bens horrible twin

Bank of Queensland admits Storm error

June 27, 2009 12:00am
BANK of Queensland was forced to make an embarrassing correction, confirming it was the subject of a regulatory investigation into its lending to clients of the Storm Financial collapse.

In a briefing to analysts on Thursday it had said it was not the subject of any legal proceedings in relation to the collapse of Storm, nor any formal investigation by the Australian Securities and Investments Commission.

Its statement on Thursday was remarkable given the investigation that ASIC launched in December was a wide-ranging review into margin loans and related advice given to Storm clients that would clearly investigate the lenders involved, and this would have to include BoQ's actions in relation to its dealings with 319 clients of Storm Financial.

BoQ issued a four-line statement yesterday, saying it was "now aware, as of late June 25, 2009, that it is the subject of a specific ASIC investigation" and that it "was not aware . . . prior to making its announcement on June 25, 2009".

A BoQ spokesman would not elaborate on Friday's backflip.

BoQ has previously said there was "no evidence of improper or dishonest practices or conduct" by it in relation to its lending to Storm clients.

But Slater & Gordon lawyer Damian Scattini has alleged BoQ violated the banking code, which required a proper assessment of a borrower's ability to repay.

He has said his clients were not even contacted by BoQ and it had effectively subcontracted that responsibility to Storm. BoQ didn't comment on those claims.

The Commonwealth Bank of Australia and Slater & Gordon this week agreed to a formal mediation process over former Storm clients who had loan agreements with CBA. CBA admitted "short-comings" in its dealings with those customers.

The CBA deal means is it is unlikely to face a class-action lawsuit. However, Mr Scattini said he was preparing to sue BoQ on behalf of about 300 clients.

BoQ's correction was released to the market less than an hour before the close of trading and trimmed only some of the strong gains made on the back of hopes it could be close to securing a minority investor. Its shares closed up 29 to $8.75 but had been trading as high as $9.02 earlier in the day.

A BoQ spokeswoman, asked if the company was close to agreeing to a minority stake sale, said the bank was looking at a range of alternatives including mergers and partnerships and would update the market "at the appropriate time".

She said the bank has had a number of discussions with "a range of parties" but wouldn't identify them or discuss the content of the talks.

A media report yesterday suggested that three unnamed Asian banks were believed to be interested in taking a stake and BoQ was expecting proposals from them in early July.