Banks

Australia's Westpac loses top two executives in money-laundering scandal

Key Points
  • Australia's Westpac Banking said on Tuesday its CEO will step down and its chairman will bring forward his retirement amid a money-laundering scandal.
  • "We sought feedback from all our stakeholders including shareholders and having done so it became clear that Board and management changes were in the best interest of the Bank," according to Westpac's chairman.
  • The departures make Westpac the third of Australia's four major banks to lose one or both of its top executives following scandals in a year-and-a-half.
A Westpac bank branch in Sydney, Australia.
Katharina13 | iStock Editorial | Getty Images

Australia's Westpac Banking said on Tuesday its CEO will step down and its chairman will bring forward his retirement as a money-laundering scandal rocks the country's second-largest retail bank.

The departures make Westpac the third of Australia's four major banks to lose one or both of its top executives following scandals in a year-and-a-half, underscoring the intense scrutiny on the country's financial sector.

It also demonstrates the power of political and investor pressure on the sector. Since the country's financial crime regulator accused Westpac of enabling 23 million payments in breach of anti-money laundering laws, including between known child exploiters, the prime minister has led calls for the bank's board to weigh the CEO's future.  

Westpac's shares edged up 1.2% in early trade on Tuesday, having slumped 8% over the previous four trading days since the regulator announced its lawsuit, wiping A$7.5 billion off the bank's market capitalization.

"We sought feedback from all our stakeholders including shareholders and having done so it became clear that Board and management changes were in the best interest of the Bank," Westpac Chairman Lindsay Maxsted said in a statement before the start of trading on Tuesday.

Maxsted confirmed he will bring forward his retirement to the first half of 2020.

For chief executive Brian Hartzer, the departure appears to be an abrupt change of course given that the previous day he cancelled end-of-year parties but assured staff "this is not a major issue", according to The Australian newspaper.

In interviews with local media at the weekend, Maxsted had said firing Hartzer during the crisis would be destabilizing for the bank.

Hartzer has been with Westpac for more than seven years, taking over as CEO and managing director in 2015.

Chief Financial Officer Peter King, who announced his retirement in September, will now take over as acting CEO of Australia's oldest bank, effective Dec. 2. The bank has an annual general meeting scheduled for Dec. 12.

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"I think it's welcome, I think it's appropriate," Health Minister Greg Hunt said on Sky News, minutes after the Westpac announcement. "The prime minister was absolutely clear when these revelations came out that the board had to reflect on the leadership."

Shadow treasurer Jim Chalmers welcomed the departure, which he said "shows that people need to be accountable for the behavior of companies under their leadership (and) clearly there has been a failure of leadership here."

A Westpac spokesman was not immediately available for a comment on Tuesday.

Finance sector casualties pile on

Hartzer's resignation is the latest in a long line of executive departures from the financial sector, which has been under heavy scrutiny since a bruising public inquiry found rampant profiteering in the industry. 

Larger rival Commonwealth Bank of Australia was accused of similar breaches by AUSTRAC in 2017, resulting in a record A$700 million penalty and prompting the bank to bring forward its CEO Ian Narev's retirement.

Financial planner AMP lost its CEO, chair and several board members during the Royal Commission inquiry over accusations of doctoring a supposedly independent report to a regulator, while wealth manager IOOF Holdings lost its CEO and chair over accusations in the inquiry of improperly using retiree money to prop up investment losses.

A separate legal action by a regulator found the IOOF bosses had not broken any laws.

In February, soon after the Royal Commission final report was published, the CEO and chair of No. 3 lender National Australia Bank stood down after being singled out in the document for failing to accept responsibility for the bank's wrongdoings.