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ASIC Knew about Banksia problems 18 mnths ago

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Greg Medcraft MUST GO!

Full story

UPDATE: QUESTIONS are being asked of government regulator the Australian Security and Investment Commission over what actions it took prior to the $660 million collapse of the Banksia Financial Group.

Thousands of investors are facing hundreds of millions of dollars in losses after the shock collapse.

Julie and Les Bailey, former dairy farmers from Numurkah, say they have potentially lost several hundred thousand dollars invested in Banksia superannuation.

"We have lost all our super," Mrs Bailey said from her Queensland home.

She said it was not only Victorians who were suffering.

Others interstate, including the couple's son, stood to lose significant investments, Mrs Bailey said.

ASIC was allegedly informed about the precarious position of Banksia, and a subsidiary Statewide Secured Investments 18 months ago, according to NSW property developer David Hawkins who was involved in litigation with the firm.

"I've been waging war against them (Banksia), as have about four other people in relation to their lending practices," he said. "The regulator has been on to them for about 18 months ... (but) ASIC have sat on their hands," Mr Hawkins claimed.

"I've been waging war against them (Banksia), as have about four other people in relation to their lending practices," he said.

Mr Hawkins was involved in court action with Banksia over a $2.2 million property deal after Banksia withdrew their support for the project.

But he said Statewide had been lending money in NSW "like a drunken sailor" when Banksia amalgamated with it in 2009.

He claimed Statewide had contested liabilities of $28-$30 million at the time but Banksia had insisted it would not inherit the firm's debt, even though it provided security for costs in a number of court cases.

Mr Hawkins said major residential, hotel and commercial developments in Sydney had faced multi-million dollar valuation and financing problems, helping to bring the collapse on.

ASIC said it was "aware" of yesterday's developments with Banksia but did not disclose when it was first notified about the financial group's problems.

ASIC spokesman Andre Khoury said the commission was "actively engaged" with Banksia's trustee and receiver.

Mr Khoury said ASIC was not a prudential regulator.

"ASIC’s historical work in this sector reflects the fact that a disclosure regime is in place for debentures, coupled with the requirement that a trustee is in place to monitor the issuer and seek to protect the interests of debenture holders," Mr Khoury said.

Banksia appointed receivers yesterday owing investors $660 million.

Banksia fell into receivership after a recent review of its non-performing loans.

About 3000 investors in eight towns and cities in regional Victoria have had their investments frozen while receivers McGrathNicol work their way through the non-bank lender's accounts.

About 100 workers also are set to lose their jobs.

The collapse has shocked communities across the state.

Kyabram District Plan Group member and accountant Peter Nelson, whose firm shares an office building with Banksia's now-closed transaction centre, said there may be hope for investors to recoup at least some of their cash, given Banksia's advances were secured by first-ranking property mortgages.

Mr Nelson, himself a Banksia investor, said everyone from retirees to sporting clubs and schools in the Goulburn River Valley region had money in the firm, describing it as a financial icon in the region that has built a strong reputation since forming in the 1960s.

"Unless there's some real bodgies in there (Banksia's accounts), we'd be hopeful something will come out in the wash," he said.

"Hopefully this won't be as bad as people believe."

Kyabram resident Jason Dunn said the town was reeling.

"People are in tears," he said.

He said many locals feared they would lose their retirement fund.

"People who worked hard all their life have just lost the lot. It's really going to affect the town. It's a black day here," he said.

Kyabram local Lynne, 50, opened up an account two weeks ago with about $8000 for a holiday.

"I'm devastated, but I got off lightly," said Lynne, who asked that her surname not be used.

"One retired lady lost the lot - $400,000. Now it has probably just gone, disappeared like that," she said.

She said Banksia was an institution that locals had trusted.

The pastor of Kyabram Baptist Church, Robert Arnold, said it was likely the church would lose money.

He said there had been no warning signs that the firm was in trouble.

"Our banking goes through them," Mr Arnold, 70, said. 

"It has come as a shock. I would have thought it would have been pretty well managed."

Victorian Farmers Federation vice president Peter Tuohey said farmers had been hit by the collapse.

“Farmers are just trying to recoup after going through a lot of pretty tough years," he told 3AW today.

"A few farmers that have got a few savings and put away carefully in a local investment company  - it’s going to hurt them pretty dearly so (it will) really set the whole area back."

Victorian Shadow Minister for Finance Robin Scott said the collapse was a terrible blow for families, and called on the Victorian Goverment to "step in and assist those communities most impacted".

Shadow Treasurer Joe Hockey said the Federal Opposition was "desperately trying to find out much more on how Banksia was structured".

"I think it's important to recognise that if an institution is not supervised by APRA, if it's not an authorised deposit-taking institution then there is a certain amount of risk," he told 3AW.

"When someone advertises themselves as a non-bank lender or as a non-bank financial institution then the money is at risk."

Banksia, which was founded in Kyabram, offered investment products including fixed-term, superannuation and pensioner deeming accounts and mortgage schemes.

Banksia has a network of 14 branches across Victoria, NSW and SA with headquarters in Melbourne.

Its other Victorian branches are in Echuca, Ballarat, Bendigo, Geelong, Shepparton, Tatura and Warrnambool.

Campaspe Shire chief exeuctive officer Keith Baillie said there were a lot of nervous people in northern Victoria after the shock announcement.

"Our concern is the impact on not only the investors but the staff employed at the Kyabram and Echuca offices, with Kyabram supporting Banksia's administration office," Mr Baillie told The Weekly Times.

McGrathNicol receiver Tony McGrath said it was too early to know what caused the collapse.

He said an urgent review of Banksia's financial position, loan book and properties was under way.

"Our primary concern is to ensure the interests of debenture holders are being protected," Mr McGrath said.

Staff will work on during the review.

The group, which bills itself as a "non-bank alternative", was founded as Kyabram Housing Investments by Patrick Godfrey in 1968. In 1999, it merged with other small investment companies to form The Banksia Financial Group.

Mr Godfrey stepped down as chief executive in August and was replaced by Warren Shaw, a former National Australia Bank general manager in charge of overseeing its retail branches.

Mr Godfrey continues to serve as a board member.

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  • doyla66
    doyla66 Wednesday, 31 October 2012


  • doyla66
    doyla66 Wednesday, 31 October 2012

    Some of the people are nice, Maria but they're limited to what they can do in a basically ineffective stuffed system. It's the whole system and approach that must change now.

  • doyla66
    doyla66 Wednesday, 31 October 2012

    If the investors didn't like what was going on did any of them succeed in getting their money out then?
    I know I couldn't get my money moved from a super investment. The super system doesn't work for people, it works for government and fund managers.

  • doyla66
    doyla66 Wednesday, 31 October 2012

    Question who insured the accountacy firm.
    The audit was false.
    Back on to point
    Who looks after mortgage lending AND fraud in this country??

    ASIC Looks after the corporations act. ASIC has total control of any company public or private.
    If you read it - the banks and any broker OR company comes under it.
    My real question is why will not the ASIC use the corporations act to enforce the law.

  • doyla66
    doyla66 Thursday, 01 November 2012

    So then, if knew about the problems 18 months ago, why did they not do ANYTHING about those problems?

    ASIC -- A Sick Institutionalised Corporation :D

  • doyla66
    doyla66 Saturday, 03 November 2012

    SUSPICIOUSLY, CEO Patrick Godfrey, who founded it in 1968, stepped down as chief executive in August, only 2 MONTHS BEFORE THE COLLAPSE? Does that not set the alarm bells ringing?
    Serious fraud investigation needs to be done here.

    As Lee rightly points out: THE AUDIT WAS FALSE. Did Mr Godfrey know about this? Is this why he resigned?
    Why will ASIC not use the corporations act to enforce the Law. It is their duty to do so.

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