Westpac has been allowed to free up $500 million of capital after completing a multi-year risk transformation program required by the Australian Prudential Regulation Authority (APRA).
APRA said it would remove the remaining capital add-on it applied to Australia’s second-largest bank after an investigation in 2020 into its risk management.
Westpac said this would increase its common equity tier 1 capital ratio by about 17 basis points and reduce risk-weighted assets by $6,250 million immediately.
The bank entered a Court Enforceable Undertaking (CEU) with APRA in December 2020, where it committed to remediating specific prudential weaknesses in its culture, governance and accountability and addressing the root causes of these issues.
Westpac established the Customer Outcomes and Risk Excellence (CORE) Program and appointed an independent reviewer.
This follows the removal of the first tranche $500 million capital add-on in July 2024, in recognition of Westpac’s progress in addressing these issues.
APRA Member Therese McCarthy Hockey said completion of the risk transformation program was a vital step in ensuring Westpac met APRA’s expectations by holding itself to the requisite prudent risk management and governance standards.
“Our experience has shown us that effective risk transformation programs may continue to identify legacy issues, and we expect Westpac to maintain its unquestionably strong capital position,” Hockey said in a media release.
Westpac CEO Anthony Miller said it had focused this year on improving its our risk culture as risk management was one of the bank’s five priorities.
“We can never forget the errors of the past and the importance of the work we have done over the past six years,” Miller said in an ASX announcement.
“The positive changes in how we manage risk must now be maintained and continually strengthened.
At the time of writing, Westpac (ASX: WBC) shares were trading 60 cents (1.56%) higher AT $38.99, capitalising at $133.36 billion.
