Australian regulators have directed Westpac to conduct an independent review of liquidity compliance and to penalize the bank upon learning of reporting violations by 2019.
The announcement came an hour before the bank itself acknowledged the violations and at the same time revealed that the regulator had made an early assessment of its risk management following the AUSTRAC debacle and expected to make an enforceable commitment regarding its deficiencies.
« APRA has now informed Westpac of its progress and results and suggested the next steps. In particular, APRA noted that Westpac has an immature and reactive risk culture, unclear responsibilities, capacity constraints and inadequate oversight, « the bank said.
Westpac shares fell on the news but later rebounded, up 1 percent versus ANZ by 1 percent around noon. 1 percent, CBA by 1. 1 percent and NAB around 0. 6 percent.
In a statement, the bank said it had started several workflows to address the issues identified by the regulator, but accepted that it had not acted quickly enough to address the regulators concerns and apologized to Peter King, Westpac CEO, for the mistakes.
« We acknowledge the results of APRA’s review and accept the need to work faster to correct our shortcomings, » said King.
Just before the stock market opened at 10 a.m., APRA released a statement announcing that Westpac had been instructed to increase its liquidity coverage ratio by an additional 10 percent until the violations were thoroughly investigated while the prospect of additional penalties were increased, reflecting a similar measure taken against Bendigo Bank in October.
Westpac later revealed the problem that arose from the activities in New Zealand and said that although the problem was resolved, there was a material benchmark violation for most of the 2019 calendar.
« The Westpac Group had violated regulatory standards. As a major offshore subsidiary in particular, WNZL’s liquidity coverage ratio (LCR) would have been below 100 percent for a large part of 2019, « the bank said in a statement.
APRA Vice Chairman John Lonsdale said that while the regulator has no concerns about the overall health of the bank, the flaws indicate weakness in risk management, framework and culture.
« While Westpac’s LCR and NSFR are well above the legal minimum, APRA’s actions reflect how serious we are in violating our regulatory requirements, » said Londsdale.
« With these measures we want to ensure that Westpac meets APRA’s liquidity requirements. It also sends a message to the broader banking industry that violations of supervisory standards are unacceptable, and APRA will respond if necessary, including by imposing penalties. «
APRA is en route to a risk control review that began in December 2019 after the bank was affected by a federal court lawsuit by AUSTRAC that resulted in the departure of its CEO and Chairman.
APRA has fined the bank a $ 1 billion capital fine in a lawsuit similar to the 2018 punishment of CBA after a review of the bank’s governance, culture and accountability framework. APRA reduced the fine by $ 500 million in late November.
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Westpac, Australian regulator, Liquidity Coverage, Market Liquidity, Finance
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