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A change to the Banking Code of Practice will prevent members of the Australian Banking Association from requesting accountants to certify a business’s ability to pay a loan.
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Accountants spared from loan certification: CPA Australia
01 August 2024
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Members of the Australian Banking Association will no longer be able to ask accountants to certify whether a small business client can repay a loan following an update to the Banking Code of Practice. The change will be effective from February next year.
This update comes under clause 78 of the code.
The new update to clause 78 (section b) of the Banking Code of Practice states:
“Where relevant, we may also take into account your projected future cash flows,”
“We will not ask a third party (such as your accountant) to certify that you can repay the loan.”
CPA Interim head of policy and advocacy Ram Subramanian said CPA welcomes the change to the code.
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“CPA Australia welcomes the update to the Banking Code of Practice which will no longer allow financial institution and brokers to request that accountants certify whether a small business can repay a loan.”
Subramanian said CPA Australia has previously campaigned for the change to the code under section 78 as it was an unnecessary demand for accountants.
“This has always been an unreasonable request and a major bugbear for public practitioners. It is something that CPA Australia has long campaigned to change,” he said
“This comes after many years of proactive engagement with the industry, CPA Australia members and other stakeholders to deliver a common-sense outcome.”
The Banking Code of Practice only applies to members of the banking association.
However, if an accountant is requested for an accountant’s letter, Subramanian recommends accessing CPA’s toolkit.
The toolkit states, “an ‘accountant’s letter’ is a document prepared by an accountant at the request of their client for a bank, lender, or another party for the purposes of approving a loan, lease or rental agreement for a client.”
CPA Australia and CA ANZ’s joint position on accountant’s letters is that they should be declined by accountants.
This is due to the credit assessment being the responsibility of the lender, not the accountant.
Contrary to their view, the professional bodies understand requests for accountant’s letters continue to increase and accountants may wish to support their clients.
CPA Australia said the ‘accountant’s letters, declarations and capacity to repay certificates- toolkit’ is a collaboration between CPA Australia, CA ANZ and the IPA.
“The toolkit supports accountants to understand how they can appropriately support clients through the process without inadvertently breaching professional standards, the law, or indemnity requirements.”
Subramanian said this change to the Banking Code of Practice is a step in the right direction and CPA Australia will continue working towards more changes for accountants.
“Public practitioners carry a mountain of regulatory burdens, but this is at least one small change to help alleviate the pressure,” he said.
“CPA Australia will continue to advocate for common sense changes that benefit our members and the profession as a whole.”
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