The Westpac Banking Corp (ASX: WBC) share price will be on watch on Wednesday.
This follows the release of an update in relation to its Westpac New Zealand business this morning.
What did Westpac announce?
This morning Westpac revealed that the Reserve Bank of New Zealand (RBNZ) has instructed Westpac New Zealand to commission two independent reports concerning its risk governance and liquidity risk management.
According to the release, the first report will assess the bank's risk governance processes and practices applied by its New Zealand board and executive management.
Whereas the second report relates to the effectiveness of the actions Westpac New Zealand has taken to improve the management of liquidity risk and the associated risk culture.
This follows previously identified breaches of the RBNZ's Liquidity Policy (BS13) and potential non-compliance identified through the RBNZ's liquidity thematic review.
These breaches were previously reported to the RBNZ and the Australian Prudential Regulation Authority (APRA). The latter regulator took action against Westpac for these issues in December.
What now?
The RBNZ has told Westpac that its New Zealand business will have to hold additional liquid assets until the central bank is satisfied that the previously required remediation work has been effective.
The bank commented: "Westpac New Zealand acknowledges the importance of liquidity and risk governance obligations and will support the independent reviewers to provide the necessary reports to the Reserve Bank. WNZL will also act promptly on any recommendations from the reviews."
"WNZL has taken a number of steps to improve risk governance but recognises more work is required, and supports the additional oversight that the independent reports will provide."
Westpac share price performance
The Westpac share price has been a strong performer over the last six months. During this period, it has gained an impressive 49% for shareholders.
