Temporary changes to banking code approved

The Australian Banking Association’s (ABA) application for temporary changes to the Banking Code of Practice has been rubber-stamped by the Australian Securities and Investments Commission (ASIC).

According to the ABA, the changes are designed to reflect the fact that the COVID-19 pandemic “may temporarily affect the provision of banking services”, as banks manage “very high volumes of customers in distressed circumstances” and operate in “very uncertain economic conditions”.

Changes to the banking code provide that:

• in certain circumstances, banks may not always be able to meet the timelines for customer communication outlined in some provisions of the Banking Code of Practice; and
• a bank’s obligations when lending to small-business customers to engage in a fair, reasonable and ethical manner, and to exercise the care and skill of a diligent and prudent banker, will be “informed by the circumstances and effects of COVID-19 generally”.

“These temporary changes will help continue the flow of credit to small and family businesses during current economic challenges, by recognising that the assessment of business loan applications presents unique challenges in this environment, including the difficulties in making predictions for matters such as the pace of economic recovery, and in assessing business’ ability to service loans,” the ABA noted in a statement.
 
The changes also reflect that, in some circumstances, banks “may not be able to comply with usual timing requirements” specified in the code.

Such obligations remain in place; however, the temporary terms ensure that non-compliance with the requirements would not constitute a breach of the code “if banks are making good faith efforts to comply”.
 
Under the special provisions, banks are required to inform customers of their rights to file a complaint with the Australian Financial Complaints Authority (AFCA).

All other aspects of the code remain unchanged.

According to the latest data from the ABA, members have deferred repayments on over 700,000 loans ($211 billion) since the onset of the COVID-19 crisis, over 61 per cent of which are for residential mortgages.

Over the same period, banks have issued almost 78,000 (worth $86 billion) in new business loans.

[Related: Banks on board for new loans program]