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ANZ Overstates Government Bond Values to Win Deals, AFR Says

Signage for Australia & New Zealand Banking Group Ltd. (ANZ) at a branch in Sydney, Australia, on Monday, Nov. 6, 2023. Rising costs and intensifying competition for home loans at Australia’s biggest banks are combining to set up a grueling earnings season. Photographer: Brendon Thorne/Bloomberg (Brendon Thorne/Bloomberg)

(Bloomberg) -- ANZ Group Holdings Ltd. overstated the value of government bonds that it traded by more than A$50 billion ($34 billion) during a one year period, the Australian Financial Review reported. 

The lender told the Australian Office of Financial Management, the manager of government bond sales, that data on the volume of turnover was incorrect, the AFR reported. The AOFM has historically chosen the largest trading firms for bond issuances.

ANZ said it has “become aware of a potential issue in our bond trading data reporting processes,” according to a statement from the firm Thursday, adding that the lender had notified the Australian Securities and Investments Commission and the AOFM. ANZ said it’s reviewing its internal processes.

The development comes as ASIC is in the process of investigating the nation’s bank over the execution of a government bond sale last year amid concerns it manipulated the sale of debt.

“These allegations are disturbing but given there’s an ASIC investigation under way, the government is unable to comment further,” a spokesperson for the Treasury department said in a statement.

The discrepancy in the turnover data was unearthed by a trader who was hired by ANZ in March last year, the AFR reported. The AOFM doesn’t publicly disclose quarterly data from each lender, rather an aggregated figure for secondary market turnover that each bank provides. 

ANZ told the AOFM it facilitated A$137.6 billion in trades of government bonds in the year to June 2023, then later disclosed that figure was A$83.2 billion, the AFR reported. 

The AOFM’s annual report showed ANZ received A$6.2 million in the 2022-23 financial year for the syndicated issuance of Australian government bonds, the top placed bank. Commonwealth Bank of Australia, Westpac Banking Corp. and National Australia Bank Ltd., all ranked joint second, with each getting A$3.1 million. 

Notably Absent 

ANZ was a notable absentee when Australia sold its first green bond in June. Rivals CBA, Westpac and NAB were joint lead managers on that issue, alongside UBS Group AG and Deutsche Bank AG. 

Some Australian lenders, including ANZ, were in the past accused of seeking to rig the benchmark bank bill swap rate. That resulted in ten of millions of dollars of fines following the settlement of cases brought by ASIC.

--With assistance from Matthew Burgess and Sharon Klyne.

(Adds details from second paragraph, sixth paragraph on AOFM sales)

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