APRA reduces liquidity add-on requirements for Macquarie Bank

The Australian Prudential Regulation Authority (APRA) has reduced liquidity add-on requirements imposed on Macquarie Bank Limited in 2021 and 2022.

APRA took action against Macquarie Bank following material breaches that revealed weaknesses in the bank’s liquidity risk controls and operational risk management.

In April 2021, APRA required Macquarie Bank to increase its Net Cash Outflow (NCO) overlay by 15 per cent in the Liquidity Coverage Ratio (LCR) calculation and reduce the Available Stable Funding (ASF) by 1 per cent for its Net Stable Funding Ratio (NSFR) calculation. APRA also agreed a remediation plan with the bank to address the identified weaknesses.

After further NCO calculation errors were identified, linked to control weaknesses, APRA increased the NCO overlay by an additional 10 per cent in April 2022, bringing the total overlay to 25 per cent.

Following a detailed supervisory assessment, including a Financial Accountability Regime attestation from Macquarie Bank outlining the progress of its remediation and independent assurance, APRA has now concluded that the bank has remediated aspects of liquidity risk management and reporting controls that affect the NCO and ASF calculations to a level that supports a partial removal of its liquidity add-on requirements. Consequently, the NCO add-on has been reduced to 15 per cent and the ASF adjustment has been removed. These changes take effect immediately.

The remaining NCO add-ons will remain in place until APRA confirms that all outstanding remediation activities are completed and effectively embedded. This is separate to the $500m operational risk capital overlay, which is subject to its own remediation activities and remains unchanged.