Westpac has decided to retain ownership of Westpac New Zealand, announcing yesterday that there will be no demerger and it will continue to hold 100 per cent of the business.

In March, the bank said it was reviewing the appropriate structure for the NZ business in light of the Reserve Bank of New Zealand’s decision to change the capital requirements of NZ banks and require structural separation of NZ banking subsidiaries from their Australian parents.

According to one estimate, the RBNZ’s revised capital requirement could result in the Big Four Australian banks having to top up their capital by around NZ$20 billion over the next five years.

Westpac has its own issues with the RBNZ, which raised concerns about Westpac’s risk governance processes and instructed the bank to commission two independent reports to address them.

The RBNZ said it had experienced ongoing compliance issues with Westpac NZ over a number of years, most recently involving failures to report liquidity correctly.

The RBNZ instructed Westpac NZ to hold more liquid assets until the RBNZ determines the remediation work to have been effective.

Westpac chief executive Peter King said in a statement: “After a detailed review, we believe a demerger of the WNZL business would not be in the best interests of shareholders.

“Our review identified opportunities to improve service for customers and value across the WNZL business and we will progress these with the WNZL board and management team.”

King did not comment to the capital or structural separation issues or the liquidity issues.

Westpac New Zealand chief executive David McLean retires today (June 25). Simon Power, general manager institutional and business banking, will act as CEO while a new CEO is appointed.