Westpac Bank: Overview, Impact of Federal Government's New Levy, and Misconduct in Consumer Lending

Running head: LEGAL ASPECTS OF INTERNATIONAL BUSINESS AND ENTERPRISE
LEGAL ASPECTS OF INTERNATIONAL BUSINESS AND ENTERPRISE
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1LEGAL ASPECTS OF INTERNATIONAL BUSINESS AND ENTERPRISE
Introduction
Westpac, one of Australia’s major banks have been executing its business aligning the
commitment to sustainable business practices. The bank further establishes the conduct to attain
one of the leading positions in Australia’s financial domain (Westpac.com 2018). For Westpac
bank sustainability has been considered as a varied approach of exhibiting its efficient financial
services and further managing risks as well as opportunities in a way which balances the long
term requirements of all its stakeholders (Westpac.com.au 2018). The following paper evaluates
the overview of the bank by further highlighting the factors which have been impacting its
services and affecting the operations of the company.
Answer 1
Westpac Banking Corporation known as Australia’s first bank and oldest organization is
identified as one of the major banking organizations operating in Australia and one of the largest
banks in New Zealand. Westpac aims to provide a wide range of consumer, business along with
institutional banking as well as wealth management services through a portfolio of financial
services brands and businesses (Westpac.com.au 2018). Westpac offers diverse banking and
financial services in Australia, New Zealand, and the Pacific region as well as in other
international regions. The bank primarily executes its operations through five vital divisions
namely Consumer Bank, BT Financial Group, Westpac New Zealand, Westpac Institutional
Bank and BT Financial Group (Westpac.com 2018). With revenue of approximately
A$ 21.642 billion and a net income of over A$ 8.012 billion as estimated in 2015, the bank
comprises over 34,500 employees in Australia and around 6000 in New Zealand and over 100
employees engaged in its Pacific division (Westpac.com.au 2018).
Answer 2

2LEGAL ASPECTS OF INTERNATIONAL BUSINESS AND ENTERPRISE
The Sydney-based head-quartered bank of Australia, Westpac further identified as
Western Pacific bank has attained the prominence of being one of the four major banks of
Australia. Its highly expanded portfolio of financial services has been segregated into two broad
segments based on customer and institution orientation (Westpac.com.au 2017). Westpac has
efficiently obtained high considerable reputation not only in Australia but has attained the
prominent position in New Zealand as well. Westpac with its collaboration with AA (Global
ATM Alliance) and several international banking institutions has been rated as AA-by Fitch and
provides highly efficient services in foreign exchange domain (Westpac.com 2018). However
recent reports reveal that for the first time the definite impact on Westpac has been witnessed due
to the federal government’s new levy. The tax introduced in the mid of 2017 has been purposed
to be relevant to liabilities and charges with the exclusion of hybrids as well as deposits below
$255,000 and as Westpac has not exposed the information on deposits it has been critical for
analysts to evaluate the extent of the impact. The first provision has been recognized as the
Treasury that estimated an increase of $6.5 billion over 4 years which further accumulates
around 2% of Westpac’s gross net revenue of around $15 billion (Murray et al. 2014).
Furthermore, it has been estimated that the taxation will account for a greater proportion of the
revenues of Westpac that would generate lower returns on its asset base and further on the
liabilities which have been levied (Bakir 2017). Thus a bank like Westpac has the propensity to
be impacted that comprises an approximate of 4% of net turnover (Westpac.com 2018).
The annual reports released by Westpac revealed that this recently introduced taxation
procedure has cost the bank and its profits for around $95 million that has been evaluated to be
equivalent to two cents per share (Westpac.com 2018). Westpac further underwent a critical
decision-making to pay the tax out of retained revenues rather than cutting shares or dividends.

3LEGAL ASPECTS OF INTERNATIONAL BUSINESS AND ENTERPRISE
Further Hutchens (2017) revealed that the Board of Directors have taken into consideration a
diverse range of determinants involving the effect of bank taxation in critically influencing the
shares and dividends. Westpac with the introduction of new levy regulation has declared a
comprehensively free dividend of around 94 cents per share that has been continuing since 2017
(Westpac.com 2018). However the federal government while declaring the May budget has
introduced a taxation process on Australia’s four other major banks other than Westpac namely
NAB, Commonwealth, Macquarie and ANZ as an approach of facilitating amendments in the
budget deficit. Reports reveal that the vital 6 point taxation process has been relevant to
Westpac’s liabilities. Bakir (2017) noted that earlier Westpac stated that this recently introduced
levy would cost around $360 million over a full year. However it has further been reported in
Reuters.com (2014) that the cost of $90 million for 3 months this tax would elevate up to $380
million that has been estimated to be equivalent to the original estimation.
Reports revealed by Clark et al. (2016) on Westpac’s performance has exposed that this
levy has further posed greater degree of impacts on its performance metrics that revealed the
declined margins by around 2 basis grades in the second half and around 1 basis point for the
complete financial year. The disbursement or outflow to income ration further has risen by
around 35 basis points in the second year and by 20 basis points for the full year (Murray et al.
2014). This expenditure of the bank further implied that the levy would reduce around 8 cents a
dividend or around 4.5% of shares which is based on the organization’s full year of share of 188
cents as estimated till 2017. However it has been stated that Westpac has not put any significant
effort to execute apportion of the expenditures between stakeholders and consumers or whether
the bank will reduce employee expenditures or will execute a unification of the three vital
approaches (Bakir 2017). As per the reports revealed by Westpac, all consumers can shift their