Westpac shares trailed the wider markets and its three peers – ANZ, NAB and Commonwealth – yesterday in the wake of the moves by ASIC to take the bank to court over claims it rigged a key money market interest rate from 2010 to 2012.
The shares ended down 1.5% at $28.68, after being down 2.3% earlier in the day.
The shares in the CBA, NAB and ANZ all ended mixed – the NAB and CBA had small losses and the ANZ was the only major to rise – up 0.3% to $22.55 – perhaps its investors were glad to be sharing ASIC’s ire with Westpac.
A widespread sell-off in bank stocks across Europe and the US on Tuesday night didn’t help sentiment among the banks.
Westpac has promised to defend itself against the ASIC charges, with CEO Brian Hartzer strongly denying ASIC’s allegations. Westpac joins the ANZ in the sights of the ASIC over similar claims.
But Westpac’s board and management, which celebrated its 199th birthday yesterday, had to stand and listen to Prime Minister Turnbull issue a lecture on bank culture – an issue that saw a number of current and former bankers get all hot under the collar at a finance conference on Tuesday in Sydney.
In his speech, the Prime Minister directly rebuked Australia’s banks, declaring there have been “too many troubling incidents over recent times” at Australia’s financial institutions and reminding them of the social licence they have to operate.
He has called on the leaders of Australia’s major banks to "stand up and show real leadership" over the "cultural issues" facing the sector and warned the "good name and reputation" of banks are at risk.
In a strongly worded speech, Mr Turnbull said banks were businesses “unlike any other" and that the "singular pursuit of an extra dollar of profit … was simply wrong".
Westpac is alleged to have rigged the Bank Bill Swap Rate (BBSW) 16 times between 2010 and 2012 – the ANZ is claimed by ASIC to have attempted to rig the BBSW on 44 days.
The bank bill swap rate is the primary interest rate benchmark used in Australian financial markets to set rates for business and commercial loans.
Mr Turnbull reminded the major banks the federal government had provided “vital support” to them in the GFC, saying that Australians understood at the time the necessity of keeping Australia’s banking system operating.
"We expect our banks to have high standards, we expect them always rigorously to put their customers’ interests first, to deal with their depositors and their borrowers, those they advise and those with whom they transact, in precisely the same way they would have them deal with themselves. This is not idealism, this is what we expect," he said.
"When Australians asked whether the major banks had done enough in return for that support by living up to legal and community standards "wise bankers such as your leaders [at Westpac] recognise these questions are legitimate. Dismissing them as bank bashing misses the point.
"I make no comment about specific cases, or any specific institutions including where claims of wrongdoing have been disputed. But we have to acknowledge there have been too many troubling incidents over recent times for them simply to be dismissed.
"The truth is that despite the public’s support offered at their time of need, our bankers have not always treated their customers as they should. Some, regrettably, as we know have taken advantage of fellow of Australians and the savings they have spent a lifetime accumulating.
"Wise bankers understand that banks need to very publicly demonstrate that their values of trust, integrity, placing the customers first in every way, they must be lived and not just spoken about,” he said.
Mr Turnbull said it was time banks recognised that remuneration and internal promotion should no longer solely be judged on direct financial contributions to a bank’s bottom line.
“The singular pursuit of an extra dollar of profit at the expense of those values is not simply wrong but places at risk the whole social licence, the good name and reputation upon which great institutions depend," he said.
