ANZ compo for two million accounts

ANZ will have to pay compensation for two million accounts held by customers who have been ripped off by the bank.

ANZ CEO Shayne Elliott. Picture: AAP

ANZ will have to pay compensation for two million accounts held by customers who have been ripped off by the bank, chief executive Shayne Elliott has told the financial services royal commission.

Giving evidence yesterday, Mr Elliott said ANZ had taken far too long to discover, report and remediate customers when the bank had done the wrong thing.

Commissioner Kenneth Hayne’s inquiry, which has torn like a wrecking ball through the financial services industry over the past 10 months, is in its final week of hearings, part of two-week round probing chief executives, chairmen and regulators about the policy issues confronting the sector.

In other evidence yesterday, Mr Elliott said the bank’s board cut the bonuses of three ANZ executives this year because of scandals inside the lender and flagged a major overhaul of the entire organisation’s remuneration structure.

Meanwhile, AMP acting chief executive Mike Wilkins — who steps down in favour of new boss Francesco De Ferrari tomorrow — defended the embattled wealth group’s vertically integrated model, putting him at odds with criticisms raised by his own customer advocate.

Counsel assisting the commission, Rowena Orr QC, took Mr Elliott to a case study in which five different processing errors by ANZ resulted in large numbers of customers being overcharged or not receiving agreed discounts on their home loans.

Mr Elliott said he did not know how many customers were hurt by these processing errors.

“If we look at all remediations that are under way, including some others beyond that five, I know that the total number of accounts affected is approaching two million, many of which will be double-counted,” he said.

“You know, it might be a customer with a credit card remediation and a home loan remediation, for example.”

ANZ has already set aside $374m to cover both compensation to be paid to customers and the cost of running remediation programs.

Mr Elliott laid much of the blame for ANZ’s woes, which include a slothful approach to uncovering and reporting to the regulator significant breaches of its financial services licence, on the “federated” business model used by the bank before he became boss.

He said this made raising problems difficult and created complexity through a bewildering array of different products.

Since taking over from Mike Smith in 2016, Mr Elliott, who has been at the bank since 2009, has attempted to unwind his predecessor’s so-called “super regional” strategy by selling off many of the Asian banks in which it holds a stake. The bank is also midway through offloading its wealth management business OnePath to embattled financial services group IOOF, whose boss Chris Kelaher has been criticised by the prudential regulator for not understanding superannuation law.

ANZ has so far transferred its financial advice business, but the transfer of its super fund operation is yet to be approved by ANZ’s subsidiary trustee board, which is required to consider whether handing it to Mr Kelaher’s operation is in the best interests of members. For his part, IOOF’s Mr Kelaher yesterday said the wealth deal “remained on track”.

Mr Elliott told the commission ANZ was simplifying its business.

“We’ve exited and sold a significant number of our businesses,” he said.

“So we no longer operate in them. Many of those were profitable, perfectly decent businesses but we decided we can’t do everything well.”

He said the bank was also simplifying ANZ’s products.

“In the Australia branch network, two years ago if you walked into an ANZ branch that branch would service around 370 products or flavours of products, different credit cards, mortgages, etc,” he said. “We’ve already decommissioned 130 of those. And we have far more to do.”

Mr Elliott admitted ANZ was responsible for at least three of 24 case studies in a scathing Australian Securities & Investments Commission report dealing with breach reporting, released earlier this year — as well as being one of the two banks in the report who had historically regarded remediation as a “distraction”.

ANZ and NAB were outed as the two banks in question during parliamentary hearings last month.

Mr Elliott also agreed with Ms Orr that at nearly 200 days, it had taken ANZ far too long to start paying back customers it had ripped off.

This was because the bank previously had a “cultural norm” of wanting to figure out exactly how many customers were affected by an issue and how much it would cost to make them whole before beginning a remediation program, he said.

“It’s wrong,” he said. “It’s flawed … we’ve adopted new principles and a new way of thinking about that …”