- New Zealand’s central bank finds “material shortcomings” in the risk governance of Westpac’s local arm following an independent review into its oversight
- The report was commissioned by Westpac on the Reserve Bank of New Zealand’s (RBNZ) instruction in light concerns around material compliance issues from Westpac
- International management consulting firm Oliver Wyman, which conducted the review, found Westpac New Zealand fell short of expected risk governance standards
- Westpac NZ Chair Pip Greenwood says the bank has immediately begun to prioritise resolving the issues flagged in the report
- Shares in Westpac Banking Corp closed 0.78 per cent lower on the ASX today at $21.63
New Zealand’s central bank has found “material shortcomings” in the risk governance of Westpac’s local arm following an independent review into its oversight.
The report was commissioned by Westpac on the Reserve Bank of New Zealand’s (RBNZ) instruction and was completed by international management consulting firm Oliver Wyman.
The central bank said it made Westpac commission the report on the back of concerns around material compliance issues as well and some of the processes and practices of the Westpac management team: concerns, RBNZ said, that turned out to be “well-founded”.
RBNZ Deputy Governor Geoff Bascand said the Westpac New Zealand board needed to see “significant improvement” in light of the Oliver Wyman report.
“The report’s findings highlighted material risks to effective risk governance and noted that the role played by the board fell short of the standard expected of an organisation of the bank’s scope and scale,” Mr Bascand said.
“In some cases, issues that had been acknowledged by the board for several years had not received due attention or effective remediation.”
He said the report found there had been “historic underinvestment” into Westpac New Zealand’s risk management capabilities. Further, investment into risk governance was typically reactive rather than strategic.
According to the report, though Westpac had a “substantial” number of risk and regulatory remediation programmes underway across the bank, these programmes had design weaknesses that meant their delivery was often delayed or ineffective.
Other areas of concern flagged in the report included the Westpac board’s engagement with the bank’s risk appetite framework and communication practices around risk.
Westpac NZ Chair Pip Greenwood said in a statement that the bank acknowledged the instances in which it “fell short” but said the appointment of a new Chair and six directors to the Westpac NZ board was part of the bank’s response to the risk governance review.
“We have also followed up immediately on other recommendations in the report, including restructuring committees and overhauling the way information on risk is provided to the board,” Ms Greenwood said.
“We’ll continue to review the collective skills on the board, as the bank’s needs evolve, and I’m confident the mix of capability and experience we’ve now built, alongside the programme of work underway, sets us up well for the future.”
RBNZ said while it noted that Westpac had already begun to make progress towards implementing the review’s recommendations, the bank had “a lot more to do”.
Shares in Westpac Banking Corp closed 0.78 per cent lower on the ASX today at $21.63.