Westpac was once described by the corporate regulator as the "most resistant" of the big four banks to Australia's finance laws, and accused of trying to keep misconduct quiet.
The Australia Securities and Investments Commission expressed the views in notes drafted before a meeting with Westpac chairman Lindsay Maxsted in 2015, and tendered to the banking royal commission on Friday.
ASIC met with Mr Maxsted after repeatedly raising concerns about how Westpac was issuing credit card limit increases to customers.
"There is a sense that they (Westpac) only tell us about issues when they think we are likely to find out about them through other means," the watchdog's notes said.
"They are reluctant to give us anything more than the minimum possible amount of information."
Westpac ignored repeated requests from ASIC to improve its lending processes.
ASIC was concerned Westpac was relying far too heavily on automation to verify if customers could afford increased credit limits, but the bank defied its guidance.
"Despite clear messages about our expectations of compliance with responsible lending requirements ... Westpac refused to change its practices until faced with the very direct threat of legal action," its notes said.
David Malcolm, Westpac's general manager of credit, accepted the bank should have taken a different approach with the regulator but denied there was a cultural problem.
"Ignoring the regulator is not a good idea," he told the commission.
Westpac sent letters to more than one million customers between 2011 and 2014 offering credit card limit increases without checking their incomes or employment statuses.
The bulk of those contacted were considered at "low risk" of default and subject only to automated checks.
More than 247,000 customers accepted an increased limit as a result, with the bank reaping a $23 million net profit over the period.
Westpac was later forced to refund $11.3 million to 3400 caught up in the credit limit increase scheme.
Its automated system had analysed customer spending data and repayment habits with the bank.
Counsel assisting the royal commission, Eloise Dias, repeatedly pressed Mr Malcolm about whether the bank took reasonable steps to investigate their customers' financial situations before making the offers.
"We were of the view, at the time, that the totality of what we did for these existing customers constituted reasonable inquiries," Mr Malcolm told the commission.
"We thought that was reasonable for the size of the additional commitment they were taking on."
Mr Malcolm said the bank offered customers credit card limit increases if it believed they could afford the extra repayments.
"The reason we're offering a limit increase is that we want it to be used, because we're a commercial enterprise, we want to grow the book," Mr Malcolm said.
"If we were offering a limit increase, it was because we thought that the customer might want it, and if they do want it, then we can profit from that."
Westpac was the last big bank to ask customers for employment and income details when offering them increases, acting in March 2015.
Looming legislative reforms will outlaw bank-initiated credit limit increases.
"We'll still need to do customer-initiated credit increases, but not bank-initiated," Mr Malcolm said.
The financial services royal commission's two-week public hearing into consumer lending issues will finish later on Friday.
Australian Associated Press
