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ANZ Bank securities lending review and risk management: Opes Prime aftermath

The ANZ Bank has released the report of a Review Committee (pdf) which examined the Bank?s involvement in Securities Lending and its relationship with Broker clients including the Opes Prime group (Opes). (Business Day background)

The Review Committee found :

• the differences between Equity Finance and other types of Securities Lending were not fully understood and appreciated by most ANZ staff involved in those products.
• ANZ?s Equity Finance business should not have operated in an environment where all the risks were not fully understood and managed. The business posed unacceptable reputational and financial risks to ANZ and these were not properly identified. These risks were compounded by the lack of a proper control environment with respect to the Equity Finance business.
• Poor accountability and ?management by committee'
• Failure to identify and act on warning signs
• Failure to report relevant issues to the Chief Executive Officer and Board
• Breaches of ANZ employee conduct policies

The weaknesses in the management and oversight of the Equity Finance business within ANZ?s Securities Lending unit meant that ANZ did not adequately identify and manage the range of risks which arose from the operation of a business of this nature. The Review Committee identified breaches of ANZ?s Code of Conduct by two employees who will leave ANZ. Six other employees were disciplined.

The Review Committee?s report has been presented to the ANZ Board which has accepted the findings and has given its full support to the remediation program. The report provided to the ANZ Board has been released today and has also been provided to the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.

The issues examined in the report are not those which caused the collapse of Brokers including Opes. Nor does the report address broader legal issues, particularly those associated with the losses incurred by the clients of Opes.

ANZ recognises that the legacy of its involvement in Equity Finance may well be with the Bank for many years through legal cases that it will continue to defend and also the impact of these issues on its reputation.

Full post as published by Australian Regulatory Compliance Review on August 24, 2008 (boomark / email).