The few detailed stories that emerged from last week’s farm-focused Brisbane hearings of the financial services royal commission made heart-wrenching reading.
More disturbing is the knowledge that these case studies were just the tip of the iceberg. Hundreds more such stories would have been among the 6,892 submissions lodged with the commission before the public hearings kicked off in March.
A common theme to emerge during last week’s hearings was the callous – and in many cases, needlessly destructive – role played by the receivers appointed by banks to sell up unwanted farm clients.
Stories were told of farms being sold in undue haste or under unfavourable circumstances at a fraction of their true value, often leaving the banks’ clients still heavily indebted, as well as homeless.
Then there are the instances of livestock being sacrificed – of long-established, valuable breeding herds being sold for hamburger mince through the fat pens.
The tragedy of it is the present royal commission is not empowered within its terms of reference to investigate the role of receivers, despite the mounting evidence of malpractice in this area.
As Queensland MP Bob Katter says, arguing against this constraint, “The receivers are at the coalface of dealing with farmers who are in the process of having their livelihood stripped away by the banks, the very people who have appointed the receiver.”
Nor can the commission resolve individual disputes, award compensation or make demands on any party to a dispute. It can, however, report to the government with recommendations. From there, any questions of compensation will be up to the courts.
Many of the problems disclosed at the hearings stem from the city-based banks’ apparent lack of comprehension – or perhaps appreciation – of rural cycles, risks and psychological pressures.
The ANZ Bank found itself on a steep learning curve after paying $2.4 billion in 2009 to take over Landmark’s loan book, only to find it littered with troubled accounts which it proceeded to purge in indecent haste, sending 162 farmers out the gate.
Nor is it just the big four “pillar” banks in the gun. We heard last week about how a local manager of the supposedly specialist rural lender Rabobank had inflated the valuations of Queensland clients’ properties in order to justify bigger loans, and thereby enable him to reach a new loans “performance” target and pocket a handy bonus.
Already the commission has had one beneficial outcome: two of the major banks are now in the throes of hiving off their troublesome wealth management subsidiaries, to refocus on their core banking function.
It’s hoped that the commission might find a more enlightened and risk-aware attitude to rural debt – both by banks and borrowers – along with some much-needed curbs on the practices of agencies engaged by banks to do their dirty work.
– PETER AUSTIN
