Belated reckoning for Australian banks

Westpac chairman Lindsay Maxsted (left) and CEO Brian Hartzer at the company's 2018 annual general meeting. Picture: Colin Murty

Fines and remediation costs payable by the big Australian banks is tipped to at $10 billion, compared to $US321 billion paid by US banks since the GFC.

This tells you that actions like the Austrac case against Westpac are just the beginning and the Australian banking oligopoly is just playing catch up.

Welcome to reality.

From an investment perspective it tells you to avoid the banks for a while, as shown by Westpac’s 12 per cent underperformance this year. Only ANZ’s 14 per cent underperformance was worse.

READ MORE: ‘Child risks’, 23m breaches: Westpac sued | PM ‘appalled’ by bank allegations | Allegations aimed at the top

Westpac’s Brian Hartzer has been the staunchest protector of all the banks being the only one to stand up to ASIC in the early days of the BBSW case.

He was vindicated in that move but when the bank you are working for has allegedly committed 23 million offences against the anti-money landing laws and is accused of allegedly facilitating child exploitation, it’s in a different league.

The charges are yet to be proved but paragraphs 27 and 28 in the Austrac statement of claim relating to child exploitation are reminiscent of the infamous page 411 in the Hayne royal commission’s final report singling out NABs Ken Henry.

Westpac reported some of the suspicious transactions to Austrac but the regulator is concerned at how long it took. The bank also concedes delays in switching on the international financial transactions instructions to correspondent banks.

In short while just the start of court proceedings, this is a snafu of major proportions for Hartzer.

The bank disclosed the potential action so market reaction is limited, but the fact is the Australian banks which once prided themselves for surfing through the GFC are now waking up to the reality which hit their US comrades at the time.

Regulators have been let loose and are keen to show their potential. Meanwhile, the economy is barely moving and the bottom line for the big banks that is it’s going to be a tough few years.