ANZ ‘betrayed the trust of Australians’, bank agrees to pay record $240 million in fines

ANZ Banking Group has reached a deal with regulator ASIC to pay $240 million in fines as compensation for multiple operating failures, including charging fees to deceased customers, ignoring hardship pleas from vulnerable clients, making false statements about savings rates, and manipulating bond trading data.

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

“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.”

Ordinary customers hammered

ANZ’s retail banking blues affected tens of thousands of customers and led to a total of $115 million in fines as the lender admitted to failing to refund fees charged to dead customers and not responding to loved ones dealing with deceased estates.

The bank’s retail division also admitted to making misleading statements about savings rates and failing to pay promised interest rates, for which it accepted a $40 million fine.

Another $40 million fine was imposed for failing to respond to hundreds of customer hardship notices, in some cases for over two years, and failing to have proper hardship processes in place.

“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,” added Mr Longo.

“There are fundamental issues with ANZ’s risk and compliance culture that require the Board’s and executives’ urgent attention.”

Last week, ANZ’s new chief executive Nuno Matos revealed plans to axe 4,500 jobs from the bank, which equals around 10 per cent of its total workforce, as the lender seeks to reset its culture and prepare for a decade of disruption linked to advances in artificial intelligence.

The bank’s shares fell 0.8 per cent to $32.92 on Monday and have advanced 16 per cent year to date, although they are roughly flat over the past decade as it struggles to manage costs and grow profit margins.

Anna Milne, a deputy portfolio manager at Wilson Asset Management, said today’s confession and apology from ANZ gives the bank and its under pressure Portuguese boss the chance to draw a line in the sand after a tough couple of months.

“Today’s news is not a surprise to the market and gives clarity around the problems,” said Ms Milne. “On the [analyst] call this morning they were quite clear it’s a line in the sand. Nuno [Matos] the new CEO has been very clear he wants to set the business up for future success and you can’t look forward while you’re focused on what’s behind you.”

Wilson Asset Management owns ANZ shares in its WAM Leaders Fund and WAM Income Maximiser Fund, with Ms Milne backing ANZ’s outsider chief executive to turn its performance around.

“There’s going to be a lot of heavy lifting over the next 12 to 18 months to get the bank to where he wants it,” she said. “We’re seeing job cuts across every bank at the moment and unfortunately it’s a reality of the AI era we’re entering. Some of the cuts are also related to productivity initiatives and some are related to initiatives that weren’t generating profits, so as shareholders we’re on board with the strategy.”

Institutional failings

ANZ’s institutional banking business also accepted total fines of $115 million after admitting to engaging in unconscionable conduct in incorrectly reporting bond trading data and mismanaging the execution of a 10-year Australian government bond issue.

“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,” said Mr Longo.

In an announcement to the stock exchange this morning, ANZ’s new chief executive Mr Matos acknowledged the significant failings and said that they reinforce the case for change at the big-four lender.

“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,” said Mr Matos.

ANZ has committed to an ASIC Matters Resolution Program to help monitor its compliance with commitments to fix the failings identified.