Hayne ‘struck’ by plight of farmers thrown off land

Royal commissioner Kenneth Hayne has taken aim at the relationship between banks and receivers.

ANZ’s Benjamin Steinberg leaves the royal commission hearings in Brisbane yesterday. Picture: AAP

Royal commissioner Kenneth Hayne has taken aim at the relationship between banks and the receivers that are appointed to distressed assets after a fire sale of farming land by agents working for ANZ led to properties being hocked for 30 per cent less than they were worth.

Mr Hayne said he was “struck” by a case where ANZ’s external administrator pushed for the sale of four properties owned by West Australian farmers Stephen and Janine Harley in August while the Harleys were looking to sell in spring to get a better price.

Receivers ended up selling for almost $600,000 below a recent valuation.

The royal commission has been under pressure to examine the role of receivers in agricultural lending, even though the inquiry’s terms of reference exclude any investigation of administrators, as repossessed farms have been sold at below market value, pushing farmers further into debt.

Over the weekend, Nationals senator John Williams urged the royal commission to use this round of hearings to probe administrators, while Rural Financial Counselling Service’s Chris Wheatcroft called for the actions of receivers to be examined in a roundabout way through the conduct of banks in appointing them.

During hearings held at the Brisbane Magistrates Court this week, the royal commission has been raking over the destruction wrought by ANZ’s rushed $2.4 billion takeover of rural financier Landmark. The acquisition in the aftermath of the global financial crisis soon wrong-footed the bank with an explosion of souring loans. About a third of the loans later became impaired or were considered at high risk of default soon after ANZ bought the division from the then-listed wheat exporter AWB, and the bank ended up forcing 162 farmers off their land.

In one case study, ANZ engaged administrators who forced the Harleys to sell all of their nine properties, including their home and their sheep. When those sales left the Harleys with debts of more than $300,000 to ANZ, the bank threatened them with bankruptcy proceedings.

“If you appoint a receiver, a receiver will move to sale promptly?” Mr Hayne asked ANZ head of commercial lending services Ben Steinberg, who faced his third day of testimony. Mr Steinberg agreed, but noted in some cases receivers may look to improve a property before a sale. Mr Steinberg agreed it would be “infrequent” for a receiver to manage a business as an ongoing concern.

“If the receiver believes the best outcome would be to hold back a sale, I would expect a receiver to come back to us with a strategy around what the best method of realisation for that property is,” Mr Steinberg said.

But ANZ also had an interest in getting the assets off its books as quickly as possible. Mr Steinberg said holding a loan that was under financial distress attracted an additional capital charge for the bank, as required by the regulator. “That capital comes to the bank at a cost,” Mr Steinberg said.

Mr Steinberg conceded that ANZ had overhauled the way it appointed receivers since it took over Landmark. ANZ now had a panel guiding the process and receivers must agree to a “consistent set of terms of conditions”.

When counsel assisting Rowena Orr asked Mr Steinberg whether receivers might “get you certainty but might not get you the maximum realisable value for the property”, the banker responded that external administrators had “statutory obligations to realise the best price possible” for the assets.

On Monday at the opening of the round of hearings, Mr Wheatcroft had said introducing receivers to a distressed borrower “never benefits a client”.

“I can absolutely categorically say that. There is nowhere to go once the receiver is in,” he said.

Mr Wheatcroft said there was “a massive destruction of value” when receivers dealt with assets.

Mr Steinberg yesterday refused to accept the bank had “systemic issues” in the way it dealt with farmers following the Landmark takeover.

ANZ was forced to overhaul the way it dealt with its agribusiness customers after a series of damaging media stories piqued political interest in the plight of farmers thrown off their land.

Mr Steinberg was unable to say whether ANZ had launched an investigation into staff falsely witnessing documents, after admitting to misconduct relating to the Handley Group. Queensland cattle farmer Elizabeth Handley’s properties suffered through fire, flood and drought. But when she asked ANZ to postpone a mediation meeting because she had received adverse biopsies, the bank declined.