The second day of bank hearings has concluded, ending ANZ’s testimony to the House of Representatives Economics Committee.
What we learned today:
- Chief executive Shayne Elliott said a bank tribunal would be a “good idea”, joining CBA chief executive Ian Narev who expressed openess to the idea.
- The ANZ chief executive revealed the bank is considering whether to stop giving political donations.
- Elliott suggested the bank had an “appetite” to restructure credit card interest rates, including possibly dropping headline rates.
- Two ANZ employees were fired for code-of-conduct breaches, but others whose actions are the subject of an Asic case on rigging the bank bill swap rate have been reinstated because the bank concluded they had done nothing wrong.
- ANZ executives had no difficulty responding to questions about the bank’s role in the aftermath of Timbercorp’s collapse, and denied any link to the 1MDB scandal.
- Elliott accepted that banks had not always met standards and apologised for any harm caused.
Updated
Matt Thistlethwaite has returned to why rate rises are passed on “like rockets” but rate cuts are passed on “like feathers”.
Deputy chief executive, Graham Hodges, says the delay can be caused by determining what the best interest rate is and moving rates at a convenient time to avoid multiple movements rather than a calculation that the bank makes money for every day it delays a rate cut.
Asked by Liberal MP Trevor Evans to address the perception that banks pass on rate rises quicker than rate cuts, ANZ chief executive Shayne Elliott says:
It’s not our intention – I understand a lot of people will be cynical about that.
He says ANZ wants to move rates on a more regular basis, but “people expect them ... shortly after [Reserve Bank] moves, so that’s what we will do”.
Updated
Liberal MP Craig Kelly has questioned why the difference between home loan interest rates and those for small business loans secured by houses has increased over time.
ANZ chief Shayne Elliott denies this reflects lack of competition – and points to the fact the risks on small business loans secured by a house are 10 times greater than a home loan. A regulatory change also increased the amount of capital that needs to be held by 60% relative to a home loan.
Asked if there has been a substantial increase in risk in lending to small business, he replies:
No. This was covered yesterday – it reflects that the risk was incorrectly priced in the past.
Updated
"No link" to 1MDB scandal, Shayne Elliott says
Adam Bandt has quizzed the ANZ executives about its role sitting on the board of Malaysian bank AmBank which held billions in the 1MDB funds at the centre of a global financial scandal.
More than $US1bn is alleged to have flowed into Malaysian prime minister Najib Razak’s bank accounts between January 2011 and April 2013 — much of it from 1MDB.
ANZ chief executive Shayne Elliott says he is satisfied nobody employed by ANZ did anything wrong and the bank was not being investigated by the US Justice Department.
He says the bank has no relationship with 1MDB, or link to what is alleged to have happened.
Updated
Adam Bandt asks about ANZ lending money to Timbercorp and whether there was a condition that other investors put up their houses or other security for their investment.
Deputy chief executive Graham Hodges denies imposing any conditions to control how Timbercorp dealt with its investors except for “normal [conditions] around credit criteria to support a securitisation structure”.
Asked what input ANZ has had in the liquidation process, Hodges says it encouraged establishment of a hardship program.
Bandt asks for all ANZ documents relating to Timbercorp and its liquidator, and will make a more specific request in writing. ANZ takes it on notice.
Updated
After Adam Bandt said ANZ gave $1.65m to the two major parties over 10 years, here’s a quick fact check on their most recent donations:
Adam Bandt's $1.65m figure was for many years. Last annual return shows ANZ gave $100k to Liberals and $80k to ALP. https://t.co/F8HQHSYSh7
— David Crowe (@CroweDM) October 5, 2016
ANZ considering stopping political donations
The Greens MP Adam Bandt has asked how ANZ justifies to its shareholders the fact it gave $1.65m to the Coalition and Labor between 2004 and 2015.
CEO Shayne Elliott responds:
We justify it by saying we are supporting the democratic process in the country.
Elliott denies the bank considers donations an “investment” to achieve outcomes such as avoiding a bank royal commission.
He reveals that there are “discussions at the board level about the role of political donations” and whether to continue making them.
It comes after NAB’s board of directors said it “resolved in May 2016 that the making of any political donations would cease with immediate effect”, according to its policy statement on political donations.
Updated
Shayne Elliott says his salary as chief executive is $2.1m a year plus, $2.1m in short-term and $2.1m in long-term incentives.
The pay of a teller is “about the $50-60,000 mark”.
He says contingent elements of pay are based on performance metrics including people management, financial results and customer satisfaction.
Balance is key to ensure remuneration based on performance is a “healthy driver in their behaviour and doesn’t drive poor outcomes”, he says.
Updated
Deputy chief executive, Graham Hodges, says ANZ will “always provide assistance” when customers say they are experiencing hardship.
He says the customers’ issues are “not just the card itself” but other financial problems, including bills and unexpected events.
“That’s what financial hardship is,” Labor MP Matt Keogh responds. He suggests that given evidence that 90% of customers experience hardship because of unexpected events after getting a card, 10% must have had financial problems when they got the card.
Chief executive Shayne Elliott responds that they may simply have overextended themselves after the bank gave them credit.
Shayne Elliott reveals ANZ’s credit card business makes “a couple of hundred million dollars” out of its total profit of $7.5bn. He accepts that movements in funding costs “unless they are extreme” are not going to have a significant impact on the bank’s profits.
Labor’s Matt Keogh makes a declaration before beginning his questions:
Dollarmites yesterday, today @mattkeogh admits to having one of ANZ's "high interest, high fee" credit cards...
— Shane Wright (@swrightwestoz) October 5, 2016
ANZ has "appetite" to reconsider credit card interest rates
Shayne Elliott says ANZ has an “appetite” to consider restructuring its credit card products.
He concedes the headline interest rate on credit card rates may be too high and could be changed so that there is a “better correlation between pricing and risk”.
Liberal MP Scott Buchholz heralds the concession (without a commitment) as “a good day for Australians”.
Liberal MP Scott Buccholz has challenged the proposition in Shayne Elliott’s opening statement that ANZ wants credit card rates to be “as low as possible”.
The chief executive qualifies that he meant: “as low as possible, competitively”.
Deputy chief executive, Graham Hodges, says the bank has run a trial with 1% of its customers who showed signs of financial hardship to suggest they use different products like a different credit card.
Some were “quite offended” others found it “very helpful”, he said.
Pat Conroy has asked whether the government and Reserve Bank implicitly subsidise the big four banks to the tune of $3.7bn because of the fact they are “too big to fail”.
The deputy chief executive, Graham Hodges, disputes that this constitutes “government support”.
Rather it is the markets and ratings agencies which have a view that Australian banks have a higher credit rating because of a perception that authorities would step in in the event of financial crisis, he says.
Updated
Pat Conroy has asked about ANZ’s return on equity in its credit card business.
Shayne Elliott repeats a similar objection to the CBA’s, that it is “difficult for us to disclose without giving away competitive information”.
He accepts the return on equity for credit cards is higher and “well above” average but says it is “decreasing at a fairly fast rate”.
Updated
The Labor MP Pat Conroy has asked if Shayne Elliott is confident that bank managers don’t put pressure on tellers to refer customers to financial planners after they’d already met their minimum targets.
The chief executive sys: “No, and I’m not necessarily sure that’s a bad thing.”
If we believe having good conversations with specialists is a good thing, then generally more is better.
If staff feel under duress, pressure or are harassed there are avenues for them to discuss that.
Updated
With the ANZ hearings under way, it appears National Australia Bank has now banned all political donations.
NAB’s board of directors says it “resolved in May 2016 that the making of any political donations would cease with immediate effect”, according to its policy statement on political donations.
The document says NAB recognises it has an important role to play in Australia’s political process, and in the development and promotion of policy, but it now believes that can be better achieved by avoiding making political donations altogether.
Therefore, “from May 2016 NAB ceased making political donations at the commonwealth, state and local government level”.
It means the federal Liberal, National and Labor parties will lose a crucial source of political funding:
- In 2014-15, NAB donated $239,686 to the Coalition and $35,600 to Labor
- In 2013-14, it donated $45,570 to the Coalition and $43,500 to Labor
- In 2012-13, it handed $130,010 to the Coalition and $56,850 to Labor
Updated
Asked about the fact the ANZ has referred 45 breach reports to Asic in the last year, Shayne Elliott replies:
We are raising the standards at which we operate ... when we find problems, we report them.
Elliott says there are about 2,000 people in the financial planning division, which the Labor MP Pat Conroy calculates is about one in 40 subject to breach reports.
Updated
'Not enough' of most senior ANZ bank executives are women: Elliott
Shayne Elliott has addressed ANZ’s diversity policy and the Male Champions of Change program.
He replies:
My key objective is that we have an open, transparent, fair and diverse workforce.
Elliott says, of the bank’s senior leadership roles, 40% are held by women but “not enough of the most senior roles”.
The Liberal MP Julia Banks asks if Elliott has read her maiden speech because of her warnings for the need for unconscious-bias training. He has not.
Elliott says the bank has done an “extraordinary amount” of such training but he is not sure at which levels and how far down the bank it has extended.
Updated
The Liberal MP Julia Banks has asked about an “endemic blokey culture” at the bank, including reports of sexist banter and attendance at strip clubs.
Shayne Elliott agrees that “culture is key”.
Asked about two employees sacked over code of conduct violations who then launched unfair dismissal claims exposing this culture, he replies:
It is in their interests to make such allegations. Unfortunately there were a small number of people in the markets division that behaved appallingly. When we found out, we acted immediately.
Updated
Matt Thistlethwaite has asked – same as yesterday – whether the chief executive is prepared to return if the committee asks. Shayne Elliott gives a simple answer: “Yes.”
Updated
Matt Thistlethwaite is quizzing the ANZ executives about league tables for performance of branches.
The bank’s chief executive, Shayne Elliott, says league tables do exist but branches are not just measured on the one metric of sales but also customer feedback and their performance relative to their opportunity (based on where the bank is located).
Updated
While the bank hearings are under way, the prime minister, Malcolm Turnbull, has been on the ABC in Brisbane.
He has been grilled about how this parliamentary inquiry compares with a royal commission, which has subpoena powers, and would have a long period to interrogate witnesses, as opposed to a process where individual committee members face time limits of 10 or 15 minutes.
Turnbull’s response to the time limits was to suggest the committee members recall the bank CEOs “as often as they like”.
The prime minister suggested the committee move to extend the hearings if members didn’t sufficient time had been given to pursue the issues.
The prime minister (who declared himself earlier in the interview as “a businessman, who had gone into politics at the age of 50”, and an “activist”) has told his host, Steve Austin:
I understand the banking industry and I understand what’s wrong with it.
He said the problem with banks was they were insufficiently transparent and accountable to their customers.
That’s why “my government” (as opposed to, as he said, earlier in the interview, “Tony’s government”) had insisted on the parliamentary hearings for the banking CEOs.
Over time this will change the culture of accountability in the banks.
Updated
Shayne Elliott has been quizzed about dealings with the Indian tycoons Pankaj and Radhika Oswal. The bank reached a legal settlement with the pair in a dispute about the winding up and sale of their Australian fertiliser business Burrup Holdings.
Pankaj Oswal allegedly forged documents to show the company had the support of European banks before getting a further $1bn in loans from ANZ.
Elliott explained the bank continued to advance the business credit because claims of forgery were just allegations and Oswal had withdrawn an admission relating to it.
At that stage and it was in the interests of the bank for the project to go ahead, because a “half-finished” fertiliser plant would be “worth nothing”.
Updated
Labor’s Matt Thistlethwaite is asking about ANZ financial planners that have been banned by Asic, including one for 10 years as a result of falsifying documents, and one who is contesting a one-year ban after resigning from the bank.
ANZ’s chief executive, Shayne Elliott, explains:
We have not –to date – specifically advised those clients [that their advisers have been banned]; we are going to. There is a gap in our process – we should [advise their clients].
To check how common it is for financial planners to be banned, take a look at Guardian Australia’s big timeline of banking scandals.
Updated
ANZ chief thinks bank victim tribunal 'a good idea'
Asked about a bank victim redress tribunal, Shayne Elliott says the only consideration is that it must be “simple and effective for customers”.
I think it’s a good idea, we have no issue with a bank tribunal.
Commonwealth Bank’s chief executive, Ian Narev, raised some practical considerations but no objection to this tribunal when asked on Tuesday.
Labor’s financial services spokeswoman, Katy Gallagher, labelled the plan put forward by backbench Coalition MPs for a bank tribunal to grant victims compensation a “stitch-up” designed to avoid a royal commission.
Updated
Shayne Elliott says ANZ will enable customers to transfer data to other banks but “we have to make sure that our customers are protected in the process”.
Asked if ANZ had resisted proposals facilitate portability of accounts to help customers switch banks, Elliott replied:
As an institution we may have, but I haven’t and at this point today we don’t oppose it at all.
CEO defends reinstatement of employees under Bank Bill Swap Rate cloud
Shayne Elliott is explaining what has happened to individuals at the bank whose conduct has been questioned by the Australian Securities and Investments Commission, which has taken action against ANZ for alleged unconscionable conduct and manipulating the Bank Bill Swap Rate between 2010 and 2012.
He said two employees had been fired for violating the banks code of conduct but the rest had been reinstated after initially being stood down.
Because we’ve done our own internal investigations and believe they’ve done nothing wrong.
Elliott said the individuals whose conduct had resulted in Asic legal action against the bank had not been charged as individuals.
Updated
Under questioning from the committee chairman, David Coleman, the ANZ chief executive, Shayne Elliott, has admitted the bank overcharged 400,000 customers fees it was not entitled to.
The bank paid back $29m in fees. He explained the overcharging was caused by a “misinterpretation around terms and conditions of those fees” for moving money between accounts.
Elliott said processes had been improved but he couldn’t say whether there were disciplinary consequences for the mistake.
Updated
Shayne Elliott has addressed failings in ANZ’s farm lending business Landmark, which it acquired in 2010.
He accepted the bank should have worked better with customers, especially when they were already in difficulty.
This was wrong, we were too slow to fix it and we apologised.
On Timbercorp, Elliott said the bank had worked with liquidator to help investors in financial distress but had not recommended people invest in the scheme.
Updated
Shayne Elliott is now addressing the interest rates the ANZ charges.
“We need our lending rates to be as low as possible to attract and retain business,” he said.
He explained the sources of funds are: equity invested by shareholders; deposits, which account for only 50% of funds for borrowing; and international borrowings.
When the RBA changes rates it directly impacts some but not all of our funding costs.
Updated
The chief executive has explained that ANZ made a profit of $7.5bn last year, but said “we’re a very large business assets of $900bn”, and that amounts to less than 1 cent for every dollar the bank holds.
The trend of returns in the last decade at ANZ has decreased from almost 20% down to little over 12%, Elliott said.
Updated
CEO Shayne Elliott starts with an apology for ANZ failings
The ANZ chief executive, Shayne Elliott, has got the mea culpa part of appearing before a parliamentary committee out of the way early, offering this apology in his opening statement:
In truth we’ve not always met the standards we’ve set for ourselves or that the community rightfully expects of us. Each time we fall short we potentially harm a customer or a member of the community, and for that I apologise.
Updated
And we’re off! The ANZ witnesses at the table are: the chief executive, Shayne Elliott, and the deputy chief executive, Graham Hodges.
A reminder or notice for those who weren’t following on Tuesday, the House of Representatives economics committee examining the big four banks is chaired by the Liberal MP David Coleman. Its deputy chair is Labor’s Matt Thistlethwaite.
The other members are: Liberals Craig Kelly, Julia Banks, Scott Buchholz and Trevor Evans; the Nationals’ Kevin Hogan; Green Adam Bandt; and Labor’s Pat Conroy and Matt Keogh.
For those who’d like to watch along a live stream is available here.
Updated
The Australian Bankers’ Association chief executive, Steven Münchenberg, has told ABC News Breakfast on Wednesday that sackings should “absolutely” be part of disciplinary consequences if bank employees have done the wrong thing.
We have acknowledged, as an industry, and we heard that from the CBA boss yesterday, that we have not always lived up to expectations.
Münchenberg defended high credit card rates to cover the risk of debts that aren’t recovered, and said mortgages that track the official cash rate were not popular when they were offered overseas.
On financial advice and conflicts of interest, he said:
We’ve actually announced an independent review of the way in which ... bank staff are paid … and we’ve indeed committed to removing or changing any payments that do lead to poor customer outcomes.
Updated
Timbercorp scandal and credit card fees to feature at ANZ hearing
Welcome to our live blog of day two of parliamentary committee hearings into the big four banks.
On Tuesday the committee heard from the Commonwealth Bank, whose chief executive, Ian Narev, revealed that nobody had been sacked for the CommInsure denial of insurance payout scandals.
Today it is the turn of ANZ, with hearings to run from 9.15 to 12.15 AEDT.
Labor plans to ask ANZ’s chief executive, Shayne Elliott, about the Timbercorp scandal, financial planners banned from the bank and remuneration structures that encouraged staff to offer financial advice unfit for customers.
ANZ is being pursued in the courts – along with NAB and Westpac – by the Australian Securities and Investments Commission over alleged unconscionable conduct and manipulating the Bank Bill Swap Rate between 2010 and 2012.
The Liberal MP Craig Kelly plans to raise credit card fees. In August Kelly told Guardian Australia the high court had weakened consumer protections when it rejected a class action against ANZ for charging late fees of $35.
After the first day of hearings Labor and the Greens made it clear they will continue to push for a full royal commission. Let’s see if they are more satisfied with the answers provided by ANZ.
Comments for the live blog are open – so please contribute your take on proceedings below. You can contact me on Twitter @Paul_Karp.
Updated
