The Australian Banking Association has announced its response to changes to the Banking Code of Practice recommended in the Final Report of the Financial Services Royal Commission.
Definition of small business
The Final Report recommended that the definition of ‘small business’ in the Banking Code be amended to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million. It would widen the definition from $3m Total Credit Exposure to $5 million per loan facility (regardless of how many facilities held).
The ABA says the banking industry has serious concerns that this recommendation may have a material impact on access to credit for small business borrowers.
In finalising the industry position on this recommendation, ABA members will model the impact on their own customers and consult with Treasury, regulators and small business groups.
The ABA says it supports and will implement the following recommendations:
- banks will work with customers in remote areas or who have limited English to identify ways for them to undertake their banking;
- ban informal overdrafts on basic bank accounts;
- Abolish dishonour fees on basic bank accounts;
- Banks will follow AUSTRAC’s guidance about the identification and verification of those identifying as of Aboriginal or Torres Strait Islander heritage;
- Amend the code to end charging default interest in areas declared to be affected by drought or other natural disasters;
- Introduce enforceable provisions of the Code, identified and agreed with ASIC, backed by legislation.
In addition to changes to the Code, banks also support the Final Report’s recommendation for clearer and improved practices for banks assisting farmers in financial distress.
The ABA says some of the changes outlined in the table will be subject to regulatory approval and banks will work with ASIC, the ACCC and Treasury to ensure these changes are made as soon as possible.