In February the Rural Finance Reform Bill was presented to the House of Representatives by Rebekha Sharkie (MP for Mayo) and read for the first time. The Bill calls for an amendment to the Banking Act 1959 in relation to loans to primary production businesses.
CAFBA supports this Bill, which follows on from the good work in this area by Kate Carnell and the ASBFEO. This Bill provides greater certainty for primary producers regarding their rights when in financial hardship. In her address to Parliament, Ms Sharkie made a couple of important observations recognising the cyclical nature in assessing business loans compared to consumer loans. Ms Sharkie said “ Primary producers ride the swells of international commodity markets, exchange rates and weather, their fortunes so often dictated by factors well beyond their control. Family farmers hope to make profits over a multiyear cycle, using the good years to build their financial buffer to see them through the bad.” This Bill avoids the problems associated with the drafting of NCCP 2.
The ABSFEO commented that “This Bill will provide a range of suitable protections for small farm businesses. It reflects the recommendations of the Select Committee on Lending to Primary Production Customers and the ASBFEO Small Business Loans Inquiry.”
Some important features of the Bill are:
- It also provides adequate timeframes for the primary producers to attempt to refinance their facilities, or sell their assets, without it impacting on the management of the farming business, or devaluing their assets through a “fire-sale”
- The one-pager, plain English fact sheet will more easily outline the primary producers rights and obligations as a borrower
- The cost of Revaluations and/or Investigative Accountants being borne by the Bank may result in the Bank being more willing to negotiate with the primary producer, rather than taking the easy option of revaluing or inputting an IA, at the borrower’s cost.
- The 6-month notice period to expiry of loan, and request to meet with borrower, is adequate and appropriate
- The 90-day notice period to inform the borrower the Bank will not renegotiate the loan is adequate and appropriate in the circumstances, given there would already be dialogue between the two parties for the 6 months leading up to loan expiry
- The removal of all-encompassing Material Adverse Change clauses are long overdue, and appropriate
- The $5mio loan size limit is adequate and appropriate
- The penalties are adequate and appropriate
CAFBA commends the introduction of this Bill.