Australia Regulator Penalizes ING Unit With A$50 Million Capital Add-On for Liquidity Misreporting

Australia's banking regulator has imposed stricter capital and liquidity requirements on ING Bank Australia after the lender admitted to misstating its liquidity position for several years. The Australian Prudential Regulation Authority (APRA) acted after discovering the bank's key liquidity ratio had at times fallen below the mandatory minimum.

Regulatory Action

APRA announced on Thursday that it had set new license conditions for the local unit of the Amsterdam-based bank. The penalties include a A$50 million ($35.84 million) operational risk capital add-on, which the regulator said was to penalize "higher operational risk and weaknesses in prudential reporting."

In addition to the capital charge, APRA has increased the minimum liquidity holdings that ING Bank Australia is required to maintain. These actions are designed to ensure the bank has a more robust buffer against financial shocks.

The Reporting Failure

The regulatory action follows a notification from ING Australia to APRA in July, where the bank disclosed it had identified significant miscalculations in its liquidity data. The errors, which spanned several years, resulted in an overstatement of its Liquidity Coverage Ratio (LCR), a critical measure of a bank's ability to meet its short-term obligations.

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According to APRA, while the bank had been reporting an LCR of around 160%, the true figure was "substantially lower." The regulator noted that the corrected ratio had, at times, dropped below the mandated 100% requirement, indicating a breach of prudential standards.

Next Steps and Company Response

As part of the new conditions, APRA has ordered ING Australia to commission an independent review. This review will investigate the root causes of the reporting failures and assess the bank's broader risk management and governance practices.

In a separate statement, ING Australia CEO Melanie Evans acknowledged the shortcomings. "We regret that these deficiencies existed in our operations and we are committed to meeting APRA’s expectations when it comes to standards of risk management, governance and regulatory reporting," Evans said.