The green light comes after the RBNZ forced Westpac to launch an independent review of its capital model compliance obligations in 2017. The review found Westpac had used unapproved models.
The Reserve Bank gave Westpac 18 months to remedy the failures, and has given the bank its seal of approval.
RBNZ deputy governor Geoff Bascand says Westpac is now operating "with peer-leading processes, capabilities and risk models in a number of areas".
“Westpac has taken the findings of the independent review as an opportunity to make meaningful improvements to its risk management, and we commend it for its co-operative and constructive engagement in working with Reserve Bank over the remediation period," Bascand added.