The Australian Prudential Regulation Authority (APRA) has raised the capital add-on applied to the Australia and New Zealand Banking Group (ANZ) to $750 million due to ongoing concerns about the bank’s management of non-financial risks.
APRA initially imposed a $500 million operational risk capital add-on in 2019 after identifying deficiencies in ANZ’s risk governance framework.
Despite the bank’s efforts to address the issues through a remediation program, the regulator has determined that substantial improvements have not been achieved.
APRA said recent incidents within ANZ’s markets division have heightened its concerns. The bank reported inaccuracies in bond trading data submitted to the Australian Office of Financial Management (AOFM) during 2022-23 and acknowledged employee misconduct within the same division.
While ANZ has undertaken internal investigations, APRA remains concerned about the bank’s controls, risk culture, and governance structures.
As a result, the regulator has imposed several new requirements on the bank:
The increased capital requirement will remain in effect until APRA is satisfied with ANZ’s progress in addressing the identified issues.
APRA chair John Lonsdale emphasised the importance of addressing these governance and risk management concerns, particularly given ANZ’s significant role in the Australian financial system.
“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,” he said.
He said recent developments reflect remaining gaps in the bank’s risk management.
“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,” he said.
APRA will continue to monitor the situation and may take further action depending on the outcomes of ANZ’s independent review.
In a separate move, APRA has lifted the additional license conditions that were placed on N.M. Superannuation Proprietary Limited (N.M. Super), which oversees the AMP Super Fund and Wealth Personal Superannuation and Pension Fund.
These conditions were initially imposed in 2019 following significant governance and risk management failures, highlighted by both APRA’s prudential reviews and the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
