External report highlights material shortcomings with Westpac NZ’s risk governance

An independent report into Westpac New Zealand’s risk governance has highlighted material shortcomings in the Board’s oversight.

The Reserve Bank of New Zealand – Te Pūtea Matua in March instructed Westpac NZ to commission an independent report to address concerns, stemming from material compliance issues, with the risk governance processes and practices applied by the Westpac NZ Board and executive management. The report, prepared by international management consulting firm Oliver Wyman, confirmed that these concerns were well founded.

“In short, the risk governance of Westpac NZ’s Board needs to see significant improvement,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.

“The report’s findings highlighted material risks to effective risk governance and noted that the role played by the Board fell short of the standard expected of an organisation of the bank’s scope and scale. In some cases, issues that had been acknowledged by the Board for several years had not received due attention or effective remediation.

“The report found there had been historic underinvestment in risk management capabilities at the bank with investment appearing reactive, rather than strategic.”

“We note that Westpac NZ has already made progress towards implementing the Review’s recommendations. The Board has recently been refreshed which, along with changes made to the Board’s processes have addressed some of the report’s findings, but there is a lot more do to,” Mr Bascand says.

“We expect Westpac NZ to prioritise remediation in line with the report’s recommendations and will be closely monitoring their efforts to ensure that they are effective.”

The findings are a timely reminder for other regulated entities to consider their own risk governance practices ahead of the cross-sector thematic review on governance being conducted in 2022 by the Reserve Bank in partnership with the Financial Markets Authority (FMA) Te Mana Tātai Hokohoko.

We appreciate Westpac NZ’s cooperation with the review process and maintain our assessment that Westpac NZ’s financial position is sound.

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