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‘Room for improvement’ on bank safeguards for guarantors


The Banking Code Compliance Committee gives the industry a pass mark on its 2021 recommendations but there is still work to do, it says.

By Philip King 10 minute read

Banks have increased protection for people who go guarantor on loans but there are gaps in the system and still room for improvement, the Banking Code Compliance Committee says.

In a follow-up on its report from two years ago, the BCCC said the banks had failed to implement three of its recommendations and some had inadequate controls in place to make sure the improvements they had made were working.

BCCC chair Ian Govey said the banks should consider all 23 of the original recommendations carefully. 

“We make our recommendations to improve and strengthen practices beyond minimal compliance with the Banking Code which, in turn, helps to enhance compliance and consumer protection,” Mr Govey said.   

“This is vital for guarantors, especially for people who may be experiencing vulnerability.” 

“Some banks had not acted on our recommendations from 2021. This was somewhat disappointing given the good outcomes we know the recommendations can help deliver.”

The report said the 17 banks which suscribed to the Banking Code of Practice held guarantees for $68 billion in loans to individuals and small businesses in


Under the Banking Code, banks commit to obligations designed to safeguard people who act as guarantors for loans.

However, the BCCC 2021 report revealed these sometimes failed to protect people acting as guarantor. Its report card on the two years since, released today, revealed “meaningful changes” including: 

  • Better support for guarantors experiencing vulnerability.
  • Enhanced training for staff.
  • More rigorous interviews with prospective guarantors.

“Our 2021 report revealed concerns, so to find significant progress from banks in our follow-up inquiry is very encouraging,” Mr Govey said. 

“These are crucial improvements in industry practices that will help banks provide important protections for people who guarantee a loan. And the improvements really emphasise the importance of our work monitoring the code and looking into practices of banks.”

But the report found three of the 2021 recommendations “had not been adequately considered by all banks” and revealed that: 

  • Not all banks consistently require staff and brokers to interview prospective guarantors.
  • Some banks had not yet audited their compliance with the code’s guarantee obligations as recommended.
  • Few banks proactively analyse guarantee data to identify areas that need improving.

In its follow-up report the BCCC makes additional recommendations including:

  • That banks ensure consistency in managing guarantees across all business units and subsidiaries.
  • That banks extend controls to third parties who undertake part of the guarantees process on behalf of a bank, such as brokers and solicitors.

“Building on the progress will be important,” Mr Govey said. “That is why we have made further recommendations – continuous improvement is central to our focus, and we want to see banks strengthen their processes and controls on guarantees.”




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Philip King

Philip King


Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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