“They must do better”: Federal Court lifts ANZ fine to $250m

The Federal Court has added $10 million to ANZ’s (ASX: ANZ) record $240 million penalty sought by the nation’s corporate watchdog, taking the bank’s total fine to $250 million over misconduct that impacted the Australian Government, taxpayers and at least 65,000 retail customers.

The news comes three months after the Australian Securities and Investments Commission (ASIC) sought what was already its largest-ever penalty against a single entity, with an additional $10 million added to the fine relating to ANZ’s inaccurate secondary bond market turnover reporting.

Justice Jonathan Beach has ordered ANZ to pay a total of $135 million in penalties for institutional and market misconduct, covering its role in a $14 billion government bond deal and inaccurate reporting of secondary bond market turnover data to the Australian Government. This includes a record $80 million fine for unconscionable conduct.

The court also imposed separate penalties of $40 million for failing to respond to hundreds of customer hardship notices, $40 million for misleading statements about savings interest rates and failing to pay promised rates and $35 million for charging fees to deceased customers without timely refunds or responses to their families.

“ANZ is a critical part of Australia’s banking system and, frankly, they must do better,” ASIC chair Joe Longo said.

“In the bond trading and misreporting matter, ANZ exposed the Australian Government to a significant risk of harm, denied the Government an opportunity to protect itself and the public interest, and mislead the government for nearly two years by overstating bond trading volumes by billions of dollars.

“ASIC estimates ANZ’s trading misconduct cost up to $26 million, reducing funds that could have supported essential public services.”

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

The bank did not disclose that it still had significant volumes to sell before pricing or provide its client an opportunity to consult with ANZ about delaying pricing.  

The court also found the bank misled the government for nearly two years by submitting inflated bond trading turnover figures, overstating its market activity despite internal concerns about the data’s accuracy and awareness that the figures could influence future bond issuance appointments.

In the retail division, it was found that ANZ failed to respond to 488 customers who submitted financial hardship notices between May 2022 and September 2024, with some cases taking two years to respond to customers.

The corporate watchdog notified ANZ of issues with its financial hardship processes in June 2023; however steps taken to fix the issues failed to work consistently, resulting in further failures up until September 2024.

Since then, the bank has completed a remediation program for affected customers, which included customer payments totalling $92,687 and corrections to customer credit reports.

ASIC also found the Melbourne-based bank did not refund fees charged to thousands of dead customers between July 2019 and June 2023. According to ASIC, ANZ did not respond to family members dealing with deceased estates in a timely manner, with the total number of affected customers unknown.

The bank first flagged the issue with systems, controls and processes in 2022, but took over a year to resolve it.

“Tens of thousands of customers suffered from systemic failures across ANZ’s retail bank, which extended to fundamental banking basics like paying the correct interest rate on savings accounts,” ASIC deputy chair Sarah Court said.

“ANZ will also pay for misconduct that made an already difficult time far harder for hundreds of its customers who were experiencing hardship or dealing with the loss of a loved one.

“This outcome sends a clear message to ANZ that it needs to do better by its customers and to all banks that the cost of breaking the law is not an acceptable cost of doing business.”

From 2017 to 2023, ANZ was ordered to pay more than $75 million across seven separate matters that covered issues such as breaching continuous disclosure laws, contravening the Credit Act, failing to provide promised benefits to customers and more.

In a statement published today on the ASX, the bank said it is “focused on significantly improving its management of non-financial risks” and has established a “dedicated program” as part of its Root Cause Remediation Plan.

“In addition, ANZ has established an ASIC Matters Resolution Program within Australia Retail to meet commitments to ASIC to deliver improvements across a number of areas in its Retail division,” the company said.

“Both programs of work will be reviewed by Promontory, an independent expert appointed to review and report on progress and delivery of this work.”

Justice Beach noted that ANZ had “engaged constructively with ASIC in advance of this proceeding being commenced, including by making admissions in relation to its conduct at the earliest available opportunity, acknowledging liability in respect of the admitted contraventions.”

The news comes a day after ANZ was handed a second strike against its remuneration report following its AGM.