APRA slaps ANZ with extra $250m capital add-on, cites ongoing ‘poor behaviour’

ANZ Banking Group’s ongoing woes with the prudential regulator continue, with APRA imposing an additional $250 million capital buffer – on top of the $500 million imposed in 2019 – after it found insufficient improvements in the big four bank’s risk management controls.

APRA in a statement today expressed “longstanding concerns with ANZ’s non-financial risk management”, singling out its markets division.

The additional $250 million capital buffer, APRA said, reflects ongoing concerns around “deficiencies” it has observed in the bank’s risk governance processes – despite the bank’s implementation of a formal remediation program.

“Despite this program being in place for several years, APRA has yet to observe significant improvements in ANZ’s non-financial risk management,” the regulator said.

The additional capital impost comes as financial services regulator ASIC also investigates ANZ’s alleged involvement in market manipulation, as well as allegations that it provided false information to the Australian Office of Financial Management, the government’s debt agency.

In addition to the $750 million capital charge, ANZ will be required to appoint an independent party to review risk governance concerns in its markets business and broader impacts across the business, as well as draft a remediation plan to address findings from the independent review.

ANZ and Westpac are the two remaining majors that still carry their APRA-imposed capital buffers, after each of the big four banks was hit with separate capital add-on orders in 2019 after deficiencies in their risk management controls were identified.

CBA’s $1 billion capital buffer (imposed following APRA’s Prudential Inquiry into the bank, which also triggered an extended enquiry into the other banks) was removed in 2022; NAB’s was removed earlier this year.

Westpac’s original $500 million capital add-on, which was subsequently increased months later to $1 billion, was cut by half in July this year, with APRA recognising the bank’s material progress on its CORE remediation program.

As a result, ANZ is the only bank to see its APRA-imposed capital buffer increase this year.

APRA notes that the bank has launched several investigations into these risk control issues, raising concerns that it has “yet to adequately address deficiencies in controls, risk culture, governance and accountability”.

APRA chair John Lonsdale, whilst acknowledging ANZ’s efforts over the last five years to improve its risk governance and culture, expressed concern over the recent spate of deficient practices that “suggest there continues to be material gaps that need to be closed as a priority”.

He noted that “the persistence of risk governance and culture issues” drove the regulator to act.

Lonsdale concluded: “We have communicated our clear expectations to the ANZ board and executive team that these issues must be urgently reviewed to ensure underlying drivers are identified and addressed.

“Depending on the outcomes from ANZ’s independent review, APRA will consider whether further action is required.”