SYDNEY (Reuters) – Australia’s banking regulator will use its increased investigative powers for the first time to examine whether Westpac Banking Corp (WBC.AX) directors and executives broke the law as part of the bank’s money laundering scandal.
Westpac will be required to hold an extra A$500 million ($339 million) in capital after the Australian Prudential Regulatory Authority (APRA) announced an investigation into the bank’s alleged money laundering breaches.
Westpac shares were down 1.2% in early afternoon trade on Tuesday, while the broader ASX200 was 0.1% higher.
Bell Potter analyst TS Lim said that while the APRA capital changes could be absorbed by the bank, the investigation would be a further distraction for its executive team.
“The bigger issue is that Westpac will be reviewing the risk practice at the same time that the bank is going to be transitioning to a new chief executive,” he said.
In a research note to clients, Macquarie analyst Victor German said Westpac’s increased “compliance and regulatory expenses will continue to weigh on earnings in the short to medium term” as the bank worked through the AUSTRAC claims.
APRA said in a statement the lender would now need the extra capital to “reflect the heightened operational risk profile of the bank”.