Post: Putting customers at the centre of banking

I would like to begin by acknowledging the traditional owners and custodians of the land on which we meet today, the Wurundjeri people of the Kulin nation, and pay my respects to their Elders past, present and future. I extend that respect to Aboriginal and Torres Strait Islander people here today.

“…The financial services industry is too important to the economy of the nation to allow what has happened in the past to continue or to happen again.”

Do those words sound familiar?

They should, as they come from Kenneth Hayne’s Royal Commission report in 2019. However, what I want to emphasise is the importance of banking to the financial system, to all Australians and the economy.

Precisely because of the significant impact banks have on people’s lives – Australians rightly have high expectations of them.

First and foremost, Australians expect them to work for their customers’ best interest – to put them first.

Although more than five years have passed since the Royal Commission, the lessons it offered should not fade with time. If they do, we know from history that we will be destined to repeat the same issues – and Australian families and business owners have the most to lose.

There has been very significant improvement in the culture at banks and financial institutions and the way they treat their customers. We have seen improvements in terms of compliance, conduct and risk governance and the quality of engagement with ASIC.

But as times change and banks respond to new opportunities and risks, bankers need to guard against the re-emergence of problems of the past – whether they be product types, incentive structures or attitudes towards customers that led to the Royal Commission in the first place.

That leads me to the focus of what I would like to discuss this morning.

As of today, ASIC has approved – and the ABA will shortly publish – the new February 2025 Banking Code of Practice.

Naturally there has been debate about this provision and that provision – and what the industry is ultimately prepared to commit to. But the Code is part of the industry’s standard for itself to provide good customer outcomes – and its success relies upon what you do every day to assist customers and deliver high quality banking products and services.

My overriding message today is that no matter where the industry is now, it should always be looking to improve and to remember the lessons of the past.

Why industry Codes are important
Before I get into the new banking Code, let’s go back to the ‘so what’ test – namely, why does this Code matter? Codes help to fill the space between the letter of the law and the mission and values statements of each company.

In general, effective industry codes achieve this by focusing on three aims:

They address industry and consumer problems not covered by legislation;
They elaborate on what the law requires to deliver additional benefits; and
They clarify what needs to be done from the perspective of a particular industry, practice or product.
Together these three things are meant to make a difference in the day-to-day practice of the banking sector. The strength of the banking industry is built essentially on trust and reliability. Having a clear code that lays down customer-centric principles and meets the three aims, gives the customer reason to trust – and that’s to everyone’s benefit.

Now, as self-regulatory initiatives, industry Codes have the potential to deliver real benefits to consumers, small businesses and subscribing entities. Since they’re industry-initiated, Codes also highlight that businesses understand the opportunity they have to enhance services for their customers.

However, as we all know self-regulation is a very small part of the overall regulation of banks. ASIC has responsibility for consumer protection and facilitating and improving the performance of the financial system. By and large this is achieved through strong laws, and considered and appropriate enforcement and engagement. Because a code is industry ‘owned’, the subscribing industry participants need to feel that compliance with the code’s commitments is feasible.

But having it approved by a regulatory body like ASIC is also beneficial – because it is a signal to consumers that this is a code they can have confidence in.

ASIC has used this approval process to defend Australians’ expectations – expectations for consumer protection. At every stage through the Code approval process, we sought to ensure that there was no diminishment of key protections of customers, and that the Code advanced protections in important areas.

So let’s look at how that’s been achieved.

Because of the significance of the Banking Code to consumer outcomes, ASIC undertook consultation in relation to whether we should approve the revised version of the Code prepared by the ABA. During this consultation, stakeholders told us that the draft version of the code had some gaps and there were elements that had been removed from the existing Code that were of significant concern.[1]

We recognise the excellent contribution of consumer advocates, the Banking Code Compliance Committee, AFCA and others to our consultation. It was clear to us there were key elements that needed to be protected or enhanced and that is where ASIC sought and secured improvements.

Specifically, ASIC received feedback that the Code should:

Retain the diligent and prudent banker obligation for consumer borrowers and their guarantors;
Continue to include detailed provisions for complaints handling; and
Continue to provide for the Banking Code Compliance Committee’s robust oversight and monitoring of subscribing banks’ compliance with the Code, including a new provision that commits subscribing banks to be bound by their obligations under the Banking Code Compliance Committee Charter.
The new Code approved by ASIC protects all of these things. It also delivers several key improvements, some of which were proposed by the ABA in the draft Code in 2023 and some of which developed through the course of the ASIC approval discussions.

For example, under the new Code, more small businesses will gain access to its protections. Consistent with the recommendation of the Independent Review and the Pottinger Review, the aggregate borrowings limit has been increased from $3 million to $5 million meaning another 10,000 businesses will be eligible.

The updated Code clarifies how banks will improve inclusivity and accessibility for customers including via interpreter services, National Relay Services, and accessible information. This is a great example of putting the customer’s needs at the heart of the process.

Commitments in relation to the administration of deceased estates have been further clarified, and there are updated guarantor provisions including a commitment to take reasonable steps to make sure a meeting is held with a guarantor before taking a guarantee.

The financial difficulty definition has also been enhanced. That means it includes more examples of financial difficulty causes – casting a wider net to draw in more who need support.

Why is this so important? Because the Code needs to be responsive to community need based on the circumstances at the time. For example, cost-of-living pressures are having a significant impact on many Australians, including through the increased cost of paying a mortgage.

Any process that fails to take that into account current circumstances fails to put the customer first.

Areas for improvement
The work ASIC has been doing with the ABA and consumer groups on the Code also points to the focus ASIC has had on delivering for Australian consumers.

ASIC’s recent review of financial hardship around home loans has revealed examples where those consumer issues need attention. Stories of people like Amy, a victim of family violence whose request for assistance took five weeks and two different applications before approval. Or people like Sumit, who had to contact his lender six times across as many months before his complaint was referred to the hardship team. He had held that home loan for 18 years before he started to fall behind.[2]

Although we identified some good practices in our financial hardship report, the poor practices we identified included:

Lenders not making it easy for the customer to give a hardship notice;
The assessment processes being too difficult for the customer to go through;
A lack of effective communication with the customer;
Vulnerable customers not being well supported; and
Insufficient focus on the challenges facing customers.
The report which was published a few weeks ago goes into these in more detail, but clearly, more needs to be done. The distress these issues cause people who are already in distress is one reason compliance with hardship obligations is an enforcement priority for ASIC in 2024.

These stories and findings show the impact of not putting the customer at the centre of your business.

They also show why enhancing the definitions of vulnerability and financial difficulty in the new Code is very much a step in the right direction.

As I said at the beginning – no matter where we are, there’s always room for improvement, to pay close attention to the expectations of consumers and the community more broadly. While there’s much that’s good in the Code, we need to be alive to apathy, complacency or in the worst circumstances, backsliding.

ASIC will continue to remain focused on the need for enhanced consumer protections, including in relation to proactively identifying customers eligible for Basic Bank Accounts, the proactive identification of consumer vulnerability, and protections for loan guarantors.

Some of these are matters that ASIC will continue to progress through reviews and reports to highlight best practice processes. There are a number of areas in which we would like to see further work.

For example, we want to see the ABA continue to work with its members on the proactive identification of customers in higher-fee accounts who are eligible for low-cost, basic accounts and ensuring effective processes for migrating those customers into appropriate accounts.

On this note, ASIC will soon be publishing a report on its Better Banking for Indigenous Consumers project. This will outline how harms in this area can be addressed – you can expect to hear more in the coming weeks.

ASIC will also be publishing a review of credit card offerings, which is a follow-up to our two reports in 2018, and a new report on scam detection, prevention and response which follows our report last year.

The Code and reports like those I have flagged should be a rallying cry to everyone. A call for banks to continuously look at how they should be putting the customer front and centre. This is particularly important given stories like Sumit’s and Amy’s that show how Australians have been let down.

So, while there are several key improvements in the new Code, as you can see, it’s not the final word in customer-focused banking. We look forward to following the implementation of the Code and seeing its subscribers hold themselves to high standards of implementation and compliance – monitored by the Banking Code Compliance Committee – and complemented by the Committee’s good work.

Regulatory Initiatives Grid
Discussion about the Code is also an opportunity to re-orient and remind everyone that we’re all here – both regulator (ASIC) and regulated – for the customer.

Why do I say both regulator and regulated? Because ASIC and its counterparts are ultimately here for the consumer, too. It’s that focus on the public that is behind ASIC’s support for the introduction of the Regulatory Initiatives Grid, or RIG.

We think it will better help industry to plan and allocate resources more efficiently. It will also build on the work the Regulatory Developments Timetable ASIC began publishing in 2022 on future activity.

While we already have a range of discussions with our fellow regulators, such as our coordination with APRA, the RIG will complement these.

When it is released, it will be important to get industry feedback on the content, to understand how helpful it is to them or whether the content is too high level or indeed too detailed.

So in conclusion, I want everyone here today to walk out of here with no doubt the emphasis and priority ASIC is putting on consumers.

Whether you are a banker, a superannuation adviser, an insurer or anyone else working in the sectors ASIC regulates, we are here to deliver a fair, strong and efficient financial system for all Australians.

And that includes keeping a constant eye to Australians’ expectations of the Banking Code of Practice and looking to each one of you to meet those expectations Australians rightly have of you.

As I said at the beginning, banks have a serious impact on the lives of Australians. When the customer is at the heart of their operations, that impact is for the good. When that focus slips – it’s for the bad. We should keep that in the forefront of our minds.

[1] Timeline:

The Code has existed since 1993.
ASIC first approved the Code in July 2018 and then an updated version, the July 2019 Code.
The current version of the Code was released in March 2020, and revised in October 2021.
An independent review of the Code was undertaken in 2021 by Mr Mike Callaghan AM PSM. The independent review made 116 recommendations.
The review of the Code coincided with a separate independent review, by Mr Phil Khoury, of the BCCC Charter also in 2021.
The ABA submitted a revised draft of the Code for ASIC to consult on in August 2023.
On 17 November 2023 ASIC published Consultation Paper 373 Proposed changes to the Banking Code of Practice, seeking interested parties’ views on the proposed changes to the Code. Submissions closed on 15 January 2024. ASIC published the submissions in March 2024.
Since March 2024 ASIC has been engaging with the ABA regarding changes to the proposed Code.
On 21 June 2024 the ABA provided ASIC with a formal application seeking approval of the new Code (the February 2025 Banking Code of Practice).
The February 2025 Code will come into operation on 28 February 2025.

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