ASIC has approved an updated version of the Australian Banking Association’s (ABA’s) new Banking Code of Practice (the Code).
Since ASIC approved the Code in August 2018 (see 18-223MR), the ABA applied to ASIC for approval of a number of changes to the Code. ASIC is assessing those changes in two stages – we have approved the first stage of changes and are yet to decide on the second stage of changes.
First stage of changes to the Code
The first stage of changes, now approved by ASIC, includes:
- new provisions that put beyond doubt that a bank will not charge fees for services to deceased customers, where services are no longer being provided to that customer’s estate
- changes to the commitments around provision of valuations to small business customers
- changes to reflect ASIC’s implementation of law reforms to credit card responsible lending (see 18-257MR), and
- minor and technical corrections throughout the Code.
ASIC approved the above changes on 25 June 2019 by issuing an approval of a new Code. The ABA published the new Code on its website on 24 June 2019. The approval is contained in ASIC Corporations (Approval of Banking Code of Practice) Instrument 2019/663.
ASIC has now revoked its previous approval of the August 2018 approval by issuing ASIC Corporations (Banking Code of Practice – Revocation of 2018 Approval) Instrument 2019/662.
The new Code, incorporating the above changes, will commence on 1 July 2019.
All ABA member banks will be required to subscribe to the Code as a condition of their ABA membership and the relevant protections in the Code will form part of the banks’ contractual relationships with their banking customers.
Second stage of changes to the Code
The second stage of changes are designed to:
- address recommendations of the Royal Commission (including improvements to the provisions dealing with accessibility to banking products and services for vulnerable customers and commitments regarding the charging of default interest on agricultural loans in the event of natural disasters, and
- address stakeholder feedback relating to various small business protections.
The ABA proposes that these changes will commence from 1 March 2020.
ASIC aims to decide on these proposed changes later in 2019. Our decision will follow engagement with key stakeholders to ensure that the revised Code provides an appropriate level of commitment by banks to consumer and small business protections.
ASIC approved the Code in August 2018. In approving the Code, ASIC considered that:
- the rules in the Code are binding on the ABA’s members and form part of the contracts between banks and their customers
- the Code was developed and reviewed in a transparent way, which involved significant consultation with relevant stakeholders including consumer and small business groups, and
- the Code is supported by effective administration and compliance mechanisms. The Banking Code Compliance Committee will have oversight on banks’ Code compliance, tools to require banks’ cooperation with their monitoring and investigations, and a range of sanctions for non-compliance with Code provisions.