ANZ weighs booze ban and signals executive pay repercussions for reputational damage
Shayne Elliott is considering a bank-wide ban on alcohol and has flagged pay consequences across multiple levels of management, as ANZ reels from ‘significant reputational damage’.
ANZ chief Shayne Elliott is considering a bank-wide ban on alcohol during work hours and has flagged bonus and pay consequences across several levels of management, as ANZ reels from “significant reputational damage”.
Fronting the parliamentary standing committee on economics on Friday, Mr Elliott said ANZ was taking allegations of wrongdoing in its markets division seriously, but he didn’t believe taxpayers had suffered as a result of the bank’s or its employees’ actions.
The corporate regulator is investigating ANZ over lax data reporting, conduct issues and irregular trading activity surrounding a $14bn government bond issuance it helped manage last year. The irregular trading activity saw pricing move in an unfavourable way for the Australian government, issuer of the 10-year bonds.
Mr Elliott said in relation to staff conduct, the bank had terminated one employee, parted ways with two others and handed out a formal warning to another regarding their behaviour. Among the poor behaviour the bank identified was the use of profanity and returning to the office after consuming an “unreasonable amount” of alcohol.
Mr Elliott was steadfast in saying ANZ had not uncovered “anything improper” in relation to how it managed the government bond issue, but admitted the probe had caused notable reputational damage that would hit the pay packets of executives and managers across parts of the bank.
“We have suffered reputational damage that is on me, I accept that there will be a consequence,” he said.
“I can assure you there will be consequence for managers at multiple layers through the organisation for that conduct, and for allowing it to happen in the first place.”
Mr Elliott also admitted the bank’s own investigation into poor conduct in the markets division “took too long”. He said the bank was reviewing its controls and processes and how it escalated potential issues, in light of the regulatory investigation.
The prudential regulator this week slapped ANZ with a requirement to hold an additional $250m in capital because of governance issues in its markets unit. That comes on top of a $500m capital add-on imposed in 2019, that is yet to be lifted.
ANZ was also embroiled in a scandal about a decade ago relating to its staff participating in the rigging of the bank-bill swap rate, which was settled with the Australian Securities & Investments Commission in 2017, for $50m.
“Whatever the outcome (of the latest regulatory probe) there will be a massive series of changes that we will put in place to ensure that these things don’t happen again,” Mr Elliott said.
Asked about a potential staff alcohol ban, he added: “We are considering that and that should be on the table. I haven't made a decision on that; again I think it’s entirely reasonable that that is considered.”
Mr Elliott will discuss a range of potential policy changes with ANZ’s board next week, including a change to its alcohol policy. The board also starts considering executive performance reviews and pay next week.
Mr Elliott first learned of the corporate regulator’s investigation into the bank’s handling of a government bond issue in February, via an email from the legal department.
He said there was nothing found “to be untoward” when the bank reviewed its handling of the transaction.
“At the time when the pricing of the bond was set … ANZ had substantially hedged its position, so at that point we no longer had any financial interest whether bond futures go up or down,” Mr Elliott added.
“After that, there was unusual activity, it spiked the price spiked, that caused questions. AOFM (Australian Office of Financial Management) quite rightly reached out.”
Getting frustrated with the veracity of the committee’s questions, Mr Elliott rebuffed suggestions the bank was entangled in a scandal.
“No allegation has been made to us at this point by ASIC. Obviously, they have serious concerns, and I respect that,” he said.
The corporate regulator has requested reams of ANZ’s documents and has been interviewing the bank’s employees.
Mr Elliott also told the committee the bank’s internal review suggested the data reporting issue in its markets team was a mistake and unintentional.
He said the data reporting issue related to ANZ not reporting numbers for synthetic repurchase agreements to the AOFM. A synthetic repo, as they are known, involves a cash trade in a debt security, and a total return swap or other types of derivatives.
Mr Elliott outlined that ANZ did not report synthetic repos to the AOFM last year, which spurred an under-reporting of the bank’s total volumes to the agency.
He said it was hard to see how ANZ got “any advantage” from the reporting issue.
The bank has since reviewed its data reporting across federal and state debt agencies and Mr Elliott said it had not uncovered further issues.
“This does appear to be isolated,” he said.
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