Australia’s largest banks are likely to strike a deal with the country’s financial regulator, the Australian Securities and Investments Commission (ASIC) after legal proceedings were initiated by the commission against Westpac for lending malpractices.
The ASIC informed a Parliamentary committee that legal action was taken based on findings of a larger study of the banking industry. The ASIC began an investigation into the country’s leading banks in 2014-15, which has reportedly brought to light lax lending standards within banks. The findings are to be shared next month.
ASIC commissioner Peter Kell noted that loan and mortgage fraud was a key focus area for the regulator. However it is being widely expected that the regulator may not file legal cases against all banks as in the case of Westpac, preferring rather to negotiate settlements with them.
ASIC senior executive Michael Saadat disclosed the scope of the investigation as part of his appearance before the committee stating that the regulator had studied the conduct of 11 banks in all. He highlighted that action against Westpac had been initiated based in its findings and announcements with respect to other lenders that it would be done over the next few weeks.
Legal proceedings against Westpac have been launched with regards to its improper lending practices between 2011 and 2015 wherein the bank’s executives used benchmark household-expenditure rates rather than actual living expenses of customers while determining loan affordability.
According to ASIC, the assessment carried out by a man regarding a customer’s ability to repay the loan might have reflected a monthly deficit in certain cases. Westpac has denied any wrongdoing and has highlighted its robust lending processes and procedures. The bank has said that it will be fighting the case and noted that it had changed its lending practices in 2015. This was rebutted by the ASIC who said that the bank had amended its policies due to regulatory inquires.
Saadat said that the penalties for the banks could be upto A$1.7 million per contravention, adding that there were a large range of charges against the banks, indicating hefty fines. ASIC chairman, Greg Medcraft told the Parliamentary committee that the regulator was willing to take tough action to make a point.
In a statement, Medcraft said
The fact that we have launched this action against one of the biggest banks in the country means that we are willing to take anyone on.
Medcraft also used his appearance to make the case for enhanced whistleblower protection to former contractors and employees. He also suggested that Whistleblower compensation be overhauled to better reflect the damages.