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British Bankers Association News Release

Thursday March 30, 2006

Strengthened Banking Code offers greater protection for customers

Additional guidance on the Banking Code will offer greater protection for customers who borrow from banks, building societies and credit card companies. The new guidance, which is published on April 1, covers the following lending situations:

Consolidation loans: Where a consolidation loan is provided for a customer who the subscriber considers to be in financial difficulties, the subscriber should take reasonable steps to ensure that any in-house borrowing is repaid with the proceeds of the consolidation loan.

Joint income borrowing: Where the income of two people is used to assess the ability to repay a loan, the loan should normally be granted in joint names.

Referral of declined loan applications: Where, after declining an application for credit, the subscriber refers the customer to another lender, they should make sure that the customer is aware that this does not necessarily mean that the application will be successful.

Assessing a customer’s ability to repay: A credit assessment should include at least two of the following four points: Income and financial commitments; how finances have been handled in the past; information from
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Strengthened Banking Code offers greater protection for customers (cont)

credit reference agencies or, subject to the customer’s permission from other sources such as the customer’s employer or landlord; credit assessment techniques such as credit scoring.

Consideration of additional information: When assessing an application for credit, lenders are encouraged to consider the purpose of the borrowing in relation to the period of repayment.

Ian Mullen, chief executive of the British Bankers’ Association said: “One of the key attributes of the Banking Code Guidance is its ability to be adapted to reflect new developments in the market place. The introduction of the new guidance is a prime example of this in action and formalises good practices that are already widely employed by the industry.”

Seymour Fortescue, chief executive of the Banking Code Standards Board added: The BCSB actively monitors compliance with the Banking Code, including its provisions on credit assessment. In the context of rising concerns about personal indebtedness, our reviews have suggested ways in which the Code could be strengthened. We are pleased that our recommendations have been accepted by the industry and believe they should encourage responsible lending and responsible borrowing. Greater care with joint lending and consolidation loans should result in fewer problems for borrowers and lower bad debts for banks. We will continue to monitor this important part of the Code, seeking to improve high standards of compliance by all subscribers.’

For further information contact:

Brian Capon, head of media relations BBA 020 7216 8810
Sandra Quinn, communications director, APACS 020 7711 6234
Rachel Blackmore, external affairs manager, BSA 020 7440 2218

Strengthened Banking Code offers greater protection for customers (cont)

Notes to editors:

The Banking Code is a voluntary code which sets the standards of good banking practice for banks, building societies and credit card companies to follow when they are dealing with personal customers in the United Kingdom. As a voluntary code, it allows competition and market forces to work to encourage higher standards for the benefit of customers. The first Banking Code was introduced in December 1991 and the latest Code, the seventh, took effect from 1 March 2005. The Banking Code is sponsored by the British Bankers’ Association, the Building Societies Association and APACS.