RBNZ demands assurance ANZ New Zealand is operating prudently
By Rebecca Howard
June 24 (BusinessDesk) - The Reserve Bank is demanding ANZ Bank New Zealand provide assurance it is operating in a prudent manner after it was censured in May and the bank says it will work with the regulator.
The central bank is using powers under section 95 of the Reserve Bank of New Zealand Act 1989 to require the local ANZ unit to provide a report by a Reserve Bank-approved, independent person. These reviews can investigate issues such as risk management, corporate or financial matters, and operational systems.
The RBNZ wants two separate reports from ANZ New Zealand. The first will cover the New Zealand lender’s compliance with the Reserve Bank’s current and historic capital adequacy requirements and the second will assess the effectiveness of the bank's attestation and assurance framework, focusing on internal governance, risk management and internal controls.
“The board had been working on commencing an independent review to provide assurance that our capital models and the directors’ attestation process are robust and operating in a prudent manner," ANZ New Zealand chair John Key said in a statement.
"Following discussions with the RBNZ, the directors agree that the best way to achieve this assurance is working with the RBNZ and an independent party to undertake the necessary reviews."
In May, the RBNZ revoked ANZ Bank New Zealand's accreditation to model its own operational risk capital requirement due to a "persistent failure" in its controls and attestation process. From March 2019, this will increase its minimum capital held for operational risk by around 60 percent, to $760 million, the RBNZ said.
ANZ is one of four big banks in New Zealand that are accredited by the Reserve Bank to use their own risk models – the internal models approach - in calculating their regulatory capital requirements.
After the May decision, ANZ is now required to use the standardised approach for calculating appropriate operational risk capital. It can still use 44 other internal models to calculate capital requirements.
At the time, ANZ said its board and management take the attestation regime very seriously and while it believes it has the appropriate controls and attestation processes in place "it will work with the RBNZ in assessment of the controls and attestation processes.
A bank's disclosure statement is required to contain certain statements signed by each director of the bank. These must state, among other things: whether the bank has systems in place to monitor and control adequately the banking group's material risks and whether those systems are being properly applied; and whether the bank has complied with its conditions of registration over the period covered by the disclosure statement.
Reserve Bank governor Adrian Orr underscored that ANZ - New Zealand's largest lender - remains sound and well capitalised.
As at 31 March 2019, ANZ New Zealand held more than $12.4 billion of capital, almost $3.5 billion more than its regulatory requirement. ANZ New Zealand's net loans and advances totalled $130 billion at the time.