ANZ says in talks with Australian govt about shoring up Pacific Islands business

Bendigo and Adelaide Bank

09/07/2024 04:28

By Lewis Jackson
       BRISBANE, July 9 (Reuters) - ANZ bank  ANZ.AX  is in
talks with the Australian government about ways to make its
business in the Pacific Islands more viable as an exodus of
Western financial services fuels concern about rising Chinese
influence, its CEO told Reuters.
    ANZ, the biggest Pacific lender with operations in nine
countries from Fiji to the Cook Islands, plans to maintain its
presence in the region but mounting risk management costs have
left those businesses unable to cover the cost of capital,
Shayne Elliott said in an interview.
    "If we were there purely commercially we would have just
shut it down," he said on the sidelines of the Pacific Banking
Forum in Brisbane.
    "We have a higher obligation but...I have an obligation to
my shareholders, it's their money at risk. That's the
conversation we are having. What can the government do to help
us be more sustainable?"
    Australia on Tuesday pledged to boost investment in Pacific
Island countries to support their banking systems. Between 2011
and 2022, the region lost around 80% of its correspondent
banking relationships in services denominated in U.S. dollars.
    China has asserted its influence in the Pacific with
security agreements. Australia and the United States have said
they want to bolster Western financial services there due to
concerns an unwinding of such services there might leave a
vacuum for China to fill.
    Westpac  WBC.AX , another Australian lender with Pacific
operations, cancelled a planned sale of its Pacific unit last
year. Australia's Bendigo Bank  BEN.AX  said in 2023 it was
quitting Nauru, where it was the only bank, only to delay its
exit, according to the Australian Broadcasting Corp.
    Westpac and Bendigo Bank did not immediately respond to
requests for comment about whether they were also in talks with
the Australian government.
        Treasurer Jim Chalmers told the event in a speech that
Australia was conscious of the importance of banking services in
the Pacific so "we have been actively talking to all the major
Australian banks, to let them know how important a continued
Australian banking presence in the region is to the government".
    ANZ's Elliott said the bank's discussions with the
government had not yet covered specific measures to improve
profitability, but suggested it might be possible for banks in
the region to standardise some services to cut costs without
relaxing risk protocols.
    "Could we share, to lower the cost, the way we run things
like AML and KYC?" he asked, referring to anti-money laundering
and know-your-customer background checks.
    "Those sorts of things can be done, but they have to be done
over more than one market to be of benefit," he added. 
    

 (Reporting by Lewis Jackson; Writing by Byron Kaye; Editing by
Edwina Gibbs)
 ((byron.kaye@thomsonreuters.com; +612 9171 7541; @byronkaye;))