Nuno Matos is the latest CEO to remediate ANZ; here’s how it bungled its non-financial risk targets before
ANZ insiders said the bank promised to create a simpler approach to risk, instead it created a monster. Rather than frank conversations about how to get the business on target, staff were treated to lengthy and bamboozling presentations.
ANZ’s approach to managing non-financial risk cost it $240m in a settlement struck this week with the corporate regulator. The agreed penalty, which is the largest in the history of The Australian Securities & Investments Commission, undermines the bank’s overhauled risk management system known as I.AM Amplified.
ANZ settled four matters with ASIC spanning its retail and institutional bank on Monday.
The chaos unleashed by new chief executive Nuno Matos’s plan to axe 3500 staff and 1000 contractors risks pushing the risk management project into deeper delays, insiders warn.
Of that tally, 160 senior managers will exit.
Now, ANZ must stand up a resolution program to ASIC and submit a root cause remediation plan to the prudential regulator.
Non-financial risk explains every problem at ANZ outside of the bank’s balance sheet, from technology to behaviour.
A review by Oliver Wyman published in April identified allegations of bullying, alcohol and substance abuse inside the bank’s markets business, but found those were not systemic.
Mr Matos aims to fix the bank’s non-financial risk problem.
But this has been a tortured journey for ANZ with its $500m capital overlay imposed by the prudential regulator in the wake of the Hayne Royal Commission.
The Australian Prudential Regulation Authority, which has stayed silent this week, criticised the bank in internal meetings with its senior management over its handling of non-financial risk.
In August 2022, APRA’s then acting general manager in the banking division, Tracey Bragg, warned ANZ in a letter that it was already well behind where the regulator wanted the bank to be.
Ms Bragg, now head of banking branch 1 at APRA, warned ANZ its work reflected a “plan to build a plan”, and had to show the regulator how it was “different from previous iterations”.
ANZ had hoped its remediation plan in August 2022 would mollify APRA. Instead, insiders say ANZ created a monster.
APRA had observed while ANZ’s senior teams were enthusiastic about their risk targets, others were not.
Staff would sit through regular meetings discussing risk handling, but these lessons were often ignored.
Ms Bragg warned ANZ’s Line 1 teams “appear to be buying into the program in a stronger way” but it was still unclear “what specifically will be delivered, by who, and by when, and with confidence that the solutions will materially uplift the quality and consistency of operational risk practices across ANZ group”.
Months after APRA’s warning, ANZ traders fumbled a $14bn government bond auction in the bank’s favour, which cost taxpayers $26m according to ASIC.
APRA was long dissatisfied with the bank’s handling of non-financial risk and acted on this when it added a $250m capital top-up (taking it to $750m) in August last year citing “longstanding concerns”.
APRA said it was “yet to observe significant improvements in ANZ’s non-financial risk management” at the time.
Risk program insiders said ANZ’s response was to build out a massive register across the bank of known risks and ownership, clarifying who was responsible for what.
But this presented its own problem, including a need for someone to constantly update ANZ’s NFR Hub built around ServiceNow and covering nearly 42,000 staff and thousands of contractors.
This unwieldy task was set to be finalised and new risk controls in place across the bank by October 2025 at the latest. But ANZ’s risk approach is still a distant goal.
Two of the key figures steering the risk push through are either gone or moved on.
ANZ technology and operations executive Gerard Florian retired on August 4, two months after. And last week, chief risk officer Kevin Corbally would be moving into the new role of managing director, capital management institutional.
ANZ risk head of delivery Hung Dang remains at the bank.
ANZ will push forward with its risk program rollout and Mr Matos has said ANZ’s risk teams will not be a source of job losses.
On Monday, the ANZ boss said the bank had to deal with its non-financial risk “holistically” noting this had to incorporate “a cultural redestination” and “cultural reset”.
This would run at least two to three years, plus another year “to make them stick”. A spokesman for the bank declined to expand on the CEO’s remarks when asked about the remdiation strategy.
Some teams have reported a lack of direction in recent weeks. This includes an internal team stood up within the risk function to tackle potential court action or regulatory enforcement.
In the culture that prevailed under former boss Shayne Elliott, positive reports were made to management as the scope of the program expanded.
Instead of frank conversations around the problems embedding a stronger risk culture at ANZ, staff were treated to lengthy and bamboozling presentations boasting slick graphics and complex flow charts.
Promontory was on Monday announced as an “independent expert” to “report on the adequacy” of its ASIC resolution program. Promontory has been inside ANZ for years, reporting to the board.
In May 2023, Promontory told ANZ’s board there had been an “increase in program capabilities”.
But this was only after Promontory had criticised I.AM as lacking “clear purpose” in a series of scathing root cause assessments.
An internal audit in 2024 identified a string of issues including requiring “greater clarity on the end state” framework.
Instead of delivering a new approach to non-financial risk as part of an energised new ANZ, the bank’s approach now looks to be on life support.
Do you know more? Contact rossd@theaustralian.com.au
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Originally published as Nuno Matos is the latest CEO to remediate ANZ; here’s how it bungled its non-financial risk targets before
