ANZ (ASX: ANZ) has confirmed that it has entered into a court-enforceable undertaking (EU) with APRA, following concerns about its non-financial risk management practices and risk culture. As part of the agreement, ANZ will face a $250 million operational risk capital overlay, equivalent to 5 basis points of Common Equity Tier 1 capital.
Why Is This Happening?
APRA’s concerns stem from ANZ’s broader risk management framework, particularly following issues in its Global Markets business. The regulator has acknowledged that ANZ has made some improvements but believes more work is needed to strengthen non-financial risk oversight.
What’s Next for ANZ?
- Independent review: A third-party reviewer will be appointed to assess the root causes of ANZ’s risk management shortcomings.
- Remediation plan: ANZ will develop and implement a Board-approved plan, with quarterly progress reviews.
- Financial impact: While additional resources will be required, ANZ says the program won’t materially impact its cost outlook.
Leadership Response
ANZ Chairman Paul O’Sullivan acknowledged the bank’s shortcomings, stating:
“We are disappointed that we have not met APRA’s expectations. The EU provides us with a clear roadmap to address these concerns.”
CEO Shayne Elliott added:
“We remain in a strong financial position, but we know there is more work to do over the next two to three years.”
While ANZ has work ahead, this undertaking is a structured path toward rebuilding confidence in its risk culture and ultimately having the capital overlay removed.
