ANZ bankers face bonus cuts after record $240m fine

ANZ Bank executives could face bonus cuts after the banking giant agreed to a $240 million penalty to settle four separate legal cases from the corporate watchdog, admitting to unconscionable conduct on a major government bond deal, incorrect reporting of trading data, and misconduct affecting nearly 65,000 customers.

The misconduct affecting consumers included failing to pay the correct interest rates on bonus savings accounts; failing to respond to hundreds of customers who had sought hardship assistance; and failing to refund fees that were charged to thousands of customers who had died.

The chair of the Australian Securities and Investments Commission (ASIC), Joe Longo, on Monday slammed the bank for what he called “grubby” conduct in relation to the $14 billion bond deal, as he accused it of “betraying the trust of Australians”.

The settlement between ANZ and ASIC draws to a close a long-running regulatory probe into misconduct in ANZ’s markets business and the bank’s role in the government bond deal, while it also reveals multiple problems in its retail bank.

ANZ chairman Paul O’Sullivan apologised and said the bank’s board continued to take action, including cuts to some bankers’ bonuses, as he vowed to step up how the bank handles “non-financial” risk.

What is behind ANZ’s $240 million fine?

ASIC and ANZ will ask the Federal Court to approve various fines that total $240 million to settle cases alleging misconduct in ANZ’s institutional bank and its retail division. If the fine is approved by the Federal Court, it will be the largest total penalty announced by ASIC against one entity.

A combined $125 million in penalties relates to ANZ’s role as manager in the issuance of a 10-year government bond, where ASIC accused the lender of acting “unconscionably” when managing a $14 billion deal in April 2023. ASIC said that instead of trading gradually throughout the day, ANZ sold a significant volume of 10-year bond futures, which “placed undue downward price pressure” on the bond price.

There is also a $40 million fine for the bank’s failure to pay bonus interest on certain online saver accounts and displaying inaccurate fees, and a $40 million fine for breaching its obligations in how it handled customer hardship.

The bank has agreed to pay a further $35 million in fines due to breaches in how it handled deceased estates. ASIC said between 2019 and 2023, ANZ failed to refund fees charged to thousands of dead customers.

“Time and time again, ANZ betrayed the trust of Australians,” ASIC chairman Longo said.

“The total penalties across these matters are the largest announced by ASIC against one entity and reflect the seriousness and number of breaches of law, the vulnerable position that ANZ put its customers in and the repeated failures to rectify crucial issues.”

How is the bank holding executives accountable?

O’Sullivan apologised on behalf of the bank and said the board had taken action to hold relevant executives accountable, including “significant” reductions in variable pay for current and former bankers.

O’Sullivan said more than 50 “accountability reviews” had been completed, and the remaining few of these would be completed in coming weeks. “It has resulted in significant impacts to variable remuneration for certain individuals,” he said. The details of any bonus cuts to top executives will be revealed when the bank’s annual report is published later this year, once it has delivered its annual results in November. Last year ANZ made $6.7 billion in cash profits.

Amid concerns about the bank’s culture, almost 40 per cent of ANZ investors voted against its remuneration report last year, and former chief executive Shayne Elliott forfeited $3.2 million in bonuses.

Ed John, executive manager of stewardship at the Australian Council of Superannuation Investors, an adviser to super funds on governance issues, said investors would have a keen eye on the accountability for executives this year.

“Concerns over risk outcomes, accountability and bonus awards led a significant proportion of ANZ investors to vote against the company’s remuneration report last year,” John said. “With today’s announcement, investors will be watching very closely to see what accountability looks like for executives this year.”

Super fund HESTA, an ANZ investor, said it wanted to see a “strong and transparent” response from the bank’s board on executive pay, and it was continuing to monitor the bank’s work to improve its risk culture.

“When voting on this year’s remuneration report, we intend to carefully consider the implications of today’s update and are looking to see a strong and transparent response from the board,” a HESTA spokesperson said.

What about customer compensation?

As part of the settlement, ASIC also described the compensation paid to customers. The bank has paid about $10 million in compensation for the bonus interest failure; slightly more than $92,000 for the issues relating to financial hardship, and $3.8 million for the issues with deceased accounts.

On the bond trading matter, ANZ said that ASIC had not alleged the bank engaged in market manipulation, and ANZ said it did not think any loss was caused to the Commonwealth due to the bank’s role as “duration manager”.

Even so, ANZ said it was paying the Australian Office of Financial Management (AOFM) the $10 million in revenue that the bank earned as duration manager as a “goodwill gesture”, and it admitted it “could have executed its role as duration manager with better communication”.

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.”

How is this linked to other big changes at ANZ?

The fine comes as ANZ chief executive Nuno Matos has been shaking up the bank since joining in May, including by cutting 3500 jobs and pushing through restructures. Matos said it wanted to see “measurable improvements” as he also apologised for the failings in its retail division. “The failings outlined are simply not good enough, and they reinforce the case for change,” Matos said.

The Finance Sector Union, meanwhile, lodged a dispute with the Fair Work Commission on Monday over the 3500 job cuts. It said the dispute would call for intervention to give clarity to affected workers.

Matos said improving the bank’s handling of non-financial risk was a top priority, and that it was clear the ANZ retail bank had “issues” with non-financial risk.

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