Phil Khoury first up at bank inquiry as spotlight turns to small business lending

The Australian 12:27pm May 16, 2018

Richard Gluyas

After his kind offer to help AMP renew its board, perhaps with a little more zeal than the company anticipated, financial services royal commissioner Ken Hayne now turns his attention to bank lending to the small- and medium-sized business sector.

The show kicks off on Monday and continues until the close of business on Friday, June 1.

As with the previous round of hearings on financial advice, some initial scene-setting rules out the prospect of immediate fireworks.

The word on the street is that the first witness in the box on Monday morning will be Phil Khoury of the governance and accountability advisory group Cameron Ralph Khoury.

Khoury is best known for his review of the Code of Banking Practice for Anna Bligh’s Australian Banking Association.

The new code, which among other things requires banks to give at least three months’ notice to their small business customers if they’re planning to call in a loan facility, was sent to ASIC for approval in December.

Khoury is expected to be asked if the framework provides sufficient protection for small business borrowers, which have long argued that their legal rights have been diluted by lopsided loan contracts.

Since the 2008 financial crisis, various parliamentary committees have heard innumerable horror stories about interactions between SMEs and their lenders.

However, as with financial advice and the initial round of consumer lending hearings, it’s the internal bank emails that tend to wreak unanticipated havoc.

There’s significant scope for the royal commission to locate an unexploded ordnance.

Bank lending to small business, defined as loans of less than $2 million, was worth $261 billion in 2015, or about 28 per cent of total bank lending to the business sector.

The issue of access and pricing of finance to SMEs is also being examined by the Productivity Commission in its inquiry into competition in the financial system, and in the review of affordable capital for SME growth by Kate Carnell’s Australian Small Business and Family Enterprise Ombudsman.