Introduction
Thanks Kylie, and welcome everyone. I'd like to start by thanking you all for joining us at such short notice. This morning, Nuno and I are providing you with an update on ANZ's settlement with ASIC, announced today.
Before I get into the details of that I want to put this settlement into an important context.
The last time I spoke with you as a group was in April as we announced our undertaking on Non Financial Risk to APRA, and I made two important commitments to you.
First, I committed that ANZ would embark on a company wide transformation to uplift NFR: effectively to strengthen our core processes, systems and controls, and indeed that uplift is underway.
I can tell you we are more convinced than ever that this program will make us much more competitive and deliver better customer outcomes.
Today's announcement continues that. The issues identified in the ASIC settlement are all failures of Non Financial Risk and a further demonstration of why it is so important that we drive a step change improvement in how we manage ANZ.
Nuno will talk more about our bank wide NFR program in his opening comments. But the NFR changes are only part of a much wider change underway at ANZ.
The Board believes that ANZ has great potential but, to realize that, we must have a significant transformation in how we operate. The Board has appointed a new CEO to drive this transformation.
In Nuno we found a leader whose skills, experience and track record gave us the confidence that he would deliver the fundamental transformation ANZ requires.
That transformation is underway. I know that there has been much commentary on the workforce changes announced last week. And I know that these are very difficult moments for those affected.
But there is a clear link between our goal of making ANZ a much better bank and this re-structuring.
We need to streamline our management layers dramatically, improve our decision making and strengthen our execution - which will also assist our uplift in NFR. While change is always difficult, for the thousands people who will continue to work at ANZ, this will be a much better bank.
At strategy day next month, Nuno and his team will outline in more detail our transformation plans to grow ANZ while driving greater efficiency and better execution.
I ask for your support as we undertake these changes and as Chair let me be really clear: the Board, including Nuno, and our Executive are 100% committed to delivering our transformation and making ANZ a better bank. We are all in!
My second commitment to you in April was to resolve outstanding issues with our regulators, including on the AOFM bond trading matter. We see this as vital in order to create certainty for staff, customers and investors and especially to clearing the path for the bank to focus on transformation rather than getting consumed in investigations and litigation about the past.
And so I am delivering on that second commitment today. You will have seen from our announcement that we have entered into an agreement with ASIC to resolve five matters within our Australian Markets and Australia Retail businesses.
This is the culmination of many months of intensive work by management and the Board, with the Board playing an active role examining these matters and reaching this outcome today.
In reaching this settlement we are acknowledging that we let our customers down and I apologise unreservedly.
This is not what ANZ stands for, or will stand for, as a bank. We will not accept these sorts of failures that impact on our customers: it is why we are committed to driving our major transformation.
I also don't shy away from this being a very large financial penalty that impacts our shareholders. It's another very important reason why we are committed to transforming.
While the overall penalty should be considered in the context of a new penalties' regime, this is not something that we take lightly - but on balance we believe the certainty provided by agreeing this penalty is in the best interest of the bank.
Markets Trading Matter
Taking the Markets trading matter to begin with, we have agreed that we did not adequately communicate the intended manner of our trading or the progress of our hedging activity, given the timing and manner of our trading.
We have also agreed that our team made misleading representations to AOFM after the transaction, and we breached some of our license obligations.
We accept that ANZ could have executed our role as duration manager better and been more transparent in our communications with the AOFM.
It's for these reasons that we have offered to pay the AOFM the revenue we earned in our role as duration manager on the transaction.
But importantly, I also want to be very clear today about what the trading matter is not about.
First, ASIC has not alleged market manipulation or over-hedging by ANZ. All trading undertaken by ANZ as duration manager was to hedge the risk born by us in connection with that role.
Secondly, and crucially, it is ANZ's view that our trading as duration manager did not harm the Commonwealth.
In fact, the price movement on this transaction from market open to pricing time was less than the average on other comparable size AOFM transactions.
Markets AOFM Data Reporting Matter
Let me turn now to the inaccurate AOFM data reporting.
We have previously acknowledged that ANZ's Markets team submitted inaccurate monthly turnover data. We have further agreed that ANZ made a false or misleading annual attestation to the AOFM in relation to that data, that we failed to lodge a timely breach report, and we breached some of our license obligations.
Importantly, ASIC has agreed that the data misreporting was not intentional. In summary, on both of these issues, while the Bank did not act with bad intent on either the trading or data reporting matters, it's clear we did make serious mistakes and, I would add, importantly, our own requirements and processes were not complied with.
Taking action: Markets
As a consequence of these findings, the Board continues to take action. This includes extensive accountability reviews on current and former employees, specifically related to this transaction and to the incorrect data reporting.
In fact, more than 50 accountability reviews have been completed with the outcomes on the remaining few to be finalised in the coming weeks.
It has resulted in significant impacts to variable remuneration for certain individuals. But above all, let me again state: the findings on our Markets Trading announced today are a clear example of why ANZ must transform its culture and way of working.
Australia Retail
Let me turn now to Australia Retail. While the Markets matter has been the subject of considerable attention, I want to acknowledge the seriousness of the Retail matters we have also agreed to resolve with ASIC today.
It's clear from the facts that we have let our customers down, including some when they were at their most vulnerable, and for that as the Chair of the Board I am deeply sorry.
Thousands of ANZ people come to work each day to do the right thing by our customers, and these failures in systems and processes have also let our people down.
It is important to note that on several of these issues there have been previous attempts to remedy them, which were inadequate.
Again, clear evidence of the need to undertake our current transformation. Of course it's one thing to be sorry but it's another to make sure we take the steps to ensure these events don't happen again.
Taking action: Australia Retail
The Board has been very clear with retail management that we require a step change in the way we manage non-financial risk and we will be holding the organisation to account to demonstrate that progress.
We have established an ASIC Matters Resolution Program in Australia Retail, ensuring we bring the appropriate governance, oversight and accountabilities to resolve these and other outstanding ASIC regulatory matters.
As part of this, we will be appointing Promontory as an independent expert to review and report on the adequacy of our work and ultimately to assess whether our commitments to ASIC have been achieved.
Conclusion
As I stated at the beginning, the Board appointed Nuno with a clear mandate to streamline and transform ANZ. Together with our ANZ teams, we are undertaking the biggest restructure and reform of the bank in recent times.
I acknowledge that this is a tough experience for many, but this transformation will ensure we deliver to customers effectively, are much more competitive and that we prevent the sort of NFR failings that are the subject of today's agreement.
You will hear more on this at next month's strategy day. I will ask Nuno to make a few comments and then we will open for questions.
