ANZ to Address Risk Management Weaknesses with New Court Enforceable Undertaking

Key Takeaways

• Capital Add-On Increased: APRA has raised ANZ's capital add-on from $750 million to $1 billion, signaling heightened concerns over the bank's non-financial risk management.
• CEU Accepted: ANZ has agreed to a Court Enforceable Undertaking (CEU) to address ongoing weaknesses in its risk culture and operational risk management.
• Root Causes Uncovered: An independent review confirmed that risk governance issues within ANZ’s Global Markets division are likely present across other areas of the bank, prompting urgent remediation steps.
• Accountability at the Top: Senior management and board members are now held accountable for implementing the remediation plan, with their performance directly tied to the bank’s success in addressing these issues.

Deep Dive

It’s been a long time coming, but the Australian Prudential Regulation Authority (APRA) has finally taken a step in holding Australia and New Zealand Banking Group (ANZ) accountable for its ongoing struggles with non-financial risk management. APRA has accepted a Court Enforceable Undertaking (CEU) from the bank and increased its capital add-on to $1 billion.

ANZ has been under APRA’s microscope for a while now, and for good reason. Despite numerous efforts over the years to address weaknesses in its risk management, particularly around operational risk and compliance, APRA has consistently raised concerns about ANZ’s reactive and ineffective approach to non-financial risks. To be blunt, the bank’s risk culture has been more of a liability than a strength.

“ANZ remains financially sound, but its management of non-financial risks leaves much to be desired,” said APRA Chair, John Lonsdale. “We can’t afford to wait until something worse happens.”

And it's not just APRA calling this out. As we’ve seen in other parts of the banking world, when a bank’s internal controls and risk culture are weak, it doesn’t take much for things to spiral. APRA is determined to make sure ANZ doesn’t follow that path.

The Independent Review and Its Findings

In 2024, APRA took an even closer look at ANZ’s Global Markets division after emerging concerns about employee conduct and risk management. As part of its ongoing efforts to get to the bottom of these issues, APRA ordered ANZ to commission an independent review to uncover the root causes and see if the problems were confined to one area of the bank or a symptom of something more widespread.

The results of that review weren’t exactly reassuring. While there was some progress in terms of culture and governance in Global Markets, the review pointed to deep-rooted issues that had yet to be fully addressed. Worse, it suggested these problems weren’t unique to Global Markets—they could be spread across other parts of the bank.

What’s In the Court Enforceable Undertaking?

In light of the findings, ANZ has agreed to several key actions as part of the CEU. The focus here is on a complete overhaul of its non-financial risk management practices. ANZ’s commitment is being taken seriously—after all, this is an offer made directly to APRA, not just a “we’ll fix it” promise.

Here’s what ANZ has agreed to do:

• A Deep Dive into Root Causes: ANZ will hire an independent reviewer to conduct a thorough analysis of the root causes and behavioral drivers of its ongoing risk management issues. This will include a gap analysis to compare current remediation work with what's actually needed to get things on track.
• A New Roadmap for Remediation: Based on those findings, ANZ is required to come up with a detailed, comprehensive remediation plan to address the shortcomings.
• Ongoing Independent Oversight: Another independent reviewer will be appointed to ensure that the remediation plan is carried out properly and effectively.
• Accountability, From the Top Down: ANZ’s leadership, including the board members, will be held personally accountable for delivering the remediation. The results will be tied to their performance, with clear ties to remuneration and accountability statements in line with the Financial Accountability Regime.

The $1 billion capital add-on will stay in place until APRA is satisfied that ANZ has met all the requirements. No room for excuses here—APRA is making sure the bank delivers on its promises.

The ball is now firmly in ANZ’s court. While the bank has expressed its commitment to addressing the issues raised by APRA, the real work begins now. For ANZ, this is about more than just fixing a few issues, it’s about restoring confidence in its ability to manage risk. The bank’s next steps will determine whether it can move past its non-financial risk management challenges or if it will continue to face scrutiny from APRA and beyond.

“We take APRA’s concerns seriously and are committed to making the changes necessary to address them,” said ANZ CEO in a statement. “We are committed to working with APRA to ensure these issues are resolved in a timely and effective manner.”

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