SYDNEY (REUTERS) - Australian Prime Minister Scott Morrison said on Thursday (Nov 21) that the board of Westpac Banking Corp must review the position of chief executive officer Brian Hartzer in the light of a major money-laundering scandal, as the lender's shares plunged for a second day.

Australia's second-largest retail bank was accused by the regulator on Wednesday of 23 million breaches of anti-money laundering laws including a failure to report transfers involving child exploitation.

"These are some very disturbing, very disturbing transactions involving despicable behaviour," Mr Morrison told Australian Broadcasting Corp in an interview.

Westpac's board "need to determine themselves" whether Mr Hartzer should resign, he added.

"They should be taking this very seriously, reflecting on it very deeply and taking the appropriate decisions for the protection of people's interests in Australia - their safety," Mr Morrison said.

A Westpac representative was not immediately available to comment.

Mr Hartzer said on Wednesday that he accepted most of the regulator's assertions, but "at a senior executive level, for the board, for me personally, in no way have we been indifferent on this".

He said he had been "disgusted and appalled" by the allegations and vowed to "get to the bottom of why this was able to persist".

Westpac had self-reported the breaches to the regulator and had since shut down the service at the centre of the complaint which let customers and affiliate overseas banks process payments from Australia, he said.

Westpac shares fell more than 3 per cent at the open of trade on Thursday, worse than a broader market decline of 0.6 per cent and taking the stock's total decline to nearly 7 per cent since the banking regulator's lawsuit was announced early on Wednesday.

The bank faces fines of up to US$14 million (S$19 million) for every transaction it failed to monitor or report on time, potentially amounting to many billions of dollars.

Jeffries Australia banking analyst Brian Johnson wrote in a note to clients that the resignation of executives at Commonwealth Bank of Australia following similar allegations raised doubts that Westpac senior management could remain in their positions.

Investor lobby group Australian Shareholders' Association (ASA) said in a statement that it was "horrified" by the alleged reporting breaches and that it wanted to know the board's response "as a matter of urgency".

The ASA would raise the issue at a meeting with Westpac chairman Lindsay Maxsted, scheduled for the next week.