According to the Australian Small Business and Family Enterprise Ombudsman Kate Carnell, banks and financial institutions still have a long way to go if they are serious about repairing their relationship with small businesses.
“Even a year on from the banking royal commission, banks and other large financial institutions are more focused on passing on their punishment to small businesses,” Ms Carnell said.
“For instance, many small businesses in the financial planning industry have faced financial ruin in the aftermath of the banking royal commission, with hundreds of planners bearing the brunt of brutal restructures and fire sales by banks and wealth funds.
“Many of these small business owners are facing the prospect of losing their homes, families and livelihoods as these financial institutions and banks bulldoze their way through their exit strategies.”
Ms Carnell also noted that the new-look Banking Code of Practice in effect from March this year fails to sufficiently protect small business borrowers.
“The ABA claims it has implemented the royal commission recommendations but it has not acted on all of the recommendations including one that is critical to small business,” she said.
“Commissioner [Kenneth] Hayne recommended that the definition of a small business should be businesses that apply for a loan up to $5 million and have fewer than 100 employees. Despite our repeated efforts, the code only protects small businesses with up to $3 million in total debt to all credit providers.
“What that means is that a large number of small businesses, particularly those capital-intensive businesses such as agriculture, building and manufacturing, are not covered by the code.”
Of particular concern to Ms Carnell was a new addition to the Banking Code of Practice under paragraph 115 (b) which, in effect, allows banks to take action against the small business guarantor, before enforcing recovery against the security provided by the small business borrower.
She referred to the new addition to the code as totally unacceptable and has the potential to be seriously detrimental to the small business borrower and their ability to secure guarantors.
“During the royal commission, Commissioner Hayne acknowledged the ABA Banking Code of Practice is the chief protection for small business borrowers and as such, it needs real and meaningful changes to give it teeth,” Ms Carnell said.
“While the code has been improved, the number of get-out-of-jail clauses for the banks still [dilutes] the protections for small businesses.
“We will continue to push for a better framework for a balanced relationship between banks and their small business customers.”
I have been waiting for this subject to even be addressed. One man band unaligned financial planners like myself have not received ONE mention in all of this yet the compliance and added costs are pilling up. And this will probably be the only mention. WHY DID THE INDUSTRY FUNDS SAIL THROUGH THE RC????????????????
Ah bugger, my car just broke down. I better call the local Butcher to come around and fix it. He said it needs a whole new engine. Meanwhile the Mechanic at the pub laughed and said it was just a flat battery. Why was a ancient lawyer used for a RC into the finance sector? and why hasn’t there been more consultation with the finance industry about the ramifications of Haynes recommendations?
Because it’s political.
It’s the Treasury Draft legislation (re the Hayne RC) that is destroying small financial planning practices. It’s a disgrace. Don’t be surprised that some Senators (in various states) will be totally replaced in the next round of Senate preselections, if the latest draft legislation goes through without amendment. They will be similarly ticked & flicked, just like advisers are being ticked & flicked currently.
Hayne got it so wrong that there should be a RC into his recommendations!! It’s almost hard to believe that there can’t have been an agenda!
Hang on Hayne at least hammered the banks and fees for no service. Now the banks are exciting as quick as possible with zero care for Advisers.
Agreed compliance is beyond a joke due to the banks. But if we hang in there with less Advisers and an ageing population plus ever increasing super. It’s hard not to see a bright future.
Not painless getting there but a very bright future.
A case of the medicine being worse than the disease .
I’m still confused as to why Hayne was appointed, no experience , no understanding and no empathy. silly and unworkable reforms which will ultimately do more harm than good, meanwhile everyone scrambles to look like they are doing something. both the PM and Leader of opposition need to man up and do the right thing for business rather than the expedient thing for votes.
I’m just trying to work out who the winners are with all of this?
Industry Super Funds
Lawyers
Banks . Politicians . Insurance companies all crooks
Banks and pollies yes but i’m not so sure about insurers. If the CVW share price is anything to go by as well as what BDM’s have been saying then the insurers are in trouble as well.
And how many of these crooks are being made to do an ETHICS course and pass an exam.
Yep NIL !!!!
Disgusting the lot of them
If I can just rephrase the whole article in a more easy to understand, yet probably more difficult to digest two lines,
Former Liberal party Chief Minister of the ACT says to all the big banks and financial services vertically aligned corporations:
“I wish you would stop dropping nuclear weapons on your financial advice practices and adviser networks, you are killing them and their families and their future only to save yourselves”.