APRA Increases ANZ's Capital Requirement Due to Bond Trading Misconduct

​On Friday, Australia's Prudential Regulation Authority (APRA) mandated a significant increase in the capital buffer for ANZ Bank, raising it by A$250 million. This decision comes in response to concerns over potential misconduct within ANZ's bond trading unit.

APRA had originally planned to review a A$500 million capital add-on imposed in 2019 as part of a broader industry crackdown on misconduct. Instead, the regulator decided to enhance ANZ's capital requirement, citing issues with the bank's risk culture.

APRA Chair John Lonsdale remarked, "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."

Lonsdale also emphasized that the regulator had urged ANZ's board to address the underlying issues and indicated that further actions could be considered based on the findings of an independent review.

In response, ANZ acknowledged APRA's concerns and is fast-tracking its efforts to resolve the issues. The bank is working with APRA to determine the scope of the independent review. The news led to ANZ's shares falling by up to 1% in early trading on Friday, in contrast to a broader market dip of 0.4% and gains in shares of other major banks such as Commonwealth Bank, Westpac, and National Australia Bank. Analysts have expressed concerns that the scandal could become a significant distraction for ANZ, with Jefferies analyst Matthew Wilson noting the potential for "disproportionate outcomes from improper conduct."