Westpac Brian Hartzer: banks now have to ‘prove you didn’t do wrong thing’ and have backing evidence
WESTPAC boss Brian Hartzer says lenders are perceived as guilty in regulatory matters until they can prove their innocence.
“Banks are in a pretty dark place on a reputational standpoint,” Mr Hartzer told a Committee for Economic Development of Australia lunch in Brisbane on Monday. That dark place reflected problems when bank processes were inadequate and an environment in which the public viewed some big companies sceptically and the institutions were political targets, he said.
“We’ve gone from a world where policies, processes, products within banks have developed over many, many years, and … we’ve dealt with issues as they came up,” he said. “Now the standard has become: ‘You need to prove you didn’t do the wrong thing, and you need to be able to document that and you need to be able to show it in hindsight.’”
That occurred alongside compliance and technology requirements changing, and so banks were looking to fix any problematic processes, he said.
He was responding generally to a question about rival bank CBA and its leadership’s handling of an anti-money laundering lawsuit from regulator Austrac. Mr Hartzer declined to comment on CBA specifically.
Westpac is defending a case brought by the Australian Securities and Investments Commission over alleged breaches of home loan contracts between 2011 and 2015, including claiming the bank failed to properly assess if borrowers could meet repayments. It has since changed practices.
Mr Hartzer said banks had “inadvertently”made mistakes from time to time, but the overall idea “there’s a conflict between doing the right thing for your customers and making money is a myth”.
“It’s a very short-sighted way to think about running your business,” he said. “We want everyone to bank with us forever … then our shareholders will be really happy.
“If you take that as your goal, then you’re not going to make decisions to boost short-term profit and damage the long-term relationship.”
But sector scepticism remains, including whether sales were partially used in assessing overall bonuses for some bank staff. Westpac said sales targets had been removed for its 3300 teller staff.
It came as quarterly figures from Westpac showed it had reduced the flow of interest-only loans in the face of regulatory clampdowns. Interest-only loans represented 44 per cent of home lending, down from 52 per cent, and Westpac was “on track” to meet regulatory requirements of it being below 30 per cent in the September quarter.
Home loan delinquencies lifted two basis points to 0.69 per cent of the book, which Westpac said was “mostly from increased hardship associated with Cyclone Debbie”. Westpac shares closed up 1¢ at $32.22.