What the Banking Royal Commission findings mean for business

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Industry associations and small business stakeholders have welcomed the recommendations outlined in the final report of the Banking Royal Commission.

The Royal Commission into Banking, Superannuation and Financial Services Industry have released their final report into their findings and recommendations last week, however some key small business stakeholders have argued the recommendations do not go far enough.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman

Ms Carnell stressed it is imperative the Australian Banking Association (ABA) and its members immediately embrace the recommendations her office has made identifying where the code is still inadequate.

“The code has too many ‘get out of jail’ clauses that advantage the banks and it still contains provisions at odds with the unfair contract terms legislation,” Ms Carnell said.

“There is no reason for the ABA not to address these concerns immediately. The code needs to provide adequate notice periods of changes or decisions not to roll-over a loan. Yet where notice periods are defined, the code then has ‘get out’ clauses for the lenders to ignore them.

“For example, clause 77 allows lenders to give a shorter notice period or give no notice where they require full repayment of a loan based on their ‘reasonable opinion’ or to protect their risk.

“Clause 213 requires lenders to only cooperate and comply with the request from their own code compliance body if they consider the request ‘reasonable’. For the code to be meaningful rather than tokenistic, there needs to be an effective mechanism in place to ensure adherence.”

Dan Petrie, Head of Industry and Communications at Chamber of Commerce and Industry Queensland

CCIQ’s Head of Industry Dan Petrie said that while the Commission’s report may be uncomfortable reading for the finance sector, decisive action by financial institutions needs to be taken to restore small business confidence in the sector.

‘The financial services system is a core pillar of the Australian economy and faith in that system needs to be restored for long term stability,” Mr Petrie said.

“The small business community is appalled at some of the behaviour exposed during the Hayne Royal Commission.

“Access to credit at a reasonable lending rate remains a key challenge for businesses. It is imperative that banks do not close up credit for small to medium sized businesses”

“The terms of reference set out for the Commission were very narrow. However, there has been little discussion as to how these practices may have affected the financial system more broadly.

“One particular implication is the large concentration of property/real estate lending (both for home occupier and investment purposes) as a proportion of the total loan and asset portfolio of Australian banks. Looking at diversification across bank balance sheets, one may suggest that they tend to operate more as traditional building societies than as banks,” Mr Petrie said.

“Accordingly, a contraction in the property market and the economy more generally are genuine risks of going concern for financial system stability going forward”.

Jennifer Westacott, Business Council Chief Executive

Business Council chief executive Jennifer Westacott said, ”We welcome Commissioner Hayne’s recommendation on business culture and governance and believe every business should take his advice to implement the proper steps to assess, identify and deal with any problems.

“Effective regulation and well-resourced regulators are critical to the financial sector and Commissioner Hayne identifies some important improvements, in particular simplifying existing laws, clarifying the responsibilities of ASIC and APRA and strengthening their accountability.”

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