BY PHILIP TREMETHICK
BANQUE D’HAWAII (VANUATU)
Title: Bank Lending and Securities in Australia
Author: W.S. Weerasooria
Published by Butterworths: Australia (1997).
Although the book has been written to cover an obvious void of reference material dealing with Bank Lending and Securities in Australia, the principles and theory covered can be readily applied in the South pacific and other areas by students, bankers, legal practitioners, accountants and academics. Naturally the text is based on Australian legislation and case law except, in some cases where there is no direct Australian authority, other cases have been canvassed by the author to support his point.
The book is divided into five parts.
Part 1 introduces the concepts of money, credit and finance in the Australian economy and provides an analysis of recent trends in bank lending. It outlines the principles of prudent lending while chapter 5 explores the issues and problems involved with the legal drafting or lending documentation.
Part 2 looks at the type and nature of securities available to the lending banker and offers a simple explanation on a subject, which is often difficult to understand. A sound coverage with respect to guarantees and indemnities is contained in chapter 7 which deals with some very important legal case decisions such as The Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 which is unfortunately misquoted in the preface as ‘The Commonwealth Bank of Australia v Amadio’. Since the book has been published there have been additional rulings in respect to independent advice liability which has serious ramification to a lender although this aspect is covered in more detail in chapter 24.
Part 3 covers foreign currency loans and provides an analysis and history of a product many banks would prefer to forget. It then moves on to some new lending techniques, corporate banking, securitisation and derivatives, an area which is well covered but probably a little advanced for the majority of banking practices encountered in the South Pacific. However, with the rapid growth in superannuation savings, securitisation is a very important concept for both investors and lenders and the book would lack substance if these complex areas were not addressed.
Part 4 then turns to the consumer issues in respect to bank lending. It addresses the growing importance of the Trade Practices Act 1974, which is increasingly being utilised in litigation cases against banks. The Code of Banking Practice which was introduced by the Australian Institute of Bankers (which took effect from November 1996), is highlighted especially with regard to the special banker-customer relationship of duty of care and confidentiality. A brief overview of the Banking Ombudsman Act, which was first established in 1990, is also covered in relation to lending. Some interesting statistics are revealed where approximately 45% of complaints are settled by the banks themselves and where a sample of disputes were involved another 30% were awarded in favour of the banks indicating a high standard of lending principle compliance by the banks and their staff.
Part 5 brings together comprehensively all the contractual and common law aspects not covered in the earlier chapters.
Unfortunately poor proof reading mars the book. One example has already been highlighted above (Preface). A further example is the illustration of money supply (multiplier effect) at p.15 which is incorrect and would seriously confuse the reader. Despite this the author must be congratulated in attempting to collate into one volume a simplified and comprehensible reference book covering the complex issues surrounding bank lending and other related problems. There is little doubt that the book will prove to be a valuable reference source for both practitioners and students alike.