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Australia: Rogue banker who inflated loan values rewarded with Hayman Island trip

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CBA's Sinead Taylor© Supplied CBA's Sinead Taylor A Bankwest banker who quit under a cloud of "conduct issues," including inflated property valuations, had previously been given a trip to Hayman Island as a reward for blitzing his sales targets.

But after the Queensland banker resigned in 2012 and the bank became aware of his botched valuations, it failed to tell all the customers affected by this conduct, the royal commission heard on Thursday.

Bankwest also relied on a revision to one of the flawed property valuations to trigger a default by a Queensland cattle farmer Mel Ruddy, who was forced to sell assets to reduce debt.

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The conduct was explored as the commission continued to probe banks' treatment of farmers, including the incentives given to bank staff, and how the banks deal with customers battling conditions beyond their control.

Bankwest’s executive general manager of personal and business banking, Sinead Taylor, admitted the incorrect valuation of Mr Ruddy's property was a breach of community expectations, and its defaulting of Mr Ruddy was neither fair nor ethical.

Counsel assisting Rowena Orr told the hearing in Brisbane that the banker, whose name was suppressed, had been a star performer when it came to hitting financial targets.

In 2010-11, the banker was given a "rural and regional champions" award for making $33.5 million in sales, well ahead of his $25 million target.

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"What was the prize for being a rural and regional banking champion?" Ms Orr asked Ms Taylor.

"I understand they went on a trip to Hayman Island," Ms Taylor replied.

Commissioner Kenneth Hayne asked if there were equivalent rewards for bankers who excelled in other parts of their job, aside from selling. Ms Taylor said it was the only set of awards she was aware of from that time.

The royal commission probed Bankwest's treatment of farmer Mel Ruddy on Thursday.© Glenn Hunt/AAP The royal commission probed Bankwest's treatment of farmer Mel Ruddy on Thursday. In late 2011, Mr Ruddy was one of the customers who joined Bankwest after dealing with the bank manager, which involved valuations carried out by the bank manager. One property named Sunrise was valued at $1.2 million, and another called Arranfield was valued at $1.1 million. The commission heard the Sunrise property was incorrectly valued on the basis of  it being a 896 hectare property, whereas it was in fact 72 hectares.

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In early 2012, the Bankwest manager resigned from the bank amid "conduct issues," Ms Taylor said. These included overstated loan valuations and inconsistencies in loan applications.

His conduct was elevated to the Bankwest's executive committee, the bank did not tell all of his customers, including Mr Ruddy, about his misconduct.

Later, conditions deteriorated for Mr Ruddy, following a slump in cattle prices following the live export ban in August 2012, and a period with little rain.

By May 2013, the bank ordered a new valuation on the property - this time from an external valuer. The valuer cut the initial 2011 valuation of Arranfield by almost a fifth, and the Sunrise valuation to just $750,000, down from $1.2 million.

The devaluation triggered a blowout in Mr Ruddy's loan-to-valuation ratio, which the bank used as a trigger to re-write the loan conditions, demanding Mr Ruddy sell Sunrise and pay down $50,000 by the end of the year.

Ms Orr asked Ms Taylor: “Do you consider that it was fair and reasonable for Bankwest to rely on a revision to its own erroneous valuation to trigger a non-monetary default?”

“It was not fair," Ms Taylor replied.

Mr Ruddy took the case to the the Financial Ombudsman Service, which in August 2015 found Bankwest had overvalued Sunrise but it did not render the lending inappropriate.

After farm debt mediation, Mr Ruddy agreed in October 2016 to sell Sunrise within six months, pay Bankwest 75 per cent of the proceeds and pay Bankwest an extra $410,000 to discharge the mortgage over Arranfield.

Sunrise was sold in April 2017 for $750,000, with Mr Ruddy having to borrow $160,000 from his mother and sell a dozer to raise the money.

Rabobank southern Queensland and northern NSW regional manager Bradley James also on Thursday told the commission there may have been "misconduct" in a breach of the Code of Banking Practice in its treatment of Queensland cattle farmer Wendy Brauer.

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