APRA Increases ANZ Capital Add-On to $1Bn

The Australian Prudential Regulation Authority (APRA) has increased ANZ's operational risk capital add-on from A$750 million to A$1 billion and entered into a Court Enforceable Undertaking with the bank due to persistent non-financial risk management concerns.

"ANZ remains financially sound with robust levels of capital and liquidity, however problems with the bank's management of non-financial risks are persistent and prevalent across the bank," said APRA Chair John Lonsdale. "APRA has seen how long-standing non-financial risk management weaknesses have manifested in material prudential issues at some of ANZ's peer banks. We have observed some similar weaknesses at ANZ and require these to be addressed as a priority."

APRA previously applied an A$250 million operational risk capital increase to ANZ in August 2024 relating to alleged misconduct and culture concerns in the bank's Global Markets business. APRA also ordered ANZ to commission an independent review of its Markets division to determine the root cause of such issues. That review — which was conducted by Oliver Wyman and published in full last week — lent credence to APRA's concerns, the regulator said.

As a part of the Court Enforceable Undertaking, and in order to rid itself of the onerous capital add-on, ANZ must:

• Appoint an independent party to undertake a group-wide review of root causes and behavioural drivers of the shortcomings in its non-financial risk management;
• Develop a remediation plan to resolve those root causes;
• Appoint an independent party to provide assurance that the remediation plan is completed;
• Provide a written attestation to APRA once ANZ is satisfied that the remediation is completed; and
• Incorporate considerations regarding the implementation of the remediation plan into executive accountability standards and remuneration.

For more on the Oliver Wyman review, and how ANZ and other institutions in similar positions may make more meaningful progress in improving their Culture Risk Governance capabilities going forward, read Starling Founder & CEO Stephen Scott's latest Weekend Reading article here.