FINANCE LAW

Silly conducts a seafood whole-selling business called: Seafood Affair. Her primary market is the restaurants in Melbournes CBD. The business had prospered for some years, earning approximately $500,000 annually, but deteriorated with the closure caused by Covid-19 in March 2020. Seafood Affair lost 80% of its income for the months of March through to June.

She approached her bank, ABC Ltd, to increase her overdraft (credit account) but it refused to extend her any more credit. They justified their decision by stating that her reduced income was unlikely to improve according to analysts in the bank. Silly argued that since the bank was a subscriber to the Code of Banking Practice it is obligated to provide her with a new loan due to her circumstances caused by Covid-19.

Is ABC Ltd obliged by the Code of Banking Practice to provide Silly with a new loan or to increase the existing overdraft due to her circumstances caused by Covid-19? (500 words)

Required:

Issue:

Relevant Laws: Code of Banking Practice:Clause 49 and 51(a) and (b). (Banking Law in Austalia)

Application: Explain the above clauses in the Code of Banking Practice and apply to the question.

• Clause 49 Bank must be diligent and prudent in making such decision. What therefore constitute diligent and prudent in this question? Discuss.
• Clause 51(a) and (b) Bank to consider the appropriate circumstances including Bens financial position and his account conduct. Discuss.
• What does the expert say about Bens ability to repay? Is this sufficient to show that Ben will be unable to pay for a further increase in his current loan amount? Discuss.

Conclusion: Summarize the arguments above to answer the issue according to the arguments made.