ANZ clarifies it hasn't engaged in market manipulation. Photo / NZME
ANZ has agreed to pay the largest penalty its Australian regulator has ever issued an entity in one go, due to failings in the bank’s dealings with both the Government and its retail customers.
ANZ and the Australian Securities and Investments Commission (ASIC) will ask the Federal Court to impose penalties of A$240 million ($268m) in relation to four separate proceedings spanning ANZ’s institutional and retail divisions.
The issues concern ANZ:
ASIC chairman Joe Longo said, “Time and time again ANZ betrayed the trust of Australians.
“Banks must have the trust of customers and government. This outcome shows an unacceptable disregard for that trust that is critical to the banking system.”
Longo said there were “fundamental issues” with ANZ’s risk and compliance culture that require “urgent attention” by the bank’s executives and board.
“In the bond trading case, ANZ was in a trusted position and its conduct had the potential to reduce the amount of funding available to the Government.
“This funding is used to support critical services including Australia’s health and education systems, affecting all Australians.”
ANZ clarified that in the bond trading case, its view was that the issue didn’t see the Australian Government lose money.
ANZ chairman Paul O’Sullivan said, “While ASIC has not alleged that ANZ engaged in market manipulation, it’s clear we have not met the standards expected of us.
“We have apologised to the AOFM [Australian Office of Financial Management] for the inadequate communication on this transaction and offered to pay the AOFM the revenue ANZ earned as duration manager.”
Of the A$240m fine ANZ has agreed to pay, A$125m relates to bond trading issues.
As for the problems in ANZ’s dealings with its retail customers, ASIC deputy chairwoman Sarah Court called ANZ out for failing to do the basics, like pay savers the right amount of interest.
She said that if the court imposed the proposed penalty, it would send a clear signal to ANZ and other banks that the “cost of breaking the law is not an acceptable cost of doing business”.
ANZ outlined various ways it was endeavouring to fix its errors and improve its operations.
O’Sullivan said certain current and former executives would receive “significant reductions in remuneration”.
ANZ has also been among the banks in regulators’ sights in New Zealand.
Last week it agreed with the Financial Markets Authority to a $3.24m fine for wrongly applying fees and interest to customers’ accounts for unarranged overdrafts, and claiming repayment of mortgage incentives previously given to customers when it should not have.
ANZ and ASB are also subject to a massive class action related to them giving customers the wrong information about their loans in the mid-2010s.
Controversially, the Government has proposed changing the law retrospectively to potentially reduce the penalties the banks face.
Without a law change, the banks could collectively be forced to repay customers and their litigation funders hundreds of millions of dollars - sums hugely in excess of the amount the banks have already reimbursed customers for the errors.
The reason the penalties could be so large is because the law between 2015 and 2019 required banks to reimburse customers all their interest costs and fees for disclosure breaches - regardless of their severity.
The Government wants to change the law in the past so it aligns with the law today, which empowers the courts to issue penalties proportionate to breaches.
The proposed change to the Credit Contracts and Consumer Finance Act is being considered by Parliament’s Finance and Expenditure Committee.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.