NEWS - Financial Services
Published 1:07 PM, 29 Oct 2009
Last update 4:22 PM, 29 Oct 2009
CBA, Slater & Gordon sign Storm deal
By a staff reporter, with AAP
The Commonwealth Bank of Australia Ltd (CBA) has signed a deal with law firm Slater & Gordon Ltd regarding the bank's loans to investors in the failed Townsville advisory firm Storm Financial.
The confidential deal relates to 53 clients who borrowed from the bank to invest in schemes promoted by Storm. The settled claims have so far involved investment home loans, Slater & Gordon said in a statement.
"During the settlement negotiations we have concentrated on the individual circumstances of each person, the strength of their legal claims and the impact on them at both the time of the loan and now," Slater & Gordon Practice Group Leader Damian Scattini said.
"While the details of individual settlements remain confidential, elements of some of the settled cases include cutting loan obligations, reducing interest rates and repayment obligations and waiving fees."
"Slater & Gordon and the CBA have agreed claims by margin loan borrowers will be tested by the scheme's expert independent panel before any further offers are made," the listed law firm said.
Mr Scattini said it was reassuring to see the CBA act in good faith, and called on other banks to take a similar approach.
The January collapse of Storm Financial, now the subject of a Federal Court case in Brisbane, has been a sore point for CBA and regional lender the Bank of Queensland (BOQ). The two banks had the highest exposure to the advisory firm, with more than 2,300 CBA customers alone affected by shortfalls in its lending practices.
An Australian Securities and Investments Commission (ASIC) spokesperson told Business Spectator that its investigation into BOQ's role was "ongoing".
Mr Scattini told Business Spectator that he was "certainly not popping any champagne yet" because there was plenty of more work to be done with rival lenders.
The deal with CBA would not come as a surprise to the other banks, Mr Scattini said. "I'm hopeful that ANZ and NAB will be sensible," he said.
Yesterday CBA chief executive Ralph Norris came under fire at a parliamentary committee hearing over the company's delay in contacting Storm clients facing margin calls.
Mr Norris told the hearing the bank's failure to alert clients were "inexplicable" and looked "terrible".
BOQ chief executive David Liddy earlier told the examination that the bank's relationship with Storm was "one of referral only".
Four months ago, BOQ said there was no evidence to date it had engaged in any misleading, deceptive or unconscionable conduct in relation to its lending to Storm clients. This followed a statement by CBA admitting to "shortcomings" in the bank's dealings with thousands of customers affected by the $3 billion collapse.
At its peak, Storm claimed to have about $4.7 billion of funds under management and more than 14,000 clients.
The Federal Court ordered the company be wound up in March with debts of about $80 million, leaving investors with huge losses and fears they may never recoup their money. Many had geared up their family homes to invest funds in shares through Storm.
Shares in CBA closed 2.97 per cent weaker at $51.45 against a 2.35 per cent fall in the benchmark index. Slater & Gordon shares, meanwhile, edged up 0.3 per cent to $1.57.
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