Fitch Ratings regards the Australian banking regulator's investigation into and new capital requirements for Westpac Banking Corp. as credit negative.

The Australian Prudential Regulation Authority, or APRA, launched an inquiry into Westpac after the Australian Transaction Reports and Analysis Centre, or AUSTRAC, filed a suit against the lender for allegedly breaching anti-money laundering and counterterrorism financing laws on more than 23 million instances. APRA will also require the bank to increase its capital requirement add-ons to A$1 billion.

Fitch believes APRA's actions will further challenge the bank, but will ultimately place the bank in a better position to address evolving industry risks. Westpac may face further remediation and increased costs if APRA's findings are adverse, Fitch added.

Although Westpac expects the capital charge to trim its common equity Tier 1 ratio by 16 basis points, Fitch does not believe this will affect the bank's ability to meet APRA's minimum requirement of 10.5%.