At a Sydney press conference, ASIC chair Joe Longo said the bank’s conduct reflects “widespread misconduct, repeated failures, and an unacceptable disregard for the trust customers put in banks”.
Under the planned agreement, ANZ will pay $125 million for the institutional and markets matters, including a record $80 million penalty for unconscionable conduct, and $115 million in total penalties for three retail matters.
The bank’s admissions cover unconscionable conduct in dealings with the Australian government, misreporting bond trading data to the government by tens of billions of dollars, mishandling customer hardship requests, underpaying bonus interest on savings accounts, and failing to refund fees in deceased estates, impacting 65,000 customers.
Longo emphasised that while ANZ has repeatedly failed Australians, the problems stem from institutional weaknesses rather than individual misconduct.
“We’re not making any allegations against individuals. But this is an institutional failure by ANZ,” he said. “It’s a failure of ANZ’s capability around managing non-financial risk.”
Bond deal at centre of misconduct
ANZ was chosen by the Australian government to help deliver a $14 billion bond deal – a prestigious and trusted role, according to the regulator.
ASIC’s position is that ANZ’s misconduct potentially left the Commonwealth $26 million worse off.
“That $26 million reflects that the bond futures price decreased by two basis points over the 45 minutes before pricing when ANZ traded most actively in the market,” Longo said.
“The critical issue here is that ANZ sold a significant volume of 10-year Australian bond futures around the time of pricing, which placed undue downward price pressure on the bond price.”
ANZ was also not transparent with the government about its trading, Longo said, adding that a lower bond price meant the Commonwealth raised less money that could otherwise have supported essential services such as health and education.
“When public funds are put at risk like this, every Australian pays the price,” Longo said.
“There are fundamental and significant issues that require urgent attention, and the ANZ board and its executives need to reflect upon them. ANZ needs to change.”
Longo didn’t hold back, describing the behaviour as “clearly grubby”.
“They said they were going to be frank in their communication to AOFM; they weren’t. They said they were going to follow their own policy and procedures; they didn’t. They well understood the inherent conflict of being a duration manager, while also discharging their responsibilities to AOFM,” he said.
“Now, none of that conduct is regarded as intentional, but the cumulative effect of it is unconscionable conduct … through a combination of organisational incompetence and failure to get a grip on their own data and systems and processes, they let themselves down.
“Objectively, it wasn’t intentional. But it was certainly incompetent.”
In its response filed with the ASX, ANZ said the Commonwealth had not suffered a loss as a result of its conduct.
Longo, however, clarified ASIC’s position: “ASIC’s position is the Commonwealth did suffer a loss of around $26 million. And that is calculated by reference to the way the trading went and the value that was placed on that trading at that particular moment in time.
“ANZ is not prepared to concede the AFM have suffered any loss, but they have agreed to pay an $80 million penalty,” he added.
The bank separately described this particular payment as a “goodwill gesture”.
‘ANZ has fallen short’
Deputy chair Sarah Court highlighted the retail misconduct uncovered, noting that three of the four charges relate to this area, including failures to respond to financial hardship requests, underpayment of bonus interest on savings accounts, and delays in refunding fees for deceased estates.
“It’s now more than five years since the banking royal commission, but disappointingly here we are yet again, with not one but four more examples of how ANZ has fallen short.
“This pattern of misconduct at ANZ stretches back beyond the royal commission and over nearly a decade. Including today, ASIC has now brought 11 civil proceedings against ANZ since 2016, and the ordered penalties, together with the proposed penalties today, total more than $310 million.”
The regulator, the chair said, will continue to closely monitor ANZ’s remediation programs, with Longo noting that the bank’s board and executives must take urgent action to restore trust.
“We will continue to have intense institutional monitoring engagement with ANZ. As we do more or less, I might add, with all the banks, but in particular with ANZ at the moment,” Longo said.
“Given the seriousness and breadth of the issues that we’re dealing with today, you can expect ASIC to be watching very closely over the next year or two to see that ANZ actually does do what it said it’s going to do, and what it said it would do in its media statement this morning.”
ANZ apologises
In its response, ANZ lodged a statement with the ASX in which chairman Paul O’Sullivan acknowledged the bank had “worked hard to get regulatory certainty on these matters, the reality is we made mistakes that have had a significant impact on customers”.
He added: “On behalf of ANZ, I apologise and assure our customers we have taken the necessary action, including holding relevant executives accountable.”
CEO Nuno Matos said the failings were “simply not good enough and they reinforce the case for change”.
“It is my expectation that we see measurable improvements across the bank to better protect and care for our customers and to create a more sustainable business.”
The bank also said it will submit its root cause remediation plan (RCRP) to the Australian Prudential Regulation Authority later this month, as required by the Court Enforceable Undertaking, and confirmed it expects to spend approximately $150 million on implementing the plan required under the RCRP in this financial year.
