Parliamentary Inquiry into Bankwest business loan practices
(7 December 2015 – Australia) Commonwealth Bank of Australia (CBA) placed 182 business loan customers into receivership during the first two years after it acquired Bankwest, a parliamentary inquiry has heard.
Following the acquisition, the Commonwealth Bank of Australia (CBA) was forced to write off about $2.8 billion in Bankwest loans in 2009 according to the submission, which said Bankwest "had no alternative" but to protect its financial position.
The bank’s lead counsel, David Cohen, told the hearing CBA called in receivers on 66 customers in the year ending December 2009 and a further 116 in the year ending December 2010.
CBA agreed to purchase Bankwest in 2008 from HBOS, a subsidiary of British lender Llloyd's which was under duress during the global financial crisis.
The Commonwealth Bank thought it had secured an attractive price for Bankwest.
"Bankwest had 5 per cent of the market share," Mr Cohen said.
The submission stated: "Unfortunately some existing highly leveraged or high-risk developments and businesses failed or suffered a significant deterioration in their ability to service their loans."
"In these circumstances Bankwest had no alternative but to take steps to protect its position," the bank said.
The assertion is that built into the contract for this purchase were 'clawback' provisions, in which the purchase price would be reduced for every loan which CBA determined was "bad".
The bank, however, said the price adjustment mechanism allowed for changes to the quantity and quality of Bankwest’s loan book at the time it was bought by CBA and that it did not allow for any clawback for loans which subsequently went bad.
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