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Aussie banks set for more pain as cost of culture rises

APRA

Investor favourites are once again in the firing line as the Australian Prudential Regulation Authority forces three of the big four to hold an additional $500 million each.

The banking regulator has written to ANZ, National Australia Bank (NAB) and Westpac advising them to raise their minimum capital requirements as part of risks identified in their risk governance and self-assessment.

This follows instructions to have additional capital to withstand market volatility. 

APRA chair Wayne Byres believes the Australian banks are well financed but need improvement on non-financial risks, such as paying out remediation.  

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“The major banks play a vital role in the stability of the entire financial system, and APRA expects them to hold themselves to the highest standards of risk governance,” said Mr Byres.

“Their self-assessments reveal that they have fallen short in a number of areas, and APRA is therefore raising their regulatory capital requirements until weaknesses have been fully remediated,” continued Mr Byres. 

This follows an increase in capital requirements in May last year, where APRA imposed a $1 billion capital add-on to the Commonwealth Bank of Australia (CBA) in response to the findings of the APRA-initiated Prudential Inquiry into CBA.

“Australia’s major banks are well capitalised and financially sound, but improvements in the management of non-financial risks are needed,” said Mr Byres.

“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 longstanding gaps,” continued Mr Byres.

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Aussie banks set for more pain as cost of culture rises
APRA
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