Heritage Bank required to bolster its capital requirements

  • By Zilla Efrat

Heritage Bank will have to increase its minimum capital requirement by $5 million through an operational risk capital add-on following enforcement action from the Australian Prudential Regulation Authority (APRA).

The move comes after Heritage incorrectly reported capital because of weaknesses in its operational risk and compliance frameworks.

However, APRA says Heritage did not breach minimum prudential capital ratios at any point and remains well capitalised.

In addition to the increased capital overlay, APRA will require Heritage to complete a remediation program to address areas of concern regarding governance, risk management systems, processes and frameworks.

“Although Heritage remains financially sound, APRA takes breaches of its prudential requirements seriously,” says APRA deputy chair John Lonsdale.

“This capital overlay reflects our assessment of the bank’s heightened operational risk and compliance profile. The increased capital requirement will remain in place until we are satisfied that our concerns have been addressed and weaknesses rectified.”

“We also expect Heritage to assign Accountable Persons under the Banking Executive Accountability Regime with responsibility for delivering the sustainable change needed at the bank," Lonsdale says.

APRA will also launch a targeted self-assessment program to assess whether other lenders are similarly affected and need to address any potential deficiencies.