The ANZ Group Holdings Ltd (ASX: ANZ) share price is down 1.5% to $29.50 on Friday amid news that the Australian Prudential Regulation Authority (APRA) has increased the bank's capital requirements.
In a statement, APRA said ANZ's capital requirements would be increased by $250 million to $750 million because of "heightened concerns" over the bank's non-financial risk management practices.
All of the Big Four ASX 200 bank shares are lower on Friday but the ANZ share price is down the most.
The S&P/ASX 200 Index (ASX: XJO) is also lower, down 0.19% to 8,011.4 points at the time of writing.
ANZ responded to APRA's statement by saying:
ANZ acknowledges APRA's concerns and is expediting work already underway to address the issues raised.
This includes working with APRA on the scope of an independent culture and control review within its Markets business which has already been initiated and will report to the Board.
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ANZ share price down as APRA flags ongoing concerns
APRA imposed a $500 million capital add-on on ANZ in 2019, citing deficiencies in its risk governance.
The bank implemented a remediation program, but APRA says there have been no significant changes.
The regulator said:
Despite this program being in place for several years, APRA has yet to observe significant improvements in ANZ's non-financial risk management.
More recently, several issues emerging in the bank's Markets business have increased APRA's concerns.
ANZ has admitted that it misreported bond trading data to the Australian Office of Financial Management (AOFM) in 2022-23, and that action has been taken in response to poor behaviour by employees in its Markets business.
While ANZ has launched several investigations into these issues, these issues raise prudential concerns that ANZ has yet to adequately address deficiencies in controls, risk culture, governance and accountability.
APRA has told ANZ to appoint an independent party to review the root causes of recent issues and risk governance in the markets business.
It has told the bank it must assess the potential impacts across the broader business and develop a remediation plan to address the independent review's findings.
APRA Chair John Lonsdale said he was concerned about the persisting risk governance and culture issues at ANZ.
Lonsdale said:
ANZ is financially sound with strong capital and liquidity levels. However, weaknesses in managing non-financial risk can lead to detrimental financial impacts and APRA has no tolerance for such weaknesses persisting.
Of the major banks that had capital add-ons applied in 2019, ANZ is the only bank yet to have its add-on either removed or reduced.
While the bank has implemented actions to improve its risk governance and culture over the past five years, these recent issues suggest there continues to be material gaps that need to be closed as a priority.
ANZ share price snapshot
ANZ shares are up 13.4% year to date, compared to the ASX 200's uplift of 5.1%.
The ANZ share price hit a 52-week high of $30.23 on 18 July.
