The Westpac Banking Corp (ASX: WBC) share price is edging lower on Thursday following the release of an announcement.
At the time of writing, the banking giant's shares are down slightly to $20.25.
What did Westpac announce?
This morning Westpac announced that it has entered into an enforceable undertaking with the Australian Prudential Regulation Authority (APRA) in relation to risk governance remediation.
This follows the recent receipt of APRA's review of risk governance which identified Westpac as having an "immature and reactive risk culture, unclear accountabilities, capability shortfalls and inadequate oversight."
Westpac's CEO, Peter King, has acknowledged that significant work is required to address the bank's shortcomings and is determined to deliver on its risk remediation activities.
He commented: "My top priority is to ensure the bank's risk culture and management of risk meet the high standards expected of us. We have had constructive discussions with APRA and know we have to deliver a disciplined step change in our management of financial and non-financial risk. While we have made progress in improving our standards, we have much more work to do, and this must be done at pace."
What is the enforceable undertaking?
The enforceable undertaking includes an integrated remediation plan.
Westpac will develop a plan which describes all major remediation activities related to risk governance. It will also set a clear timeline for implementation and specifies who is accountable for delivery.
The bank will have to submit this plan in writing to APRA within 90 days from the commencement of the enforceable undertaking.
Westpac will also have to provide sufficient funding and resources to implement the plan and establish appropriate governance arrangements.
The enforceable undertaking also requires Westpac to make regular reports. This will see an independent reviewer provide APRA with updates on the effectiveness of the integrated plan within 15 business days from the end of each quarter.
Finally, Westpac will be required to provide clarity on accountability. It will incorporate accountability for the delivery of the integrated plan into relevant Banking Executive Accountability Regime statements and remuneration scorecards.
