Angry Anz Chief Admits Opes Link Has Harmed Bank

The Age

Thursday April 24, 2008

Vanessa Burrow

A "PISSED off" ANZ chief executive has vowed to eliminate any laxness at the bank, acknowledging that its involvement with collapsed broker Opes Prime has damaged its reputation.

"When you shake the tree, stuff falls out," Mike Smith said yesterday while reporting ANZ's first-half results. "Frankly, a bit more fell out than I thought and I'm not terribly pleased about that.

"The question to ask is: should ANZ have been in this type of business? Quite clearly not."

Even as it conducts a review into its involvement in securities lending, and Opes Prime in particular, ANZ has agreed to invest $55 million in another securities lender and financial services provider.

Melbourne-based Chimaera Financial Group, which has been the subject of speculation about its financial strength, said yesterday it would raise additional equity of $65 million. Almost all will come from ANZ, which will be invited to appoint directors to Chimaera's board.

In a statement, Chimaera director Sal Catalano said the company had been subjected to "unfounded media speculation about its securities financial business" and was planning to expand its business.

"Chimaera has enjoyed a long-standing relationship with ANZ since its formation and we are looking forward to working even more closely with ANZ in the future," said Chimaera director Ian Pattison.

Mr Smith refused to comment on Chimaera yesterday, but said ANZ would have helped Opes Prime work through its issues if it had not detected "irregularities".

When Opes Prime was placed in administration last month - amid allegations of potential fraud - title to shares that were once held by clients was passed to ANZ and other secured lenders. ANZ has sold about 60% of the shares it seized, but the process has upset Opes Prime clients, and prompted several to take legal action to prevent the bank from liquidating their holdings.

"I have to say, I'm somewhat pissed off about the whole thing," Mr Smith said. "These were issues that were unexpected and have to be managed accordingly."

The furore has prompted the review of securities lending, to be headed by Mr Smith, with help from heavyweight company director David Crawford and two senior ANZ employees.

Part of their task will be to examine the actions of several staff members who have been suspended because of their conduct in relation to Opes Prime.

"I am absolutely determined to see if there were any breaches of our processes or our standards, and I will be taking the very strongest action," Mr Smith said yesterday, explaining that business dealings with Opes Prime had been "far below the radar" of the ANZ board.

"I am just not prepared to have anything but the very highest standards of behaviour and performance at ANZ - and that is just not negotiable."

On the topic of market regulation, Mr Smith said it was human nature to overreact in times of crisis.

"The role of a regulator is to ensure that the industry it is regulating is effectively safe," he said, likening regulation to having a burglar alarm installed in a house.

"It prevents an awful lot of problems coming to it but it's not going to prevent a real professional cat burglar from getting in.

"It's a question of making sure that you regulate sufficiently to provide the maximum security to the maximum number of people - but you can't be 100% tight."

LINK

? For information about the ANZ securities lending review, go to tinyurl.com/6cx5n2