SYDNEY (Reuters) - ANZ Group ( ANZGF ) on Monday agreed to pay A$240 million ($159.5 million), the Australian corporate regulator's largest-ever penalties against a single entity, following systemic failures ranging from acting "unconscionably" in a government bond deal to charging deceased customers.

"Time and time again ANZ betrayed the trust of Australians," Australian Securities and Investments Commission (ASIC) Chair Joe Longo said.

The penalties are a troubling milestone for Australia's fourth-largest bank, which last week announced 3,500 job cuts as new CEO Nuno Matos looks to improve profitability.

ANZ Chair Paul O'Sullivan told analysts and reporters on Monday the bank must make a significant change in the way it operates.

"In reaching this settlement we are acknowledging that we let our customers down and I apologise unreservedly," he said.

ANZ shares opened 1% lower but regained some ground to be trading off 0.35% by 0128 GMT.

Including Monday's announcement, ASIC has brought 11 civil penalty proceedings against ANZ since 2016, with total penalties exceeding A$310 million. ANZ has admitted allegations in each case, according to ASIC.

The latest settlement, requiring Federal Court approval, resolves five separate investigations across ANZ's Australian Markets and Retail divisions. Central to the violations was ANZ's conduct during a A$14 billion government bond issuance on April 19, 2023.

Instead of trading gradually to limit market impact, ANZ sold significant volumes of 10-year Australian bond futures around pricing time, placing "undue downward pressure" on bond prices while assisting the Australian Office of Financial Management's debt issuance, ASIC said.

The regulator added ANZ misled the government about trading turnover data for nearly two years - information used to select dealers for bond issuances.

"In the bond trading case, ANZ was in a trusted position and its conduct had the potential to reduce the amount of funding available to the government," Longo said, noting the funds were used for services such as the nation's health and education systems. "When public funds are put at risk, every Australian pays the price."

The government did not immediately respond to a request for comment.

SERIOUS MISTAKES

O'Sullivan said the bank did not act with bad intent, but it did make serious mistakes. It had carried out 50 "accountability reviews" on people involved in the markets trading business and some current and former staff had variable components of their pay impacted significantly, he said.

"The findings on our markets trading (business) ... are a clear example of why ANZ must transform its culture and way of working," he said.

O'Sullivan said the results of the pay changes would be in the bank's remuneration report released following the end of its financial year later this month.

Beyond bond trading, the violations revealed widespread customer service failures. Between July 2013 and January 2024, ANZ failed to pay promised bonus interest to new account holders due to system deficiencies.

More egregiously, from July 2019 to June 2023, the bank continued charging fees to thousands of deceased customers, unable to identify which fees should be waived or whether charges after death had been refunded.

"Today's announcement reinforces the fact that change is needed, and that we need to operate in a different way than in the past," Matos said.

"That's critical, and that demands we do fewer things much better. We are getting again the basics right."

ANZ said it would submit its remediation plan to the Australian Prudential Regulation Authority by the end of this month, expecting to spend A$150 million implementing reforms in the financial year ending September 30, 2026.

The bank previously fired or suspended traders from its markets business over the inappropriate conduct allegations.

($1 = 1.5047 Australian dollars)