Storm Financial did not act on margin calls it received from Commonwealth Bank of Australia's (CBA) margin lending arm, Colonial Geared Investments (CGI), during the sharp stock market fall at the end of 2008, the bank told a federal parliamentary committee in Sydney on Friday.
"In October and November 2008, it was increasingly realised that the instructions to Storm were not being acted on," CBA business and private banking group executive Ian Narev told the Parliamentary Joint Committee inquiry into financial products and services.
According to CBA, it then started contacting Storm clients directly about breaches of loan covenants, but clients did not want to discuss the matter with the bank, Narev said.
"They wanted to speak with their financial adviser first," he said.
CBA told the committee it was common practice to rely on dealer groups to send margin calls to clients.
"We would like to point out that the other 7000 dealers were treated in exactly the same way [as Storm], and 15,000 margin calls were made through those 7000 dealers in the October through December period," Narev said.
Storm founder Emmanuel Cassimatis told the committee early last week it was CGI's responsibility to make margin calls and that he did not know why this had not happened.
He also claimed to have received confusing information that he could not use to inform his customers.
The bank denied these accusations.
"Based on the feedback we have from Storm, there were no signs of lack of information," Narev said.
