Clik here to view.
Regulators have been in the know since the Storm Financial Inquiry of misuse of
desktop valuation systems AND incorrect LAF information AND who was responsible!
Misuse of valuation assessment system (VAS)
3.66 The committee has heard some suggestions that local CBA staff sought additional business by proactively and inappropriately using their desktop computer home valuation assessment system (VAS) to revalue Storm client's
houses, thereby making them eligible to borrow more against the new, higher value.
3.67 CBA executives contested this suggestion:
Effectively, Storm was selecting customers who were Commonwealth Bank loan customers. They would approach the bank under the pretext of their customer wanting to take out additional borrowing against their home. They were not solicited or sourced by the bank ... we were told the customers were supplying their owners' equity—the value that they put on their own home—and VAS was used to decide whether a valuation was required to verify that valuation. The only spreadsheets that I have seen are spreadsheets that came in from Storm, where we used the VAS system to identify whether an external valuation was required. The results of those were then sent back to Storm.[49]
3.68 The CBA has, however, admitted that its staff did not always use VAS appropriately:
We have discovered that, when it came to providing loans, mostly secured by property, we failed at times to follow
our own policies and lending practices. Additionally, a property valuation assessment system known as VAS was
misused on occasion by some staff with the effect that loans against some properties were larger than they would
3.69 This was disputed by Mr Andrew Jackson, a former CBA employee:
I would argue that the staff working in the team did not use VAS in any way that is not standard practice by almost every lender in Australia ...there is no override button.
If there was a problem with how they were using VAS then this would have been an issue for every lender in
Inaccurate figures on loan applications, leading to inappropriate lending
3.57 The committee received considerable conflicted evidence about who filled out loan documents on behalf of clients. The committee received many written submissions from individuals stating that they signed blank forms, discovered post collapse that they had loans they did not even know about, or belatedly discovered that information on loan documents—particularly relating to income and assets—was inaccurate:
It was either Storm or the banks were putting their own figures on the forms. We obviously signed the loan applications to get the loans, but—
...
We signed the forms at Storm Financial.
...
3.58 Mr Dalle Cort of Storm (Nine) in Cairns told the committee that the documents were filled out by the banks:
Loan documents were done by the banks, not by Storm ... They were bank documents ...If they came from the bank,
they were all filled out and they just needed a signature from the client. So they were all filled out by the banks.[44]
3.59 Mrs Carmela Richards, speaking in her capacity as a former CBA employee, confirmed that bank staff completed these forms but denied that they lied about critical figures:
The staff did not lie about income or assets. Anything that was told to the bank was advised to us by the clients and with appropriate supporting data provided to back this up.[45]
3.60 The forms were apparently not filled out by staff at Storm headquarters in Townsville:
We did not complete bank applications. We would send our own form of advice listing the client's position. As far as I remember, all of the banks—and we have had discussions with them on many occasions over the years—were adamant that their credit policy was that they had to confirm with the client, and that was perfectly acceptable. We understood they would either do a face-to-face interview depending on the bank or they would do it over the phone ... There was feedback to suggest that was occurring so I am a little bit surprised to hear that it maybe was not.[46]
3.61 Many investors question why the banks did not take greater responsibility for ensuring a borrower's ability to repay their loans:
I do believe that the banks have some responsibility in our demise, as not once did Colonial meet with us or interview us regarding our loans or how we intended—at our age—to repay approximately $1.6 million. If things went bad, as they did, we were as we are. Not once did they contact us regarding a margin call, and we were given no opportunity or say in the matter. The first contact we had with Colonial was on 8 December, and by that time everything had been sold down. That, consequently, left us with nothing.[47]
3.62 Several banks have explained to the committee that, for margin loans, standard industry practice is to simply use the value of financial assets such as shares, cash or managed funds to secure the loan.[48]