ANZ Bank (ASX:ANZ) has faced further regulatory scrutiny from the Australian Prudential Regulation Authority (APRA), this time over its handling of information and transactions involving Commonwealth Government bonds.
In a statement on Friday, APRA announced a significant increase in its capital overlay penalty on ANZ, raising it by 50% to $750 million. This decision was prompted by growing concerns about the bank's non-financial risk management practices.
APRA has long expressed dissatisfaction with ANZ's approach to non-financial risk management. In 2019, the regulator imposed a $500 million operational risk add-on to the bank, citing deficiencies in its risk governance. Despite years of remediation efforts, APRA has observed limited improvement in ANZ's practices.
Recent issues in the bank's Markets business have exacerbated APRA's concerns. ANZ admitted to misreporting bond trading data to the Australian Office of Financial Management (AOFM) and took action against employees involved in misconduct. These incidents have highlighted deficiencies in ANZ's controls, risk culture, governance, and accountability.
As a result, APRA has imposed a $750 million operational risk capital add-on, appointed an independent reviewer, and required ANZ to develop a remediation plan. The capital add-on will remain in place until APRA is satisfied with the bank's progress.
APRA Chair John Lonsdale expressed deep concern about the persistent risk governance and culture issues within ANZ, one of Australia's largest banks. While the bank's financial health is sound, weaknesses in non-financial risk management can lead to significant financial consequences.
