Westpac shares fell 5.4% to $26.24 yesterday, which contributed to the overall fall in the ASX 200 of 1.9% or more than $33 billion.
The stock went ex its final 94 cents a share dividend yesterday which knocked the shares lower (as a dividend payment always does).
But on top of that was the latest from a Federal Court case involving Westpac and regulator, ASIC.
ASIC and Westpac now have to start a court case all over again after the Federal Court rejected the bank’s offer to pay a $35 million settlement for contravening responsible lending laws.
ASIC had accused Westpac of breaching responsible lending laws for using a benchmark – the household expenditure measure (HEM) – to assess its customers’ ability to repay home loans.
Federal Court judge Nye Perram tore up the settlement between the parties on a technicality after finding ASIC and Westpac could not agree on exactly how, or how many times, the bank broke the law.
The decision by Justice Perram means it is back to taws for the case. ASIC will now have to re-litigate the case in the Federal Court, agree to a new settlement, appeal the matter to a higher court or drop the case altogether.
In throwing out the settlement on Tuesday, Justice Perram said: “I do not propose to make the declaration sought.”
In some 5041 instances, Westpac had used the HEM benchmark in preference of declared living expenses because they were higher than the benchmark, Justice Perram said.
“In these cases, the declared expenses were more than the HEM benchmark and, if those expenses had been used instead of the HEM Benchmark, a flag would have been triggered and the customer’s application would not have been approved without referral to manual assessment,” Justice Perram said.
“What would have happened after that manual assessment the parties have not told me. Nor have they told me whether any of these 5041 loans were, or were not, suitable for the borrowers.”
The case returns to court on November 27.
