The Australian Prudential Regulation Authority (APRA) will oversee a comprehensive assessment of how Macquarie Group Limited calculates capital requirements for its businesses outside the bank after identifying a breach of the group’s Non-Operating Holding Company (NOHC) authority. Macquarie has corrected the understatement of required capital, and an AUD 100 million governance overlay has been put in place. The miscalculation, identified during a recent capital review, dates back to 2019 and resulted in lower required capital for those businesses. It did not undermine the financial stability of the group, including the bank, at any point. APRA Deputy Chair Therese McCarthy Hockey described the breach as a serious governance and assurance failure because Macquarie’s own processes had not identified and addressed the issue. The assessment will examine Macquarie’s Economic Capital Model, and APRA may consider further action depending on the findings. The AUD 100 million overlay is additional to the existing AUD 500 million capital overlay imposed on Macquarie Bank Limited in 2021. Removal of either overlay requires APRA approval. APRA also reiterated its plan to review all existing NOHC authorisations to ensure they appropriately address risks arising from group structure and activities.
APRA to oversee Macquarie capital assessment following breach and AUD 100 million governance overlay
The Australian Prudential Regulation Authority will oversee an assessment of Macquarie Group Limited’s capital model for its businesses outside the bank after identifying a capital understatement dating back to 2019. Macquarie has corrected the calculation, and an AUD 100 million governance overlay is in place alongside the existing AUD 500 million capital overlay on Macquarie Bank Limited. The breach did not undermine the group’s financial stability, but APRA may consider further action following the assessment.