Westpac, NAB and ANZ have been ordered to set aside a total $1.5 billion more in capital until they have finished refunding customers for their various wrongdoings and are more capable of identifying non-financial risks.
The Australian Prudential Regulation Authority on Thursday said it had written to Westpac, NAB and ANZ to tell them each needed to hold an extra $500 million in capital.
The move follows APRA’s decision in May last year to apply a $1 billion capital add-on to Commonwealth Bank in response to the findings of the APRA-initiated prudential inquiry into a money laundering scandal.
CBA’s major rivals were among 36 institutions asked by APRA to look at their own risk assessment systems in the light of a report that had suggested many issues were “not unique to CBA”.
NAB, ANZ and Westpac did so and reported back to APRA. However, only NAB had made its self-assessment public until Westpac followed suit on Thursday.
ANZ still had not done so.
APRA chair Wayne Byres said on Thursday Australia’s big four banks were still falling short when it came to identifying risk. In CBA’s case, that had led to it breaching money-laundering law and the largest civil penalty in Australian corporate history.
“Australia’s major banks are well-capitalised and financially sound but improvements in the management of non-financial risks are needed,” Mr Byres said.
“This will require a real focus on the root causes of the issues that have been identified, including complexity, unclear accountabilities, weak incentives and cultures that have been too accepting of long-standing gaps.”
The $500 million requirement, to be applied through an increase in risk weighted assets, will apply from September 30. It will remain until Westpac, NAB and ANZ complete their planned remediation to strengthen risk management, and close gaps identified in their self-assessments.
Westpac released a full copy of its self-assessment shortly after APRA’s announcement on Thursday, having previously made only a summary available.
Westpac said the extra capital requirements are expected to reduce its level 2 common equity Tier 1 capital ratio by approximately 16 basis points.
Westpac’s CET1 capital ratio at March 31 was 10.6 per cent.
ANZ said the requirements represented an 18 basis point impact on its CET1 capital ratio.
The big four banks have together shelled out more than $5 billion in customer remediation over the past two years in the wake of damaging revelations at the financial services royal commission.