Australian regulator orders Macquarie Group to fix client money handling after breaches

[SYDNEY] Australia's corporate watchdog ordered financial giant Macquarie Group Ltd to overhaul how it handles client money after ruling the bank had breached the rules for a decade, the latest battle in a regulatory war on the country's lenders.

After Macquarie self-reported the suspected breaches, the Australian Securities and Investments Commission (ASIC) said on Friday that its own investigation found Australia's biggest investment bank broke client money handling rules from 2004 to 2014.

It gave Macquarie until May 9 to deliver a report on its client money procedures from an independent expert, specifying that the bank must give the expert access to "its books ... employees, contractors, agents and/or consultants".

Macquarie said it would seek a review of the ASIC order, saying no client lost money as a result of the breaches and that it hired KPMG to review the exact same part of its sprawling investment empire in 2013.

The order is the latest of a series of showdowns between Australia's biggest banks and regulators intent on reducing risk to customers amid a stalling global economy.

In 2015, the Australian Prudential Regulatory Authority forced lenders including Macquarie to raise their cash reserves in relation to their mortgage books.

ASIC is also investigating several banks for potential misconduct in relation to the bank bill swap rate, a measure used to set interest rates.

ASIC said Macquarie's client-facing banking operations breached the Corporations Act by failing to deposit money into designated client trust accounts and by making withdrawals that were not permitted from those accounts. "ASIC expects licensees to maintain strict controls and follow proper procedures in their handling of client funds,"ASIC commissioner John Price said.

A Macquarie spokeswoman said in an email that the bank"treats client money with the utmost seriousness and in self-reporting these incidents to ASIC took a conservative and consultative approach".

The KPMG review addressed all the problems which led to the breaches, the spokeswoman added.

Macquarie Group shares were up 0.4 per cent, while the broader market fell 0.6 per cent.

REUTERS