Australian Prudential Regulation Authority Increased AUD 750 Million ($509 Million) Add-on Capital Requirement for ANZ on Concerns of Non-Financial Risk Management Practices, ANZ Current Market Value at $60 Billion
28th August 2024 | Hong Kong
The Australian Prudential Regulation Authority (APRA) has increased AUD 750 million ($509 Million) add-on capital requirement for ANZ on concerns of non-financial risk management practices. ANZ current market value is at $60 billion. APRA (23/8/24): “The Australian Prudential Regulation Authority (APRA) has increased the capital add-on applied to Australia and New Zealand Banking Group (ANZ) to $750 million in response to heightened concerns about the bank’s non-financial risk management practices. APRA has held longstanding concerns with ANZ’s non-financial risk management, and imposed a $500 million operational risk capital add-on to the bank in 2019 to reflect deficiencies in its risk governance. This capital add-on has remained in place as the bank implemented a remediation program. Despite this program being in place for several years, APRA has yet to observe significant improvements in ANZ’s non-financial risk management. More recently, several issues emerging in the bank’s Markets business have increased APRA’s concerns. ANZ has admitted that it misreported bond trading data to the Australian Office of Financial Management (AOFM) in 2022-23, and that action has been taken in response to poor behaviour by employees in its Markets business. While ANZ has launched several investigations into these issues, they raise prudential concerns that ANZ has yet to adequately address deficiencies in controls, risk culture, governance and accountability. In response, APRA will require ANZ to: 1) hold an operational risk capital add-on of $750 million, representing an increase of $250 million to the existing add-on; 2) appoint an independent party to review the root causes of recent issues and risk governance in the Markets business, and assess the potential impacts across the broader bank; and 3) develop a remediation plan to address findings from the independent review. The capital add-on will remain in place until such time as ANZ has delivered required remediation to APRA’s satisfaction.”
“ Australian Prudential Regulation Authority Increased AUD 750 Million ($509 Million) Add-on Capital Requirement for ANZ on Concerns of Non-Financial Risk Management Practices, ANZ Current Market Value at $60 Billion “
ANZ Bank Fired & Suspended Traders for Misconduct in Bond Trading Unit, Australia Securities & Investments Commission Investigating ANZ for Execution of 10-Year Treasury Bonds in 2023, Informed Australian Office of Financial Management (AOFM) of Submitting Incorrect Monthly Secondary Bond Turnover Data Including Omissions & Double Counting of Transactions for 2022/2023
26th July 2024 – ANZ Bank has fired & suspended traders for misconduct in the bond trading unit. The Australia Securities & Investments Commission (ASIC) is currently investigating ANZ for execution of a 10-year treasury bonds in 2023. ANZ Bank had also informed the Australian Office of Financial Management (AOFM) of submitting incorrect monthly secondary bond turnover data, including omissions & double counting of transactions for 2022/2023. ANZ (16/7/24): “ANZ today provided an update on the progress of its ongoing investigations into potential trading and conduct issues in parts of its Markets business. The update concerns three separate but related matters: data reporting processes; allegations around a 2023 bond transaction; and conduct and behavioural matters primarily within its Sydney dealing room.” In 2024 May, the Australian Securities & Investments Commission (ASIC) began investigating ANZ Bank as risk manager for a 2023 10-year treasury bonds issuance (by the Australian Office of Financial Management, AOFM), with ANZ suspected to breach the ASIC Act & Corporations Act.
ASIC investigation into AOFM transaction – As previously advised, ASIC is investigating ANZ’s execution of a 2023 issuance of 10-year Treasury Bonds by AOFM. ANZ is cooperating fully with ASIC’s investigation which is expected to take some months. ANZ’s external counsel has engaged independent experts to analyse trading data in relation to this issue. This independent experts’ work remains ongoing. 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.
Data reporting – ANZ advised the Australian Office of Financial Management (AOFM) in August 2023 it had submitted incorrect monthly secondary bond turnover data for the FY22-23 year. This error came to light before the required year-end sign-off on the accuracy of the data supplied.
Data errors were caused by a range of issues including process and data extraction errors on ANZ’s part. This resulted in the incorrect inclusion of transactions that should have been omitted as well as double counting of some transactions. ANZ acknowledges this is an unacceptable failure. It is also investigating whether it should have reported this issue to the Australian Securities and Investments Commission (ASIC) earlier than it did and will engage with ASIC further on this matter.
Conduct and behaviour issues – In addition to our own internal investigation, ANZ has engaged specialist external counsel to investigate allegations of inappropriate conduct and behaviour primarily within the Sydney dealing room. While the external investigation remains ongoing, there have been employment outcomes for several employees including suspension, termination and a formal warning. Management changes in the Sydney dealing room have also been made.
ANZ Chief Executive Shayne Elliott: “With the assistance of external counsel, we are investigating these issues with the urgency expected and the Group 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. We have also reviewed recent data submissions provided to relevant customers and although there will be ongoing work, we don’t believe we have material issues with the data we have submitted. However, as an additional precaution, I have asked our internal audit team to review the governance and control frameworks supporting the production of similar submissions to customers and report its findings to the Board.
I have personally apologised to the Chief Executive at AOFM for ANZ’s failures. We are significantly enhancing our governance process around this data, including building a separate validation tool and increasing training for relevant staff. We had already strengthened our breach reporting process through system improvements. My immediate priority is to ensure the investigations are 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. Importantly, we are not limiting our reviews and will address any conduct that is not in line with our expectations.”
Australian Securities & Investments Commission Investigates ANZ Bank as Risk Manager for 2023 10-Year Treasury Bonds Issuance, Suspected to Breach ASIC Act & Corporations Act
16th May 2024 – The Australian Securities & Investments Commission (ASIC) is investigating ANZ Bank as risk manager for a 2023 10-year treasury bonds issuance (by the Australian Office of Financial Management, AOFM), with ANZ suspected to breach the ASIC Act & Corporations Act. ANZ (13/5/24): “ANZ notes that the Australian Securities and Investments Commission (ASIC) is investigating ANZ’s execution of a 2023 issuance of 10-year Treasury Bonds by the Australian Office of Financial Management (AOFM). ANZ was appointed by the AOFM to act as a risk manager in relation to the issuance of the Treasury Bonds. ANZ understands that ASIC is investigating suspected contraventions of a number of provisions of the ASIC Act and the Corporations Act. ANZ takes compliance with its regulatory obligations seriously and is co-operating fully with ASIC.” In March 2024, ANZ bank agreed to pay $37.4 million (AUD 57.5 million) in interest-free credit cards class action settlement for interest charged between 2010 to 2019, with the lawsuit filed by specialist litigation law firm Phi Finney Mcdonald focusing on group litigation & shareholder class actions.
ANZ Bank to Pay $37.4 Million in Interest-Free Credit Cards Class Action Settlement for Interest Charged Between 2010 to 2019, Lawsuit by Specialist Litigation Law Firm Phi Finney McDonald Focusing on Group Litigation & Shareholder Class Actions
29th March 2024 – ANZ bank has agreed to pay $37.4 million (AUD 57.5 million) in interest-free credit cards class action settlement for interest charged between 2010 to 2019, with the lawsuit filed by specialist litigation law firm Phi Finney Mcdonald focusing on group litigation & shareholder class actions. Phi Finney McDonald: “The claim alleges that during the Claim Period ANZ charged interest to customers retrospectively on credit card purchases that previously had the benefit of an interest-free period (Retrospective Interest). The claim further alleges that ANZ did not provide transparent instructions to its interest-free credit card customers of the manner in which it charged Retrospective Interest and that customers had no ability to determine the amount of Retrospective Interest they would pay. From 1 January 2019, Parliament prohibited the practice of charging of Retrospective Interest by amendment to the National Consumer Credit Protection Act 2009 (Cth) by the Treasury Laws Amendment (Banking Measures No.1) Bill 2018. The proceeding alleges that ANZ’s credit card contract terms were unfair terms pursuant to sections 12BF and 12BG of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) because ANZ 1) charged Retrospective Interest; 2) charged interest on purchases paid off in a timely manner by the cardholder; 3) did not provide cardholders with the ability to calculate their potential interest charges; and 4) obfuscated the interest charging mechanisms within ANZ relevant credit card contracts, preventing the cardholder from being able to understand the interest consequences of not paying off the entirety of their closing balance … … Phi Finney McDonald acts for the Representative Applicant, Daniel Tour, and Australia and New Zealand Banking Group Limited (ACN 005 357 522) (ANZ) credit card holders who were charged interest by ANZ from 1 July 2010 to 31 December 2018 (Claim Period) in a class action against ANZ. The class action, filed in the Federal Court of Australia, alleges that ANZ’s “interest-free” credit card contracts contained unfair terms and that ANZ engaged in unconscionable conduct causing loss and damage to ANZ credit card holders. Woodsford Litigation Funding is providing financing for the class action.” ANZ: “ANZ today announced it has reached an agreement to settle a class action brought against it by Phi Finney McDonald in 2021. The class action related to certain interest charged on certain ANZ personal credit cards in the period from 1 July 2010 to 1 January 2019. ANZ will pay $57.5m in the settlement, which is covered by a provision held at 30 September 2023. The settlement is without admission of liability and remains subject to court approval.”
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