Banks 'bloviate' about change but it's business as usual - ASBFEO

AUSTRALIAN Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said the responses today from CBA and ANZ to the ASBFEO bank inquiry recommendations fall well short of what’s needed to improve current small business lending practices.

“Judging by the responses of the big banks so far, it’s clear they’re not listening to the growing chorus of concern about the way they treat small business borrowers,” Ms Carnell said.

“Both banks bloviated today about supporting various recommendations we’ve made in our inquiry report, but the devil’s in the detail; when you dig a little deeper, there’s always conditions attached, and without definitive timelines for action, all of this talk means absolutely nothing.” 

Speaking at today’s House Economics Committee hearing, CBA CEO Ian Narev committed to removing non-monetary default terms, but only from agreements for loans up to $1 million, while ANZ CEO Shayne Elliott said his bank was only prepared to consider the future use – as opposed to removal – of non-monetary default terms in agreements for loans of up to $3 million.  It follows NAB’s unwavering refusal on Friday to remove any such clauses from small business loan agreements.

“We simply don’t think it’s reasonable for the banks to be able to default a small business loan when people are compliant financially, and we’re absolutely resolute in our recommendation that all non-financial default clauses be removed from small business loan contracts of up to $5 million,” Ms Carnell said.

“The banks say they rarely use these clauses for loan impairment, so why insist on their inclusion in the first place?  They claim that getting rid of them would drive up risk for the bank and cost for the borrower, but if they’re rarely used, how could this possibly be the case, not to mention the fact banks already factor-in the risk associated with small business loans, including small business loans secured against bricks and mortar such as the family home.

“Our inquiry heard heart-breaking stories from small business owners who’d been subject to such clauses, so for ANZ’s Graham Hodges to today maintain their inclusion is ‘good practice’ is just breathtaking,” she said.

Ms Carnell once again reinforced the practical need for the banks to change the way they define a small business.

“Mr Narev today said ‘there’s no magic number’ when it comes to stipulating what defines a small business loan facility.  In fact, there is such a number and it is $5 million,” Ms Carnell said.

“$5 million isn’t a figure we’ve plucked out of the air, it’s a figure supported by others including David Murray, and more recently Phil Khoury, who was appointed by the banks to scrutinise their own code of conduct.

“Anything below $5 million is clearly an out-of-date concept that does not represent the true lending picture of Australia’s small businesses. $5 million covers 98 per cent of loans to small business so I call on the banks to heed our advice – and that of others – and acknowledge they’re severely out of touch on this.

“We don’t want weasel words about supporting changes; we don’t want the banks to cherry-pick certain details from our recommendations that best suit them.  All of our recommendations are reasonable, do-able and do-able quickly, and all of them are designed to make a difference in the lives of small business people, and there’s absolutely no excuse for the banks to keep kicking the can down the road on this,” she said.

www.asbfeo.gov.au

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