For the second time this year, APRA will impose an immediate increase in Westpac's capital requirements as it levels allegations of breaches of the Banking Act - possibly a first - against the bank.
Allegations of breaches of the Banking Act - possibly a first- have been levelled by APRA at Westpac, with the bank subject to an "investigation" and a "review" over the hair-raising allegations of "systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act" alleged last month by Austrac.
For the second time this year, APRA will "impose an immediate increase in Westpac's capital requirements of $500 million, to reflect the heightened operational risk profile of the bank."
APRA said this brings the total operational risk capital add-ons that Westpac is required to hold to $1 billion, following the increase announced by APRA in July 2019.
This will be complemented by "an extensive review program focused on Westpac's risk governance. The review program will include risk management, accountability, remuneration and culture," APRA said.
The "prudential matters" that are the subject of APRA's investigation include:
Whether Westpac, its directors, and/or its senior managers contravened the Banking Act 1959 and the prudential standards by engaging in, and in the way they responded to, the conduct set out in and otherwise related to the Austrac proceedings.
Whether the bank's governance, control and risk management framework was adequate; and appropriately implemented;
Westpac's accountability and remuneration arrangements, including whether they "were adequate, and appropriately implemented to effectively manage non-financial risks"
any "failure to comply with the requirements of the prudential standards" including those relating to Governance, Fit and proper and Risk Management.
APRA also said it would probe if "there was a failure to promptly notify APRA of any significant breaches and/or a breach of accountability obligations" and finally any "failure to comply with accountability obligations under the Banking Executive Accountability Regime."
Westpac said the capital add-on would reduce its tier one capital ratio by 16 basis points.