Economic References Committee's Bank Report

Senator WILLIAMS (New South WalesNationals Whip in the Senate) (16:21): I would like to add some comments to what my colleague Senator Bushby has just contributed.I have made some additional comments and recommendations to this inquiry. Senator Bushby emphasised that we are not a court, and how true that is. Some of the evidence that came forward was very concerning. People were distressed. They are under enormous financial pressure and, hopefully, this inquiry and the recommendations will bring this to the attention of both sides in this whole financial game, whether it be the banks or the lenders.

I have concerns about section 420A of the Corporations Act. There was a property owned by a Mr Jim Neale in Sydney. It was valued at $4 million. It was sold for, I believe, $645,000 and after the sale was valued at $3.58 million. Section 420A says that those receivers in place of controlling those assets must sell at the best possible market price. I asked ASIC at Senate estimates if they have ever charged anyone under section 420A, and they are coming back to me on that. They took it on notice. I think section 420A is a toothless tiger and it needs addressing so that when assets are cashed up the best possible price is achieved for those people who are being sold up.

I have huge concerns about Bankwest and when the Commonwealth Bank took over Bankwest. There were lots of arguments saying that Bankwest had a clawback system. It was in their interests to impair loans so that HBOS, Halifax Bank of Scotland that fell over in the UK, would have to reimburse the Commonwealth Bank for the price they paid for Bankwest, whereas Commonwealth Bank and Bankwest said this was not the case. I suggest that ASIC look at the whole transaction and see that the Corporations Law has been abided by all the way.

There is a lot of pressure to lend. No doubt a lot of bank managers and loan officers are under a lot of pressure to meet targets. This is concerning, and evidence from the Finance Sector Union is saying that when a loans officer has a target set to lend so much money a month, even if they go on holidays or are sick, they still must meet those targets. That can be very difficult at this time with the lack of business confidence that, sadly, we are seeing in many places in Australia now. We know that there is a lot of debt. There must be a limit to it, and so a lot of those workers are under enormous pressure.

One concern I have is the penalty interest rates when someone defaults on their loan. One customer at Bankwest was paying around eight per cent. When they defaulted, their interest rate went to 18 per cent. That is a huge increase. It appears to me that when you are down, they put the boot in. The point I am making is: if someone owes the bank a million dollars and their assets are $1.2 million, they put them on penalty rates of 18, 20 or 25 per cent. Nothing is regulated in that respect, then they sell the asset for a million dollars. If it takes 12 months to clear the decks, then their debt may have gone up another $200,000 or $300,000, and that is tax deductible to the bank. In that situation, banks can dictate their tax deductions. What other business can do that in Australia? This is something I think needs addressing: if you are paying eight per cent and you default, there should be a maximum of no more than an increase of 50 per cent on eight per cent—in other words, 12 per cent. We see interest rates go so high when people least of all in their business life do not need to have the boot stuck into them.

Low doc loans are very concerning. I tabled a statutory declaration to the committee this week where the loan application form had been falsified by the bank manager. Figures put in were not true. Assets and investments were simply not true, and it is clear that through the work of Ms Denise Brailey that they have been fudging the books, the applications—this is to get the loans over the line, to meet those targets the loans officers have to meet. I raised this with ASIC in Senate estimates. They said that is fraud. I asked ASIC to work with Denise Brailey, whose organisation is the Banking and Financial Consumers Support Association, to look at those and, if necessary, make a recommendation to the Director of Public Prosecutions.

We had one case of GST where the receiver had sold the asset for $9 million, and the receiver was paid $9.9 million. It attracted GST. That money went to the bank, but the bank did not want to hand that $900,000 back to go to the Australian Taxation Office. That is a very serious issue, and information I have received from phone calls and others are saying that this is not uncommon. The Australian Taxation Office should look at this very issue.

I will just raise this point in closing:

Under the GST Act, liquidators, receivers, managers and administrators are all collectively referred to as "representatives of incapacitated entities." Such representatives are personally liable for any GST payable on taxable supplies that are made by a company post appointment. The ATO ranks as an unsecured creditor in respect of pre-appointment liabilities. This means that the ATO is at risk that it will not recover pre-appointment GST liabilities in full. However, if a representative is personally liable for the GST liability that arises post appointment, the ATO is likely to recover its GST liability on post appointment supplies in full.

This situation needs to be clearly spelt out to the insolvency practitioners industry.

I fully support a full and thorough inquiry into the finance industry in Australia. It has been a long time since the Wallis inquiry. There are many issues I could talk about, be it support from the government to non-ADIs, which would obviously reduce competition. We know the costs of the banks have risen. There is no question about that; hence, their movements are not in parallel all the time with the Reserve Bank cash rate movements.

In closing, I would like to thank Senator Bushby for his chairing of the committee and his interest and input; to the staff, as he has mentioned; and to the other senators who were involved. To those who gave us evidence and submissions: many of you have had an extremely tough time. I hope you get over those tough times and your future is brighter financially and you can cope with the mess you have been in. There have been some terrible situations: Paul French at Cobar with his hotel—sold up for about the price of the poker machines. When I phoned the bloke, he was off to the Royal Prince Alfred Hospital to have his three-monthly check that his leukaemia is still in remission. Tough times for many—and I thank those people involved. The senators and the staff are doing a wonderful job.