Global food forum: Bankers promise to learn lessons

Banks had to ‘stop, pause and listen’ after receiving a poor scorecard over their treatment of farmers, a senior banker says.

ANZ chairman Phil Chronican.

Banks had to “stop, pause and listen” after receiving a poor scorecard over their treatment of farmers, but are continuing to lend to the agricultural sector, a senior banker says.

Khan Horne, NAB’s regional customer executive for NSW specialising in agribusiness, told the 2019 Global Food Forum that NAB had already started implementing some of the recommendations of the financial services royal commission about how agricultural customers should be dealt with.

He said NAB supported royal commissioner Kenneth Hayne’s recommendation that the banking code of conduct be amended to extend small business protections from those that borrow up to $3 million to enterprises that borrow up to $5m.

This position is at odds with that of the Australian Banking Association, which has bitterly opposed the move, and the powerful Council of Financial Regulators, which yesterday rejected Mr Hayne’s proposal that the $5m limit apply to any single line of credit, rather than the total borrowed.

Mr Horne said banks were “still growing” agricultural lending.

“I was just doing some numbers earlier in the week, and lending to Australian agriculture has only gone back once in the last decade,” he said.

“So the banks are actually open for business, and they are lending.”

Global Food Forum 2019 logo

He said NAB had already brought in one of Mr Hayne’s other recommendations, which was to stop charging high “default” rates to customers who are unable to repay their loans after being hit by drought or other natural ­disasters.

And he endorsed the extension of farm debt mediation from the four states that now have such schemes to a national program, saying it had been a successful process in NSW for 20 years.

“It’s a bit like the rail gauges: the other states nearly got it right,” he said.

“If they just did one rail gauge, we’d have been far better off. So we absolutely support that, and have been calling that for many years, because it is a good process.”

He said NAB also supported Mr Hayne’s call for lending to farms to be supported by an independent valuation at the time credit is advanced, even though it would increase the cost of loans.

This recommendation was designed to combat the complaints from farmers and small businesses to the royal commission that their assets were revalued downwards after they borrowed, putting them in default even though they had made every repayment.

“No one likes extra costs in transactions, extra legal fees, accountants’ fees, valuations fees,” he said. “It’s a fact now — you know, going forward — there will be external, qualified valuations.”

Earlier, NAB’s chairman and interim CEO Phil Chronican said the bank would pause closures of regional branches till 2021.

“We’ve got to build trust back out in the community environment, customer-by-customer or customer, and branches are important to small local towns,” Mr Horne said, urging customers to in turn support their local branch.

Paul Jensz, the executive chairman of the Agfood Fund, said the importance of strong governance was an important lesson from the royal commission.