Banking royal commission: BoQ, Suncorp next in line for grilling

The Australian 12:00am May 8, 2018

Michael Roddan

The Bank of Queensland and Suncorp will be forced to send executives to face questioning at the royal commission as Kenneth Hayne’s inquiry targets lending to small businesses later this month.

The hearings will likely be fiery, with Commonwealth Bank’s wholly owned Bankwest business also to be put under the spotlight for its dealings with small businesses, many of which were tipped into default at the height of the global financial crisis after the division was taken over from HBOS.

The royal commission into banking and financial services yesterday announced all four major lenders will also once again be grilled in Melbourne’s Federal Court over a fortnight starting on May 21.

While the first two rounds of hearings covered mortgage lending and financial advice, the third round will focus on major financial institutions’ dealings with small and medium businesses. The Anna Bligh-led industry lobby group, the Australian Banking Association, will also face questioning, along with the Australian Securities & Investments Commission, about self-regulation. The ABA’s code of banking practice was recently overhauled with a key focus on small business loans.

The banking sector’s habit of tipping small businesses and farm owners into default with non-monetary default clauses — which allowed the banks to use heavy-handed contracts to tip borrowers who had been meeting all their repayments into receivership — has been a key focus for the small business ombudsman, Kate Carnell. Ms Carnell, who completed her inquiry into small business loans last year, was a vocal critic of the banking sector before the royal commission was called by Malcolm Turnbull late last year. Ms Carnell committed her office to helping royal commissioner Mr Hayne carry out his investigation. ASIC will be questioned on the extension of unfair contract terms legislation to small business contracts.

The royal commission will call ANZ, Bank of Queensland, Commonwealth Bank, Westpac and Suncorp to give evidence about responsible lending to small businesses. National Australia Bank and Bankwest have been asked to face questions about the management and monitoring of loans to businesses.

Bankwest has been a lightning rod for irate borrowers who had been pushed into default at the height of the global financial crisis, after CBA was asked to take over the ailing lender from distressed lender HBOS. Many Bankwest borrowers were defaulted after CBA reduced the value of the loans after the acquisition.

CBA will also be questioned, along with Westpac, about product and account administration practices.

The ABA’s code of practice was recently rewritten after it was criticised for being overly complex. The revamped code sought to limit the use of non-monetary default clauses, with protections for small businesses with $3 million or less of borrowings.