Report says ANZ lacked rigour

A new report by ANZ has shown that the bank historically did not have enough rigour around its processes to ensure it stayed within the rules, the Reserve Bank says.

The Reserve Bank has been working with ANZ to ensure historical non-compliance with its capital adequacy requirements was being addressed.

ANZ was censured in May last year by the regulator for ‘‘persistent failure in its controls and attestation process’’.

Directors at ANZ New Zealand had repeatedly attested that the bank was complying with the Reserve Bank’s rules when in fact it had been using an unauthorised model to calculate how much operational risk capital it held since 2014, without knowing.

As a result, the Reserve Bank required ANZ to use a standardised model for calculating how much capital it should hold, which meant ANZ’s minimum capital would increase by around $260 million.

ANZ was required to have two independent reviews.

The first was published in December and found ANZ’s directors’ attestation and assurance framework required improvement to become fully effective.

The latest report assessed the bank’s compliance with Reserve Bank capital adequacy requirements.

The report identified some of instances of non-compliance, indicating that historically there was not sufficient rigour around ANZ NZ’s processes.

Seventeen of 33 wholesale credit models in use were not approved by the Reserve Bank, nor was an operational risk capital model approach.

Historically, three out of 19 changes to retail models and 15 out of 35 changes to wholesale models were not approved by the Reserve Bank before they were implemented. ‘‘The current noncompliance, in terms of the use of unapproved models, stems from a number of reasons indicating there was not sufficient rigour historically around these processes,’’ the report said.