Australia’s big four banks will face a parliamentary grilling this week, including questions over ANZ’s alleged manipulation of the bond market.
Chief executives of the big four – ANZ, Commonwealth Bank, National Australia Bank and Westpac – will face the House Standing Committee on Economics in Canberra on August 29 and 30.
At the forefront of discussions will be the disconnect between the big four and the Reserve Bank on monetary policy, with most major banks at odds with the Reserve Bank’s messaging on future interest rate moves.
Committee Chair Dr Daniel Mulino said the scrutiny would be timely amid the cost-of-living crisis.
“At our August 16 public hearing, the RBA Governor told us it is premature for commentators to be thinking about rate cuts, yet the major banks all predict an easing cycle in the near to medium term,” he said.
Also paramount to the committee will be recent allegations ANZ manipulated the bond market.
ASIC has now publicly stated it suspects ANZ broke the law, with chair Joe Longo confirming to the Financial Review in July that an investigation was ongoing.
ANZ is alleged to have manipulated future yield higher, enabling it to buy bonds from investors at a low price.
ANZ allegedly then reversed its future trades, letting general interest rates fall and the price of the bonds it held climb, giving it a profit.
If allegations are true, ANZ would have engaged in both market manipulation and insider trading.
ANZ has also been accused of overstating its trading success to the government, to secure bond management opportunities.
The government selects managers based on activity and experience in trading bonds. It’s alleged ANZ overstated its trading success.
According to the Australian Financial Review, ANZ told the government it had “facilitated” $137.6 billion in bond trades in FY23, when it had really only facilitated $83.2 billion.
Dr Mulino said he was very concerned about the ANZ allegations.
“The Hayne Royal Commission was a watershed moment in terms of resetting expectations about ethical conduct by banks,” he said.
“One of our core roles since (the commission) has been regular public scrutiny of the banks through these hearings to discourage ethical backsliding, and the allegations against ANZ are obviously extremely serious.”
In a July 25 statement, ANZ chief executive Shayne Elliot said where the bank found any evidence of wrongdoing, individuals would be held accountable.
“The Board will also lead a process to ensure consequences will be applied to senior executives, both past and present, including myself, where appropriate,” he said.
The statement said ANZ had been advised by the Australian Office of Financial Management in August 2023 it had submitted incorrect monthly secondary bond turnover data for FY23.
“This error came to light before the required year-end sign-off on the accuracy of the data supplied,” the statement said.
“Data errors were caused by a range of issues including process and data extraction errors on ANZ’s part.
“This resulted in the incorrect inclusion of transactions that should have been omitted as well as double counting of some transactions.”
In response to allegations of market manipulation, the ANZ statement said analysis by ANZ’s external counsel was ongoing.
“ANZ’s own preliminary analysis has not identified any evidence of market manipulation,” it said.
“ANZ, however, does not have all the information that ASIC has, and this position will be reviewed in coming months.”
The two-day public hearing will also examine the loss from scams, and what role banks play in the green energy transition.
Dr Mulino said the Committee would also ask how banks can better protect customers from increasingly sophisticated scams.
“Australians lost $2.7 billion to scams last year, with a marked increase in scams from social media,” he said.
“The banks are obviously not the only powerful corporations in this space, but they are incredibly important - and many people are rightly calling on them to do more to protect vulnerable customers.”
Commonwealth Bank and Westpac will appear on Thursday, with NAB and ANZ set to appear on Friday.
