(Reuters) - Australian shares fell on Wednesday, with second-biggest lender Westpac Banking Corp weighing heavily on the heavyweight financials sector after regulators accused the bank of serious breaches of anti-money laundering rules.
The S&P/ASX 200 index <.AXJO> dropped 1.2%, or 83.3 points, to 6,732.10 by 0124 GMT. The benchmark rose 0.7% on Tuesday.
Australia's financial crime regulator on Wednesday alleged that Westpac Banking Corp <WBC.AX> had breached laws on over 23 million instances and applied for civil penalties against the lender, sending its shares 2.5% to a more than six-month low.
"Twenty-three million counts of breaches is clearly a significant number... It is possible we will see substantial fines for Westpac in due course," said Henry Jennings, senior analyst and portfolio manager at Marcustoday Financial Newsletter.
Financial stocks <.AXFJ> tumbled to a more than two-month low with the other "Big Four" banks also recording sizable declines.
National Australia Bank <NAB.AX> and Commonwealth Bank of Australia <CBA.AX> shed 1.6% and 1.4%, respectively.
Jennings added Westpac's issue adds to an ongoing cycle of problems for banks and fanned worries about the wider sector.
Further dampening sentiment were comments from U.S. President Donald Trump threatening to raise tariffs on Chinese imports if no deal was reached to end the prolonged Sino-.U.S. trade war.
Meanwhile, a more than 3% drop in crude oil prices amid concerns of oversupply weighed heavily on energy stocks <.AXEJ>, which fell to their lowest in near two weeks.
Shares of oil and gas Beach Energy Ltd <BPT.AX> dropped 3.4% to a near three week low.
Australia's biggest independent coal miner Whitehaven Coal <WHC.AX> plummeted to a more than two-year low after a disclosure revealed a stake sell off by UBS.
Mining stocks <.AXMM> fell 1% with gold related stocks dragging the index.
Saracen Mineral Holdings <SAR.AX> fell as much as 10.9% to post its worst session in more that three years as the stock traded for the first time since it announced the acquisition of a 50% stake in a major gold mine in Western Australia.
New Zealand's benchmark S&P/NZX 50 index <.NZ50> rose 0.4% or 45.57 points to 10,937.81.
The index was bolstered by a 12.2% rise in shares of Metlifecare <MET.NZ> after the company said it had received a takeover offer and suspended its buyback programme. The stock posted its best session in near 12 years.
(Reporting by Shreya Mariam Job in Bengaluru)
