Australian Banking Association (ABA) launches new banking Code: a big step forward for banking staff and customer protection

Introduction to the new Code

The Australian Banking Association’s (‘ABA’) new Banking Code of Practice (‘the Code’) came into effect on 28 February 2025. This latest iteration of the Code introduces enhanced customer protection and accessibility and sets higher standards for banks and their staff.

The new Code sees significant structural and semantic changes from its predecessor, which was last updated in 2021.[1] These changes include restructuring, removal of regulatory duplication and simplification of language for customers, and are an effort to ‘strike the right balance between creating new protections and removing parts of the Code that were either already in law or have recently been superseded by new legislation.’ [2]

The new Code clearly sets out consumer rights and protections and how they may be enforced against subscribing banks.[3] Additionally, there is an updated conduct standard for banks to operate banking services ‘efficiently, honestly and fairly’,[4] consistent with the standard set by the Corporations Act 2001,[5] and the National Consumer Credit Protection Act 2009.[6] The revised standard guides all new and existing provisions across the Code.

Expansion to new customer groups and accessibility requirements

Following submissions by various stakeholders, the ABA has expanded the Code’s umbrella of protection to several new customer groups. Most notably, an updated definition of ‘small business’ under the Code, has increased the upper limit of aggregate borrowings, including undrawn amounts, existing Loans and any Loan currently applied for, from $3 million to $5 million,[7] establishing safeguards for what is estimated to be an additional 10,000 small businesses.[8]

Sizable emphasis has also been placed on inclusivity and accessibility requirements for customers, and the need for banks to accommodate these requirements, particularly through staff training and resourcing. This, for example, includes free interpreter and National Relay Services to customers who may require them.[9] Moreover, additional support will need to be provided to vulnerable customers or those at risk of facing vulnerability, such as incarcerated persons which the Code now expressly recognises.[10]

The definition of ‘financial difficulty’ has been expanded to include customers who are likely or unable to meet future repayments.[11] The Code also provides new and explicit protections to farmers experiencing difficulties due to drought or natural disasters. Where a Borrower breaches their obligations to a Bank because of drought or natural disasters, in certain circumstances default interest will need to be refunded if charged, or waived entirely.[12]

Increased protection for guarantors deceased estates

Banks must also now commit to taking reasonable steps to ensure protection of guarantors.

This includes:

1. meeting with prospective guarantors before accepting the guarantee;
2. ensuring that the borrower is not present at the meeting;[13]
3. discussing the financial situation of the guarantor and exhausting reasonable alternatives before selling the guarantor’s primary place of residence.

Banks will need to ensure existing procedures and practices are aligned with these new requirements.

Greater support for deceased estates

The Banking Code Compliance Committee’s (‘BCCC’) 2023 report on the Management of Deceased Estates found that ‘many banks did not have adequate systems and processes to comply with the Code’, resulting in gross mismanagement of deceased estates.[14] Following this, the new Code has clarified the obligations of banks in relation to the administration of deceased estates. The Code now requires banks to provide clear and accessible information and explaining the steps that can be undertaken by a representative to manage a customer’s account in the event of their death.[15]

BCCC scrutiny

The new Code follows the latest biannual compliance report published by the BCCC, which highlights an increase in reported breaches of obligations for financial difficulty and responsible lending.[16] The report identified several critical areas of concern, including financial difficulty, responsible lending, and support for vulnerable customers.[17] It also underscores the necessity for banks to improve their oversight and processes to better assist customers, especially those experiencing financial hardship or vulnerability.

These concerns are pressing, especially considering their ratification under the new Code. To comply with the new Code, Banks will need to strengthen their monitoring systems to detect and address breaches early.[18] It is also crucial to ensure that staff are well-trained to handle situations with customers experiencing financial difficulty and vulnerability, as defined under the new Code. This is essential so that they can provide clear and accessible information to customers about their rights. Additionally, Banks should also proactively reach out to customers in financial difficulty to offer assistance.[19]

Ensuring compliance with the new Code is essential to avoid scrutiny and penalties. If members of the Code have not already done so, they should be reviewing existing systems, policies and processes to ensure continued compliance.

Please reach out to Martin Nguyen to ensure your institution is fully prepared to meet these new requirements and provide the necessary support to your customers.

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Authored by:
Martin Nguyen, Partner
Adriti Mehta, Paralegal

[1] October 2021 Banking Code of Practice.

[2] Australian Securities and Investment Commission, ‘Banks Raise the Bar in New Banking Code’ (Media Release, 6 September 2023).

[3] February 2025 Banking Code of Practice 8.

[4] Ibid 12.

[5] Corporations Act 2001 (Cth) s 912(1)(a).

[6] National Consumer Credit Protection Act 2009 (Cth) s 47(1)(a); Explanatory Statement, ASIC Corporations (Approval of February 2025 Banking Code of Practice) Instrument 2024/523 12(d)(iv) (‘Explanatory Statement’).

[7] February 2025 Banking Code of Practice 40; Explanatory Statement (n 6) 12(d)(iii).

[8] Australian Securities and Investment Commission, ‘Banks Raise the Bar in New Banking Code’ (Media Release, 6 September 2023).

[9] February 2025 Banking Code of Practice 16 [46].

[10] Ibid 16-17 [52]; Explanatory Statement (n 6) 12(d)(vii).

[11] February 2025 Banking Code of Practice 32 [168]; Explanatory Statement (n 6) 12(d)(viii).

[12] February 2025 Banking Code of Practice 26-27 [128]-[131].

[13] Ibid 24 [109]-[110].

[14] Banking Code Compliance Committee, More Work to Do: A Report on the Management of Deceased Estates (Report, July 2023) 3.

[15] February 2025 Banking Code of Practice 28-29.

[16] Banking Code Compliance Committee, Compliance with the Banking Code of Practice (Report, 16 December 2024).

[17] Ibid 19-26.

[18] Ibid 27.

[19] Ibid 26.