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Australian Prudential Regulation Authority moves against 'material breaches of prudential liquidity standards' by Westpac, including in relation to Westpac NZ

Australian Prudential Regulation Authority moves against 'material breaches of prudential liquidity standards' by Westpac, including in relation to Westpac NZ

The Australian Prudential Regulation Authority (APRA) is taking enforcement action against the Westpac Banking Corporation over material breaches of prudential liquidity standards, including in relation to Westpac New Zealand.

APRA says the breaches, identified during 2019 and this year, relate to the incorrect treatment of specific funding and loan products for the purposes of calculating the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). While the breaches have been rectified and don't raise concerns about the overall soundness of Westpac’s current liquidity position, APRA says they demonstrate weaknesses in risk management and oversight, risk control frameworks and risk culture.

"As a result, APRA will now require comprehensive reviews by independent third parties of Westpac’s compliance with APRA’s liquidity reporting requirements and the remediation of its control framework for liquidity risk management. Until the findings from the independent reviews are addressed to APRA’s satisfaction, APRA will also require Westpac to apply a 10% add-on to the net cash outflow component of its LCR calculation," APRA says.

“In taking these actions, our objective is to obtain assurance that Westpac is complying with APRA’s liquidity requirements. It also sends a message to the wider banking industry that breaches of prudential standards are not acceptable, and APRA will respond as appropriate, including by imposing penalties,” APRA Deputy Chairman John Lonsdale said.   

 Liquidity is the ability to access cash when it is needed. There's more from APRA on liquidity in banking here.

In a statement Westpac says APRA's action includes some for breaches of liquidity requirements relating to its Kiwi subsidiary Westpac NZ.

"While the breaches have been rectified, and Westpac Group would have still continuously met its liquidity ratio minimums, Westpac Group had breached the prudential standards. Specifically, as a material offshore subsidiary Westpac NZ’s LCR would have been below 100% for much of 2019. Westpac’s LCR for the September quarter 2020 was 151%. APRA has indicated that Westpac has material weakness in its liquidity processes and control framework," Westpac says.

APRA's full statement is here, and Westpac's is here.

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lol who would have thunk it ?? Just make having a Large Term Deposit (with Westpac) a condition of having an interest only mortgage .. problem 1/3 solved.

You're welcome Westpac.

All a Numbers game really.

With a greater uptake of decentralized crypto currency, banks will become less necessary. As it will become possible to be your own bank. No fees, instant transactions, and a practical storage of wealth. That time is not far away.

It's already here. But what is your point? This is an entirely different matter. Quite a few people on interest dot co showboating about digital assets recently and talking like experts and prophets.

"Quite a few people on interest dot co showboating about digital assets recently and talking like experts and prophets"

It seems to be a bit like property, where the value only goes up based on the more people that buy into it. I have also seen a lot ofpeople talking up digital assets recently, but often people will keep quiet on the really good deals.

What is more relevant here is:

-- APRA is run by ex-bankers for bankers. Nobody has been identified here in terms of accountability. Nobody has been fined.

-- NZ regulatory oversight is opaque, weak, and toothless.

Being under the regulatory minimum for LCR is a serious breach.

By whose standards and authority? APRA? Don't be so naive.

You don't think it's a material breach? It is.

No surprise really, banks tend to lend just as much if not more than they can to keep their shareholders happy so this is just an effect of how neoliberal capitalism works. Why we need to add this additional risk to the economy just so someone makes a profit escapes any sensible logic.

Correct. Hence we rarely see bankers accountable under the law and for the privilege to operate how they like.

What does Westpac need do, or not do in order to be disengaged as banker to the New Zealand Government?

What threshold of pain, scandle and demonstrated bad character do these characters need display in order to stir someone in Wellington from their slumber?

Westpac became banker to the New Zealand Government in 1989. Since then we have established and grown a dedicated Government Business team, providing for the day-to-day banking needs of each government department.

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In addition to meeting Government's everyday banking, we are continuously reviewing the way we deliver practical and strategic solutions to support the New Zealand Government in achieving its stated business objectives. This has seen a broadening in our focus with our key priorities including…

They make it sound as if the government does not have its own central bank to finance its spending.