On the stand, Bank of Queensland (BoQ)’s head of product and governance, Douglas Snell, admitted that the bank issued a business loan which fell outside of serviceability requirements.
Mr Snell said that the loan agreement to SME owner Suzanne Riches contained a number of errors. These included calculating Ms Riches’ living expenses as a single, despite the fact she was married, did not accurately calculate depreciation figures, understated her PAYG tax liabilities and also wrongly listed the term of the loan as 30 years, when in fact it was 25 years.
Ms Riches had already taken the stand at the royal commission yesterday afternoon.
The litany of basic mistakes added up to provide serviceability figures that were way off the mark. Had they been done correctly, Mr Snell admitted that the loan would never have been made.
The commission heard that BoQ is somewhat unique in the banking sector in that it operates branches under a franchise system, with around 60 per cent of branches franchised.
Of particular note is the fact that the responsible owner-manager in this case was found to have misappropriated client funds, and the branch was subsequently closed.
Additionally, the loan was approved despite the branch in question having already been subject to an audit that raised concerns about the branch’s provision of credit.
To make matters worse for the bank, Mr Snell was forced to admit that even though Ms Riches defaulted on the loan almost immediately, nobody at the bank looked into why the default occurred so quickly and whether its own loan approval processes had failed.
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