ANZ's bond scandal contagion
APRA is hiking ANZ’s capital penalty by 50% over its bond scandal, but even more damning is the regulator's frustration with the bank's slow pace on risk management and cultural issues.
ANZ has been hit with a $250 million capital penalty by the prudential regulator, on top of a $500 million overlay for poor risk management that’s already been sitting there for five years. It’s not a big deal in terms of the bank’s balance sheet — representing just 6 basis points of Common Equity Tier 1 (CET1) capital — and it hasn’t hit the bank’s credit rating.
The real issue is that this is the first major sign of contagion from ANZ’s multiple trading room scandals, which are now infecting regulatory relationships and management priorities.
This substantially increases pressure on senior management — notably CEO Shayne Elliott, head of institutional Mark Whelan, and head of risk Kevin Corbally (both potential CEO candidates) — as well as the board.
The critical line from the Australian Prudential Regulation Authority was this: “APRA has held longstanding concerns with ANZ’s non-financial risk management, and imposed a $500 million operational risk capital add-on to the bank in 2019 to reflect deficiencies in its risk governance.”
