ANZ NZ says David Hisco, its CEO of almost 9 years, is leaving due to 'ongoing health issues' and following an internal review of personal expenses; issues over tens of thousands of dollars of chauffeured car usage and wine storage

ANZ NZ says David Hisco, its CEO of almost 9 years, is leaving due to 'ongoing health issues' and following an internal review of personal expenses; issues over tens of thousands of dollars of chauffeured car usage and wine storage
Antonia Watson (left), and John Key speak to media about David Hisco's ANZ departure.

By Gareth Vaughan

David Hisco, ANZ New Zealand's CEO since 2010, is leaving the bank through what chairman John Key describes as mutual agreement, after his expensing to the bank of chauffeur driven cars for personal use and wine storage dating back nine years came to light.

At a press conference in Auckland on Monday Key revealed there had been a dispute with Hisco over tens of thousands of dollars worth of chauffeured car usage and wine storage charged to the bank via direct chargeback invoicing. This was exposed by a review implemented by Shayne Elliott, CEO of ANZ NZ's Australian parent the ANZ Banking Group. Key said he had been alerted three months ago.

Monday's revelations come after ANZ NZ announced in late May that Hisco had taken extended sick leave with Antonia Watson, the bank's managing director for retail and business banking, stepping in as acting CEO. Key says Hisco genuinely has some health issues, but wouldn't elaborate on them. They are separate, but possibly impacted, by the dispute over expenses, adds Key.

"Some of these health issues he had been working through and they had been there for quite some time. I've no doubt that the stress of this situation added to this," Key says.

The wine storage was in Australia, the cars were primarily used in New Zealand for personal purposes, Key says.

"He [Hisco] believed he had authority to do that for reasons of being an ex-pat and... discussions he'd had with executives in Australia. He believes he had the authority to do that, we accept that but we don't accept the way they were recorded in our accounts," says Key.

"We're not requiring him to pay the money back. The reason for that is that David is adamant that he had authority for the expenditure."

"What is at the heart of this issue is the way that expenditure was recognised... In our view it was mischaracterised or there's a lack of transparency...He has an explanation for the way that expenditure was recognised in the books," Key says.

"We parted company and it was mutual."

On departure Key says Hisco gets in the order of $2 million through one year's salary and accrued long service leave. However, he has forfeited $6.4 million of equity rights. Key noted Hisco had expensed the cars and storage through direct chargeback invoicing, suggesting if it had been done via his credit card it would have been picked up earlier.

ANZ NZ is comfortably New Zealand's biggest bank. As of March 31, it had total assets of $164.952 billion, total liabilities of $153.224 billion, and gross loans of $132.275 billion. Last year the bank's annual profit was a shade under $2 billion.

'We are disappointed David is leaving ANZ under such circumstances'

Key says conduct expectations should be the same for both the most senior and the most junior ANZ NZ staff. Key says Hisco is free to talk about his departure, with no deal between him and ANZ preventing him from doing so.

"Well David has been dealing with some medical issues, the ANZ New Zealand board was concerned about how he was characterising certain expenses and transactions following an internal review of personal expenses," Key says.

"Specifically this related to the long-term personal use of corporate chauffeured cars, as well as charging the company for storage without proper disclosures. The amounts in dispute are in the tens of thousands of dollars. We are disappointed David is leaving ANZ under such circumstances.

"However his departure demonstrates that when people do not do the right thing we hold them to account no matter their status or position in the organisation. This culture of strong values is one I and the ANZ New Zealand board believe is important and why we have been open with the regulator, our customers and the public about this matter," says Key. 

"David will, like anyone else, receive his contractual and statutory entitlements. This equates to 12 months notice and the leave he has already accrued. As a result of this decision David has also forfeited his rights to around $6.4 million in equity."

In a statement issued earlier on Monday, ANZ said it "today confirmed the appointment of Antonia Watson as Acting CEO of ANZ New Zealand, following the departure of David Hisco".

"While Mr Hisco does not accept all of the concerns raised by the Board, he accepts accountability given his leadership position and agrees the characterisation of the expenses falls short of the standards required."

Monday's announcement comes after ANZ NZ announced in late May that Hisco had taken extended sick leave with Watson stepping in as acting CEO.

“We are fortunate to have an experienced executive in Antonia Watson to step in while we conduct a search for a replacement. Antonia’s extensive banking career has her well placed to help ANZ manage through this transition,” Key says, adding that he hopes Watson applies to be permanent CEO.

"Mr Hisco will receive his contracted and statutory entitlements to notice and untaken leave, with all unvested equity to forfeit. The Reserve Bank of New Zealand and Australian Prudential Regulation Authority have been notified of the changes and are being provided all requisite filings."

ANZ's 2018 annual report shows (page 54-55) that in the year to September 2018 Hisco was on a A$1,170,703 fixed salary. On top of this he received A$644,397 in cash as 'variable remuneration' and A$864,274 of 'deferred variable remuneration', which vested during the year, giving a total remuneration received during the year of A$2,679,384. Hisco was paid in New Zealand dollars, with the amounts converted into Australian dollars.

National Bank brand successfully disposed of, recent capital-related RBNZ censure

Hisco's appointment as ANZ NZ CEO was announced in September 2010, with him succeeding Jenny Fagg. An Australian, he had previously been managing director of ANZ NZ subsidiary UDC Finance between 1998 and 2000. Hisco, 55, has also been a member of Australian parent the ANZ Banking Group's group executive committee with responsibility for Asia wealth, Pacific, and international retail.

An undoubted high-point of Hisco's time as CEO of ANZ NZ was the successful culling of the National Bank brand, and moving ANZ onto National Bank's core 'Systematics' banking platform in 2012. The two moves effectively unified the two banks nine years after the ANZ Banking Group bought the National Bank from Britain's Lloyds TSB for A$4.915 billion plus a dividend of NZ$575 million paid from National Bank's retained earnings. Hisco also shifted ANZ NZ's headquarters to Auckland from Wellington, and aggressively took on ASB in the City of Sails.

A low-point was the recent censure the bank received from the Reserve Bank and revoking of ANZ NZ’s accreditation to model its own capital requirements for operational risk, citing a persistent failure in controls and the director attestation process at the country’s biggest bank that dates back five years.

The Reserve Bank is also making ANZ NZ increase its risk weighted assets by more than $10 billion after reviewing its capital adequacy on farm lending and residential mortgage lending. Combined, the two capital-related run-ins with the Reserve Bank mean ANZ NZ's minimum regulatory capital requirment rises by more than $1 billion.

For her part Watson says it's a day of "shock and disappointment" for ANZ NZ's 7,000 staff at and the 1200 staff across ANZ Pacific.

"David Hisco was well liked as a leader," Watson says.

"But the New Zealand leadership team and I stand firmly behind Sir John and the ANZ New Zealand board in believing that David has not met the standards and expectations of the organisation. We are all united in the belief that regardless of who you are in ANZ, if you're a young teller on your first day in the job or a CEO with 39 years experience, the standards are the same. Today many of us feel let down. And to be fair to David he accepts as a leader he has to be accountable," says Watson.

David Hisco by Jacky Carpenter.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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83 Comments

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32
up

I’m starting to feel a bit sick too, perhaps it’s being caused by too much worrying about the behaviours of our banking sector.

Never you fear Joe, you can sleep tight. Our banking association has said we are not like Ozzie banks and there is no need for a royal commission like they had which equated bankers similar to real estate agents or grave diggers.

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj...

"But the New Zealand banking industry body has been quick to defend the local market.

New Zealand Bankers' Association chief executive Karen Scott-Howman said: "New Zealand's regulatory environment is very different from that in Australia, and the Australian-owned banks operating in New Zealand are separately governed and regulated under New Zealand law."

Thanks Smalltown, that’s good to know. I feel better already.

That’s a bit rough on grave diggers...what did they ever do to you?

Reminds me of "gardening" leave.

Reminds me of George Best.

‘I spent a lot of money on booze, birds and fast cars. The rest I just squandered.’

12
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Are the reasons given possibly just a misdirection from the capitalisation ratio issues at ANZ? I don't imagine ANZ want that discussed any more.

23
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If they wanted a quiet departure, they could have just gone with his health. The expenses issue must be so bad that they have to report it and can't cover it up.

14
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People were wondering about the real reason for leaving. I wasn't going to speculate but it's expenses. How is it that every ceo position whether public or private people keep clocking up unrelated expenses? It's not like they aren't paid enough.

This is what I find weird, who mucks around with expenses when they earn that much?

12
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Getting paid $3.1m per year puts you in the category of working poor and having to go to the food bank so you can eat. You are right the expenses he intentionally miscategorised has now cost him $6.4m in options. Was it worth it? No, but he did it anyway.

I wonder if he was charging up movies at his hotel as well?

Exactly. He came from Australia where this was obviously the norm.
Now what is called the Day of the Long knifes are out and Hisco has to be moved on.
What else has to be revealed??

But no matter what theft is still theft.

Time to start using Somes Island again perhaps?

23
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It does make you worry for banks risk management practices. If the CEO is prepared to claim a few thousand dollars in extra expenses which puts his $3m salary at risk then what risks are they prepared to take with your money to make a profit?

Another possibility is that he had no idea what he was doing. So the bank may be taking risks because of an ignorant or unqualified ceo. Perhaps the board is being unintentionally misled on other matters. You need capable people in senior positions.

They do say that you can get promoted to your level of incompetence, ie. the more incompetent you are the higher you go. There are some real plonkers in many high positions...it’s not just politicians that are guilty.

Ludwig,

If memory serves,that's Peter's Principle at work.

ANZ has the largest derivatives exposure of all the banks. 9.2 billion dollars of assets on the balance sheet according to the RBNZ dashboard.

The Answer is simple . There has been a changing of the Guard in Australia. Even earning excessive profits has not protected him. So he has been made a scapegoat thru claiming expenses that are now unacceptable. What is really going on in the Banking Industry that they are scared will be revealed
ANZ would not be the only culprits. BNZ making large aqusational noises. Me smells a race thru the whole system..

That number is pitifully small compared to recent past exposures:

Derivatives contracts held by New Zealand's major banks surged in value by 38.5% in the year to September 30, 2015.

A chart in KPMG's annual Financial Institutions Performance Survey shows derivatives contracts held by the country's big five banks rose by $770.3 billion, or 38.5%, to to $2.77 trillion. Interest rate contracts comprised the lion's share, jumping 48% to $2.34 trillion.

At $1.2 trillion, ANZ holds just over half all the interest rate contracts with a big annual jump in interest rate swap contracts recorded year-on-year. ANZ also holds the biggest slice of the combined $430.9 billion of exchange rate contracts, although ANZ's share dropped 6% to $209.713 billion.

All up, ANZ NZ had $1.4 trillion worth of derivatives held for trading as of September 30 last year, which was the end of the bank's financial year.

Link

Audaxes
Good to have you on board. But I do need to mention a few rules of NZ news websites.

Off balance sheet activities and counter party risks are not something that we like to discuss in NZ, even if the derivatives market at the end of 2015 equated to almost 10 times NZ GDP. There is nothing to see here and these little magical banking thingies don’t need to be disclosed on the balance sheets and haven’t been in Oz or NZ for some time now. They’re just little banky things that are rarely leveraged trades.

Can I make the suggestion so that this canary stays in the dark hole of the coal mine that,

‘They’re not the droids you’re looking for, you can go about your business, move along’

But from me, we’ll done for bringing it up.

I'm flabbergasted. What on earth is the point of having a financial stability dashboard if all the riskiest stuff, the stuff that could really blow up the bank, if that stuff is not even on the balance sheet.

Thanks for the link Auaxes, but I must be missing something. Why does the RBNZ bank financial strength dashboard show far fewer derivatives assets on the balance sheet than the KPMG report suggests? I'd quite like to know if these banks are holding leveraged bets on each-others securitised mortgage portfilios.

18
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They're all crooks.

Preside over a housing bubble, take some money you're not entitled to (despite being paid a fortune) and then leave... disgraceful.

15
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And then there's this. No explanation but reading between the lines.......
https://www.stuff.co.nz/business/industries/110524164/the-disappearing-a...

If all bank officials become subject to Reserve Bank of New Zealand non-objection then there will be a massive cull starting with you know who.

ANZ New Zealand Chairman John Key says it's disappointing Hisco is leaving ANZ under such circumstances after such a long career, his departure is "the right one in these circumstances given the expectations we have of all our people, no matter how senior or junior."

Pot /kettle/black

So when will shareholders (part owners) be informed specifically what “concern about the characterisation of certain transactions” means?

I've located a video of the expenses. Hisco put t and a under travel and expenses.
https://www.youtube.com/watch?v=rC9uDbq6WWE

13
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Smell from banks beginning to deteriorate.

12
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Thank god JK’s at the helm. ‘Tens of thousands’ at stake when the remuneration package is well over 3mill? Normally in these cases, the disputed amount is simply repaid unless there is an underlying conflict or the need for a scapegoat. Two and two are making a lot more than five here.

David apparently insists he had the right to claim the expenses, thus it sounds like he's refusing to pay it back and so the board decided he had to leave. Presumably this means he was fired.

12
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A banks culture starts with the CEO... be worried.

DP

16
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Are you all ready for the ‘loan’ reporting scandal?
One mortgage split into two loans to satisfy the banks reporting on LTV’s to the RBNZ. It’s just a matter of time before it comes out. The RBNZ are now aware that the numbers of loans don’t match the transaction numbers. Particularly in the First home buyer calculations. Interesting times ahead.

Surely they wouldn't be that stupid in this day and age? Structuring loans to meet the LTV requirements ought to be trivially easy to uncover.

Loan to Value restriction never have been based on numbers. Perhaps read the relevant legislation before this repeated commentary.

P S now come on don't give the game away please

You can't be right about this Joe.

I'll be astounded if you are.

Jk has explained what went down.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

"Key said the issue does not involve how much money was spent but rather how that spend was characterised in the records.
Key said the board was first notified of anomalies around three months ago and decided to take action after an internal review.
He said the bank would not be pursuing Hisco to pay back the money for the anomalies.
However, Hisco would be forfeiting around $6 million in equity holdings he held at the bank."

$6 million. Wow. Why did it take 3 months to be acted on?

Hard not to see this as a sacrificial from the recent problem with operational risk capital requirements.

20
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Didn’t a former BNZ chairman call for both Sir John Key and CEO Hisco to resign recently over the capital requirements breach? And they are firing Hisco over thousands in inappropriate expenses? Seems like there might be more to this story later on...

11
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And its not even clear whether these expenses were inappropriate. Mr Key looking for a scapegoat in my view.

All it takes is for one thing to be investigated, then it leads to other issues to investigate.

Supposedly it was the Reserve Bank NZ that found out their risk model was wrong, whereas this was an expenses review undertaken by ANZ's Australian parent, no doubt as a result of the RBA scrutiny of banks over the ditch.

1) RBNZ finds the IRB model is wrong
2) ANZ investigates internally how this happened
3) Scape goat prepared
4) Thrown under bus

Look forward to it.

FYI, this story has been updated, and will be updated further, with detail from John Key's press conference.

Good guy Bad guy....

10
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Well Key isn't holding back in putting himself forward as the guardian of transparency and accountability. Interesting timing considering his own responsibility has been called into question.

give us a break mate. J K lilly white ( no pun intended)

Maybe David had a scruples attack.. but I am unclear as to why they would push him under the bus? perhaps he knows too much..

CB
They would not be pushing him under the bus as they have done if he knows too much. If he knows too much, they would be looking to have an amicable departure with confidentiality clauses (read gagging) rather than this which clearly allows Hisco to speak out. There is a lot, lot more to this than $10,000s.
Neither Hisco nor Key will be on each other's Christmas card list this year.

the word "entitled" comes to mind. And these people look after our money.

Ah No. Its their money, they're entitled. OBR

I agree with comments above that not all has been explained.
You have a now ex-CEO forfeiting his job, $6 million in equities and a reputation in shatters. Hisco has lost very, very heavily here. ANZ/Key's statements as to the announcement are very damming and belittling of Hisco.
However, ANZ/Key's acknowledgement that there was dispute as to whether verbal approval was given for such expenditure, it would seem that this leaves Hisco very good opportunity to challenge his dismissal.
I very much doubt that ANZ would be leaving themselves readily open to any such challenge. Companies tend to want to avoid challenges over employment issues.
In normal circumstances, for such a position involving a grey areas over a sum of just $10,000s, one would expect a negotiated settlement, resignation for "health reasons", and seemingly amicable parting of the ways. Watson's comments in support of Hisco seemed rather hollow and one is left with the very clear impression that this parting is not amicably mutual as ANZ said.
Is there more?
If what ANZ/Key say is correct, there would seem grounds for more from Hisco to take legal action.
If there is not anything from Hisco, then there was more than $10,000s of "grey area" contested spending as stated.
Either way, there is or will be a lot more to this than presented by ANZ/Key.

Making a big display of Hiscos' departure for the public, and then in a few months his lawyer will quietly negotiate a settlement full of gag orders for Unfair dismissal *cough*being the fall guy*cough*?

Hi Pragmatist

Have you ever heard of the name Adoboli?

This chap made tens of millions for a Swiss bank.. a good friend of mine got fired from this bank’s back office team after raising concerns about activities some 18 months before what happened to be the big event.
Since 2010 my friend has never discussed with me his removal from the firm or indeed why it happened, and he’s never worked for a bank again...to be fair, it appears that he’s not needed to work at all since he got the boot.

Washing dirty linen in public raises the stink level. But is this a diversion ?
May be RBA/RBNZ will get involved at some stage to find more ?

Go smokey Go

.

Key saves ANZ !

Ocelot, I think you right. A distraction from ANZ capital adequacy indiscretions. When JK was asked if he would resign from the ANZ Chair position, he replied, "ANZ is not the only bank to have erred with the regulations/regulator". Perhaps Mr. Hisco can use the same defence.... " I am not the only man to have mis-used the expense budget".
Food for thought. (teehee)

13
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This doesn’t add up, bit like a lot other stuff at the bank. Huge PR disaster over a trifling amount of money and Hisco is a head office man with a lot of company clout, probably more than John Key. This didn’t need to come out and the fact that it was willingly revealed suggests there’s a stinking pile of dead fish somewhere. Lot more to see here folks, So don’t move on. Key will be next, I think. My guess is something to do with money laundering.

uh oh murky now turns out Jk sold hisco his holiday home,
nothing in that BUT he can not remember if he was on the ANZ board at the time
if not then that is one hell of a coincidence,
if so why not just come out and say he heard I was selling/ I mentioned it and he wanted to buy and we came up with a price?

He has a terrible memory for such a smart guy... remember he couldn't remember his personal views on the Springbok Tour in '81...slippery doesn't come close.

Hunts with the hounds and runs with the foxes...still, bigger fool me - I voted for him twice

Fool me once, shame on you; fool me twice, shame on me.
Yeah, he suckered me twice as well. In the end there was just too much pony tail fondling for for my liking.

I was suckered twice as well. The shame is ongoing.

I don't feel so bad now, he only fooled me once:)

lol yeah I got fooled once by him too, then that credibility problem started to rear it's head.

The Smiling Assassin strikes again ?

He sure cut Hisco loose quickly compared to the number of last, last, last chances he gave Judith Minister for Oravida.

or is it now "the dark knight"?

11
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Ha ah..mr key spinning it. If those are the real reasons I'd be dumb founded. Does he think all he needs to do is convince mike hoskin and all will be well?

Whoops...
Guess which ex prime minister of NZ gave his KEYS of his beach house (in exchange for cash one would expect) to Hisco???
President of Property

This kind of reminds me of Lord Black. He too was disgraced over a relatively small amount given his salary - he too said he did nothing wrong. The difference was that it was in the US so went to prison. He has recently received a presidential pardon.

From the herald "Soon after Hisco departed on sick leave. Key did not comment publicly about the breach.
Today he described them "as very separate issues".
He also attributed blame for the breach to an error by a junior staffer".

Looks like he and Simon have been using the same training material on 'how to dodge a bullet'.

keep to the point Rastus. Don't bring old politics into it.

It's all sounding very crooked

Well thats NZ inc for you. If Orr has any intestinal fortitude he might be reconsidering the need for a royal commission along the lines of Australia's but he wont. Theres too much of a smalltown nature about NZ where everyone has links with each other, be it upbringing, uni etc.
Look at the Wine Box, Erebus, David Bain case, Finance companies, JKs time in politics, etc etc for how this will play out

You remind me of Donald Trump. Looking under the carpet you find all sorts of dirty laundry

Yeah. We are masters of 'Crony capitalism'

As I was saying - smalltown NZ, totally inbred.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12241963

Ahhh. There's that feeling up my spine. I only met John Key one time and it struck me by his disposition he is an absolutely ruthless person. Here he is living up to his pre politics corporate reputation...I sense there is a lot more to this story than meets the eye. Btw...I never voted for him...

They will need a replacement-someone who has extensive knowledge of the banking system and would definitely be available-Fred 'the shred' Goodwin. Now,who could question his probity?