BankWest lending practices cause headache
(11 August 2010 − Australia)The lending practices of the Commonwealth Bank’s subsidiary BankWest has resulted in the bank topping up provisioning by A$212 million and the dismissal of several executives.
CBA has dismissed several BankWest executives, including a former risk officer, after it was discovered the lender "systemically" inflated the credit quality of hundreds of commercial property loans and mortgages when it was owned by the British group HBOS.
BankWest was purchased from HBOS at the discounted rate of A$2.1 billion in 2008 after its British parent ran into trouble, however was revised further after auditors discovered under-provisioning of its exposure to the commercial property and business sector, the price was then knocked back further.
The deal resulted in the Commonwealth Bank become the biggest lender in Western Australia.
In recent times Commonwealth executives became alarmed by the number of Bankwest loans that were found to be impaired. Normally problem loans become red flagged long before they are classed as impaired.
This sparked a review of 1,100 accounts.
CBA found a situation where the loans were incorrectly rated as far as we were concerned from a credit-quality perspective, and also there were issues about the valuation of the underlying security, CBA’s chief executive, Ralph Norris said.
Despite the losses, Mr Norris, said the BankWest acquisition was something he would do 100 times over.
As a result of the review the bank placed more loans on its watch list and topped up its provisioning by A$212 million.
BankWest was purchased from HBOS at the discounted rate of A$2.1 billion in 2008 after its British parent ran into trouble, however was revised further after auditors discovered under-provisioning of its exposure to the commercial property and business sector, the price was then knocked back further.
The deal resulted in the Commonwealth Bank become the biggest lender in Western Australia.
In recent times Commonwealth executives became alarmed by the number of Bankwest loans that were found to be impaired. Normally problem loans become red flagged long before they are classed as impaired.
This sparked a review of 1,100 accounts.
CBA found a situation where the loans were incorrectly rated as far as we were concerned from a credit-quality perspective, and also there were issues about the valuation of the underlying security, CBA’s chief executive, Ralph Norris said.
Despite the losses, Mr Norris, said the BankWest acquisition was something he would do 100 times over.
As a result of the review the bank placed more loans on its watch list and topped up its provisioning by A$212 million.
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