ANZ Banking Group, ANZ New Zealand’s Australian parent, faces fines of A$240 million after admitting to “unconscionable conduct” in bond dealing services it undertook for the Australian government and “widespread misconduct” across products and services affecting nearly 65,000 Australian customers.

In what the AFR has called the biggest scandal in the ANZ Group’s 182-year history, ANZ and ASIC, the Australian securities and financial conduct regulator, will ask the Federal Court to impose penalties of A$240 million in relation to four separate proceedings spanning misconduct across ANZ’s Institutional and Retail divisions between 2013 to 2023.

The bond dealing issue concerns a A$14 billion issuance on 19 April, 2023, in which ANZ was assisting the Australian Government’s sovereign debt management agency, the Australian Office of Financial Management (AOFM).

ASIC says that, instead of trading gradually throughout the day to limit market impact, ANZ sold a significant volume of 10-year Australian bond futures around the time of pricing. placing undue downward price pressure on the bond price.

“ANZ knew its trading could expose its client to significant risk of harm, but did not disclose to its client that ANZ still had significant volumes to sell before pricing nor provide its client an opportunity to consult with ANZ about delaying pricing,” ASIC’s media release says.

“When the Government later asked what happened, ANZ’s reports were misleading or deceptive.”

The bank also admitted three customer-related issues “across multiple levels and multiple divisions of ANZ” in what ASIC Deputy Chair Sarah Court calls “a clear failure to manage non-financial risk.”

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,
Making false and misleading statements about its savings interest rates and failing to pay the promised interest rate to tens of thousands of customers, and
Failing to refund fees charged to thousands of dead customers and not responding to loved ones trying to deal with deceased estates within the required timeframe.

Better management of non-financial risk was prominent among the aims stated last week by new ANZ Banking Group CEO Nuno Matos as he announced plans to shed around 3,500 Australian staff and up to 1,000 contractors – a move the bank says will result in a A$560 million restructuring charge.

ANZ’s departed CEO, Shayne Elliott, said in August last year the bank itself had found no evidence of misconduct or market manipulation by ANZ in connection with the bond issues, nor any evidence that misconduct during a 2023 government bond issuance had cost Australian taxpayers

He also said whilst some information provided to AOFM (the Australian Office of Financial Management) may have been incorrect, this was a mistake, rather than a deliberate act.

The ASIC release also details seven other matters of prior misconduct between 2017 and 2023.

ASIC Chair Joe Longo says the penalties sought are the largest announced by ASIC against one entity.

“Time and time again ANZ betrayed the trust of Australians.”