Today is an important day for ANZ as we will be lodging our initial submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Commissioner Hayne asked us to answer some very specific questions – basically to identify any instances of misconduct by ANZ in the past ten years or situations where our conduct fell short of community standards or expectations, to explain why we think these failings happened and what we have done to fix them and stop them from happening again.
Although many of the issues in our submission are known and have been or are being fixed – seeing them all in one document is confronting.
Of course, it would be easy to lay the blame on a few bad apples or to say that these are largely historical technical glitches resulting from large complex IT systems. That would be wrong.
“My hope is the Royal Commission serves as a watershed moment in restoring the trust of customers and the community. I’m committed to ANZ playing a significant role in repairing these relationships."
For me, it’s completely unacceptable that we have caused some of our customers financial harm and emotional stress. I’m ultimately accountable for this and once again apologise.
I am also completely committed to the changes we are making – leadership, strategic, systems, people and cultural – to build an ANZ worthy of the community’s trust and respect.
This work has already begun and we are making progress but we have a lot more to do. Our response to the Royal Commission only motivates me and my leadership team, and I’m sure all of us, to go harder and faster with the required changes.
I hope to be able to share our submission with you once the Commissioner has formally released it to the public.
We get why we’re having a Royal Commission
The Royal Commission’s terms of reference acknowledge Australia has one of the strongest and most stable banking systems in the world.
When many parts of the global economy struggled in the Global Financial Crisis (GFC), the Australian economy and banking system stood up well and has only strengthened since then.
Our role in helping support the economy is, however, placed under a cloud by the fact that some Australians lost real money and suffered significant harm.
It’s often cited that not one bank depositor lost money during the GFC, but as the Financial System Inquiry found we know more than 80,000 Australians lost billions of dollars as a result of the collapse of managed investment schemes, poor financial planning advice and other misconduct.
While the result is that customers trust banks to keep their money safe, many no longer believe that we put them at the centre of everything we do. If we are to be the successful company we aspire to be, this needs to change.
As many of you already know, when I was appointed Chief Executive a little over two years ago, I spent considerable time travelling the country to listen first hand to customers from all walks of life as they talked candidly about their experiences with banks.
It was very valuable to get such direct feedback.
While most Australians are pretty happy with their own bank and the service they get day-to-day, many in the community challenged the way the industry behaves.
Time and time again, I heard tough questions about how quick we are to pass on interest rate rises as opposed to reductions, the size of our profits, the amount of money senior executives earn, how hard it can be to switch banks, the unfairness of many fees and charges, how hard it can be for small businesses to get loans, the potential conflicts of interest in the broader finance sector and, importantly, how hard and slow it can be to get a result when things go wrong.
This isn’t a complete list but goes some way to understanding why the community’s trust in us has diminished. And while there are certainly things we need to apologise for and change, there are also things we need to explain better.
While I firmly believe we are now on the right path, our submission shows we’ve had significant failures over the last decade. We need to do more to make sure we meet our promises and keep up with changing community standards.
Our purpose is to shape a world where people and communities thrive. That means striving to create a balanced, sustainable society in which everyone has the opportunity to take part and build a better life.
We cannot achieve this purpose without being worthy of the community’s trust – and I want us to work with our customers, the community, the Royal Commission, the Government, regulators and the industry to help achieve that goal.
Fortunately, work is already well underway. Since the financial crisis, the Government and industry have initiated a number of reforms to improve conduct and customer outcomes:
- The Government introduced major reforms including the ASIC enforcement review, changes to responsible lending, the future of financial advice reforms, reforms to external dispute resolution, and changes to the accountability of bank executives through the Bank Executives Accountability Regime.
- The banking industry introduced its own initiatives which have seen the strengthening of the Code of Banking Practice, the employment background-checking protocol, better protections for whistleblowers and changes to remuneration practices to place greater weight on meeting customer needs.
Some of these important reforms are still being implemented and their ultimate impact on conduct and consumer outcomes is yet to be fully realised.
However, the direction and weight of these reforms highlight how community expectations of Australia’s financial services industry have changed over the last decade.
I want to be clear that ANZ supports these reforms. We will continue to work to implement these reforms and other positive changes during the course of the Royal Commission and beyond.
There is also a lot we are doing here at ANZ:
- Building a simpler bank. We want to do a few things and do them well. You all know that unnecessary complexity increases the risk of mistakes, so we’re taking steps to simplify our business, including making the tough decision to sell some of our businesses in Australia, New Zealand and Asia and reduce the number of products we offer. We will also continue to prioritise investment to reduce the complexity and improve the automation of our systems and processes. Combined with our improved testing of technology systems, this will help minimise mistakes in the first place and when they do happen make them easier to identify and fix.
- Changing the way we run the bank. We have changed the way we organise ourselves and made it much clearer what we want people to do, what they are accountable for and changed the way we pay people to focus much more on risk, values and behaviours.
- Improving supervision. A simpler bank is easier to supervise and govern but we also needed to reform our governance – for example establishing a Responsible Business Committee (which I chair), but also investing more resources – people, systems and money – in our supervision and compliance processes across the bank.
- Making products fairer. In 2017 we made significant product, fee and interest rate changes to benefit our customers including reducing rates on our low-rate credit cards. This has been well received by customers and we will continue to do more. We also appointed the former Australian Commonwealth Ombudsman, Colin Neave, as ANZ’s Customer Fairness Adviser. Reporting to me and the Board, Colin has initially focussed on our approach to remediation and will continue to contribute to ensuring our core retail products are fair and responsible.
- Calling out unacceptable behaviour. Since 2008 there have been a number of examples of bankers behaving badly, including here. As a result, the community has concluded that these individuals reflect a toxic culture in our industry rather than a few “bad apples”. We discovered some totally unacceptable behaviours and acted swiftly and decisively and will continue to do so. This has given our people confidence to speak up when they see bad behaviours which has driven a really significant increase in whistleblower cases in the past 12 months. These are being acted on and will help us change for the better.
- Fixing issues faster. Our submission acknowledges that when things have gone wrong, in some instances, it has just taken too long to recognise the issue and remediate our customers. There is no excuse for this. We did not identify some issues quickly enough and we did not adequately resource their repair, but this has changed. We are working hard to streamline our remediation processes and this has seen the establishment of both the Executive Governance Remediation Forum to improve oversight in our Australia Division, as well as the creation of the new Responsible Banking team exclusively focused on remediation and other responsible banking initiatives and a specialist advice remediation team in Wealth.
- Increasing transparency and availability. The community has raised serious questions about how banks are run and how we behave. We are making substantive changes in a number of areas but on many we have to do a better job of listening and having a meaningful and respectful conversation with the community. We can only engage in that dialogue if we acknowledge and fix our failings and make ourselves available. This is why I spend time on talkback, on social media, and in our call centres and branch network.
- Listening to you. Nobody knows how we can serve our customers better than you, which is why we held the ANZ Jam in 2016, an all-staff online conversation to discuss not only our purpose but also how we can do a better job for customers. This generated hundreds of ideas and is resulting in real change for our customers and employees alike. Initiatives such as increasing the availability of support teams during WA business hours, making it easier for customers to contact us when they are overseas and improving employee technology are only the start but are having a great impact.
We will of course, continue to engage thoughtfully with Commissioner Hayne and his team, in the constructive, positive and open manner that you would expect of the leaders of your bank.
My hope is the Royal Commission serves as a watershed moment in restoring the trust of customers and the community. I’m committed to ANZ playing a significant role in repairing these relationships.
I think there are three immediate things I can do:
- I can listen to customers who tell their stories as part of the Royal Commission and understand where we have let them down.
- I can listen to what the Royal Commission recommends to improve the financial services sector.
- I can continue to listen to you. If you think there is more we can be doing – tell me. I want to know. We have set up a dedicated page on Max and you can email me directly if you have a concern. Alternatively you can lodge a whistleblower report by contacting one of our Whistleblower Protection Officers, calling 1800 997 448 or emailing email@example.com.
In return, my request is that you come to work every day and continue do your best for our customers. I want the Royal Commission to motivate you to go the extra mile – and for us to work together to make ANZ the place we all want it to be.
As I said in my ANZ Way letter in August, let’s do things differently and make a long-lasting difference for future generations of which we can all be proud.
Thanks for reading and for everything you do to support our customers.
Shayne Elliott is CEO, ANZ