Smith Takes Charge Of Opes Fiasco

Sydney Morning Herald

Tuesday April 15, 2008

Danny John

THE growing damage to ANZ's reputation caused by the fallout from the collapsed stockbroker Opes Prime has prompted the chief executive, Michael Smith, to take charge of a wide internal investigation into the bank's role in the affair.

Responding to a blizzard of criticism that has been felt in ANZ's boardroom, Mr Smith extended the terms and depth of an initial review to a virtual public inquiry in an attempt to extricate the bank from the controversy in which ANZ seized $919 million of shares from Opes clients after the broker's failure.

ANZ, which lent at least $650 million to the firm, has since been selling the stock in dozens of ASX-listed companies on the grounds that it had been pledged as collateral for the money Opes had borrowed and then farmed out to clients to buy the shares.

However, the 1200 individuals subsequently discovered they did not actually own the equity, having agreed to sign it over to Opes. They now face combined losses of as much as $350 million.

ANZ's close involvement with Opes has proved particularly embarrassing for the bank as it has faced accusations of relaxing its previously tight rules on lending to outside parties.

Four employees in its securities lending division - now the focus of the Smith investigation - have been suspended because of their links to Opes.

At least three of them are said to have had dormant margin lending accounts with the broker.

In a sign of the high-level concerns about the affair's impact on ANZ's standing, Mr Smith told the Herald he would do whatever was necessary to fix the situation.

"The reputation of this institution is paramount to me and I will do everything I can to ensure that we uphold that reputation and indeed enhance it," said Mr Smith, who took control of the internal inquiry yesterday after his return from China.

The investigation will focus on three key issues: Management and control of ANZ's role in securities lending and its relations with outside clients, including Opes Prime. It will almost certainly cover the bank's links with another controversial stockbroker, Tricom; Whether any employee had breached the bank's policies, procedures and ethical standards, including any dealings with Opes; The bank's compliance with the law and market regulations.

Any staff found to have fallen foul of ANZ's rules would be dealt with sternly, Mr Smith said.

"If there is any evidence of impropriety, then frankly they can expect zero tolerance from me," he added.

Mr Smith also committed to making public the inquiry's conclusions and any action taken by the bank.

ANZ underlined the seriousness of the inquiry by bringing in the former Westpac director and current BHP Billiton board member David Crawford to help Mr Smith and ensure the bank "meets the highest ethical, risk management and regulatory compliance standards".

The inquiry team will also include two senior ANZ executives - David Hisco, managing director of the finance leasing arm, Esanda, and Chris Page, head of risk for the Asia-Pacific region - who have not been connected with the securities lending operation.

Mr Smith has chosen to exclude the head of ANZ's institutional division, Peter Hodgson, who has responsibility for the operation at the centre of the furore, to try to avoid criticism of the investigation.

However, Mr Smith said he maintained full confidence in Mr Hodgson.