APRA has ordered Macquarie, Rabobank and HSBC to tighten funding arrangements to ensure funds cannot be withdrawn by parent companies during financial stress.
Following a review of funding agreements across the authorised deposit-taking (ADI) industry, APRA notified the three banks that the reporting of their intra-group funding as stable has been in breach of the prudential liquidity standard.
APRA’s review found these banks were improperly reporting the stability of the funding they received from other entities within the group. These banks had provisions in their funding agreements that would potentially allow the group funding to be withdrawn in a stress scenario, undermining the stability of the Australian bank.
The prudential regulator has ordered Macquarie Bank, Rabobank and HSBC to tighten their funding arrangements to make sure local funds cannot be withdrawn by their parent companies in the event of financial stress.
APRA Deputy Chair John Lonsdale said: “Macquarie Bank, Rabobank Australia and HSBC Australia are financially sound, with strong liquidity and funding positions in the current stable environment. However, to ensure they would be able to withstand a scenario of financial stress, group funding agreements for Australian banks must be watertight, so they can be relied on when they would be most needed.”
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry.