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Terms of Reference for the Review

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

  1. 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:
    1. banks which adopt this Code;
    2. consumer organisations;
    3. other interested industry associations;
    4. relevant regulatory bodies; and
    5. other interested stakeholders.
  2. 5.2     We will participate in any such review and co-operate with the person conducting it.
  3. 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:
    1. banking issues; and
    2. 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.
  4. 5.4     We will require the ABA to promptly publish on its website:
    1. the recommendations and report arising from a review of this Code and to make them available to the public in hard copy on request;
    2. reasons why any such recommendation has not been accepted; and
    3. 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:-
      1. The need for a voluntary code of conduct to encourage broad membership by industry participants and regulator support;
      2. 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;
      3. 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;
      4. Key commitment 2.1 a of the CBP concerning banks continuously working towards improvement in standards of practice and service in the banking industry;
      5. 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;
      6. The impacts of the reviewer’s recommendations on banks and bank customers;
      7. The need for flexibility in the provision of products and services and to promote competitive advantage;
      8. The provisions of comparable industry codes and other self regulatory arrangements including the Electronic Funds Transfer Code of Conduct;
      9. Changes which have occurred in the legal and regulatory environment since the last review of CBP;
      10. Consistency with other self regulatory initiatives and formal regulation;
      11. The principle of certainty of contract between bank and customer;
      12. 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

    1. The reviewer is to report with recommendations on:
      1. Generally how the CBP has operated since its last review and the perception of the CBP among community, consumer, industry, regulatory and political interests;
      2. What barriers, if any, exist to the membership of the CBP;
      3. Means for addressing any interpretation or comprehension difficulties by banks or customers in relation to the provisions of the CBP;
      4. Means for addressing any significant compliance difficulties, including significant competitive disadvantages, that banks have in conforming with the CBP;
      5. Changes that have occurred in the banking and customer environment, regulatory and operational, and what, if any, responses are required under the CBP;
      6. The structural, organisational and operational aspects of the relationship between internal complaints handling, external dispute resolution and monitoring of banks’ compliance with the CBP;
      7. 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.
    1. The reviewer is to submit a final report with recommendations to the ABA by 31 May 2008. In view of the widespread interest in the Review,  to allow time for further consultations with interested parties and to ensure that all issues are given thorough consideration, the final report was scheduled for October but is now expected to be released in December 2008.