Legal Responsibilities of a Banker - Example

Legal Responsibilities of a Banker Student’s Name Institution Date Legal Responsibilities of a Banker A banker has several legal responsibilities to a customer in maintaining a current account. The banker must be willing to allow a customer to withdraw from his deposits at any time of his choosing. A current account does not have any deposit limits and as such, a banker should not restrict a customer from accessing monies deposited in his account. He needs to ensure that his customer’s needs are well met to avoid any misunderstanding that may arise due to poor performance. A banker also needs to monitor all deposits that are made in a customer’s current account to find out if they are accurate and genuine (Consumer focus 2012). This helps both parties to avoid any form of misunderstanding that may arise when correct information about the relationship between them is not given out. A banker needs to take time to find out if a cheque that has been deposited in a customer’s current account is genuine. Failure to do so may result in the bank losing or paying out cash on a cheque which is not genuine to a fraudster. A banker that pays out customer’s funds due to a false cheque may be required to bear liabilities that are likely to result from his actions. A banker needs to honour a customer’s payment orders by following all instructions that the customer has given him. The payments made by a banker from a customer’s account must be within acceptable time limits to ensure unnecessary delays are dealt with (Cheffers & Pakaluk 2005). All bankers must be ready to honour all contractual terms that define their relationships with individuals or companies that are recognised as their customers. Money has legal characteristics and as such, all forms of money are valued as means of trade and exchange. A banker needs to assist clients to understand the types of services they are looking for. He needs to review a client’s previous history to find out if there are any financial issues that have an effect on their relationship (Kwaw 1996). A bank accepts deposits from customers which are used to give out credit to other firms and other individuals which are repaid with an interest on top of the borrowed amount. However, there are express terms in a credit transaction which both parties involved need to honour. A borrower needs to repay the loan within the stipulated amount of time agreed upon with the banker (Gomez 2011). The period of repayments and the interest charged on credit are also terms which both parties need to agree upon fully before the loan is given out. In some instances, the contractual terms that define the relationship between bankers and their customers determine if the interest rates charged will remain the same or they will be altered due to various economic conditions. A bank needs to explicitly point out to the customer if the current rates of interests being charged on loans will remain fixed until the time the period of repayment is over or whether they are subject to different changes. If the interest rate charged on the loan is likely to change before the period of repayment elapses, the bank needs to inform the client about it before any credit is given out. This will ensure that the client is given all important information regarding the credit he is being offered to ensure he is not disadvantaged if he fails to repay the loan as agreed (Malloy 2011). The bank is not supposed to seize any assets that have been used as collateral by a debtor without following the laid down legal procedures. A banker also has to reveal all important details about the relationship he has with a customer before signing any contract. He needs to inquire about a customer’s credit history before opening any account for the customer. This will help a banker know about a customer’s integrity and reliability. It will also help a banker find out if a customer is involved in different illegal activities that are unlawful. A banker needs to be diligent to protect his institution and customer from any problems that may affect the safety of the funds deposited (Weaver & Kingsley 2001). As a result, a banker needs to find out the real identity of a customer, address, telephone and email contacts. This helps a banker to easily communicate with his customers to make them well informed about various changes the bank is experiencing (Bagehot 2007). Bankers have a duty of safeguarding the confidential relationship between them and their customers. Bankers should not release details about their financial involvement with their customers to parties who do not have an important role to play in the relationship. This may expose a customer to various fraudsters who may try to defraud him of his cash (Shanahan 1997). Confidentiality is one of the most crucial duties a banker needs to observe to establish a working professional working relationship based on trust and respect. This enables a banker to avoid any security loopholes that occur due to careless handling of important information and data. All transactions which are undertaken between a banker and his customer should not be known by other external parties (Tyree 2005). If necessary, a banker needs to put in place strong physical and data security measures to prevent any form of intrusion by outsiders into the bank’s important systems. A banker needs to record all transactions between the institution and its customers. All bank statements should be availed whenever a customer asks for them to show all transactions which he has undertaken in the bank. This helps to strengthen good accounting practices in the bank and eliminates the possibility of fraudulent activities taking place within an institution (Coulbeck 2012). Financial records in a bank ensure high quality services are offered by a bank to its customers. As a result, a bank is able to show proof of a particular transaction that has been done to shield it from any problems that may have an effect on its operations (Luna-Martinez 2000). This makes it easy for both the bank and its customers to monitor and track their accounts to prevent any problems that are likely to affect how an institution performs its responsibilities. A banker is also required to have all details about other clients who do not maintain accounts with the institution. For instance, a bank may offer credit cards and other services which are not related to deposit taking. In doing so, a banker must ensure that he understands all legal requirements he is expected to fulfil to ensure all activities are done within the limits of the law. A banker needs to find out whether he has control over funds which are not directly deposited in a customer’s account to find out how they affect the operations of his institution. A banker needs to do all he can to give good customer service to his clients (De Soto 2009). This makes them more confident about the services being offered and strengthens the relationship existing between them. A banker has the right to dishonour cheques written by a customer requesting for a particular amount of money to be given out to another payee. If the customer does not have adequate funds in his account, he cannot order his bank to pay out the amount because that will be a violation of the contractual relationship that exists between them. However, a banker and a customer have to agree on the best processes to be followed before an account is closed. This will ensure all parties agree to end the contractual relationship existing between them. This enables a banker to sever any ties that exist with an existing customer without any legal problems arising from this process (Admati & Hellwig 2013). A customer also needs to validate the accuracy of information he gives out to a bank to prevent any form of forgery or fraud from taking place. A customer is required to exercise a lot of caution when drawing cheques to ensure all figures and words stated are accurate (Hu 2011). This minimises the risk of bouncing cheques which affects the reputations of various financial institutions negatively. A banker also has the right to combine both the credit and debit balance in a customer’s account to find out if a customer has the right credit history. This enables a bank to take all the necessary steps to recover all the money a customer owes it if he defaults to pay his loan (Gomez 2008). Therefore, a banker is legally entitled to deduct specific sums of money from a customer’s account on a periodic basis until the time when all debts owed are settled. In conclusion, bankers and customers need to understand their legal responsibilities to strengthen relationships that exist between them. This helps them improve the quality of banking services which are offered in an area because they are able to understand expectations they want to get out of their relationships better. Both parties need to provide accurate details and information specifying the type of relationship they are going to have to prevent any conflicts from occurring. References Admati, A & Hellwig, M 2013, The bankers' new clothes: what's wrong with banking and what to do about it, Princeton University Press, Princeton. Bagehot, W 2007, Lombard street: a description of the money market, Cosimo Books, New York. Cheffers, M & Pakaluk, M 2005, A new approach to understanding accounting ethics, Allen David Press, Massachusetts. Consumer focus 2012, Banking services and the consumer (RLE: banking & finance), Routledge, London. Coulbeck, NS 2012, The multinational banking industry (RLE banking & finance), Routledge, London. De Soto, JH 2009, Money, bank credit, and economic cycle, Ludwig von Mises Institute, Berlin. Top of Form Bottom of Form Gomez, C 2008, Financial markets, institutions, and financial services, PHI Learning, London. Gomez, C 2011, Banking and finance : theory, law and practice, PHI Learning, London. Hu, JC 2011, Asset securitization: theory and practice, Wiley, New York. Malloy, MP 2011, Banking law and regulation, Aspen Publishers, Aspen. Kwaw, EM 1996, The law & practice of offshore banking & finance, Greenwood, New York. Luna-Martinez, JD 2000, Management and resolution of banking crises, World Bank, New York. Tyree, A 2005, Banking law in Australia, Butterworth, Sydney. Weaver P and Kingsley, CD 2001, Banking & lending practice, AIBF and Lawbook Co, Sydney. Shanahan, K 1997, Australian dictionary of banking and finance, LBC Information Services, Sydney. Read More