ANZ bank faces a record $240 million penalty for engaging in "unconscionable conduct" in some of its bond trading for the federal government, as well as "widespread misconduct" affecting nearly 65,000 retail customers.

The bank has agreed to the penalty with the Australian Securities and Investments Commission (ASIC), although it will require Federal Court approval.

ASIC said the settlement included $125 million for matters related to Australian government bond trading, where the bank misreported trading data and acted "unconscionably" while managing a $14 billion bond deal, which ASIC said had the potential to reduce the amount of funding available to the government.

The regulator said $115 million of the proposed penalty relates to customer failings.

ANZ failed to respond to hundreds

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