Westpac New Zealand Unit Ordered to Review Risk Management -- Update

By Alice Uribe and Jack Hagel 

SYDNEY -- Westpac Banking Corp. said it is considering a demerger of its New Zealand business after regulators there ordered it to review its risk management.

The major Australian bank on Wednesday said that it is in a very early stage of its assessment and that no decision has been made yet. The lender said the impact of the risk-management reviews, ordered by the Reserve Bank of New Zealand, will be one consideration in its decision.

"The business continues to perform well with a strong position in retail and commercial banking," Westpac said in a statement. "However, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac's NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward."

The Reserve Bank of New Zealand on Wednesday said it ordered the Westpac unit to commission independent reports addressing concerns the central bank has expressed about the unit's risk governance processes and practices.

"We have experienced ongoing compliance issues with Westpac NZ over recent years, most recently involving material failures to report liquidity correctly, in line with the Reserve Bank's liquidity requirements," Geoff Bascand, the central bank's deputy governor and general manager of financial stability, said in a statement. "Furthermore, the bank has continued to operate outside of its own risk settings for technology for a number of years."

The central bank also required the unit to provide a separate independent report assuring the effectiveness of actions taken to improve the management of liquidity risks.

It said it would increase the amount of liquid assets the unit is required to hold until the central bank is satisfied with the unit's remediation efforts. The reserve bank also said that the Westpac unit's current liquidity and funding positions are sound and that the bank is well capitalized. It added that Westpac has worked to address the root causes of compliance issues related to liquidity requirements.

Westpac said it would provide further updates as required.

Write to Alice Uribe at [e-mail] and Jack Hagel at [e-mail]

(END) Dow Jones Newswires

March 24, 2021 15:52 ET (19:52 GMT)

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