Banking royal commission: ANZ to pay compensation on two million accounts

ANZ admits its process for paying back ripped-off customers has been flawed and too slow, as it faces a big compensation bill.

ANZ CEO Shayne Elliott arrives at the Banking Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Melbourne, Wednesday, November 28, 2018. (AAP Image/Wayne Taylor) NO ARCHIVING

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

Appearing this morning as part of commissioner Kenneth Hayne’s final round of public hearings, Mr Elliott said ANZ had in the past taken far too long for the bank to discover, report and remediate customers when the bank had done the wrong thing.

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 underway, 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.”

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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 escalating 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.

Mr Elliott told the royal 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, et cetera,” 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 and Investments Commission report dealing with breach reporting, released earlier this year - as well as being one of the two banks in the report which had historically regarded remediation as a “distraction”.

He 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. And so what we have done now, with our remediation team, is we’ve adopted new principles and a new way of thinking about that which essentially says once we have sufficient knowledge where we can determine remediation even for a small number of customers, a cohort, we should start.

“So we don’t need to wait until we have 100 per cent knowledge. We should start and do it in tranches and get going.”