Westpac has revealed it's considering a demerger that would see the New Zealand arm of its business sold.
The bank released a statement to the Australian Securities Exchange (ASX) on Wednesday afternoon, announcing it is considering whether such a move would be in the best interests of its shareholders.
It comes just hours after the Reserve Bank of New Zealand - Te Pūtea Matua raised concerns about Westpac's risk governance processes and told them to commission two independent reports to address them.
Westpac said it would assess the impact of the Reserve Bank's reviews, but was only in the "very early stage" of this assessment and no decisions had yet been made.
"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," the bank said in its statement.
"However, given the changing capital requirements in New Zealand and the Reserve Bank 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.
"Westpac will provide further updates as required."
Westpac has recently been consolidating its international operations in Asia.
As part of its 'fix, simplify and perform' strategy, the bank said it has been considering the businesses it operates in, and has already "placed a number of businesses into a Specialist Business Division, for ultimate exit".
Earlier on Wednesday, the Reserve Bank said it had experienced "ongoing compliance issues", most recently involving material failures to report liquidity in line with its requirements.
"Furthermore, the bank has continued to operate outside of its own risk settings for technology for a number of years," said Geoff Bascand, the Reserve Bank's Deputy Governor and General Manager of Financial Stability.
"Westpac NZ needs to take a close look at its risk governance practices. To ensure this happens we are requiring them to provide an independent report that assesses Westpac NZ's risk governance processes and practices applied by the Westpac NZ Board and executive management."
The Reserve Bank says it's also requiring Westpac to provide a separate independent report to "provide assurance that the actions they have taken to improve the management of their liquidity risks, and the culture surrounding it, are effective".