ANZ's head of lending services Benjamin Steinberg admitted that the bank did not behave in an ethical manner towards a number of farming finance customers the bank acquired as part of a botched push into the agribusiness sector in 2009.
The admission was painfully teased out by senior counsel assisting Rowena Orr, QC, and an irritable Commissioner Hayne during a colourful morning of hearings that included an interjection from the Member for Kennedy, Bob Katter MP.
When the hearing began 10 minutes late at 9.55am the microphones appeared not to work, leading Mr Katter to shout from the public gallery. "Can't hear ya."
He was quickly admonished by commissioner Hayne: "I won't have interruptions like that, I just won't have it."
Bob Katter MP claimed he was responsible for the royal commission outside the hearing but said he was worried it was descending into farce. Tammy Law
ANZ's Mr Steinberg was questioned at length about the experience of a particular Landmark customer Charlie Phillott.
The bank's written submission admits breaching the Banking Code of Practice however Mr Steinberg's answers about the case study appeared to frustrate commissioner Hayne. After considerable bank and forth, Mr Steinberg was prepared to admit the bank did not "work constructively" with Mr Phillott.
"You say that you did not act constructively, are you saying that you did not act fairly or reasonably?" Commissioner Hayne asked.
"Yes, I think that is correct," Mr Steinberg said.
Commissioner Hayne was not satisfied with the answer and continued to probe Mr Steinberg.
Commissioner Hayne was not satisfied with the answer and continued to probe Mr Steinberg. Supplied
"Are you saying that the bank did not act in a consistent and ethical manner? ... did the bank act in an ethical manner?"
"I think it's fair to say we didn't," Mr Steinberg said.
Earlier in the hearing, minutes from a board meeting dated August 6, 2015 were displayed, which referred to the bungled Landmark acquisition. That meeting was attended by chairman David Gonski and current CEO Shayne Elliott.
The minutes refer to a looming class action threat flowing from the mishandling of the Landmark acquisition.
A paper titled Farming segment support strategy that was co-authored by ANZ's current intuitional boss Mark Whelan was also examined. The paper noted that remediation flowing from the issues at Landmark could reach $60 million.
"There is a lesson to be learned from the Landmark acquisition in connection with assumptions that were made around the delinquencies and expected losses that were not stress tested" an extract from the paper reads.
Mr Steinberg's answers to questions from Ms Orr abut the lack of stress-testing did not satisfy Commissioner Hayne who was compelled to ask ANZ's legal counsel Dr Matthew Collins, SC, to intervene at one point.
Dr Collins asked Ms Orr to rephrase her question and was eventually rewarded with the answer she was seeking.
"The best I can say is that I was not aware of there being any stress testing," Mr Steinberg said.
Of the Landmark loan book, around one third of the loans acquired were classified as impaired or high risk by the time ANZ conducted its own independent assessment.
ANZ had 19,577 agricultural clients as of March 31, 2018 down from 26,150 clients at the end of 2009.
It has $9 billion worth of loans outstanding to the sector with the vast majority to farmers in Victoria, NSW and Queensland.
During her opening remarks, Ms Orr said ANZ had taken enforcement action against 30 farmers over the last three years.
More than 100 ANZ customers have taken their cases to the Financial Ombudsman Service with the ombudsman siding against the bank on only a handful of occasions.
The public hearings will continue in Brisbane until Friday June 29.This article was first published by https://www.afr.com/