The higher capital charge sparked concerns about its wider approach to risk management, which helped to drive ANZ shares 2.9 per cent lower, to $25.90.
Financial advice has been a key problem for banks, and ANZ has previously admitted it had failed to provide annual reviews to more than 10,000 “prime access” customers between 2006 and 2013, which triggered millions of dollars in refunds.
Last year, as the royal commission delved into problems with advice, ANZ also scrapped sales incentives in its advice business, and vowed to speed up customer compensation payments.
ANZ’s managing director of private banking and advice, Mike Norfolk, said its new approach to providing advice would give customers “complete control” over when and how they reviewed their financial plan.
“We know we need to think differently about how we do this, which is why we are taking a new approach to providing our customers ongoing advice and phasing out Prime Access as part of that,“ he said.
Meanwhile, the Reserve Bank of New Zealand on Friday slapped ANZ’s NZ business with a 60 per cent increase in its minimum capital for operational risk, to $760 million, after the central bank revoked ANZ’s accreditation to use its internal capital models for this type of risk.
Due to their more advanced risk management systems, the largest banks are allowed to model how much loss-absorbing capital they hold.
RBNZ deputy governor Geoff Bascand said maintaining this accreditation required ongoing high standards, with “stringent responsibilities” on bank managers and directors.
“ANZ’s directors have attested to compliance despite the approved model not being used since 2014. The fact that this issue was not identified for so long highlights a persistent weakness with ANZ’s assurance process,” Mr Bascand said.
ANZ said it took its responsibilities “very seriously” and it reported the matter to the RBNZ when it became aware of the error.
Bell Potter analyst TS Lim said the increased capital was “no big deal” for ANZ as a whole, but the lapse raised concerns over the potential for other problems.
“When you think about overall risk management, it’s a worry,” Mr Lim said.
Clancy Yeates is a business reporter.