MoneyAPRA forces NAB, Westpac, ANZ to hold extra $500m each in capital due to culture, governance concerns

03:50  12 july  2019
03:50  12 july  2019 Source:   smh.com.au

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Three big banks face another drag on profits, after the regulator ordered NAB , Westpac and ANZ Bank to each hold an extra $ 500 million in capital . The Australian Prudential Regulation Authority ( APRA ) on Thursday said it was slapping on the extra capital requirement in response to the banks '

The Australian Prudential Regulation Authority ( APRA ) is forcing three of the big Aussie banks to hold more capital APRA said on Thursday that it has written to ANZ , National Australia Bank ( NAB ) and Westpac advising of an increase in their minimum capital requirements of A$ 500 million each .

APRA forces NAB, Westpac, ANZ to hold extra $500m each in capital due to culture, governance concerns© Louis Douvis APRA chairman Wayne Byres says more improvement is needed NAB, ANZ and Westpac. The financial regulator will force National Australia Bank, Westpac and ANZ Bank to each hold an extra $500 million in capital due to problems with their governance and culture.

The Australian Prudential Regulation Authority (APRA) on Thursday said it was slapping on the extra capital requirement in response to the bank's "self-assessments" of how they managed "non-financial risks."

The banks were ordered to carry out the assessments after a similar exercise at scandal-plagued  Commonwealth Bank saw it get hit with a $1 billion capital charge last year.

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Westpac , NAB and ANZ have been ordered to set aside an extra .5 billion in capital until they The $ 500 million requirement, to be applied through an increase in risk weighted assets, will apply In July 2017, APRA raised the amount of top quality capital the banks must hold to 10.5 per cent by

The additional charge for "operational risk," which will likely weigh on returns, will be kept in place until the banks complete their plans to strengthen their management of "non-financial risks" and close gaps identified in the self-assessments. APRA is not releasing the self-assessments, though NAB has made its public.

By late morning, ANZ shares were down 0.6 per cent, Westpac shares had slipped 0.2 per cent, and NAB shares were up 0.2 per cent. CBA shares were 4c or 0.05 per cent higher at $81.29.

APRA said the self-assessments, which 36 of the country's biggest banks, insurers and superannuation funds were required to conduct, did not raise any concerns about these institutions' financial soundness.

But the regulator did find that many of the problems at CBA - which was found to be too insular, among other harsh criticisms - were not unique to it.

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Westpac will be required to hold an extra A$ 500 million (9 million) in capital after the Australian Prudential Regulatory Authority ( APRA ) announced an investigation into the bank 's alleged money laundering breaches. Westpac shares were down 1.2% in early afternoon trade on Tuesday, while

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“Australia’s major banks are well-capitalised and financially sound, but improvements in the management of non-financial risks are needed. 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," APRA chairman Wayne Byres said.

“The major banks play a vital role in the stability of the entire financial system, and APRA expects them to hold themselves to the highest standards of risk governance. 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,” Mr Byres said.

ANZ Bank told investors that the lift in its capital requirement would lower its tier 1 capital ratio, a key gauge of strength, by 18 basis points.

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Fitch Ratings lowered its outlook for Westpac Banking Corp and Australia and New Zealand Banking Group Ltd ( ANZ ) to The third bank cited by APRA was National Australia Bank ( NAB ), the No. 4 lender. Regulators in both countries have been pushing their banks to beef up their capital buffers

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Westpac said the change would reduce its tier 1 capital ratio, which was most recently 10.64 per cent  of risk-weighted assets, by 16 basis points.

Chief executive Brian Hartzer said: "We acknowledge the need to improve non-financial risk management andoversight and we are working to resolve the issues raised. Our Board and senior executives are committed to addressing the shortfalls identified in the report and will continue to provide regular updates on our progress.”

NAB said the capital charge would lower its common equity tier 1 capital ratio by 16 basis points. Acting chief executive  Phil Chronican said the bank, which released its self-assessment last year, was working on implementing the report's recommendations in order to "accelerate and drive far-reaching change."

For example, he said the bank had improved how it compensated customers, paying out $170 million in the year to June, and it had reduced aged small business complaints by 50 per cent since last October.

“The board and executive leadership team take the findings seriously and we are moving forward with rigour and discipline to change the way we operate," Mr Chronican.

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