APRA Raises Capital Requirements for Westpac, Launches Investigation
APRA has launched an investigation on Westpac Banking Corporation and decided to impose an immediate increase of $500 million in the capital requirements of Westpac, given the magnitude and nature of the issues alleged by AUSTRAC. The Australian Transaction Reports and Analysis Centre, or AUSTRAC, is a government agency that uses financial intelligence and regulation to disrupt money laundering, terrorism financing, and other serious crime. The investigation on Westpac will examine whether the bank, its directors, and/or its senior managers breached the Banking Act, including the Banking Executive Accountability Regime (BEAR), or contravened the APRA prudential standards.
APRA will conduct its investigation simultaneously with an investigation by the Australian Securities and Investments Commission (ASIC), as well as the legal proceedings of AUSTRAC, with each agency cooperating where appropriate. Through the investigation, APRA aims to ensure that fundamental deficiencies in the risk management framework of Westpac, the second largest bank in Australia, are identified and addressed and those responsible are held accountable. APRA will also initiate an extensive review program focused on the risk governance of the bank, covering aspects such as risk management, accountability, remuneration and culture. An element of the review will be an examination of the steps Westpac has been taking to strengthen risk governance in recent years, including through its self-assessment. In particular, the APRA investigation will examine the possibility of a failure to:
- Comply with the requirements of the prudential standards, including CPS 510 on minimum requirements for good governance, CPS 520 on minimum requirements for determining the fitness and propriety of individuals to hold positions of responsibility, and CPS 220 on the risk management framework
- Promptly notify APRA of any significant breaches and/or a breach of accountability obligations
The immediate increase of $500 million in the capital requirements of Westpac reflects the heightened operational risk profile of the bank, making the total operational risk capital add-ons that Westpac is required to hold to $1 billion, following the increase announced by APRA in July 2019.
Related Link: Press Release
Keywords: Asia Pacific, Australia, Banking, Westpac, Operational Risk, AUSTRAC, BEAR, Capital Requirements, Governance, ASIC, 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.
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
Related Articles
EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
BCBS and EBA Publish Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
PRA Updates Timeline for Final Basel III Rules, Issues Other Updates
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
US Treasury Sets Out Principles for Net-Zero Financing
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
EC Launches Survey on G7 Principles on Generative AI
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
