On 3 February 2017, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) released the Final Report on its Small Business Loans Inquiry.

ASBFEO’s key recommendations

The Code of Banking Practice (COBP) should be amended to include a dedicated section on small business customers dealing with the following.

  • For loans below AU$5 million, where a small business has complied with loan payment requirements and has acted lawfully, the bank must not default a loan for any reason. Any conditions under which banks can unilaterally value existing security assets during the life of the loan, or invoke financial covenants or catch-all ‘material adverse change’ clauses, must be removed.
  • For loans below AU$5 million, banks must provide a one-page summary of the clauses and covenants that may trigger default or other detrimental outcomes for borrowers.
  • For loans below AU$5 million, banks must put in place a new small business standard form contract that is short and written in plain English.
  • External Dispute Resolution schemes should be expanded to include disputes with third parties that have been appointed by the bank, such as valuers, investigating accountants and receivers, and to borrowers who have previously undertaken farm debt mediation.


On 28 April 2017, the Australian Bankers Association (ABA) released its detailed response to the Carnell Report.

In summary, ABA members proposed:

  • in respect of financial covenants triggering loan defaults, to remove these except for property investment and development loans and specialised lending (including invoice discounting);
  • to continue to monitor LVR ratios so as to comply with APRA prudential guidance;
  • to extend notice periods (eg where a facility is not being rolled over) to 90 days.

The ABA commits to finalising the new COBP by 31 December 2017 with full implementation by 31 December 2018 (ASBFEO wanted implementation by 31 December 2017).

Read the Small Business Loans Inquiry (Carnell Report)