Westpac Customer Engagement Approach to address financial

Westpac Customer Engagement Approach to address financial

Westpac Customer Engagement Approach to address financial

Westpac Customer Engagement Approach to address financial difficulty following bank-initiated credit limit increases Final Advisory Report August 2017 WBC.300.004.4547

Westpac Customer Engagement Approach to address financial

KPMG | i © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Disclaimer This report is delivered subject to the agreed written terms of KPMG’s engagement.

This report provides our observations of the implementation of the Customer Engagement Program and detailed findings of KPMG’s assuranceengagement work for Westpac under the terms of the Statement of Work dated 24 February2016. The contents of this report do not represent our conclusion, which will only be contained in our limited assurance report. This report is provided solely for the benefit of the parties identified in the Statement of Work and is not to be copied, quoted or referred to in whole or in part without KPMG’s prior written consent. KPMG accepts no responsibility to anyone other than the parties identified in the Statement of Work for the information contained in this report.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information including for reasons of negligence, negligent misstatement or otherwise. WBC.300.004.4548

Westpac Customer Engagement Approach to address financial

KPMG | ii © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Contents Contents ii Glossary iii 1 Executive Summary 5 1.1 Introduction 5 1.2 Scope and Approach 6 1.3 Limitations 6 1.4 Commentary on Westpac’s progress 7 1.5 Testing in scope for this report 8 2 Testing completed for this report 10 2.1 Timeline of this review 10 2.2 Testing methodology 10 3 Detailed Findings 14 3.1 The Banks response to Interim recommendations 14 3.2 FinalReport observations 20 Appendix A : Westpac Letter to ASIC 24 Appendix B : ASIC Letter to Westpac 30 Appendix C : Information used to underpin this report 31 WBC.300.004.4549

Westpac Customer Engagement Approach to address financial

KPMG | iii © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Glossary Key terms Definition Customer Engagement Approach Section 1 of the Schedule in Westpac’s letter to ASIC, also referred to as “the Program”. Section 1 forms the basis of the scope for KPMG reports and the Limited Assurance report.

Steering Committee Members from Credit Risk, Collections, Compliance, Product, Regulatory and Legal providing oversight and direction for the Program.

Proprietary Tracking Spreadsheet Excel databaseof all 6,613 customers which have been extracted using the methodology outlined in the Schedule under 1.1. Contains the record of conversation held as account notes and data elements for determining a remediation amount. CallScript The scripting used by a dedicated member of the Assist team to advise the customer of the call purpose, establishing the customers circumstances at the time of increasing the limit and, if appropriate, determination of the refund amount. Online banking message A message lasting 60 days which was posted to online banking for customers that could not be contacted and had not responded to the 3-2-1 Contact Strategy.

The message for Westpac customers was, “ We would like to speak with you about information relating to your credit card. Pleasecontact us on 1300 363 503 as soon as you can. Thankyou. Your team at Westpac.” Internal system message A system note that remains on Westpac internal systems for customers that have not been in contact in regards to the Program. The note states, “ Customer is eligible for CLI Remediation assessment. Please contact [Assist Operator Names] from the Collections Team to assist the customer further.” Credit default listing A credit default listing relates to default information recorded at a Credit reporting Bureau Preconditions to the disclosure of default information include – the consumer credit payment must be overdue by at least 60 days, the overdue amount must not be less than $150 (or if a higher amount is prescribed by the Regulations, that amount).

WBC.300.004.4550

Westpac Customer Engagement Approach to address financial

KPMG | iv © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Total Waived The total remediation refund processed. FinancialImpact The total waived excluding written off accounts (internal). The amount paid by the Bank to vendors (sold).

WBC.300.004.4551

Westpac Customer Engagement Approach to address financial

KPMG | 5 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 1 Exe cutive Summary 1.1Introduction Westpac (“the Bank”) has entered into an arrangement with the Australian Securities and Investments Commission (ASIC)whereby the Bank will undertake a program to assess potential financial hardship from bank-initiated credit limit increases (CLI)of Consumer Credit Card customers for the period between 12 September 2012 and 17 December 2014 (the “Program”) .

The Bank have committed to KPMG providing independent assurance over the Program’s implementation. The Bank in their letter to the Australian Securities and Investments Commission, dated 13 November 2015 addressed the Program as follows: “ We have set out in the attached Schedule the elements of the proposed negotiated outcome with ASIC relating to our previous Credit Limit Increase (CLI)arrangements for consumer credit cards.

These elements comprise:  a customer engagement approach consisting of a way to identify recipients of CLI for whom the Bank did not make direct enquiries about their employment and income status, who subsequently faced financial difficulty;  a regulatory outcome approach to reflect the seriousness in which we regard regulatory feedback and involving a contribution to the Salvation Army’s MoneyCare program; and  confirmation about changes to our systems and processes to ensure we meet ASIC’searlierfeedback when we recommence bank-initiated CLIsanticipated to begin during December 2015”.

In our Statement of Work dated 24 February2016, KPMG agreed to report on the results of the Program’s procedures and assess the risks of any material deficiencies at the end of the following stages:  First report (“the First Report”) at the completion of the Pilot (approximately 600 customer assessments);  Interim report (“the Interim Report”) following substantial rollout of the customer engagement program (approximately 3,000 customer assessments); and  Limited Assurance report (negative assurance opinion) and final report (“th is Report”) at the conclusion of the customer engagement program (approximately6,000 customer assessments) as defined by the Bank.

WBC.300.004.4552

Westpac Customer Engagement Approach to address financial

KPMG | 6 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 1.2S cope and A pproach The objective of the independent assurance is to independently assess the implementation of the Program articulated in the Schedule.

This Schedule was accepted by ASIC in writing in its letter to the Bank dated 17 December 2015.

As per the scope of work, KPMG’s role has been to monitor, review and report on the implementation progress, at the pilot, interim and final stages, and, where appropriate make recommendations to address features of the implementation that required further consideration by the Bank. The scope of our work, including the preparation for the Limited Assurancereport, encompasses the elements of the Customer Engagement Approach “the Program”, focussed on the Program design described under Section 1 of the Schedule. Where appropriate, we have further considered the extent to which the Bank has responded and resolved any identified areas of ASIC concerns in its correspondence with the Bank during the period of the Program.

In conducting the review, KPMG’s procedures have included:  management interviews and inquiries;  review of the information provided as evidence for the implementation, including the data sources used to support identifying the relevant customer population, establishing the customer’s circumstances, CLI specific treatments and possible outcomes;  review of the processes employed to ensure outcomes are fair and consistent to support the Program’s guiding principle “to ensure that credit card customers have not been disadvantaged by receiving a bank-initiated CLI”; and  analysis of the level of program governance, oversight and direction underpinning refinements to the Program.

The approachto testing remained the same throughout the course of the review with additional Design Effectiveness and Operational Effectiveness testing conducted on the implementation of Pilot and Interim report recommendations. This third and final report provides an update on the Program since 6 December 2016, as well as the most recent findings from items received up to and including 28 June 2017, and delivers our final observations on the Program. 1.3Limitations This report has been prepared as outlined in the Scope and Approach Section and is subject to a number of limitations which should be considered when reading this report.

These limitations include:  As of the date of this Report, there remain customers that could not be contacted and had not therefore participated in the Program. While the Bank considers all possible cases have been assessed and, where appropriate, remediation has been made, a number of customers cannot be finalised because all means of contacting these customers have been exhausted. WBC.300.004.4553

KPMG | 7 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.  While all of the customer calls were made availableby the Bank as part of the review, KPMG has not reviewed all calls and has applied professional judgment to draw conclusions about the population from which the samples have been selected.

 KPMG have not been provided the final customer outcomes that will be reported to ASIC. While we believe all commitments by the Bank have been implemented, there is the potential for customer engagement activity to continue after the release of this report. Our review does not extend to include oversight of the Bank’s subsequent activity.  The broader reform process by the Bank is not within the scope of our review. These reforms include voluntary contributions to the SalvationArmy to support their Moneycare program, along with system and process changes and the additional measures to support future decision making for bank-initiated credit limit increases.

KPMG have indicated within this report the sources of the information provided. We have not sought to independently verify those sources unless otherwise noted within the report. KPMG is under no obligation in any circumstance to update this report, in either oral or written form, for events occurring after the report has been issued in final form. The Limited Assurance Report and findings in this Final report have been formed on the above basis. 1.4Commentary on Westpac’s progress This section provides a summary of the progress of the Bank’s activities undertaken to prepare for the conclusion of the Program.

KPMG presented its Interim report to the Steering Committee on 8 December 2016 and noted management’s ongoing commitment to adopt the recommendations in preparation for the conclusion of the Program. 1.4.1 Interim phase Following the Pilot, a full rollout of the Program commenced on 22 June 2016. The Bank’s development of tools and processes during the rollout demonstrated management’s appetite for continuous improvement and a positive response to our recommendations from the Pilot stage review and associated report, in support of the Program’s aim to deliver fair and consistent outcomes.

In addition to the enhanced call script, Assist Operators were provided with an embedded remediation calculator in the Proprietary Tracking Spreadsheet, revised process maps and an increased volume of Quality Assurance over call outcomes to enhance consistent application of the process.

During the rollout phase, the Bank had self-identified the customer contact rate to be lower than expected. The Steering Committee subsequently approved the use of the “3 -2-1” Contact Strategy1 in an attempt to increase the customer contact rate from 25 August 2016 onwards. This process consisted of:  Three outbound calls made. If no Right Party Contact (RPC),leave Voice Message;  Send Two SMS’s to customer requesting them to contact the Support Team; and  Send One final - Please Contact us within 21 days letter. 1 Project CLI Remediation Steering Committee 2016-08-25 Meeting-Final WBC.300.004.4554

KPMG | 8 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. The Bank advised if no contact had been made with the customer following the completion of this revised contact strategy, an additional period of 150 days would be allowed for customers to contact the Bank.

1.4.2 Final phase progress During this Final review period KPMG observed the implementation of all remaining processes, including the implementation of Interim report recommendations (Section 3), third party vendor activities for sold accounts and the establishment of online banking messages as a final contact attempt.

Specifically, the remaining Program processes included within our final review were:  Executing sold account activities in accordancewith the appropriate process maps.  Continuing to implement processes relating to the treatment of exception cases.  Completion of all activities to address credit default listings that resulted for the relevant customer.

 Updating the “3- 2-1” Contact Strategy with the inclusion of online banking messages as a final contact attempt to increase participation.  Implementation of a process to direct future inbound calls to experienced Assist Operators after the Program is closed.  Continuation of program reporting throughout the period. The Bank has indicated it is preparing the Program for closure and it expects this Final report and our Limited Assurance report to inform the decision. Once this Final report has been presented to the Steering Committee, the Bank will engage with ASICand finalise any outstanding matters.

1.5T esting in scope for this report KPMG have adopted a consistent test design through the Pilot, Interim and into this Final stage, based on the ‘Schedule’ which sets out the elements of the negotiated outcome that was accepted by ASIC.

Table 1 summarises the testing that has been conducted in the completion of this report. Table 1: KPMG testing scope for this report The Bank’s commitment to ASIC Testing methodology Comment Referencefor observations Identifying the relevant customer population Design and Operational Effectiveness testing Completed in the Interim review. No further testing required. N/A Establishing the customer’s circumstances Design and Operational Effectiveness testing Testing completed in this reporting stage. No material findings. Section 3 – KPMG Ref 8, 9 CLI Specific Treatment Design and Operational Effectiveness testing Completed in this report.

No material findings. Section 3 – KPMG Ref 10, 11 WBC.300.004.4555

KPMG | 9 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. The Bank’s commitment to ASIC Testing methodology Comment Referencefor observations Possible outcomes Design and Operational Effectiveness testing Completed in this report. No material findings. Section 3 - KPMG Ref 12 Expected timeframes and piloting exercise Design and Operational Effectiveness testing Completed in this report.

No material findings. Section 3 - KPMG Ref 13 In the event the external firm identifies any matters, we will respond and resolve any issues.

Review management response and subsequent actions following Interim recommendations and ASIC areas of concern Completed in this report. No material findings. Section 3 - KPMG Ref 14 WBC.300.004.4556

KPMG | 10 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

2 Testing completed for report 2.1T imeline ofthis review KPMG were re-engaged to complete this third and final report and undertake testing on implementation activities up to 28 June 2017. The timing of the report has been based at a point in the Program when all possible cases have been assessed (6,613) and, where appropriate, remediation has been made, including for all sold vendor accounts. KPMG has maintained contact with the Program on an ongoing basis since the delivery of the Interim report, with an information request formally submitt ed to the project manager on 28 March 2017, followed by subsequent information requests through the course of this review.

2.2Testing methodology As per previous review stages, our objective of this stage has been to test the implementation of the Program in accordance with the Schedule. The methodology was based on the following key requirements:  Schedule provided to ASICin the Bank’s letter dated 13 November 2015;  Program design as documented in the Bank’s Group Memo – “Collections ASIC CLI Issue Remediation” dated 24 January2016 (the Memo); and  Program operationalisationand execution according to intended objectives. In addition to the requirements in place at the time of our Pilot and Interim reports, two further areas for testing have arisen.

The testing methodology for these two additional areasare as follows: 2.2.1 Additional customer contact attempt s The Bank advised there were 967 customers (14.6% of the Program population) who could not be contacted or did not respond to the “3- 2-1” Contact Strategy during the Program. A final attempt was made to contact these customers through the posting to their account of an online banking message. Batch loading was evidenced as being completed by 28 November 2016, with an expiry date for messages of 31 January2017.

To ensure that any customers can be appropriately assessed and actioned after the conclusion of the Program, an internal message has been posted to the relevant accounts on Bank systems to re-direct the customer to a member of the CLI team should they make contact with the Bank on this matter. WBC.300.004.4557

KPMG | 11 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

Liability limited by a scheme approved under Professional Standards Legislation. 2.2.2 Third party vendors and credit default listings The Bank had sold delinquent Credit Card customer accounts to seven third party vendors. A percentage of the Program population were included in the accounts sold to these third party vendors.

The Bank advisedthat the Steering Committee endorsed a recommendation2 that no remediation action was to be taken on bankrupt customers. This resulted in no customer communication letters for Credit Corp Part IX, Balbec and Insolve as these vendors only purchased Part IX accounts. In order to test the remediation Program for the remaining third party vendors KPMG randomly sampled 12 accounts from a total of 1,428 accounts which represents 0.8% of the total in scope sold account population. Of the sample selected, all vendors had executed instructions in accordance with the Sold Account process maps3 and supporting information provided to them by the Bank, including providing correspondence emails and key data elements from the “Internal Sold Account Tracker” spreadsheet.

The following vendors were in scope for this review:  Credit Corp  Lion  NCML  Baycorp As a part of the Program a number of key activities were implemented by the Bank, the third party vendors and three Credit Reporting Bodies (CRB) . These activities included:  The Bank established an account level breakdown of remediation totals for each of its vendors;  Individual communication letters were prepared by each vendor and delivered advising customers of their remediation amount;  The Bank calculated the income loss incurred (“Debt Recourse Cost”) for compensating each vendor;  Vendor invoices were provided to the Bank in order to compensate for the Debt Recourse Cost.

 Account level credit default listing adjustment actions were performed by the three CRB’s. The accounts requiring credit default listing adjustments have been provided to the CRB’s. KPMG sampled 30 accounts and noted the following outcomes:  17 cases where a credit default listing was evidenced on all three CRB’s (57%);  5 cases where a credit default listing was evidenced on two CRB’s (16%);  8 cases where a credit default listing was not recorded on any of the three CRB’s (27%).  In all cases the correct remediation action had occurred.

2.2.3 Continuation of program reporting Table 2 provides a summary of the total number of cases that have been reported on the Program between the last Steering Committee on 8 December 2016 and a snapshot of the daily reporting that is being maintained by the project during the period of this review. 2 CLI Decision Required 160404 FINALRe-Issue 8th April 3 End-to-End Workflow – CLI Remediation – Sold Accounts WBC.300.004.4558

KPMG | 12 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Table 2: Assessment outcomes reported by the Bank Program statistic (number of cases) As at 8/12/2016 As at 21/3/2017 Assessmentoutcomes (number of accounts): Resolved – In-house 3,119 3,695 Resolved – Sold Accounts 1,634 2,177 Total customers contacted 4,753 5,872 Remediated 2,583 3,363 Customers unaffected by CLI 2,170 2,509 Customers yet to be contacted / un-contactable 1,860 741 Total 6,613 6,613 Remediation ($): Total Waived $10,222,690 $11,162,375 FinancialImpact $3,250,407 $3,296,219 2.3Final observations The Customer Engagement Approach program was designed to address concerns that customers may have suffered financial hardship from bank-initiated CLI’s in the period between 12 September 2012 and 17 December 2014.

The Program was designed to ensure that credit card customers have not been disadvantagedand, where disadvantagewas identified, remediate customers back to the position they would have been had they not received the bank-initiated CLI. Based on our review, it is our view that the Program has been implemented in accordancewith the Schedule and its objectives. The steps the Bank has taken to achieve the Program’s objectives include:  a dedicated project team and management commitment on the continuous improvement of its processes, particularly in the Pilot phase;  the development of the Program’s assessment processes, which were subject to appropriate testing in a Pilot phase prior to their full implementation and enhanced over time to support fair and consistent outcomes;  the implementation of a Quality Assurance process, including call monitoring and information recording; WBC.300.004.4559

KPMG | 13 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.  Sample reviews of calls conducted by KPMG, which found that the Bank had materially adhered to the Program’s documented processes and objectives when assessing customers’ circumstances and, where exceptions were observed, the Bank responded appropriately by undertaking further assessments and notifying customers of any changes to assessment outcomes; and  Periodic reporting by KPMG to provide findings and recommendations in relation to the Program’s progress and outcomes.

Since the Program commenced, oversight and direction of the Program’s implementation has been provided by the monthly Steering Committee and weekly Decision Council Sub-committee . As the Program has evolved and matured, KPMG noted further refinements were made to its implementation processes. In considering the relatively low rate of improvement findings identified in our testing and the Bank’s responses to these findings, and the level of Quality Assurance offered through the Program, it is our view that the Program has been implemented in line with the documented Schedule and implementation has operated as intended.

WBC.300.004.4560

KPMG | 14 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 3 Detailed Findings 3.1The Bank ’sresponse toInterim recommendations In our Interim report dated 6 December 2016, we presented a number of observations and recommendations. We have set out below a high level summary of those Interim recommendations, the Bank’s management response and KPMG’s subsequent review.

The Bank acknowledged the observations at the time of the Interim report, and, have addressed each of the recommendations as summarised in the table below. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion 1 “Identifying the relevant customer population.

We will begin with all customers who received a bank-initiated CLI in the period from 12 September 2012 (being the date of ASIC’s letter to industry) up until 17 N/A Noted The Bank noted the KPMG finding of a duplicated account in the in- house and sold account databases. KPMG were satisfied with the treatment of this account with no further testing or remediation action required. WBC.300.004.4561

KPMG | 15 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion December 2014 (which was the date we paused issuing bank-initiated CLI invitations); Of this population, we will identify those customers who we had classified as requiring No Further Credit Assessment (‘Non-FCA’) (i.e. due to particular eligibility criteria we did not expressly ask the customer about employment or income status);” 2 “Establishing the customer’s circumstances.

Having identified the relevant customers, a dedicated member of our Assist team will make an outbound call (the dedicated Assist team member will also act on any inbound call received by the Assist areas relevant to this matter). They will inquire about the customer’s current financial circumstances, including To ensure consistency across all Assist Operators the call must align to the design of the enhanced script. KPMG recommend WBC increase their QA on a retrospective basis and satisfy itself that “ambiguity” did not manifest in calls throughout the rollout Between June 2016 and November 2016 WBC have monitored calls at the rate of 10 per Operator per month.

This being an increase in call monitoring during the Pilot phase of 2 calls per Operator per month. Where necessary, action was taken to correct any faults. Therefore WBC is confident with the quality of the calls conducted and that the application of the enhanced script has been consistent during rollout. In reviewing the calls highlighted as ambiguous by KPMG, WBC considered KPMG have reviewed the evidence provided and are of the view the recommendation has been implemented effectively.  While outbound calls had been completed the Bank continued its Quality assuranceon a go- forward random sampling basis and provided evidence of 47 additional calls that were assessed across November 2016 and March 20174 .

4 Call Monitoring-20-04-2017 WBC.300.004.4562

KPMG | 16 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion whether or not they are or have faced financial difficulty, and, using a guided scripted process.” that the call outcome was consistent with the sentiment of the remediation Program.

WBC believes this opinion to be supported by the outcome of our conversation with customer SCRA5437931001331444as detailed below.

However, with acknowledgement of KPMG’s observations we have:  Contacted customer SCRA5437931001331444and repeated the call; the outcome was consistent with our previous conversation.  CC4564712503290298moved into bankruptcy on 21 October 2016 and will be processed in line with BAU, as a result WBC are of the view that recontacting the customer for the purposes of the CLI Program was no longer appropriate.  We have made reasonable attempts to contact customers CC4564712032930141& SCRA4564577780088370in line with the 3-2-1 Contact Strategy. To date we have been unsuccessful in  Evidence of monthly Quality assurance summary log on Assist team members showed original assessment decisions were not overridden.

 The Bank advised account SCRA4564577780088370had an online banking message posted following unsuccessful contact as per management response at the Interim report stage.  KPMG observed an online banking message was not posted to account CC4564712032930141as the account had moved into bankruptcy and the Bank advised it will be actioned in line with BAU processes. WBC.300.004.4563

KPMG | 17 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion contacting these customers. In addition to following the 3-2-1 Contact Strategy we have sent the customers an additional ‘Please contact us’ letter and will be posting an online banking message.

3 “Establishingthe customer’s circumstances– A short decision tree processwill then be applied to establish: If the customer was unemployed or had reduced income at the time of the bank- initiated CLI. If so they will receive the CLI Specific Treatment;” KPMG recommend WBC rectify the incorrect process map for audit trail purposes. The Assist Operators follow the written Script rather than the Process Map when contacting customers. Please note, the process maps service as supplementary material.

The Script questions whether the customer had a reduction in income. This Customer did not experience a reduction in income and did not qualify for remediation.

Process map named Current Account and Accountsin Collection has been updated and sent to KPMG as well as evidence of sign off at Working Group. KPMG noted the Bank’s response to ASIC, in an email from Joshua Moyes to Anthony Thompson, dated 16 February2017. We note the correct action was applied and this case did not relate to a situation where the customer was identified as being in collections at the time of the CLI. 4 “Establishing the customer’s circumstances– A short decision tree processwill then be applied to establish: KPMG recommend that WBC identify which accounts did not have a call record available from the Pilot, and satisfy itself that the lack of a call record did not affect the review outcome In completing a review of Pilot volumes, WBC is confident that the 14 Pilot accounts where calls were not identified during review, were not affected by the lack of a call recording and the approach KPMG noted the Bank’s response to ASIC,in an email from Joshua Moyes to Anthony Thompson, dated 16 February2017.

KPMG have reviewed the management response and have WBC.300.004.4564

KPMG | 18 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion We will conduct regular reporting in relation to these activities.” to each call was consistent with the sentiment of this remediation Program.

WBC has previously provided evidence of the Pilot review to KPMG, highlighting accounts with revised outcomes.

confirmed the record of conversation provided in the proprietary tracking spreadsheet is sufficient to determine that the assessment outcome remains. 5 “CLI SpecificTreatment – We Will: On a case by case basis, apply partial debt waivers and / or card limit decreases for amounts down to and including the pre-CLI limit, including any fee reversals;” N/A Noted The Bank noted the KPMG observation relating to dynamic versions of the proprietary tracking spreadsheet with no further testing required. 6 “CLI SpecificTreatment – We Will: On a case by case basis, apply partial debt waivers and / or card limit decreases for amounts down to and including the pre-CLI limit, including any fee reversals;” To ensure consistency for reporting purposes we recommend WBC sample check the remediation field columns in their proprietary tracking spreadsheet to mitigate against incorrect reporting.

WBC will conduct a sample review of the information captured in the proprietary tracking spreadsheet as part of our Program close down activities to ensure fields have been accurately completed. The Bank advised KPMG that Quality assuranceon the proprietary tracking spreadsheet for accuracy has been completed with no further discrepancies identified. We have no evidence that this has not been applied correctly. WBC.300.004.4565

KPMG | 19 © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Interim Recommendation(s) WBC Management Response KPMG Conclusion 7 “CLI SpecificTreatment – We will: The method of providing the refund to the customer will vary depending on the Customer’s current limit and balanceof the account:” While KPMG did not observe any issues with the manual input for the current balance,we recommend WBC satisfies itself that the manual input field has been accurately completed.

WBC will conduct a sample review of the information captured in the proprietary tracking spreadsheet as part of our Program close down activities to ensure fields have been accurately completed. The Bank advised KPMG that Quality assuranceon the proprietary tracking spreadsheet for accuracy has been completed with no further discrepancies identified. We have no evidence that this has not been applied correctly. WBC.300.004.4566

KPMG | 20 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 3.2Final Report observations The observations and recommendations included are made as an outcome of the Final phase and build upon observations from the Pilot and Interim. Only those areas of testing where we have identified observations or improvement opportunities have been included in this report. KPMG Ref Test plan description Observation(s) 8 “Establishing the customer’s circumstances: Having identified the relevant customers, a dedicated member of our Assist team will make an outbound call (the dedicated Assist team member will also act on any inbound call received by the Assist areas relevant to this matter).

They will inquire about the customer’s current financial circumstances, including whether or not they are or have faced financial difficulty, and, using a guided scripted process.” We observed that 967 accounts were determined to require an online banking message, valid for 60 days until 31 January2017 and based on the status of customer contact in the proprietary tracking spreadsheet. A report highlighted 715 were rejected following the batch upload, due to the customer not being registered for online banking (63) and the card being blocked for bankruptcy6 reasons (8).

To ensure rejected online messages did not materially disadvantagecustomer contact, KPMG tested 8 rejections and it was noted all had the “3- 2-1” Contact Strategy applied. The following 1300 numbers contained in the online messages were dialled for testing and in all instances flowed through to a dedicated CLI Assist Operator.  1300 363 503 – Westpac 5 Email dated 23/11/2017 from M. Lam RE: additional exclusions 6 Email dated 25/11/2017 from M. Lam RE: CLI Remediation - Online Message reports and 2 additional accounts to be added WBC.300.004.4567

KPMG | 21 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Observation(s)  1300 369 877 – St George  1300 365 502 – Bank of SA  1300 656 698 – Bank of Melbourne The Bank advised these numbers will be used for other purposes after the Program concludes.

9 “Establishing the customer’s circumstances: Having identified the relevant customers, a dedicated member of our Assist team will make an outbound call (the dedicated Assist team member will also act on any inbound call received by the Assist areas relevant to this matter). They will inquire about the customer’s current financial circumstances, including whether or not they are or have faced financial difficulty, and, using a guided scripted process.” To support the conclusion of the Program, customers who had not responded had an internal system note loaded to Tallyman/TCSand VisionPLUSsystems, intended to direct an operator to an Assist team member who had worked on the CLI remediation program.

This was completed for all brands by 2 February 2017.

We observed:  Notes of “customer is eligible for CLI Remediation Assessment. Please Contact [Assist Operator names] from the collections team to assist the customer further”  A communication memo provided to the Collections team to inform them of the system note and instructions to redirect inbound calls. The Bank advised notes will move down on accounts over time as more notes are added, however, there have been instances of this process being followe d prior to the Program conclusion. We believe this additional step is a positive move to address the remaining customers and feel the process has been applied faithfully.

WBC.300.004.4568

KPMG | 22 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Observation(s) 10 “CLI SpecificTreatment – We will: On a case by case basis, apply partial debt waivers and / or card limit decreases for amounts down to and including the pre-CLI limit, including any fee reversals.” The Bank advised all sold accounts would be eligible for remediation.

We sampled 12 accounts to test the implementation of the vendor processes (3 accounts per in scope vendor7 ).

We noted all information contained in the individual customer letters for the vendors sampled reconciled against the Sold Account Tracker for balance reduction and interest & fees. Recoveries Corp are a vendor collecting on behalf of the Bank and were excluded from the Sold Account process maps, impacting 4 accounts. We observed the CLI treatment and instructions for the adjusted recovery amounts for each account being consistently applied.8 11 “CLI SpecificTreatment – We will: As a result of our customer engagements and have regard to credit reporting, address any listing that resulted for the relevant customers.” The accounts requiring credit default listing adjustments have been provided to the CRB’s.

Of the 30 accounts sampled we noted:  17 cases where a credit default listing was evidenced on all three CRB’s (57%);  5 cases where a credit default listing was evidenced on two CRB’s (16%);  8 cases where a credit default listing was not recorded on any of the three CRB’s (27%).

While all CRB’s actioned the listing according to the Bank’s instructions, we noted CRB differences in how they applied the reduction adjustment in certain instances. 7 This excludes Vendors processing Part IX Bankruptcies and Recoveries Corp. Pantheraand Pioneer were also excluded in the Final Report as they were covered during Pilot and Interim phases 8 KPMG Questions-WBC Responses-04052017 WBC.300.004.4569

KPMG | 23 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Ref Test plan description Observation(s) 12 “Possibleoutcomes” We observed evidence of regular monitoring and reporting of the remediation amounts through the course of the review 9 .

While we did not access the Bank’s financial systems to evidence payments, we were advised of the adjustment process and transferring refunds from interest to bad debts10 . 13 ”Expected timeframes and piloting exercise.” We observed the completion of the remaining processes in preparation for Program closure. 14 “In the event the external firm identifies any matters, we will respond and resolve any issues.” Throughout the review period we observed management being receptive to feedback and implementing change. We note in this Report, all Interim report recommendations were adopted and implemented effectively.

9 Regularupdates of file named: CLI Remediation - Daily Operational Tracking YYYY -MM -DD 10 Email from K. Huang dated 06/04/17 - RE: CLIRemediation: KPMG Final Report - Proof of impact to GL WBC.300.004.4570

KPMG | 24 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Appendix A :Westpac Letter to ASIC WBC.300.004.4571

KPMG | 25 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. WBC.300.004.4572

KPMG | 26 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. WBC.300.004.4573

KPMG | 27 © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. WBC.300.004.4574