APRA Takes Action Against Westpac Over Breaches of Liquidity Standards
In a couple of recent developments, APRA granted a limited authorized deposit-taking institution license to TransferWise Australia Pty Limited and took enforcement action against Westpac Banking Corporation. The action against Westpac is in response to the material breaches of the APRA prudential standards on liquidity. The breaches, which were identified during 2019 and 2020, relate to the incorrect treatment of specific funding and loan products for calculating the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).
Although these breaches have been rectified and do not raise concerns about the liquidity position of Westpac, APRA believes that these breaches demonstrate weaknesses in risk management and oversight, risk control frameworks, and risk culture. APRA will now require comprehensive reviews, by independent third parties, of Westpac’s compliance with the liquidity reporting requirements of APRA and the remediation of its control framework for liquidity risk management. Until the findings from the independent reviews are addressed to the satisfaction of APRA, APRA will also require Westpac to apply a 10% add-on to the net cash outflow component of its LCR calculation. In December 2019, APRA had commenced a risk governance review into Westpac and applied a $1 billion capital add-on to Westpac’s operational risk capital requirement, in response to allegations by AUSTRAC that Westpac had breached anti-money laundering laws. The review of APRA is ongoing and the capital add-on will remain in place until APRA is satisfied that deficiencies in risk governance have been adequately remediated.
In a more recent development in the Westpac compliance assessment, APRA has concluded that Westpac has failed to deliver the expected risk governance improvements despite almost two years of remediation. This has undermined the confidence of APRA in Westpac’s ability to remediate these weaknesses in a timely manner. Westpac has acknowledged these concerns of APRA and a recently signed Court Enforceable Undertaking (CEU) requires Westpac to:
- Develop an integrated plan that incorporates all its major risk governance remediation programs, covering both financial and non-financial risks
- Obtain independent assurance over the implementation of the plan with direct reporting to APRA
- Assign accountabilities for delivery of the plan to named executives and Board members and incorporate outcomes into remuneration decisions
Related Links
Keywords: Asia Pacific, Australia, Banking, LCR, Westpac, Transferwise Australia, NSFR, Liquidity Risk, Basel, Governance, Compliance Risk, 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.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
ACPR Updates Draft Version of RUBA Taxonomy for BanksRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
