ANZ in strife again, as ASIC examines whether the bank wrongly calculated savings interest

ANZ is yet again in hot water with the Australian Securities and Investments Commission which is examining allegations it incorrectly calculated interest on thousands of savings accounts.

ANZ chief Shayne Elliott, who steps down in July, and ASIC chair Joe Longo may go head to head in early 2025 on a number governance issues at the bank.

The corporate regulator is investigating allegations ANZ incorrectly calculated interest on thousands of customer savings ­accounts, the latest in a spate of probes into potential systemic governance issues at the bank.

The Australian understands ANZ’s retail bank is the subject of a string of regulatory investigations that may come to a head in coming months. The Australian Securities and Investments Commission is delving into whether ANZ wrongly calculated, and then incorrectly paid bonus and regular interest on some of its savings and deposit accounts, according to sources. The regulator was also trawling through ANZ’s hardship provisions – relating to people in financial distress – given concerns about how the bank is engaging with customers and managing those processes.

ANZ is believed to have brought in global consulting behemoth McKinsey to conduct work and assist executives in the retail bank to strengthen its processes.

The potential compliance problems suggest the regulator may take ANZ to task, particularly if it finds systemic ­issues within the retail bank.

The savings accounts of potentially thousands of customers may be affected if the claims of miscalculation are correct.

An ASIC spokesman declined to respond directly to questions about ANZ, but said: “ASIC closely supervises the conduct of Australia’s banks. ASIC has a range of investigations under way related to banks operating in Australia, but as a matter of course does not comment on the details of individual investigations.”

An ANZ spokesman said the bank often “engages external providers” to review and help improve practices.

“This includes our approach to risk management, which as we outlined at our full-year results in November will be a key focus in 2025,” the spokesman added, declining to comment directly on McKinsey’s ANZ work.

“Like all financial services organisations, we are in constant dialogue with regulators about a variety of matters and any questions on specifics should be directed to ASIC. ANZ remains focused on supporting our customers who may be facing financial difficulty, including through our hardship ­processes.”

The savings account and interest accrual issues are said to relate to ANZ’s broader processes and systems. The latest potential problems follow the bank being in hot water over incorrectly paying interest to customers on their savings about a decade ago.

In 2015, ANZ was forced to pay customers compensation when the bank realised that over a period from May 2007 to April 2014 the amount of bonus interest it calculated did not reflect ANZ’s communications to customers.

Former High Court justice Kenneth Hayne, who headed the royal commission into the financial services industry. Picture: Valeriu Campan

That blunder related to customers that held ANZ’s Progress Saver account.

“This occurred because, in some cases, the bonus interest qualification period that ANZ ­applied to accounts was not consistent with ANZ’s communications,” the bank said at the time.

Recent online customer reviews of ANZ Plus, the bank’s new platform, are critical of changes ANZ made in October that imposed minimum monthly deposits to earn a higher rate of interest, a move several customers said was poorly communicated. Some customers complained they had not been notified at all.

The latest potential regulatory issues follow a tumultuous period for ANZ.

The Australian in December revealed that ANZ was again in the corporate regulator’s sights – that time over deficiencies in its retail bank, including allegations it incorrectly charged fees to dead customers’ ­accounts. ANZ also failed to fix glaring system deficiencies in a timely manner.

The bank was notified in many of those cases of a customer’s death by other family members but continued to charge fees. The controversial practice appears to have persisted at ANZ, despite it being called out as blatantly wrong in the 2018 Hayne royal commission.

In his 2019 final report, Kenneth Hayne warned banks and wealth managers that charging dead customers’ accounts fees exposed the institutions to possible breaches of the Corporations Act.

As well as the multiple issues being assessed by regulators in ANZ’s retail bank, its markets division is also being investigated by ASIC.

That relates to allegations of irregular trading and futures activity ahead of a $14bn government bond issued in 2023. ANZ was a risk manager on the issuance and separately has admitted to misreporting data to the government’s debt and cash management agency.

The Australian Prudential Regulation Authority last year hit ANZ with a requirement to hold $250m in additional capital due to the bank’s lax handling of non-­financial risks.

That was on top of a $500m capital overlay imposed by APRA in 2019 that reflected governance shortcomings. The combined overlay is the highest additional capital impost – beyond standard requirements – that remains in place among the biggest four banks.

ANZ chairman Paul O’Sullivan and Nuno Matos, who takes over as chief executive in July. Picture: Aaron Francis

ANZ, which is in the process of a chief executive changeover, received a strike against its pay report in December and a huge shareholder protest vote against the granting to chief executive Shayne ­Elliott of restricted rights reflecting long-term bonuses to the tune of $3.2m. ANZ eventually retreated from the bonus resolution.

The board and ANZ chairman Paul O’Sullivan last year announced that former HSBC and Santander banker Nuno Matos would take the CEO reins from Mr Elliott in July.

In late December, Mr Elliott sold ANZ shares worth about $7.7m in a move believed to reflect the diversification of his investment portfolio.

However, Mr Elliott had not sold a share in ANZ prior to that, and holds about four times the minimum required in the bank’s stock.

ASIC has previously taken aim at other banks over their handling of hardship, after wrapping up a sweeping review last year. The review uncovered widespread issues across several lenders.

It showed ASIC’s findings across 10 different lenders, but did not include ANZ, despite delving into the practices of the other three majors.

In the wake of the review, ASIC launched legal action against Westpac and National Australia Bank over their respective handling of customer hardship applications.

ASIC claimed between 2018 and 2023 NAB failed to respond to at least 345 hardship applications within the 21-day time frame required.

Westpac is alleged to have failed to deal with 229 applications within 21-days between 2015 and 2022.

On ANZ, ASIC said in its 2024 report it had “previously undertaken” a review of the bank’s hardship policies, processes and practices, just prior to compiling its report.

“While they (ANZ) were not included in this review, a case study and some examples are based on information from that previous review,” the report said.

Originally published as ANZ in strife again, as ASIC examines whether the bank wrongly calculated savings interest