The Westpac Banking Corp (ASX: WBC) share price is up after an Australian Prudential Regulation Authority (APRA) update.
What’s moving the Westpac share price?
APRA announced today that it has closed its investigations into possible breaches of the law, including the Banking Executive Accountability Regime (BEAR), by Westpac.
As a reminder, APRA commenced this investigation in December 2019 to examine prudential concerns arising from allegations by AUSTRAC that Westpac had breached anti-money laundering and counter-terrorism laws. APRA’s investigation also examined the bank’s actions to rectify and remediate the issues after they were identified.
In June last year, APRA delegated certain enforcement powers under the Banking Act to ASIC which was conducting its own investigation whether the conduction contravened the Corporations Act 2001. This delegation was done to avoid both agencies separately investigating and potentially litigating related matters.
What was the result?
After looking at ASIC’s investigation, APRA has determined to close its investigation.
Westpac is still subject to a court enforceable undertaking to implement the risk governance remediation plan to improve risk governance across the business. There’s an ongoing independent review to make sure it’s on track.
The $1 billion operational risk capital add-on, which reflects the bank’s heightened operational risk profile, will also remain in place until Westpac completes its remediation to APRA’s satisfaction.
APRA Deputy Chair John Lonsdale said: “Although the investigation has not found evidence of breaches of the Banking Act or the BEAR, APRA remains determined to ensure Westpac rectifies its risk governance weaknesses effectively and sustainably.
“Under the enforceable undertaking, Westpac has clearly defined Executive and Board accountabilities for the implementation of its integrated risk governance remediation plan. APRA will be holding Westpac to account for the delivery of the required improvements.”
Summary thoughts
For Westpac shareholders, it’s good to hear that there will be no further punishment for what happened. Hopefully the last few years of financial and reputation damage will mean that Westpac (and other big banks) behave properly for the foreseeable future. These types of issues can drag on for years if banks do the wrong thing.
My favourite business in the banking sector is the global investment bank Macquarie Group Ltd (ASX: MQG).
