The Australia and New Zealand Banking Group (ASX: ANZ) share price has fallen in early trade on news of independent reviews.
ANZ is a leading Australian and New Zealand banking institution, with a presence throughout the oceanic region. ANZ is one of the Big Four Aussie banks and derives much of its revenue from mortgages, personal loans and credit.
Why Is ANZ Being Reviewed?
Just over a month ago the Reserve Bank of New Zealand took away ANZ’s banking licence to model and operate its own capital levels. ANZ had not been using an approved model for the calculation of operational risk capital (ORC) requirement since December 2014.
A failure of systems and controls, as well as no verification being undertaken by the Bank, meant that ANZ decommissioned the RBNZ approved model without first ensuring it had the necessary regulatory approved models in place to move to a new model.
How Is ANZ Responding?
ANZ Bank New Zealand will work with RBNZ on independent reviews of its capital models and attestation process.
The necessary reviews will be undertaken by an independent party and will work with RBNZ under section 95 of the RBNZ Act, this section has been used in the past with other banks.
ANZ New Zealand Chairman Sir John Key said: “As has been the case with independent reviews of other financial institutions’ processes, we agree that the most effective way of achieving this assurance is via the independent report powers,”
However, the large bank said it continues to be sound and well capitalised with strong credit ratings. At the end of the last quarter, March 2019, ANZ NZ had $12.4 billion of capital, which was almost $3.5 billion more than required by regulations.
Is ANZ A Buy?
Banks are undoubtedly safer if they hold capital through the whole economic cycle, but in the normal times, which is most of the time, they are less profitable, which isn’t an attractive outcome for shareholders. I wouldn’t want to buy ANZ shares today, or perhaps ever unless in a deep recession.
I would much rather buy shares of the reliable ASX shares in the FREE REPORT below instead.
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