A Rural Bank district manager manipulated and suppressed information that led to a farming business being saddled with a $2.2 million loan it could not afford.
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The manager lied to both his employer and the agribusiness customer in what was described as a systemic problem with management of lending customers at the company, the banking royal commission has heard.
The customer's initial application for a $2 million-plus loan was declined because Rural Bank's head office concluded there would be problems repaying it.
The Queensland farmer then resubmitted the application but for a $1 million loan.
The other $1 million was obtained through a high risk, speculative margin loan from Macquarie Bank, which was represented as a loan from an "aunt".
The district bank manager and other executives supported the customer anyway and did not tell head office, which approved it.
Rural Bank chief executive Alexandra Gartmann was grilled at the royal commission in Darwin about a poor culture and structures when it came to approving loans and verifying the risk profile of customers.
Counsel assisting Rowena Orr QC asked if she accepted that the "district banking manager responsible for this file had manipulated and suppressed information from the bank that was relevant to the assessment of serviceability?".
"Yes," she replied.
"So he had misrepresented the bank's position to the customer?" Ms Orr said.
"Yes," Ms Gartmann replied.
Another bank manager increased the facility of a farmer from $750,000 to $850,000 based on a $1.74 valuation of his livestock.
The next month it was valued at just $728,500, less than the value of the credit facility.
It also emerged that the bank recently discovered it had 62 loans that had become non-performing involving Queensland cattle farmers.
Multiple examples were provided of Rural Bank managers granting such high risk loans without proper inquiries and verifications.
While Ms Gartmann said they had left the company, she denied there were systemic problems including conflicts among staff who had more incentives to grow their loan books than monitor existing loans.
That was despite an internal report from its own chief risk officer at parent company Bendigo and Adelaide Bank Taso Corolis saying systemic problems existed and recommending major structural changes.
Australian Associated Press
