Peak industry body, the Australian Banking Association (ABA), has announced it has submitted a draft of its revised Banking Code to corporate regulator ASIC for industry consultation – its first update to the Code since 2019.
The current Code has been in force since 2021, with the ABA anticipating the new Code will be in place in early 2024.
The Banking Code – noted by the ABA as the only financial industry code with ASIC approval – provides a set of enforceable standards that customers, small businesses, and their guarantors can expect from Australian banks, according to the ABA.
While not a legally enforceable document, the Code provides safeguards and protections that are not set out in the law. The ABA notes that the Code complements, and in some areas sets higher standards, than the law itself.
Many of the changes follow recommendations proposed as part of a 2021 independent review of the 2019 Banking Code. The review was led by Mike Callaghan, a former executive director at the Australian Treasury.
Among the proposed additions and amendments to the Code include:
- an expanded definition for small businesses. This is expected to give an additional 10,000 SME customers Banking Code protections.The 2021 Callaghan review recommended following the definition determined by the Pottinger Review.
- new obligations for banks to meet with customers intending to act as guarantor to help them understand their obligations before accepting a guarantee.The Callaghan review recommended banks should commit, unless impractical to do so, to meet either face-to-face, via video conference or other means with the guarantor before accepting the guarantee, and particularly where the guarantor has not sought independent legal or financial advice (and without the borrower being present).
- a new vulnerable customer definition, acknowledging anyone can become vulnerable at any time in their life due to a life-changing circumstance such as losing a partner or a job or becoming ill.The 2021 review recommended the adoption of the UK Financial Conduct Authority’s definition, which states that a vulnerable customer is ‘Someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care’
The review added: “While some customers may be more likely to be vulnerable, it is important for banks to be alert to the circumstances of each and every customer, in identifying vulnerability.”
- a new commitment to organise or refer customers to free support services such as interpreters, AUSLAN and National Relay Services, following the 2021 report recommendations.
- greater clarity on the types of support available to all customers, including financial difficulty options for small businesses.The independent review recommended an amendment to Clause 176 of the Code to clarify the situations where banks can advise customers on the independent help they can access when facing financial difficulty – for instance, from financial counselling organisations.
- an updated section on inclusive and accessible banking which recognises that banking services should be inclusive of people with diverse sexual orientations and gender identities.The Callaghan review examined the findings of several advocacy groups for vulnerable groups, noting inconsistencies and deficiencies in codified protections for visually and hearing-impaired individuals, prisoners and those in transition from the prison system, sex workers, and LGBTIQA+ consumers.
ABA chief executive Anna Bligh said the updated Code will, for the first time, also provide a new ‘Customer Guide’ outlining banking protections available under Australian law and how consumers can access and enforce those protections along with the Code.
She added that “banks are committed to using simpler language for customers to understand how the Code protects them.”
In addition to the increased protections for customers, the ABA has taken the opportunity to streamline and simplify the Code where possible.
“Since the last Code was updated in 2019 there [are] now 1,175 pages of additional legislation and regulation applying to the banking sector.
The ABA has taken this opportunity to strike the right balance between creating new protections and removing parts of the Code that were either already in law or have been recently superseded by new legislation,” Bligh said.
The peak body notes that updates to the Code followed extensive stakeholder consultation which were overseen by Mike Callaghan.
Corporate regulator ASIC will now undertake its own consultation on the Code with relevant industry stakeholders as part of its approval process.