Thursday, 5 May 2016
Corporations and Financial Services Committee; Report
On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the following reports: Impairment of customer loans and the report on the 2014-15 annual reports of bodies established under the ASIC Act.
Reports made parliamentary papers in accordance with standing order 39(e).
by leave—The first report that I wish to speak to is the Impairment of customer loans. The terms of reference for this inquiry into the impairment of customer loans required the committee to consider the practices of banks towards borrowers' financial difficulty and the role of constructive or non-monetary defaults which include breaches of loan contract terms other than borrowers not meeting repayment requirements.
The committee is aware that the matters raised in this inquiry have been examined previously, and, despite previous examination, allegations continue to be raised. In order to ensure that the issues raised during the inquiry were thoroughly examined, the committee has:
The majority of the evidence received by the committee addressed small business and commercial loans. Many are small family businesses who may still have to borrow millions of dollars to achieve their commercial objectives yet be run by an individual, family or partnership that has significant personal exposure due to the use of personal assets such as the family home as security.
From the evidence it has received, the committee has been able to determine that there has been—albeit in a minority of cases—a persistent pattern of abuse of the almost complete asymmetry of power in the relationship between lender and borrower.
The committee has not been able to discover evidence that demonstrates that there was widespread or systematic illegal behaviour by banks or that there were deliberate impairments of loans motivated solely by clawbacks or warranties associated with acquisitions of banks. However, the committee does consider that there are four factors that create an environment in which small business borrowers are very vulnerable and that banks are able to exploit this vulnerability. These factors are:
The committee considers that to address the vulnerability of small business and commercial borrowers it is essential that a single body be empowered to:
The committee considers that the most appropriate body to undertake this role is the Australian Small Business and Family Enterprise Ombudsman. The committee therefore recommends that the government bring forward legislation and other measures to give the Australian Small Business and Family Enterprise Ombudsman the relevant powers to carry out this role, and to do so retrospectively where appropriate.
The committee has made a number of other recommendations in relation to practices of banks, valuers and receivers.
I commend the report to the House.