Penitent yet defiant, CBA steers blame on to Storm
Sydney Morning Herald
Thursday August 6, 2009
THE Commonwealth Bank is continuing to use the computer valuation system which, it admits, was partly responsible for irresponsible lending to clients of Storm Financial.The Commonwealth, in a submission to an inquiry into the collapsed financial planner, says staff in its Townsville office were pressured by former colleagues who had joined Storm into misusing the computer system to approve riskier loans.The system, known as VAS, signalled an increase in the value of a client's property. Alerted this way, Commonwealth and Storm staff would then allow the client to borrow more.The Commonwealth, which had a relationship with about 30 per cent of Storm's 13,000 customers, is the only bank to accept some of the blame for its involvement.But it says Storm deserves much of the blame for the misery resulting from the wealth adviser's failure. Storm, not the bank, provided deficient financial advice €“ and the regulator, the Australian Securities and Investments Commission, failed to check whether Storm was meeting its obligations.In 2006 and 2007, some staff at the Commonwealth's Townsville office, which had a section devoted to working with Storm, left to join the financial planner.The Commonwealth's view is that much of what went wrong can be pinned on pressure exerted by its ex-employees."These individuals used their pre-existing relationships with staff in our Townsville area office to encourage loan approvals," the bank says in its submission to the parliamentary inquiry into financial products and services in Australia."This small, on-the-ground team was under constant pressure from Storm in dealing with customer loans. As a result, in approving customers loans, staff in the Townsville area office at times relied too heavily on information provided to them by Storm advisers about customers and their loan requirements."The bank says there was "misuse" of VAS by some staff."There was clear evidence that Storm constantly pressured our staff," the bank says."The message was that if [our staff] did not process the loan applications in a manner and timeframe expected by Storm, the business would move to one of our competitors, of whom there were many. We allowed that pressure to result in lending behaviour which, at times, fell below our usual and expected standards."The Commonwealth still uses VAS but has cut back on instances where the bank does not use an external valuer.The bank acknowledges that it helped sponsor events staged by Storm, "but these were not material and are consistent, rightly or wrongly, with industry practice".
© 2009 Sydney Morning Herald