When it comes to battling Australia’s banks, Geoff Shannon says “no-one has been more deeply in the trenches than me”.
For eight years, Mr Shannon, the founder of activist group Unhappy Banking, waged a battle with Bankwest after it ceased funding his $14 million residential project on the north coast of NSW during the depths of the financial crisis. He lost the acrimonious dispute last year.
He’s also been assisting dozens of other aggrieved customers of Bankwest – purchased by Commonwealth Bank during the GFC – and other banks to mediate claims loans were unfairly terminated when borrowers were experiencing financial pressures.
This has given Mr Shannon a ring-side seat to observe the strong-arm tactics banks use to defend their contractual rights. But even this hasn’t been enough to convince him a royal commission is warranted.
“I don’t think the royal commission is going to bring the compensation that people are looking for,” he said. “It won’t be able to deal with individual cases, or ones before the courts.”
While the issues commissioner Ken Hayne will tackle remain uncertain, the sordid history of loans made to farmers and developers in rural constituencies seem likely to feature prominently given members of the Nationals support for the inquiry.
A parliamentary joint committee inquiry on the issue last year found loan contracts “give banks the power to behave in ways that are unethical, unreasonable and lack transparency”.
‘Kicked up the arse on the way out’
Mr Shannon said the royal commission won’t have sufficient time to delve into too many individual cases but he reckons it should focus on banks’ heavy-handed enforcement actions.
“Human beings deserve some respect, even if they are being exited by a bank. The reason we have got all these disputes is the way people have been handled – they have been kicked up the arse on the way out,” he said.
In response to growing concerns about their lack of empathy, CBA and the other major banks have already changed small business lending contracts, including those used for farmers, removing for loans less than $3 million the “financial indicator covenants” which have allowed banks to trigger defaults when property prices fell below pre-agreed levels.
The moves were prompted by the report last year by Small Business Ombudsman Kate Carnell. She says community expectations are changing and many people now see banks as essential services like telecommunications or electricity companies.
“You can’t get paid without having a bank, which raises interesting issues about what their obligations are more broadly to a community,” she said.
“Is their job only to create shareholder value? It could be for senior management whose job is to reduce risk and improve profit. But do we think banks should behave in a way that causes community upheaval to improve their bottom line? Is that reasonable?”
‘Not a crazy bank basher’
Yet Mr Shannon doubts the royal commission will get to the bottom of how banks assess the risk of lending to regional Australia given its terms of reference restrict the commission from examining the work of financial regulators on macro-economic stability.
“I am not a crazy anti-bank basher, I’m a common sense bloke who has worked out what’s going on,” he said.
“The banks have been trying to get out from rural areas and exit as many loans as they can. That’s why they have all this drama: they have lost their appetite to lend.
“APRA’s requirements on capital reserves have resulted in banks finding better ways to make money, which is natural, given they are public companies with duties to shareholders. But we have to give the banks back their appetite to lend to commercial [projects] and farmers.
“A royal commission should put the onus back on the government and APRA to give the banks back their appetite to want the business,” he said.
“But I think the government will design the terms of reference to avoid that kind of scrutiny.”
Read more: http://www.afr.com/business/banking-and-finance/financial-services/hayne-commission-wont-help-farmers-bank-activist-says-20171205-gzz0ep?login_token=jc7g4naVKOPE1eaTqILkXmpWr5XIHLZSwAKut83UR10i17JNlmu88Mgg2prsQlQjBOXQKxlO6z_dM6XpiV3xCg&expiry=1512480972&single_use_token=zhjSDwq5VHRC1owdm81XMpYf-fz-INMRBP1xLcUSzFKcp21kxnGZ54-pAMtVDxl2jzlPpodH_HWUJl_fsfRZCg#ixzz50QmXwI5E
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