Small business ombudsman backs proposed banking code reforms

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson has affirmed his support for the findings from an independent review into the Banking Code Compliance Committee (BCCC), a body that monitors banks’ compliance with their industry code of practice.

The BCCC confirmed in August that it had commenced an independent review into its practices, with Phil Koury, a principal at consultant cameron. ralph. khoury, conducting the assessment. 

The development followed the Australian Banking Association’s (ABA) announcement in July that it had commissioned an independent review of the Banking Code of Practice with former Treasury deputy secretary Mike Callaghan leading the inquiry. 

“We welcome the final report of the independent review of the BCCC, noting the adoption of two significant recommendations my office has advocated for,” Mr Billson commented.

Among other suggestions, the review has recommended the inclusion of a fourth member to the committee with expertise in small business.

“Having a committee member with expertise in small business will provide balanced representation and help the BCCC meet community expectations.”

The report has also urged the BCCC to engage more with its Small Business and Agribusiness Advisory Panel, with Mr Billson remarking it will bring more attention to SME issues.

“The panel is critical to the committee’s purpose to monitor and drive best practice Code compliance,” Mr Billson continued. 

“A greater understanding of the unique challenges faced by small business customers will enhance the work of the BCCC and help meet the needs of the small business community.”

Mr Billson equally welcomed the final report into the Banking Code of Practice, noting that there is work to do to “improve relationships between small business customers and banks”, and debanking is still “an issue for certain small business sectors”. 

Of its 116 recommendations, the report suggested in regard to small-business lending, that:

• The code should specify that future earning capacity is taken into account when assessing a small business’ capacity to repay a loan.
• The code should clarify that a bank’s approval of a small-business loan will not be dependent on a third party (such as the small business’ accountant) certifying the capacity of the small business to repay the loan.
• Banks should advise a small business if there is likely to be a delay in the initial indication of how long it would take for a decision, the reason for the delay, and give a revised estimate when a decision is likely.
• Banks should commit that if they require additional information when considering a loan application, they will endeavour to ensure that this does not delay the time it will take for the bank to make a decision.
• Banks should commit to tell small business the reason, if appropriate, as to why a loan was declined, along with what would be needed for the application to be reconsidered.

“The code review recommends seeking a commitment from banks to communicate with the customer before denying a banking service or closing an account, with an opportunity for the customer to respond, in accordance with AUSTRAC guidance,” Mr Billson added. 

“In the case where a service is denied, or account closed, it recommends the bank give a reason. It finds these decisions should be on a case-by-case basis.

“My office also supports the recommendation that the BCCC consider conducting an inquiry into banks’ performance in accordance with these commitments.”

[Related: ‘Essential’ need for regional SMEs to access banks: ASBFEO]