ANZ’s woes mount as NZ boss departs in expenses scandal

David Hisco has quit over a ‘mischaracterisation’ of about $25,000 in personal expenses.

ANZ’s outgoing CEO of New Zealand, David Hisco.

ANZ’s woes in New Zealand have dramatically escalated with the departure of country boss David Hisco over a “mischaracterisation” of about $25,000 in personal expenses as legitimate business expenses.

ANZ NZ chairman John Key said the matter related to Mr Hisco’s use of chauffeured cars, mostly in NZ, as well as wine storage in Australia.

While ANZ accepted Mr Hisco’s assurance that he had verbal authority from “executives in Australia”, and the bank was therefore not seeking repayment of the funds, Sir John said the heart of the issue was the way the expenditure had been recorded in the accounts.

“The point worth remembering here is that I set the standards for ANZ on behalf of the board and those standards have to be trust and transparency,” the former NZ prime minister told a press conference in Auckland.

“The simple bottom line is we have to set the same standards for a freshly minted teller as we do for the CEO.

“David by his own admission would say that he failed that standard — there was not transparency and we could not accurately see what the expenditure was for.”

The false description of Mr Hisco’s personal expenses was uncovered in a review ordered three months ago by group chief executive Shayne Elliott of expenses claimed by his senior executive team.

No other concerns emerged from the review.

Mr Hisco, who has been CEO of ANZ NZ for nine years, went on extended sick leave late last month, with retail and business banking boss Antonia Watson appointed acting CEO.

Now that the permanent position has opened up, Ms Watson is likely to be one of the leading internal candidates.

Meanwhile, her former boss, who earned $3.5 million in 2018, will leave ANZ with about $2m, including 12 months’ salary and accumulated leave.

He will forfeit $6.4m in equity entitlements.

Ms Watson, who appeared with Sir John at the press conference, said it had been a day of “shock and disappointment” at the bank. “The NZ leadership team and I stand firmly behind Sir John and the NZ board, believing David has not met the standards and expectations of the organisation,” she said.

“We are all united in the belief that if you are a young teller in the first day of your job or a CEO of 39 years’ experience, the standards are the same.”

Ms Watson also said that Mr Hisco was an “open-minded and modern” leader, with about 40 per cent of management roles held by women. However, as the bank’s leader in NZ, he accepted that he had to be accountable.

ANZ, which has the biggest NZ operation of the big four ­Australian lenders, has been in the central bank’s crosshairs in ­recent months. In May, the Reserve Bank of NZ banned the bank from using an internal risk model to calculate its regulatory capital requirements after directors attested to compliance despite the approved model not having been in use since 2014.

ANZ is now required to use a standardised approach, increasing its minimum capital held for operational risk by 60 per cent to $NZ760 million ($722m).

Deputy governor Geoff Bascand said the penalty reflected a “persistent weakness” with ANZ’s assurance process. “The fact that this issue was not identified for so long highlights a persistent weakness with ANZ’s assurance process,” Mr Bascand said.

ANZ said the mistake occurred in December 2014, when its calculation of operational risk capital was changed to a final run of a previous model, with an annual adjustment to reflect the growth of the business.

The old model had been decommissioned without RBNZ approval. This year, as well, ANZ and its Australian rivals have been fighting a rearguard action against an RBNZ proposal to hike capital requirements so that the country can withstand a once-in-200-years banking crisis.

CEO Shayne Elliott said at the bank’s half-year result last month that ANZ had options in relation to the amount of capital it put into NZ and how it was deployed.

“We’ve shown that we’re not shy of taking hard decisions,” Mr Elliott said.

“We actually have a responsibility to act responsibly with our shareholders’ capital, and we will do so.”

While the risk capital problem with the RBNZ was a separate issue, Sir John said Mr Hisco would also take some responsibility for that as CEO.

He said the reality was that a person who was “quite junior” in the organisation had made a call that was outside their authority.

The board believed it was getting the right advice because it was advised in writing that the model that the bank was using were compliant. The model in question was one of 45, and had come up with a capital difference of $NZ23m. This compared to ANZ NZ’s $NZ13 billion in total capital holdings, of which $NZ3.5bn was surplus to regulatory requirements.