Anna Bligh, the Chief Executive of the Australian Bankers Association, has recently spoken of the “strong and mutually beneficial relationship between the banking sector and the restructuring and advisory sector”, including how the industry plays an integral corporate advisory role when small businesses are going through tough times.
In preparing her published speech for the ARITA conference, Ms Bligh might have been relieved that she did not need to address the big issues for the ABA – the Major Bank Levy Act 2017, the Regional Investment Corporation Bill 2017, or AUSTRAC v CBA.
She did list the various insolvency related inquiries concerning banks:
· the joint parliamentary committee inquiry into impaired loans, tabled in 2016;
· views on its findings from the Australian Small Business and Family Enterprise Ombudsman – ASBFEO;
· the Ramsay Report, leading to the establishment of AFCA; and
· a current Senate inquiry into lending to primary industries. Comment on her evidence to the inquiry is here.
Items she discussed included these
Code of Banking Practice and Ethics
The Code of Banking Practice is being re-written to ensure a ‘clear commitment to ethical behaviour by banks’, no doubt in banks’ dealings not only with their customers but also their service providers.
As to ethics, many bank officers who are professional accountants and lawyers already have their own ethical standards. In particular, bank accountants have new obligations under their international Code of Ethics, APES 110, to report on relevant breaches of the law of both their banking customers and of their own employer bank. The usefulness of such a professional obligation has been raised in current debates about banking regulation and the recent proceedings brought by AUSTRAC. These Code obligations also apply to accountants who are receivers and insolvency practitioners generally, except there this may conflict with legal obligations.
Conflicts of interest
Ms Bligh said that guidelines are being issued shortly as to how banks can reduce potential conflicts of interest when using investigative accountants (IAs) and insolvency practitioners. It is interesting to note that the obverse concern exists in New Zealand, that there are potentially too many restrictions on IAs becoming receivers or liquidators. Then there is the UK, where the right of a bank to appoint its own receiver is much restricted.
Farm Debt Mediation
This topic was also covered. The ABA has expressed concerns about extending farm debt mediation to IAs and receivers, in terms of both principle and practicality.
External Dispute Resolution – EDR
Ms Bligh makes some reference to the developments in EDR, and the replacement of FOS and CIO by ACFA. There is also the rejection of the ASBFEO view that EDR extend to investigating accountants and receivers; and ARITA has said it is proposing its own EDR scheme, being trialled soon. While Ms Bligh says that it is vital that bank customers be able to avoid ‘expensive legal processes’, all courts require disputes to have been mediated before any litigation commences.
Other ABA views that may have been of interest are the increased regulation of IPs, and the extended rights of creditors, under the new insolvency laws; the expected role of banks in the proposed safe harbour period, and limitations on ipso facto rights; and the anticipated reduction in the period of bankruptcy to one year.
The protection of secured creditors in insolvency is fundamental, although the retention of that protection need not be assumed to continue.
This is the text of her speech.