With no meaningful action on open banking, the Australian Bankers’ Association's support of the “vast majority” of recommendations in the Final Report on the review of the Code of Banking Practice (Code), has been hammered by a former chief investigator at the Centre for International Finance and Regulation (CIFR).
Of the 99 recommendations, the banking industry last week declared its support for 61 “in full,” 29 recommendations “in principle or in part,” while the remaining nine the ABA either “needs more time to consider or will not support”.
According to the peak industry body, the code is central to “make sure banks do the right thing by their customers” and raise standards across banking responsibility, accountability and banking culture.
While major banks like the ANZ last week threw their support behind the lobby group's position, Dr Rob Nicholls, a visiting fellow at UNSW’s School of Business and former CIFR chief investigator, lambasted the response as “paper thin” and hypocritical.
“The ABA seems to think that by supporting a majority of the recommendations, this somehow indicates that cultural change has occurred,” Nicholls said.
“However, the fact that the ABA and its members - among the unsupported recommendations - oppose a cooling-off period for unadvised guarantors is a clear example of the exquisite hypocrisy at work here.”
Nicholls said the rejection or amendment of nearly 40 per cent of the recommendations suggests that there is no cultural change, but “merely more of the same disdain” for consumer rights.
According to the ABA, jurisdiction for a member’s potential unfair or unconscionable contract terms flowing from a bank error, should lie within the courts, not within the code.
“Industry codes in other service sectors as diverse as telecommunications and franchising are designed to make the service provider responsible without the customer having to seek legal redress,” he said.
ABA executive director, retail policy, Diane Tate disagreed, suggesting last week the industry was being transparent and responsive.
“Banks are demonstrating they are taking action to change as well as being honest about the things which are more complex to resolve.”
Recommendations not supported by the bankers' association include:
- 22) “a new obligation that prohibits banks from offering a credit card credit limit increase.”
- 39) “The Code should be amended to prohibit signatory banks from signing a guarantor, who has not been legally advised, until at least the third day after the provision of all required information to the guarantor.”
- 44) “The Code should specify that a guarantee is unenforceable if the signatory bank fails to comply with the pre-execution requirements.” The ABA argues this should be the court’s call.
- 53) “Clause 28 of the Code should be amended to include a new provision that a signatory bank may, at its discretion, decide to waive a small unsecured debt if the bank is provided with evidence that the person is in long term financial hardship and the circumstances warrant a compassionate approach.” ABA says the industry does not consider it appropriate for the Code to include this provision because it could create unrealistic customer expectations.
ANZ group executive Australia, Fred Ohlsson said his bank also backed the “vast majority” of recommendations.
“We have fully supported the Code of Banking Practice review since the ABA launched it last year, and will work to implement the vast majority of the recommendations as outlined by the review," he said.
Some of the easy wins for customers that the ABA was happy to support include, the “plain-English language” communications clause so that Australians can better understand their banking rights and responsibilities.
“ANZ backs the recommendation for the Code to be written in plain English so our customers can better understand their banking rights and responsibilities. We also support an easier way to cancel credit cards or reduce credit limits," Ohlsson said.
For Dr Nicholls, the value of supporting the recommendations are self-evident and "anything else is just re-arranging deck chairs on the Titanic. He added that the path for action is lit by Britain’s interventionist, open-banking approach to reform.
“Now is the time for the government to follow the UK line in interventionist action to promote competition in the retail banking sector," he said.
“Open banking standards and ease of account switching are small steps that could see the retail banks wanting to adopt all of the recommendations in the draft Code."