Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Westpac capital requirements increased

Date 15 November 2017

Westpac capital requirements increased after breaching regulatory obligations

Westpac New Zealand Limited (Westpac) has had its minimum regulatory capital requirements increased after it failed to comply with regulatory obligations relating to its status as an internal models bank.

Internal models banks are accredited by the Reserve Bank to use approved risk models to calculate how much regulatory capital they need to hold. Westpac used a number of models that had not been approved by the Reserve Bank, and materially failed to meet requirements around model governance, processes and documentation.

“This is very disappointing. Operating as an internal models bank is a privilege that requires high standards and comes with considerable responsibilities. Westpac has not met our expectations in this regard,” Reserve Bank Deputy Governor and Head of Financial Stability Geoff Bascand said.

The Reserve Bank required Westpac to commission an independent report into its compliance with internal models regulatory requirements. The report found that Westpac:

• currently operates 17 (out of 35) unapproved capital models;

• has used 21 (out of 32) additional unapproved capital models since it was accredited as an internal models bank in 2008; and

• failed to put in place the systems and controls an internal models bank is required to have under its conditions of registration.

The Reserve Bank has decided that Westpac’s conditions of registration should be amended to increase its minimum capital levels until the shortcomings and
non-compliance identified in the independent report have been remedied. Westpac’s minimum capital ratio requirements will be 6.5 percent for Common Equity Tier 1 capital, 8 percent for Tier 1 capital and 10 percent for Total capital, with the additional 2.5 percent capital conservation buffer applying. Currently, for all other locally incorporated banks capital ratios are set at, respectively, 4.5 percent, 6 percent and 8 percent, plus the 2.5 percent buffer.

In addition, the Reserve Bank has accepted an undertaking by Westpac to maintain its total capital ratio above 15.1 percent until all existing issues have been resolved. The Reserve Bank has given Westpac 18 months to satisfy the Reserve Bank that it has sufficiently addressed those issues or it risks losing accreditation to operate as an internal models bank.

“We believe the regulatory action is appropriate given the seriousness of Westpac’s non-compliance and the need to protect the integrity of the capital regime,” Mr Bascand said.

The Reserve Bank has taken into account that Westpac has not deliberately sought to reduce its regulatory capital. While there have been serious shortcomings and
non-compliance, it appears that Westpac has remained well above its required regulatory capital levels.

Westpac has confirmed that it does not dispute the findings of the independent report, that it is committed to remedying all the issues identified, and that it will maintain its total capital ratio above 15.1 percent.

More information

Key prudential requirements for banks


ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: Body massages and Uber are in, DVDs are out, says Stats NZ

Statistics New Zealand has rejigged the consumers price index basket in its latest three-year review, adding body massages, Airbnb and Uber and removing DVD and Blu-Ray players…More>>

ALSO:


StuffMe: Commerce Commission Welcomes Dismissal Of Merger Appeal

In a summary of their judgment released today, Justice Dobson and lay member Professor Martin Richardson dismissed the appellants’ process criticisms and found the Commission was entitled to place significant weight on the prospect of reduced quality of the products produced by the merged entity. More>>

ALSO:

Digital Futures: New Chief Technology Officer Role Created

Communications Minister Clare Curran has called for expressions of interest for the new role of Chief Technology Officer position to help drive a forward-looking digital agenda for New Zealand. More>>

Dry: Beef + Lamb Launches Drought Resources

The resources include a fact sheet outlining strategies to manage and mitigate the effects of drought, coping with stress on the farm and advice on feed requirements and animal welfare during the dry period. More>>

ALSO:

InternetNZ: Net Neutrality Failure In US "Will Hurt All Users"

InternetNZ Chief Executive Jordan Carter has condemned the decision by the United States communications regulator to undo 2015 open Internet rules, warning that all Internet users will end up worse off as a result. More>>

ALSO: