The key banking regulator, APRA, thinks Westpac's (ASX:WBC) behaviour has improved, so it has halved the $1 billion capital penalty imposed in 2019 in two tranches.
APRA said in a statement on Friday morning that it has cut the overlay in half immediately because of improvements in the bank's risk governance, culture, and risk management. The $500 million add-on was imposed in July 2019 in response to higher operational risk noted in the bank's risk governance self-assessment, and an additional $500 million was imposed in December 2019 due to risk governance concerns.
APRA said the remaining $500 million capital add-on will remain in place "until Westpac completes its transition work and APRA undertakes further validation work to assess the sustainability of improvements made in risk governance, culture, and accountability practices and outcomes."
In a separate statement, Westpac said the ongoing transition process involves embedding the uplift in its risk management practices.