The Treasurer noted financial services contributed 10 per cent of Australia’s gross domestic product.
“It is a vitally important sector to our economy and we need to continue to ensure that they uphold the highest standards of professionalism,” he said.
Mr Frydenberg said he made clear how seriously the government viewed the allegations in discussion with the bank’s leadership prior to its decision on Monday night. The alleged breaches include not properly monitoring or having proper systems in place to detect money laundering, counter-terrorism financing and child exploitation.
“These issues develop a momentum of their own but there needed to be accountability,” Mr Frydenberg said in Canberra. “These alleged breaches are of the most serious nature.”
But he confirmed some Westpac executives were likely to be spared from tough new laws passed last year that gave the banking regulator stronger powers to dish out big fines and bans. The Banking Executive Accountability Regime (BEAR) laws were introduced in 2018. Westpac’s breaches date back to 2013.
Mr Frydenberg said he had been briefed by Australian Prudential Regulation Authority chief Wayne Byres. He said the BEAR did apply “to some elements of these issues” but added “it is not retrospective, so he is working that through with members of his team”.
Mr Frydenberg said there was “a systemic failure” at the bank but would not comment on whether executives should be docked part of their remuneration. He said that was a matter for shareholders.
Westpac’s board on Sunday said it would withhold bonuses from all of its senior executives as an “interim” measure in response to the scandal. Mr Hartzer will be eligible for his $2.7 million salary but will lose up to $20 million in bonuses. His resignation is effective immediately. Mr Maxsted will leave the board early, retiring in the first half of next year.
Chief financial officer Peter King will act as CEO as the board seeks a long-term replacement.
Reserve Bank of Australia deputy governor Guy Debelle, speaking at a conference in Canberra on Tuesday, backed the approach taken by regulators against Westpac. He said the move by the bank board could not be a surprise.
“It looks like to me the response that you would expect given the nature of the allegations that are on the table,” he said. “The allegations are very disturbing and serious.”
With Clancy Yeates
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.