ANZ small-business team under instruction to relentlessly acquire new customers
ANZ ordered its small-business team to “relentlessly acquire” new customers in a sales push that could result in bonuses for staff, the financial services royal commission has heard.
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ANZ ordered its small-business team to “relentlessly acquire” new customers in a sales push that could result in bonuses for staff, the financial services royal commission has heard.
An internal ANZ document presented to the royal commission shows the banking major urged its small-business teams to ramp up efforts to “relentlessly acquire new-to-bank customers, attract larger customers and enhance their share of wallet with ANZ”.
The instructions were delivered in a document titled “key messages” contained within a small-business banking support package sent to branches in 2014.
In a separate document, a previously high-flying small-business banker facing disciplinary action last year blamed mistakes on “a culture of sales pressure” and the “excitement of closing new deals”.
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The documents were presented as the commission on Wednesday continued to probe how ANZ satisfied its banking code obligation to only lend what people could pay back.
The commission scrutinised details of a $220,000 loan to a husband and wife launching an untested gelato franchise based on a business plan full of errors, and wildly optimistic revenue and expense assumptions.
The Financial Ombudsman Service later ruled the loan should not have been made.
Former ANZ small-business general manager Kate Gibson, who is now head of home lending at the bank, denied the bank’s sales culture had contributed to poor lending practices.
“I do believe that the culture of small business was one of wanting to perform, but I don’t believe there was a culture of sales pressure,” she said.
ANZ’s incentives for small-business bankers had evolved since 2014 to place less emphasis on sales targets, Ms Gibson said. Having previously defended making the loan to the gelato franchise, Ms Gibson on Wednesday conceded the bank had not been “prudent and diligent” in extending the credit as required by the banking code of conduct, which is legally binding.
Despite admitting errors in their lending, both ANZ and Westpac took issue with rulings by the Financial Ombudsman Service that had gone against them, warning the logic behind the decisions could stifle lending to small businesses.
Referencing the gelato business loan, Ms Gibson said the ombudsman’s ruling suggested banks should only lend to someone wanting to start a small business, who had a partner with an income outside the proposed business venture that could cover the loan’s interest payments.
“I’m not entirely clear how you would lend to a person who didn’t have a spouse or assets,” Ms Gibson said of the ombudsman’s decision.
Westpac commercial banking general manager Alastair Welsh defended a loan made in 2014 to a former Pie Face franchisee who ended up losing the business and having to sell her investment property.
The Financial Ombudsman Service later ruled the loan should not have been made.
Mr Welsh on Wednesday said the ombudsman came to that decision by using a 3 percentage point buffer test on a loan charging 6 per cent interest — that is, stress testing the loan as though the borrower were paying 9 per cent interest.
Westpac used a buffer test adding 1.5 percentage points.
Mr Welsh said having a buffer test that was 50 per cent of the loan’s interest rate would crimp lending to the small-business sector, particularly those in a start-up phase.
“The loan should have been made,” he said. “A 3 per cent buffer in our view would prohibit a lot of business lending and that would be very concerning for me.”
The third round of hearings for the royal commission continues in Melbourne tomorrow.
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