ANZ hit with union complaint over mass job cuts after $240m ASIC penalty

ANZ agreed to pay Australia's largest-ever ASIC penalty for misconduct. Its new CEO Nuno Matos said he has the right ideas ‘to better protect and care for our customers and to create a more sustainable business’.

The banking giant has apologised for its ‘betrayal of trust’. Picture: Jane Dempster

ANZ boss Nuno Matos seized on the wrongdoing that took place on his predecessor’s watch as grounds for a ‘cultural revolution’ he hopes to engineer by sacking 4500 people and having agreed to the largest fine ever imposed by the market regulator.

The bank will pay $240m for a litany of failures, including charging fees to dead customers, as well admitting to unconscionable conduct in a bond trading scandal where it was hired on behalf of the government to sell Australia’s government debt. ANZ’s peace deal with the corporate regulator puts to bed a possible market manipulation prosecution.

The Australian Securities & Investments Commission attributed $125m of the fine to ANZ’s role in a $14bn bond deal where it also submitted incorrect trading data to the Australian Office of Financial Management. ANZ overstated its data by “tens of billions of dollars” over two years.

This includes an $80m component for the unconscionable conduct of its traders.

Mr Matos said the failures identified by ASIC were “simply not good enough” and the bank needed a “cultural revolution”.

“It is my expectation that we see measurable improvements across the bank to better protect and care for our customers and to create a more sustainable business,” the former HSBC banker said.

“The next 12-18 months are the right timing to have a company completely in good shape to attack the market and serve customers in a very sustainable way.”

ASIC chair Joe Longo and Deputy Chair Sarah Court on Monday. Picture: Jane Dempster/The Australian.

ANZ noted the regulator “has not alleged ANZ engaged in market manipulation or over-hedging”. Instead, “it is ANZ’s view that no loss was caused to the Commonwealth from its trading as duration manager”.

It would forgo revenue booked from handling the bond placement only “as a goodwill gesture”.

But ASIC disagreed and said ANZ had cost the Australian government at least $20m and raised its borrowing costs over the life of the loan.

“Time and time again, ANZ betrayed the trust of Australians,” ASIC chairman Joe Longo said.

In addition, the bank will pay $115m in fines over repeated failures in its retail banking division previously revealed in The Australian. This figure plus the $125m related to the trading floor rounds out the $240m penalty.

It did not respond to hardship notices or put in place proper hardship processes for struggling customers.

ANZ also made false and misleading statements about its savings rates, failed to refund fees charged to thousands of dead customers and declined to respond to their families within the required time frame.

Mr Longo said the penalty was the largest announced by ASIC against a single entity. The financial crimes watchdog Austrac penalised Westpac $1.3bn in 2020 for breaches of anti money laundering law.

The bond trading scandal, among ASIC’s largest and most complex investigations, exposed ANZ traders engaging in “grubby” behaviour, abusing its trusted position.

“Its conduct had the potential to reduce the amount of funding available to the government,” Mr Longo said. “This funding is used to support critical services, including Australia’s health and education systems, affecting all Australians.”

That was echoed in a transcript of an Australian Office of Financial Management official querying ANZ’s actions.

“I wouldn’t mind explanation ... That’s from a taxpayer’s perspective, we need to, you know, we need to be better,” Darren Sloane, director of debt syndicate at ANZ, was told by the government debt agency.

ASIC deputy chair Sarah Court said ANZ had shown a “clear failure to manage non-financial risk”. “Even on the basics like paying the correct interest rate, it fell short,” she said.

ASIC has now fined ANZ more than $310m since 2016 over 11 different cases.

ANZ CEO Nuno Matos. Picture: Jane Dempster/The Australian.

ANZ chairman Paul O’Sullivan said the bank had “made mistakes that have had a significant impact on customers”, and gave his strong backing for Mr Matos’ dramatic overhaul of workforce, including thousands of job cuts, outlined last week.

“Nuno and his team will bring to the organisation a focus on systemic change, how we change our systems and processes and our culture so we prevent these sorts of issues from happening again,” he said.

Mr Matos will axe 3500 full-time staff and 1000 contractors. The cuts are aimed at removing duplication.

“We need to streamline our management layers dramatically, to improve our decision-making and to strengthen our execution, all of which will assist our uplift in non-financial risk. And whilst change is always difficult for the thousands of people who will continue to work at ANZ, this will result in a much better bank,” Mr O’Sullivan said on an investor call on Monday.

Mr Matos has been facing intense media scrutiny since his arrival in Melbourne as Shayne Elliott’s successor.

Treasurer Jim Chalmers called the Portuguese-born banker last week when he heard news of his jobs target.

The Finance Sector Union is furious and submitted its claim against ANZ to the Fair Work Commission on Monday as the fate of nearly 2000 unallocated workers still hangs in the balance.

The bank promised to “deliver improvements across a range of areas”.

ANZ appointed consulting firm Promontory “as an independent expert” and would also submit a root cause remediation plan to APRA in response to the regulator’s actions, telling investors it expected to spend a further $150m on implementation of these measures.

APRA has hit ANZ with two orders to hold extra capital, loading it up with an extra $500m as punishment for its failures.

Fitch Ratings said the scale of ANZ’s non-financial risk problems had been factored into its recommendation “since large-scale issues were first identified by the 2018 banking royal commission”, according to a note.

Fitch said it was unlikely that ANZ could remove its $1bn cumulative APRA penalty for “several years”.

Citi analyst Thomas Strong said Mr Matos was “clearing the decks” ahead of an October strategy day.

Originally published as ANZ hit with union complaint over mass job cuts after $240m ASIC penalty