BoQ backs Temenos amid claims software provider selling ‘vapourware’

Lucas BairdReporter

Mar 11, 2024 – 2.46pm

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Bank of Queensland is standing by Temenos, the embattled Swedish provider of software to financial services firms, after it was accused by an activist investor of selling “vapourware” to Australian lenders.

Nate Anderson’s Hindenburg Research alleged the company had employed aggressive accounting practices and had sold faulty software to local lenders including Judo Bank, BNK and MyState. Shares in Temenos have fallen some 25 per cent to 66.24 Swiss franc ($114.05) in the weeks since the report.

BoQ confirmed it “leverages Temenos primarily for core banking services”. Dan Peled

Temenos has denied the allegations, but has still launched an independent review into the matters raised by Hindenburg.

While unmentioned in the Hindenburg report, BoQ and its subsidiaries ME Bank and Virgin Money are the largest customers of Temenos in Australia, with a multiyear strategy first implemented in 2021 hanging on its software.

BoQ confirmed it “leverages Temenos primarily for core banking services” and that its digital bank utilised the firm’s banking-as-a-service platform.

“BoQ has been in contact with Temenos about the allegations raised,” a spokesman said. “We are satisfied with Temenos’ response to conduct an independent investigation.

“The services provided by Temenos have been reliable and stable, and they continue to be an important partner in our digital transformation.”

Among the allegations raised by Hindenburg was that Temenos software was responsible for BNK’s failure to properly submit data to regulators, earning it a $250,000 fine, and costing the junior lender “$100 million worth of lost opportunity”. At Judo, Hindenburg’s sources said it sold “vapourware”, denoting software that was long in development but undelivered.

APRA, AUSTRAC issues

BoQ has also been at the centre of its own regulatory issues – the Australian Prudential Regulation Authority slapped it with extra capital requirements totalling $50 million and AUSTRAC forced the bank into a court-enforceable undertaking due to issues with its risk and compliance systems – but denied that Temenos was related to these issues.

“The enforceable undertaking and remedial plans entered with both APRA and AUSTRAC are not related to Temenos,” a BoQ spokesman said.

“There were no fines given by the regulators in this process, noting as part of the enforceable undertaking BoQ is required to hold an additional operational risk-capital add-on until the remedial action plan is complete, as disclosed at the time.”

It also denied delays in the integration of ME Bank, which ran a year longer than anticipated, were related to problems with Temenos’ software.

While Judo and MyState have not made any comment on the Temenos issue, BNK said it took full responsibility for the issues that led to its APRA fine but would not say whether it would continue to do business with the Swedish company.

“We maintain an active, engaged, and collaborative partnership with Temenos,” a spokeswoman said. “While we are committed to optimising our strategic partnerships for long-term success, we will naturally consider all options open to us if we see potential benefit.”

BoQ shares were trading 0.6 per cent lower on Monday at $6.18.

Lucas Baird is a journalist based in The Australian Financial Review's Sydney office. Connect with Lucas on Twitter. Email Lucas at lucas.baird@afr.com