Westpac chair Lindsay Maxsted laments ‘very disappointing statements’ from CEO Brian Hartzer

Lindsay Maxsted ‘disappointed’ to read in The Australian that CEO Brian Hartzer had downplayed the crisis.

Westpac chairman Lindsay Maxsted (left) and outgoing CEO Brian Hartzer. Picture: Colin Murty

Westpac chairman Lindsay Maxsted has revealed that chief executive Brian Hartzer handed in his resignation following criticism from the bank’s shareholders over its inadequate response to the Austrac scandal.

Mr Maxsted also said he was “very disappointed” to read the front pages of The Australian this morning where Mr Hartzer told senior managers the scandal was “not an Enron or Lehman Brothers”.

“They were very disappointing statements to read and clearly I and the board and all of Westpac do not agree with those statements in isolation,” Mr Maxsted said on an analyst call on Tuesday.

“All I’ll say in addition to that is the statements need to be read in context … that is not Brian’s views and certainly some of the words used there are definitely not Brian Hartzer’s views and definitely not Westpac’s views”.

“I was not at the meeting … Obviously having seen those quotes and I’ve inquired of Brian in what context or why he made those and he’s given me some context,” Mr Maxsted said.

“Over the past few days I have held discussions with many of our stakeholders, including shareholders. It was clear from these discussions there was an expectation we take decisions above and beyond the response plan we announced on Sunday,” Mr Maxsted told the call.

“The role of the board is to act in the best interests of the company and the shareholders. Today’s announcement reflects that.”

READ MORE: Westpac CEO Brian Hartzer quits over Austrac scandal | Golden handshake but CEO forgoes bonuses | Stay calm, this is no Enron, says Westpac’s Brian Hartzer

Mr Hartzer’s resignation comes six days after the financial intelligence agency, Austrac, took legal action in the Federal Court against Westpac over an alleged 23 million breaches of anti-money-laundering and counter-terrorism-financing laws, including financial transactions enabling child exploitation. Each of the breaches could attract a fine of up to $21m.

Mr Maxsted said the bank had no prior warning of the alleged breaches relating to child exploitation transactions ahead of Austrac’s legal action.

“We had no knowledge in advance of November 15, which was when we received an email from Austrac indicating they had issues relating to our payment systems into the Philippines through LitePay. That was the first time it was mentioned that there were 12 customers of particular concern to them.”

The board accepted the gravity of the issues raised by Austrac and was deeply remorseful, Mr Maxsted said.

Westpac shares climbed after the announcement, the stock gaining 1.1 per cent to $24.70 in early trading on Tuesday, after briefly rallying as high as $24.79. The jump follows a combined 8.8 per cent slump in the stock price since the financial crimes regulator launched legal action against the bank last Wednesday.

Mr Hartzer will step down on December 2 and be replaced by interim CEO Peter King. The global search for a new chief executive will begin after the lender’s annual general meeting on December 12, Mr Maxsted confirmed.

Mr King, who had been the bank’s chief financial officer, said he was personally committed to implementing “every aspect of the bank’s response plan”.

“We will carry out the work with diligence and speed and will provide updates on our progress. I would also like to pass on my deep sorrow for Westpac’s failings…The chairman has asked me to do the job and I will be here as long as the board needs me.”

Mr King had previously announced his plans to retire in 2020.

Mr Maxsted, who this morning announced he would bring forward his retirement to early 2020, will not be involved in the CEO search but he hoped internal candidates would “throw their hat into the ring”.

“Definitely the global search will include looking at internal candidates. We think we’re in a good position there and I’m hoping internal candidates put their hat into the ring for job. They certainly would be welcomed into the process,” he said.

He also flagged the board may consider appointing an external candidate to the post of chairman.

“In terms of the new chairman, that’s up to the board… but I suspect they’ll want to go to the market and see who else might complement the existing skill base.”

Westpac shares gained following the announcement that the bank’s CEO Brian Hartzer will resign. Picture: AAP