APRA removes Westpac's $500m capital overlay after risk management overhaul
Make us a preferred source
Make us a preferred source on Google
The news: The Australian Prudential Regulation Authority (APRA) said it will remove the $500 million capital overlay applied to Westpac, after the banking giant completed its multi-year risk transformation program required by the regulator.
The context: APRA initially imposed a $500 million capital requirement on Westpac along with ANZ and NAB in July 2019 in response to risk profile concerns uncovered in the banks’ self-assessments.
The regulator then slapped Westpac with an additional $500 million requirement in December 2019 due to its heightened risk profile.
Westpac entered into a court-enforceable program overseen by an independent reviewer to improve its culture and risk exposure and accountability. APRA consequently rolled back the additional $500 million requirement last year, in recognition of the bank’s improvement.
APRA indicated at the time that the remainder would stay in place until Westpac completed its transition work and the regulator undertook further validation work to assess the sustainability of improvements made in prudent risk management practices and outcomes.
Westpac said the removal of the capital overlay today will mean the bank's common equity tier 1 capital ratio will increase by 17 basis points, reflecting a reduction in risk weighted assets of $6.25 billion. This change will apply with immediate effect.
What they said: “As a systemically important bank, APRA expects Westpac to hold itself to the requisite standard of prudent risk management and governance practices,” said APRA member Therese McCarthy Hockey.
“Completion of this risk transformation program is a vital step in ensuring these expectations are consistently met. Our experience has shown us that effective risk transformation programs may continue to identify legacy issues, and we expect Westpac to maintain its unquestionably strong capital position.”
Westpac CEO Anthony Miller commented: “Risk management is one of our five priorities and this year we've been focused on embedding the improvement to our risk culture. We can never forget the errors of the past and the importance of the work we have done over the past six years.”
The sources: ASX, APRA media release
