MELBOURNE, Australia – Affected ME Bank customers with redraw accounts lost access to around $17,000, albeit temporarily.
The sudden changes in ME Bank’s redraw facilities caused massive inconvenience to its customers as they temporarily lost access to thousands of dollars, said Jamie McPhee, the chief executive of ME Bank.
In a statement before the Standing Committee of Economics, the bank’s CEO stated that the sudden changes on ME Bank’s redraw account limited the overall cash amount that affected customers can now access. Through their facilities, borrowers can only access around $1.5 billion worth of funds, down by a couple of hundreds of millions from the previous $1.8 billion.
Mr McPhee also commented that thousands of individual ME Bank members lost access to thousands of assets, although it’s only temporary. Around 20,000 customers currently don’t have access to as much as $17,000 due to the sudden changes in the bank’s redraw accounts.
ME Bank overturned it on Friday following the wave of their members showing outrage over the matter.
Currently, there are around 8% of the total number of members, which is about 1,795 customers who already returned to their original redraw limit.
According to the bank’s CEO, the sudden changes in the accounts also heavily impacted around 17% of their home loan members. Overall, 4% of ME Bank’s total number of customers got affected by the changes in the redraw accounts.
Further, Mr McPhee stated that their main objective is to protect all their customers who are on a high risk of falling behind their loan repayments. Funding loans to the struggling superannuation funds are not their principal concern at the moment, he said.
Mr McPhee continued that ME Bank hasn’t approved or given any financing to around 26 of its super fund owners. The redraw changes made also did not breach the banking regulations.
The bank’s chief executive further stated that they are taking the best approach in the matter, and with right intentions. They are considering the interest of their customers, first and foremost, he said. However, Mr McPhee admitted that the communication and the timing were wrong, and the bank could have done better.
Mr McPhee expressed his and the bank’s apology about the inconvenience that their customers experienced because of the issue.
The chairman of the committee, Liberal MP Tim Wilson, asked Mr McPhee about the value of the 26 super fund investments for ME Bank members. The chairperson expressed his curiousness over the finances as ME Bank never made dividend payments to its shareholders.
Mr McPhee said that the investment value of their super fund members comes from the substantial capital growth of the bank. He noted that ME Bank continued to grow since it launched in 1994, and their profits over the years got reinvested back into the bank to help boost its growth.
During the past financial year, the business got valued by around $1.2 billion, following its constitutional net profit recorded at $67 million.
Mr Wilson also asked the bank’s CEO about whether ME Bank is an investment or a member of the super funds. For this, Mr McPhee said that the committee would have to ask the super funds to know the answer to that question.
He further stated that the bank is running under an independent board. The last time that ME Bank got a capital injection from its shareholders was in 2017.
The bank’s CEO also commented that the board already began the discussions about the possibility of ME bank making dividend payments before the COVID-19 pandemic happened. The bank is already on a solid footing to do so, he said.
However, Mr McPhee admitted that the health crisis due to the coronavirus disease put the board’s talks on hold.
Mr Wilson also quizzed the CEO about whether the bank is offering home loan rate below the official 0.25% cash rate to some of their customers or if they are running a private and separate banking arm.
To this, Mr McPhee commented that ME Bank is offering a 0.05% discount on their mortgage loan offers through their member benefits program. He added that the scheme is a vital basis of the bank’s mortgage deferrals. It is available to employers, unions, and funds.
Mr PcPhee also stated later that ME Bank promotes and offers above discounted home loans to CTU’s members through the Member Connect Portal. Further, the bank also pays Tony Beck, the chairperson of the ACTU portal for the consultation on ME Bank’s businesses with the Australian Banking Association.
Mr McPhee further said that the bank saves by boosting business through the member portal of the ACTU compared to having physical branches. That allows ME Bank to offer more competitive products and lower fees.
The chief executive also got questioned about the extended period it has taken ME Bank to set up an updated IT system, which caused the issues to its old redraw accounts.
For this, Mr McPhee commented that the process is very intensive, and they already have a sub-committee in place to look in the matter.