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  • A decision made by the Reserve Bank of New Zealand (RBNZ) has made Westpac (WBC) ponder its place in Australia's neighbouring country
  • The bank is considering a demerger from its NZ counterpart, Westpac New Zealand, after the RBNZ asked Westpac to commission an independent report into its risk governance processes
  • The New Zealand body also asked Westpac to hold any additional liquid assets and wants them put under the microscope as well
  • Westpac said it would "assess the best structure" for its Australian and New Zealand divisions going forward
  • Shares in Westpac fell by 0.98 per cent on Wednesday after the announcement was made — closing at $24.19 each

A decision made by the Reserve Bank of New Zealand (RBNZ) has made Westpac (WBC) ponder its place in Australia's neighbouring country.

"As part of Westpac’s fix, simplify and perform strategy we have been actively
considering the businesses we operate in," a Wednesday press release read.

"Westpac NZ is a valuable part of the Westpac Group and has been for over 160 years."

"However, given the changing capital requirements in New Zealand and the
[Reserve Bank of New Zealand] requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward".

Earlier on Wednesday, the RBNZ asked Westpac to commission two independent reports — one into risk governance and another into liquid assets.

The New Zealand central bank also asked for Westpac to hold any additional liquid assets during this time.

"Westpac is in the very early stage of this assessment and no decisions have been made," the bank also said in its press release.

"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."

RBNZ Deputy Governor Geoff Bascand said ongoing issues with Westpac New Zealand sparked the request for review.

"We have experienced ongoing compliance issues with Westpac NZ over recent years, most recently involving material failures to report liquidity correctly, in line with the Reserve Bank's liquidity requirements," he said.

"Westpac NZ needs to take a close look at its risk governance practices."

According to the RBNZ, Westpac NZ disclosed breaches of its own to the regulator in September of last year.

Déjà vu

These requests made by the RBNZ echo similar sentiments towards Westpac by the Australian Prudential Regulation Authority (APRA), which slammed the bank last year.

In 2019, Westpac was awarded a record $1.3 billion money laundering fine by the Australian Transaction Reports and Analysis Centre. Chief Executive Brian Hartzer left a year later.

The misconduct led APRA to label Westpac's culture as "immature" with "unclear accountabilities".

Shares in Westpac fell 0.98 per cent during Wednesday trade after the announcement was made. It closed at $24.19 apiece.

WBC by the numbers
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