ANZ fined $240 million for bond trading, retail misconduct

ANZ has copped a whopping $240 million fine for bank-wide "unconscionable conduct" that includes admitting it was guilty of misleading the government over the $14 billion bond scandal.

The misconduct relates to five separate matters spanning the retail and institutional businesses.

The lion's share of the civil penalty relates to ANZ admitting it acted unconscionably and misled the government, as well as failing to meet its AFSL obligations when it managed the 10-year treasury bond deal and produced inaccurate reporting.

For this portion of the fine, ANZ will pay $125 million, split between its role as duration manager in executing the deal ($85 million) and for submitting inaccurate monthly secondary bond turnover data ($40 million).

On April 19, 2023, ANZ was mandated to help the government's sovereign debt management agency, the Australian Office of Financial Management (AOFM), deliver a $14 billion bond issuance.

Proceeds raised were to fund services such as health, social welfare, education, infrastructure and defence.

"Instead of trading gradually throughout the day to limit market impact, ANZ sold a significant volume of 10-year Australian bond futures around the time of pricing, which placed undue downward price pressure on the bond price," ASIC said.

"ANZ knew its trading could expose its client to significant risk of harm, but did not disclose to its client that ANZ still had significant volumes to sell before pricin,g nor provide its client an opportunity to consult with ANZ about delaying pricing."

Consequently, this denied the government an opportunity to protect itself and the public interest and that it was "relying on ANZ's expertise and professionalism".

When the government began asking questions, it saw that reports ANZ produced were misleading or deceptive.

ASIC also alleges ANZ misled the government about its trading turnover, which helps the government select dealers for bond issuances, for nearly two years.

"ANZ's inflated figures made it appear more active than it was and occurred despite internal concerns about the accuracy of the data and awareness that the figures could influence future appointments on bond issuances," ASIC said.

In response, ANZ said that ASIC has not alleged the bank engaged in market manipulation or over-hedging.

"All trading undertaken by ANZ as a duration manager was to hedge the risk borne by it in connection with the role on this transaction," the bank said.

"It is in ANZ's view that no loss was caused to the Commonwealth from its trading as a duration manager. However, given ANZ could have executed its role as a duration manager with better communication, ANZ has offered to pay the AOFM the revenue it earned as a goodwill gesture."

Several ANZ employees have either been suspended to terminated when the scandal came to light.

APRA has also jumped on ANZ, worried about its non-financial risk management practices and forcing it to increase its capital add-on to $750 million.

ASIC chair Joe Longo slammed the bank for "fundamental issues" in its risk and compliance culture that "require the board's and executives' urgent attention".

"In the bond trading case, ANZ was in a trusted position and its conduct had the potential to reduce the amount of funding available to the government. This funding is used to support critical services including Australia's health and education systems, affecting all Australians," he said.

"The total penalties across these matters are the largest announced by ASIC against one entity and reflect the seriousness and number of breaches of law, the vulnerable position that ANZ put its customers in and the repeated failures to rectify crucial issues."

Retail matters

ANZ will pay $40 million for dismissing 488 financial hardship concerns from customers, who communicated serious issues such as domestic violence and medical conditions, between May 2022 and September 2024.

In some cases, ANZ took more than two years to respond to customers and for others attempted to recover debts even when it did not respond to the hardship notices.

This includes issuing default and demand notices and sending out external debt collection agencies on customers.

ANZ ignored ASIC's concerns over its financial hardship processes in June 2023. Steps taken by ANZ to fix the issues did not work consistently, ASIC said, resulting in more that occurred up to September 2024.

ANZ has completed a remediation program for affected customers, which has included customer payments totalling $92,687 and corrections to customer.

Another $40 million in civil penalties relate to failing to pay bonus interest between July 2013 and January 2024.

ANZ promised to pay introductory bonus interest to customers who opened certain new accounts.

However, due to process deficiencies in ANZ's systems, ASIC alleges the bonus interest was not always applied. The bank has since remediated 194,487 accounts affected.

Separately, between August 2024 and March 2025, ANZ promoted on its website base variable and bonus fixed introductory interest rates for certain accounts which ASIC alleges were inaccurate.

The impacted 56,703 customers, resulting in ANZ failing to pay the correct amount of interest promised to 26,917 customers, with around $480,000 in interest not paid out. ANZ said it intends to remediate these customers.

Finally, ANZ will pay $35 million for failing to refund fees charged to thousands of deceased customers between July 2019 and June 2023.

"This is because its systems and processes could not identify which fees should be waived and/or refunded and whether any fees charged after a customer's death had been waived or refunded," ASIC said.

"ANZ did not respond to representatives of deceased estates in the required timeframe after notification of the customer's death."

ANZ still has not been unable to identify the total number of affected customers and the full extent of the impact is still unknown.

ASIC went on to say that ANZ's failures are "likely to have compounded the difficulties faced by loved ones dealing with the death of a family member or relative, as well as frustrating the probate process."

ANZ first identified the systems, controls and processes issue in 2022, and took over a year to resolve it.

In July 2024, ANZ was sanctioned for breaches of the Banking Code of Practice by the Banking Code Compliance Committee.

Some 18,900 customer accounts have been remediated $3.8 million for fees ANZ did not intend to charge and additional costs arising from delays.

On the retail business failures, newly appointed ANZ chief executive Nuno Matos said: "Unfortunately, some of our failings occurred when our customers were at their most vulnerable. For this we are deeply sorry, and we are making changes to better support when they need us most."

Matos will axe 3500 jobs across the bank, affecting 14% of the work force from its retail and technology divisions.

"This comes off the back of ANZ's credibility already being in question after a humiliating email botch-up under Nuno Matos' leadership revealed job cuts to staff once again before they had even been briefed," the Finance Sector Union said.

This article first appeared on Financial Standard

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