By Graham Hand
This insider’s tale explores how Australian banks have misplaced the belief and admire in their shoppers through relentlessly pursuing gains. It describes many of the new units applied by way of the nation financial institution and followed through different banks to extend their sales to the detriment in their employees and shoppers.
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Additional info for Naked among Cannibals: What Really Happens Inside Australian Banks
State Bank needed to plan for life without a government guarantee. Whereas some regional competitors could claim 80 per cent of funding came from retail customers, a combination of State Bank’s reliance on the guarantee in wholesale money markets and the vestiges of the Amalgamation Agreement meant only 20 per cent of funding came from retail sources at the start of the 1990s. Amazingly, it was the terms of a 1931 agreement that caused State Bank’s lack of retail deposits. The old Rural Bank was established in 1921 as a department of the Government Savings Bank of New South Wales (GSB).
The same people who laughed at the recluse in Spain or the fallen hero behind bars in 1999 were in awe a decade earlier. The Bank became one of the ‘stuffees’ in the large bank syndications, in a bid for market share, only to learn later from the lead manager that the mutual client was unable to meet covenants that nobody had examined properly. Negative pledge lending and unenforceability of documentation were major issues, and often the client did not expose any 26 NAKED AMONG CANNIBALS of his own funds in a project (which the Bank called ‘hurt money’, the amount lost by a client when a default occurs).
Where a customer had not provided the security offered at the time of approval, he would call on the client and demand security be lodged or the loan would be called. But most dramatic of all, in assessing the quality of the loan book, he believed the Bank had at least a billion dollars of problem loans that had not been identified. State Bank’s shareholders’ funds in 1990 were $750 million. If properly provisioned, according to Bates, the Bank would need a capital injection. Not surprisingly, these views were far from welcomed, especially by the people who had written the loans.