Australia raises capital requirements for ING's local unit after overstating liquidity position

• APRA increased minimum liquidity requirements and imposed a A$50 million ($35.84 million) operational risk capital add-on as penalty for weaknesses in prudential reporting
• ING Bank Australia's true Liquidity Coverage Ratio was substantially lower than the reported 160%, occasionally breaching the mandated 100% minimum requirement
• The bank must commission an independent review to assess the causes of reporting failures and evaluate its broader risk management and governance practices

Summary: Australia Imposes Stricter Capital Requirements on ING Bank Following Liquidity Reporting Failures

The Australian Prudential Regulation Authority (APRA) has imposed heightened regulatory requirements on ING Bank Australia after the institution materially overstated its liquidity position for several years, at times breaching minimum regulatory thresholds.

Key Regulatory Actions:

• APRA increased minimum liquidity requirements for the bank
• Imposed an A$50 million ($35.84 million) operational risk capital add-on as penalty
• Mandated an independent review of risk management and governance practices

Violations Discovered:

ING Bank Australia notified APRA in July 2024 after identifying miscalculations in its Liquidity Coverage Ratio (LCR) spanning multiple years. While the bank reported LCR levels around 160%, the actual figures were substantially lower and occasionally fell below the mandatory 100% minimum requirement. The discrepancies resulted from errors in the bank's liquidity position calculations.

Company Response:

ING Australia CEO Melanie Evans acknowledged the operational deficiencies and committed to meeting APRA's standards for risk management, governance, and regulatory reporting. The Amsterdam-based parent company's Australian unit is among the country's largest banks.

Market Implications:

This enforcement action highlights increasing regulatory scrutiny of financial institutions' risk reporting accuracy in Australia. The capital add-on will impact ING Australia's operational costs and capital allocation. The case underscores the importance of robust internal controls and accurate prudential reporting systems, particularly for systemically important financial institutions. The independent review may reveal broader governance weaknesses that could affect the bank's reputation and operational flexibility in the Australian market.