Banking royal commission: ANZ ‘caused distress’ to farmers

ANZ admits it should have been more empathetic to farmers, as banks face a grilling over their treatment of rural families.

Warren Day (centre), of ASIC, leaves the royal commission in Brisbane after giving evidence. Pic: AAP

Five banks and their dealings with farmers are being put under the microscope by the banking misconduct royal commission, which started its special farm finance hearings in Brisbane today.

The ANZ, NAB, Rabobank, CBA and Rural Bank (Bendigo) will all face questioning from the commission over the next five days, with five farm families selected to tell their financial stories relating to each bank.

Several banks have already admitted in pre-statements to the inquiry that they have either uncovered cases of misconduct relating to farm lending, or incidences when they did not meet community expectations or the banking code of conduct.

Counsel assisting Rowena Orr said key issues during the week would include non-monetary defaults, when farmers had not missed loan repayments but had a default, deed of forbearance or foreclosure notice issued by their bank purely because lowered land valuations had changed debt to equity ratios on paper, and triggered defaults or hiked penalty interest rates.

Another key issue will show how many farmers fell into financial trouble after banks bought the loan books of other lending institutions, and changed loan conditions or interest in ways that were unfavourable to the farmers involved.

The notorious takeover by ANZ of Landmark loans and farm clients in 2010 — the subject of the largest number of submissions (32 per cent) relating to agricultural finance to the royal commission — will be one of the first spotlights cast during this week’s hearings.

In its statement on farm lending to the commission, Ms Orr said the ANZ had disclosed several incidents of misconduct relating to farmer clients who had held loans with Landmark.

“(The ANZ) accepts that some of its dealings with former customers of Landmark fell below community expectations, and that in some cases, it may have breached its obligation to act fair and responsibly towards Landmark clients,” Ms Orr said.

“ANZ acknowledged it should have been more empathetic (to former Landmark farmer-clients) and that it had caused distress.”

The Commonwealth Bank — which similarly took over Bankwest’s many farm borrowers —

said in a statement to the commission that it had taken enforcement (foreclosure) action against 82 agricultural customers in the last decade and admitted five cases of misconduct against farmers involving fee overcharging and a failure to apply promised bonus interest rates

and payments.

But the commission was told that CBA denied that any of its farm enforcements — most relating to Bankwest loans — had been taken in haste or were proportionately too common.

Ms Orr said a third focus of the commission will be if the major banks — who hold 96 per cent of Australia’s $71.7 billion rural debt — provide enough support to farm clients in remote and regional Australia, or if difficulty accessing bank managers and advice deepened financial hardship.

She also will question if banks are too quick to call farm loans into default, without taking into account events such as seasons, drought, or commodity price collapse.

The commission was told the temporary northern live cattle export ban by the federal government in 2011 played a major part in financial distress in the Queensland cattle industry, with three case studies to be profiled from that sector.

Ms Orr told Commissioner Kenneth Hayne that in the past decade, the five banks in question had forced more than 400 farm families off their properties.

But the packed court space — filled with aggrieved farmers from Victoria, Western Australia and Queensland — groaned with disappointment when Ms Orr said it was not within the terms of the royal commission to examine the behaviour of receivers appointed by the banks to look after rural properties after their farm owners had been evicted.