The banks’ currently define businesses with a total loan exposure of up to $3 million as small businesses, which gives these customers extra protections.
The threshold that was given the green light by the Australian Securities and Investments Commission (ASIC) when it approved the ABA’s revamped code of conduct last year, but ASIC only agreed to the figure after a lengthy debate with banks.
As it announced the overhaul of its code of conduct, the ABA said adopting a higher $5 million threshold, regardless of the customers’ existing borrowings with the bank, would be a «very significant expansion of the current definition» which needed careful consideration.
«The industry has serious concerns that this recommendation may have a material impact on access to
credit for small business borrowers,» the ABA said.
Before the industry reaches a final position on the definition of a small business loan, the ABA said banks would model the impact of a lower threshold on their customers and consult with the federal Treasury, regulators, and small business groups.
The ABA’s chief executive, former Queensland premier Anna Bligh, said the banking industry was treating commissioner Hayne’s final report as a «roadmap» for winning back consumers’ trust.
“The industry has taken the report and is acting with urgency to ensure lasting reform occurs without delay,» Ms Bligh said.
“The royal commission highlighted the need for the Banking Code of Practice to be strengthened to
increase protections for small business and increase the accessibility of services for customers in
remote areas or with limited English.