While the board had backed Mr Hartzer over the weekend in the face of fierce political pressure, Mr Maxsted met key investors and governance advisers on Monday and was told the bank needed to show more accountability over the crisis.
“What happened from Friday until early yesterday evening was that it became very apparent to me and the rest of the board that the best interest of the company was to go down this particular route, and that’s what we’ve done,” Mr Maxsted said on Tuesday.
Peter King, a 25 year veteran of the bank, will replace Mr Hartzer who has been CEO since 2015. As the bank attempts to avoid a shareholder revolt at its annual meeting in two weeks, the chair of the board’s risk committee, Ewen Crouch, also said he would no longer stand for re-election.
In a sign of the ongoing pressure on Australia’s second largest bank, Labor is demanding the House of Representatives’ Economics Committee call Westpac executives to learn more about its handling of the scandal.
The committee took evidence from Mr Hartzer and Mr King a fortnight ago as part of its oversight of all banks and their response to recommendations out of the financial services royal commission.
The committee’s deputy chair, Labor frontbencher Andrew Leigh, said the committee should use its powers to look more deeply at Westpac’s handling of the scandal.
“Westpac must answer for this unprecedented money-laundering scandal,” he said.
Treasurer Josh Frydenberg sought to assure Westpac customers that despite the turmoil at the top of the bank, the lender would remain financially solid.
“These are going to be pretty difficult days not just for board and management but for thousands of employees across the country,” he said.
“It [Westpac] will get through it and it will continue to play a vitally important role in our economy. I don’t think it will compromise Westpac’s ability to continue to be an important financial service provider in this country.”
Mr Hartzer’s fate was sealed at a board meeting that stretched past midnight on Tuesday morning at the bank’s Kent St headquarters in Sydney. On Monday Mr Maxsted had met with various investors including a key governance adviser, Institutional Shareholder Services, and the country’s biggest superannuation fund, AustralianSuper.
A bank source, who did not want to be named because they were not authorised to speak publicly, said some investors had wanted Mr Hartzer to stay in the job. But there was a concern the crisis was having a destabilising effect on the banking giant.
Mr King on Tuesday vowed to push ahead with a review into how the bank managed to breach anti-money laundering laws – allegations that could lead to a record fine and have already sparked two separate inquiries from powerful financial regulators.
“The chairman has asked me to do the job, and I will be here as long as the board needs me. Stability of the company is very important,” said Mr King, who had given notice to retire before the crisis erupted.
Westpac said Mr Hartzer had been given 12 months notice and would be paid $2.68 million over this period. Mr Hartzer will also forfeit performance share rights that were potentially worth up to $20 million if targets had been met, and he will not be eligible for short-term bonuses in 2020 or 2021.
Mr Maxsted re-iterated the bank’s “deep remorse,” and said it was “unbelievably repulsed” by its alleged failure to upgrade its transaction monitoring in the way suggested by Austrac. He said the payment system at the heart of the child exploitation allegations did have “protections,” but the bank was disgusted that its lapses had allegedly facilitated payments linked to child exploitation.
“Please don’t think that this bank has sat on its hands and had no attention to these matters. The actual evidence is that it’s the exact opposite,” he said.
Business Council chief executive Jennifer Westacott backed the upheaval within Westpac’s executive ranks, saying it would “clear the air” around the bank. But she cautioned against a new round of “bank bashing” as this could restrict the flow of credit to businesses and individuals.
Clancy Yeates is a business reporter.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra