ANZ Fined $160M for Bond Deal and Customer Violations

The Australian corporate regulator’s largest-ever fine against a single company, A$240 million ($159.5 million), was agreed to be paid by ANZ Group for systemic violations that included billing deceased customers and acting “unconscionably” in a government bond deal.

As new CEO Nuno Matos seeks to increase profitability at a lender that already has to hold more capital in reserve than its peers, due in part to fallout from the bond deal, the penalties announced on Monday represent a troubling accomplishment for Australia’s fourth-largest bank, which recently announced 3,500 job cuts.

“ANZ has repeatedly betrayed the trust of Australians,” stated Joe Longo, chair of the Australian Securities and Investments Commission (ASIC). “As far as the unacceptable behavior is concerned, it was clearly nasty.”

Since 2016, ASIC has filed 11 civil penalty cases against ANZ, totaling more than A$310 million in fines, including Monday’s announcement. ASIC claims that ANZ has acknowledged accusations in every instance.

Paul O’Sullivan, the chair of ANZ, stated that the bank needs to alter its operations drastically.

He said to reporters and analysts, “In making this settlement, we accept that we let our clients down and I apologize unreservedly.”

The benchmark S&P/ASX200 (.AXJO) opened Monday’s trading session down 0.13%, while ANZ shares ended the day 0.6% lower.

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Government Bond Deal and Market Misconduct

The most recent settlement, which the Federal Court must approve, ends five different investigations into ANZ’s Australian Markets and Retail businesses. The actions of ANZ during the April 19, 2023, issue of A$14 billion, opens a new tab, government bonds were at the heart of the infractions.

ANZ sold large quantities of 10-year Australian bond futures around pricing time, putting “undue downward pressure” on bond prices while supporting the Australian Office of Financial Management’s debt issuance, according to ASIC, rather than trading gradually to limit market impact.

According to the regulator, ANZ’s trading activity in the forty-five minutes before the bond’s formal issuance caused bond futures prices to drop two basis points, costing the government almost A$26 million.

Longo stated that “ANZ was in a trusted position and its behavior had the potential to reduce the amount of funds available to the government,” pointing out that the money was utilized for educational and health services across the country.

Although ANZ stated that it did not agree with the government’s estimate, it did offer to reimburse the A$10 million it would have received for its involvement in the agreement.

According to a statement of agreed facts filed with the Federal Court and released by ASIC, ANZ has not been involved in a government transaction since this one more than two years ago.

“We need every company that operates in Australia to do the right thing by its customers and comply with our laws or face the consequences,” said Treasurer Jim Chalmers.

Important Mistakes

According to O’Sullivan, the bank made grave errors but did not behave maliciously. According to him, it conducted 50 “accountability reviews” on workers in its markets trading division, and some current and past employees experienced large changes in variable compensation components.

Customer Service Failures and Future Remediation

Widespread shortcomings in customer service were also among the infractions. System flaws prevented ANZ from paying new account customers the guaranteed bonus interest between July 2013 and January 2024.

The bank was unable to determine which costs should be waived or whether expenses made after a customer’s death had been reimbursed; therefore, it continued to charge thousands of deceased clients fees for four years until June 2023.

“Today’s statement reinforces the point that change is needed, and that we must operate in an entirely different manner than in the past,” Matos stated.

“That’s crucial, and it requires us to perform fewer tasks with more quality. We are relearning the fundamentals.

With plans to spend a $150 million on improvements in the fiscal year that ends on September 30, 2026, ANZ stated that it will present its remediation strategy to the Australian Prudential Regulation Authority by the end of this month.

On Monday, the Finance Sector Union said that it would file a grievance with Australia’s industrial tribunal against ANZ for its 3,500 job layoffs. The bank had not been informed of the union’s claim, according to an ANZ representative.