APRA tells ANZ to go harder on non-financial risk after meeting between John Lonsdale, Nuno Matos

The prudential regulator is playing hardball. Chair John Lonsdale told ANZ’s new CEO Nuno Matos he needs to go harder on correcting non-financial risk issues.

APRA chair John Lonsdale at the Australian Banking Association conference. Picture: Supplied

Prudential regulator John Lonsdale told ANZ boss Nuno Matos that he wants to see improved non-financial risk at the banking major, in their first meeting since Mr Matos took the top job.

The Australian Prudential Regulation Authority chair said ANZ now had to show progress working through a risk transformation plan in the wake of a scandal inside its markets business, speaking on the sidelines of a banking summit in Sydney.

Mr Lonsdale said Mr Matos, a Portuguese banker recruited from HSBC, had “indicated pretty clearly” in his letter to the APRA chair that the bank is keen to “make progress on non-financial risk”.

He also made clear to Mr Matos that the regulator had “indicated pretty clearly we want them to” achieve that progress.

ANZ was slapped with nearly $500m in additional capital by APRA over its non-financial risk failings, taking the bank’s total additional capital burden to nearly $1bn with a pre-existing penalty in place.

The bank’s non-financial risk improvement plan was now a “work in progress”, Mr Lonsdale said. “We’re very serious about seeing some progress,” he underlined.

Mr Matos has made an effort to reach out to all of Australia’s regulators, including the Reserve Bank and financial crimes agency Austrac.

ANZ CEO Nuno Matos at headquarters in Melbourne. Picture: Arsineh Houspian.

He is set to sit down with Australian Securities & Investments Commission boss Joe Longo shortly, as ASIC scopes out a major investigation into the bank over allegations its traders rigged a $14bn government bond auction. ANZ denies any wrongdoing.

Mr Lonsdale’s meeting with Mr Matos took place in the weeks after he settled in at ANZ. He said he sat down with regulated entities “all the time”.

APRA has repeatedly refused to reveal further information about ANZ’s engagement with the regulator, as well as Mr Matos’ letter to Mr Lonsdale.

Legal officers at the regulator told The Australian that secrecy provisions applied to the documents.

Separately on Thursday, Mr Lonsdale revealed APRA was moving forward with changes to its oversight of the banking sector, including creating a new third category of banks in a bid to slash the regulatory impost on smaller operators.

Mr Lonsdale said this was aimed at striking a “sensible balance” and “lowering the regulatory burden for banks while ensuring institutions of all sizes have the financial and operational resilience”.

Australia currently has two tiers of banks, but this will carve the sector up between majors, medium banks, and small banks.

“This change will allow us to introduce more nuance into our policy and supervision approach to banks, with greater differentiation between requirements for different bank business models,” he said.

Originally published as APRA tells ANZ to go harder on non-financial risk after meeting between John Lonsdale, Nuno Matos