Australia's big banks broke laws and failed public,
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[March 23, 2018]
By Paulina Duran
SYDNEY (Reuters) - Australia's top banks
routinely and repeatedly breached laws when issuing home loans, credit
cards and other consumer loans, according to a scathing summary of the
first round of hearings at the country's inquiry into financial
Rowena Orr, barrister assisting the judicial inquiry, said on Friday the
misconduct found in subpoenaed confidential records and through public
examination of bank executives included several instances of breaches of
the Corporations Act and the National Credit Act.
"Over the last two weeks the commission has received evidence of
misconduct and conduct falling below community standards and
expectations by a number of financial services entities," Orr told the
Some of the examples included: selling insurance to thousands of people
who could not claim it; offering bonuses and incentives that encouraged
bankers to engage in fraudulent lending practices; and giving car yards
higher commissions for selling higher-rate auto loans.
In summary, the inquiry found that the banks failed to act honestly and
fairly, as required by law and breached their obligations to lend
The banks have the opportunity to respond to the Royal Commission, as
the year-long inquiry is called, which is due to publish an interim
report by September.
Its final recommendations could lead to criminal or civil prosecutions
as well as greater regulation on the financial sector, which includes
the 'Big Four' lenders - National Australia Bank, Commonwealth Bank of
Australia, Australia and New Zealand Banking Group and Westpac Banking
The interim summary was focused on instances of misconduct by the
consumer credit units of several major financial institutions including
ANZ, CBA, NAB and Westpac.
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The center-right government reluctantly agreed to order the inquiry last
year in response to a series of banking scandals, including
interest-rate rigging and breaches of anti-money laundering laws by CBA.
Earlier in the day, Westpac disclosed to the inquiry 55 new instances
where staff falsified or accepted falsified documentation linked to home
loan applications over the past few years.
The inquiry also heard on Friday that Westpac offered credit card limit
increases to more than two million potentially vulnerable people without
making minimum checks about whether they had a job and could afford to
repay the debt.
As a result, the bank derived A$23 million ($17.74 million) in profits but
thousands of people were left in financial difficulty, the inquiry revealed.
The Australian Securities and Investments Commision (ASIC) raised Westpac's
lending practices with the banking industry lobby group as early as 2012, but
the bank ignored the regulator's concerns and its threats of legal action.
"Of the big four banks, Westpac appears most resistant to ASIC and the laws we
administer," according to a 2015 ASIC memo about a meeting it held with Westpac
Chairman Lindsay Maxsted, which was disclosed in the inquiry.
The inquiry will reconvene in April to assess the scandal-hit financial advice
and wealth management sectors.
($1 = 1.2967 Australian dollars)
(Reporting by Paulina Duran in SYDNEY; Editing by Muralikumar Anantharaman)
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