Terms of Reference

  1. On 4 June 2015 the House of Representatives referred the following matters, relating to the impairment of customer loans, to the Parliamentary Joint Committee on Corporations and Financial Services for inquiry and report by 31 March 2016:
    1. practices of banks and other financial institutions using a constructive default (security revaluation) process to impair loans, where constructive default/security revaluation means the engineering or the creation of an event of default whereby a financial institution deliberately reduces, through valuation, the value of securities held by that institution, thereby raising the loan-to-value ratio resulting in the loan being impaired;
    2. role of property valuers in any constructive default (security revaluation) process;
    3. practices of banks and other financial institutions in Australia using non-monetary conditions of default to impair the loans of their customers, and the use of punitive clauses such as suspension clauses and offset clauses by these institutions;
    4. role of insolvency practitioners as part of this process;
    5. implications of relevant recommendations of the Financial System Inquiry, particularly recommendations 34 and 36 relating to non-monetary conditions of default and the external administration regime respectively;
    6. extent to which borrowers are given an opportunity to rectify any genuine default event and the time period typically provided for them to do so;
    7. provision of reasonable written notice to a borrower when a loan is required to be repaid;
    8. appropriateness of the loan to value ratio as a mechanism to default a loan during the period of the loan; and
    9. conditions and requirements to be met prior to the appointment of an external administrator; and
  2. in undertaking this inquiry, the Committee take evidence on:
    1. the incidence and history of:
      1. loan impairments; and
      2. the forced sale of property;
    2. the effect of the forced sale of property in depressed market conditions and drought;
    3. comparisons between valuations and sale price;
    4. the adequacy of the legal obligations on lenders and external administrators (including s420A of the Corporations Act 2001) to obtain fair market value for the forced sale of property; and
    5. any related matters.

On 4 June 2015 the committee resolved that:

  • in conducting the inquiry the committee will not investigate or seek to resolve disputes between customers and banks; and
  • where the experiences of customers may inform the committee about the practices of banks, the committee welcomes submissions that explicitly address the terms of reference

Committee Secretariat contact:

Committee Secretary
Parliamentary Joint Committee on Corporations and Financial Services
PO Box 6100
Parliament House
Canberra ACT 2600

Phone: +61 2 6277 3583
Fax: +61 2 6277 5719
corporations.joint@aph.gov.au

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Past Public Hearings

04 Apr 2016: Sydney, NSW
16 Feb 2016: Sydney, NSW
02 Dec 2015: Canberra, ACT

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Inquiry Status

Submissions Closed

Accessibility

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