Bligh appears at banks royal commission

Megan Neil
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Anna Bligh said banks were still a little uncomfortable about the $3 million threshold

Smaller lenders are worried changes to how a small business is defined will leave them at a competitive disadvantage with the major banks, Anna Bligh says.

The former Queensland premier is giving evidence to the banking royal commission in her capacity as CEO of the Australian Banking Commission.

The inquiry is examining the self-regulation of banks under the industry's Code of Banking Practice.

Ms Bligh said a new draft code that has gone to the corporate regulator provides a number of new protections for small businesses.

But the ABA and Australian Securities and Investments Commission disagree about the definition of a small business, in terms of the threshold that must be met for businesses to gain the protections and entitlements of the new section of the code.

The code would apply to loans of $3 million or less, whereas an independent reviewer recommended a $5 million threshold, compared to the limit of $1 million that applies in unfair contract legislation.

Ms Bligh said banks were still a little uncomfortable about the $3 million threshold, as they had to take on more risk with a small business loan.

She said they felt distinctly uncomfortable about a $5 million level, particularly in the case of smaller regional banks with smaller loan books.

"(They) feel that not only will they be exposed to a high degree of risk with such contracts but that because of the size and nature of their loan book, that will put them at a competitive disadvantage against the four major banks."