ASIC approves changes to the banking code, extending COVID-19 special note

The Australian Securities and Investment Commission (ASIC) has approved changes to the Banking Code of Practice, including an extension of the COVID-19 special note that gives banks more time to handle complaints.

ASIC announced last Friday that it had approved proposals from the Australian Banking Association (ABA) to amend the industry-written document, which regulates business dealings between small businesses and the major banks.

Notably, ASIC agreed to extend the COVID-19 special note for a further six months, until September.

Established in March last year, the COVID-19 special note gives banks more flexibility in relation to the code’s strict timing requirements for complaints and communications with small business customers.

The COVID-19 special note also allows banks to consider the effects of the coronavirus pandemic when issuing new or increased loans to small businesses.

The proposals will also amend the code’s previous definition of ‘banking services’ due to an unintended effect of the current definition, which excludes certain types of businesses from protection.

It will only make minor changes to the definition of a small business.

The code will specify when banks can decline to deal with a representative that a customer in financial difficulty has appointed, in the event the bank believes they are not acting in the client’s best interests.

Lastly, the changes will ensure the code’s complaints response times align with ASIC’s regulatory guide 271 on internal dispute resolution, which is due to start in October.

More change to follow

These changes to the existing Banking Code of Practice are the result of a new framework that came out of the recommendations of the banking royal commission and the Pottinger review of 2020.

The Pottinger review called for significant changes to the definition of small businesses, including an increase of the threshold for total credit from $3 million to $5 million.

The ABA has already agreed to lift the threshold to $5 million, however, this significant change will not take effect until 2023.

This higher credit threshold is a change that Australian small business and family enterprise ombudsman Kate Carnell has demanded for some time.

Boosting the loan threshold to $5 million will bring the code’s definition of a small business in line with the corresponding definition used by the Australian Financial Complaints Authority.

The ABA says the change will see an extra 10,000 businesses covered by the code.