Opinion: The failure of BNK Banking Corporation to submit aggregated asset and liability data to APRA for the February 2023 reporting period looms as a potentially significant incident for the Perth-based deposit taker.
Reporting monthly loans and deposits data is a regulatory requirement for all licensed banks and cases of non-compliance are extremely rare.
APRA’s overriding mandate is to ensure regulated institutions are always positioned to meet their obligations to depositors.
An important part of that work is to verify that banks are capable of calculating their liabilities to individual depositors at any point in time.
That BNK was unable to furnish APRA with aggregate deposits data for February naturally raises questions on whether it is currently able to calculate the value of deposits it is holding on behalf of each individual depositor.
If you can’t furnish a monthly aggregate of your deposit holdings, the logical extension is that you might not be across what’s sitting in each of your customer’s accounts.
That’s a serious matter because the regulator expects banks to know what their liabilities are.
It’s also an obligation under Australian Prudential Standard 910, which lays out the minimum requirements a deposit-taking institution must meet to ensure that it is adequately prepared, should it become a declared entity under the Financial Claims Scheme.
There is some doubt as to whether BNK can comply with APS 910 at the moment after it disclosed to this publication this week that it notified APRA in February of an unresolved “technical error” with its core banking platform.
The bank said it was working to resolve the problem “as soon as possible” but gave no assurance that it would be able to meet the next deadline for submitting its banking data to the regulator.
BNK has been trying to fix the technical issues for more than a month and acknowledged in a statement issued by an external media representative on Monday that it was still “currently unable to generate the internal information needed for the Monthly ADI Statistics”.
The bank is almost certain to cop plenty of heat from APRA about its failure to report its deposits data for February.
It might even lead the regulator to appoint an independent auditor to test the reliability of information generated through the bank’s systems.
Now that the protracted technical problems with BNK’s Temenos banking system are known to the public, the bank needs to clarify whether it is actually able to calculate the amount of customer deposits it holds at both aggregate and individual customer levels.
A failure to do that might indicate a material breakdown in internal controls and some degree of operational dysfunction.
Data disclosures made to APRA by BNK in the three months to the end of January showed a remarkable 20 per cent increase in the aggregate deposit base of the company.
At the end of October BNK reported total deposits of A$1.079 billion, including $509 million from the household sector.
By the end of January it reported total deposits of $1.302 billion, including $711 million from households.