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The corporate regulator has rejected a push by the banks to reduce the protections available to small businesses in the Banking Code of Practice.
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ASIC retains small-business protections in banking code
10 July 2024
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The Australian Small Business and Family Enterprise Ombudsman has welcomed moves by ASIC to retain and expand protections for small businesses in the new Australian Banking Association’s code, effective 28 February 2025.
The Australian Banking Association’s code reinforces a respectable standard of good industry practice, enabling small businesses to exercise their rights.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said he is pleased the ASIC has retained this protection within the code for small businesses.
“A push by the banks to shrink the Code has been rejected and they must continue to include an explicit and detailed pledge outlining how they will handle complaints,” he said.
It was originally proposed by the ABA to remove complaints-handling instructions for small businesses from the code and refer them to ASIC Regulatory Guide RG 271 instead.
This proposition was strongly advised against by Billson who believes small businesses shouldn’t be expected to understand regulatory advice and how to utilise it.
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“It was never reasonable to expect busy and resource-constrained small businesses to read and understand regulator guidance for financial firms, and then to decipher and be clear on how to exercise rights afforded to them,” he said.
The new code effective February 2025 will encompass 10,000 more small businesses and will specifically detail how these businesses can use the information to their advantage.
The protections of the new code will encompass these additional small businesses by increasing the value of the aggregate borrowing criterion from $3 million to $5 million.
The new code will ensure small and family businesses have a clearer understanding of how they can access bank support, rather than facing the hurdle of competing for it.
Billson said this should be the base requirement of the baking code, rather than something strived for.
“Competitive access to finance has been a longstanding challenge for small and family businesses. Policy incentives need to strike the right balance between managing risk and supporting entrepreneurship, including by ensuring small businesses have reasonable and reliable access to banking services,” he said.
Banks have experienced frustration from regionally based small and family businesses that have struggled to have face-to-face interactions due to branch closures.
The enforcement of the new code will include an updated introduction clearly outlining how these individuals, small business, and their guarantors can maximise their entitlements if eligible.
Additionally, the new code will also ensure banks that have signed it will take the necessary action to hold a meeting with a prospective guarantor and discuss customer circumstances.
Billson said the new code should capture practices and expectations reflecting good industry standards that should continue to evolve over time.
“I call on the banks to make sure the benefits of their expanded commitments and the updates in the new code apply to both current and prospective small-business customers,” he said.
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