ANZ chief Shayne Elliott vows to make significant changes at chastened big four bank

ANZ chief Shayne Elliott has vowed to make a significant number of changes to his bank’s policies and practices before the year’s end.

ANZ chief executive Shayne Elliott in Singapore to celebrate the 50th anniversary of the bank operating there.

ANZ chief Shayne Elliott has vowed to make a significant number of changes to its policies and practices before the year’s end, as the bank continues to suffer reputational damage linked to alleged conduct in the government bond market.

The Australian Securities & Investments Commission is investigating irregular trading and price activity in the government bond market relating to a $14bn issuance jointly managed by ANZ last year.

The review includes assessing whether taxpayers had to pay more for the bond issuance, given odd trading activity in the futures and bond market around the pricing of the securities.

ANZ’s internal assessment of the trading issue found no material wrongdoing in the bond market, but the bank identified staff conduct issues within its markets division and longstanding errors in how it was reporting data to the Australian Office of Financial Management.

“We’ve put together a big work list of (policy and process) changes,” Mr Elliott told The Australian in Singapore, referring to about 25 items including changing workplace accountabilities for some staff. He noted about half of that list would be complete within the next six months, with a decision around the bank’s alcohol consumption policy during work hours expected before Christmas.

“I would say a significant amount will be done by Christmas. There’s a lot of the low hanging fruit, you know, changes to code of conduct,” Mr Elliott added.

He and several of the bank’s board members are in Singapore to mark the bank’s 50th anniversary of operating there.

The ASIC investigation and other problems at ANZ have caused the bank notable reputational damage, and an internal bank probe into broader conduct within its markets division led to the termination of one staff member and ANZ parting ways with two others. Another employee was issued a formal warning and is expected to have their bonus cut.

One of the employee matters related to the consumption of alcohol. Mr Elliott said while ANZ had considered an outright ban of alcohol during work hours for employees, a measure like that would be impractical.

“How on earth would you even implement that and monitor it?

“Culture doesn’t exist in a vacuum and there’s no perfect culture either. We’ll continue to adapt because the world around us is changing fast,” he told attendees at an event in Singapore.

Mr Elliott said in light of the problems ANZ wanted to “tighten up” the code of conduct and was introducing better controls and processes for ownership of issues and accountability.

He also expects pay consequences for some members of the executive team, including himself, and for those further down the ranks with direct accountability for the poor behaviour.

“We’re working through the impacts on people like myself and my team with the board as we speak,” Mr Elliott said.

ANZ CEO Shayne Elliott, speaking in Singapore, said the bank wanted to ‘tighten up’ its code of conduct.

Asked whether he was expecting significant pay consequences, he replied: “Yes.”

ANZ’s institutional banking boss Mark Whelan said ANZ had made changes to how it was reporting data to the government’s debt management agency, the AOFM, as it worked to ensure the errors didn’t recur.

“We’ve got two sets of eyes on it now and we’ve changed some of the sign-off processes,” he added. “We’ll go over that with APRA (Australian Prudential Regulation Authority) and ASIC to see … if they’re comfortable with the changes we’ve made in due course. It’s still a work in ­progress.”

The markets unit sits within the broader institutional bank, which also grappled with conduct concerns about a decade ago.

The prior matter related to participation by ANZ employees in the rigging of the bank-bill swap rate and examples of poor behaviour on the trading floor. That bank-bill swap rate issue was settled with the regulator in 2017 for $50m, and ANZ agreed to an enforceable undertaking with ASIC in late 2017 in the wake of that controversy.

Mr Whelan said employees within the institutional bank were disappointed with the behavioural issues identified, but he shrugged off suggestions ANZ’s culture had not changed since the rate-rigging scandal.

“The (latest) conduct issue has probably been the one that’s disappointed staff the most,” he added.

“People (outside ANZ) really connected it to nothing’s changed since those days … I don’t accept that. We will take ownership of these particular issues that occurred and we dealt with them as quickly as we could.”

On whether the latest ASIC investigation and conduct issues would hamper his ability to become ANZ’s next chief executive, Mr Whelan said: “If it puts a black mark on my name that’s for other people to make a judgment on, hopefully with all the facts, not partial facts.”

ANZ is conducting an external review to ascertain whether any of the lax conduct was systemic, and whether there were further breaches of the bank’s code of conduct across its divisions. The review is being undertaken by a consulting firm and coincided with APRA forcing the bank to hold another $250m in capital due to governance lapses. That takes the total additional capital being held for compliance and governance failings to $750m.

Mr Elliott said the external review would take some months but noted interim reports would be lodged with the board.

Separately, ASIC has urged ANZ’s board to carefully consider its compliance culture, after the Federal Court knocked out the bank’s attempt to appeal a finding that it misled investors over a 2015 $2.5bn capital raising.

Joyce Moullakis travelled to Singapore as a guest of ANZ.