ANZ Bank Faces $35 Million Fine for Handling of Deceased Estates

In a significant development for the Australian banking sector, the Australian and New Zealand Banking Group (ANZ) has agreed to pay an additional $35 million in fines due to serious breaches in its management of deceased estates. The Australian Securities and Investments Commission (ASIC) reported that between 2019 and 2023, ANZ failed to refund fees charged to thousands of deceased customers, raising serious concerns about the bank’s operational integrity and customer trust.

ASIC’s Strong Condemnation

ASIC Chairman Joe Longo did not mince words in his criticism of ANZ, stating, “Time and time again, ANZ betrayed the trust of Australians.” He emphasized that the total penalties imposed on ANZ are the largest ever announced by ASIC against a single entity, underscoring the gravity and frequency of the breaches. Longo highlighted the vulnerable position that ANZ placed its customers in and the bank’s repeated failures to address critical issues.

This latest fine adds to a growing list of penalties faced by ANZ, which has been under scrutiny for its handling of various customer-related issues. The bank’s mismanagement of deceased estates is particularly troubling, as it reflects a broader pattern of negligence that has plagued the institution in recent years.

Accountability Measures for Executives

In response to the mounting criticism, ANZ’s CEO, Shayne Elliott, has publicly apologized and indicated that the bank’s board is taking steps to hold relevant executives accountable. This includes “significant” reductions in variable pay for both current and former bankers. Elliott mentioned that over 50 “accountability reviews” have been completed, with more expected in the coming weeks. The specifics of any bonus cuts for top executives will be disclosed in the bank’s annual report, set to be released later this year.

Last year, ANZ reported a cash profit of $6.7 billion, but investor confidence has been shaken. Nearly 40% of ANZ’s shareholders voted against the bank’s remuneration report, signaling widespread dissatisfaction with executive pay practices amid concerns about corporate culture. Former CEO Shayne Elliott forfeited $3.2 million in bonuses, a move that some investors viewed as insufficient given the scale of the issues.

Investor Scrutiny and Expectations

Ed John, executive manager of stewardship at the Australian Council of Superannuation Investors, noted that investors are closely monitoring how ANZ holds its executives accountable this year. “Concerns over risk outcomes, accountability, and bonus awards led a significant proportion of ANZ investors to vote against the company’s remuneration report last year,” John stated.

HESTA, a super fund and ANZ investor, has expressed its desire for a “strong and transparent” response from the bank’s board regarding executive pay. The fund plans to scrutinize the implications of the recent announcements when voting on this year’s remuneration report.

Customer Compensation Efforts

As part of the settlement with ASIC, ANZ has also addressed customer compensation. The bank has paid approximately $10 million for failures related to bonus interest, over $92,000 for issues concerning financial hardship, and $3.8 million for problems associated with deceased accounts. These figures highlight the financial impact of the bank’s mismanagement on its customer base.

In a related matter concerning bond trading, ANZ clarified that ASIC had not alleged any market manipulation. However, the bank has agreed to pay the Australian Office of Financial Management (AOFM) $10 million as a goodwill gesture, acknowledging that it could have communicated better in its role as “duration manager.”

Leadership Changes and Organizational Restructuring

The recent fine comes at a time of significant change within ANZ. CEO Nuno Matos, who took the helm in May, has initiated a series of reforms, including the elimination of 3,500 jobs and a comprehensive restructuring of the organization. Matos has emphasized the need for “measurable improvements” in the bank’s operations, particularly in its retail division, which has faced scrutiny for its handling of non-financial risks.

“The failings outlined are simply not good enough, and they reinforce the case for change,” Matos stated, indicating a commitment to improving the bank’s culture and operational standards.

The Finance Sector Union has also raised concerns, lodging a dispute with the Fair Work Commission regarding the job cuts. The union is seeking clarity for affected workers, highlighting the human cost of the bank’s restructuring efforts.

Conclusion

The $35 million fine imposed on ANZ serves as a stark reminder of the challenges facing the Australian banking sector. As the bank grapples with accountability issues, investor scrutiny, and organizational restructuring, the path forward remains fraught with challenges. The ongoing efforts to improve customer trust and operational integrity will be critical for ANZ as it seeks to restore its reputation in a competitive financial landscape. The coming months will be pivotal in determining whether the bank can effectively implement the necessary changes to regain the confidence of its customers and investors alike.