Westpac chief Brian Hartzer to step down in wake of scandal

Westpac chief executive Brian Hartzer will step down and chairman Lindsay Maxsted will leave the board early, as the country's oldest bank is engulfed by a money laundering scandal.

In the face of fierce political pressure over bombshell allegations the bank failed to properly vet thousands of payments linked to child exploitation, Mr Maxsted on Tuesday said Mr Hartzer would be stepping down from Monday.

Chief financial officer, Peter King, will act as CEO as the board seeks a long term replacement. Long-serving Westpac board member Ewen Crouch, chair of the bank's risk and compliance committee, will also bow to a likely shareholder protest vote and not seek re-election to the board at Westpac's annual general meeting next week.

Mr Hartzer’s exit and board changes come after days of mounting pressure from investors for accountability over a money laundering compliance scandal that was triggered by a lawsuit from the financial intelligence agency, AUSTRAC.

Westpac said Mr Hartzer had been given 12 months notice and would be paid $2.68 million over this period. Mr Hartzer will forfeit performance share rights that were potentially worth up to $20 million if they had vested, which would have required meeting performance targets.

Westpac also said Mr Hartzer would not be eligible for short-term bonuses in 2020 or 2021.

Westpac chief Brian Hartzer is stepping down from the bank. Credit: AAP

"As CEO I accept that I am ultimately accountable for everything that happens at the Bank. And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves," Mr Hartzer said in a statement to the ASX.

In Mr King, the bank has opted for a Westpac veteran, who has spent more than 25 years at the lender and is well regarded in the financial markets. In September this year, Mr King had announced he would be retiring from Westpac, giving 12 months notice, but Westpac on Tuesday said he would stay until a long-term replacement for Mr Hartzer is found.

Peter King, currently chief financial officer, will act as CEO as the board seeks a long term replacement.Credit: Louie Douvis

"The Board accepts the gravity of the issues raised by AUSTRAC," Mr Maxsted said in the statement.

"As was appropriate, we sought feedback from all stakeholders including shareholders and having done so it became clear that Board and management changes were in the best interest of the Bank."

"Brian leaves the bank with a strong balance sheet, with each of our businesses number one or two in their markets," he said.

Mr Maxsted has been the bank's chairman since 2011.

The bank’s announcement did not say who would be its next chairman. It comes two days after Mr Maxsted gave Mr Hartzer his strong backing, with the caveat that the CEO would leave if it was destabilising for him to remain in the top job.

Mr King will be paid fixed remuneration of $2.1 million a year, with a short term bonus target of $2.1 million and an annual long-term incentive of up to $2.8 million.

The bank was thrown into crisis last week by a regulatory lawsuit that says it breached anti-money laundering laws 23 million times, including failing to adequately vet thousands of payments potentially linked to child exploitation.

The Australian Securities and Investments Commission (ASIC) on Monday took the unusual step of publicly confirming it had started looking into possible breaches of laws it administers — most likely a reference to the Corporations Act.

Westpac chairman Lindsay Maxsted also announced he will bring forward his retirement as chairman to the first half of 2020.Credit: Wayne Taylor

Confirmation of the ASIC investigation came a day after the Australian Prudential Regulation Authority (APRA) said it too was investigating the bank.