The prudential regulator has warned Westpac could face fines and disqualification of its senior management as it considers whether to launch action against the under-siege bank.
Under questioning during a parliamentary hearing on Monday, Australian Prudential Regulation Authority (APRA) chair Wayne Byres said the regulator would confirm by the end of the month whether it was launching proceedings under the Banking Executive Accountability Regime (BEAR) for 23 million money laundering breaches allegedly made by the bank.
Mr Byres said the obligations under BEAR were two-fold – one relates to the bank itself and its level of co-operation with APRA and the other is concerned with individual accountability.
The BEAR requires all deposit-taking institutions to lodge an “accountability map” to APRA declaring the names and responsibilities of senior management and executives.
“There are various people designated by Westpac as accountable persons – that broadly includes individual directors, the chief executive and by and large the next layer of group executives,” Mr Byres said.
“Each of those accountable persons has their own obligations under the BEAR regime – to act honestly, conduct their affairs with due skill and diligence and to make sure they don’t do anything that might unduly jeopardise the current standing of the bank.”
If these employees breach their “accountable persons” obligations APRA has the power to unilaterally disqualify that person by terminating their employment from the company or banning them from the industry altogether.
“The immediate onus is on the bank to make sure those people are appropriately held to account,” he said.
“But if there is a sense that it is not done efficiently or effectively, then there is an opportunity for APRA, if the circumstance is warranted or the behaviour is sufficiently serious, to seek disqualification of certain individuals.
“But it is important to note the [Westpac] breaches occurred by in large before the BEAR came in,” Mr Byres said.
The BEAR came into effect in February last year and is non-retrospective.
Consumer Action Law Centre chief executive Gerard Brody said that previously there was no avenue for bank executives to be held personally accountable for misconduct.
“The organisation might have got a fine or a civil penalty but it didn’t really come home to hit any of the people at the top who are making those decisions,” he said, adding the BEAR had changed this.
Westpac declined to comment.
APRA is one of three financial regulators circling Westpac in the wake of the scandal that has claimed the scalp of former chief executive Brian Hartzer and chairman Lindsay Maxsted. The Australian Securities and Investments Commission (ASIC) and AUSTRAC are also investigating the breaches.
Mr Byres said it was a challenge to make sure these regulators were not doubling up on work.
“We do need to be careful about not trying to run two cases on the same facts at the same time,” he said.
APRA’s deputy chair John Lonsdale said the regulators had ramped up efforts to increase collaboration, scheduling quarterly meetings that became daily towards the end of AUSTRAC’s investigation into Westpac.
The prudential regulator has also begun tightening its “twin peaks” relationship with corporate watchdog ASIC by more working closely on programs like the BEAR.
APRA and ASIC updated its 2010 agreement last Friday, with the regulators vowing to “strengthen engagement, deepen co-operation and improve information sharing”.
Parliamentary committee chair federal Liberal MP Tim Wilson signalled his support for APRA conducting a larger-scale inquiry into Westpac, as it did when the Commonwealth Bank faced its own bombshell lawsuit in 2017.
“APRA has said they’re considering their response to Westpac. APRA held a full and transparent review into CBA and it now seems the same is necessary for Westpac to rebuild the shattered public and investor confidence,” Mr Wilson told The Age and The Sydney Morning Herald.
Mr Byres said the CBA report was being used as a benchmark for other financial institutions, but compliance remained a big task.
“They are complex organisations, they have complex systems and they are constantly changing,” he said.
“Sadly and unfortunately even with the best will in the world, there will be things that go wrong.”