BCCC: Strict Compliance & More Training

The BCCC has released its latest findings and Good Practice Guidances (CX4423) and (CX6212), finding that the BCCC expects strict compliance under banks’ obligations under the Code when executing guarantees, and that bank staff training should go beyond mere awareness of the Code’s role in consumer protection.

Compliance with the Guarantees provisions of the Code

1. As outlined in the BCCC’s Inquiry Report: Banks’ compliance with the Banking
   Code’s guarantee obligations, guarantees have significant legal and financial
   implications for consumers. If the primary borrower defaults on the loan and the
   guarantee is enforced, some of the risks to the guarantor include:
   a. severe financial hardship
   b. being forced to sell assets to pay a debt, and/or
   c. being evicted from their home or their home being sold by the bank.
2. The BCCC therefore expects strict compliance with the bank’s obligations under the
   Guarantee provisions of the Code, whether it be before accepting the guarantee,
   when executing the guarantee or during a guarantee.
3. Banks need to have robust and comprehensive systems, policies and procedures to
   support its compliance with the Code’s Guarantee provisions. For example, having
   poor record keeping practices will prevent banks from identifying and assessing a
   Code breach. This means there is a risk that guarantors against whom enforcement
   action is proposed may not have been provided key information to make an informed
   decision about giving a guarantee.
4. The Guarantee provisions under the Code are intentionally prescriptive and if the
   bank does not comply with any of those obligations, it should proactively determine if
   the guarantee is enforceable and take appropriate actions to rectify and remediate
   impacted customers and guarantors.
5. While it is appropriate for banks to obtain legal advice on the validity and
   enforceability of a guarantee, it is also important that they avoid an overly legalistic
   approach. Banks’ treatment of non-compliance guarantees must take into account
   the Guiding Principles that underpin the Code and the banks’ obligations under
   clause 10 to engage with guarantors in a fair, reasonable and ethical manner

Oversight of business units’ compliance with the Code

1. Banks should take their compliance with the Code seriously and this applies to all
   their relevant business units.
2. The governance framework and systems banks operate under should be aligned in
   such a way that banks are able to:
   a. promptly identify which of their business units are required to comply with the
   Code, and
   b. robustly monitor and oversee the relevant business units’ ongoing compliance
   with the Code’s standards and requirements.
3. Banks should also ensure that the training programs, systems, processes and
   technology available to staff members in the wider bank are aligned with those
   provided to staff members in the business units. This ensures that the entire
   organisation shares common knowledge and skills to enable its staff to assist
   customers in the most efficient, effective and consistent manner.
   Provide adequate and appropriate training to staff members
4. The training provided by banks to staff members in relation to the Code should go
   beyond awareness by educating them about the Code’s role in consumer protection
   framework, and the importance of them meeting their Code obligations to customers.
   Training should also extend to any relevant third parties e.g. brokers acting on behalf
   of the bank.
5. Banks should focus on tailoring the training to suit specific roles within the
   orgnanisation. For example, staff members dealing with Guarantees should be
   provided in-depth training on the Guarantees provisions of the Code compared to a
   call-centre staff member.
6. Such specified training increases employee engagement with the content,
   encourages knowledge retention and bridge the gap between employees’ awareness
   of the Code and their understanding about role specific Code compliance obligations.
7. If banks do not ensure that their staff members have the right capabilities and
   competency to effectively carry out their functions under the Code, it is highly likely
   there would be detrimental consequences for customers who are being provided a
   financial service by the banks.
8. Banks should also, on a regular basis, revisit the content and frequency of existing
   training programs and/or requirement of new training programs to ensure that they
   are aligned with any regulatory developments, updated guidelines, the BCCC’s
   Guidance Notes etc.

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