Westpac may have to raise funds to cover costs of dealing with child exploitation payments saga
The news only gets worse for Westpac’s more than half a million shareholders as it emerges their holdings could be further devalued by actions under consideration by a key regulator.
NSW
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Westpac’s 530,000 small-time investors face more pain with one regulator launching a new investigation into the paedophile payments scandal while another is deciding whether to make the bank raise more capital which would further undercut the value of each share.
In July, the Australian Prudential Regulation Authority (APRA) forced Westpac, ANZ and NAB to set aside $500 million each to fix problems with their operations.
It’s understood APRA is now in talks with Westpac and other authorities — as well as taking legal advice — on the possibility of issuing a decree that another large sum be reserved.
Earlier this month the bank said it would raise $2.5 billion from investors to deal with litigation and penalties. That was before the dirty money watchdog Austrac accused it of breaking the law 23 million times — including in relation to child exploitation — for which it could face a penalty of more than $1 billion.
If Westpac was ordered to further bolster its balance sheet that would mean additional pain for shareholders by increasing the number of shares on issue.
Westpac’s stock is down 15 per cent in less than a month, including a fall of 1.5 per cent yesterday in a rising market.
University of Wollongong prudential regulation expert Andy Schmulow said APRA should make the bank raise more capital to cover the continuing crisis.
It should also push for the heads of CEO Brian Hartzer and directors using the Banking Executive Accountability Regime, known as BEAR.
“APRA needs to be removing people from the board,” Dr Schmulow said.
The regulator made no comment yesterday.
Home Affairs Minister Peter Dutton yesterday said “Westpac banking bosses, through their negligence, have given a free pass to paedophiles. There is a price to pay for that and that price will be paid and we have been very clear about it.”
Westpac chairman Lindsay Maxsted on Sunday said it could sack Mr Hartzer if big investors demand it. Mr Maxsted is in direct talks with major shareholders ahead of the company’s AGM next month.
“We’ve got lots to work through on this one,” one of the top 20 investors in the bank told The Daily Telegraph yesterday. “There are plenty of questions.”
The Australian Securities and Investments Commission has also launched an inquiry that is likely to look at alleged failures by the board.