ANZ was ill-prepared to deal with farmers facing hard times after its Landmark acquisition and did not understand their emotional connection to their land, the banking royal commission has found.

A significant number of former Landmark customers felt they were treated unfairly by ANZ after the bank took over their loans in 2010.

Royal commissioner Kenneth Hayne QC found the problems could be attributed, at least in part, to ANZ’s lack of preparation for the very high probability it would have to deal with significant numbers of agribusiness customers experiencing financial difficulties.

Mr Hayne also pointed to the culture and practices in ANZ’s lending services group that managed high-risk loans, before changes in 2014.

‘ANZ’s lack of preparation for dealing with agribusiness customers in financial distress was made worse by the fact that more former Landmark customers fell into financial difficulties than ANZ had expected,’ Mr Hayne said in his interim report.

Before August 2014, there was no specialist agribusiness team within lending services and some customers had not seen a bank manager for more than two years.

Mr Hayne said there were also examples of customers being refused seasonal funding to plant crops or interest payments being made due at the wrong time of a farm’s working capital cycle, such as before harvest.

He noted that before the 2014 changes, the lending services group relied more on external law firms to deal with customers in financial difficulty.

‘It took a less flexible approach to dealing with customers in financial difficulty and demonstrated a lack of understanding of farmers’ emotional connection to their land (and the emotional impact that recovery and enforcement action can have on agribusiness customers).

‘At times, lending services increased the interest rates of customers experiencing financial difficulty, placing an additional financial burden on those customers.’

ANZ acknowledged shortcomings in its conduct in relation to some former Landmark customers but had rejected any broader conclusions, including about its lack of preparation.

ANZ paid $40 million in total to 40 to 50 former Landmark customers, through debt forgiveness or compensation.