APRA takes $500m off Westpac's risk capital requirements

The news: The prudential regulator will halve the $1 billion additional capital holdings it imposed on Westpac due to improvement in its risk profile, risk management, and bank culture.

The context: The Australian Prudential and Regulation Authority (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. APRA 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 has now rolled back the additional $500 million requirement in recognition of the bank’s improvement.

However, in June Westpac was found to have violated the Australian Banking Association’s branch closure guidelines, and the corporate watchdog on Monday revealed that it was among a group of banks that kept low-income customers in high-fee accounts.