The Reserve Bank of New Zealand (RBNZ) has revoked ANZ’s approval to model its own operational risk capital requirements, citing a “persistent failure in its controls and attestation processes.”
ANZ is now required to use the standardised approach for calculating operational risk capital, which will increase its minimum capital held for operational risk by approximately 60% to $760 million.
Banks in New Zealand can calculate their capital requirements in two ways: through internal models approved by the Reserve Bank, or through the standardised approach. Reserve Bank Deputy Governor Geoff Bascand says ANZ had not used an approved model since 2014, and that this highlighted a “persistent weakness” in the bank’s assurance process.
“Accreditation is earned through maintaining high risk management standards, and comes with stringent responsibilities for the bank’s directors and management,” Bascand stated.
“The Reserve Bank’s role is to review and approve internal models. The onus is then on bank directors to ensure, and attest, that their bank is compliant with the Reserve Bank’s regulatory requirements. To do that, bank directors need to be satisfied that the internal assurance processes that sit behind the attestations are being adhered to.”
“ANZ’s directors have attested to compliance despite the approved model not being used since 2014,” he continued. “The fact that this issue was not identified for so long highlights a persistent weakness with ANZ’s assurance process.”
The Reserve Bank has encouraged ANZ to conduct a full review of its attestation processes, and to assess its compliance with capital regulations. Bascand says it will “continue to work with ANZ in assessing its systems controls before determining any further action.”