Kate Gibson, previously in charge of small business but now head of home lending at the bank, was grilled over the 2014 loan at the banking royal commission on Wednesday.

The money was given for the first Australian outlet of a New Zealand gelato chain, which ultimately failed, largely based on a business plan filled with pages of "clip-art", the commission heard.

The borrowers complained to the Financial Ombudsman Service that ANZ should not have approved the business loan and other credit facilities totalling $220,000 because they could not service the debt.

The ombudsman found in the customer's favour.

Ms Gibson admitted a "number of errors" were made by the bank - including basic data entry mistakes, which other people then relied upon.

"Errors are going to be made, that's just life," she told the commission.

"There are human beings involved and errors will be made. But when I stepped back and looked at the cumulative number of errors here I was not comfortable.

"I don't think that level of error is acceptable."

Asked by senior counsel assisting Michael Hodge QC whether she thought that ANZ had demonstrated the care and skill of a prudent and diligent banker, Ms Gibson replied: "No".

Meanwhile, Westpac defended its decision to lend money to a Victorian woman and her business partner for a Pie Face franchise.

Marion Messih gave evidence on Tuesday that she had to sell an investment property when the store she bought with her sister-in-law failed.

She said the bank insisted it would take all of what was still owing on the business loan - not only her half at $165,000 - from the sale proceeds.

Her sister-in-law is now repaying Ms Messih $120 a week.

Ms Messih said she would have had money left over after clearing all her debts, including mortgages on the investment property and her home, through the $750,000 sale.

Westpac executive Alastair Welsh told the commission on Wednesday he reviewed the application and, while conceding there were a "few gaps" in the information provided to the bank, he was broadly "happy with it".

"The loan should have been made," the general manager of commercial banking said.

It's at odds with FOS, which agreed with the woman that the loan should not have been given. However, it found the bank was entitled to take the full amount owed for the business loan.

Mr Welsh acknowledged that the bank was bound by FOS's ruling but it disagreed with the determination.

Australian Associated Press