A New Banking Code !

That Banking Royal Commission certainly dragged the banks - kicking and screaming - into the public media forum and revealed the irregularities that have plagued customers for years.  Bank chiefs have vowed the industry will be under new obligations to be more ethical and customer focussed as part of a revamped code of conduct.

It is promised that from 2019 it will be far easier to cancel credit cards, and customers will get a warning letter when any interest free periods are due to expire.  This is to be the start of a more open regime with a more sustainable banking industry.  There will be stronger protection for customers who act as guarantors on loans - and they will be given a  three day cooling off period.

This revised code of conduct will be mandatory for retail banks that are members of the Australian Bankers Association and there will be a stronger commitment to ethical behaviour.  Customers will get better information about changes to their accounts and there will be delays in offering add on insurance products. Contracts for business loans will have fewer conditions to be met.  In the past, banks had been too quick to call in loans to small business.

This banking revision has come at a critical time for the agricultural industry.  Australia is suffering the worst drought in recorded history and it is quite possible that it may extend well into next year.  In the past the banks took  a heavy handed approach.  They often downgraded the value of the property because of the drought and this brought the risk ratio of the loan into negative territory.  As a result, farmers were forced off their land and the property sold.

It is important that the people who manage rural banking have at least a working knowledge of the agricultural industry.  Farming strategy is very different from merchant banking and banks need to be very selective when deciding promotions to rural areas. A city whiz kid may be hopelessly lost in charge of a branch with mostly farming customers.

Farming presents a different risk ratio.  Droughts eventually always end and then the farms are busy restocking and the cash flow hikes.  It is very much a boom and bust business but with a steady hand on the money supply the risk evens out over a period of time.   In the distant past, the patience of both the farmer and the bank was legendary.

Hopefully, the thinking of banks will have changed.  Prior to this Royal Commission the impetus of the banks - from the top down - was gouging to deliver profits.  Ridiculous policies were put in place and their instigators richly rewarded.  There was an atmosphere of sheer greed prevailing and it became a race between the big four as to who could deliver the most bloated bottom line.   It was a day of champagne and cigar parties on the day profits were announced.

The customers will be sceptical.  Now it is up to the banks to prove that they have turned the corner and behave ethnically !