Banking on Change: Navigating the 2025 Code of Practice Enhancements

Written by: Berkan Balaban

The Australian Banking Association (ABA) has introduced an updated Banking Code of Practice (Code), approved by the Australian Securities and Investments Commission (ASIC), which commenced on 28 February 2025.

This revised Code aims to elevate standards within the banking industry, offering enhanced protections and fostering greater trust between banks and their customers.

What is the Banking Code of Practice, its scope and applicability:

The Banking Code of Practice serves as a framework outlining the standards of practice and service for banks when dealing with current and prospective customers. It applies to individuals, small businesses, and guarantors engaged with banks that are signatories to the Code. By subscribing to the Code, banks commit to ethical conduct, transparency, and responsible banking practices, thereby integrating these standards into their contractual agreements with customers.  The Code provides safeguards and protections often not set out in the law, or otherwise complementing legal requirements and, in some areas, setting higher standards than the law.

Penalties and Repercussions for Code Breaches

While the Banking Code of Practice is a voluntary commitment by subscribing banks, adherence is closely monitored by the Banking Code Compliance Committee (BCCC). The BCCC investigates alleged breaches and can publicly name banks found in violation, leading to reputational damage. Additionally, breaches may result in enforcement actions by regulatory bodies such as the Australian Securities and Investments Commission (ASIC), which can impose fines and other penalties. For example, recent investigations into banks charging fees to deceased customers have led to significant scrutiny and potential enforcement actions.

Banks Subscribed to the Code

A comprehensive list of banks that have adopted the Banking Code of Practice is maintained by the Australian Banking Association (ABA). This list includes major financial institutions (Subscribers) such as:

• Arab Bank Australia Limited
• Australia and New Zealand Banking Group (ANZ)
• Bank of Queensland (BOQ)
• Commonwealth Bank (CBA)
• ING Bank Australia
• Macquarie Bank
• Westpac Bank

These banks, among others, have committed to upholding the standards set forth in the Code.

Key Changes in the 2025 Code

The 2025 Banking Code of Practice introduces several significant enhancements including but not limited to:

• Expanded Definition of Small Business: The threshold for aggregate borrowings has been increased from $3 million to $5 million, extending Code protections to an additional 10,000 small businesses.
• Enhanced Conduct Standards: amendments to provide services “efficiently, honestly, and fairly”, aligning with obligations under the Corporations Act and the National Consumer Credit Protection Act.
• Improved Inclusivity and Accessibility: offering better support through interpreter services and accessible information, ensuring services are more inclusive for all customers.
• Strengthened Guarantor Protections: requirement to take reasonable steps to meet with prospective guarantors before accepting a guarantee that is provided without obtaining independent legal advice first. Subscribers are further required to discuss the customer’s circumstances and alternatives before proceeding with the sale of a guarantor’s primary residence.
• Enhanced Protections for Vulnerable Customers:  The Code expands its definition of vulnerable customers to include:
  • Disability
  • Serious medical conditions
  • Financial difficulty
  • Literacy and language barriers, including limited English
  • Cultural background
  • Aboriginal or Torres Strait Islander status
  • Remote locations
  • Incarceration or recent release from incarceration

Subscribers are now obligated to take extra care with customers experiencing vulnerability by:

1. Facilitating the appointment of third-party representatives, such as lawyers or financial counsellors, to act on behalf of the customer.
2. Providing referrals to external support services, including interpreter services and the National Relay Service, to enhance accessibility and inclusivity.

Key Take-Aways: Influence on Non-Bank Lenders and Industry Standards

Although the Code applies specifically to its subscribing banks, the ethical standards it establishes set a benchmark for the broader finance industry. An argument can be made that this heightened standard may influence court scrutiny of non-bank lenders not subscribed to the Code, especially if they engage in unreasonable or unethical practices. Courts could view the Code as reflecting industry best practices, thereby holding non-bank lenders to similar expectations. This dynamic encourages non-bank lenders to align or at the very least begin to take steps towards aligning their practices with the ethical standards established by the Code to mitigate legal risks and maintain competitiveness.

Both bank and non-bank lenders must remain vigilant in adapting to these changes to uphold integrity and protect consumer interests.

If you are a lender and have any questions regarding your policies and procedures to meet these evolving expectations, please do not hesitate to contact us at JHK Legal.