AUS
NZ
UK
CA
USA
IND
Source: Phongphan, Shutterstock
Summary
- The central bank of NZ has raised concerns about risk governance procedures in Westpac's New Zealand unit.
- RBNZ has asked Westpac NZ to provide 2 independent reports over issues about the bank’s failure to report liquidity correctly.
- APRA also took actions against Westpac due to liquidity issues in December.
Reserve Bank has asked Westpac to take a closer look at its risk governance practices and ordered the company to pay for 2 independent reports to address the same. On Wednesday, the central bank declared that Westpac would have to increase its cash holdings until any remedy work was done and the work proved successful.
In a statement, RBNZ Deputy Governor Geoff Bascand stated that there had been ongoing compliance concerns with Westpac NZ in recent years, most notably involving significant failures to disclose liquidity properly. He noted that Westpac had operated outside of its own risk settings for technology for many years.
RBNZ has asked Westpac NZ to give 2 independent reports that will show:
- The first independent report will evaluate Westpac NZ's risk governance methods and procedures as implemented by its board and executive management.
- The second report would have to demonstrate that the steps taken by Westpac NZ to strengthen the management of its liquidity risks and the culture around them have been successful.
Source: © Esmehelit | Megapixl.com
The bank has breached the liquidity policy requirements of RBNZ for a period of 8 years (2012 to 2020) due to flawed computations of certain conditions for liquid assets. RBNZ stated that Westpac was found to violate mismatch ratio requirements, a measure of a bank's liquid assets to make sure it was stable at the time of stress.
Westpac later corrected them and started a remediation effort to detect core issues, which resulted in the violation of the requirements. RBNZ was optimistic in Westpac's current liquidity position, but it needed to ensure that Westpac NZ had completed the necessary work and that the modifications were successful.
Breaches led to enquiry by APRA in December
The liquidity policy of RBNZ has been violated previously also as per reports of RBNZ and the Australian Prudential Regulation Authority (Apra). These issues led APRA to take action against Westpac NZ’s parent, Westpac Banking Corporation, in December. While the violations were fixed, the regulator claimed that it revealed flaws in risk management and supervision.
Westpac NZ stated in a statement that it had taken a series of steps to strengthen risk governance, but acknowledged that more work was needed and that the independent reports would provide further supervision.
