Significant improvements on guarantees, but areas still need work

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.”