The Australian corporate regulator, ASIC, has entered into a settlement agreement with ANZ following a series of transgressions, most notably surrounding a federal government bond sale that occurred in April 2023. This sale resulted in nearly $10 million in trading profits for ANZ, but also led to an additional burden of $26 million in interest payments for taxpayers, as outlined by ASIC.
The intricate details of the situation are likely to only resonate with those well-versed in financial matters. Essentially, ANZ had been appointed by the Australian Office of Finance Management (AOFM) to assist with the sale of approximately $14 billion worth of Commonwealth bonds. As the “duration manager,” ANZ took on significant risk regarding interest rate fluctuations before the bond sale, a role that included managing market risks through buying and selling futures contracts.
When it came time to price the bond issue, ANZ selected a specific moment—1:50 PM AEST on April 19, 2023—despite having managed only a small fraction of the risk involved up to that time. Instead of postponing the pricing, ANZ’s traders confirmed the scheduled timing and rushed to hedge their exposure by dramatically increasing their sales of bond futures. In the last 20 minutes prior to the pricing call, ANZ’s traders accounted for between 76% and 87% of the total market trades, rapidly driving down bond prices.
These actions resulted in an increase in the interest rate on the bonds sold, ultimately costing the federal government $26 million due to the higher rates set during the bond sale. The regulator highlighted that although a slight shift of 0.02 percentage points might seem trivial, it has a significant cumulative effect, especially on a sale of this magnitude.
While concerns around potential market manipulation were raised, ASIC ultimately decided that the evidence suggested a mismanagement rather than deliberate wrongdoing. The regulator reiterated this in their statement, clarifying that they did not find sufficient evidence to suggest that ANZ’s actions amounted to over-hedging or market manipulation.
ASIC Chair Joseph Longo characterized ANZ’s behavior as “unconscionable” and described their conduct during the bond sale as “grubby.” He noted that while the misconduct wasn’t intentional, it was certainly marked by incompetence. Longo pointed out that ANZ failed to adhere to its own policies and lacked transparency in communications with the AOFM.
Moreover, ANZ’s issues extended beyond this bond sale. The bank has faced scrutiny over significant inaccuracies in reporting bond trading activities to the AOFM and failures in customer banking operations—ranging from unpaid bonuses on savings accounts to inappropriate fees on deceased individuals’ accounts.
In a broader context, the settlement, amounting to $80 million, represents the largest penalty ever imposed by ASIC for this kind of breach. With 3,500 jobs expected to be cut as part of a corporate restructuring, and ongoing consumer issues lingering, ANZ faces substantial challenges moving forward in regaining its reputation in an increasingly critical financial environment.
