The Banking Royal Commission and Small Business (Part One)

The Banking Royal Commission and Small Business (Part One)


Hello I’m Kate Carnell, the Australian
Small Business and Family Enterprise Ombudsman. Well it’s been a big couple of
days with the release of the Commissioner Hayne report into the banking
and financial sector. Now there are lots of small businesses out there that have
been badly affected by the big banks and other financial institutions so this has
been an important piece of work for many small businesses and consumers of course
in Australia. Now unfortunately Commissioner Hayne
didn’t focus all that heavily on the small business sector. There’s really not a
lot in it for small businesses but there are some good bits. One of the
recommendations of Hayne is for the Banking Code of Practice to be extended
to make the definition of small business for all loans up to $5 million
and small businesses to be businesses with less than 100 employees. Now
at the moment the Banking Code only covers small businesses where the
aggregate loan is less than $3 million. So this extension will mean that
the Banking Code of Conduct covers another 10 to 20,000 small
businesses. Hayne has also recommended that the Banking Code should be legally
enforceable. Now although the current Code is approved by ASIC, ASIC can’t
actually legally enforce it. Now one of the things that he doesn’t focus on, and
we’re bit disappointed with that, is the sort of changes that need to happen in
the Banking Code of Conduct to really give the Code real teeth. Because
Commissioner Hayne has said that the Banking Code of Conduct is the basic
document that small businesses need to rely on for justice, for fairness. So
the Banking Code has to be good, has to have teeth, has to support small
businesses, and at the moment even the new Code – which is better than the old
Code and does have a chapter for small business – has a whole lot of get-out-of-jail clauses for the banks. So it says things like small businesses will be
given 30 days to pay back a loan if they are in default and then the next
paragraph says but if on our reasonable opinion, eg the bank’s reasonable opinion,
a shorter period of time is more appropriate, then there will be a shorter
period of time or no period of time at all. We don’t think that’s reasonable.
We’ve gone back to the ABA with line and verse of all of the changes we believe
need to happen to ensure that small businesses are appropriately protected.
We will be pushing the ABA heavily to ensure that the new Code, which comes
into effect on 30th June, it reflects exactly what Commissioner Hayne
said and that was it was a document that gave small businesses a capacity to
access real justice and fairness. It’s worth having a read of the
recommendations if you haven’t already but there are some good things for
small business but I have to say the small business chapter is very brief.

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