Is Westpac facing costly ANZ loan failure?
Westpac has set aside large sums of money as compensation.
Westpac has signaled to investors that it may have to pay borrowers compensation and may face the wrath of regulators.
ANZ and ASB were taken to task by the Te Komihana Tauhokohoko Trade Commission for failures in their lending processes and faced a multi-million dollar class action lawsuit from borrowers.
In a note to its annual report, Westpac says its “New Zealand company is reviewing its processes for certain products related to the requirements of New Zealand’s credit contracting and consumer finance law.”
“The outcome of this complex review is uncertain and could lead to customer remedies, regulatory action and litigation,” Westpac said.
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The other Australian banks ANZ and ASB have paid indemnities to the borrowers after agreements reached with the Trade Commission.
But the borrowers have launched a class action lawsuit claiming the amounts returned by the two banks are less than what the law says they should have paid.
ANZ and ASB had identified weaknesses in their lending processes and reported them to the regulator.
ROBERT CUISINE / STUFF
Financial Markets Authority Managing Director Rob Everett and Reserve Bank Governor Adrian Orr present the findings of their joint review of the conduct and culture of banking in New Zealand. First published in 2018.
Westpac made a profit of just over $ 1 billion after tax in the year ending late September.
Westpac has been approached for comment.
Massey University banking expert Claire Matthews said it was not clear whether Westpac’s rating referred to the possibility that it had similar defaults to ANZ and ASB.
Matthews said Westpac disclosed the possibility of having to pay compensation, and possibly facing regulatory action and litigation, as it has a duty to do to investors.
“They just take the precaution of advising investors,” she said.
Peter King, managing director of Westpac Group, lamented the bank’s repeated failures in dealing with customers, as well as the risk management failures that have prompted regulators to take action, including New Zealand reserve bank Te Pūtea Matua.
“These issues are not acceptable to a company of our quality and heritage,” said King, who noted that three-quarters of the bank’s group executives had been hired in the past two years.
While details are lacking in Westpac’s warning to investors, ASB and ANZ have resolved their failures with the Trade Commission by admitting that they failed to take the necessary precautions required of a responsible lender.
ANZ paid $ 35.4 million to customers, while ASB paid $ 8.1 million to customers.
But, Scott Russell, the Auckland lawyer leading the class action lawsuit against the two banks, said if a bank failed to meet its disclosure obligations, it would not be able to charge interest or fees on the loan. concerned until the situation is resolved.
Like ANZ, Westpac was undertaking a simplification project, in part to cut costs, according to its annual report.
ANZ chief executive Antonia Watson also said it reduced the chances of the bank making mistakes, when the bank reported an after-tax profit of nearly $ 2 billion last week.
Westpac’s report showed it had reduced the amount of capital set aside for bad credit losses in New Zealand, but it had added “additional provisions for estimated customer repayments in 2021, including remediation customers at Westpac, New Zealand “.