Westpac has been slapped with a record fine of $35 million for failing to properly assess 10,500 home loans between 2011 and 2015, in what the bank admits was a breach of consumer protection laws.

The penalty was agreed in a last-minute settlement with the Australian Securities and Investments Commission (ASIC), which last year launched landmark legal action over the loans.

Westpac will pay a $35 million penalty for breaching responsible lending laws. Credit:Fairfax Media

But although the government talked up the result as a sign of ASIC's strength, the sharemarket did not react to the fine, which will be the biggest ever civil penalty for a responsible lending breach, but roughly equal to what the bank makes in a single day.

In the first action of its kind, ASIC last year took Westpac to court alleging there had been problems in how the bank calculated repayments on interest-only loans, and that it had relied on a benchmark to estimate customers' living costs rather than using expenses declared by the borrowers.