It was common practice for Westpac bankers to fill out loan documents with false information, one of the bank’s senior executives has told the financial services royal commission.

Evidence at the commission yesterday showed Westpac relied on a rat’s nest of wrongly dated and falsely witnessed documents to take a loan guarantee from blind and seriously ill disability pensioner Carolyn Flanagan.

Westpac general manager of commercial banking Alastair Welsh also admitted that bank processes supposed to ensure people who gave guarantees got a commercial benefit from the loan were no more than a box-ticking exercise.

Ms Flanagan gave Westpac security over her house in December 2010 in order to help her daughter get a $160,000 loan to buy a pool repair franchise in Western Sydney. However, the business failed and Westpac moved to take the home.

The Financial Ombudsman Service ruled against Ms Flanagan, but after she got help from NSW Legal Aid she was able to strike a deal with Westpac to remain in her home rent free until she dies.

Under heavy cross-examination by counsel assisting the commission, Michael Hodge, QC, Mr Welsh admitted to “errors” by the banker who took the guarantee from Ms Flanagan, but insisted there was “no problem” with the bank’s processes.

Ms Flanagan’s ailments have included glaucoma, cancer, depression, osteoporosis, diverticulitis, pancreatitis, chronic obstructive airway disease and a fractured pelvis.

The commission heard that because of her illnesses, Ms Flanagan could not read or write, although she could sign documents if shown where the signature was required.

Nonetheless, the banker who arranged the loan wrote “yes” in answer to a question on an acknowledgment form asking Ms Flanagan if she had “read the guarantee and indemnity … carefully”, the commission heard.

The banker, Michelle Fletcher, also wrote “yes” next to a question asking if Ms Flanagan had received independent legal advice.

However, the commission has heard that at the time Ms Fletcher filled out the form, on December 8, 2010, Ms Flanagan had not received any independent legal ­advice.

She received advice from a lawyer two days later.

“It’s not uncommon for these to be filled out in anticipation of something,” Mr Welsh told the commission.

“That is often the practice,” he said — before backtracking to say that it “could be the practice at this point in time”.

He also admitted it was possible that the positive answers to other important questions on the form, dealing with Ms Flanagan’s understanding of the risk of going guarantor for her daughter, might also only represent aspirations for the future.

And he told the commission it was Westpac’s belief Ms Fletcher witnessed the document without actually seeing Ms Flanagan sign it — a practice known as “false witnessing”, which the inquiry has already taken aim at NAB over.

After initially telling the commission that “in my view, she did this in error and crossed it out”, Mr Welsh admitted that he did not know whether the incorrect witnessing was crossed out by Ms Fletcher or the lawyer who correctly witnessed the document two days later.

The law requires that guarantors get a commercial benefit from the loan they guarantee, a requirement Westpac met because Ms Flanagan was a shareholder in the company her daughter used to buy the franchise.

But Mr Welsh admitted that Ms Flanagan was unlikely to ever receive a dividend from the type of tightly held private company involved in the transaction.

Commissioner Kenneth Hayne put it to Mr Welsh that “the processes that the bank went through to determine whether the guarantor stood to gain any financial benefit were processes that were more form than substance”.

“Yes, I think that’s a correct assessment. It was more form and the substance was more anchored in the security position and not anchored in understanding of Ms Flanagan’s income or potential to pay back the debt,” Mr Welsh replied.

He agreed with Mr Hayne’s assertion the inquiries made by Westpac were “form rather than substance or, if you like, box-ticking rather than looking at the ­reality”. He said that the main mistake Westpac made was “we forgot this was about Ms Flanagan”. “We got into legal process and what FOS said and who was on what base,” he said.

“You know, she was looking to stay in her home. And when we finally cut to the chase of that, that’s what we did. We gave her life tenancy for her home.”