The Australian Securities and Investments Commission (ASIC) has given the Australian Banking Association’s (ABA’s) new Banking Code of Practice its tick of approval following an independent review and extensive stakeholder consideration.
The new code, which provides for improved protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms, was altered by the ABA to satisfy ASIC’s criteria and would commence operation from 1 July, 2019.
Given the code applies to small businesses which borrow up to $3 million, it would cover between 92 and 97 per cent of businesses in Australia, but ASIC’s approval is conditional on an independent review of the definition of “small business” within 18 months of the code’s commencement.
The targeted review aims to test the adequacy and application of the code’s small business coverage in practice and would run alongside ASIC’s collection of quarterly data from banks and the Australian Financial Complaints Authority.
All ABA member banks would be required to subscribe to the code as a condition of their ABA membership, and it would be administered and enforced by independent monitoring body, the Banking Code Compliance Committee.
The code is still subject to any findings from the Banking Royal Commission.