On 27 June 2024, following extensive consultation with key stakeholders, the Australian Securities and Investments Commission (ASIC) approved the Australian Banking Association’s (ABA) updated Banking Code of Practice (2025 Code).1
ASIC’s approval specifically recognises that the 2025 Code2 retains existing protections from the current version of the code, while providing additional benefits for small business customers, guarantors, vulnerable customers, and customers requiring additional support. These changes ensure that for those ABA members who subscribe, the 2025 Code remains responsive to current and emerging issues in the sector.
The 2025 Code takes effect from 28 February 2025, and represents the first substantive amendments since 5 October 2021. In this article, we explore the key changes reflected in the 2025 Code and provide our thoughts on the impact of these changes on the Australian individual and small business banking customer landscape.
Updated definition of “small business”
The definition of “small business” has been expanded. Under the 2025 Code, the test for what constitutes a “small business” extends to a business customer with $5 million in aggregate borrowings (up from the existing upper threshold of $3 million in aggregate borrowings). ASIC anticipates that this change will result in an additional 10,000 small business customers in Australia benefitting from the protections under the 2025 Code.
This has clear implications for participating banks, who will need to consider their product suite and ensure that any products aimed at small business customers who previously fell outside the scope of the definition are now 2025 Code-compliant.
Updated conduct standard
In the current version, the Banking Code of Practice requires subscribing members to ‘engage with [customers] in a fair, reasonable and ethical manner’. This conduct standard varies slightly from the ‘efficiently, honestly and fairly’ obligation applicable to Australian financial services and credit licensees.3
During ASIC’s review of the 2025 Code, it considered designating the ‘fair, reasonable and ethical’ conduct standard as an enforceable code provision, which would attract civil penalties. However, to avoid the creation of two slightly varying conduct standards, the ABA amended the 2025 Code to reflect the existing legislation, and from February 2025, subscribing banks must do all things necessary to ensure that banking services provided under the Banking Code of Practice are provided ‘efficiently, honestly and fairly’.
This amendment supports greater clarity for both the beneficiaries of the Banking Code of Practice as well as its subscribing banks, and is one example of many other revisions (including the restructure of the 2025 Code into 5 parts as opposed to the original 10 parts) that aim to simplify and clarify the application of the Banking Code of Practice.
Further protections to guarantors of small business loans
In the absence of confirmation that guarantors have taken independent legal advice on the impact of guarantees, subscribing banks will be required to implement stricter controls to ensure guarantors of small business loans have been provided with enough information to properly understand the financial risks of a guarantee.
For example, subscribing banks will need to take reasonable steps to ensure that a meeting is held with the prospective guarantor to discuss the implications of the proposed guarantee prior to signing. Steps must also be taken to ensure that the borrower is not present at the time of that meeting taking place, which will be particularly important where the meeting does not occur in person (such as via video conference).
Focus on inclusivity and accessibility in the provision of banking services
A new inclusive and accessibility commitment has been incorporated into the 2025 Code. Subscribers to the 2025 Code must take reasonable measures to enhance the accessibility of banking services for customers with specific needs and requirements, including customers managing a disability, older customers, Aboriginal and Torres Strait Islander customers, LGBTQI + customers, and customers with limited English language skills. Such reasonable measures now include (where appropriate or practicable) organising or referring customers to external support, including interpreter/translation services (such as AUSLAN) or National Relay Services, free of charge.
This uplift was in response to concerns voiced by accessibility advocacy groups during the independent review of the Banking Code of Practice in 2021,4 who noted that because the accessibility principles were not specifically referred to in the Banking Code of Practice, it encouraged the downplaying of their importance in delivering accessible banking products and services.
These enhancements ensure that the Banking Code of Practice continues to meet community standards for its subscribing banks regarding the accessibility and inclusivity of its banking services.
Enhanced requirements to consider vulnerability
While the current Banking Code of Practice requires banks to take “extra care” with vulnerable customers, the 2025 Code expands the list of examples of vulnerable circumstances to specifically include disability, literacy and language barriers, cultural background, Aboriginal and Torres Strait Islander customers, and customers in remote locations. Incarcerated persons are also expressly recognised as customers that may be at an increased risk of experiencing vulnerability.
Subscribing banks must ensure, where possible and appropriate, that vulnerable customers are able to appoint lawyers and other third-party representatives to deal with the bank on the customer’s behalf.
Under the 2025 Code, employees of banks will also need to undergo training, to help them recognise a person that may qualify for a basic, low or no fee account.
Impact and next steps
In responding to the concerns and recommendations raised in the independent review of the Banking Code of Practice as well as ASIC’s consultation with stakeholders, the 2025 Code uplifts the existing standards and customer protections in the Australian banking industry, and ensures that the Banking Code of Practice continues to provide real benefits to its intended beneficiaries.
The Banking Code Compliance Committee will continue to have oversight of subscribing banks’ compliance with the 2025 Code, with the power to require cooperation from the subscribing banks with their monitoring and investigations, as well as apply sanctions for non-compliance.
Following ASIC’s approval, we expect subscribing banks to have commenced implementing the necessary changes to their systems and engaging with staff training well ahead of the 28 February 2025 effective date.
The Banking Code of Practice will be due for a further review in at least 5 years’ time.5
If you would like to further discuss the impact of the 2025 Code to your organisation, please contact us.
