They never learn, do our big banks? Even though they drove the market’s modest gains in 2023-34, keeping it from a rotten, negative performance, one—the ANZ (ASX:ANZ)—did so with unclean hands.
How do we know this? A key banking watchdog has sanctioned ANZ for continuing to charge or failing to refund fees for deceased estates and failing to respond to representatives of deceased estates within the required timeframe.
On Tuesday, the Banking Code Compliance Committee (BCCC) chair, Ian Govey, said the decision to name ANZ for its non-compliance reflected the seriousness of the bank’s breaches.
“Naming a bank is a sanction that we reserve for the most serious and systemic breaches,” he said. “The significance of the deficiencies in ANZ’s compliance frameworks was deeply concerning. Its non-compliance warranted such a sanction.”
On the ASX on Tuesday, investors initially ignored the finding and sent ANZ shares up 1% in early trading, but that confidence didn’t last. By early afternoon, the shares were down nearly 0.4% as investors realized the seriousness of the finding from the Committee.
The ANZ wasn’t alone. The committee (which is an independent body established to ensure compliance with the Banking Code of Practice) found last year that six Australian banks, including the big four, had charged fees for services no longer provided in deceased estates. The issue was highlighted at the Banking and Financial Services Malpractice Royal Commission, with AMP, the Commonwealth Bank, and NAB among the worst offenders.
Charging fees to customers who have died is banned by the Banking Code of Practice. Yet six banks, led by ANZ, did just that, according to the compliance committee.
The Committee said that between July 2019 (five months after the Banking Royal Commission ended) and September 2023, ANZ breached its code obligations by failing to stop or refund fees charged to estates of customers who had died. The watchdog also said ANZ failed to respond to instructions or requests for information from representatives of deceased estates within the required 14 days.
“Despite first identifying the issues in early 2022, ANZ took over a year to implement solutions and then nearly two years to start its customer remediation program, which is still ongoing and expected to be finalized by the end of July 2024,” the BCCC said.
The BCCC’s Govey also said there were concerns about ANZ’s remediation efforts, which failed to meet expectations.
“Once aware of the issues, ANZ did not act with sufficient urgency to remediate the affected customers,” he said. “It should have done more to address this more quickly.”
The compliance committee also said ANZ’s inability to accurately quantify breaches of its fee obligations called into question the adequacy of its compliance frameworks and ability to monitor and comply with its code obligations effectively.
The Committee, though, has acknowledged that ANZ’s remediation made assumptions beneficial to customers, such as reimbursing charges that might have already been refunded. At completion, the customer remediation will consist of payments of nearly $3.3 million to 18,852 impacted estates.
The watchdog formally warned another (unnamed) bank, which it said had also breached BCCC obligations by failing to stop or refund certain fees charged to deceased estates but chose not to name them.
“We determined that in this case a warning was appropriate given the circumstances,” Govey said, noting the lower financial impact, the smaller number of affected estates, and the swiftness with which the bank acted. “It identified the issue in June 2022 and by August 2022 had taken action to prevent future breaches.”
