Credit decisions hurt WA

CENTRALISED credit decision making by the major banks is contributing to WA’s insolvency crisis, says Castle Gates managing director John McGlue.

In a paper he presented to a recent Australian Institute of Credit Management State Cong-ress, Mr McGlue said, in many cases, decisions on significant matters were made outside the state where the situation applied.

“WA companies wanting to borrow significant sums of money from the Big Four banks find, in some cases, the lending decision isn’t made in Perth. It is made in Sydney or Melbourne,” Mr McGlue said.

He said the bank’s centralisation of the credit management functions made a serious difference when it came to a line ball decision that could mean life or death for a company.

But insolvency specialist Diana Newman said the major banks were not the key to the current rash of WA companies experiencing difficulties.

“Some banks have a certain involvement in the current crisis but they are not major players,” Ms Newman said.

“Also, directors are opting for voluntary administrations because of increased liabilities from the Australian Tax Office such as unremmitted Group Tax.

“Banks have taken a more controlled lending line.”

Ms Newman said the Asian crisis and the recent downturn in commodity prices were responsible for a lot of recent company difficulties.

“The third factor is a lot of people are being offered redundancy packages and are keen to get into a business,” she said.

“But they don’t necessarily have the skills to run a business.”