In the vibrant world of real estate where banks are not just financiers but have also become investors and private equity participants, it is ever increasingly critical to accurately note the outcome of a loan application to obviate any concerns of conflict of interest.
Case in point…a commercial property was recently sold to a private client and application for finance was made to III banks. Bank I reverts with an offer significantly below par given the quality of client, substantial asset backing and superior cash flow from the property. Bank I’s offering is therefore promptly rejected by the private client.
The very next day the seller’s agent is informed that Bank I declined finance for the private client. In the first instance, breach of confidentiality comes into play and then it comes to light that Bank I had a keen interest in acquiring the very same property for its own book.
Now Bank I does not only become the subject of suspicion for breach of confidentiality, but also appears somewhat guilty of unethical behaviour. It would seem that the “leak” to the seller’s agent that finance was declined for the purchaser, a blatant untruth, was an attempt to scupper the transaction and open the door for Bank I to acquire the property.
Case in point…a commercial property was recently sold to a private client and application for finance was made to III banks. Bank I reverts with an offer significantly below par given the quality of client, substantial asset backing and superior cash flow from the property. Bank I’s offering is therefore promptly rejected by the private client.
The very next day the seller’s agent is informed that Bank I declined finance for the private client. In the first instance, breach of confidentiality comes into play and then it comes to light that Bank I had a keen interest in acquiring the very same property for its own book.
Now Bank I does not only become the subject of suspicion for breach of confidentiality, but also appears somewhat guilty of unethical behaviour. It would seem that the “leak” to the seller’s agent that finance was declined for the purchaser, a blatant untruth, was an attempt to scupper the transaction and open the door for Bank I to acquire the property.
In the current market of multi-faceted stake holders and free flow of information, the banks in particular need to scrutinise their procedures and up their ethics. A simple test is to conclude transactions on the basis that the applicant is your mother, assuming of course that you love your mother. This is nothing out of the ordinary…simply ensure that employees respect the bank’s philosophies and values. I have yet to see values that promote breach of confidentiality, lack of integrity and subversive ethics…yet it happens!
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