WELLINGTON (Reuters) - New Zealand’s central bank has revoked Australia and New Zealand Banking Group’s local license to calculate its own operational risk capital due to “persistent” control failures, adding to the bank’s minimum capital requirement in the country.

FILE PHOTO: An ANZ bank logo is pictured in Sydney, Australia April 23, 2018. REUTERS/Edgar Su/File Photo

The censure comes at a time when the Reserve Bank of New Zealand (RBNZ) is undertaking broader measures to increase capital requirements and reduce risk to the financial system in the event of any major shock.

ANZ’s New Zealand unit would now be required to use the central bank’s standardized approach for calculating operational risk, raising its minimum capital requirement to NZ$760 million ($496.4 million), the RBNZ said in a statement.

Shares in ANZ’s New Zealand unit, listed on the local stock exchange, closed 3.1% lower at NZ$27.25.

ANZ is the biggest of the four Australian-owned banks that dominate the New Zealand market. It is accredited by the Reserve Bank to calculate its own regulatory capital requirements, but an internal review in April revealed that ANZ was not using the operational risk model the central bank had approved.

“ANZ’s directors have attested to compliance despite the approved model not being used since 2014,” RBNZ’s deputy governor, Geoff Bascand, said in a statement.

“The fact that this issue was not identified for so long highlights a persistent weakness with ANZ’s assurance process.”

The operational risk model is one of several used by ANZ to asses its risk capital, a spokeswoman for the bank said.

ANZ said it accepts the regulator’s decision, which would mean that as of March 31 the bank’s operational risk capital requirement increased by NZ$277 million.

“While isolated, and with no impact on customers or the operation of the bank, ANZ New Zealand is disappointed this error occurred,” it said in an emailed statement.

The bank said it will work with RBNZ as it assesses whether it has appropriate verification processes in place.

In late 2017, the RBNZ forced Westpac Banking Corp's New Zealand unit to keep higher capital levels until it fixed issues with its risk model's governance, processes, and documentation. (reut.rs/2EhEt0S)

As part of its broader measures for the financial industry, RBNZ has already proposed raising top banks’ capital ratio to 16%, indicating the country’s top four banks, including ANZ, could collectively have to raise NZ$20 billion in new capital over the next five years, which could push up borrowing costs.

A decision is expected in the third quarter.