ANZ’s rainy day reserve privileges revoked by RBNZ
(17 May 2019 – New Zealand) ANZ Banking Group has been penalised by the Reserve Bank of New Zealand for running an unapproved model for its rainy day, or operational risk capital, reserves.
The RBNZ has revoked the bank’s privilege to run its own operational risk reserve after ANZ admitted it had been using a rogue model for almost five years.
New Zealand’s central bank has, however, denied claims the move was payback for ANZ’s remarks about withdrawing from the country in response to increased capital weightings.
“The Reserve Bank has revoked ANZ Bank New Zealand Limited’s accreditation to model its own operational risk capital requirement due to a persistent failure in its controls and attestation process,” the RBNZ said in a statement.
The new approach will require ANZ to increase its minimum capital held for operational risk by 60 per cent, or $277 million, to $760 million. ANZ shares fell 76¢, or 2.9 per cent, to $25.90 on Friday.
ANZ said once the problem was discovered it was escalated to the board and reported to the RBNZ. It says the unapproved model was based on the sanctioned version but included an annual adjustment to reflect growth.
“While isolated, and with no impact on customers or the operation of the bank, ANZ New Zealand is disappointed this error occurred,” the bank said.
ANZ is one of the big four Australian banks that is currently squaring off against the RBNZ ahead of a flagged increase in capital requirements which some analysts say could require them to set aside another $8.1 billion.
At the bank’s half-year results on May 1, ANZ CEO Shayne Elliott said he had “obvious concerns” about any changes and may need to rethink how much business the bank did in New Zealand as a result.
“Clearly we have options, on the amount of capital we put into New Zealand, and on how we deploy that capital in New Zealand, into which sectors and what returns we require of it," he said.