The Australian Banking Association (the ABA) recently proposed several variations to the 2020 Banking Code of Practice (the Code) (which was amended in July 2020 to take into account the impacts of COVID-19 on lenders and borrowers in Australia (the COVID-19 Special Note)).

Australian Securities and Investments Commission (ASIC) variations to the Banking Code

According to ASIC, these latest variations make the following updates to the Code:

  • amend the Code’s definition of ‘banking services’ to address an anomaly in the Code’s previous wording that had the unintended result of excluding certain types of small business banking customers who would otherwise meet the Code’s definition of ‘small business’;
  • make some minor amendments to the Code’s definition of ‘small business’;
  • 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;
  • specify situations in which banks may decline to continue dealing with a representative that a customer in financial difficulty has appointed, if the bank reasonably considers that representative is no longer able to act in the customer’s best interests; and
  • align the Code’s timeframes for responding to complaints with the updated timeframes in ASIC’s Regulatory Guide 271 Internal dispute resolution, which is due to commence on 5 October 2021.

ASIC approved these variations by way of legislative instrument on 9 January 2021, meaning these variations are now approved and form part of the Code. This ASIC approval marks one of the first times that ASIC has exercised its new approval rights under the regime introduced on 1 January 2021 by the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 (the FSR Bill).

ASIC is now authorised to (amongst other matters):

  • approve an industry code of conduct (section 1101A(1));
  • declare any provisions of such an approved code to be enforceable at law (section 1101A(2)); and
  • approve changes to an approved code of conduct by way of legislative instrument (section 1101AA), a power that ASIC exercised when approving the variations to the Code on 9 January 2021.

Further, these new provisions in the Corporations Act declared that the Code is an approved code of conduct for the purposes of the ASIC approval regime introduced by the FSR Bill (section 1672).

Further, ASIC can now identify and declare part or all of an approved industry code of conduct to be enforceable. Its approval of the variations to the Code on 9 January 2021 did not identify any such enforceable provisions, however it is expected by the ABA, ASIC and the banking industry more widely that when the Code is again updated in late 2021 it will include a number of such enforceable provisions. We are closely monitoring these matters and will keep you updated on any announcements throughout 2021.