An independent report into Westpac New Zealand has found material shortcomings in the way its board has run the bank.
Photo: RNZ / Nate McKinnon
The Reserve Bank ordered the report because of concerns about Westpac's compliance with banking rules, and shortcomings in its risk management policies and procedures.
The report says the bank's independent directors didn't have sufficient expertise in banking, risk management and banking technology, and didn't challenge executives.
The Reserve Bank's deputy governor Geoff Bascand said the local Westpac board had started changes but significant improvement was needed.
Westpac chair Pip Greenwood said they accepted the findings and were making changes.
"We have always aimed for high standards of risk governance but acknowledge that in the instances identified we fell short."
"We have also followed up immediately on other recommendations in the report, including restructuring committees and overhauling the way information on risk is provided to the Board," Greenwood said.
Since RBNZ instructed the bank to commission the independent review in March 2021, a new chair and six new directors had been appointed to the Westpac NZ Board.
Westpac said it had also significantly increased investment in risk management in recent years.
Westpac NZ actions findings of independent risk governance review
Westpac NZ accepts the findings of the independent risk governance review carried out by consultancy firm Oliver Wyman and is well advanced in addressing recommendations in the report.
The Reserve Bank of New Zealand (RBNZ) had required Westpac NZ to commission the review that the RBNZ released today.
Westpac NZ Board chairperson Pip Greenwood, who took over as Chair on 1 October, agreed strong risk governance and a strong risk culture are fundamental requirements for banks.
"We have always aimed for high standards of risk governance but acknowledge that in the instances identified we fell short."
Ms Greenwood said since the RBNZ instructed the bank to commission the independent review in March 2021, a new chair and six new highly experienced and skilled directors had been appointed to the Westpac NZ Board.
"We have also followed up immediately on other recommendations in the report, including restructuring committees and overhauling the way information on risk is provided to the Board."
Westpac NZ had also significantly increased investment in risk management in recent years.
"We'll continue to review the collective skills on the Board, as the bank's needs evolve, and I'm confident the mix of capability and experience we've now built, alongside the programme of work underway, sets us up well for the future."
Ms Greenwood said improving risk governance and following through on recommendations in the report were key priorities for herself, the Board, new Westpac NZ chief executive Catherine McGrath, and new Board Risk and Compliance Committee chair Rob Hamilton.
"We're united in our determination to keep lifting capability in this area and will continue to work constructively with the RBNZ on these matters and ensure they are up to speed with our progress and support our plans."