The bank closed its branch in Tennant Creek, in the Northern Territory, in September 2022, at first telling the community the closure was temporary.
After three weeks, Westpac issued letters, emails and text messages to advise the closure would be permanent and direct customers to alternative services.
An industry watchdog on Tuesday released its investigation into the closure, sanctioning Westpac for "serious and systemic" breaches of its obligations under the Banking Code of Practice.
The investigation found Westpac did not comply with the Australian Banking Association's branch closure protocol by failing to provide customers with adequate information about the shutdown.
It also failed to properly support Tennant Creek residents in accessing other services, the Banking Code Compliance Committee report found.
The committee sanctioned Westpac by publicly releasing the details of its breaches.Â
"In this case, Westpac has fallen short of their promise to customers," chair Ian Govey said in a statement.
"Their actions have had a significant and detrimental impact on many people within the Tennant Creek community."
The finding comes one month after a long-running Senate inquiry recommended tougher regulation of bank closures, after nearly 800 shutdowns across country Australia in the six years to June 2023.
A Westpac spokesman said the Tennant Creek closure occurred outside its usual processes after damage to the branch and the ATM, which posed safety threats.
"We recognise more could've been done to fully support our customers during the closure," the spokesman said.
"As a result, we have reviewed and strengthened our branch closure protocols."
The watchdog said there were 3398 branch customers when it shut.
"The breaches posed a high risk of harm to customers," the report said.
"The members of the community who were most affected, or at risk of being most affected ... were those potentially experiencing vulnerability and were not equipped to handle the transition with no notice or assistance."
The closure was also a major focus of the earlier Senate inquiry.
Charity CatholicCare NT told the inquiry it was inundated by hundreds of older Indigenous people after the shutdown, as they were left without cash or having to quickly adjust to digital services.
The Senate committee recommended a banking regulator have veto power over closures.
"The committee has been struck by the depth of community concern, the feelings of disappointment and anger, and the consistency of the messages from regional Australia," its final report said.
"People feel abandoned and disrespected by the banks."
