Commonwealth Bank to Pay Storm Financial Victims

Submitted by Share Trading on 24 February, 2010 - 14:58

Commonwealth Bank (CBA) has agreed to pay Storm Financial victims more than $200 million. Storm Financial was a Townsville-based financial planner which in 2008 was placed into liquidation after a collapse of their business model which involved investors withdrawing equity from the value of their homes to invest into the (then) booming share market.

Ralph Norris, the CEO of Commonwelth Bank has agreed to compensate 2000 Storm Financial customers as it represents a ''fair, transparent and expeditious resolution'' which effectively guarantees that no CBA customer will lose their homes and extend a right of permanent tenancy to almost all Storm Financial victims under the bank's hardship provisions. CBA negotiated the principles with law firm Slater & Gordon.

Storm Financial investors have the choice of agreeing to the principles as agreed to by Commonwealth Bank, or having their case heard separately by the review panel or leaving the settlement process altogether. Slater & Gordon is being paid $5000 a client, or $10 million if all 2000 CBA customers agree to a deal under the settlement process. The average CBA customer had a Storm margin loan of $1 million. Under the compensation principles, the investor would have had equity of $110,000 if the margin call had been made at 90 per cent. The compensation would be 90 per cent of this amount, or about $100,000. If all 2000 clients were to receive this level compensation, it would cost the bank almost $200 million - before any compensation on home loans was considered. Using the principles template will avoid any further mess involved with litigation.

Update: Storm Bailout - ANZ Agrees

25/2/2010: ANZ (ANZ) has agreed to put forward a proposal to settle its claims against the bank by investors involved in the collapse of Storm Financial. The proposal will be put forward to about 250 ANZ customers.