Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Why APRA is taking action against Westpac (ASX:WBC)

APRA has announced it’s taking action against Westpac Banking Corp (ASX: WBC).

What happened?

Yesterday, the Australian Prudential Regulation Authority (APRA) announced that it has taken enforcement action against Westpac due to material breaches of APRA’s prudential standards on liquidity.

APRA explained that the breaches, identified during 2019 and 2020, relate to the incorrect treatment of specific funding and loan products for the purposes of calculating the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

The regulator said that whilst these breaches have been rectified and don’t raise major concerns about Westpac’s overall liquidity position, APRA thinks this has demonstrated weaknesses in the risk management and oversight, risk control frameworks and risk culture.

What is APRA going to do?

APRA will require independent third parties to comprehensively review Westpac’s compliance with APRA’s liquidity reporting requirements and fixing its control framework for liquidity risk management. Until this is addressed, APRA will also require Westpac to apply a 10% add-on to its net cash outflow component of the LCR calculation. APRA is making sure Westpac has ample liquidity.

APRA Deputy Chair John Lonsdale said: “In taking these actions, our objective is to obtain assurance that Westpac is complying with APRA’s liquidity requirements. It also sends a message to the wider banking industry that breaches of prudential standards are not acceptable, and APRA will respond as appropriate, including by imposing penalties.”

What did Westpac say?

Westpac CEO Peter King said: “We acknowledge the findings of APRA’s review and accept the need to work faster to address our shortcomings.”

Westpac said that APRA has indicated Westpac hasn’t demonstrated the expected improvements from its programs. It wants a program to address the full scope of financial and non-financial risk issues, and their root causes. And APRA wants a stronger assurance over delivery.

The major bank said that it expects to enter into an enforceable undertaking and it will work constructively with APRA on the details.

Summary thoughts

I think this shows the pitfalls of not doing the correct thing in the first place, which has resulted in Westpac being penalised. Whilst I understand the attraction to banks (largely being the dividend income), I don’t think they can generate outperformance over the long term. That’s why I’m looking at other ASX dividend shares such as Brickworks Limited (ASX: BKW) which also benefit from the ‘opening up’ theme.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content