Banking code shake-up after royal commission final report

The new code, approved by ASIC last year, introduces a range of new measures to make banking products easier to understand and more customer focused, the Australian Banking Association (ABA) said.

The code itself is currently enforceable through the courts and the Australian Financial Complaints Authority as it forms part of a customer’s contract with their bank.

"The code represents a stronger commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency. The new changes announced today further increase protections for Australian customers," the association said.

The code will be updated with key amendments in response to the recommendations of the royal commission final report, which outlined the need for changes in protection for small businesses and farmers and a greater focus on customers in remote areas and those with limited English.

Banking Code needs real and meaningful changes

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said she is pleased the ABA has responded to some of the recommendations from the royal commission, but says there is so much more to be actioned.

“Commissioner Hayne acknowledged the ABA Banking Code of Practice is the chief protection for small business borrowers and as such, it needs real and meaningful changes to give it teeth,” Ms Carnell said.

“We are in discussion with the ABA and have developed a list of amendments to the code that provides a better framework for a balanced relationship between banks and their small business customers.”

Ms Carnell also restated the importance of amending the definition of small business so it applies to businesses with a loan facility of up to $5 million and fewer than 100 full-time employees.

“This definition was backed by the Murray review, the ABA’s own independent Khoury review and is applied by the new Australian Financial Complaints Authority,” the Ombudsman said.

“A $3 million aggregate loan limit is just not workable. It potentially excludes a large number of small businesses, particularly those capital intensive businesses such as farms, building and manufacturing.”

“Banks now have the opportunity to show they’re serious about reform and are willing to change.

“We look forward to a response to our recommendations as a matter of urgency.”