(Reuters) – Australia’s bank regulator said on Thursday Westpac Banking Corp no longer needs to keep an additional amount of cash reserve after the company took steps to rectify issues related to the regulator’s liquidity requirements.
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.
(Reporting by Sameer Manekar in Bengaluru)