The Customer Owned Banking Association has entered talks with ASIC as part of a bid to win regulatory approval for its voluntary code of practice.Dangerous shoals lie ahead as the Australian banking industry pushes ahead with the most important of the recommendations from the recent royal commission, at least those recommendations with political backing.COBA chief executive Mike Lawrence told Banking Day that his association began engaging with ASIC after the release of the Hayne royal commission's final report in February."We have already started to engage ASIC and asked for feedback as we go through a review of our banking code," he said."We're doing a gap analysis between our code and the Australian Banking Association's code."The ABA code is already approved by ASIC, which has put the heat on COBA to get its code officially sanctioned by the regulator.Banking royal commissioner Kenneth Hayne has recommended that all codes of conduct in the financial services industry be made mandatory and acquire some level of legal enforceability.In his final report, Hayne proposed embedding some of the obligations of service providers under banking industry codes as terms and conditions in consumer contracts.That recommendation has sparked a furious debate between consumer advocates and industry bodies on whether all "obligations" specified in industry codes should be legally enforceable.The Consumer Action Law Centre, an influential Victorian-based consumer advocate, argues in a submission to Treasury's consultation that all clauses in industry codes should govern the terms of the contract. However, Lawrence questioned the wisdom of transforming industry codes into strictly legal documents."The are many laws and regulations that our members have to comply with - whether it's through licences and standards overseen by ASIC or APRA," he said."We want to avoid making the (COBA) code a legal document."Lawrence elaborated this epithet:"I just think it is dangerous to turn the code into another legal document."When asked whether that meant COBA was opposed to having its code embedded in consumer contracts, Lawrence said: "The industry hasn't yet landed on what are the enforceable provisions of the different codes."One of the perceived shortcomings of the COBA code is the restricted definition of  what constitutes a small business customer.Most businesses employing more than 20 people are not covered by COBA's code even though most would be captured under the ABA's more generous definition.Such variation between the codes has prompted mutual banks such as Bank Australia to call for "more alignment" in customer coverage.Lawrence said that COBA was reassessing its definition of a small business."We are certainly looking at it…but it's too early to say whether we will change the definition."Lawrence believes that critical differences in the profile of COBA members compared to the ABA's subscribers meant that the two codes were never likely to be identical."We think this is an opportunity to differentiate," he said."COBA's members are structurally different from an investor-owned bank and we want to stay true to that."I've no doubt there will be overlap between the codes but at the same time there will be differences."