SYDNEY: ANZ Group Holdings Ltd.’s markets arm makes up a tiny fraction of the Australian bank’s roughly 40,000 employees.

But it is now becoming a huge source of problems for the 189-year-old company and its CEO Shayne Elliot.

ANZ is considering a series of policy changes to help rebuild the firm’s reputation after three traders left the bank amid allegations of misconduct on its Sydney trading floor.

The securities watchdog is also investigating the bank’s role as a risk manager in last year’s debt sale.

Elliott has apologized for spreadsheet errors that misrepresented the value of fixed-income trading reported to a government agency.

Interviews with more than a dozen current and former ANZ employees paint a picture of a company that has been struggling for years with allegations of misconduct among its traders.

In one sign that the bank is struggling to put an end to such behaviour, ANZ staff conducted an internal investigation into Sydney trading activities in 2019, questioning them about alcohol consumption and other issues.

“There is a clear, slow return to old practices and cultures in banking and finance,” said Allan Fels, former chairman of the country’s competition regulator and a professor at the University of Melbourne and Monash University.

“There’s enough of this going on to be a constant concern. We haven’t solved the industry’s problems.”

ANZ’s trading activities are starting to resemble the country’s banking sector problem, and even Elliot’s job and salary may be at stake.

An ANZ spokesman said the company takes “conduct and behavioural issues identified in our Sydney negotiating office seriously,” it said in a statement.

The bank “made it very clear that if we found any evidence of wrongdoing, those involved would be held accountable.”

ANZ shares have lagged its peers over the past year and on August 23, the country’s banking regulator recommended the company raise capital.

The Australian Prudential Regulation Authority said recent problems at its markets division suggested the bank had yet to “adequately address deficiencies in its controls, risk culture, governance and accountability”.

The agency also directed ANZ to appoint an independent body to analyse the root causes of the problems and present a plan to resolve them.

The investigation centred around ANZ’s Sydney trading room, one of the bank’s smallest trading rooms in cities around the world.

ANZ’s market group is managed by Singaporean Anshul Sidher. It is part of the bank’s institutional division, which has been overseen by group chief executive Mark Whelan since 2016.

Neither Sidher nor Whelan have been implicated or charged with wrongdoing. Some employees at ANZ’s main trading floor in Sydney reported to line managers in other cities or countries, which may have contributed to a lack of close supervision and accountability, according to people familiar with the unit.

Whelan, who lives in Melbourne and regularly travels to the bank’s two dozen or so locations, has spent little time on the Sydney trading floor, the people added.

As Bloomberg previously reported, ANZ has moved Trevor Vail, co-head of global fixed income trading, from Singapore to Sydney and has also appointed a new chief risk officer for its markets division in the Australian financial centre.

Already in 2013, the bank took steps to identify problems related to the internal culture of its operations on global markets.

According to a copy of the report obtained by Bloomberg News, PricewaterhouseCoopers LLP conducted an independent analysis at the time, collecting information from 163 people from Australia, Singapore, Hong Kong and the United Kingdom.

It found there was a “fear of blame and a concern about raising risk issues” with managers and senior leaders. It also noted weaknesses in guidance on expected behaviours and a “lack of visibility and trust in leadership”.

PwC recommended that ANZ improve its risk culture by better defining the strategy, culture, behaviours and performance metrics for its global markets function.

The review comes after Australian regulators began investigating whether ANZ and other lenders manipulated a key interest rate benchmark known as the bank bill swap rate, which is the domestic equivalent of the London interbank offered rate.

Elsewhere in the world, such as in the UK, those responsible for managing individual traders “have a personal responsibility to turn a blind eye to what is going on,” said Andy Schmulow, an assistant professor of law at the University of Wollongong.

“It’s impossible in Australia,” he said. — Bloomberg