APRA imposes capital increases on Macquarie Bank

Macquarie Bank has seen its liquidity and operational risk capital requirements increased by the Australian Prudential Regulation Authority (APRA) after failing to meet requirements. 

The enforcement action related to the incorrect treatment of a specific intra-group funding arrangement for the purpose of calculating capital as well as breaches of reporting standards on liquidity between 2018-2020. 

APRA said that, while the breaches were historical, they raised “serious questions” about the bank’s practices. It said it “cannot rule out” further action in the future if more information came to light. 

As a consequence of the breaches, APRA required:  

• Macquarie Bank to hold an operational capital overlay of $500 million, reflecting deficiencies in its management of operational risk inherent in the bank’s intra-group structure;  
   
• A 15% add-on to the net cash outflow component of its LCR calculation; and  
   
• A 1% adjustment to the available stable funding component of its NSFR calculation. 

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APRA deputy chair, John Lonsdale, said: “APRA’s legally-binding prudential and reporting standards play an essential role in enabling APRA to adequately monitor risks to financial safety and stability. For one of the country’s largest financial institutions to have committed breaches of this nature is disappointing and unacceptable. 

“Alongside the enforcement actions, APRA will subject Macquarie Bank to intensified supervision to address the bank’s persistent difficulties in complying with its prudential obligations. We cannot rule out further action as more information comes to light about the root causes of these breaches.” 

The increases would take effect today.