The banking association is hesitant to support Commissioner Kenneth Hayne’s recommendation to change the definition of a small business.
The Australian Banking Association (ABA) has committed to “taking forward” seven of the banking royal commission’s recommendations concerning changes to the Banking Code of Practice.
Pending regulatory approval, new protections are set to be enshrined in the code in response to the commission’s final report, including:
In addition to changes to the code, the ABA has also expressed support for the royal commission’s call for clearer and improved practices for banks assisting farmers in financial distress.
Reflecting on the changes, ABA CEO Anna Bligh said: “The royal commission final report is the industry’s roadmap for earning back the trust of the Australian people.
“The industry has taken the report and is acting with urgency to ensure lasting reform occurs without delay.
“The royal commission highlighted the need for the Banking Code of Practice to be strengthened to increase protections for small business and increase the accessibility of services for customers in remote areas or with limited English.”
Ms Bligh continued: “In addition to the changes to the code, banks will also deliver greater assistance to farmers through clearer and improved practices when assisting farmers with distressed loans.
“The industry will be implementing these changes to our code as soon as possible.
“This work will build upon the new code, approved by ASIC in July last year, which delivers a better banking experience for Australian customers.”
ABA contests change to SME definition
However, the ABA said that it “has not yet reached a view” on the commission’s recommendation to amend the definition of “small business” in the banking code to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million.
“[More] consideration needs to be given to the issue by regulators, the ABA and the small business community, particularly the change from total credit exposure to per loan facility,” the ABA noted.
“Given the potential impacts, the industry believes this a prudent approach to this change.”
Among the potential impacts raised by the ABA is concern about the effect that such a change could have on the availability of credit and competition in the market.
The ABA stated that the royal commission’s recommendation to expand the definition from total borrowings of a business to an assessment on a per loan basis regardless of the existing borrowings would be a “very significant expansion on the current definition, which the industry believes should be considered carefully before any change is made”.
The association added: “The industry has serious concerns that this recommendation may have a material impact on access to credit for small business borrowers.”
[Related: RC’s final recommendations revealed]
If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.
Charbel Kadib is the news editor on The Adviser and Mortgage Business.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.
One-fifth of Australians have admitted to not telling the whole t...
The SME challenger bank has announced its latest equity funding r...
The aggregator has partnered with a finance brokerage to add a co...