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Banking, Finance Investment

Significant improvements on guarantees, but areas still need work

Banking Code Compliance Committee 3 mins read

Banks have made significant progress on improving protection for people who go guarantor on loans since a 2021 report found failings, the Banking Code Compliance Committee (BCCC) said today. 

However, in releasing its follow-up to the 2021 report, the BCCC noted that there were still some shortcomings that need to be addressed to ensure best practice Code compliance.   

In the 2021-22 financial year, guarantees held by banks that subscribe to the Banking Code of Practice supported $68 billion worth of loans to individuals and small businesses. The BCCC’s 2021 report revealed practices that did not always adequately protect people in the process of guaranteeing a loan. 

The follow-up report, the 2023 Guarantees Follow-Up Report, examines the extent to which banks had considered the 23 recommendations from the 2021 report and implemented them where appropriate.  

Under the Banking Code, banks commit to obligations designed to safeguard people who act as guarantors for loans, and the BCCC’s recommendations aim to improve practices across the industry. 

Today’s report found that banks had made meaningful changes in response to the 2021 report. Across the industry, many banks are now offering:  

  • better support for guarantors experiencing vulnerability,  

  • enhanced training for staff, and  

  • more rigorous interviews with prospective guarantors.  

Chair of the BCCC, Ian Govey AM, recognised the work of banks to improve practices since the 2021 Guarantees Report uncovered poor practices. 

“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.” 

While the improvements were significant, the 2023 Guarantees Follow-Up Report noted that there were still areas that needed attention.  

Three recommendations for better practice from the 2021 report had not been adequately considered by all banks, with the report revealing 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.  

Mr Govey addressed these drawbacks, noting that the BCCC expected the banks to consider all the recommendations carefully.  

“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,” Mr Govey said.  

“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. 

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

To build on the progress banks have made, the BCCC offered additional recommendations in the 2023 Guarantees Follow-Up Report. These include:  

  • Ensuring consistency in managing guarantees across all business units and subsidiaries  

  • Extending 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.” 

The 2023 Guarantees Follow-Up Report also offers valuable insights and tips on better practices for the industry.  

To improve the customer experience and mitigate risks for guarantors, fostering a more secure and trustworthy banking environment, banks should consider the advice in the report as well as the recommendations.  

Read the 2023 Guarantees Follow-Up Report on the BCCC's website.

About us:


About the Banking Code Compliance Committee 

The Banking Code Compliance Committee is an independent body responsible for monitoring and enforcing compliance with the Banking Code of Practice. The committee strives to maintain high industry standards and protect the interests of consumers in the Australian banking sector. 

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