NZ c.bank revokes ANZ's permission to assess operational risk capital
* RBNZ revokes permission to assess own operational risk
* Decision due to persistent oversight failures
* Requires ANZ to lift minimum capital requirement
(Updates with closing shares)
By Charlotte Greenfield
WELLINGTON, May 17 (Reuters) - New Zealand's central bank
has revoked Australia and New Zealand Banking Group's
local licence to calculate its own operational risk capital due
to "persistent" control failures, adding to the bank's minimum
capital requirement in the country.
The censure comes at a time when the Reserve Bank of New
Zealand (RBNZ) is undertaking broader measures to increase
capital requirements and reduce risk to the financial system in
the event of any major shock.
ANZ's New Zealand unit would now be required to use the
central bank's standardised approach for calculating operational
risk, raising its minimum capital requirement to NZ$760 million
($496.4 million), the RBNZ said in a statement.
Shares in ANZ's New Zealand unit, listed on the
local stock exchange, closed 3.1% lower at NZ$27.25.
ANZ is the biggest of the four Australian-owned banks that
dominate the New Zealand market. It is accredited by the Reserve
Bank to calculate its own regulatory capital requirements, but
an internal review in April revealed that ANZ was not using the
operational risk model the central bank had approved.
"ANZ's directors have attested to compliance despite the
approved model not being used since 2014," RBNZ's deputy
governor, Geoff Bascand, said in a statement.
"The fact that this issue was not identified for so long
highlights a persistent weakness with ANZ's assurance process."
The operational risk model is one of several used by ANZ to
asses its risk capital, a spokeswoman for the bank said.
ANZ said it accepts the regulator's decision, which would
mean that as of March 31 the bank's operational risk capital
requirement increased by NZ$277 million.
"While isolated, and with no impact on customers or the
operation of the bank, ANZ New Zealand is disappointed this
error occurred," it said in an emailed statement.
The bank said it will work with RBNZ as it assesses whether
it has appropriate verification processes in place.
In late 2017, the RBNZ forced Westpac Banking Corp's
New Zealand unit to keep higher capital levels until it
fixed issues with its risk model's governance, processes, and
As part of its broader measures for the financial industry,
RBNZ has already proposed raising top banks' capital ratio to
16%, indicating the country's top four banks, including ANZ,
could collectively have to raise NZ$20 billion in new capital
over the next five years, which could push up borrowing costs.
A decision is expected in the third quarter.
($1 = 1.5312 New Zealand dollars)
(Reporting by Nikhil Kurian Nainan in BENGALURU and Charlotte
Greenfield in WELLINGTON, Additional reporting by Paulina Duran
in SYDNEY; Editing by Stephen Coates and Himani Sarkar)
First Published: 2019-05-17 03:34:02
Updated 2019-05-17 07:55:30
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