The Reserve Bank of New Zealand - Te Pūtea Matua has raised concerns around Westpac New Zealand's risk governance processes and has instructed the bank to commission two independent reports to address them.
"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. Furthermore, the bank has continued to operate outside of its own risk settings for technology for a number of years," Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
"Westpac NZ needs to take a close look at its risk governance practices. To ensure this happens we are requiring them to provide an independent report that assesses Westpac NZ's risk governance processes and practices applied by the Westpac NZ Board and executive management."
The Reserve Bank has also required that Westpac NZ provides a separate independent report to provide assurance that the actions they have taken to improve the management of their liquidity risks, and the culture surrounding it, are effective. Until the Reserve Bank is satisfied that Westpac NZ's remediation work is complete and effective, it is increasing the bank's required holding of liquid assets (cash or assets that can be easily converted into cash).
The independent reviews come under Section 95 of the Reserve Bank of New Zealand Act 1989. This gives the Reserve Bank the power to require a bank to provide a report by a Reserve Bank-approved, independent person. The Reserve Bank will work with Westpac NZ to implement the findings.
It is important to note that the Reserve Bank is confident that Westpac NZ's current liquidity and funding positions are sound, and that the bank is well capitalised. The reviews outlined today are to ensure this remains the situation on an ongoing basis.
