SYDNEY: Leadership shortcomings and a problematic culture that didn’t always keep bad behaviour in check were highlighted among the root causes of risk management flaws at ANZ Group Holdings Ltd, an independent review shows.
Oliver Wyman’s five-month investigation centred on the Australian bank’s markets unit, where it found a culture that wasn’t always strong enough to compel staff to act in line with expected behaviour.
ANZ’s board will require Mark Whelan, the firm’s institutional bank chief, to oversee the implementation of the 19 recommendations and 53 sub-recommendations of the review.
The assessment also indicated risk culture problems might not be limited to the markets division and recommended the bank do a further investigation to examine whether similar issues are also present in other parts of the firm.
With new chief executive officer (CEO) Nuno Matos due to take the helm next month, the scathing report underscored the challenges ahead for the former HSBC Holdings Plc wealth chief.
The banking regulator, the Australian Prudential Regulation Authority (Apra), yesterday increased its capital add-on for ANZ to A$1bil (US$628mil) from A$750mil following the findings of the Oliver Wyman report, saying long-standing risk management flaws remain.
ANZ said it will soon appoint an independent reviewer to identify root causes and behavioural drivers of shortcomings in the firm’s non-financial risk management practices and risk culture.
Outgoing CEO Shayne Elliott labelled Apra’s fresh constraints on the bank “at the harsher end of reactions”, even as he admitted that the bank should have done more sooner.
The prudential regulator’s penalty on the bank “feels like a new standard”, of what merits such enforcement, Elliott told Bloomberg in an interview from Melbourne.
“I should have done more at the start,” Elliott said, but added from the bank’s perspective, Apra “have increased their expectations. We can argue whether that’s right, wrong or unfair, whatever, but they’ve shifted the goalposts”, he said.
The report noted the allegations of multiple instances of unacceptable workplace conduct in ANZ’s markets business in recent years, relating to a small number of individuals, including bullying and alcohol and substance abuse, saying there was no evidence of widespread or systemic misconduct.
It also flagged limitations in the supporting infrastructure that allowed misconduct to emerge and persist.
This ultimately resulted in a loss of trust among staff, the report said.
The independent review took place between October 2024 and March 2025, and included interviews with more than 110 staff.
A significant number of employees within ANZ’s markets division in Sydney and London, across various roles and seniority levels, said that they had raised concerns to management about the observed inappropriate workplace behaviour, the report said. Staff believed leaders didn’t take decisive action to address the reported misconduct, allowing it to persist, according to the report.
Key recommendations included clarifying and reinforcing leadership standards in the markets unit, as well as a higher level of front office supervision.
That will ensure expectations for supervisors are clearly articulated, reinforced and monitored, the report said.
Other recommendations focus on sharing lessons learnt and improving reporting capabilities at the bank, it said.
The bank appointed Mark Evans as head of non-financial risk programme delivery, reporting directly to the CEO.
ANZ also added a new general manager responsible for operational risk, Dan Wong, who will report to chief risk officer Kevin Corbally.
Apra had “long-standing concerns over ANZ’s non-financial risk management practices and risk culture,” chair John Lonsdale said a statement yesterday.
“These included weaknesses in ANZ’s operational risk and compliance management and a reactive risk culture.”
Matos takes over from Elliott next month. Elliott has taken a multi-million-dollar hit to his compensation in part due to mishaps in the bank’s markets division and the firm is also facing a regulatory probe into bond trading.
“We are disappointed that we have not met Apra’s expectations about how the bank manages non-financial risk and its non-financial risk culture,” ANZ chair Paul O’Sullivan said in a separate statement.
“We now have a clear roadmap for addressing the concerns.”
The regulator said it also accepted a court enforceable undertaking from ANZ to address “ongoing weaknesses in the bank’s non-financial risk management practices and risk culture”.
“Both the board and management will bring a clear-eyed focus to completing this work, seeking to have the capital overlay removed as quickly as possible,” O’Sullivan said.
Australia’s banking regulator raised the lender’s capital add-on to A$1bil, which in total cuts 10 to 15 basis points from return on equity.
“We think ANZ’s profit will miss in financial 2025 on margins that could fall seven basis points this year,” said senior industry analyst Matt Ingram.
“The bank also faces credit headwinds as insolvencies soar and mortgage credit weakens.” — Bloomberg
