Australian lender Westpac has initiated a procedure to assess a possible demerger of its business in New Zealand.

The move comes after the Reserve Bank of New Zealand (RBNZ) raised concerns about Westpac New Zealand’s risk governance processes.

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In a statement, Westpac said the assessment is in a very early stage and no decisions have been made.

The statement further noted that the bank has already placed multiple businesses into a Specialist Businesses Division, for ultimate exit, while simultaneously working to consolidate its international operations in Asia.

“Westpac NZ is a valuable part of the Westpac Group and has been for over 160 years. The business continues to perform well with a strong position in retail and commercial banking.

“However, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward,” the statement added.

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Earlier, RBNZ directed Westpac New Zealand to get two independent reviews regarding its risk governance processes.

The central bank took the step after identifying compliance issues with Westpac NZ regarding liquidity requirements.

RBNZ also raised bank’s cash holdings, until remediation work is complete.

However, the central bank also added that it is confident that Westpac NZ’s current liquidity and funding positions are sound and is well capitalised.

Earlier this month, Australia’s banking regulator APRA closed a money laundering investigation on Westpac.