Source: MIL-OSI Submissions
Source: Reserve Bank of New Zealand
30 May 2022 – An independent report into Westpac NZ’s liquidity risk management has found that it is moving in the right direction as it builds a proactive risk culture.
In March 2021 the Reserve Bank of New Zealand – Te Pūtea Matua required Westpac NZ to commission an independent report assessing the management of its liquidity risks, and the culture surrounding it, after finding the bank to be in breach of the Reserve Bank’s Liquidity Policy.
The report, prepared by Deloitte, found that Westpac NZ’s repatriation of its liquidity model from its parent to New Zealand and other risk management enhancements has led to an overall improvement in its liquidity control environment. Deloitte’s assessment found no material gaps in the changes made, but detailed a number of further recommendations to enhance the progress that Westpac NZ has made to date.
“We are encouraged to see that Westpac NZ has taken the necessary steps to improve its liquidity risk management and risk culture by increasing its resourcing and improving its governance processes,” Deputy Governor Christian Hawkesby says.
“We expect that the momentum built to date will allow Westpac NZ to continue the overall transition from a reactive, to a proactive risk culture.”
We appreciate Westpac NZ’s cooperation with the review process and maintain our assessment that Westpac NZ’s financial position is sound.
The independent report was requested under Section 95 of the Reserve Bank of New Zealand Act 1989. This gives the Reserve Bank the power to require a bank to provide a report by a Reserve Bank-approved, independent person.
Westpac NZ was found to be in breach of the requirements of the Reserve Bank’s Liquidity Policy (BS13), which includes compliance with minimum mismatch ratios. The mismatch ratio is a measure of a bank’s liquid assets, adjusted for expected cash inflows and outflows to mitigate risk during a period of stress.
A separate, independent report into Westpac NZ’s risk governance was published last November.