The Australian Prudential Regulation Authority (APRA) in 2020 had taken action against the bank for breaching prudential standard on liquidity.
The regulator had then said it would require the bank to set aside an extra 10% on top of the liquidity cover ratio it calculated until the "short-comings have been rectified to APRA's satisfaction".
"APRA has confirmed the bank has satisfactorily addressed the conditions for removal of the overlay," Bendigo and Adelaide said in a statement.
The removal of the liquidity add-on is effective Aug. 9, the regulator said after Bendigo completed a comprehensive review into its adherence with APRA's liquidity requirements.
Bendigo and Adelaide, which operates primarily in retail banking, said the removal of add-on would contribute about 12 to 14 percentage points to its liquidity coverage ratio.
Australian financial institutions have faced increased scrutiny from regulators after a 2019 government inquiry found rampant fee-gouging and predatory sales tactics to inflate bonuses, leading to multiple lawsuits and customer remediation charges.
(Reporting by Rishav Chatterjee in Bengaluru; Editing by Shilpi Majumdar)
