Banking Code of Practice Guidance Note and compliance report

The Banking Code Compliance Committee (BCCC) has published a Guidance Note on clause 10 of the Banking Code of Practice as well as a Report on banks’ transition to the 2019 Banking Code of Practice.

Clause 10 Guidance Note
Clause 10 of the Banking Code of Practice says banks will engage with customers in a “fair, reasonable and ethical manner”

The Guidance Note discusses how the BCCC will assess banks’ compliance with clause 10.

The Guidance Note says Clause 10 has three elements: ‘fair’; ‘reasonable’; and ‘ethical’. The BCCC will consider these elements both collectively and separately, where appropriate. For example, the BCCC may focus on whether a bank has acted fairly as a standalone obligation.

The BCCC may assess whether a bank’s conduct complies with clause 10 alone or alongside other Code obligations. For example, if the BCCC investigates an alleged breach of clause 167 (financial difficulty) of the Code, the BCCC will consider whether the bank has acted in a fair, reasonable and ethical manner.

In making an assessment, the BCCC will consider:
a) whether the bank can demonstrate that its engagement or decision making was guided or informed by clause 10 and the Guiding
Principles
b) community standards and expectations, and
c) standards set by AFCA.

The BCCC expects banks to conduct regular checks of its training, key performance indicators and culture to ensure that staff are supported and empowered to meet the obligations of clause 10.

The BCCC expects that when the bank identifies, investigates and records a breach of any Code obligation that it investigates whether clause 10 has also been breached, and record and report the same, as appropriate.

The Guidance Note also contains a case study and breach examples.

Report on Banks’ transition to the 2019 Banking Code of Practice
The BCCC has issued a report on whether subscribing banks have taken appropriate steps to ensure compliance with the 2019 Code, which came into effect on 1 July 2019.

The BCCC’s report says that while banks have addressed many or most issues that would be expected for a successful transition the BCCC has significant concerns about compliance in a number of key areas across the industry, and some specific concerns in relation to individual banks.

Its comments include:

  • banks’ responses to its inquiries did not state whether customer-facing staff are trained to identify and report a possible breach of the Code. The BCCC expects a positive customer-focused culture to be supported through training and considers that customer-facing staff are well positioned to identify and escalate a possible breach of the Code.
  • banks” responses did not confirm whether Code training is delivered to external third parties, such as brokers, and offshore customer-facing staff.
  • 11 out of 19 banks confirmed that they had made changes to their key performance indicators (KPIs) in pursuit of a ‘balanced scorecard’. Those banks that did not report that changes to KPIs had been implemented are strongly encouraged to consider the effectiveness of the measures they have in place to deliver and build the right culture to support Code compliance.
  • 9 out of 19 banks confirmed they provided staff with both sensitivity and cultural awareness training. In some cases, this training has been combined with training on the obligations to assist customers in vulnerable circumstances. Eight banks did not provide details of any training provided to ensure staff are equipped to competently comply with Chapter 13. The BCCC is concerned by this outcome.
  • Banks should continue developing initiatives to improve products and services that are inclusive and accessible to all groups of customers.
  • 11 out of 19 banks explicitly stated that they had either developed new policies, improved existing policies or created specific customer guidelines to support staff who deal with vulnerable customers. The BCCC is concerned about the ability of the remaining banks to support their staff and comply with these aspects of the Code and will seek further information from them.
  • 13 out of 19 banks confirmed they have designed and rolled out vulnerability training to staff. Only one bank reported that training is also delivered to its broker channel and tailored for its offshore staff. Three banks did not refer to vulnerability training in their response at all.
  • The BCCC is concerned that 2 of the 11 banks adopting a broader definition of small business, have reserved the right to contend that the Code does not apply to the relevant customer in the event of a BCCC investigation. The BCCC finds this unacceptable and expects that the Code’s small business obligations, if broadly applied by a bank, should continue to apply for the purposes of any BCCC inquiry or investigation.

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