‘Not happy with us’: ANZ scrambles to get its house in order amid scandals

ANZ has conceded it has been too slow to fix its non-financial risks over the past five years, and vowed to get its corporate governance in order by early next year.

Mark Whelan, ANZ’s head of institutional lending, said while the bank had been dealing with several internal issues – including a bonds trading scandal that is the subject of a regulatory investigation – he did not believe there was a widespread cultural problem across the organisation.

ANZ’s Mark Whelan says the bank is reviewing its code of conduct to put a greater emphasis on a “speak-up culture”.Credit: Oscar Colman

“[The regulators] are not happy with us, and therefore we have to accept it, but then we need to understand exactly what it is and why we’re falling down,” Whelan told this masthead in his first comments after the scandal broke.

“We already have a good idea of it in some areas, and particularly in non-financial risk areas … and just lean into it and fix it.”

ANZ has been battling to contain the fallout from a suite of scandals in the bank’s institutional division over the past few months.

The corporate and prudential regulators have “heightened concerns” about ANZ’s corporate governance, stemming from the bonds trading scandal, in which traders are alleged to have manipulated the bond rate, forcing up the federal government’s cost during a $14 billion debt sale last year.

The Australian Securities and Investments Commission (ASIC) is investigating those allegations, but chief executive Shayne Elliott has said the bank’s preliminary internal probe found no evidence of wrongdoing.

That internal investigation, led by Herbert Smith Freehills, is expected to update the board early in the year – around the same time ASIC could resolve its probe.

Separately, the Australian Prudential Regulation Authority (APRA) in August hit the bank with a $250 million capital add-on charge after ANZ admitted its markets unit inflated its bond trading figures to the federal government – portraying itself as more experienced than it actual was – and a workplace complaints investigation found traders in the Sydney dealing room were inebriated during working hours.

APRA criticised ANZ for not fixing its non-financial risks and having no clear plans for managing them more than five years after it ordered the bank to hold $500 million in capital over similar issues.

“I think it’s a fair observation from [APRA],” Whelan said.

“We started this four or five years ago, and we were leaning into it, I think, OK. We put a lot more resources behind it in the last 18 months, and we’re making more progress.

“There are six risk themes we’re doing one by one, we’ll have those in place. But then the game turns to, ‘How do you embed it and improve it on an ongoing basis?’ It’ll never stop, to be frank, but we’ll get to a point where I think we’re in a reasonable shape, I would hope, in the next five months.”

Whelan said he believed non-financial risks, such as reputational and cybersecurity issues, posed the biggest problems for banks because they damaged the brand and ultimately ended up costing the institution greater than financial issues.

He said the bank was reviewing its code of conduct following the string of problems to place a greater emphasis on a “speak-up culture”.

ANZ chief executive Shayne Elliott at a parliamentary hearing last month. Credit: Alex Ellinghausen

ANZ has also expanded the terms of reference of a separate review into workplace culture following APRA’s criticisms and will be required to reveal its “remediation plan” to the regulator.

“We had a handful of people who behaved incorrectly, which is really disappointing … but what did happen is that it got reported internally, and we dealt with it,” Whelan said.

Elliott last month told a parliamentary committee he was expecting to have his bonuses cut because of the “reputational harm” the allegations have had on ANZ.

“I’m not for a minute suggesting here that we are perfect or that there aren’t other improvements we can make culturally, procedure-wise, policy-wise, all of it,” Elliott told this masthead.

“We’ll learn from this just like we’ve learned from other things. Whether or not it does result in an allegation or a case or anything, there’s clearly something to learn.

“We’ve had some … reputational damage and obviously that’s caused us to reflect, and we’ve already put in place some changes in those areas as well.”

The reporter is in Singapore as a guest of ANZ.

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