The Westpac chief executive Brian Hartzer has resigned and chairman Lindsay Maxsted will step down early following the money-laundering scandal involving allegations the bank failed to stop transactions with the Philippines involving child exploitation.
Hartzer will be paid $2.69m for doing nothing for the next 12 months while serving out his notice period, the bank said in an announcement to the ASX on Tuesday morning.
He will not get a short-term bonus this year and will lose any long-term bonuses that have not already vested, Westpac said.
Pressure had been mounting on Hartzer and Maxsted to quit since last Wednesday, when the financial intelligence agency Austrac launched legal action accusing the bank of more than 23m breaches of anti-money laundering and counter-terror finance laws over more than $11bn in transactions.
The most damaging allegations revolved around Westpac’s alleged failure to monitor customers sending money to the Philippines and other locations in south east Asia in a way consistent with child exploitation.
Austrac’s allegations sparked investigations from the federal police, the corporate regulator and the prudential regulator, the announcement of a potential class action, a warning of a possible ratings downgrade from Moody’s and pushed Westpac’s share price down four days running.
Hartzer, who last week promised he would stay and “fix” the problem, will finish next Monday and chief financial officer Peter King will become acting chief executive, Westpac said.
“As CEO I accept that I am ultimately accountable for everything that happens at the bank,” Hartzer said. “And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves.”
Maxsted, who has been on the Westpac board since 2008 and chairman since 2011, said he would “bring forward his retirement as chairman to the first half of 2020”.
Ewen Crouch, who has been on the board since 2013, will not seek re-appointment at the company’s annual meeting on 12 December.
Crouch was listed on the AGM notice paper as up for re-election alongside Nerida Caesar, who has been on the board for two years, and Peter Marriott, who has served six years.
Westpac will also abandon a motion calling for shareholders to approve long-term bonuses for management.
The moves come after a week of steadily increasing pressure from politicians, including a threat from the treasurer, Josh Frydenberg, that the board could be disqualified. The bank held crisis meetings with major investors on Monday.
Class action shareholder lawsuits are also likely, with law firm Phi Finney McDonald first to announce it was investigating the bank on Monday.
Hartzer is reported to have told staff during a meeting on Monday that the crisis was “not an Enron or Lehman Brothers” and was not resonating with ordinary Australians.
“For people in mainstream Australia going about their daily lives, this is not a major issue so we don’t need to overcook this,” he was quoted as saying in the Australian.
He also reportedly cancelled the bank’s Christmas party.