Banking code temporary changes extended

One of the variations approved is to extend the application of the code’s COVID-19 Special Note, which allows for special application of specified code provisions in light of the extraordinary external environment caused by COVID-19, for a further six months until 1 September 2021.

The extension has come after the ABA sought ASIC’s approval to insert into the March 2020 code a “special note”, which outlined temporary changes to timing requirements for specified obligations in the code.

In May 2020, in anticipation of the potential impacts of the coronavirus pandemic on the internal resources and capacity of banks who subscribe to the code, and the types of problems confronting their customers, the ABA sought ASIC’s approval for the insertion.

In June 2020, ASIC approved an application for temporary amendments to the banking code to better manage the COVID-19 crisis. Changes to the code provided that in certain circumstances banks may not always be able to abide by the timelines for customer communication outlined in some provisions of the code.

It also provided that a bank’s obligation 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”.

ASIC has now approved this extension until September 2021 by way of ASIC Corporations (Approval of Variation of March 2020 Banking Code of Practice) Instrument 2020/602.

The ABA has applied for ASIC’s approval under the new subsection 1101AA (1) of the Corporations Act, of further variations of the March 2020 code.

Other than the extension of the operation of the COVID-19 Special Note for six months to September 2021, the variations are designed to make refinements to the code’s definition of “small business”, and insert a definition of “financial counsellor” for the purposes of clause 163.

The changes to the small business definition were recommended by independent firm Pottinger, which reviewed the definition in September and October 2020. The review recommended that those changes be made immediately and that more comprehensive changes will be considered as part of the code’s triennial review.

The variations also seek to “address an anomaly in the Code’s definition of ‘banking service’, which previously had the unintended effect of carving out certain types of businesses that would otherwise, but for a technicality caused by the interaction with the definition in the Code and provisions in Chapter 7 of the Corporations Act, have Code protection”.

Furthermore, the variations seek to align the timeframes banks have to respond to complaints under the code, with the timeframes in ASIC’s new Regulatory Guide 271 Internal Dispute Resolution, which is due to commence on 5 October 2021.

ASIC previously approved the code as a whole in December 2019, with the code commencing on 1 March 2020.

On 1 January 2021, a new framework commenced for ASIC’s approval of codes of conduct, as part of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, which received Royal Assent on 17 December 2020.

According to ABA figures released in November last year, the number of deferred loans had plummeted from a peak of more than 900,000 loans to 300,000, while the value had dropped to below $100 billion.

November figures from the Australian Prudential Regulation Authority (APRA) showed that a total of $60.3 billion worth of loans are on temporary repayment deferrals across Australia, which is around 2.3 per cent of total loans outstanding.

This is down from $87.6 billion – or 3.3 per cent of total outstanding loans – in October.

[Related: ASBFEO criticises new banking code]