ASIC allegations don’t suggest cultural problem: Westpac

by Miklos Bolza09 Mar 2017
Brian Hartner, chief executive of Westpac, has faced up to the House Economics Committee in its inquiry into the four major banks.

Responding to question from committee chair and Liberal party member David Coleman around the various allegations from the Australian Securities & Investment Commission (ASIC) about the bank, Hartner praised the regulator saying that it was “very active”.

For a lot of the issues raised by ASIC however, Westpac approached ASIC of their own accord, he said.

“We went to ASIC and said there’s been a mistake,” Hartner told Coleman, which was a sign of a “healthy culture” for risk management.

Where there were disputes, including over allegations that Westpac gave inappropriate home loans to borrowers, this was merely around how to apply the law. There was “no suggestion of a cultural problem,” he said.

When Coleman pointed out that the volume of allegations against Westpac was notable, Hartner responded saying, “I’d like it to be none.”

Housing market trends

Labor MP Matt Keogh brought up the rising cost of housing in Sydney and Melbourne which Hartner agreed was “very high”.

He hesitated to say that Australia was in a bubble however, defining a bubble as something credit-fueled and speculative, driven by an expectation that housing prices will always go up. The current situation in Sydney and Melbourne was instead driven by “significant supply constraints,” he said.

When looking at trends in the housing market, Hartner said that Westpac took a very granular approach where the bank knew its exposure of “every single building” in Australia.

While there has been a “significant ramp up in construction,” this mostly targeted foreign buyers who accepted lower levels of building quality than locals, Hartner said. While this could create a “potential glut,” these buildings would eventually end up clearing albeit at a slower rate than anticipated.

Responsible lending & the regulators

Keogh then moved onto responsible lending guidelines implemented by the Australian Prudential Regulation Authority (APRA), saying that blanket rules could damage an individual’s home loan refinancing opportunities. Instead, this should be examined on a case-by-case basis.

Hartner agreed, saying there were dangers in the regulator’s current prescriptive approach. However, he added that Westpac was having an “evolving conversation” with APRA around this.

One of the issues that Westpac was concerned about was regulators expecting the banks to manage their credit policies in one particular way.

“We’re not sure that’s the right answer,” Hartner said.

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