The corporate regulator, ASIC has forced two of the country’s biggest banks to revamp their foreign exchange operations after finding numerous holes in procedures and weaknesses in processes.
And as a result, Westpac Banking Corp (WBC) and the Australia and New Zealand Banking Group (ANZ) will donate $6 million to various charities and their wholesale foreign exchange arms to be independently monitored as part of a settlement with the corporate regulator, ASIC.
ASIC revealed the deal in a statement issued yesterday revealing the settlement with the two banks.
The deal had no impact on the share prices of both banks – Westpac shares were down 0.2% at $34.80, while ANZ shares edged half a per cent higher to $32.05.
Both banks have entered into enforceable undertakings with ASIC after the regulator (with hep from offshore regulators) picked up problems with the banks’ forex systems and controls between January 2008 and June 2013.
These including instances of employees disclosing confidential details of currency trades, sharing information when they were not supposed to and communicating information with parties outside the forex dealing rooms.
Each lender has agreed to donate $3 million to charity. ANZ’s is to Financial Literacy Australia. Westpac’s will be to what it says is a “community benefit payment of $3 million to support the financial capability of vulnerable people including women experiencing family violence, the elderly and youth at risk.”
“The foreign exchange market is a systemically important market that depends on all participants acting with integrity and fairness,” ASIC commissioner Cathie Armour said in a statement issued yesterday.
"ASIC is committed to ensuring that major financial institutions have the systems in place to ensure that financial services are provided fairly, honestly and efficiently."
ASIC will appoint independent experts to assess each bank’s progress, with both having already made changes since the period in question.
“ANZ has co-operated fully with ASIC’s investigation on this matter and we accept that during this period aspects of our supervision and monitoring of the Spot FX business were not good enough,” ANZ chief risk officer Nigel Williams said in the same statement.
“We have taken responsibility and we apologise."
ASIC said it is concerned that Westpac and the ANZ "did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning and integrity of the market.”
Westpac also apologised in the ASIC statement and said it will continue to enhance its policies and controls.
In December, National Australia Bank and Commonwealth Bank agreed to similar enforceable undertakings and to each donate $2.5 million as part of the same industry-wide investigation.
ASIC said in yesterday’s statement that it “is grateful for the assistance of our international regulatory counterparts in progressing our investigation, including the UK Financial Conduct Authority, the NZ Financial Markets Authority and the Monetary Authority of Singapore.”
Damp lettuce leaves come to mind.
