Banks are improving the way they deal with farmers but still occasionally act in unacceptable and unconscionable ways, a parliamentary inquiry has heard.
A Senate select committee is taking evidence in Canberra into bank lending to primary production customers.
Anne Scott, from the Australian Small Business and Family Enterprise Ombudsman, told the inquiry that banks’ understanding of farmers’ circumstances was improving.
But an ombudsman review of complained-about loan cases submitted to another parliamentary inquiry showed a third were a mixture of poor business decisions and poor bank practice and a further third where there are ‘‘very real issues where bank/financial institution conduct was unacceptable and possibly unconscionable’’.
Ms Scott said while the number of cases in the ‘‘unconscionable’’ category was small, ‘‘being a small number is not sufficient excuse not to do something about it, because the results are devastating’’.
Asked about bank industry culture, she said there were ‘‘very strong incentives’’ for banks to make money.
‘‘When you haven’t got any constraints, there are no constraints on how aggressive a bank can be, because the contracts allow them to do all sorts of things with the loan,’’ she said.
Ms Scott said it was appropriate for a bank to step in and deal with impaired loans.
If the borrower hadn’t done anything wrong and was still making loan repayments the bank had a choice to ‘‘hang in’’ or ‘‘get out of it as quickly as possible’’.
‘‘And that’s the area we have the most concern about. We feel there is a responsibility to the borrower there that is getting lost on some occasions.’’
The small business ombudsman told the inquiry in its written submission a typical farm operation in Australia held a loan of $5million.
It said notice periods for breaches of loan conditions should be lengthened to give farmers more time to respond and reduce the chance of default, and farm debt mediation should be standardised across the country.
Westpac national agribusiness manager Stephen Hannan said the bank had two centuries of experience in working with farmers.
Out of 30600 agribusiness customers, receivers and managers had only been appointed to 15 customers over the past two years.
‘‘We are by no means infallible ... where we make a mistake we put it right,’’ Mr Hannan said.
Westpac head of credit restructuring Gwyn Morgan said even in the worst cases the bank persisted to get the best result for the borrower.