Australia’s banks were revealed on Monday (May 21) to have engaged in a wide range of misconduct, with a powerful inquiry into the country’s financial sector hearing of admissions of fraudulent loans and double-charging interest.
All of Australia’s “big four” lenders acknowledged some transgressions in their submissions, said Michael Hodge, senior counsel assisting the inquiry, on the opening day of the third round of public hearings which will focus on banks’ treatment of small and medium-sized businesses.
The admissions of bad behaviour came as Kenneth Hayne, the former judge presiding over the Royal Commission, said he had been swamped with more than 5,500 submissions detailing misconduct, 11 percent of which were related to small and medium size businesses.
The admissions are a further hit to the sector’s reputation after previous rounds of hearings uncovered widespread abuses in Australia’s financial advice industry, leading to executive departures at wealth manager AMP Ltd.
Australia and New Zealand Banking Group told the investigation it was aware that 47 fraudulent business loans had been extended last year.
“ANZ acknowledged that in 2017, two ANZ business banking managers were found to have been colluding with external third parties to make 47 fraudulent loans. One was dismissed, the other resigned during the disciplinary process,” Hodge said.
Commonwealth Bank of Australia admitted to systematically double-charging interest to some business customers over many years, he said, adding the country’s largest lender had failed to tell the regulator about the problem in a timely manner, which is required by law.
National Australia Bank had also admitted to overcharging customers due to incorrect calculations of interest rates and double-charging fees, while No. 2 lender Westpac Banking Corp had admitted to offering loans to businesses that should not have been targeted, Hodge said.
Westpac is still investigating the scope of the problem, he added.
Media representatives for the banks told Reuters that it would not be appropriate to comment out of respect for the proceedings.
The country’s four largest banks dominate the mortgage and business lending market, while also holding the lion’s share of deposits and consumer credit loans.
Less than halfway into a year-long investigation, the commission has already prompted the banks to impose stricter lending conditions on borrowers, triggering fears the economy will be the victim of a new era of subdued credit growth as a result.
Shares in the big four banks were mostly lower on Monday, with CBA, Westpac and NAB losing less than 1 percent while ANZ was largely flat.
Alastair Welsh, head of commercial lending at Westpac, is scheduled to be the first bank executive to appear before the inquiry this week.