(Bloomberg) — Australia’s banking regulator said ANZ Group Holdings Ltd. needs to hold more capital due to a lack of improvements in risk management as the company struggles to turn around a markets business that has been accused of having a poor corporate culture.

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Several issues in ANZ’s markets business have heightened concerns of the Australian Prudential Regulation Authority (APRA), it said in a statement on Friday. Although ANZ has launched several investigations into these issues, they raise concerns that the company has not adequately addressed deficiencies in controls, risk culture, governance and accountability, APRA said.

“ANZ is financially sound and has strong levels of capital and liquidity,” APRA Chairman John Lonsdale said in the statement. “However, weaknesses in the management of non-financial risks can lead to adverse financial impacts and APRA will not tolerate sustained weaknesses.”

ANZ has taken action against staff over culture and conduct issues and hired an outside legal adviser to investigate allegations that the company overstated bond deals to win business. The company is also facing an investigation into its role in a government bond sale last year.

The bank’s shares traded about 1.5 percent lower on Friday, the biggest drop in three weeks.

APRA increased ANZ’s capital surcharge by A$250 million (US$168 million) to A$750 million. Since 2019, there has been an additional capital requirement of A$500 million due to deficiencies in risk management.

The 2019 penalty also affected National Australia Bank Ltd. and Westpac Banking Corp., which were affected by this additional capital requirement. Commonwealth Bank of Australia had to raise an additional $1 billion the year before. With the regulator satisfied that the problems had been fixed, those capital raises were removed by the CBA in 2022. NAB’s requirement was also removed, while Westpac’s capital raise was cut in half this year.

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In its statement on Friday, the regulator said that of the major banks that had capital add-ons applied in 2019, ANZ is the only bank to have had its add-on either removed or reduced so far. It said that while the bank had implemented measures to improve its risk governance and culture over the past five years, “these recent issues suggest that material gaps remain that need to be addressed as a priority.”

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ANZ said in a separate statement that it acknowledged the regulator’s concerns and was accelerating work already underway to address the issues raised. “This includes engaging with APRA on an independent culture and controls review within the Markets business, which has already been initiated and will report to the Board.”

APRA also called on ANZ to appoint an independent party to investigate the causes of the recent problems and risk management in the market business and to assess the potential impact on the whole bank. It called for a recovery plan to take into account the findings of the independent investigation.

“We have communicated our clear expectation to ANZ’s board and management that these issues need to be urgently reviewed to ensure the underlying causes are identified and addressed,” Lonsdale said. “Depending on the outcome of ANZ’s independent review, APRA will consider whether further action is required.”

(Updated with previous capital requirements for Australian banks in fifth paragraph and additional regulator comment in sixth paragraph.)

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