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The prudential regulator has ordered Macquarie Bank, Rabobank and HSBC to tighten their funding arrangements to make sure funds cannot be withdrawn by their parent companies in the event of financial stress.

The Australian Prudential Regulation Authority says the institutions must strengthen arrangements after discovering they were “improperly reporting the stability of the funding they received from other entities within the group”.

Macquarie Bank is part of ASX-listed Macquarie Group, while Rabobank Australia and HSBC Bank Australia are both foreign owned.

APRA said all three banks had provisions in their funding agreements that would potentially allow group funding to be withdrawn in a stress scenario.

“Macquarie Bank, Rabobank Australia and HSBC Australia are financially sound, with strong liquidity and funding positions in the current stable environment,” APRA deputy chair John Lonsdale said.

“To ensure they would be able to withstand a scenario of financial stress, group funding agreements for Australian banks must be watertight, so they can be relied on when they would be most needed.”

Macquarie said its non-compliance was a result of APRA’s clarification that a clause in a loan agreement between the bank and its owner meant that repayment of intra-group funding could be accelerated to less than the mandated 30 days.

Macquarie Group, which raises long-term funding and places surplus funds with Macquarie Bank in the form of intra-group loans, said it has removed the clause.

“Macquarie will take this opportunity to work with APRA on intra-group arrangements … and address any remaining concerns,” Macquarie Group said in a statement.

At 1032 AEST, shares in Macquarie Group were flat at $128.88 against the backdrop of a near one per cent rise for the overall ASX200 financials.