(Reuters) -Australia's bank regulator again increased the cash ANZ Group ( ANZGF ) must hold in reserve, as it criticised on Thursday what it said was the lender's failure to address wide-ranging problems with its non-financial risk management.

The Australian Prudential Regulation Authority (APRA) raised the amount of spare cash that ANZ, Australia's fourth-biggest bank, must keep on hand to A$1 billion ($628.50 million) from A$750 million. That followed a similar A$250 million increase the regulator had mandated in August.

The watchdog also accepted a court enforceable undertaking from the lender to address its non-financial risk management practices and risk culture.

ANZ shares fell as much as 3.6% by 0016 GMT while the broader benchmark was down 1.8%.

In August, the regulator had asked ANZ to conduct an independent review to determine the root cause of its problems, in response to suspected wide-ranging misconduct at its bond trading unit.

The lender overstated the value of government bonds that it traded by more than A$50 billion over a one-year period, according to local media reports. ANZ has not confirmed that figure, and the corporate regulator is investigating the alleged misconduct.

The APRA said the review found that the shortcomings in the bond trading unit may be present in other parts of the bank, adding that ANZ's remediation program to implement a group-wide non-financial risk management framework was not enough to resolve its issues.

"APRA has assessed that the completion of this program alone will not effectively and sustainably address the broader non-financial risk weaknesses across ANZ," the watchdog said.

ANZ said in a separate statement that it had accepted all recommendations of the review, and was taking immediate actions in response to the review and the undertaking with APRA. 

Among these actions is the creation of the position of group head, non-financial risk program delivery. Mark Evans, currently head of Singapore, Southeast Asia, India and the Middle East, will take up the new role.

"While the bank remains in a strong financial position with strong capital and liquidity levels, we know we have more work to do in the coming two to three years to boost our uplift of non-financial risk practices," said ANZ's outgoing CEO, Shayne Elliott.

Some analysts said the changes would increase cost pressures for the bank.

"We have seen that the enforceable undertaking requires further investment in risk and compliance systems over a multi-year period, which is code for higher expense growth and is not fully factored in consensus estimates," analysts at Sandstone Insights said in a note.

Elliott's replacement by former HSBC wealth chief Nuno Matos was announced in December. The lender moved up his retirement to mid-May from July on Monday.($1 = 1.5954 Australian dollars)

(Reporting by Aaditya Govind Rao in Bengaluru; Editing by Maju Samuel and Muralikumar Anantharaman)