Senate banking inquiry submissions: Five telling charts

More than 150 submissions have been received as part of a Senate inquiry into changes in bank lending practices since the GFC and the relationship between banks, receivers and valuers.

The inquiry is being led by Nationals Senator John Williams, who raised the alarm at reports that banks were pulling loans to small business clients, including farmers, leading to assets being sold at rock-bottom levels.

Its purpose is to examine recent developments in the banking sector arising out of the impact of the GFC and subsequent events, including “the impact on borrowing and lending practices in the banking sector both during and since the global financial crisis”.

Many of the personal submissions relate to the conduct of Bankwest following its acquisition by the Commonwealth Bank in December 2008.

Law firm Slater & Gordon in conjunction with litigation funder IMF Australia is currently conducting due diligence with respect to a potential class action for aggrieved borrowers/mortgagors against BankWest and the Commonwealth Bank, with more than 120 businesses having signed up.

“As part of its purchase arrangements for Bankwest, CBA extracted from the seller a warranty which enabled CBA to claw back part of the purchase price depending upon whether the assets of Bankwest had been accurately disclosed to CBA in the accounts of Bankwest. Little is known about that warranty,” says Slater & Gordon.

The Commonwealth Bank acquired Bankwest in late 2008 for the bargain price of $2.1 billion following the near collapse of UK parent HBOS.

The committee will issue its report and recommendations at the end of October.

Property Observer has five telling charts that have been included in submissions:

Abacus, which represents building societies and credit unions, presented this chart to show the dominant positions of CBA and Westpac reflecting their respective acquisitions of Bankwest and St George. 

Source: Abacus

The Commonwealth Bank includes this chart which its ays shows that while Australia’s banking system ranks well by international standards for profitability, it falls far short of the top performing international systems

The Mortgage and Finance Association of Australia (MFAA), which principally represents mortgage brokers and non-bank lenders (NBLs), presents this chart to show how interest rates on mortgages increased at the same time as non-bank lenders almost disappeared from mortgage lending.

Source: MFAA

Bankwest, which in its submissions says CBA’s acquisition “did not cause any change to existing contractual arrangements between Bankwest and its customers” presented this chart to show that its customer satisfaction rating has improved relative to the big four banks since being acquired by the CBA.

Source: Bankwest

NAB in its submission presented this chart to show that it has only recovered 124 out of the 137 basis point increase in funding costs since June 2007:

Source: NAB