Ousted Westpac chief Brian Hartzer will be paid a $2.68 million golden handshake to walk away from his job, days after the money laundering scandal broke.

The bank is accused of failing to detect sexual predators were using its online products to transfer cash for child pornography.

Westpac chairman Mr Maxsted announced the changes in a statement to the ASX at 8am on Tuesday, also confirming Mr Hartzer will walk away with 12 months’ pay in lieu of notice.

Mr Maxsted will also bring forward his retirement as chairman.

The clean-out follows revelations financial regulators are investigating 23 million breaches of anti-money laundering laws with hundreds of suspect transactions linked to child exploitation in the Philippines.

“The board accepts the gravity of the issues raised by AUSTRAC,” Mr Maxsted said.

“As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so, it became clear that board and management changes were in the best interest of the bank.”

The current chief financial officer Peter King will take on the CEO’s job.

Mr Hartzer is stepping down from the bank despite reports overnight that he told executives not to panic.

According to a report in The Australian he said: “We all read the Fin (The Australian Financial Review) and The Australian, and we all read that and think the world is ending,” he said,

“But actually for people in mainstream Australia going about their daily lives, this is not a major issue so we don’t need to overcook this.’’

Mr Maxsted thanked Mr Hartzer contribution to the company over the past seven years.

“Brian leaves the bank with a strong balance sheet, with each of our businesses number one or two in their markets,” Mr Maxsted said.

In Parliament, Home Affairs Minister Peter Dutton accused Westpac of giving “a free pass to pedophiles” on Monday.

“Westpac banking bosses, through their negligence, have given a free pass to pedophiles and there is a price to pay for that, and that price will be paid,” Mr Dutton said.

“We have no more important undertaking as a government than to keep Australian children safe. We will continue to do it. It is clear that the Westpac banking bosses have failed that obligation.”

Labor’s treasury spokesman Jim Chalmers welcomed news of Mr Hartzer’s resignation.

“The behaviour of Westpac under Brian Hartzer’s leadership was nothing short of disgraceful,” he said.

“My criticism of the government when it comes to the banking royal commission is that they talked a big game before the election when they knew people wanted to hear tough talk on the banks and then afterwards they dragged their feet,” he said.