Westpac enters court enforceable undertaking
The Australian Prudential Regulation Authority (APRA) has agreed to a court enforceable undertaking (CEU) from Westpac as it looks to lift its efforts to address risk governance deficiencies.
APRA said the CEU came after it expressed concerns with the bank’s progress in remediating weaknesses that included an "immature and reactive risk culture, unclear accountabilities, capability shortfalls, and inadequate oversight".
APRA’s deputy chair, John Lonsdale, said entering into the CEU was a “serious step that indicates the severity of the situation. The integrated plan required by the CEU must be designed to deliver the sustainable risk governance step-change that APRA requires”.
The concerns came from APRA’s review into the bank’s risk governance following its AUSTRAC money laundering breaches in December, 2019.
In June, APRA said Westpac’s change in risk governance since its 2018 self-assessment had only been “incremental” and that bank failed to deliver expected risk governance improvements despite almost two years of remediation. APRA said this undermined its confidence in the bank to remediate weaknesses in a timely manner.
Westpac acknowledged APRA’s concerns and the CEU signed today required Westpac to:
- Develop an integrated plan that incorporates all its major risk governance remediation programs, covering both financial and non-financial risks;
- Obtain independent assurance over the implementation of the plan with direct reporting to APRA; and
- Assign accountabilities for delivery of the plan to named executives and Board members and incorporate outcomes into remuneration decisions.
“As one of the country’s largest and most important financial institutions, Westpac should be a leader in risk management. Although the bank has made progress in some areas over the past year, it is not good enough,” Lonsdale said.
“We continue to observe new prudential issues arising while long-standing weaknesses persist, and we believe Westpac’s governance, culture and accountability frameworks and practices are still in need of a substantial uplift.
“APRA’s concerns have been communicated directly to the bboard and senior management with the clear message that the magnitude of improvements that Westpac needs to deliver requires a deep commitment to change at all levels across the organisation.”
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