An investigation by the corporate regulator into ANZ’s alleged distortion of an April 2023 bonds sale by the Australian Office of Financial Management (AOFM) was known to Treasury when it advised Treasurer Jim Chalmers about the bank’s acquisition of Suncorp’s banking arm. However, Treasury advised Chalmers to approve the deal on the basis it was in the national interest, despite what could become one of the biggest banking scandals in that industry’s sordid history.
In late June, Chalmers approved the ANZ-Suncorp transaction, with several conditions, under the Costello-era Financial Sector (Shareholdings) Act 1998 (FSSA), which requires the treasurer’s approval for acquisitions of more than 20% (previously 15%) of financial institutions, and provides for the imposition of conditions on them. The act requires that the applicant satisfies to the treasurer that the transaction is in the national interest. At the time, Chalmers said it was an “on-balance call” to approve the acquisition.
While deliberately broad, the national interest test doesn’t appear to allow a treasurer to respond to specific instances of misconduct or alleged misconduct by the applicant. Crikey understands Treasury had been aware of the Australian Securities and Investments Commission’s investigation into ANZ’s mishandling of an AOFM bonds sale for months prior to advising Chalmers. The focus of the FSSA on the impact of the transaction on the national interest appears to leave a gap for malignant corporate actors to be allowed to gobble up competitors, provided they can demonstrate the deal doesn’t harm the national interest.
ANZ’s alleged misconduct, which may have cost taxpayers millions of dollars in higher-than-expected interest costs, has been the subject of some excellent reporting by the Financial Review, led by Jonathan Shapiro. Last week the AFR revealed ANZ had grossly overstated the value of its bond trades to win AOFM work.
As Shapiro notes today, “This is a scandal of epic proportions. The man on the street and the political class may be a little baffled by the jargon and complexities of the bond market … But Joe and Jane Public read these words: ANZ’s traders are alleged to have deceived the taxpayer — you and me — over months, if not years, to get into a position where it could manipulate higher the cost at which our nation borrows money. And they paid millions of dollars in bonuses to those that did this.”
As with ANZ’s recent admission that it had been caught out charging dead people fees, if true, this is an absolute outrage by ANZ — which has form in market manipulation — and a crime against all taxpayers. Unbelievably, the bank’s CEO Shayne Elliott actually complained last week that details of the allegations had been reported by the media, as if the public didn’t have the right to know how his bank is accused of ripping taxpayers off by the millions.
Elliott has also been pushing for looser lending standards, while claiming to be sorry for young people trying to enter the housing market. His call for changes to the prudential regulator’s requirement for a 3% minimum serviceability buffer on home loans is motivated purely by self-interest, rather than the plight of young people, who, along with the rest of us, look to have been ripped off by ANZ in its alleged bonds sale misconduct.
Elliott and the ANZ forget that it is the deposit guarantee from the federal government that helps them remain a highly-rated bank, along with the automatic assumption by ratings companies that if a bank like ANZ gets into trouble, the government will come to its aid. That is a key reason why the Australian banking system is rated among the safest in the world — and that 3% serviceability buffer is part of that assumption; mortgagees are assumed to have enough resources to withstand a rise in interest rates, strengthening the quality of banks’ loan books.
Chalmers should put some amendments to the FSSA on his agenda for a second term, if Labor manages to get one: add consideration of an applicant’s record of misconduct and breaches of financial and corporations law to the national interest test. The next time an outfit like ANZ comes knocking for another anti-competitive deal, it can be sent packing.
