Inquiry told banker inflated valuations
Bankwest told a Queensland cattle farmer he had to sell a property as it tried to fix a bank manager’s inflated property valuation, the banking royal commission heard.
One of Melville Ruddy’s properties was valued at $1.2 million on the basis that it was a 896 hectares in size when it was actually only 72 hectares.
The banking royal commission heard Bankwest knew in 2012 the bank manager had inflated valuations but did not tell five customers, including Mr Ruddy, where he was the sole valuer.
Mr Ruddy told the inquiry he had been planning to sell the ’Sunrise’ farm near Toowoomba and reduce his debt when the bank manager convinced him to move to Bankwest in 2011.
Senior counsel assisting the commission Rowena Orr QC said Mr Ruddy and his wife relied on the property valuations when they decided to hold on to Sunrise and borrow more money.
Bankwest executive general manager of personal and business banking Sinead Taylor said the bank did not tell the Ruddys the valuation was wrong but should have.
“All of the customers should have been told that there was an issue,” she said on Thursday.
Ms Taylor said it was not fair to the customers and breached a banking code requirement for the bank to act fairly and reasonably.
In 2011 the manager valued Sunrise at $1.2 million and the Ruddys’ Arranfield property, 110km west of Charleville, at $1.1 million.
A May 2013 revaluation wiped more than a third of the value off Sunrise, taking it to $750,000, and put Arranfield at $900,000.
That meant the Ruddys were in breach of the loan-to-valuation ratio - the size of the loan versus the value of the property - and in default on the loan.
Bankwest, a Commonwealth Bank subsidiary, charged the Ruddys $6600 for the valuations.
Mr Ruddy said he couldn’t pay bills and lost about 80 head of cattle because they could not afford to feed them.
Bankwest materially changed the Ruddys’ obligations to the bank, requiring them to sell Sunrise and make a $50,000 debt reduction.
Ms Orr asked: “Do you consider that it was fair and reasonable for Bankwest to rely on revision to its own erroneous valuation to trigger a non-monetary default?“
Ms Taylor said it was not fair.
The inquiry heard the bank manager resigned from Bankwest in March 2012, at a time when the Commonwealth Bank subsidiary became aware of conduct issues.
Ms Taylor said the concerns included that he overstated valuations and that he told one customer he was putting money into a term deposit but actually put it into another customer’s account.
The bank manager had been named one of Bankwest’s “rural and regional champions“ in 2011 after exceeding his sales targets, earning him a trip to Hayman Island.
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