Westpac’s loan action ‘bad call’

THE Bank of Melbourne locked away $100,000 of a customer’s money as it tried to fix its own mistake with a loan, effectively using it as a “bargaining chip”.

Bradley Wallis has told the banking royal commission he and his wife felt like they were being held to ransom.

A senior Westpac executive admitted it was wrong for its Bank of Melbourne subsidiary to withhold the money.

“We shouldn’t have done it,” Westpac’s general manager of commercial banking Alastair Welsh said yesterday.

Bank of Melbourne lent Mr Wallis $516,000 to buy a bed and breakfast property outside Port Macquarie in NSW, but provided a residential rather than business loan.

The inquiry heard Bank of Melbourne pressured the couple to put $100,000 from the sale of an investment property into a term deposit that could not be withdrawn until the B & B loan was changed to a commercial one.

That was so the bank could cover a security shortfall, as it had lent a higher amount than it should have. Mr Welsh agreed with senior counsel assisting the commission Rowena Orr, QC, that the bank took the action to try to solve a problem caused by its own conduct, and through no fault of the couple.

“That was a bad call by us,” Mr Welsh said.

Ms Orr said: “You retained the $100,000 as a bargaining chip to get Mr and Mrs Wallis to agree to the restructure of the loan that you wanted because of the conduct of (the banker) at the loan origination point?” Mr Welsh again agreed.