CODE OF BANKING PRACTICE FINETUNED FOR GUARANTORS

Sydney, May 14, 2004: The Australian Bankers’ Association (ABA) today announced some modifications to the revised Code of Banking Practice to finetune some disclosures and practices so they better suit the needs of prospective guarantors and to reduce unnecessary time and paperwork.

In announcing the reforms, Chief Executive of the ABA David Bell, said: “The revised Code of Banking Practice is a world-class self-regulatory code. It sets very high standards of conduct for banks in their dealings with individuals and small business customers.  The Code is contractually binding on subscribing banks.”

“The modifications will finetune the Code to ensure that prospective guarantors receive appropriate and relevant disclosure, rather than duplicating information they already know about their company.

“Directors of their borrowing company can opt out of receiving some information about the financial performance of their company held by the bank. They can also opt out of having to wait a day, after they have received information, before they give their guarantees.”

“The modifications have been undertaken because company directors who are to become guarantors have complained of having been forced to receive disclosures they don’t want, because it contains information they already know. Unfortunately complying with the Code had been causing delays in the settlements of company’s loan facilities.”

“To avoid these delays and to make disclosure more relevant, banks have changed the Code to smooth the loans process.”

The other main modification is about the disclosure to prospective guarantors about any credit limit excesses or account overdrawings by a borrower.  Instead of telling guarantors about every excess and overdrawing, however minor or inconsequential, subscribing banks can introduce a threshold of $100 for excesses and overdrawings of $100 or more. This will ensure that only material excesses and overdrawings are provided to the prospective guarantor.

“These minor changes finetune the Code to ensure it works effectively and efficiently in the interests of prospective guarantors. The Code is designed to foster good relationships between banks and their customers including guarantors and this is based on good standards of conduct.  It makes sense in the interests of good relationships for these modifications, minor as they are, to be made to the Code” said Mr Bell.

“The effects of these modifications will be independently monitored and reported back to the ABA’s Community and Consultative Forum.”

“The Code already makes provision for an independent Code Compliance Monitoring Committee (CCMC) to investigate and monitor complaints about Code breaches.  All ABA members who subscribe to the Code have agreed that the CCMC may be empowered to conduct its own enquiries into Banks’ compliance with the Code.  Any person may make a complaint to the CCMC about a breach of the Code,” concluded Mr Bell.

Banks will announce individually when they are ready to implement the modifications.