ANZ faces $125 million fine over misleading the AOFM in a $14 billion government bond issuance
ANZ Bank has admitted to misleading the Australian government in a $14 billion bond deal and has agreed to pay a penalty of $125 million for its actions.
The bank incorrectly reported its bond trading data to the government by overstating the volumes by tens of billions of dollars over almost two years. The bank also admitted to acting unconsciously and failing to meet its obligations as an Australian financial services licensee.
The fine was part of a broader regulatory action against the bank, in which the Australian Securities and Investments Commission (ASIC) also took action over several issues concerning retail clients, including matters related to hardship, misleading statements about interest rates on savings accounts and failing to refund fees charged to deceased customers.
There are fundamental issues with ANZ’s risk and compliance culture that require the Board’s and executives’ urgent attention
In total, ANZ is facing $240 million in fines. The Court will now determine whether the penalties are appropriate for each matter.
“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,” Joe Longo, Chair of ASIC, said.
“Banks must have the trust of customers and government. This outcome shows an unacceptable disregard for that trust that is critical to the banking system.
“There are fundamental issues with ANZ’s risk and compliance culture that require the Board’s and executives’ urgent attention,” he said.
A $14bn Government Bond Issuance Gone Wrong
In April 2023, ANZ helped the Australian Office of Financial Management (AOFM) with the issuance of a 10-year government bond, but failed to take the appropriate measures to limit the market impact of the placement.
Instead of trading gradually throughout the day to limit impact, ANZ sold a significant volume of 10-year Australian bond futures around the time of pricing, which placed downward pressure on the bond price.
ASIC said ANZ was aware of the risk to the government, yet the bank did not disclose it still had significant volumes to sell before pricing. ANZ also did not provide the government with an opportunity to consult about delaying pricing and, thereby, denied the government an opportunity to protect itself and the public interest.
When the government later asked what happened, ANZ’s reports were misleading or deceptive, the regulator said.
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
ASIC also alleges ANZ misled the government about its trading turnover for nearly two years. This data helps the government select dealers for bond issuances.
ANZ’s inflated figures made it appear more active than it was.
Court documents show that among ASIC’s allegations related to inaccurate reporting include a period from September 2021 to June 2023, when there were 23 occasions where ANZ provided the AOFM with inaccurate data on volumes of trading, the counterparties and geographic locations involved.
“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.
“When public funds are put at risk, every Australian pays the price,” Longo said.
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