Thursday, July 11, 2019 - APRA orders A$500m capital charge for ANZ, NAB, Westpac

Australia and New Zealand Banking Group (ANZ)
Source - https://www.regulationasia.com/apra-orders-a500m-capital-charge-for-anz-nab-westpac/?utm_source=Regulation+Asia+Subscription+-+Member&utm_campaign=6c01dcdce1-11Jul2019-RA&utm_medium=email&utm_term=0_d30b640721-6c01dcdce1-116647129&ct=t(11Jul2019-RA)&goal=
Where - Australia
Cost - 1,500,000,000 AUD
Business line - Corporate Services

APRA (the Australian Prudential Regulation Authority) has asked ANZ, NAB and Westpac to increase their minimum capital requirements by AUD 500 million each to reflect higher operational risk identified in their risk governance self-assessments.

“The capital add-ons will apply until the banks have completed their planned remediation to strengthen risk management, and closed gaps identified in their self-assessments,” APRA said.

In May 2018, APRA ordered CBA to apply a AUD 1 billion dollar capital add-on in response to the findings of the Prudential Inquiry into the bank. Following the Inquiry, APRA asked 36 of Australia’s largest banks, insurers and superannuation licensees to self-assess whether CBA’s weaknesses also existed in their own companies.

Though no concerns about financial soundness were raised, the self-assessments confirmed that many of the same issues identified in CBA’s Inquiry were not unique, APRA said. The self-assessments identified the need to strengthen non-financial risk management; ensure accountabilities are clear, cascaded and enforced; address long-standing weaknesses; and enhance risk culture.

“Australia’s major banks are well-capitalised and financially sound, but improvements in the management of non-financial risks are needed,” said APRA Chair Wayne Byres. “This will require a real focus on the root causes of the issues that have been identified, including complexity, unclear accountabilities, weak incentives and cultures that have been too accepting of long-standing gaps.”

“Their self-assessments reveal that they have fallen short in a number of areas, and APRA is therefore raising their regulatory capital requirements until weaknesses have been fully remediated,” he added.

According to Reuters, the new capital requirement will cut ANZ’s CET1 (common equity tier 1 capital) by about 0.18 percentage points, and NAB’s and Westpac’s by 0.16 percentage points.

APRA said it may impose more capital requirements on the sector without specifying which company.