APRA reduces liquidity add-on requirements for Macquarie Bank
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The news: The Australian Prudential Regulation Authority (APRA) has reduced the additional liquidity requirements imposed on Macquarie Bank in 2021 and 2022.
The context: APRA previously took action against Macquarie following “material breaches” that exposed weaknesses in the bank’s liquidity risk controls and operational risk management.
In April 2021, APRA required Macquarie to increase its net cash outflow (NCO) overlay by 15% in the liquidity coverage ratio (LCR) calculation, and to reduce the available stable funding (ASF) by 1% for its net stable funding ratio (NSFR) calculation.
APRA also agreed a remediation plan with the bank to address the identified weaknesses.
After further NCO calculation errors were identified, APRA increased the NCO overlay by an additional 10% in April 2022, bringing the total to 25%.
Following a supervisory assessment, APRA said it believes Macquarie has improved its liquidity risk management and reporting controls “to a level that supports a partial removal of its liquidity add-on requirements”.
The NCO add-on has now been reduced to 15%, and the ASF adjustment has been removed, effective immediately.
APRA said the remaining NCO add-ons will remain in place until all outstanding remediation activities are completed and embedded. This is separate to the $500 million operational risk capital overlay, which is subject to its own remediation activities and remains unchanged, the regulator said.
The source: APRA
