Australia’s second largest bank Westpac believes the $900 million it has set aside for an eventual settlement with financial regulator AUSTRAC over breached anti-money laundering laws is adequate.
Westpac boss Peter King told federal MPs the bank has admitted to a substantial majority of breaches and it continues to work with AUSTRAC.
“It remains our preference to settle the matter,” Mr King told the House of Representatives economic committee on Friday.
“Ultimately it is the court that decides on the penalty.”
Deputy chair of the committee and Labor MP Andrew Leigh wondered why the bank thought $900 million would be adequate to cover the fine when he understands the financial regulator is looking at a potential $1.5 billion.
Mr King said he had read such numbers in the media but didn’t know the source of them.
“Based on our review of the matters we have determined that $900 million was the right provision,” he said.
It was Mr King’s first appearance as CEO in front of the committee after taking on the role in April.
On the economy, he said the June quarter was certainly a tough one, with a seven per cent contraction.
“We think from here it should improve,” he said.
But he said the outlook for unemployment was more complicated when taking into account government support, but the bank was looking at a peak of eight per cent compared with 7.5 per cent now and just more than five per cent at the beginning of the crisis.
The Reserve Bank is looking at a jobless rate of 10 per cent by the end of the year.
On house prices, the bank expects they will fall 10 per cent because of the COVID-19 crisis from a starting point in April. Prices have already declined three per cent.
Mr King said the bank intended to move away from “broad packages” to assist customers during the pandemic and towards more individual tailored arrangements.
He said at the peak, the bank provided mortgage deferrals worth $50 billion to assist clients during the initial lockdown across the country.
This is now down to about $30 billion after some 50 per cent of these customers indicated they will start repayments again.
“However, we know there are still many customers who are finding it tough,” Mr King told the committee.
“Our message to customers needing more support is contact us early.”
In July, the Westpac announced deferrals would extend beyond the initial six-month period.
“Over time you will see us move away from broad packages to more individual tailored arrangements, as we work with customers who need longer term support,” he said.