Australia regulator accepts ANZ’s undertaking to fix risk culture; hikes capital add-on

(Reuters) -Australia’s prudential watchdog said on Thursday it had accepted a court-enforceable undertaking from ANZ Group to address the lender’s non-financial risk management practices and risk culture.

The Australian Prudential (LON:PRU) Regulation Authority (APRA) also raised the amount of spare cash that the country’s No. 4 lender must keep on hand to A$1 billion ($628.50 million) from A$750 million.

In August, the regulator had asked ANZ to conduct an independent review to determine root causes of its issues, in response to a suspected wide-ranging misconduct at its bond trading unit.

The lender overstated the value of government bonds that it traded by more than A$50 billion over a one-year period, according to local media reports. ANZ has not confirmed that figure, and the corporate regulator is investigating the alleged misconduct.

The APRA said the review found that the shortcomings in the bond trading unit may be present in other parts of the bank, invalidating the progress of ANZ’s remediation program to implement a group-wide non-financial risk management framework.

"APRA has assessed that the completion of this program alone will not effectively and sustainably address the broader non-financial risk weaknesses across ANZ," the watchdog said.

ANZ said in a separate statement that it had accepted all recommendations of the review, and was taking immediate actions in response to the review and the undertaking with APRA. 

Among these actions is the creation of the position of group head, non-financial risk program delivery. Mark Evans, currently head of Singapore, Southeast Asia, India and the Middle East, will take up the new role.

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"While the bank remains in a strong financial position with strong capital and liquidity levels, we know we have more work to do in the coming two to three years to boost our uplift of non-financial risk practices," said ANZ’s outgoing CEO, Shayne Elliott.

Elliott’s replacement by former HSBC wealth chief Nuno Matos was announced in December after the misconduct came to light. The lender moved up his retirement to mid-May from July on Monday.

($1 = 1.5911 Australian dollars)

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