APRA Applies Additional Capital Requirements to Three Australian Banks
APRA is applying additional capital requirements to three major banks in Australia to reflect higher operational risk identified in their risk governance self-assessments. The minimum capital requirement of ANZ, National Australia Bank, and Westpac is being increased by USD 500 million each. The capital add-ons will apply until the banks have completed their planned remediation to strengthen risk management and have closed gaps identified in their self-assessments.
APRA supervisors continue to provide tailored feedback to other banks, insurers, and superannuation licensees that provided self-assessments to APRA. Where weaknesses have been identified, the level of supervisory scrutiny is being increased as remediation actions are implemented. Where material weaknesses exist, APRA is also considering the need for the application of an additional operational risk capital requirement.
This increase in capital requirements follows APRA’s decision, in May 2018, to apply a USD 1 billion capital add-on to the Commonwealth Bank of Australia in response to the findings of the APRA-initiated prudential inquiry into the bank. Following the final report of the inquiry, APRA wrote to the boards of 36 of the largest banks, insurers, and superannuation licensees in the country asking them to gauge whether the weaknesses uncovered by the inquiry also existed in their own companies. Although the self-assessments raised no concerns about financial soundness, it was confirmed that many of the issues identified in the inquiry were not unique to the Commonwealth Bank of Australia. This included the need to strengthen non-financial risk management, to ensure that accountabilities are clear, cascaded, and enforced, and to address the long-standing weaknesses and enhance risk culture.
Related Links
Keywords: Asia Pacific, Australia, Banks, Capital Requirements, Operational Risk, ANZ, National Australia Bank, Westpac, Regulatory Capital, 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
Previous Article
SEC Statement Highlights Risks to Consider During LIBOR TransitionRelated Articles
PRA Publishes Q&A on Property Valuation Requirements Under CRR
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO Consults on Outsourcing Principles for Operational Resilience
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS Consortium to Develop AI Fairness Metrics for Credit Scoring
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE Updates Definitions for BTL Data Collection
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI Examines Financial Stability Implications of Payment Deferrals
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA Finalizes Policy on Prudent Person Principle Under Solvency II
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA on Extending Large Exposure Limits for French Systemic Banks
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
ECB Highlights NPL Resolution as Key Policy Issue in Post-COVID Europe
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ Publishes Financial Stability Report for May 2020
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB Updates Guidance on Reporting of Securities Holdings Statistics
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).
