Australia’s small business ombudsman has promised to monitor the new Banking Code of Practice, which took effect on July 1.

Kate Carnell said that while the new code is an improvement on previous versions, time will tell whether it addresses the imbalance of power enjoyed by the banks.

“We will be watching very closely to see just how strongly the code is enforced, particularly as it relates to small businesses,” she said.

“There have been a number of claims made in the media that this Banking Code of Practice has teeth, but clause 213 states banks need only comply with reasonable requests from the Banking Code Compliance Committee. That calls into question the ability of the committee to be effective.”

Ms Carnell said small businesses that have dealings with the compliance committee should tell the ombudsman about their experience.

“We want small businesses to help us gain an understanding of whether this committee is doing the job that it is supposed to,” she said.

“As the code only applies to 19 banking groups – there are over 100 deposit-taking institutions –  small businesses must first establish if the code applies to their bank and if they meet the code’s definition of a small business.”

The code defines small businesses as having:

  • Turnover of less than $10 million
  • Headcount of less than 100
  • Total debt of less than $3 million

“As the revised Banking Code of Practice works towards improving banks’ small business lending practices, we will continue to monitor its effectiveness and to advocate for safeguards against misconduct in the hope of restoring small business’ confidence in banks,” Ms Carnell said.