The Australia and New Zealand Banking Group (ASX: ANZ) share price has come under pressure on Friday following news from across the Tasman sea.
At the time of writing the banking giant's shares are down 2.5% to $26.00.
What happened?
This morning the Reserve Bank of New Zealand (RBNZ) took aim at ANZ's New Zealand operations for a persistent failure in its controls and attestation process.
According to the release, the RBNZ has revoked ANZ Bank New Zealand Limited's accreditation to model its own operational risk capital requirement.
This means that ANZ is now required to use the standardised approach for calculating appropriate operational risk capital, which will mean an increase in its minimum capital held for operational risk by around 60% to NZ$760 million.
Deputy Governor Geoff Bascand advised: "Accreditation is earned through maintaining high risk management standards, and comes with stringent responsibilities for the bank's directors and management."
He added: "The Reserve Bank's role is to review and approve internal models. The onus is then on bank directors to ensure, and attest, that their bank is compliant with the Reserve Bank's regulatory requirements. To do that, bank directors need to be satisfied that the internal assurance processes that sit behind the attestations are being adhered to."
But this wasn't the case with ANZ according to Mr Bascand. He said: "ANZ's directors have attested to compliance despite the approved model not being used since 2014. The fact that this issue was not identified for so long highlights a persistent weakness with ANZ's assurance process."
The release explains that the RBNZ had "encouraged ANZ to undertake a full review of its attestation process, and assess its compliance with capital regulations" and that ANZ's failure to use an approved model was revealed through that review.
It will now work with ANZ in assessing its systems controls before determining any further action.
This news appears to have spooked the shareholders of the other big four banks. At the time of writing the share of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC) are all trading lower.
