A lot of small businesses will be disappointed by the financial services royal commission’s interim report, despite its scathing assessment of the industry, the sector’s ombudsman says.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell says the interim report has not addressed many of the issues raised by small businesses affected by bank misconduct.
‘It was small businesses that got the royal commission up. It wasn’t consumer pressure, it was small business pressure,’ the ombudsmen told AAP on Saturday.
‘There was nothing in it for them.’
This is particularly the case for businesses affected by the purchase of Bankwest by the Commonwealth Bank of Australia (CBA), she said.
Ms Carnell said there were around 2000 businesses with performing Bankwest loans whose loans were defaulted using overly aggressive tactics, including changes to loan-to-value ratio requirements, and the application of ‘exorbitant’ default penalty interest rates.
While the royal commission addressed similar tactics used on agribusinesses, the report did not mention CBA’s treatment of Bankwest loans, she said.
In the report handed down on Friday, royal commissioner Kenneth Hayne QC said pure greed has driven the widespread misconduct by Australia’s major banks and financial institutions who have ignored the law ‘because they can’.
‘Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty,’ he said.
Ms Carnell welcomed Mr Hayne’s recommendation to change the definition of a loan facility for small business in the Code of Banking Practice to $5 million, instead of the current $3 million.
The ombudsman also warned against additional regulation that could see further tightening of lending to small businesses.
‘Restricting lending or increasing the cost would not be good for the economy,’ she said.