APRA Penalizes Macquarie Bank for Breaches of Regulatory Standards
APRA has increased liquidity and operational risk capital requirements of Macquarie Bank Limited, in response to multiple material breaches of the prudential and reporting standards set by APRA. The enforcement action relates to the incorrect treatment of specific intra-group funding arrangements for calculating capital and related entity exposure metrics as well as multiple breaches of reporting standards on liquidity between 2018 and 2020. These resulted from deficiencies in Macquarie Bank’s ability to manage the operational risk inherent in the complex intra-group structure, within which it transacts with its related entities. The increases in the capital and liquidity requirements of Macquarie Bank will take effect from April 01, 2021.
The breaches are historical and do not impact on the overall soundness of Macquarie Group’s capital or liquidity positions. However, they raise serious questions about the bank’s risk management practices and ability to calculate and report key prudential ratios. As a consequence of the breaches, APRA will require:
- Macquarie Bank to hold an operational capital overlay of $500 million, reflecting deficiencies in its management of operational risk inherent in the bank’s intra-group structure
- 15% add-on to the net cash outflow component of its liquidity coverage ratio calculation
- 1% adjustment to the available stable funding component of the net stable funding ratio calculation
In addition, APRA will require Macquarie Bank to resubmit and restate selected regulatory returns. APRA will also subject Macquarie Bank to intensified supervision to address the bank’s persistent difficulties in complying with its prudential obligations. Further action is also possible as more information comes to light about the root causes of these breaches. The APRA Deputy Chair John Lonsdale said, "For one of the country’s largest financial institutions to have committed breaches of this nature is disappointing and unacceptable."
Related Link: Media Release
Keywords: Asia Pacific, Australia, Banking, Basel, Liquidity Risk, Reporting, LCR, NSFR, Regulatory Capital, Macquarie Bank, Enforcement Action, APRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Next Article
BOG Becomes Member of Basel Consultative GroupRelated Articles
BoE Seeks Information Before Migrating Statistical Reporting to BEEDS
The Bank of England (BoE) published the Statistical Notice 2021/09 requiring additional information from firms and software vendors to assist in the onboarding and testing phases for migrating statistical reporting to the BEEDS portal.
FCA Publishes Final Rules on Investment Firms Prudential Regime
The Financial Conduct Authority (FCA) published the final rules on the Investment Firms Prudential Regime (IFPR) to streamline and simplify the prudential requirements for solo-regulated UK firms authorized under the Markets in Financial Instruments Directive (MiFID).
EBA Finalizes Standards on Alternative SA for Market Risk
The European Banking Authority (EBA) published the final draft regulatory technical standards on gross jump-to-default amounts and on residual risk add-on under the Capital Requirements Regulation or CRR.
CFRF Publishes Guides to Manage Financial Risks from Climate Change
The working groups of the Climate Financial Risk Forum (CFRF) published a second round of guides (or Session 2 guides), written by the industry for the industry, to help financial firms manage climate-related financial risks.
PRA Finalizes Policy for Non-Performing Exposure Securitizations
The Prudential Regulation Authority (PRA) published the final Policy Statement PS24/21 that contains the new Non-Performing Exposures Securitization Part of the PRA Rulebook and an updated Supervisory Statement SS10/18 on the general requirements and capital framework with respect to securitizations.
BIS to Launch Asian Green Bond Fund Early Next Year
The Bank for International Settlements (BIS) announced the development of an Asian Green Bond Fund, in collaboration with the development financing community, to channel global central bank reserves to green projects in Asia Pacific.
FSOC Report Issues Recommendations to Address Climate Risks
The Financial Stability Oversight Council (FSOC) released a report in response to the U.S. President's Executive Order on climate-related financial risk.
BIS Paper Mulls Policies to Alleviate Challenges Posed by Big Techs
The Bank for International Settlements (BIS) published a paper that examines the business models and the associated risks posed by big technology firms foraying into financial services sector.
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
