APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity. Bendigo and Adelaide Bank informed APRA in September of multiple breaches of APS 210, stemming from IT coding that incorrectly classified some retail deposits in the most stable category of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).The breaches, while material, do not impact the overall soundness of the current liquidity position of the bank. However, they raise questions over the bank’s past risk management practices and ability to accurately calculate and report its liquidity ratios.
The breaches of APS 210 on liquidity are historical in nature and the current liquidity position of bank is comfortably above the minimum regulatory requirements of APRA. To address these concerns, APRA will require a comprehensive review by an independent third party into the bank's adherence to the liquidity requirements of APRA. APRA will require the bank to apply a 10% add-on to the net cash outflow component of its LCR calculation, which will remain in place until the independent review is finalized and shortcomings have been rectified to the satisfaction of APRA. APRA will also require the restatement of relevant disclosures under APS 330 on public disclosure, for the preceding 24-month disclosure period. APRA will wait for the outcome of an internal Bendigo and Adelaide Bank review before determining whether further action is required. APRA Deputy Chair John Lonsdale said, “In taking these actions, our priority is to ensure the underlying causes of the compliance failures are properly identified and addressed. It also sends a message to the wider banking industry that such breaches of our prudential standards are not acceptable, and APRA will respond in a commensurate manner, including applying penalties where appropriate.”
Keywords: Asia Pacific, Australia, Banking, Liquidity Risk, APS 210, LCR, NSFR, APS 330, Bendigo and Adelaide Bank, Disclosures, Basel, APRA
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