Culture tests ANZ, Westpac and Macquarie

Ian Rogers Latest news
The sea level is rising around ANZ’s Docklands HQ, but no upswell yet in self-criticism on culture and accountability at the bank.
The sea level is rising around ANZ’s Docklands HQ, but no upswell yet in self-criticism on culture and accountability at the bank.

If Tony Boyd at the AFR is on the money, new capital charges for several institutions seem imminent.
Westpac, a probable target, will this week publish its self-assessment in relation to culture, governance and accountability.

If so, the bank will have chosen to air unsettling material around seven months after stakeholders might reasonably have expected to have had access to it, the chance to read the Westpac self-assessment being crucial to the operation of any informed market in the shares or debt of Australia’s second-biggest bank, or in fact the entire capital market.

Out and not so proud any day now was the tip of the Financial Review’s Chanticleer columnist, but a Westpac spokesperson yesterday declined to comment on Boyd’s reports on this topic published late on Friday.

Commonwealth Bank was cornered into a joint venture self-assessment overseen and written by a 3 person panel selected by APRA in the wake of the anti-money laundering compliance blunders that triggered waves of change at the bank.

The astounding findings of the 2018 Prudential Inquiry into CBA and its reactive and complacent risk management culture, published in May of that year, was the background for APRA ordering up complementary analysis, Mao-style, from CommBank’s suspect competitors.

Of bigger banks only NAB, in the first week of December, took the initiative to release its self-assessment.

That document Banking Day at the time politely labelled as “a litany of defects and an overload of corrective work around conduct and operational risk.”

NAB’s board signed off on comments like this: “The development and embedding of a disciplined bank-wide approach to conduct risk management has not happened with sufficient pace or urgency.”

It’s beyond the pale that the equivalent reports from ANZ and Westpac and another 30 banks and ADIs in total are not yet all in the public domain.

ANZ, Tony Boyd once more reports, for now remains stubborn in its reluctance to publish.

A coordinated rush of public release of these reports, maybe that’s the way this will be sorted out in true oligopoly-style, to minimise focus on the worst of the worst and maximise confusion.

Perfectly fine were this jointly done 30 weeks ago, and when finally done will serve as only more evidence of the hollow centre of Australian finance, whenever it is these urgently needed appraisals turn up on bank websites.

Investors and depositors already know the themes, now let the final quarter of banking’s 2019 financial year kick off with details.

In a letter to shareholders one week ago, Lindsay Maxsted, chair of Westpac set out to soften the blows falling this week.

Westpac’s “self-assessment highlighted that while our culture, governance and accountability settings in their totality generally support the sound management of non-financial risks, our approach is less mature than our approach to managing financial risks.”

There is also, he said, “an analytical and consultative culture that can slow down decision making, create complexity and dilute accountability.”

So far, APRA’s harassment of the industry to come clean has seemed feeble, though its tone may be turning harsh this week.

APRA’s own appraisal of these self-assessments released last month said that while accountabilities were fairly clearly set out at senior levels, there was less clarity at lower levels.

“For some institutions, the issues identified in the self-assessment are material and the changes required to address them are significant,” the APRA report said.

APRA also warned it was considering applying additional capital requirements to some institutions.

How close to this danger zone are Westpac, ANZ or any other bank, including Macquarie? Back to the AFR and Banking Day’s former boss for part of the answer.

APRA is writing to the boards of all 36 banks, insurers and superannuation funds that provided self-assessment reports, Tony Boyd wrote, the “consideration” upgraded to denigration.

“These letters … are expected to contain new capital charges for several institutions in need of a stronger supervisory response to their management of non-financial risks.”