Following multiple breaches to prudential and reporting standards, the Australian Prudential Regulation Authority (APRA) has hit Macquarie Bank with increased liquidity and operational risk capital requirements.
Macquarie Bank breached APRA's reporting standards on liquidity "multiple times" between 2018 and 2020 and incorrectly treated specific intra-group funding arrangements for calculating capital and related entity exposure metrics.
"These resulted from deficiencies in Macquarie Bank's ability to manage the operational risk inherent in the complex intra-group structure, within which it transacts with its related entities," APRA said.
Macquarie Bank is now required to hold an operational capital overlay of $500 million which reflects the deficiencies in its management of operational risk inherent in the bank's intra-group structure.
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In addition, it will require a 15% add-on to the net cash outflow component of its liquidity coverage ratio calculation and a 1% adjustment to the available stable funding component of its net stable funding ratio calculation.
"Alongside the enforcement actions, APRA will subject Macquarie Bank to intensified supervision to address the bank's persistent difficulties in complying with its prudential obligations. We cannot rule out further action as more information comes to light about the root causes of these breaches," APRA deputy chair John Lonsdale said.
Macquarie acknowledged the new requirements and said it has a number of programs in place to strengthen capital and liquidity reporting.
"We note the actions announced by APRA and share their disappointment," Macquarie Group chief executive Shemara Wikramanayake said.
"We recognize that while specific historical matters leading to these actions have been addressed, we have continued work to strengthen our operating platform and risk governance. We will work with APRA through a period of intensified supervision to advance this work as quickly as possible."
APRA noted the breaches are historical and do not impact Macquarie's current capital or liquidity positions.