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The Australian Prudential Regulation Authority (APRA) in 2020 ordered Westpac to add 10% to the amount of cash it keeps on hand after it fell short of the regulator’s standards.
A review of Westpac’s risk management by APRA had found it incorrectly calculated several key capital ratios through 2019 and 2020. (https://reut.rs/3Q6r79N)
The bank has since completed a program to remediate findings from an independent review into Westpac’s liquidity risk management to APRA’s satisfaction, the regulator said on Thursday.
The removal of the liquidity add-on is effective from Sept. 1, while the capital requirement add-on of A$1 billion to reflect Westpac’s “heightened” operational risk profile remains in place, according to the regulator.
The removal of the add-on will contribute about 13 percentage points to Westpac’s liquidity coverage ratio (LCR), the bank said.
The bank’s average LCR for the June quarter was at 130%.
It is unlikely Westpac’s reported average LCR will materially rise from current levels in future reporting periods, according to the bank.
