The Australian Prudential Regulation Authority (APRA) announced today that it would undertake a review of the risk management controls employed by the National Australia Banks treasury division.
The move follows the approximately A$180 million in losses relating to unauthorised trading in foreign exchange options announced by the National Australia Bank on Tuesday this week.
As part of its review, APRA will investigate:
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trading activities that caused the losses and whether the Banks existing escalation procedures were effective;
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controls in the Bank treasurys front and back offices; and
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weaknesses in the design and implementation of the Bank's internal control systems, including market risk management.
APRAs Deputy Chairman, Mr Ross Jones, said that the review was standard regulatory practice in cases of this nature.
From a prudential perspective, APRA has to ensure that any breakdown of controls and processes in this instance has been properly identified and that appropriate action has been taken by the institution in question to rectify the matter, he said.
APRA will also in the short term specifically review the risk management practices of authorised deposit-taking institutions (ADIs) with treasury functions.
APRA is in constant dialogue with the ADIs it regulates and does not have any specific concerns about individual institutions or the industry in general, Mr Jones said. However, both APRA and industry recognise the importance of reassuring the community and the industry review is part of that process.
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, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $1.7 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.
| Media and industry inquiries only: |
Sue Morey
Head of Public Affairs
Australian Prudential Regulation Authority
Telephone: 02 9210 3384
Mobile: 0438 124 524 |
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APRA Contact Centre
1300 131 060
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