-on it imposed on ANZ and other big lenders in 2019 during a crackdown on industry misconduct, but instead raised ANZ’s requirement by A$250 million, citing risk culture concerns.
The regulator also told Australia’s seventh-largest listed company to hire an external party to review the causes of problems at its bond trading division, in addition to investigations already underway by the bank and the securities regulator.
“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,” APRA Chair John Lonsdale said in a statement.
The regulator had told ANZ’s board and executive team it wanted the problem’s underlying drivers addressed, and “depending on the outcomes from ANZ’s independent review, APRA will consider whether further action is required”, Lonsdale added.
ANZ said in a statement that it acknowledged APRA’s concerns and was expediting work that was already underway to address the issues. The bank was working with the regulator on the scope of the independent review, it added.
“The key risk we are concerned about is that ANZ will be required to provide an enforceable undertaking to APRA to remediate controls, risk culture, governance and accountability issues,” E&P analyst Azib Khan said.
Rival Westpac had been distracted for four years by an APRA risk management intervention in 2020, and “we see risk of similar multi-year operational underperformance for ANZ”, he added.
($1 = 1.4912 Australian dollars)
Sign up here.
Reporting by Byron Kaye in Sydney and Roushni Nair in Bengaluru; Editing by Mohammed Safi Shamsi and Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.