As the bad news continues flowing out of ANZ New Zealand, we seek answers to some pertinent questions

As the bad news continues flowing out of ANZ New Zealand, we seek answers to some pertinent questions

By Gareth Vaughan

The bad news continues flowing out of ANZ New Zealand in what is rapidly turning into an annus horribilis for the country's biggest bank.

The latest chapter - at the time of writing - is a Stuff report citing an ex-ANZ NZ manager claiming staff were sacked for deleting email addresses from customer files because they didn't want to get bad feedback about their service. ANZ NZ says seven staff lost their jobs over this issue.

The bad news began on a quiet Friday afternoon on May 17. That's when the Reserve Bank revealed it had revoked ANZ NZ’s accreditation to model its own capital requirements for operational risk, citing a persistent failure in both controls and ANZ NZ's director attestation process dating back five years. This was followed in late May by the news ANZ NZ's CEO since 2010, David Hisco, had gone on extended sick leave.

Next up on June 17 was news Hisco was leaving the bank, allegedly by mutual agreement, after his expensing to the bank of chauffeur driven cars for personal use and wine storage dating back nine years had come to light. At the time I mulled whether there was more to the departure than the bank was claiming.

Subsequently a series of stories by journalist Kate MacNamara have appeared on Stuff. These included details of Hisco's broader expenses over his tenure as ANZ NZ CEO, details of a tawdry house purchase by Hisco's wife from ANZ, with the house apparently having a maintenance bill of more than $100,000 a year, topped off by suggestions ANZ staff tried to blow the whistle on Hisco's expenses as long ago as 2014.

The Financial Markets Authority is now looking at the house deal from a related party transactions perspective. And on June 24 the Reserve Bank announced ANZ NZ's regulatory capital modelling and director attestation process were to be independently reviewed.

I put some questions to ANZ NZ late last week off the back of recent developments. I asked for an individual response to each question. The questions are below.

1) Were John Key's comments at the media briefing that David Hisco was leaving ANZ over ongoing health issues and the mis-characterisation of wine storage and chauffeur driven car expenses the full extent of the reasons why he has left the bank? 

2) If David Hisco was claiming personal expenses as business expenses for nine years, or thereabouts, why did ANZ's internal auditing process not pick this up? Or if it did, when did it do so?

3) Does ANZ NZ have a systemic problem with the misuse of expenses by its executives?

4) How concerned is ANZ's hierarchy that a disgruntled employee(s) may be leaking this information to the media, and that there may be more to come?

5) In announcing David Hisco's departure ANZ said his misuse of expenses had been exposed by a review implemented by ANZ Group CEO Shayne Elliott. Was this review implemented after a tip off by a whistle-blower or informant at ANZ NZ? 

6) Were other ANZ NZ executives' expenses checked in this review, or was it just done at group level?

7) The issues with David Hisco's expenses and his departure closely follow the RBNZ censure and revoking of ANZ NZ’s accreditation to model its own capital requirements for operational risk due to a persistent failure in controls and the director attestation process. Are changes to ANZ NZ's board likely as a result of these two issues (the RBNZ censure and the Hisco expenses issue)?

8) What is ANZ's message to a) customers, and b) staff off the back of these two recent bad pieces of publicity?

And below is ANZ NZ's response in full.

 Most of what you’re after was discussed at the press conference, so you might want to refer back to that. We’ve already said everything we can say on the house. On the board, Sir John has indicated already that Tony Carter is due to retire next year. On the whistle-blower stuff, there are laws in Australia and New Zealand which are designed to protect details of a whistle-blower case and which restrict what we can say. There are criminal sanctions if we were to breach such laws.

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33 Comments

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24
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You want answers to what's caused the problems at ANZ.....?
Here's mine.
John Key.

A fish rots from the top.

Any business thats takes on an ex all black or politician becomes an immediate short.

Idiotic comment. He has been on the board less than a year.

Ordinarily I would agree with you re the comment about ex-All blacks and politicians however given John Key had previously worked for significantly larger and more complex banks than ANZ I think he is well qualified to be on the board.

Agree, it's not a good comment. This was probably present in ANZ for quite some time - the bank seems to have an attitude of riding its massive market share, rather than refining its internal processes as well as its offerings to customers. I love a good day of reckoning for large corporates that have a bad attitude.

Smalltown are you saying John Key is a fish ?
At least John Key is actually ultra intelligent albeit couldn’t formulate a strategy for NZ in 9 long years apart from opening the gates wide to immigration
Another National Prime Minister was
a poorly educated cow cocky who became e leader of the National Party became Prime Minister & then after retiring from politics got handed a top post requiring little work & a huge salary
Heck that’s the NZ political tradition for all time

31
up

I’m an ANZ customer, but if they want to leave NZ they should just leave! I’m sure their competition will be happy to divvy up their customers amongst themselves.

They think because they’re the biggest bank in NZ they can just push us around? Please. Back up your threats or STFU would be my response.

What a PR cockup.

16
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David Hisco must be struggling hard to hide his smile at the PR fiasco and the continuing spotlight on ANZ.

A PR fiasco where the ANZ seems to have funneled a $3m benefit in his direction without informing the IRD - he might be able to suppress a smile.

Here's David Hisco from early May on ANZ potentially floating ANZ NZ on the sharemarket or selling out of NZ;

 "If you work it out you find it's actually quite difficult for that to occur. The [share] market wouldn't actually be able to absorb it so you couldn't float it in New Zealand. So then it comes down to whether there's somebody else out there in the world that wants to buy a bank in New Zealand. And last time I looked [with] National Bank, Lloyds wanted to get out and they sold it to us. I don't know what's going on on the other side of the world these days but everyone seems to have their own problems. So I'm not sure how practical that really is."

https://www.interest.co.nz/banking/99458/anz-nz-ceo-david-hisco-suggests-rbnzs-capital-proposals-would-saddle-new-zealanders

"You're stuck with me. You're ugly. No one else will want you!"

Kiwibank is so much better

15
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It’s concerning because this could just be the small stuff, with MUCH bigger stuff to be revealed later - to do with lending practices during what turns out to have been a property bubble. Let’s hope not! As Warren Buffett said, it’s only when the tide goes out we see who’s been swimming naked.

Let's not forget Warren Buffett's Berkshire Hathaway needed bail-out-money during the GFC and the old goat hasn't been making the best investment decisions of late. But yes, good point.

I like it when people start criticising and questioning Buffetts recent investment decisions, as that almost always means he’s soon to be proven correct yet again, and there’s a great buying opportunity around the corner as well. I think he’s going to be proven right about US financial stocks in particular.

at least warren buffet admits to his mistakes I have never heard JK admit to anything he has said or done wrong,
that for me tells a lot about the character of each man
one says what he means and means what he says the other you cant trust a word out of his mouth
https://www.cnbc.com/2017/12/15/warren-buffetts-failures-15-investing-mi...
http://www.mortgagebrokersauckland.co.nz/john-key-denies-house-price-inf...

Well, at the end of the day...things are um, things have actually been pretty good. Nothing really to worry about here. Trust me (insert best attempt at a Grinch grin)

I like your optimism. ANZ believe they have the clout to push around the RBNZ re reserve requirements and you hope they will respond to a query from a journo about the CEOs expenses ;)

I've been concerned about ANZ for the past 3 years. Who's even driving this clown car now days?

Though I don't hold deposits with ANZ, they do manage my KiwiSaver. How much of this year's 'government contribution' will ANZ use to invest in their own shares [artificially boosting/maintaining their stock price]?

Get your Kiwisaver out of there now. No chance are they investing in your interest.

I am very happy with the returns .. by all accounts the ANZ manage KiwiSaver funds very well - I'm just concerned about how they're running their banking arm lol.

We used to be with the National Bank, which was a good bank. But when ANZ sucked it into their system, we moved toot sweet to a NZ-owned bank. We didn't need the ANZ culture. It surprises me that anyone is actually surprised at what's coming out now. Wasn't it obvious? Plus the Aussies could tell you a bit.

Good move, I was with National Bank also and was subsequently shifted to ANZ. A very smooth transition I must admit. I just hope ANZ continues quietly packaging up and selling their toxic assets/derivatives. The likes of John Key did wonders in this area at Merrill Lynch, so fingers crossed.

I'm a member of more than one bank so if my confidence in ANZ diminishes anymore, rejigging shouldn't be a problem. Best not to put all ones eggs in one basket.

I wonder if ANZ's consumer insights and marketing people are reading these comments. I'm sure their brand equity has taken a beating recently. Can't really blame the marketing and brand people. Starts at the top and the values of the business.

ANuZ horribilis.

Threatening a democratic and societal protection policy is not a good look.

Our accountant warned us years ago when we wanted to change banks, stay away from anz. Maybe Key has found out about the rott.

Yesterday I set up a daily automatic payment. Every day $25K will flow out of ANZ. They won't even notice, but when they shut up shop neither will I.
(They won't leave - making two much profit out of us suckers)

Hi Gareth

It might be worth asking them why they aren’t really competing in the new loan market offerings over in Australia.

Regards
Joe

I am sure all issues revolve around the events leading up to the RBNZ censure:

7) The issues with David Hisco's expenses and his departure closely follow the RBNZ censure and revoking of ANZ NZ’s accreditation to model its own capital requirements for operational risk due to a persistent failure in controls and the director attestation process. Are changes to ANZ NZ's board likely as a result of these two issues (the RBNZ censure and the Hisco expenses issue)?

- my emphasis

Moreover,

Unable to tackle effective monetary requirements, bank regulators around the world turned to “macroprudential” approaches in the wake of the Global Financial Crisis. It was mostly public relations, a way to assure the public that 2008 would never be repeated. A whole set of new rules was instituted which everyone was told would rein in the worst abuses.

Among the more prominent of these was Basel 3’s leverage ratio. Of the banks that failed or nearly failed more than ten years ago, they did so with what seemed to authorities hidden leverage. Their capital ratios, for the most part, were fine. Yet, the amount of leverage each institution had employed was beyond imprudent.

The reason for what may seem to be a contradiction was simple: regulatory arbitrage. Banks found a way to game the rules. Employing all sorts of mathematical transformations, including the heavy use of credit default swaps (regulatory capital relief), firms manipulated their risk-weighted assets regardless of gross exposures. To put it simply, they made risky activities seem much less so.

Link

If it looks like a duck, walks like a duck and quacks, then it probably is a duck. That sums up the St Helier's house sale. My take is that Key will have to go. As to the Omaha house, it's bang on the beach and a sitting duck for the next tsunami. Might take a figurative one to wash all this s**t away. And what a lame, bordering on arrogant, response to GV's measured and valid questions.

Re Mr Key and Karma. No need for revenge. Just sit back and wait. Those who hurt you will eventually screw up themselves and if you're lucky, God will let you watch.

Don't give anz too much grieve boys, all (big) banks are the same. And the bigger they are the worse they are. I've got a good engineer. He's building me a safe. The interest rates are lousy but I won't lose it.

He’s probably been concealing the true financial position for a while.

If you think along those lines, then the crime starts to fit the punishment. Else you can’t reconcile everything that’s been happening with them.

ANZ is about to go bust.