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Former ASIC employee calls for royal commission into banking practices

Former ASIC employee calls for royal commission into banking practices
A former Australian Securities and Investment Commission (ASIC) employee has called for a royal commission into banking practices amid allegations of misconduct by the Commonwealth Bank and Bankwest.

The Parliamentary Joint Committee on Corporations and Financial Services has heard evidence in relation to the Commonwealth Bank and its takeover of Bankwest during the Global Financial Crisis.

Allegations brought forward include that 'clawback' provisions were built into the takeover contract to benefit the bank if it defaulted on loans.

Witnesses allege the bank then began to default on loans of customers, even those who paid on time.

The former ASIC employee Romesh Wijeyeratne told the inquiry the bank had shown its "intent to deceive".

"Failure of parliament to call a royal commission will create a moral hazard which will further propagate the current culture of the executive level of white collar level corruption," he said.

"This behaviour undermines public confidence in the finance sector and damages the Australian economy, community and families."

In submissions to the inquiry, the Commonwealth Bank of Australia said the claims are without foundation.

"The acquisition of Bankwest coincided with the height of the GFC and the credit profile of a number of customers changed, due to the resulting negative impact on the economy and property prices (in particular development properties) and the tighter credit positions adopted by all banks," CBA said in its submissions.

"Bankwest under Commonwealth Bank ownership met all existing contractual obligations and continued to provide credit if it was obliged to do so."

Property developer: I was a 'dead man walking'

A property developer told the Federal Parliamentary inquiry he was a "dead man walking" after the Commonwealth Bank defaulted his loans for a $282 million resort development in Queensland.

Developer Rory O'Brien told the Committee that in 2009 the bank gave him 48-hours notice to repay $178 million.

"This was a deliberate starvation of our financial oxygen and in and of itself, is unconscionable conduct," he said.

"How can anybody possibly operate in a total vacuum when you're trying to do business [at] a normal arms length over $178 million deal relating to a quarter of a million dollar project that sits completed."

Mr O'Brien told the inquiry that lengthy court battles between customers and the banks over defaulting were deliberate, so the customer would sign settlements that included gag orders.

Mr O'Brien settled with the bank in 2014 for $100,000 and today told the inquiry a subsequent joint media release outlining the allegations as "without foundation" was false.

After the collapse of the Lehman brothers in the US during the GFC in 2007, the British government injected over $60 billion into Lloyds, HBOS, and the Royal Bank of Scotland.

HBOS then sold Bankwest and St Andrews Insurance to the Commonwealth Bank for $2.1 billion in 2008.

A spokeswoman for the Commonwealth Bank said the organisation welcomed the inquiry.

"Commonwealth Bank welcomes scrutiny, has actively participated in all inquiries since these issues arose in 2008 and is openly cooperating with this Parliamentary Inquiry," the statement said.

"Our position has not changed and we believe these claims are without foundation and are untrue."

Author: Thuy Ong and Nicole Chettle
Source: ABC News   
Last modified onFriday, 13 November 2015 21:05

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