Exclusive: Clydesdale reacts to

A bank in the middle of recalling £300 million worth of commercial loans has responded to questions arising from its “aggressive” reclamation procedures, B&C can exclusively report.

 

A spokesman from National Australia Bank (NAB), which owns Yorkshire Bank and Clydesdale Bank, has replied to queries raised by Clive Betts, MP for Sheffield South East.

 

Mr Betts had previously been in contact with B&C following the initial news that NAB was to appear before a Government tribunal over its “aggressive” recall procedures.

 

In its response, the bank has claimed that its approach to reclaiming its entire commercial portfolio has arisen out of a need to meet additional costs maintained as part of its withdrawal from the commercial lending market.

 

Having borrowed the capital lent to borrowers on fixed terms, NAB has asserted that it was itself “locked into” the life of the loans in question, so that if loans were terminated early or its interest rates reduced, the bank faced significant costs itself.

 

Mr Letts raised concerns that several NAB customers who had approached him could not cope with the heightened level of interest, exacting terms and inflexibility of the bank to rearrange deals.

 

The bank’s representatives went on to say that each case would be considered on its individual merits but, in the first instance, NAB’s preference “would always be to see all monies repaid in full, as any losses incurred by the bank reduced its ability to offer new lending to businesses and personal customers”.

 

B&C previously heard from a mortgage broker and commercial landlord who told us that changes in the covenants on rearranged Yorkshire Bank deals meant that they faced recalls across their own portfolios.

 

In particular, they raised concerns that NAB was revaluing properties in order to claim that customers were in breach of their contractual position with regards to the LTV agreed.

 

NAB denied such allegations, stating that there was “a requirement to revalue properties at intervals”, citing that the terms of most of their commercial products contained an agreement that valuations would be obtained every three years by bank-approved valuers and at the customers’ expense.

 

The bank did not reveal whether they would continue to pursue assets from the business partners of those whom it considered to be in arrears, nor were its representatives available for further comment.

 

Mr Betts himself said: “I put very clearly to NAB my belief that the discussions now taking place between the bank and its customers would in some cases need to consider the possible reduction of the high interest rate being paid, to waive or at least reduce redemption penalties and accept a payment of only part of the loan.

 

“If NAB’s intention really was to assist existing customers to secure alternative financing then it seemed to me that this would only be possible through the making of such concessions. Equally, if NAB is determined to seek to recover the money loaned in full, such concessions would very likely lengthen the time it would take to achieve this, though I pointed that simply forcing businesses into liquidation would be unlikely in the present climate to realise more than a fraction of the money NAB is seeking to recover.”

 

He added: “NAB confirmed that concessions might well be made and that appointing receivers or administrators was only ever done as a last resort and where no alternative could be agreed between the banks and its customer.”

 

NAB’s statement read: “NAB indicated that all of the paperwork associated with their loans made it clear that no advice was being offered and that customers should seek their own advice before committing to the loans.

 

“The loan documentation states explicitly that customers should not enter into the loan if they did not understand the risks (including, in particular, the condition relating to break costs). The documentation also states that the Bank strongly recommends that customers take independent legal and financial advice before signing the document.”

 

NAB has also indicated that it is willing to investigate the handling of all the loans of customers who have complained thus far to Mr Betts in order to seek a “mutually agreeable orderly withdrawal”.