Westpac dumped from government home loan scheme

In what is turning into another very bad week for Westpac, Australia’s second largest bank is set to be barred from a lucrative opportunity.

Scandal-plagued Westpac was set to be one of the two major banks to offer mortgages under the federal government’s first home loan deposit scheme. Only National Australia Bank has been announced as one of the major banks for the program, which allows low- and middle-income earners to get financing without a large deposit.

But Westpac was axed as the other bank in light of the money-laundering allegations it is currently facing according to bank insiders, The Australian reports.

Meanwhile, Labor has called for the bank to face a federal parliamentary economic committee in light of the allegations.

Westpac has been dropped as one of two big banks in the government’s first home loan deposit scheme. Picture: Mark Metcalfe/Getty Images.

Westpac has been accused of 23 million money laundering breaches by Australia’s money-laundering watchdog AUSTRAC, including some which may have funded child exploitation in Southeast Asia.

Now the coalition government will have to choose from either Commonwealth Bank or ANZ to join the scheme with NAB, giving the banks get access to 5000 eligible first home buyers per year each.

NAB recently settled a $50 million class action by customers who were sold junk insurance products.

Applications to the scheme would have to be made directly to the banks and NAB has promised not to charge them interest rates higher than those not taking part.

Westpac CEO Brian Hartzer resigned this week. Picture: AAP Image/Lukas Coch.

The scheme allows home buyers to only put down a five per cent deposit on the loans, with the National Housing Finance and Investment Corporation guaranteeing the rest of what would normally be a 20 per cent deposit.

CALL FOR PURGE

So far, the scandal has claimed the scalps of Westpac chief executive Brian Hartzer, whose imminent departure was announced yesterday, and chairman Lindsay Maxsted, who will step down in 2020.

But now there are also increasing calls for more to be done.

Labor has called for the pair to front an inquiry into the crisis to discover how it arose in the first place.

Labor frontbencher Andrew Leigh, the deputy chair of the House of Representatives’ Economics Committee, told the Sydney Morning Herald the body should investigate Westpac’s breach in-depth.

“Westpac must answer for this unprecedented money-laundering scandal,” he told the publication.

SHAREHOLDER REVOLT

Peter King has been named as Mr Hartzer’s temporary replacement, but as he is due to retire in late 2020, uncertainty still remains.

The ongoing scandal has angered major investors and shareholders, with The Australian reporting a number of investors – including the Future Fund – are considering forcing a spill of Westpac’s entire board unless more senior heads roll.

Major players are also demanding iron-clad guarantees similar child exploitation crises won’t happen again.

According to The Australian, if more than one quarter of investors vote against the company in protest, a board-spill resolution would be on the cards in December.

THE SCANDAL

While Westpac’s troubles began with AUSTRAC’s charges, there were also a series of other factors which deepened the crisis.

Yesterday, The Australian published explosive claims surrounding comments Mr Hartzer allegedly made to senior staff in a top-secret meeting on Monday, including downplaying the situation by claiming it “is not a major issue” for the everyday Aussie, and that as a result,

“we don’t need to overcook this”.

It was described by ABC News Breakfast host Michael Rowland as “Brian Hartzer’s ‘Prince Andrew interview’ moment”.

After the alleged comments were leaked, Mr Hartzer’s departure was announced – as well as the fact he would walk away with $2.7 million, the equivalent of 12 months’ pay.

That news also angered the Australian public, with many questioning why he was receiving such a large sum following the catastrophe.

CHILD ADVOCATES SLAM CEO

Yesterday, child sexual assault groups slammed the “unforgivable” comments made by the outgoing Westpac chief executive that regular Australians didn’t have an issue with the scandal engulfing the beleaguered bank.

Bravehearts founder Hetty Johnston, who runs the organisation aimed at preventing child sexual assault, told news.com.au the comments were “unbelievable and unforgivable”, and said she had a heated discussion with Mr Hartzer at the end of last week after she revealed to the press Bravehearts would be cutting ties with Westpac.

She told him she wanted him to better understand the enormity of the issue by arranging for he and his board to meet victims of the crimes Westpac allegedly allowed its customers to partake in.

“I want to bring half a dozen kids into your boardroom and let your board members and yourself look into the eyes of these kids and tell them that it’s not a main street issue or people don’t care,” Ms Johnston said.

“I can’t even find words to describe how distressing that is.

“For me it’s devastatingly disappointing because you look to our industry leaders and corporate leaders as people who have so much responsibility around moral guardianship, and to see it treated so nonchalantly and with such disregard is quite devastating.”