Sydney, 21 December, 2007: The review of the Code of Banking Practice is now underway with the appointment of independent consultant Jan McClelland to conduct the review.

The Code provides for it to be reviewed every three years. The Code sets out the banking industry's key commitments and obligations to customers on standards of practice, disclosure and principles of conduct in relation to banking services. It applies to personal and small business bank customers.

Ms McClelland said: “The last review of the Code of Banking Practice was very extensive and has provided a strong foundation on which to move forward. I want to build on this previous work and identify those aspects of the Code that are working well and some areas where improvements could be made.”

Ms McClelland outlined the process which will be followed in the review of the Code:

1)     Consultations will be held with interested stakeholders who will be encouraged to make a submission to the review. Views will be sought from banks, consumer groups, other interest groups, regulatory bodies and other interested stakeholders;

2)     Then an Issues Paper will be produced which outlines draft recommendations on changes to the Code;

3)     Further consultation will occur on the Issues Paper with interested stakeholders;

4)     A report with recommendations about what changes are considered necessary and reasonable for the Code will be completed mid-year, 2008.

The terms of reference for the review are published under Notes for Editors (see over). The website – www.reviewbankcode2.com.au - will publish all the documents related to the review of the Code of Banking Practice. This website is currently under construction.

Ms McClelland is an experienced reviewer as she has previously headed Government Reviews in NSW into the Consumer, Trader and Tenancy Tribunal, NSW Government Recruitment, Mine Safety, Police Education, Road Safety Education, Business Planning and Corporate Governance, and Shared Services, Asset Management and Procurement.

Ms McClelland was the former NSW Director-General Education and Training and Managing Director of the NSW TAFE Commission and has held senior public service positions with the NSW Departments of Health, Education and Public Service Board. She is also Chair and Director of government, private sector and not-for-profit organisations.  In 2005, Ms McClelland was Chair of the Australian Consumers Association now known as CHOICE.

David Bell, Chief Executive of the ABA, said: The Australian Code of Banking Practice stands out both in scope and the specific customer benefits it provides.”

“Regular reviews of the Code ensure that we can continue to develop and adapt the Code in response to industry conditions and customer demands. The Code is a strong charter because its provisions have contractual effect.  Further, the terms and conditions of bank and customer banking services, that are an enforceable contract between the bank and the customer, must include a statement that the relevant provisions of the Code apply to the particular banking service.”

Banks’ compliance with the code is independently monitored by the Code Compliance Monitoring Committee which was established in 2003 and has been active in ensuring subscribing banks comply with the Code. Independent compliance monitoring is an important feature of a Code if the Code is to be credible and seen as of value by customers.”

Under the current Code, the ABA will be required to publish on its website Ms McClelland’s recommendations and provide quarterly progress reports on implementation of her recommendations and provide reasons why any particular recommendation is not accepted.

The current code is published on the ABA website at www.bankers.asn.au under the Industry Standards section.

If you would like to make a submission to the Code Review, please send your correspondence to: Code of Banking Practice Review, GPO Box 3419, Sydney, NSW 2001.

Notes for Editors:

Review of the Code of Banking Practice – Terms of Reference 2007

Background

The Code of Banking Practice (CBP) is an instrument of banking self regulation.

The CBP was first published in November 1993.  With the agreement of the Federal Treasurer, the CBP became fully operative from 1 November 1996.

The CBP sets standards of good banking practice for banks to follow when dealing with individual and small business customers and their guarantors.

The first review of the CBP commenced in 2000.  The final reviewed version of the CBP was published in May 2004 and appears on the Australian Bankers’ Association website at www.bankers.asn.au.

The CBP is to be reviewed every three years in accordance with the provisions of Clause 5 of the CBP which provide relevantly as follows: -

“5        Review of this Code

5.1          We will require the ABA to commission an independent and transparent review of this Code every 3 years or sooner if appropriate, with the review to be conducted in consultation with:

(a)      banks which adopt this Code;

(b)      consumer organisations;

(c)      other interested industry associations;

(d)      relevant regulatory bodies; and

(e)      other interested stakeholders.

5.2          We will participate in any such review and co-operate with the person conducting it.

5.3          We will require the ABA to establish, and we will support, a forum (including consumer, small business and banking industry representatives) for the exchange of views on:

(a)      banking issues; and

(b)      the effectiveness of this Code.

We will also require the ABA to ensure that these views are taken into account in the next review of this Code.

5.4        We will require the ABA to promptly publish on its website:

(a)          the recommendations and report arising from a review of this Code (and to make them available to the public in hard copy on request);

(b)          reasons why any such recommendation has not been accepted; and

(c)          quarterly progress reports on the implementation of those recommendations which have been accepted, until the implementation process is complete.”

Key Considerations

(1)                In conducting the review the reviewer is to have particular regard to  the provisions of Clause 5 of CBP and:-

(a)                    The need for a voluntary code of conduct to encourage broad membership by industry participants and regulator support;

(b)                    The need for a voluntary code of conduct to use plain language so that it is easily interpreted, understood and applied by banks and customers alike;

(c)                    Whether a more principles-based approach to the CBP would achieve the need in (a) and (b) balanced by the need of CBP subscribers to be clear about their promises and accountability under the CBP;

(d)                    Key commitment 2.1 (a) of the CBP concerning banks continuously working towards improvement in standards of practice and service in the banking industry;

(e)                    The need for an evidence based approach for amendments to the CBP derived from the operation of the banking and financial services consumer participants but having regard to resource constraints of certain community and consumer group participants;

(f)                     The impacts of the reviewer’s recommendations on banks and bank customers;

(g)                    The need for flexibility in the provision of products and services and to promote  competitive advantage;

(h)                    The provisions of comparable industry codes and other self regulatory arrangements including the Electronic Funds Transfer Code of Conduct;

(i)                      Changes which have occurred in the legal and regulatory environment since the last review of CBP;

(j)                     Consistency with other self regulatory initiatives and formal regulation;

(k)                    The principle of certainty of contract between bank and customer;

(l)                      The requirement of banks to act in accordance with prudential standards necessary to preserve the stability and integrity of the Australian banking system.

Review Scope

The reviewer is to report with recommendations on:

(a)                   Generally how the CBP has operated since its last review and the perception of the CBP among community, consumer, industry, regulatory and political interests;

(b)          What barriers, if any, exist to the membership of the CBP;

(c)                   Means for addressing any interpretation or comprehension difficulties by banks or customers in relation to the provisions of the CBP;

(d)                   Means for addressing any significant compliance difficulties, including significant competitive disadvantages, that banks have in conforming with the  CBP;

(e)                   Changes that have occurred in the banking and customer environment, regulatory and operational, and what, if any, responses are required under the CBP;

(f)                    The structural, organisational and operational aspects of the relationship between internal complaints handling, external dispute resolution and monitoring of banks’ compliance with the CBP;

(g)                   How the obligations on subscribers under the provisions of the CBP can be harmonised with the provisions of the Electronic Funds Transfer Code of Conduct and relevant legislation.

(2)              The reviewer is to submit a final report with recommendations to the ABA by 31 May 2008