Legal Responsibilities of the Banker - Literature review Example

Duties of banker Name Professor Institution Course Date Duties of banker Introduction The banking services play a critical role in the contemporary society. It is approximated that more than 90 percent of adults hold a bank or structure society account in Australia (Cranston, 2002). Hence the proper delivery of services by the banks is of importance to most of these customers. Like any other institution, bank must have competent and professional employees to deliver quality service and satisfy customer needs (Cranston, 2002). They are a number of positions in the bank but the most outstanding position that frequently appears is the banker. This is person who mostly interacts with customers at each given day. As such this position is very important in financial institution. With this realization, this essay seeks to explain important legal responsibilities of the Banker in maintaining the customer’s current account. This paper will also describe briefly the most generally cited legal duties of the Banker. Legal Responsibilities of the Banker According to Proctor (2010) the English common law defines a banker as an individual who conducts a banking business, including opening and maintaining current accounts for bank customers, paying and collecting cheques for the bank clients. On the other hand, current account is defined as a type of transactional account established in the UK and other nations which as a UK banking tradition (Proctor, 2010). This form account provides different flexible means of payment allowing clients to send money directly to people. Majority of current accounts goes together with the cheque book and provide the institution to set standing orders, direct payment and debits by means of a debit card. In the context of banking Act of Singapore, “conducting business” implies the task of obtaining money on deposit or current account, collecting and paying cheques paid on or drawn by customers and interacting with customers (Ellinger, Lomnicka & Hooley, 2006). The relationship between a banker and a customer is contractual in any means at the moment a customer has opened an account in a bank. The most significant part is when the customer signs of a particular of a specimen signature card at the time of account opening. Ellinger, Lomnicka & Hooley (2006) affirm that the relationship here is significant to permit that every party hold their right and duty. The relationship between a banker and a customer can be classified into two including special relationship and general relationship. The relationship between banker and customer can be considered a general relationship between a debtor and a creditor (Ellinger, Lomnicka & Hooley, 2006). When a client deposits money or borrow money, they act in their role. From a special relationship viewpoint, a customer play a significant role when he or she deposits drafts, dividends, cheque for collection by the bank, whilst bank carry out agency services (Cranston, 2002). However, the specific legal responsibilities of the Banker in maintaining the customer’s current account are the duty to honor cheques and the duty of secrecy. On the other hand the general duties of a banker are to responsibility to protect trust property and also the duty to advice the customers of financial issues and also concerning her account. Firstly, it is a responsibility of a banker is the legal responsibility of secrecy (Cranston, 2002). A banker must not disclose the secrecy of their customers account. When carrying out an account opening with a bank, there a contract created between a customer and their bank. In this process a contractual duty of a banker is created which means there is an agreement a banker will keep confidential the information of their customers. According Ellinger, Lomnicka & Hooley (2006) this duty of confidentiality is not just employed in account transactions; it also involves all information a bank holds concerning the customer. Common law provides that there is a contractual obligation on a banker where they are not allowed to disclose the information of a customer to third parties. In Commonwealth countries a banker cannot is not allowed to disclose any unauthorized information and they are under statutory duty. A case in point is the “Tournier v National Provincial and Union Bank of England in 1924 (1 KB 461) where Court of Appeal collectively agreed that the obligation of secrecy has to be employed from the context of the relationship between banker and customer and be considered contractual in nature (Cranston, 2002). Privacy Act 1988 section P (6) provides even though a banker is an as agent of a bank has no obligation to disclose the information of a customer (Cranston, 2002). “Banking and Financial Institution Act of 1989 popularly known as (BAFIA) provide that the bank is also has a legal responsibility not make any illegal disclosure of information. This law states in part XIII of BAFIA: Information and Secrecy. Also Section 97(1) of the same Act states that no officers or the director of a bank, any agent of a bank or external bureau and any individual who posses the information of client, for instance accountants, lawyers and liquidators is allowed to disclose any document or information relating to a customer (BAFIA, 1989). The Malaysian Banking Law also states that the banker adheres to the standing order of their customers in carrying out payment for customers like the insurance premium (BAFIA, 1989). When handling foreign exchange, it is the legal responsibility of banker to abide by the exchange control law and instructions set by the banking authorities. Other responsibilities of a banker consist of obtaining money for the account of the customer, to adhere to any mandate given by the customer and to make available a statement of account. However it should be noted that some sections of the law allow disclosure under certain circumstance. Section 99(1)(b) of the Financial Institution Act of 1989 gives an exception where by a banker can only disclose when allowed by customer or his or her representative under a written permission (BAFIA, 1989). According to section 99(1)(b), disclosure is allowed when the customer is declared bankrupt or a corporation is being or has been wound up and liquidation (BAFIA, 1989). In pursuance of the section 99(1) of (h), secrecy is exempt in case which disclosure is carried out under compulsion a given Federal Legislations (Ellinger, Lomnicka & Hooley, 2006). The bank is allowed, bypassing the approval of the customer, to disclose information to the police officer carrying out the investigation of an offence mentioned in those legislations. Additionally, the banker has to consult the said customer by their all of their knowledge and professionalism so as to help the customer to an ideal financial position (Ellinger, Lomnicka & Hooley, 2006). This is because they will not just be handling customers but also people from different financial organizations and entities as well. Hence, it is crucial that a banker has an outstanding professionalism. Bankers are granted the principal duty of offering financial advice information concerning the current account to their customers (Cranston, 2002). Bankers require communicating often with customers either via phone call or finding solutions for clients. Besides, bankers have to evaluate the financial position of their customers and advice them how they can realize their preferred financial status (Proctor, 2010). It is via this information that bankers showcase their financial knowledge and customers establish their reliance on this guidance. Bankers require divulging every data and information that they have or establish to their clients. When a banker or a bank is fond to have hidden information of benefit to the customer it can be sued. Cranston (2002) claims one such case happened in 1992 involving Barclays Bank plc v Quincecare Ltd [1992] 4 All E.R. It held that if any bank implements an order with which a banker of the bank knows to be dishonestly granted, or chose to keep quiet on a clear reality of dishonesty, or conducted itself recklessly and failing to divulge any information to their clients, the said bank can be taken to court (Cranston, 2002). The Trade Practices Act 1974 of Australia in section 18 (1) now called Australian Consumer Law also provides that an individual should not engage in trade which is misleading or deceptive in nature (Proctor, 2010). Proctor (2010) posits that since “banking” implies accepting deposits that can be withdrawn by draft, order, cheque or otherwise, a banker is bounded by a duty to honor cheques given out by the clients from their current accounts, providing there is adequate balance in that current account and that balance is appropriately valid for payment of a cheque. There are some situations where a banker is free to enforce his obligation to honor the cheques given out by an account holder. When a cheque has been appropriately drawn and orderly filled, that is the figures, date and amount in words visibly written. In a nutshell, the cheque given is neither post dated nor stale (Ellinger, Lomnicka & Hooley, 2006). According Proctor (2010) the obligation of a banker to honor a cheque can stop when particular conditions exist. In other words, the authority of a banker to honor cheques is retracted in a case that particular situations are met. Firstly, if the customer cancels the payment before cashing the cheque; in this case, banker gets the instructions stop payment from an account holder and therefore is his or her responsibility to end the obligation to pay the cheque (Ellinger, Lomnicka & Hooley, 2006). Other cases consist of the receiver of notice concerning the death of the drawer at the moment drawing or a client is claimed bankrupt before a cheque is paid. When a customer is declared bankrupt, the cheque drawer turns out to be insolvent and a banker is not capable of cashing the cheque from the customer’s account (Proctor, 2010). Another condition which makes the responsibility to honor cheque ends is a garnishee instructs attaching of the balance in his or her account or order attachment of income tax got by the banker. Cranston (2002) argues that apart from the cancellation of the legal responsibility to honor the cheque, a banker is allowed decline to honor cheques providing the account of customer has insufficient to facilitate payment of the said cheque. The law also allows the banker to decline to conduct his duty, if the issued cheque does not match with an account it is claimed to be issued. If a cheque granted is not in its appropriate order, for example, if it is post dated, payment countermanded, stale or even there is a difference of amount figures and in words, then a banker can have a legal responsibility to decline to honor that cheque of a client (Cranston, 2002). One last case that legally allows bankers to cancel its responsibility is when the balance in account of client is earmarked for some specific reasons and the remaining balance is inadequate even after satisfying the other reasons a banker to honor the said cheque. Cranston (2002) state that the banker also has a responsibility to take care of a property deposited by a client with or without charging him or her since it is the responsibility of a banker to care for the property. The responsibility protecting the trust or client property is deep-seated to the principle of operation of trusts and the trusteeship (Ellinger, Lomnicka & Hooley, 2006). In a relationship between a banker and customer enables the banker is to act as a trustee for clients. A bank is the place for clients to store their properties particularly cash so as to get the security of their properties, therefore it is the duty of the bank to make sure the security for these properties are provided. Consequently, it is apparently understood that trustees in this case the bankers have the duties of making sure that they can reduce the harm that the property may face which they have on trust (Ellinger, Lomnicka & Hooley, 2006). To that extent, this responsibility will be reliant on the nature of that property, in order to protect the property from run-down or becoming broken. Another is context of this duty to protect trust property for a banker as a trustee is the responsibility to put into consideration the beneficiaries or customer’s best interest and constantly put into consideration the best alternative means of capitalize on the value of the property or utility they safeguard on trust, as appropriate (Cranston, 2002). Conclusion In conclusion, the position of a banker is very important to the customers and to the society because they safeguard their property and a slight negligence can cost a lot to the customer, the bank and even him or herself. With regard to that they must hold a candid relationship with the customer. The banker must not just provide quality services but must also abide by the law when providing these services. References Banking and Financial Institutions Act 1989, Banking and Financial Institutions Act 1989 (BAFIA). accessed on 3rd November 2013 http://www.pytheas.net/docs/malaysia/BankingandFinancialInstitutionsAct1989.pdf Cranston, R 2002m Principles of Banking Law (Second Edition), Oxford University Press. Ellinger E., Lomnicka, E & Hooley, R 2006, Ellinger's Modern Banking Law (Fourth Edition, Oxford, Oxford University Press. Proctor, C 2010, The Law and Practice of International Banking, Oxford University Press. Read More