While the new Banking Code of Practice is an improvement on previous versions, it remains to be seen if it will be effective in addressing the imbalance of power held by the banks, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell has said.
“There have been a number of claims made in the media that this Banking Code of Practice has teeth, but clause 213 states banks need only comply with reasonable requests from the Banking Code Compliance Committee (BCCC),”Ms Carnell says.
“That calls into question the ability of the committee to be effective.
“We will be watching very closely to see just how strongly the code is enforced, particularly as it relates to small businesses.
“In the meantime, we are encouraging small businesses who have dealings with the Banking Code Compliance Committee (BCCC) to tell ASBFEO about their experience.
“We want small businesses to help us gain an understanding of whether this committee is doing the job that it is supposed to.
“As the code only applies to 19 banking groups – there are over 100 deposit taking institutions – small businesses must first establish if the code applies to their bank and if they meet the code’s definition of a small business.”
“Under the code, small businesses are defined as having an annual turnover of less than $10 million, fewer than 100 staff and crucially have less than $3 million total debt to all credit providers.”
“As the revised Banking Code of Practice works towards improving banks’ small business lending practices, we will continue to monitor its effectiveness and to advocate for safeguards against misconduct in the hope of restoring small business’ confidence in banks.”