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Impact of the Code of Conduct

Will the Code of Banking Practice have an impact on conduct in the financial services?

This week the Australian Securities and Investments Commission (ASIC) just approved the new code of practice earlier this week.

However, the conduct regulator indicated that they may review the code considering the findings from the Royal Commission.

Per an official statement from the regulator that this code of conduct was established after extensive engagement with the Australian Banking Association (ABA). And they announced the code will come into effect that 1 July 2019.

The corporate regulator highlighted specifically better protections for small business that borrow up to and more than $ 3 million and will provide protection for unfair contract terms for businesses that borrow up to $ 1 million, addressing the ‘expanded protection for consumer’ and more of a focus on ‘monitoring and enforceability’.

“All ABA member banks will be required to subscribe to the Code as a condition of their ABA membership and the relevant protections in the Code will form part of the banks’ contractual relationships with their banking customers,” ASIC said.

The code will be enforced by the Banking Code Compliance Committee (BCCC).

The ABA CEO Anna Bligh said that the new code of conduct will the do better at meeting community standards.

“Banks understand that Australians have high expectations and know that they have a big challenge ahead of them. The new Banking Code of Practice marks an important step in the right direction,” she added.

The GRC Professional reached out to David Jacobson Lawyer and writer at Bright Law who said that this is just a revised version of the 2013 code of conduct and does not present new obligation to the industry.

“But as a result of a number of developments, it is likely to be given more consideration by subscribing retail banks when dealing with customers, in addition to compliance with basic legal obligations.”

Factors that Jacobson said that this new code will bring in to consideration:

  1. Recent court decisions which found that the Code was a binding contract between a bank and its customers;

  2. An independent expert review which recommended redrafting of the language used as well as a stronger individual and small business protection focus;

  3. Detailed scrutiny by the Financial Services Royal Commission of what the Code means when it says a bank “will exercise the care and skill of a diligent and prudent banker.”

“Thus, the revised Code will have a heightened awareness by banks which should lead to changes of policies and procedures to comply with it,” he added.

David Bartlett, Corporate Criminologist based at Griffith University told the GRC Professional that the expectations of the impact of this revised code need to be realistic.

“It would be naive to think that the new Code in and of itself will make a significant difference,” Bartlett said. “The extent to which the new Code makes a difference will depend upon a range of factors, including its implementation and the extent to which member banks genuinely embrace it.”

He added that successful implementation of the code does not guarantee effectiveness.

“What I'd like to see is the ABA committing now to a rigorous, independent evaluation of the Code after it has been operating for 2 years. That will help keep everyone focused on getting implementation right and give the Code the best chance of being as effective as it can be,” he explained.

Is this something to be celebrated?

However, is the code a step forward considering the findings of the royal commission?

On LinkedIn, Terri Clementson posted:


Can’t clap ASIC and Australian banking’s celebration of their 2 yr negotiation to reach an agreed Banking Code of Conduct. ‘The Australian’ newspaper reminds us this covers ONE of “...six areas of industry-led reform, including aligning banker pay with customer outcomes, better remediation, proper treatment for whistleblowers, higher standards for conduct, a new beefed-up industry code of practice, and repairing relations with the corporate regulator”. But why INDUSTRY SPECIFIC reform at all??? Left hand: adds complexity. Right-hand wrestles the left hand to rationalise fragmentation (eg. with ‘capstone’ repairs like the draft, Whistleblowing Protection Bill stuck in the Senate - attempting to mop up mentions of whistleblowing protection littered thru tax, insurance, super and corps law legislation and contradicted by Australian standards). Surely Corps law is the single pointed gaping hole requiring binding ethical obligation definitions? Will ASIC now spend 2 yrs debating specific Codes of Conduct for each sector (mining, then energy, education, telecoms...etc). So...with 111 ANZIC industry groups we MAY be able to explain ethics by 2238 (one down 110 to go???) Spare me.

In a quick comment to the GRC Professional, Elizabeth Sheedy said that the industry codes only work if they are enforced.

“So that is the big question – will the banks actually enforce them?” she asked.

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