Matos cops another headache from the Elliot years
The Australian government’s debt management agency has ruled out involving ANZ in future bond syndications until it can demonstrate a “material and lasting” improvement in its risk culture – a rare public rebuke following a string of regulatory failures and a record penalty.
Anna Hughes, chief executive of the Australian Office of Financial Management (AOFM), told a Senate inquiry that the agency had effectively sidelined the country’s fourth-largest bank since April 2023.
The move follows revelations that ANZ mishandled a $14 billion sovereign bond issue and misreported trading data to inflate its standing in government debt markets.
“Given the nature of the findings, the AOFM will need to see a demonstrable change in the risk culture of ANZ before it can be considered for future syndications,” Hughes said.
Regulator scrutiny over bond trading
The AOFM’s freeze on ANZ’s role as a lead manager means the bank will not share in lucrative underwriting fees or global investor marketing for Commonwealth bonds.
Although ANZ remains eligible to participate in weekly government bond tenders, it has been excluded from the higher-margin syndications that shape its profile in fixed-income markets.
At the centre of the dispute is ANZ’s conduct during a 2023 issuance where, as duration manager, it was responsible for managing interest rate exposure on behalf of the government.
ASIC later found that ANZ’s trading activity placed downward pressure on bond prices and was not properly disclosed to the AOFM, creating a conflict between the bank’s profit motive and the public interest.
The watchdog’s investigation also uncovered inflated reporting of secondary market bond volumes – data used by the AOFM to assess dealer performance.
ANZ admitted to overstating its trading turnover by tens of billions of dollars and acting unconscionably in its government dealings.
A $240 million reckoning
In September, ANZ agreed to pay penalties totalling $240 million across four separate proceedings, covering both its institutional bond operations and retail banking failings.
The settlement, subject to Federal Court approval, includes a $125 million penalty for its institutional and markets misconduct, of which $80 million represents a record sanction for unconscionable conduct.
ASIC chair Joe Longo said ANZ’s actions demonstrated “an unacceptable disregard for the trust that underpins the banking system”, noting that the behaviour had the potential to reduce funding available to essential public services.
“Banks must have the trust of customers and government,” Longo said. “This outcome shows an unacceptable disregard for that trust that is critical to the banking system.”
Culture overhaul under pressure
Chief executive Nuno Matos (pictured) acknowledged the bank’s systemic failings, telling investors and staff that the misconduct reflected deep-seated deficiencies in its management of non-financial risk.
“The failings outlined are simply not good enough,” Matos said. “It is my expectation that we see measurable improvements across the bank to better protect and care for our customers and to create a more sustainable business.”
The bank has installed a dedicated non-financial risk executive, Les Vance, and launched a program to overhaul governance systems across its retail and institutional units. However, Hughes told senators that the AOFM would not reinstate ANZ to its panel of syndicate managers until cultural reforms were clearly evident and verified.
Implications for financial institutions
The episode underscores the growing regulatory focus on non-financial risk management within Australia’s banking and financial services sectors.
For insurers, asset managers, and corporate treasuries that rely on the integrity of sovereign bond markets, the findings serve as a cautionary tale about the reputational and operational consequences of weak governance.
Although ANZ maintains it did not cause financial loss to taxpayers, ASIC estimated that the government was $26 million worse off due to the bank’s trading activity during the bond pricing process. The AOFM has refused to accept repayment from ANZ until the Federal Court formally signs off on the settlement.
The case represents another blow to ANZ’s long-running efforts to restore regulatory confidence, coming after years of fines for misconduct ranging from responsible lending breaches to misleading credit card disclosures.
It also highlights the intensifying scrutiny on how major banks manage non-financial risks – a theme increasingly resonant for financial institutions across sectors facing similar regulatory headwinds.
