ASIC fines Westpac $113m for longstanding matters

Rick Steves

The penalties for each of the proceedings reach a total of $113 million, subject to court approval. Westpac has substantially provisioned the penalties in the bank’s Full Year 2021 results.

Australia’s Big Four banks risk losing AUS$13 billion

Westpac has settled with the Australian Securities and Investments Commission to longstanding matters, ending up paying $116 million to the regulator.

The six separate charges were resolved through agreed civil penalty proceedings filed in the Federal Court of Australia.

According to ASIC, these matters follow regulatory investigations, many instigated following the issues being self-reported by Westpac, including some which were raised during the Royal Commission.

The majority of affected customers have been compensated, and any remaining payments will be completed as quickly as possible, the financial watchdog added.

“As flagged, we have been working to resolve a number of outstanding regulatory matters before the Bank. We have cooperated with ASIC through the investigations and the process to get to this resolution today”, Westpac Chief executive Peter King said. “This outcome is an important step forward for us as we continue to fix issues and build stronger risk foundations.

“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us. The issues raised in these matters should not have occurred, and our processes, systems and monitoring should have been better. We are putting things right and unreservedly apologise to our customers”, King added.

The penalties for each of the proceedings reach a total of $113 million, subject to court approval. Westpac has substantially provisioned the penalties in the bank’s Full Year 2021 results.

Criminal proceedings for insider trading underway

In May, ASIC launched criminal proceedings against Westpac for insider trading, unconscionable conduct and breaches of its licensing requirements.

This is in relation to the role of the bank in the execution of a $12 billion interest rate swap transaction of AustralianSuper and a group of IFM entities.

In September 2016, the Consortium submitted a bid to buy controlling stake in Ausgrid from the New South Wales government.

Once this bid had passed scrutiny and other due diligence, a special purpose vehicle was formed to complete the transaction and other formalities and Westpac was engaged for the same as debt funding was required.

But this debt of around $12 billion had floating interest rates and had a repayment period of over 10 years. In order to hedge this risk of floating interest rates by buying interest rate swaps which would effectively nullify this risk and make it similar to a fix interest rate debt.

The allegation against Westpac is that on 20th October 2016, the agreement was signed between the Consortium and the NSW government at 7 AM and by 8.30 AM, Westpac somehow had the knowledge that the interest rate swap would come to it. So, when the markets opened at day, it took the appropriate positions in order to illegally benefit from the execution of this swap.

ASIC said that this knowledge was not available to the rest of the market participants at that time and hence this wasnt a level playing field as far as the market and its participants were concerned. This also meant that the execution of such large positions at that time had impacted the market prices of that interest swap. These actions were illegal as it had been done with insider information, ASIC deemed.

The actual interest rate swap was executed by the Consortium at 10:27 AM on the same day. Westpac had not informed the Consortium that it had pre-positioned itself in anticipation of this swap being executed and ASIC decided that this amounted to an unconcionable conduct.


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