On Friday, the regulator said issues in ANZ’s markets business have raised concerns following the bank’s admission of misreporting bond trading data to the government’s debt agency in 2022–23, and an ensuing internal investigation which has resulted in suspensions and terminations.
But the Australian Prudential Regulation Authority (APRA) noted that while ANZ has launched several investigations into these issues, they “raise prudential concerns that ANZ has yet to adequately address deficiencies in controls, risk culture, governance and accountability”.
In addition to imposing a $250 million capital charge on ANZ, the regulator has tasked the bank with appointing an independent party to review the root causes of recent issues, assess risk governance in the markets business, and develop a remediation plan.
“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.
This is not the first time ANZ has had a capital add-on applied. Back in 2019, APRA imposed a $500 million operational risk capital add-on to the bank to reflect deficiencies in its risk governance.
“Of the major banks that had capital add-ons applied in 2019, ANZ is the only bank yet to have its add-on either removed or reduced. 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,” Lonsdale said.
“We have communicated our clear expectations to the ANZ board and executive team that these issues must be urgently reviewed to ensure underlying drivers are identified and addressed.”
The chair added that depending on the outcomes from ANZ’s independent review, APRA will consider whether further action is required.
In a statement filed with the ASX, ANZ said it “acknowledges APRA’s concerns and is expediting work already underway to address the issues raised”.
“This includes working with APRA on the scope of an independent culture and control review within its markets business which has already been initiated and will report to the board.”
