Banking code stoush trips into farce
The Australian Banking Association's fierce campaign to present its Code of Banking Practice as a viable tool for thwarting customer exploitation by the major banks looks to be degenerating into high farce theatre.While the catastrophic weight of the industry's failings has repeatedly forced the ABA to remove bank-friendly clauses in the code, it seems that the industry's peak body is again struggling to persuade critics that the latest version of its sacred document will protect unsuspecting customers from bad industry behaviour.Australian small business and family enterprise ombudsman Kate Carnell yesterday called for ABA chief Anna Bligh to rip up the multiply-reworked and re-revised code so that "the imbalance of power held by the banks" could be addressed.Although ASIC signed off on the latest edition of the code on 7 September, there's a fair chance that Bligh and her band of wordsmiths at the ABA could be returning to the drawing board at the request of commissioner Kenneth Hayne.The royal commissioner observed in his interim report published late last month that the main protection for small business borrowers remains the industry code.A thorough review of the code by Carnell and her senior staff has revealed weaknesses in the wording of provisions that they say will allow the banks to continue turning the screws unfairly on small businesses."We have examined the code clause by clause and found banks can still change their risk appetite, call in loans with no notice and choose not to work with small businesses to return a loan to performing when impairment has been caused by factors outside the control of small business," Carnell said yesterday."We also found that each clause that provides notice periods is offset by a clause giving the bank the right to disregard if, in their option, they need to."In a formal submission to the royal commission, the small business ombudsman's office has called for the code to be reworked again.It also wants the code to be enforced by a "truly independent body", arguing that the Banking Code Compliance Committee set up by the ABA in 2013 should be scrapped.In the pre-royal commission era, such public attacks on the ABA's code invariably would have been met with a swift public counter-punch from Bligh.But in the current environment of toxic public sentiment towards the banking sector, the ABA is choosing instead to ride with the punches.Given the royal commission's negative assessment of the performance of various regulators in its interim report, the ABA might soon discover that ASIC's blessing of the code could count for little when Hayne presents his final report to government early next year.The public circus surrounding the wording of the code is set to run well into next year, and possibly beyond it.