Westpac has admitted that it was the unnamed bank cited as considering passing on a bank levy to its customers instead of allowing its shareholders to soak up the drop in profit margins.
This is according to Westpac CEO Brian Hartzer, who appeared at the Parliamentary Committee this Thursday as politicians hauled in executives of major banks to face questioning for the financial misconduct unearthed by the Royal Commission inquiry.
Hartzer said that Westpac floated the idea of passing the levy onto bank staff as he answered inquiries about malpractice in lending culture over the last few years before the exposure of the scandals.
The Australian Competition and Consumer Commission (ACCC) said in a report back in March that it had evidence of one of the Big Four banks compiling plans to pass on the cost of this new levy onto either customers or staff.
The ACCC carried out an inquiry last year after noticing concerning results in mortgage pricing when the government implemented a levy of 0.06% on the liability of banks, which should raise billions over the next few years.
The commission investigated the Big Four’s reaction to the changes made in the 2017 federal budget. Westpac said that the levy would cost $370m annually and that it would have to deliver out-of-cycle mortgage rate hikes as a result.
The ACCC became particularly irate while compiling its report when it discovered that one of the big banks had made clear that its shareholders would absorb the levy but planned to change its stance and look at how to pass the costs onto consumers and staff after the report concluded.
At the time, Westpac was under suspicion as being the bank in question for this behavior, and Hartzer admitted that this was likely to be the case. Talking about the levy, he said that “it was a very significant increase in costs, understandably our product teams looked at options about how to deal with that extra cost.”
He did, however, state that despite the ACCC’s accusations, Westpac’s idea “may have been put in a paper, it was not an option I have considered.”
Stating that he believed that Westpac did not actually carry out this plan in any form despite its considerations, Hartzer said that the bank had “not sought to recover the costs from customers nor do we have any intent to do so at any time.”
While Westpac would have looked at the possibility, according to Hartzer, its first half earnings lift suggests that it found another way to alleviate any issues from the levy.
Hartzer also apologized for Westpac’s misconduct unearthed by the Royal Commission inquiry, but he issued caution as to how heavy-handed the bank’s response would be.
He said that any “regulatory changes that impact how much individuals can borrow” as well as business borrowing rates, credit availability and “affordability of suitable financial advice” should go under sufficient consideration before any action occurs.
Warning against a “tick-the-box approach,” Hartzer responded to accusations by some MPs that he was promoting more deregulation. He maintained that he was not creating a list of tasks to carry out just for the sake of it, as this would stifle natural market processes.