ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255

Administered by Department of the Treasury

Legislation au F2019L01636 Not in force Legislative Instrument

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Explanatory Statement

 

ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254

ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255

 

This is the Explanatory Statement for ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254 (New Revocation Instrument) and ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255 (New Approval Instrument).

The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).

Summary

  1. The Banking Code of Practice (Code) is a self-regulatory document created by the banking industry, as represented by the Australian Banking Association (ABA), and is administered by an independent Code monitoring body. The Code sets out standards of practice and service in the Australian banking industry for individual and small business customers, and their guarantors. ASIC does not administer the Code.
  2. On 19 December 2017, the ABA applied to ASIC for approval of its Banking Code of Practice (2018 Banking Code) under section 1101A of the Corporations Act 2001 (Corporations Act). ASIC approved the 2018 Banking Code by issuing ASIC Corporations (Banking Code of Practice) Instrument 2018/700 (2018 Approval Instrument). The 2018 Banking Code was due to commence operation on 1 July 2019.
  3. After ASIC issued the 2018 Approval Instrument, the ABA proposed a number of changes to the 2018 Banking Code. On 14 December 2018 and 14 May 2019, the ABA applied to ASIC for approval of variations to the 2018 Banking Code. The variations, which ASIC approved in June 2019 by way of ASIC Corporations (Approval of Banking Code of Practice) 2019/663 (June 2019 Approval Instrument), were designed to:

(a)     clarify that a bank will not charge fees for services to deceased customers, where services are no longer being provided to that customer’s estate;

(b)     modify banks’ commitment to provide a copy of a valuation to a small business borrower to allow banks to place reasonable limitations on the use to which the borrower (or any third parties) can put that valuation;

(c)     clarify the original intention and the position in the ABA’s Industry Guideline: Appointing property valuers when lending to small businesses and primary producers that a copy of the valuation be provided to a small business borrower only where the loan is secured against commercial or agricultural property;

(d)     reflect ASIC’s implementation of law reforms to credit card responsible lending in ASIC Credit (Unsuitability – Credit Cards) Instrument 2018/753; and

(e)     make minor and technical corrections throughout the 2018 Banking Code.

4.      Also on 14 May 2019, the ABA proposed a number of changes to the Code, which were primarily designed to address:

(a)   recommendations 1.8 (relating to accessibility to banking products and services) and 1.13 (relating to the charging of default interest on loans secured by agricultural land in areas declared to be affected by drought and natural disaster) in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry;

(b)   some stakeholder feedback about perceived shortcomings in the Code’s small business protections; and

(c)   some minor and technical issues identified by the ABA.

5.      In September and October 2019, the Australian Competition and Consumer Commission (ACCC) undertook public consultations on its draft determination in response to the ABA’s application for authorisation of relevant Code provisions under subsection 88(1) of the Competition and Consumer Act 2010. Following stakeholder submissions in October 2019, the ABA proposed further changes to the Code. The changes were intended to give greater clarity to clauses 44B and 47 of the Code, which deal with basic, low and no-fee accounts for eligible customers.

6.      The ABA has requested that ASIC revoke the June 2019 Approval Instrument – with effect from 1 March 2020 – and approve a new Code (March 2020 Banking Code), which is set to commence on 1 March 2020 (reflecting the variations in paragraphs 3, 4 and 5 above).

Purpose of the instruments

7.      The purpose of the New Revocation Instrument is to revoke the June 2019 Approval Instrument, so that the version of the Code that ASIC approved in June 2019 (June 2019 Banking Code) is no longer approved by ASIC. The New Revocation Instrument commences on 1 March 2020, which is when the March 2020 Banking Code is due to commence. ASIC has set a delayed commencement date for the New Revocation Instrument so that the June 2019 Banking Code continues to have ASIC’s approval until the March 2020 Banking Code commences.

8.      The purpose of the New Approval Instrument is to give ASIC’s approval of the ABA’s March 2020 Banking Code, as published on12 December 2019. As mentioned, the March 2020 Banking Code will commence on 1 March 2020.

9.      ASIC has assessed the March 2020 Banking Code and is satisfied, as at the date of issuing the New Approval Instrument, that the March 2020 Banking Code meets the requirements of subsection 1101A(3) of the Corporations Act. In particular:

(a)   ASIC has assessed that the Code is not inconsistent with the Corporations Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities;

(b)   ASIC is satisfied that there are arrangements in place to ensure compliance with the Code (e.g. the Code forms contractual promises between the bank and its customer, the Code monitoring body is well-equipped to monitor compliance and take appropriate measures in response to non-compliance and customers may take breaches of the Code to the Australian Financial Complaints Authority for external dispute resolution);

(c)   ASIC is comfortable that the Code applies to an appropriate range of entities (i.e. ABA member banks) and that the Code does not substantially duplicate provisions in other codes of conduct relating to ABA members; and

(d)   ASIC considers the Code includes significant commitments beyond what the law requires.

Consultation

10.  ASIC engaged with a targeted range of stakeholders to invite their feedback on the content of the draft March 2020 Banking Code (as well as the earlier 2018 Banking Code and June 2019 Banking Code). Stakeholders with whom ASIC consulted in relation to the March 2020 Banking Code included small business representatives, consumer representatives and the Banking Code Compliance Committee. ASIC’s earlier consultation on the 2018 Banking Code and the June 2019 Banking Code contributed to ASIC’s assessment of the March 2020 Banking Code, as the March 2020 Banking Code is based largely on the 2018 Banking Code and June 2019 Banking Code (with updates).

Operation of the instrument

11.  Section 2 of the New Revocation Instrument provides that the New Revocation Instrument commences on 1 March 2020. Section 5 provides that approval of the 2018 Banking Code is revoked.

12.  Section 2 of the New Approval Instrument provides that the New Approval Instrument commences on the day after it is registered on the Federal Register of Legislation. Section 5 provides that the March 2020 Banking Code is approved. The March 2020 Banking Code states, “This version of the Code takes effect from 1 March 2020.”.

Incorporation by reference

13.  The New Revocation Instrument incorporates by reference the June 2019 Banking Code.

14.  The New Approval Instrument incorporates by reference the March 2020 Banking Code.

15.         Both documents are available at http://www.ausbanking.org.au.

Legislative authority

16.  Subsection 1101A(1) of the Corporations Act provides that ASIC may, on application, approve codes of conduct that relate to any aspect of the activities of financial services licensees, authorised representatives of financial services licensees, or issuers of financial products, being activities in relation to which ASIC has a regulatory responsibility. The approval must be in writing.

17.  Paragraph 1101A(4)(a) of the Corporations Act provides that ASIC may, on application by the person who applied for the approval, revoke an approval of a code of conduct.

18.  Subsection 1101A(3) of the Corporations Act provides that ASIC must not approve a code of conduct under section 1101A unless it is satisfied that:

(a)   the code is not inconsistent with the Corporations Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and

(b)   it is appropriate to approve the code, having regard to the following matters, and to any other matters that ASIC considers are relevant:

(i)    the ability of the applicant to ensure that persons who hold out that they comply with the code will comply with the code as in force from time to time; and

(ii)  the desirability of codes of conduct being harmonised to the greatest extent possible.

19.  Instruments made under subsection 1101A(1) and paragraph 1101A(4)(a) are disallowable legislative instruments.

Statement of Compatibility with Human Rights 

14. The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.


Attachment

Statement of Compatibility with Human Rights

 

This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  

ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254

 

ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255

Overview

  1. ASIC Corporations (Banking Code of Practice -Revocation of June 2019 approval) Instrument 2019/1254 (New Revocation Instrument) revokes ASIC Corporations (Banking Code of Practice) Instrument 2019/663, which approved an earlier June 2019 version of the Banking Code of Practice (Code). The New Revocation Instrument commences on 1 March 2020, which is the date when a new version of the Code (March 2020 Banking Code) commences.
  2. ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255 (New Approval Instrument) approves the March 2020 Banking Code (as published by the Australian Banking Association on 12 December 2019).

Assessment of human rights implications

3.             The New Revocation Instrument does not engage any of the applicable rights or freedoms.

4.             The New Approval Instrument does not engage any of the applicable rights or freedoms.

Conclusion

5.             The New Revocation Instrument and the New Approval Instrument are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview

The ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254 and ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255 were enacted to address the need for updating the Banking Code of Practice, which governs the standards of practice and service in the Australian banking industry for individual and small business customers. These instruments were enacted by the Australian Securities and Investments Commission (ASIC), following applications by the Australian Banking Association (ABA). The policy objective behind these instruments is to ensure that the Banking Code of Practice aligns with contemporary regulatory standards, addresses identified gaps in customer protections, and meets the requirements of the Corporations Act 2001. The instruments facilitate the revocation of the June 2019 approval and the approval of a revised version of the Banking Code effective from 1 March 2020, incorporating changes that respond to stakeholder feedback and regulatory recommendations.

Scope and Application

The ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254 and the ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255 are legislative instruments that pertain to the Banking Code of Practice (Code) in the Australian banking industry. The New Revocation Instrument revokes the approval given to the June 2019 version of the Code, while the New Approval Instrument approves the March 2020 version of the Code. These instruments are applicable to banking entities within the scope of the Australian Securities and Investments Commission (ASIC) regulatory authority. They are primarily focused on the conduct and transactions of financial services licensees and authorised representatives of financial services licensees, particularly those represented by the Australian Banking Association (ABA). The geographic reach of these instruments is national, as they apply across Australia. Both instruments are subject to the legislative framework provided by the Corporations Act 2001. The instruments do not specify any exclusions, exemptions, or thresholds, but they do extend or restrict application through the subordinate instruments they reference. The instruments are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Key Provisions

The main operative sections of the ASIC Corporations (Banking Code of Practice – Revocation of June 2019 Approval) Instrument 2019/1254 and the ASIC Corporations (Approval of March 2020 Banking Code of Practice) Instrument 2019/1255 pertain to the revocation of the approval for the June 2019 Banking Code of Practice and the approval of the March 2020 Banking Code of Practice. Section 5 of the Revocation Instrument revokes the approval of the June 2019 Banking Code of Practice, while Section 5 of the Approval Instrument provides for the approval of the March 2020 Banking Code of Practice. The Revocation Instrument commences on 1 March 2020, and the Approval Instrument commences on the day it is registered on the Federal Register of Legislation, which is intended to be the same date as the March 2020 Banking Code. The obligations and requirements imposed by these instruments on the Australian Banking Association (ABA) include ensuring that the March 2020 Banking Code of Practice meets certain criteria set out in subsection 1101A(3) of the Corporations Act 2001. These criteria include that the Code is not inconsistent with the Corporations Act or any other Commonwealth law under which the Australian Securities and Investments Commission (ASIC) has regulatory responsibilities. The Code must also include arrangements for compliance, such as contractual promises between banks and their customers, monitoring by the Code monitoring body, and the ability for customers to seek external dispute resolution through the Australian Financial Complaints Authority. Additionally, the Code must apply to an appropriate range of entities (i.e., ABA member banks) and not substantially duplicate provisions in other codes of conduct. Under these instruments, breaches of the Banking Code of Practice could result in civil consequences for the banks. Customers who experience breaches of the Code can seek redress through the Australian Financial Complaints Authority. While the instruments themselves do not prescribe criminal or civil penalties, non-compliance with the Banking Code of Practice could lead to regulatory action by ASIC under the Corporations Act 2001, which may include fines and other enforcement measures. The maximum penalties for breaches of the Corporations Act would apply according to the specific provisions of that Act.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.