Saturday, November 6, 2010

Secrecy shrouds bank boss loans

BANK executives are taking out huge loans with their own organisations but refusing to say what interest rates they pay.
Immediate family members also qualify for the deals, and so do any companies they are involved with outside of their banking roles, but the secrecy surrounding the loans is raising suspicions that they are enjoying extraordinarily low rates.
For example, in Westpac's last annual report, Greg Bartlett, former boss of St George, is listed as having a loan that reached $11 million during the 2008-09 financial year, but paid only $423,050 in interest (equivalent to a rate of just 3.84 per cent based on the highest balance during the year).

"We don't disclose specific details of any of our customer arrangements, as that would be a breach of their privacy," a bank spokesman said. "Director loans are treated no differently to any of our customers."

However, Mr Bartlett was treated differently in the past: the annual report states he was given an "interest-free loan" of $140,785 that was advanced by St George in 1989. In the 2008-09 financial year this gave him a saving of $7425. No customers qualify for interest-free loans.Commonwealth Bank CEO Ralph Norris has a loan that reached $NZ2.191 million during the past financial year, but the bank would not say what rate he was paying or how he would be affected by the rise.
And in ANZ's last annual report, CEO Mike Smith had a loan that varied between $535,611 and $1 million during the year, before it was paid off.

The only comment the banks would make was that the loans were at "arm's length", which means they are on the same terms available to all customers. The shroud of secrecy around the deals makes it impossible to know for sure.

The news has led to allegations some executives could exploit their inside knowledge of likely movements of funding costs, enabling them to take the most advantageous rates at the best posible time. "They know the optimum time to fix their rates and so have an advantage over everybody else," Curt Rendall, of accountants Rendall Kelly, said.
"Directors should at least have to disclose the rate they are paying so their dealings are transparent."ANZ said some of its directors opted to fix their loans, but refused to say who, and when.

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