Australian Prudential Regulation Authority accepts enforceable undertaking from ANZ and lifts capital add-on to AUD 1 billion

The Australian Prudential Regulation Authority has accepted a Court Enforceable Undertaking from Australia and New Zealand Banking Group to address persistent weaknesses in non-financial risk management practices and risk culture, and has increased the capital add-on applied to the bank to AUD 1 billion. Under the undertaking, ANZ must appoint an independent reviewer to conduct a group-wide review of root causes and behavioural drivers (including a gap analysis against existing and planned remediation), develop a comprehensive remediation plan, and obtain independent assurance over execution of that plan. The bank must also provide written attestations to APRA from the relevant Accountable Person and the Chair of the Board Risk Committee and/or Board Audit Committee once remediation activities are complete and target states are substantially achieved, and embed delivery accountabilities in Financial Accountability Regime accountability statements and remuneration scorecards. APRA linked the action to long-standing concerns across operational risk and compliance management and a reactive risk culture, reinforced by an independent review commissioned after serious conduct and non-financial risk issues in ANZ’s Global Markets business which cautioned similar shortcomings may exist elsewhere; the capital add-on rise follows an earlier increase that lifted the AUD 500 million operational risk add-on imposed in 2019 to AUD 750 million. The AUD 1 billion capital add-on will remain in place until ANZ delivers the required remediation to APRA’s satisfaction.