The BCoP is binding and enforceable, designed to shepherd financial institutions into a more sustainable, ethical future following the transgressions exposed by the Royal Banking Commission. The high-profile cases of unethical and corrupt behaviour caused a significant erosion of consumer trust in Australia’s financial industry, as well as among individual bankers.
The Underpinnings of the Banking Code of Practice
First set forth in 1993, the Banking Code of Practice was developed specifically to create a standardised set of practices for the Australian banking industry. Banks had both failed to self-regulate and also in their duty to effectively and fairly serve customers. The Code is designed to spur improvement in the performance of bankers, driving a higher level of professionalism across financial services.
The Purpose of the Code
The Code is designed to put Australia's banks squarely back on the path to transparency. To achieve compliance, banks must adopt strict ethical standards and transparent behavior.
Fees must be fair and clearly explained as well as listed in disclosures given to banking customers. Frequent review of customer rights and responsibilities must also be made a priority. All lending practices should be undertaken with a solemn responsibility to perform due diligence and assess the customer’s ability to repay their loan or credit extended to them.
At the core of the Code is a commitment to providing robust financial protection for customers, including individual or small business banking customers, as well as anyone who is planning to secure or may be considering securing a loan to an individual or small business customer. These additional individuals, or guarantors, must be seen to benefit personally from securing the loan, not just the loan applicant.
By imposing these stricter lending criteria guidelines on banking practices, the Code helps to provide for more transparency and responsible lending by requiring delays before signing and a cooling-off period after signing a loan or credit agreement. The Code also asks that lenders direct their customers (and any guarantors) to seek legal counsel prior to making significant changes in their finances.
The BCoP gives power to an independent body, the Banking Code Compliance Committee (BCCC). The Committee monitors and tracks banks’ compliance with the Code, ensures Code enforcement and has the authority to punish banks that don’t comply with any part of the Code.
Specific mandates within the BCoP
Upon adoption of the BCoP, banks (and by extension anyone acting to represent the bank, such as individual bankers) must comply with all sections of the Code, or face the BCCC’s scrutiny. The Committee has the full right and power to monitor the activity of any ABA member bank at any time to watch for breaches. The BCCC may:
- Request, at any time, information related to activities governed by the Code
- In case of a Code breach allegation, conduct a thorough investigation
- In case of verified severe breach systemic breaches, conduct a thorough investigation
In cases of a verified breach, once the investigation is concluded, the BCCC may:
- Report findings and make recommendations in regard to Code breaches
- Publicly name and formally warn a bank for Code breaches
- Mandate that a bank should take corrective action in the cases of a severe violation
- Require a bank to retrain staff or to conduct a compliance audit and review
In cases of serious, systemic or ongoing breaches or issues, the BCCC may:
- Apply sanctions (both on banks and any other stakeholders)
- Report the issues to the Australian Securities and Investments Commission (ASIC)
- Provide guidance and reports to stakeholders and regulators
- Complete any other needful and reasonable functions and responsibilities
Any violations of the BCoP can result in jail time plus a significant monetary fee for any institution or banking individual involved. Compliance with the BCoP is a basic requirement for all banks currently operating in Australia.
However, this mandated compliance may not be enough. Even with the Committee putting teeth behind the Code, it merely represents the bare minimum bankers should be committed to. The industry can do far better.
Read More: BCOP draft in line with FINSIA's professionalism strategy
Beyond the Code: a commitment to professionalism
Banks and bankers aren’t constrained by the BCoP. Instead of seeing it as a rigid structure to carefully work inside of, they should see it as a foundation on which to build on, the initial starting point for a much more rich and comprehensive code of ethics and professionalism.
When bankers come together to learn from one another and commit to a shared vision and set of higher standards than what is mandated, consumer trust can be won back and the industry as a whole can flourish once again.
FINSIA is driving a new wave of banking professionalism
Since 1886, FINSIA has focused on facilitating the industry to professionalise for the betterment of the community. FINSIA is a professional not-for-profit membership body for financial services, with a goal of bettering the banking industry.
With approximately 8,000 members across Australia and New Zealand, FINSIA covers banking, institutional markets, funds management and securities including financial advice, raising standards of competency and conduct while increasing consumer trust and enhancing bankers' sense of worth and value.
FINSIA’s educational services are designed to increase the professionalism of Australia’s banks. Our Chartered Banker course can enrich the knowledge and professionalism of bankers across your institution, providing them with core knowledge, deep insights and access to a strong network of mentors within the member body.
By choosing to promote and facilitate access to this qualification, you can build the next generation of bankers: professional, ethical, transparent and focused on the greater good. Not only will they uphold the guiding principles underpinning the BCoP, but they will go far beyond it. Your institution can take the first step today by reaching out to see what FINSIA can do for your own staff, at all levels.
