Westpac NZ is working to address its governance shortfalls

  • By Zilla Efrat

Westpac New Zealand says it accepts the findings of the independent risk governance review carried out by consultancy firm Oliver Wyman and is well advanced in addressing recommendations in the report.

Westpac NZ chair Pip Greenwood says since the Reserve Bank of New Zealand instructed the bank to commission the independent review in March 2021, a new chair and six new highly experienced and skilled directors had been appointed to the Westpac NZ board.

“We have always aimed for high standards of risk governance but acknowledge that in the instances identified we fell short,” says Greenwood, who took over as chair on 1 October.

“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.”

Westpac NZ has also increased its investment in risk management substantially in recent years, she says.

“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 program of work underway, sets us up well for the future.”

Greenwood says improving risk governance and following through on recommendations in the report are key priorities for herself, the board, new Westpac NZ CEO Catherine McGrath, and new board risk and compliance committee chair Rob Hamilton.

The RBNZ instructed Westpac NZ to commission an independent report to address its concerns around material compliance issues, the risk governance processes and practices applied by the Westpac NZ board and executive management. The report, prepared by Oliver Wyman, confirmed that its concerns were well-founded.

Deputy Governor and general manager of Financial Stability Geoff Bascand says: “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. In some cases, issues that had been acknowledged by the board for several years had not received due attention or effective remediation.

“The report found there had been historic underinvestment in risk management capabilities at the bank with investment appearing reactive, rather than strategic.”

Bascand notes that Westpac NZ has already made progress towards implementing the review’s recommendations but says there is a lot more to do.

“We expect Westpac NZ to prioritise remediation in line with the report’s recommendations and will be closely monitoring its efforts to ensure that they are effective.”

A separate, independent report into the actions Westpac NZ has taken to improve the management of its liquidity risks, and the culture surrounding it, will be completed and published in the first half of 2022.