Westpac compliance spend rises $47m, profit drops 15%

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Westpac’s annual profit may have taken a dive, but Australia’s second largest bank isn’t scrimping on GRC.

Overall, the Westpac group’s statutory net profit for the 2011/12 financial year came in at $5.97bn – a 15% annual drop that was attributed largely to the previous year benefitting from one-off St George tax consolidation.

Westpac’s full year results document reveals that $210m was spent on projects relating to regulatory change and compliance, which was an increase of $47m on the previous year and contributed to an overall increase in expenses of 2%.

“A number of the projects delivering these changes have moved to implementation phase over the past 12 months, including National Consumer Credit Protection, Personal Properties Securities Reform, Cooper Superannuation Reforms, Future of Financial Advice Reforms (FoFA), Basel III, elements of US Dodd-Frank legislation and OTC Derivatives,” said the document.

Significant capabilities delivered included:

  • Successful implementation across all brands of system changes addressing responsible lending and credit card requirements under National Consumer Credit Protection;
  • Implemented government requirements to make it easier for customers to move their transaction or savings accounts between banks, by facilitating an easy switch of their direct debits and credits to a new bank;
  • Enhanced Anti-Money Laundering capability;
  • Establishment of a single personal property securities register providing a national view of assets and securities. Security documentation has been simplified to reduce paper and provide the customer with easier to understand legal documents. Registrations will occur directly and more accurately, potentially leading to faster and cheaper settlement and less re-work;
  • Implemented changes to enable GST to be charged on the entire amount financed under all hire purchase agreements in compliance with changes to tax legislation;
  • Established the infrastructure to improve the settlement of low value payments, to provide better visibility enabling same-day settlement of low value payment obligations;
  • Enhanced analytical and assurance capabilities for financial advisers; and
  • Enhanced insurance risk management frameworks enabling more accurate measurement, management and pricing of risk resulting in improved risk based decision making, all in line with new regulatory requirements.

When it came to one of the group’s business objectives – “Consideration of Environmental Social and Governance (ESG) issues incorporated into relevant risk management policies, practices and decision making processes by 2013” – the following update was issued:

“In Full Year 2012, the Group's ESG Risk Management Framework, ESG Credit Risk Policy and suite of position statements were reviewed and updated to ensure that ESG considerations are embedded more consistently across the Group’s activities. ESG risk management training sessions were also conducted during Full Year 2012 for risk and credit managers.”

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