The Australian Prudential (LON:PRU) Regulation Authority (APRA) has issued a warning to ANZ amid ongoing concerns about the bank's culture and "non-financial" risk management problems.
While unveiling its new corporate plant, APRA chair John Lonsdale said the regulator's frustration with ANZ had grown as the bank failed to make sufficient progress over the past five years, particularly following the Banking Royal Commission.
APRA's concerns have been exacerbated by ANZ's handling of a bond trading scandal, leading to a stern reminder regarding the management of non-financial risks, governance, culture, remuneration and accountability.
Lonsdale said, "We've had longstanding concerns on non-financial risk and more recently they’ve been heightened by the developments in the markets area of the bank. What we said to the board and the management very clearly is we want further action on non-financial risks.”
These failures earned ANZ a $250 million capital penalty, on top of a $500 million requirement that remains from previous sanctions following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Furthermore, ASIC has initiated an investigation into ANZ’s involvement in a $14 billion government bond placement, which raised red flags about the bank’s trading activities ahead of the issuance.
Lonsdale also announced that APRA had mandated ANZ to engage an independent third party to thoroughly review the root causes of recent issues and assess risk governance in its markets business. This is intended to provide a clearer picture of the broader implications across the bank.
Amid these developments, ANZ CEO Shayne Elliott acknowledged the possibility of pay cuts for senior executives, aligning with ongoing evaluations by the bank's board to enforce accountability.
This issue will be a key topic at ANZ’s upcoming annual general meeting in Brisbane, where shareholders will vote on the bank's remuneration report.
A significant backlash from shareholders could potentially lead to a major board reshuffle, underlining the gravity of the situation faced by the bank.