In its submissions to the financial services royal commission this week, ANZ Bank addressed its behaviour towards some of the customers it gained through its $2.4 billion acquisition of agrilender Landmark Financial Services in 2010.
The big four bank conceded that its actions fell below community standards and expectations on several instances, but argued that they do not amount to misconduct.
ANZ outlined that the counsel assisting the banking royal commission, Rowena Orr, examined only a dozen customer groups, representing about 0.27 of a percentage point of the 4,500 customers it gained from Landmark, and so broader conclusions of misconduct should not be drawn.
“There is no basis for concluding that they are in any way representative of the treatment of the entire loan book as a whole,” the bank wrote in its submission published on Tuesday (17 July).
The submission further disputed the claim that systemic issues existed within the bank’s lending services units that led to decisions or communications being made that fell below community standards and expectations or amounted to misconduct.
This was rejected on the grounds that there was no evidence to suggest the conduct affected a “broader” customer group, nor was it attributable to broader cultural issues.
In its submission, ANZ claimed that between 2010 and 2017, it received “relatively few complaints” from former Landmark customers (i.e. 71) and paid $40 million to 40 to 50 of such customers through debt forgiveness or compensation.
The major bank also rejected an assertion made by Ms Orr that it was unprepared to take on Landmark customers, which could have influenced its conduct.
“Nor does the evidence support a connection between any lack of preparation by ANZ to receive new Landmark customers in 2010 and the conduct about which the commission has heard evidence,” ANZ wrote.
“When the specific examples of conduct falling below [community standards and expectations], or misconduct, are examined — such as a failure to honour a client’s cheques, a delay in making funding available, not accepting a reasonable settlement offer, not taking sufficient steps to assess the suitability of a guarantor, or cases of poor communication — the commission should not conclude that the relevant conduct was attributable to any lack of preparation in 2010.”
However, ANZ was the only major bank to support a moratorium on action against agribusinesses affected by natural disasters, such as the charging of default interests during periods of drought, as long as it is “governed by ANZ policy and not by legislation or by industry code”.
“This would provide ANZ with flexibility to offer a wider range of measures, take into account the particular circumstances and the appropriate duration of support,” the major bank’s lawyers wrote in the submission.
National Australia Bank (NAB), meanwhile, refuted in its submission to the banking royal commission that its actions towards Queensland cattle farmers, the Smiths, fell below community standards and expectations or amounted to misconduct. In this case, NAB suggested that charging them millions in default interest over more than five years for not meeting their loan repayment obligations was justified.
The major bank insisted in its submission that it had not charged the Smiths any default interest for the period of time alleged in circumstances where their farms were affected by flood.
NAB additionally noted that it allowed the Smiths to keep their two properties rather than taking enforcement action, but default and ordinary interest continues to be charged.
It also stated in its submission that it still wants a mediated resolution that will allow the cattle farmers to keep one of their farms and have cattle to earn income while getting relief from the default interest so they could refinance.
However, reaching a new agreement with the Smiths, according to the major bank, has been “difficult” for several reasons including the farmers’ alleged unresponsiveness to communications and “frequent” changes in advisers.
Upon the closure of the fourth round of royal commission hearings, NAB announced a range of initiatives to support customers affected by drought in NSW and Queensland which include the suspension of loan repayments and the waiving of fees.
Bendigo and Adelaide Bank response
Bendigo and Adelaide Bank similarly defended its subsidiary Rural Bank from claims of misconduct, noting that the agribank is not a signatory to the Code of Banking Practice and therefore cannot breach the code.
It also underscored in its submission to the banking royal commission that the behaviour that was brought into question by the counsel assisting was that of Elders staff (not Rural Bank staff), who reportedly withdrew information from Rural Bank staff that would have impacted the approval of a $2.15 million loan.
The counsel assisting alleged that the loan should not have been approved, but Bendigo and Adelaide Bank responded that there was little to demonstrate that the customer would not be able to repay their debts or that the customer, who was a surgeon and not a full-time farmer, was experiencing any financial difficulty.
“In circumstances where the customer’s strategy was to on-sell some of the purchased land to repay the facility, Rural Bank had an appropriate basis to believe the customer would be able to repay the loan. And given that Rural Bank had lent to the customer at less than the value of the purchased land, it was lending at an appropriate loan-to-value ratio,” the regional bank stated in its submission.
Bankwest and Rabobank admit to failings
Conversely, the Commonwealth Bank of Australia (CBA) and Rabobank admitted to misconduct and actions falling below community standards and expectations on most cases presented by the counsel assisting the royal commission.
CBA accepted findings of misconduct on all instances except for one in relation to Bankwest’s dealings with Queensland cattle farmers, the Ruddys, saying that the errors made by staff (which allegedly include overstated valuations) fall below community standards and expectations but do not amount to misconduct.
“[The Financial Ombudsman Service] determined that the valuation did not render the lending inappropriate and that the facility would likely have been granted even if an accurate valuation of Sunrise had occurred,” the major bank stated in its submission to the royal commission.
Bankwest had revised the valuations of Mr Ruddy’s farming properties following the departure of the employee that had miscalculated valuations, after which Bankwest deemed that the cattle farmer was in breach of the bank’s loan terms, requiring him to sell his properties.
Meanwhile, Rabobank accepted instances of misconduct when it came to its treatment of another Queensland cattle-grazing family, the Bauers, but denied two, saying that while there is a conflict of interest when a bank manager is representing all parties involved in a transaction (including the seller and two buyers), the bank manager in question had reportedly been “transparent” in his communications with all the parties.
“The circumstances indicate that no party in the transaction received a benefit or suffered a detriment of any kind. The parties proceeded to negotiate arm’s-length agreements between themselves with no involvement from the bank manager on any side as to the terms of the sale agreements. No confidential information was passed on or was misused by any party or the bank manager. In fact, the outcome of the transaction was to the mutual satisfaction of all parties,” the agribank said in its submission to the royal commission.