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Australia and New Zealand Banking Group Ltd. (ANZ) performed a reset on Monday by withdrawing sales incentives from bonuses for its financial planners, in an effort to clean up its practices amid significant probe concerning suspected wrongdoing in the country’s financial sector.  

Besides removing the bonuses, Australia’s third-biggest bank will also immediately dismiss planners, who offered inappropriate advices and failed to pass two assessments on their conduct. The lender did not provide details on how it would change its pay system for financial planners.    

The bank is improving its system to back 9,000 clients, who were given bad financial advice as well. ANZ expects to finish compensating affected customers by the end of 2018.

ANZ Chief Executive Shayne Elliott stated that it has taken too long for changes to occur, so where they see solutions they will act, as it is important for them that their customers feel confident in the quality and integrity of asking advice to protect the things they care about in a complex program.    

Shares of ANZ closed up 0.2 percent higher to A$27.620 on Monday.

Australia’s Financial Sector Under Pressure by Year-long Probe

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ANZ’s overhaul comes after the Royal Commission turned its focus on the financial industry, following a series of scandals.

Hit by allegations of providing misleading advice, not honoring insurance claims, manipulating rates, and failing to prevent money laundering, the government last year started a year-long investigation into industry misconduct and whether regulators are ready to identify and deal with it.

The firm’s move shows just how the Commission’s probe is quickly and broadly affecting the sector, and urges other major banks to follow.

It also marks a turnaround for ANZ, which, together with the rest of the industry and the conservative federal government, deemed until 2017 a royal commission unnecessary, as it saw the current regulatory structure was working.   

Three months into the inquiry, Australia’s financial sector took more damage after financial planners were claimed to have been receiving bonuses and payments for selling improper and poorly-working products, or in some cases, for no products at all.

Australia’s big four and insurance firm AMP Ltd.'s were believed by the Commission to be charging customers for financial advice they did not even received.

ANZ’s wealth division Chief Risk Officer Kylie Rixon admitted that 5 percent of the advice provided between mid-2013 and mid-2015 were unable to meet conditions that should have benefitted the client.

One employee also confirmed that the bank insisted on a sales deal with a financial planner who had 700 customers, despite recognizing he had failed regulatory assessments.

ANZ estimated external legal costs for the royal commission to be around $50 million.

Elliot said they will learn from this inquiry and continue to take real action to restore trust within the community, adding that they are committed to playing their part, and will continue to engage with the Commission in an open, constructive and transparent manner.

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