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
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
BIS Hub and Central Banks Conduct CBDC and DeFI Pilots
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)
