Westpac’s general manager for commercial banking, Alastair Welsh, was testifying in response to claims that Westpac-owned Bank of Melbourne made serious errors in the provision, and subsequent handling of, a loan to a NSW business.
Bradley Wallis testified that Bank of Melbourne provided he and his wife with a residential loan for the purchase of a restaurant, Bed and Brekfast and associated resident, despite the primary activity of the property being commercial.
However, the business struggled, and so the family decided just eight months later to sell their investment property — also held by the bank — to release equity for the purchase of a new home elsewhere. That, in turn, would allow them to sell the business but retain the property on which it operated.
It was only during this process that Bank of Melbourne realised its error in issuing a residential loan, and that transferring it to a commercial loan led to a blowout in the loan-to-value ratio (LVR). To cover this, the bank forcibly withheld $100,000 from the Wallis’ settlement on the investment property.
Mr Welsh admitted that under no circumstance should the customers have been punished in this way for what was a mistake by the bank.
However it’s what happened next — and what did not happen — that raised the particular ire of the commission.
Bank of Melbourne told the Wallis family that the bank had the legal and contractual right to appropriate the funds in this way, but could not provide any documentation to prove this on request.
Following a formal complaint, the Financial Ombudsman Service (FOS) suggested the bank acted unfairly but did have the right to do so. Yet senior counsel assisting the royal commission, Rowena Orr QC, suggested that FOS was wrong and that the bank had in fact acted beyond its legal entitlement in appropriating the funds.
Additionally, internal emails revealed that the funds were seized simply “for comfort” than to meet any process, and that the bank withheld key information from FOS needed to make its determination on the complaint.
“The banker got it wrong,” Mr Welsh said, adding that some of these actions could amount to misconduct.
Despite this, Mr Welsh was forced to admit that he has not spoken with the relevant staff, nor is there any evidence available to suggest that any form of disciplinary action was taken against them.
See all the hearings in full and in real-time on the My Business royal commission blog.