Head of commercial lending at Westpac, Alastair Welsh, stumbled over his answers at the banking royal commission today. Picture: AAP Image/Stefan Postles
Head of commercial lending at Westpac, Alastair Welsh, stumbled over his answers at the banking royal commission today. Picture: AAP Image/Stefan Postles

Bank boss crumbles under intense grilling

WESTPAC heavyweight Alastair Welsh repeatedly stammered and stumbled over his words as he faced intense questioning over his bank's dodgy business loan practices today.

Shortly after taking the stand for the second day at the banking royal commission, it was clear the pressure was mounting for the bank's general manager of commercial banking.

Throughout the day, Mr Welsh struggled to explain his bank's processes relating to a business loan, which ultimately saw an elderly cancer survivor and guarantor lose her home.

Day 21 of the banking royal commission saw Mr Welsh cop a grilling over the case involving Carolyn Flanagan, who put her house on the line for her daughter's failed business venture in 2010.

Yesterday, the commission heard Ms Flanagan - who has numerous serious health issues - lost her house to Westpac after her daughter defaulted on a business loan after convincing Ms Flanagan to act as guarantor.

The bank had wanted to sell the property immediately, but after a lengthy dispute process Westpac eventually agreed to allow Ms Flanagan to remain in her home until she dies.

Upon her death, Westpac will sell the property to recover its $170,000.

Mr Welsh stammered many times, and at one point Commissioner Kenneth Hayne even asked him: "Do you wish to take up the lifebuoy thrown to you?"

Mr Welsh's counsel intervened, insisting Mr Welsh was being asked questions he hadn't initially been requested to address.

Mr Welsh faced tough questioning over allegations the banker who worked on the loan pre-signed a witness signature on the loan guarantee and mortgage and falsely answered a questionnaire as part of the loan application, which, if true, would be a breach of the bank's own policies.

And the commission also heard of several glaring inconsistencies in documents relating to the loan, with some documents stating Ms Flanagan's unnamed daughter's failed Poolwerx franchise had no employees while others stated there were a number of staff.

Ms Flanagan herself was listed as an employee in some documents, despite the elderly woman being blind and seriously ill.

Mr Welsh had few hard answers for the commission and he stumbled over his words on several occasions.

He said Westpac's policy was to exercise "extreme caution" when considering guarantees like those provided by Ms Flanagan.

Counsel assisting the commission, Michael Hodge, argued that the bank had not followed its own policies in this case, which Mr Welsh denied.

"The imperfections, or the errors, should have raised some questions, but as I have worked through with you, I am comfortable the process has been followed correctly," Mr Welsh said.

The guarantee was for a loan of $160,000 - and yet the franchise agreement stated the cost of the franchise was just $85,000.

"I did not do a forensic review of how much this business cost," Mr Welsh said. "I took a reasonable approach which is often the approach the bank has to take."

The commission also heard the daughter and her partner had already purchased the franchise before they applied for the loan.