The Commonwealth Bank of Australia (CBA) has effectively been cleared of allegations in its involvement of forcing Bankwest customers into defaults on Friday.

The joint parliamentary committee submission by CBA stated that it purchased Bankwest when its owners HBOS suffered financial crisis. The bank put 182 business loan customers into receivership during the first two years. During the hearing, the leading bank said that it was left with no alternative but to protect its economic hold in the market.

“Unfortunately some existing highly leveraged or high-risk developments and businesses failed or suffered a significant deterioration in their ability to service their loans,” the submission read. “In these circumstances Bankwest had no alternative but to take steps to protect its position,” CBA stated.

CBA chief counsel David Cohen addressed the committee and said that the bank out 66 customers into receivership at the year-ending December 2009 and then 116 borrowers in the year-ending December 2010. The bank though it had paid suitable price for the banker. Cohen mentioned that Bankwest only had five percent market share when CBA bought it. Until December 2008, bad debts provision for CBA was limited to $630 million only.

The allegation entailed contract that had “claw back” provisions included in it. It said that the purchase price of the borrowers would be reduced for each loan that the CBA believed to be “bad.” The bank justified its decision by saying that the price adjustment mechanism allowed transformation to the quality and quantity of Bankwest’s loan book when it bought the second-tier lender, ABC reports.

In November, the parliamentary committee listened to the Bankwest customers, who claimed that CBA took advantage of the claw back provisions by declaring defaults on more than 1000 Bankwest loans.

Cohen and Chief Finance Officer David Craig defended the bank’s decision and said whatever it did was for customer’s good. “The CBA could not reduce the purchase price payable to Lloyds by impairing customer loans and nor did it intend to do so. We repaid all of wholesale funding, again there was no clawback possible, there were no warranty claims in relation to impaired loans,” the Sydney Morning Herald quoted Craig as saying.

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