Bankwest has refunded more than $4.9 million in mortgage interest payments after overcharging about 10,800 offset account customers for almost a decade.
The Commonwealth Bank subsidiary alerted ASIC to a self-discovered failure to link customers' offset accounts to home loans between 2007 and June 2016.
The Australian Securities and Investments Commission said Bankwest looked into its systems following breaches by another bank.
"It is critical that licensees ensure that their systems work properly so that promises made to customers about their bank accounts are kept," ASIC deputy chairman Peter Kell said in a statement on Thursday.
"When a problem is identified, licensees not only have an obligation to report the breach, but impacted customers must be returned to the position they would have been in, had the breach not occurred."
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Bankwest retail executive Andrew Whitechurch said the lender became aware of the issue in March 2014 and had been working on resolving it since, keeping ASIC informed on its progress.
Mr Whitechurch said Bankwest had now updated its systems and processes to prevent a repeat.
