Australia’s fifth-largest mortgage lender moves quickly to address underlying failures
Macquarie Group must hold an extra $100 million in capital after the Australian Prudential Regulation Authority (APRA) found the home lending giant had understated the capital needed to support risks in its non-bank businesses since 2019.
The prudential regulator will oversee a full assessment of how Macquarie Group Limited (MGL) calculates required capital for its non-bank arm. APRA also said further action may follow, depending on what that review finds.
The breach relates to a condition of MGL’s non-operating holding company (NOHC) authority.
A NOHC is a parent company that doesn’t carry on a business itself. It owns other companies. In Macquarie’s case, the parent is Macquarie Group Limited (MGL), and it owns two separate groups:
- Macquarie Bank Limited. This is the deposit-taking bank that APRA regulates. It writes home loans and holds customer savings.
- A non-bank group. This houses Macquarie’s asset management, investment banking and commodities trading businesses.
APRA identified the miscalculation during a recent capital review. The regulator said the error lowered the non-bank’s required capital. It added that the financial stability of the group, including Macquarie Bank Limited, was not undermined at any point.
“The breach did not result in any competitive advantage for the bank," a Macquarie spokesperson told MPA.
Nontheless, the action lands on an already contested issue for the mortgage industry and can be seen as a win for Macquarie's competitors.
Commonwealth Bank has commissioned analysis from consultancy Mandala that argues Macquarie’s NOHC structure lets its banking arm operate on a lighter capital base than the major banks, which helps it price mortgages and deposits more aggressively.
Macquarie Bank, which is Australia’s fifth-largest home lender holding over $200 billion in home loans, does not disclose its net interest margins.
Macquarie rejects the Mandala claim, with a Macquarie spokesperson telling MPA that its competitive rates were “a deliberate business choice and is not driven by our capital cost base”.
This week’s action concerns capital for MGL’s non-bank businesses, not Macquarie Bank’s own capital ratios. APRA has not suggested the breach affected the bank’s lending.
Even so, a sector-wide review of NOHC authorisations puts the structure under direct scrutiny at a sensitive time for the group. Macquarie is also managing the chief executive handover from Shemara Wikramanayake to Greg Ward.
What’s a capital overlay?
A capital overlay is an add-on to an institution’s required capital. APRA typically imposes one until the institution fixes the weaknesses behind a breach. It is not a fine, but it ties up capital the group cannot otherwise deploy.
MGL has already corrected the understatement. The new $100 million governance overlay sits on top of the $500 million overlay from APRA’s 2021 action against Macquarie Bank over multiple prudential breaches. Both overlays can only be removed with APRA’s approval.
The review will focus on Macquarie’s Economic Capital Model. This is the internal framework the group uses to decide how much capital its non-bank businesses must hold against their risks.
APRA notes ‘seriousness of the underlying failure’
APRA deputy chair Therese McCarthy Hockey said the breach reflected a serious failure in the group’s governance and assurance processes. She noted that Macquarie had not caught the problem through its own controls. As one of the country’s largest financial groups, she said, Macquarie is expected to meet among the highest standards of risk management.
McCarthy Hockey acknowledged the group’s cooperation. However, she said “addressing the breach after identification does not diminish the seriousness of the underlying failure”. She added that boards and senior executives are responsible for keeping effective controls in place, not simply reacting once deficiencies come to light.
She also confirmed APRA will review all existing NOHC authorisations. The aim is to check they properly address the risks that come from group structures and activities. APRA first signalled this work in its 2026–27 corporate plan, which flagged a review of banking governance structures.
