Australia adopts code of banking practice

A new industry-driven code of practice has been established for Australian banks.

On 1 August 2003, the Australian Bankers' Association released a new code of banking practice, which has been adopted by a number of Australian banks. The new code applies to small businesses as well as individuals and the provisions of the code form part of the contract between bankers and customers.

Perhaps the most interesting feature of the code relates to guarantees. The code states that not only should guarantors be provided with information about the guarantee but the bank should also provide the prospective guarantors with:

• financial accounts or statements of position of the borrower that are held by the bank;
  
  
• any notice of demand made by the bank on the borrower;
  
  
• information on whether the borrower has dishonoured any facilities with the bank; and
  
  
• notice of any over-drawings or excesses on any facilities the borrower has with the bank.

The code also states that all guarantees are to be limited. If participating banks do not comply with the guarantee provisions of the code they will not be able to enforce their guarantees.

For more information on the Australian code of banking practice click here to link to the Australian Bankers' Association website.

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