Anz Executives In Firing Line

Sydney Morning Herald

Wednesday April 16, 2008

Danny John

KEY executives within ANZ's financial institution products division - and its powers of approving tens of millions of dollars of loans - are expected to be targets of the wide-ranging investigation of the bank's links with the failed stockbroker Opes Prime.

The inquiry team, headed by the ANZ chief executive, Michael Smith, is understood to be focusing on the operations of the division's custodian services arm, which has direct responsibility for the securities lending business that lent both cash and shares to Opes.

Among the list of executives likely to be interviewed are the institutional banking boss, Peter Hodgson, the head of the financial institution products division, Antony Cahill, and Ben Steinberg, the executive director of corporate portfolio management.

Mr Hodgson carried out the initial internal probe of the bank's involvement with Opes, under Mr Smith's orders. Mr Cahill has been at the forefront of ANZ's campaign through the courts to establish its claims of ownership to the Opes stock used to underpin the bank loans made to the broker.

It was Mr Steinberg who was told by two of Opes's directors four weeks ago that there were substantial holes in the trading accounts of a number of the broker's clients - which subsequently led to the company going into administration despite ANZ extending a $95 million cash lifeline.

That move prompted ANZ to appoint receivers to seize more than $900 million of shares in numerous listed companies. The shares had been pledged as collateral by Opes to cover more than $650 million of loans made to the firm by the bank. The stock sell-down has proved highly controversial.

There is no claim of impropriety against any of the executives whose management roles have determined their roles in the affair.

The subsequent fallout from the stock seizure and claims of lax lending practices prompted Mr Smith to take charge of the fledgling investigation on Monday in an effort to contain the damage to ANZ's reputation caused by the Opes collapse.

It is believed the inquiry will also look at the more aggressive approach taken by the institutional banking division last year to grow its business. This new attitude followed criticisms by senior management, including the former chief executive John McFarlane, that the division's profit contribution had dropped off.

The institutional bank is ultimately responsible for the securities lending operation which had all the direct dealings with Opes.

These included the equity financing arrangements under which the broker handed over to the bank shares its clients thought they owned in return for loans, and its controversial stock lending policy whereby ANZ on-lent equity to third parties to trade on the sharemarket.