State KAP leader and member for Traeger Robbie Katter says the terms of reference for the Banking Royal Commission have become unclear after Treasurer Scott Morrison contradicted the commission’s senior counsel on the issue.
On Monday, Ms Rowena Orr, counsel assisting the commissioner, stated liquidators and receivers were not captured in the terms of reference.
This was contradicted on Wednesday when Member for Kennedy Bob Katter asked Treasurer Scott Morrison if receivers were included in the terms of reference for the Banking Royal Commission.
Mr Morrison replied the Royal Commission “would catch liquidators, to the extent that they were operating on behalf of a financial services entity – for example a receiver – as defined in the letters patent.
“Referring to registered liquidators or receivers would single them out from the wide category of services – for example, accounts and order that are similarly captured – and it may be inferred by some that other similar services are not included.,’’ he said.
In the opening address of the round four hearings being held in Brisbane Ms Orr said the Royal Commission would not assess the role of receivers in farm foreclosures because it was not in the terms of reference.
“The conduct of receivers does not fall within the terms of reference of this Royal Commission because receivers do not fall within any of the categories within the definition of a financial services entity,’’ she said.
“A receiver cannot be considered to be a person or an entity that acts or holds itself out as acting as an intermediary between borrowers and lenders.’’
Mr Katter said there is a clear expectation from farmers and the community that receivers are appointed by, and work on behalf of, the banks.
“The receivers are at the coal face of dealing with farmers who are in the process of having their livelihood stripped away by the banks, the very people who have appointed the receiver,’’ he said.
“The Federal government set the terms of reference, yet the Royal Commission and the Federal treasurer seem to be odds over this important aspect.
“If this has allowed receivers to be excluded from scrutiny by the Royal Commission farmers have the right to be appalled at this oversight.
“The terms of reference for this Royal Commission state it is investigating conduct by financial service entities – including anyone acting on behalf of those entities.’’
Mr Katter said the Royal Commission had demonstrated that there is a big gap in rural lending and the nature of agricultural business doesn’t always fit with the business model of the banks.
“When things go bad because of drought or a few bad seasons, banks reclassify farms as being more risky,’’ he said.
“This increases rates and inevitably results in foreclosures which leads to more reclassifications and further foreclosures – and we end up in a death spiral.’’
Mr Katter said horror stories from farmers when dealing with receivers had been well documented.
“Farmers have also accused receivers of causing ‘’massive destruction of value’’ to their farm businesses,’’ he said.
Mr Katter said the creation of a Development Bank would overcome a lot of these issues.
“The Government could ensure the agriculture industry is more stable and sustainable,’’ he said.
“I believe this provides a workable solution to overcome many of the problems agri businesses face in our regional areas.’’
Terms of reference for Royal Commission:
ASIC Receivership: A guide for creditors
Treasurer Morrison’s response in Parliament: