NAJIB'S AMBANK A/CS CONFIRMED: ZETI FINES AMBANK RM53.7 MIL OVER NAJIB SCANDAL - REPORT

AMMB Holdings, in which ANZ Bank has a 24 per cent stake, has quietly shelled out 53.7 million Malaysian ringgit ($17.6m) to settle with ­Malaysia’s central bank over compliance breaches related to the political scandal involving Prime Minister Najib Razak.

Quietly is the operative word here, because AmBank somehow managed to disclose the penalty without revealing the offence.

AmBank has been caught up in the long-running scandal involving the PM, the sovereign wealth fund 1MDB and some unexplained payments of almost $US700m into the PM’s AmBank account.

AmBank said the penalty related to non-compliance with certain regulations, and that it was co-operating with the central bank, Bank Negara Malaysia, and was strengthening its governance structure. It also said it would spend 25 million ringgit in each of the next four years on improvement of its systems, infrastructure and training. “This series of measures will further enhance the robustness of our processes, reporting and governance structure, as well as safeguard against such circumstances recurring in the future,” the bank said.

In a communications triumph (or lack thereof), AmBank said it was “well-placed for future growth”, but provided absolutely no details about its misconduct.

Four Pillars confirmed yesterday that the penalties were imposed for compliance and reporting breaches related to so-called PEPs (politically exposed people) in the 1MDB debacle.

Last month, incoming ANZ chief executive Shayne Elliott resigned from the AmBank board.

The new arrangements for ­Elliott, who will take over from Mike Smith on January 1, are consistent with Smith’s internal board commitments. ANZ retains a strong presence on the AmBank board, with non-executive directorships held by CEO Australia Mark Whelan and human resources executive Suzette Corr.

Executives on secondment include AmBank CFP Mandy Simpson, chief risk officer Nigel Denby and head of transaction banking Chin Aun Tan.

The tweak is on

After returning from an investor roadshow to the US and Europe, ANZ chief executive-elect Shayne Elliott has broached the sensitive topic of incumbent Mike Smith’s super-regional strategy.

A short summary of Elliott’s musings in a video posted on the bank’s BlueNotes website yesterday is that financing trade in Asia is a core competency, but the strategy will be tweaked to suit the current environment, both short-term and long-term.

It’s no secret that competition, the heavy hand of regulation, the slowdown in China and low interest rates are presenting an array of challenges for the nation’s most Asia-focused bank.

For Elliott, the appropriate response is to tweak, not withdraw.

“We need to tweak and look at our resource allocation — question things that are working well and we want to do more of, and things that are not working so well, where we need to question the model,” he said.

Elliott will clearly take a less confrontational approach than Smith to investors and analysts, many of whom have expressed frustration about the low-returning Asia business now that growth has tapered as well.

Whereas Smith has scolded the market for its short-term focus, his successor said there was, indeed, such a thing as patient capital.

“I understand the desire to always look at the next quarter,” he said. “But my view is investors are remarkably patient and they are interested in the long term.

“There are lots of examples of companies around the world that have brilliant long-term strategies that don’t make any real profits today. The classic example is a company like Amazon.”

Overall growth, he said, would be a challenge for the sector, given subdued credit conditions and pressure on margins, with regulation, compliance and technology absorbing significant funds.

Change was therefore inevitable, otherwise earnings growth would be “pretty meagre”.

Reining in bitcoin

As custodians of stability in the ­financial system, central bankers are wary of anything that dilutes the effectiveness of monetary policy. Bitcoin and its 600-odd imitators are habitually thrown into that bucket, despite barely registering on the most sensitive of payments-system radars.

Digital currencies are a ­challenge, even at an intellectual level. Their value is mostly determined by supply and demand, similar to commodities like gold. However, unlike gold, their intrinsic value is zero. They are not backed by any authority, which means their practical value is linked to the prospect of some future exchange for products or services, or a certain amount of sovereign currency.

Further, they are not a liability of any individual or institution, and management of the total currency supply is determined by a computer protocol. It’s a policymaker’s nightmare, so it’s no surprise that the central bankers’ club, the Bank for International Settlements, has issued a cautionary paper on the whole subject.

The BIS’s core finding is that the use of private digital currencies is currently too low to have any influence on the potency of monetary policy. In principle, though, any impact would depend on the degree of substitution from traditional deposits and payments to the digital world, and the extent of economic and financial links between the users of sovereign currency and the digital alternative.

If the substitution is significant and the links are weak, the power of monetary policy will wane. The other issue is that a widespread take-up of digital currencies could crimp central bank earnings through a decline in their non-interest paying liabilities. Of course, the institutions that deride Bitcoin are the same ones salivating at the potention of its underlying technology — the blockchain. But that’s another story. - http://www.theaustralian.com.au/