Non-major pledges $3bn to SMEs

Following on from the decision by the Council of Financial Regulators (CFR) – made up of the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, the Australian Treasury, and the Reserve Bank of Australia – to dismiss the banking royal commission’s proposed changes to the definition of a small business, Suncorp bank has pledged monetary support for this sector.

In his final report, commissioner Kenneth Hayne proposed to amend the definition of small business in the Code of Banking Conduct (the code) to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million.

The current borrowing threshold is $3 million.

The recommendation has been met with a mixed reception from industry stakeholders, with the Australian Banking Association (ABA) and several lenders reluctant to adopt the change.

Earlier this month, the CFR suggested that the effects of the royal commission’s suggested changes and any response to them by lenders are “still to be gauged,” adding that any moves to extend the limit instead be considered by an independent review to be undertaken within 18 months of the updated banking code coming into effect.

The new code, set to come into effect on 1 July 2019, includes new rights and protections for customers, small businesses and guarantors, as well as stronger enforcement and compliance. The intention of the code, which is not legally binding, is to encourage ethical behaviour and responsible lending, while improving transparency and providing greater financial protection

The challenges surrounding access to credit for small businesses were also highlighted in the CFR’s statement.

Suncorp Bank has now welcomed the CFR’s “considered approach to improve access to credit for small and medium-sized businesses across Australia” and has said that it will pledge $3 billion of new credit “for this critical segment, which will also provide benefit through increased competition”.

The non-major bank said it would also increase its appetite for lending with less security with “a focus on cash flow providing greater access to bank credit for small and medium-sized businesses”.

David Carter, CEO of Suncorp banking and wealth, said supporting small business across Australia was “one of the most important things the bank does because when local businesses succeed, local communities thrive”.

“We have actively campaigned for the retention of the $3 million threshold, and the CFR’s support of this provides greater certainty, enabling us to better support small business owners across Australia invest in, and grow, their business,” he said.

“The final step in improving access and price of credit for small business and increasing competition is a level playing field around capital allocation between major and regional banks.”

Mr Carter continued: “We are proud to support Australian farmers and small business owners, but when we do, as a non-major bank, Suncorp needs to allocate more capital against these loans.

“More banking competition will help small business owners across Australia invest and grow,” Mr Carter said.

[Related: Westpac ‘surprised’ by Hayne’s small business definition]