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
Previous ArticleFSB Publishes Work Program for 2020
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.