Backlash from trading conduct issues could hit chief executive Shayne Elliott

ANZ boss Shayne ­Elliott has been plunged into crisis over a trading scandal that is threatening to cause substantial reputational damage to the big four bank.

ANZ chief executive Shayne Elliott. Picture: Arsineh Houspian

ANZ chief executive Shayne ­Elliott has been plunged into crisis over a trading scandal that is threatening to cause substantial reputational damage to the big four bank as it battles charges of market manipulation, bad behaviour and supplying false data to the federal government.

ANZ on Thursday said it had terminated and suspended “several employees” in its trading team and would beef up oversight of its Sydney dealing room after investigating allegations of inappropriate conduct and behaviour in its trading division.

But the backlash from multiple investigations into trading and conduct issues within the markets arm could yet hit the leadership team, with the bank’s board now mulling action against the CEO and other senior executives.

The Australian also understands allegations against the bank’s markets team have extended beyond current staff, with former employees, some of whom now work for rival banks, summoned for formal interviews.

The big four bank has been under fire for weeks over multiple allegations centred around its trading division, including that its traders manipulated the sale of government bonds and the bank inflated bond turnover data. It has also been dealing with serious misconduct allegations in the team.

The scandal also puts a cloud over the board’s succession plans, with the long-serving CEO – Mr Elliott has been at the helm since 2016 – potentially now looking at a six to 12-month delay to any exit plans as he scrambles to get the bank back on track.

In a lengthy update on the three separate issues the bank is grappling with, Mr Elliott said they were being investigated “with the urgency expected”, adding that the board “continues to supervise this work closely”.

“We have been very clear with our people. Where we find any evidence of wrongdoing, those involved will be held accountable and action will be taken. The board will also lead a process to ensure consequences will be applied to senior executives, both past and present, including myself, where appropriate,” he said.

Mr Elliott said he had personally apologised to the chief executive of the Australian Office of Financial Management after the bank supplied incorrect bond turnover data for the 2023 fiscal year that included, in some cases, double-counting transactions.

The inflated numbers submitted by ANZ could have seen it get more mandates to issue commonwealth debt.

Mr Elliott put the blame for the inflated numbers on “process and data extraction errors” and said the lender was also investigating whether it should have reported the error to the Australian Securities & Investments Commission earlier than it did. ANZ notified AOFM of the error in August last year, but did not say when it informed ASIC.

Despite the allegations, ANZ shares are up 1.7 per cent over the past month. Picture: NCA NewsWire/Bianca De Marchi

ANZ is separately also under investigation by ASIC over its execution of a 2023 issuance of 10-year Treasury bonds by the AOFM, with the regulator suspecting contraventions of a number of provisions of the ASIC Act and the Corporations Act.

ANZ on Thursday said it was still co-operating with ASIC’s investigation, which is expected to take months. Crucially, the lender said its own analysis had not identified any evidence of market ­manipulation.

“ANZ’s external counsel has engaged independent experts to analyse trading data in relation to this issue. This independent experts’ work remains ongoing,” the bank said.

“ANZ’s own preliminary analysis has not identified any evidence of market manipulation. ANZ, however, does not have all the information that ASIC has, and this position will be reviewed in coming months.”

To beef up oversight of the trading team in the wake of misconduct allegations, the bank’s Singapore-based head of credit and rates trading, Trevor Vail, will relocate to Sydney, while its chief risk officer for markets, ­Michelle Ho, will move from London to Sydney and will also operate from the dealing floor to keep the trading team in line. Mr Vail is understood to have flown to Australia in recent weeks as the trading scandal erupted.

The move to bolster oversight of the division comes as external counsel continues to investigate the conduct and behaviour allegations levelled against the bank’s markets arm.

On staff conduct, Mr Elliott said his priority was to make sure the investigations were completed in a timely manner, “that action is taken against any indi­vid­uals who have not met the required standards and that the necessary steps are taken to ensure these conduct failures do not re-occur”. He added: “Importantly, we are not limiting our reviews and will address any conduct that is not in line with our expectations.”

While the market has so far taken the allegations in its stride (ANZ’s share price is up 1.7 per cent over the past month), Wilson Asset Management portfolio manager John Ayoub warned that regulators may take a harder line than previously if ANZ was found to have broken the law.

“I think the way the regulators will look at this and, given the change in standards that we’re expecting (from ASIC), previous fines may not be the best example of what could be coming their way,” Mr Ayoub told The Australian. “I’d expect any fines to be bigger than what they have been in the past. I think they could be bigger, more punitive, to stop this kind of behaviour.”

ANZ’s last major trading scandal saw it fall foul of ASIC in 2016, when the regulator accused a group of lenders of engaging in market manipulation and unconscionable conduct by rigging the bank bill swap rate. Months later, ANZ admitted to manipulating the BBSW to its advantage and paid a $50m penalty.

ANZ shares closed Thursday’s session down 0.6 per cent at $29.32.