Australian regulator hikes ANZ’s capital requirements after bond trading misconduct

08/22/2024

1 minute read

2024.08.22 19:30

(Reuters) -Australian prudential regulator said on Friday it has increased the capital add-on requirement for lender ANZ Group to A$750 million ($502.73 million), intensifying its regulatory oversight following the bank’s recent admission of misreported bond trading data.

The move by the Australian Prudential Regulation Authority (APRA), representing an increase of A$250 million to the existing add-on, highlights persistent concerns about ANZ’s risk management practices.

APRA had previously mandated an A$500 million operational risk capital add-on for the bank in 2019, citing similar inadequacies in its risk governance framework.

This regulatory development follows a tumultuous period for Australia’s fourth-largest lender, which recently suspended several traders from its markets division amid allegations of misconduct, stemming from reports of suspected misrepresentation in government bond trades by bank personnel.

“While ANZ has launched several investigations into these issues, these issues raise prudential concerns that ANZ has yet to adequately address deficiencies in controls, risk culture, governance and accountability,” the regulator said in a statement.

APRA has now mandated ANZ to engage an independent entity to conduct a comprehensive review of the markets business focusing on the root causes of recent issues, including risk governance practices and potential broader implications.

ANZ will also be required to formulate a detailed remediation strategy to address the findings and recommendations from the review.

Concurrently, the Australian Securities and Investments Commission is probing ANZ’s alleged manipulation of a A$14 billion 10-year Australian treasury bond sale in April 2023, where the bank is suspected of artificially inflating bond values by influencing 10-year futures contracts prices moments before terms were finalized.