Banking royal commission live

ASIC’s approval of the banking code of conduct depends on evidence at the royal commission, it has told Kenneth Hayne.

Welcome to the last day of the small business hearings at the financial services royal commission.

This morning, corporate regulator ASIC is in the spotlight, with two witnesses scheduled: ASIC senior executive leader of deposit takers, insurers and credit services Michael Saadat and ASIC senior executive leader of enforcement for financial services Tim Mullaly.

This afternoon, counsel assisting will sum up the fortnight of hearings and make recommendations. The commission has heard over the past two weeks of:

— NAB seizing house sale proceeds when it had no right to do so;

— A CBA executive putting his “bruised” emotions ahead of giving customers a refund; and

— Westpac allowing a blind disability pensioner to act as a guarantor for her daughter’s small business loan.

It comes amid the explosive news this morning that the ACCC expects criminal cartel charges to be laid against ANZ in relation to trading in the bank’s shares after an institutional share placement in 2015. ANZ will defend the allegations.

9.59pm: Solving the code

ASIC senior executive leader, deposit takers credit and insurance team, Michael Saadat has answered questions about ASIC’s possible approval of the banking code of practice from senior counsel assisting Michael Hodge QC.

One condition of approving a code is it had to be independently reviewed every three years, and the review could make recommendations but ASIC would not be able to change the code - at most it could revoke approval of the code.

ASIC did not have a strict requirement that industry associations implement all recommendations but it was one of the considerations.

ASIC would also consider whether an industry made meaningful improvements to the code.

Focus turned to loan guarantees.

There was an issue over whether a lender could take into account a guarantor’s resources when deciding whether or not to make the loan. The code was modified to allow banks to consider guarantor resources but only if the guarantor had a connection to the borrower - although going guarantor for a borrower is considered to create a connection.

ASIC had not had feedback about the issue of making sure guarantors give properly informed consent.

Feedback around parental guarantees had largely been around the consequences if banks did not comply with the code, with some stakeholders saying the guarantee should be made void if the bank did not comply with the pre-execution loan requirements. This had not been adopted into the code but this was not in contention with the ABA.

9.47am: ‘The last big issue to solve’

ASIC senior executive leader, deposit takers credit and insurance team, Michael Saadat has taken the stand to answer questions about the banking code of practice and unfair contract terms from senior counsel assisting Michael Hodge QC.

ASIC is still reviewing the code and has deferred the review while the commission hearings were going on.

The main sticking point is the definition of small business and the monetary definition the ABA proposed, Mr Saadat said.

The regulator wanted to make sure that there was nothing in this round of commission hearings that would affect whether it should approve the code, he said.

An independent review of the code and other stakeholders said small businesses should be defined as loans up to $5m but the banking lobby group prefers a $3m figure.

This is “the last big issue to resolve”, Mr Saadat said.

Mr Saadat said there were concerns about the code’s provisions being applied to larger loans, or larger “covenant-lite” loans, which could make banks less willing to lend as they wouldn’t have the same ability to take default-based action.