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A bank is defined in the common law as being an institution engaged in banking business.

It
is the purview of parliament or the courts of the particular jurisdiction as to what constitutes
banking business. The courts established three fundamental principles which apply. The first,
that the business of banking can change from time to time was established in Woods V
Martins Bank [1959] 1QB 57. Woods, a young man with no business experience, inherited
money. He became a customer, even though his account was not opened until weeks
thereafter, when he made an investment in a company on the advice of the manager. Salmon
J in his judgement opined that,

The limits of a bankers business cannot be laid down as a matter of
Law. The nature of such a business must in each case be a matter of fact
and accordingly cannot be treated as if it were a matter of pure law.

This is an important tenet as the banking climate is a dynamic one, as banks respond to
stimuli in the economy to diversify their portfolio in order to remain profitable.1 The second
principle is that, a financial institution regarded as engaging in banking business in one
jurisdiction, is not necessarily so considered in another. This is illustrated in the Irish and
Australian courts where one does not need to open a current account, in order to be deemed
as “engaged in banking business,” as accepting money on deposits and re-lending it to make a
profit, is sufficient. This underscores the last principle borne out in the case law, where an
institution widely considered to be a bank, will usually be treated by the courts as engaged in
banking business. The principle was applied in the Australian case of Commissioners of the
State Savings Bank of Victoria v Permewan Wright & Co. Ltd. [1914] 19 CLR and the
Canadian case of Canadian Western Bank v Alberta 2 SCR 3. However in the UK, the
converse obtained, where in United Dominions Trust v Kirkwood [1966] 2 QB 431, a bank
was defined as an institution that accepts money from their customers in the form of deposits
and then collects cheques on their behalf, placing those cheques to the customer’s credit. The
banks must honour the cheques that are drawn on them or orders drawn on them to pay a
third party.

To carry on the banking business the institution must maintain current accounts for customers
and record debits and credits to the account as per Lord Denning. It is argued that the opening

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Class notes 28 May 2018, banks engage in securities, insurance, pension, etc. through their subsidiary
companies.

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of the account is crucial as this defines the duty of care that is owed in the customer- banker
relationship in most jurisdictions. In Great Western Railway Company v London and County
Banking Co. Ltd. [1901] AC 414 cashing cheques regularly for a number of years was
insufficient to privilege the person as a customer of the bank as no account was maintained
there.

In elucidating on the notion of the bank, Lord Diplock considered the size of the banking
business and the quality and purpose of the current account opened. Here the qualities of
stability, soundness and probity were accounted, in relation to the statutes and regulatory
framework are relevant. These include the Financial Institutions Act, the Banking Act, the
Bank of Jamaica Act, and Financial Services Commission Act. The last two of which
established the Bank of Jamaica and the Financial Services Commission respectively.

The duty of care as mentioned by Ungoed –Thomas L is defined by the Legal Dictionary
Online, as a legal obligation which is imposed on an individual requiring adherence to a
standard of reasonable care while performing any acts that could foreseeably harm others.
The quotation references the case of Selangor Rubber Estates Ltd. V Cradock [1968] 2
Lloyd's Rep. 289 and may apply as a recourse for a breach in tort or contract. There are two
important concepts arising, which are firstly, the objective standard to be met in the exercise
of skill and care. The second refers to the unique facts which will be applied in the test. The
principles are but the foundation, and banks will not normally be held liable once there has
been a clear exercise of good faith and the defendant party has met the criteria for being fit
and proper.2

A relationship implies a two- fold duty and it is expected that a customer has certain
obligations. The duty of a customer is to exercise reasonable care in transactions. As in the
case of drawing cheques. This applies even if he or she employs someone to write them. In
London Joint Stock Bank v. McMillan and Arthur [1918] AC 77, an employee of a customer
wrote out a cheque for £2 but failed to write the words. Enough space was left on either side
of the '2' for the amount of the cheque to be altered after the signature to reflect the sum of
£120. It was held that the bank's customer (the employer) did not exercise reasonable care in
making the written order, and had therefore lost his case against the bank.

2
Based on the Financial Services Commission requirements.

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the bank must honour it save in what I would expect to be exceptional circumstances. who stole money from his law firm and spent it gambling with the defendants. a court would not normally impute fiduciary duty to banks in their dealing with commercial or even 3 Class notes 12 June 2018. The test laid down in Selangor regarding the bank’s duty is. The case concerns a partner. Banks also must have practiced soundness in its dealings.”4 In the words of Parker LJ. Banks do not normally have a fiduciary duty to its customers. According to authorities. May LJ is cited as saying. the judgments of the Court of Appeal on the issue of bank liability in the instant case. who was held to be aware of the defaulting partner’s weaknesses and activities. Whether if a reasonable and honest banker knew of the relevant facts he would have considered that there was a serious real possibility albeit not amounting to probability that its customer was being defrauded. The firm also sued their banker. remains the leading authority on the duty of care owed by a bank to its customer.The foregoing acknowledges that the customer-banker relationship is one that is based on trust and the assumption that the average reasonable person is also honest.3 Selangor’s principles were confirmed in the case of Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548. Each side alleged that the bank knew or ought to have known that Cass was drawing on the firm's bank account for the purposes of satisfying his personal gambling problem. As a consequence. “There are certain unusual cases when a bank will be put on enquiry and when its failure to investigate circumstances further would constitute a breach of its Duty of Care. The Bank could not have been expected to determine “the commercial wisdom or otherwise” of the transaction it faced when the customer presented the instrument for transfer.” The crux of the matter is on those “certain unusual cases” which is a phrase similar to the “relevant facts” cited in the topic. and yet they failed to take any action The House of Lords held that actual knowledge of the wrong intent of the customer would be necessary in order to impute liability on the bank as a third party. “Presented with a cheque drawn in accordance with the terms of that contract. The issue is therefore the circumstances under which a bank will be held liable for breaching its duty to its customers given the extreme latitude (arguable though it may be) awarded by the courts. Cass. 4 [1989] 1 WLR 1340 at 1356 A-B 3 .

even though the latter may be in a more vulnerable position. a servant who tries his incompetent best is not in breach of these obligations of good faith <https://webstroke.their personal customers. however. such as accounting for profits.6To continue expounding on the degree of responsibility. for instance. The leading case in English law according to the authorities. Jamaica Ltd. It was held by the Court of Appeal that the solicitor’s negligence in the transaction rendered him liable to the society for a breach of contract. makes payments for third-party cheques. 4 . when the immense number of customers are considered alongside the number of transactions that take place on a daily basis. A solicitor acted incompetently on behalf of a building society and the society’s customer in a mortgage contract. The importance of this case rests in its judgment by Millet LJ. In Woods.com/bankcustomer-relationship.uk/law/cases/bristol-west-building-society-v-mothew-1998> accessed 7 July 2018 6 There were bank leaflets in the bank emphasising their expertise in giving business advice. remits funds abroad and buys or sells stocks and shares for the customer. In http://lawatleeds. it is noted also that banks are not usually bailees as there would be a higher standard expected.co.5 that a breach of duty by a fiduciary may not be a fiduciary breach of duty. He failed to notify the bank that the customer had a second charge on the property the bank was proposing to fund. keeping the money entirely separate from others’ money and protection against 5 Lord Millet: fiduciary obligations a very strict as a principal exposes himself to his agent. returning the exact money deposited. the banker collects bills of exchange and cheques. Duty dictates that a bank becomes an agent in certain prescribed instances such when. there was no breach of a fiduciary duty. the circumstances in which there can be a claim for a lack of duty in relation to loyalty or fidelity depend largely on the facts and circumstances of each case. on the circumstances on which a fiduciary duty arises in banking is Bristol and West Building Society v Mothew [1996] EWCA Civ 533. Consequently. The reluctance or caution on the courts’ perspective is derived from the inordinate need to protect the banking sector from a flood of litigation.weebly.html> accesses 4 July 2018. The customer is expected to protect his/her own interest also and only rarely would the bank be expected to act as an agent in relation to customers. The issue to be determined was whether the breach represented a breach of his fiduciary duty as a solicitor. the courts found that the bank had undertaken to act as advisor to the client and so was held to have owed a fiduciary duty of loyalty and fidelity founded on the facts of the case. This will be explored further in two Jamaican cases involving Sagicor Bank.

” The precedent in Lipkin Gorman is that the bank does not owe its customers any particular duty of care in relation to the ordinary day to day transactions undertaken based on the authority of the signature on the customers’ accounts. defines the duties of a banker and along with Foley v Hill (1848) 2 HLC 28. and the bank's obligation is to repay an equivalent sum (and any agreed interest) to the customer on the customer's order. Banker-Customer Relationships. is a leading case on the banker-customer relationship in relation to a customer’s account. In Foley. The banker must receive money from and collect cheques and other bills of exchange for the customer and repay the money against the customer's written order.weebly. The banker must give reasonable notice before closing an account in 7 Banker-customer Relationship <http://lawatleeds.html> accessed 5 July 2018. This order may be one that is written or expressed as was held in the Jamaican case of Morrell V Workers Savings and Loan Bank [2007] UKPC 3. the court is equally hesitant to ascribe a common law or contractual duty of care in the case of its products or services which may fall outside of routine day to day transactions. 1.7Since that is not the normal case there is no duty beyond that of reasonable “skill and care. Joachimson as reported in Whiting (199-201) 8 identifies the duties as.insolvency. When the customer deposits money in the account it becomes the bank's money.com/bankcustomer-relationship. to underwrite loans to those financial speculative or risky ventures which a customer may engage in and may suffer a loss as a result. Moreover. Instead the relationship between them is that of debtor and creditor. Whiting. The order must be addressed to the branch where the account is kept and repayment made at that branch during normal working hours (banking practice has changed since then to include online banking and automated teller facilities). the facts established the position that a banker does not hold the sums in a bank account on trust for its customer. The judgement in the case of Joachimson v Swiss Bank Corporation [1921] 3 KB 110. In: Mastering Banking. A court will not normally acknowledge a liability flowing from this scenario and a bank could not be said to be negligent. P. 8 D. London 1985) 5 . 2. That is. (Macmillan Palgrave.

order that the customer may make other arrangements and also to facilitate cheques that may have been drawn. Based on (1) supra. having breached its legal standard by failing to take reasonable steps to secure the best price for the property that it sold despite the bank’s contention to the contrary. which is the opposite to the normal legal requirement that the debtor must seek out the creditor.pdf> accesses 4 July 2018. McMillan and Arthur [1918] AC 77. Sheila v Sagicor Bank Ja. it will be seen that the customer (the debtor) must seek out the creditor (the bank).jm/sites/default/files/judgments/Khiatani%20Jamaica%20Limited%20and%20Khiat ani%2C%20Sunil%20et%20al%20v%20Sagicor%20Bank%20Jamaica%20Limited. The customer also is under a duty to exercise reasonable care in drawing cheques. [2016] JMCA Civ 38. which represent a commercial customer and a personal customer respectively. The objective standard as applied to the facts are seen in the judgements in the cases of Khiatani Jamaica Limited.gov. Khiatani. 9 <http://supremecourt. 6 . Ltd. Sunil and Khiatani. He is actually constrained by legal standards in what he can do and how he does what he does. At the end of the day if his conduct is called into question once it can be shown that he breached the legal standard in the particular case he will be held accountable despite the margin of discretion afforded him. The court also accepts that the mortgagee must take account of the mortgagor’s interest.Wright V Sagicor Bank Jamaica Ltd. The margin of discretion afforded to the mortgagee does not mean that he can act as if he is disposing of his own property. cited supra. In the former case the court found at [102]9 that the Defendant bank was liable. and this applies even if he or she employs someone to write them as London Joint Stock Bank v. 3. That interest in the vast majority of cases will be that the property is sold for best price possible so that his indebtedness can be reduced by as much as the sale permits. [2016] JMCC COMM 34 and Marvalyn Taylor.

These are (1) where the disclosure is compelled by the law(This is especially meaningful in light of recent legislation both locally and internationally)12. (3) where the disclosure is required in the interests of the bank and (4) where the customer consented. In the case of the latter.S. The contractual duties of a 10 Justice Sykes’ statement at [1] “The application of the facts to the law.uk/cases/docs/jcpc-2017-0011-judgment. led to a harm to the customer. July 2018) <https://www. 'Relationships Between Banks And Customers' (Lawteacher.jcpc.” 11 [2018] UKPC 12 at para. It was determined on the facts that the defendant’s case disclosed no real prospect of her successfully resisting the Bank’s claim. and Proceeds of Crime Act 2007.The bank’s defence that it acted reasonably and in good faith and the fact that there was a shortfall for which it is seeking restitution from Mr and Mrs Khiatani (‘the Khiatanis’) is not a sufficient reason to say that it breached its duty to the claimants was rejected. 12 < https://www.13 It must be stressed that the time of commencement of the banker-customer relationship is of the utmost importance in analysing the assessment of Ungoed LJ. even implicitly to the disclosure.B. the Privy Council reversed the Court of Appeal and reinstated the trial judge’s granting of a summary judgement in favour of the bank.net/free-law-essays/commercial-law/relationships-between-banks-and-customers- commercial-law-essay. the rules of which are laid down in Tournier v National Provincial and Union Bank of England [1924] 1 K. that it is the bank’s duty to treat those information learnt from the customer’s account and also information arising from the bank-customer relationship as confidential. Bankes LJ gave the underpinning principles. account holders or be subject to withholding on withholdable payments.php?vref=1> accessed 4 July 2018 7 .11 Both cases affirmed the banker-customer relationship and arose as a result of the contractual relationship which exists. generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U. four conditions were given under which disclosure is permitted.lawteacher. This is a case in which a customer's employer acting on the disclosure of information from the bank. Here the negligence of the bank in disclosing confidential information.net. A bank has a duty to guard the privacy of the customer in the bank-customer relationship. 461. 13 All Answers ltd. Taylor-Wright. (2) where there is a duty to public to disclose. failed to renew his (the customer’s) contract.10 The overarching issue was the negligence of the bank as a trustee of the power of sale. Simultaneously.pdf> accessed 4 July 2018 12 For example Foreign Account Tax Compliance Act 2010. This judgement arose on the facts of this particular case and not as a result of the banker-customer relationship per se. Jamaica.

Cit 8 . a banker is not precluded from opening an account on a conditional basis on the understanding that it will be closed if references are unsatisfactory.P. who forged all the documents. The relevant facts are. it was not taken out by the company but by the forger. In Stoney Stanton Supplies (Coventry) Ltd v Midland Bank Ltd [1966] 2 Lloyd's Rep. The provision creates a legal dilemma however.uk/Natwest-Bank-v-Morgan. Whiting15 in his text notes even with the provision under section 4. or a director opens an account in the name of the company. In: Mastering Banking. The position that a normal relationship between a customer and banker did not give rise to a relationship of trust and confidence was affirmed in the judgement. that faced with arrears. The bank was not found liable and could enforce its security against the wife. that stipulates that when collecting a cheque the bank must receive payment for a customer also when an account is to be opened suitable references must be tendered. As the company did not authorize the opening.14 where a wife sought to have a second mortgage contract set aside citing undue influence as the bank manager had come to her home to have her sign documents for the refinancing. Banker-Customer Relationships.co. Lord Denning MR held that as far as the opening of the account was concerned. legislation governs the use of instruments such as cheques (Cheques Act 1957). 373). This is not the same as where there taken to be implicit consent as for example where a grandparent opens an account in the name of a child without the consent of a parent/guardian. it could not be said that there was any banker-customer relationship between this company and the bank. In certain countries like the UK. The grounds that the bank did not ask the wife to obtain independent advice and that the husband was hovering around when the manager spent only a few minutes advising the wife was rejected.banker do not begin until then there is a so called “meeting of the minds” and there is a real intent on the part of both to establish this relationship as no written contract usually exists between banker and customer. OP. The objective standard requiring ‘reasonable skill and care’ was met in the case concerning National Westminster Bank plc v Morgan [1985] UKHL 2.php> accessed 5 July 2018 15 Whiting D. a husband and wife agreed with the bank to both refinance their mortgage with liability for the husband’s business. if cheques are collected for the account 14 <http://www. The terms of the banker –customer contract have been gradually determined and modified as banking practice developed over the years.e-lawresources.

and the collection of cheques was a risk. It may also be sufficient to satisfy the requirement necessary where the bank acts as an agency and certain other duties are imposed on the bank requiring highly personalized services as the modern banking context demands. It would not be in the interest of the courts or the jurisdiction that they oversee to employ a higher standard of loyalty and fidelity. except in exceptional circumstances outside of the general duties as propounded by the ‘landmark decision’16 of Lord Denning in United Dominion Trust v Kirkwood [1966] 2 QB 431.Hooley. With technology and the development in electronic communication. in spite of what or how they may construe the duty to arise. Ungoed-Thomas’ observation as to ‘the reasonable care and skill ’standard is one that is favoured by most courts. In the final analysis the standard or judgements which approximate to the standard of “reasonable care and skill’ may represent a balance that will enable the continued viability of a bank. or when the implied contract between the parties begins. the banker customer relationship will require stricter adherence to privacy and security on the part of both parties to the agreement. as given previously.holder in the meantime as it is quite likely that the account holder has not become a customer.A. The banking sector is important to a successful economy and commercial banks represent a key player in the sector.Lomnicka. ‘Ellinger's Modern Banking Law' 9 .J. without undue hardship to the customers who themselves took due care. 16 E. E.Ellinger.P. R.

London 1985) https://doi.org/10. Ellinger's Modern Banking Law (4th Edn .1007/978-1-349-17757-8_8 Case Law Woods V Martins Bank [1959] 1QB 57. V Cradock [1968] 2 Lloyd's Rep. United Dominions Trust v Kirkwood [1966] 2 QB 431 Great Western Railway Company v London and County Banking Co. Mastering Banking . P. [1914] 19 CLR Canadian Western Bank v Alberta 2 SCR 3. [1901] AC 414 Selangor Rubber Estates Ltd. Ltd. Commissioners of the State Savings Bank of Victoria v Permewan Wright & Co. E.P et al. (Macmillan Master Series. Palgrave.References Textbooks Ellinger. 289 London Joint Stock Bank v. McMillan and Arthur [1918] AC 77 10 . D. Ltd. Oxford University Press 2006) Whiting.

Tournier v National Provincial and Union Bank of England [1924] 1 K. 461 Stoney Stanton Supplies (Coventry) Ltd v Midland Bank Ltd [1966] 2 Lloyd's Rep. [2016] JMCA Civ 38. Sheila v Sagicor Bank Ja.Wright V Sagicor Bank Jamaica Ltd. 373) National Westminster Bank Plc v Morgan [1985] UKHL 2 Statutes Banking Act Jamaica Bank of Jamaica Act 1960 Cheques Act 1957 Proceeds of Crime Act 11 . [2016] JMCC COMM 34 Marvalyn Taylor.Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548. Ltd. Bristol and West Building Society v Mothew [1996] EWCA Civ 533 Joachimson v Swiss Bank Corporation [1921] 3 KB 110 Foley v Hill (1848) 2 HLC 28 Morrell V Workers Savings and Loan Bank [2007] UKPC 3 Khiatani Jamaica Limited.B. Sunil and Khiatani. Khiatani.

According to the question commercial banks “appear to enjoy tremendous freedom” in their role as deposit taking and payment making institutions. It also prescribes conditions under which breaches may occur in contract and on the principles of good faith. once certain precluding conditions are not evident. the statutory requirements underpinning both and the matter of control that ought or ought not to be applied on this particular aspect of their banking practice. The leading cases which define the banker-customer relationship are Joachimson v Swiss Bank Corporation [1921] 3 KB 110. 3. but rather as a creditor. such as when. Specifically the obligations of a bank are: 1. Right of general lien. 4. 2.Question 2. To honour cheques. These ascribe the legal position of each party in that the banker must receive money from and collect cheques and other bills of exchange for the customer and repay the money against the customer's written order. The issue is to what extent such an assertion could be said to be true. are regulated by the central bank. To follow the customer’s oral or written instructions. as the bank’s agreement is to repay an equivalent sum of money based on the order of the customer who provides his signature. In the UK the Cheques Act 1957 imposes obligations on the drawee bank to pay or dishonor cheques based on a list of factors (section 67.B. Failure on the part of a bank to do so could incur liability with compensation to the client. To give notice before closing an account Alternatively banks also have the following rights 1. unless falling under the exceptions specified in Tournier v National Provincial and Union Bank of England [1924] 1 K. not exercisable in certain circumstances.2). To maintain accurate accounting and keep a record of such 5. 461. This places the banker not as a trustee in relation to the customers’ account. 12 . To ensure confidentiality in relation to the account and personal information. given that commercial banks like other players in the financial sector. To address the legality of their actions in imposing certain fees this paper will examine the role of central banks. the obligations of the banker customer relationship. and Foley v Hill (1848) 2 HLC 28.

3. When the customer deposits some money in the bank without specific instructions and the amount is not sufficient to discharge all debts. Money or documents are deposited for a specific purpose. twenty-five core principles for effective banking supervision were adopted. The central bank of countries are in charge of regulating financial sector. this relationship takes place in the context of a regulator. i. The proceeds of Crime Act (POCA) and The POCA Regulations. even to a time barred debt. if a customer owes several distinct debts to the bank. with notification to the customer. Implied is the right to charge interest on advances. Right of set off. The financial Building Institutions Act. These acts since the financial collapse has been 17 Mastering Banking <https://link. A banker customer relationship exists because of the mutual confidence placed in each party to the contract. 17 5. Together with the Bank for International settlements.1007/978-1-349-17757-8_8> accessed 7 July 2018. I. This objective has been achieved through both primary and secondary legislation. 2. then the problem arises as towards which debt this amount should be adjusted. 18 Bank of Jamaica The Central Bank’s Role as Regulator p 7 13 . Valuables are deposited for custody ii. These principles according to the Bank of Jamaica (BOJ ) publication18 details the minimum powers and authorities which supervising banking authorities must have together with the duties which must be performed to be effective. iii. v.com/chapter/10. These are The Banking Act. 4. In the absence of any specific instructions. A customer as trustee of property leaves such with the bank with notification. The Financial Institutions Act. Securities have been left with bank by mistake iv. However. There is an express agreement that the right should not be exercised. Right of appropriation. Right to close the account.e.springer. This is the bank has the right to adjust the amount standing to the credit of the customer against the debit balance in the other account or to combine the accounts. To perform this function banks since 1997 employ and adhere to the Basel Committee on banking supervision. and reasonable commission for expenses incurred when acting on the customer's behalf. But the banker must inform the customer about the appropriation.. the bank has the right to appropriate the deposited amount to any loan. A foremost specification is a “suitable and potent” legal framework.

In addition. at least. It is therefore. Technology which has impacted banking operations has influenced charges and fees and introduced new fees. it promotes the safety and soundness of financial institutions so that they do not become a source of systemic risk and pose a threat to the payment system. Such a role reposes only with the board of directors and senior managers who must satisfy the fit and proper criteria19. the BOJ is established by the Bank of Jamaica Act 1960. and maintain a stable financial system. The literature asserts that in undertaking that role. credibility and viability of an economy. For instance using an Automated Teller Machine (ATM/ABM) to withdraw or deposit money attracts a surcharge fee.’ Firstly. so that the collapse of the early 1990s will not reoccur. strengthen. Management. 21 Being that there is oversight from an authoritative body such as the central bank. It is noted that banking supervision is ‘double pronged. This role is crucial as this sector is vital for the stability. Banking and Finance Law class notes 5 June 2018. As a regulator the central bank does not manage banks nor can they assume the proper management thereof. Some of these fees because they are implied are subject to discretion and this may be the loophole for a plethora of fees in spite of the regulatory mechanisms. They would also need to ascertain the financial soundness of the licensee. as with the 1990s crisis. This aspect uses a risk management assessment methodology employed by the United States known as CAMELS. there is some legitimacy to their levying of these fees overall. they have regular on site and continuous off site examinations of institutions. Assets quality.implemented to achieve. In Jamaica. The role really primarily concerns protecting depositors and an overall collapse of the sector. allocates credit and meets the needs of the customers and communities they serve. Section 34 empowers the BOJ to examine on a yearly basis. 20 Ibid. 14 . outside the scope of the regulator to prevent the failure of a financial institution. using the ATM of another 19 A measure of the competence. The BOJ falls within the portfolio of the Ministry of Finance. Liquidity and Sensitivity to market risks. The inspection involves supervision of practices and also monetary inspection. Cit p 2 21 This stands for Capital adequacy. Earnings. Secondly it promotes an efficient and effective banking system that finances economic growth. It is the monetary authority in Jamaica. integrity and qualification of the board and management. Op. the affairs of each licensee and to ensure compliance with the statutory requirements. 20 In publications from the Bank of Jamaica.

the central bank exercises power conferred by subsection (4) of section 132 of the Banking Services Act. FGB. inter/intra banking.wallets. safety deposit boxes  Loans and discounts. using other machines (most internet banking free)  Depository services. The charge will differ across bank and according to the type of account. SBJ. NCB. The BOJ publishes these fees annually as part of its commitment to standards and in accordance with The Banking Services (Deposit Taking Institutions) (Customer Related Matters) Code of Conduct.  Transfer fees between accounts. The Government Consumption Tax is applied to these fees. 2016. this fee varies across banks as there is no one set fee applied by the regulator. CBNA. lists approximately 65 different categories of fees and charges across eight commercial banks 22including:  Minimum monthly service charge (waived in some instances where there is a minimum balance maintained). JMMB.  Stop payment/cancellation orders ( local and foreign exchange accounts)  Savings account. The Commercial Banks Schedule of charges and Fees as at 31 December 2017.Withdrawal  Telegraphic transfer of funds  Ebanking-ABM. 15 . JN. FCIBJ. As the regulator and supervisor of the financial sector.bank will attract another kind of fee known as Other Bank Fee. Some banks will waive the maintenance. A regular checquing account attracts a monthly maintenance fee that may be higher than that charged for a regular saving account. once a minimum balance is maintained.credit card/ debit card services  Cash advances  Late payment  Overlimit  Replacement card  Miscellaneous charges-foreign cheque and draft negotiated  Manager’s cheque  Bill payment services –in house charges 22 Banks are BNS.

The Banking Services Act 2014 contains provisions. Necessity is occasioned by payments to be made. The code may provide for matters such as the obligation to provide customers with reasonable notice of fees and charges. that stipulate that the Supervisor (who under the Act is the Governor of the Bank of Jamaica) may issue a code of conduct on consumer related matters. The matter was aired at a Caribbean Policy Research Institute (CAPRI) think tank forum in Kingston24. Damien King clearly stated the position that there should be no regulation of bank fees as this would negatively impact investment and the profits. The CaPRI’S executive director. particularly on dormant accounts and there was a concerted thrust to have customers use online/ technology based alternatives to in house banking. statutory refund payments (National Housing Trust). tax returns. or remove the service altogether ( This seems at best a thinly 23 Simone Bowie Jones The regulation of Banking Fees and Customer Service < https://www. especially as it is a necessity for an individual to have an account at a bank or other deposit taking institution.com/resources/item/the-regulation-of-banking-fees-and-customer-service. 24 Reported in Daily Observer “ Bank Fees Stir Passion at CaPRI Forum” 16 March 2018 <http://jamaica- gleaner.23 impose an obligation to keep the language in contracts with customers simple and clear and that key terms are brought to the customer’s attention and require licensees to establish effective methods to deal with customer complaints When persons are informed then they will be in a position to make better choices. customer access to information at a reasonable cost. Dr.16 (1) (a) } or a direction { (1) (b) } to the deposit taking institution should breaches occur in the provisions thereof. stipulates enforcement procedures and applicable sanctions such as a warning {S. Customers however will be dissuaded when they are faced with a situation where banks seem to operating in a manner which does not engender public trust and this feeling peaked at the start of the year 2017 when the banks introduced new and what seemed to be excessively high fees. insurance payments (claims) and others which are made through direct credit. Providing information about their practices instills confidence and trust in the banking sector and depositors and investors will be inclined to support this valuable sector.html> accessed 8July 2018. in section 132 (4) (b). require interest rates to be expressed as annual rate calculated in a standard manner across the industry.The Code of Conduct 2016.com/article/business/20180316/bank-fees-stir-passions-capri-forum> accessed 9 July 2018 16 . referred to above in Part III.myersfletcher. including salaries. This would be brought about by the need of banks to switch costs to other income bearing products such as loans.

The fee being charged on dormant accounts was also raised at the Forum. as she does not know how to use the 25 <http://www. but one 53 year old customer expressed that she is faced with removing her money. a leading bank was charging a cheque encashment fee of $1385 for non. His bank since the furor had removed fees on these accounts by the end of 2017. who do not trust the new technology. It was noted that dormant fees represented $45 billion in income across banks.customers. It would appear that the banks would want to appropriate these funds before the turnover.veiled threat). The same transaction at publication of the BOJs schedule as at 31 December 201725 attracted a new rate of $385 for both customers and non- customers. Dr. although the sector is sensitive to public outcry. Some customers prefer to be dealing with a person face to face rather than an ABM or an online system. Mr.jm/financial_sys/rates_charges. King.26 A notice in one branch advised using a Bank on the Go in a nearby parish.boj. that the weakest and most vulnerable should be protected and their lack of access to a sophisticated banking methodology would place them at a distinct disadvantage. The opposition government representative (Fitz Jackson) was of the opinion however. Banks need to consider that they enjoy a wide and varied customer base. For example.php> accessed 9 July 2018 26 The Sunday Observer “Clarendon Vex as NCB. The trust aspect is very integral to the customer. the schedule showed that all eight commercial banks had no fees on these accounts. Currently he gave the profit as $31billion from bank fees for the country’s two largest banking groups.banker relationship. made his opinions based on the fact that online banking is an alternative to in- house transactions. A report in the recent press about the closure of two major banks who have decided to close their branches in Chapleton and Frankfield sparked the ire of residents as the closure affected personal and commercial banking. It was suggested that the impetus arose on the fifteen year timeline which banks have before these balances are turned over to the administrator general. Jamaica David Noel stated that dormant accounts represented a net loss to his company last year. There is a considerable population of digital immigrants (persons born before the advent of digital technology). After angry feedback in the press and on social media about it. Participant and CEO of Scotiabank.org. Jackson’s effort to have his Bill tabled in Parliament has not been successful so far. Scotia Cutback” ( 8 July 2019) pp 8-9 17 . the fee was rolled back. which are avoidable in this age of new technology and online banking.

respectively28 Governments have seen the need for control in limiting what fees are charged and the setting of limits on how much can be legally charged. It also raises questions about banking safety and security as digital immigrants may employ unsafe means. depending on the nature and severity of the disability. with the private sector seems to have decided that these control measures are unnecessary given the measures 27 The Daily Gleaner “Bank Fee Bill Dumped . 2014.com/resources/item/the-regulation-of-banking-fees-and-customer-service.  Free cheque (or similar instrument) cashing and changing. 2018) < http://jamaica-gleaner. In Jamaica parliament. by allowing strangers. In a press report government the then minister of finance.html> accessed 9 July 2018 18 . by any medium on any transaction. they naively trust as they cannot do better and they need the access. Shaw told parliamentarians that 95 per cent of the provisions in the Banking Services Bill were already included in the Bank of Jamaica’s Code of Conduct for deposit-taking institutions.27 Mr. The proposed Bill contains a mandatory service package which if enacted would form the Twelfth Schedule to the Banking Services Act 2014.myersfletcher.machine and she usually has to ask for assistance. Its provisions are applicable to all accounts. per account. It stipulates:  No charges for customer inquiries of any sort. credit facility or financial instrument between a licensee and a customer. Other affected had similar stories. and are debating guidelines to be initiated. Overall the banker-customer relationship becomes a strained one and there is unlikely to be mutual confidence.Gov't Votes To Reject Proposed Law” (February 14. Such stories are not sensitive to the customer or his/ her needs. Mr. Shaw further stated that he had identified 14 provisions in the bill that the previous administration included in the Banking Services Act.  No charges for statements.com/article/lead-stories/20180214/bank-fee-bill-dumped-govt-votes-reject-proposed- law>accessed 9 July 2018 28 Simone Bowie Jones “The Regulation of Banking Fees and Customer Service” <https://www.  A minimum of 120 free transactions by any medium. For the disabled also this is an added burden. In other jurisdictions such as Barbados and Trinidad the central bank stipulated guidelines limiting fees to be charged by commercial banks and deposit taking institutions. per annum.

5% of the loan amount. quoted as. cheque encashments and deposits and withdrawals in house. To extrapolate. which affects the ordinary depositor or customer. The transient words and phrases contained in Section 132 (4) (b) such as “reasonable notice. when Jamaica National Bank came on the scene as a bank. “… should not exceed 0. the percentage used to calculate commitment/standby fees should not exceed 1.” Once this is done as it can be. As a case in point. There is a long list of services provided by commercial banks. The regulator. they advertised “low and new fees” as their selling point. banks have acceded it is reasonable to infer that banks are behaving indiscriminately and outside of the good faith criterion. In short banking is a business and the sector should not be allowed free -fall without some form of direct control like a limit or cap on fees and charges. both primary and secondary. The transactions which are basic and common to the ordinary customer.already implemented by the legislation. banks are assessing market risks capability and applying this as a strategy to gain a competitive edge in the market. as the organ of the government is empowered to do apply these controls and since once pressured. 19 . then consumers can feel “reasonably” safe and confident when doing business with our local banks.” reasonable cost’” and “standard manner” ought to be replaced with definite words and figures as those issued in the Central Bank of Barbados Guidelines. There should be minimum standards imposed on these fees and charges such as the minimum monthly charge on savings accounts. It is the purview of the government to make this stipulation and to ensure its enforcement.0% of the loan amount and charges for transfers via the Real Time Gross Settlement (RTGS) should not exceed $15 Barbadian Dollars. particularly pensioners and the disabled should attract little to no charge.

and the notice had set out when the account would be classified as dormant. benefits shall continue to accrue.A licensee can freeze an inactive account with a credit balance and classify it as dormant or close a zero balance inactive account. where the licensee has stated how the agreement can be terminated. The mandatory removal of such a lengthy list of fees would likely have an adverse impact on a bank’s bottom line. the very notion of the proposed obligation of fairness and reasonableness of terms. and providing the option for the customer to either continue the transaction. this can only be done where the customer has been given notice ninety (90) days prior. how the customer is to respond to the notice and the consequences of failing to respond. or cancel it free of all fines. Also. or which differ materially from the initial agreement. there is to be no maintenance fee and electronic statements are to be published. The notice should also include the current statement of account and the whether a dormant account can be reactivated. other fees and no charges or other change unless at least 45 days written notice has been provided to the client explaining that they can opt out of the changes and propose changes. no transactions are to be made to the account. how to respond to the notice. Of note. 72 hours cooling off period after the execution of an agreement. annual fees. Disclosure of all fees and charges for ABM. what the parties to the agreement ought to have reasonably known or contemplated at the time of the 20 . where the dormant account has a credit balance. and in the case of a zero balance account. Provision to customers of a “key contractual terms” fact sheet It is not difficult to see why a bank would be concerned by the provisions of the Bill and of the minimum service package. No increase in interest rate. bearing in mind. in each instance. charges or penalty. whether this can be revived before closure. automated tellers or any other medium for processing transactions. and consequence of failing to respond. prior to the completion of the transaction. free of all charges. The notice should state when the change will be effective. However. No modification of terms and conditions which would place the customer in an adverse position.

Additionally. the percentage used to calculate commitment/standby fees should not exceed 1.0% of the loan amount and charges for transfers via the Real Time Gross Settlement (RTGS) should not exceed $15 Barbadian Dollars. mortgages and other security documents. Notification is also to be given within thirty days of the effective date of new charges. for transferring money between customer accounts at the customer’s bank’s ATM. These guidelines stipulate that the percentage charged for application/negotiation fees should not exceed 0. this provision would bring the requirement to specifically bear on all deposit taking institutions and may cause them to have to amend some of the provisions of their loan agreements.coursehero. there is to be no charge for cheque cashing.1007/978-1-349-17757-8_8 pp 109-121 https://www.a. Though the Consumer Protection Act has long since contained provisions regarding unfair contract terms and a requirement for reasonableness in relation to contract terms. dormant account notification charge which is reversible on acknowledgement of account holder and the minimum balance on which interest is to be paid should not exceed $300.agreement could impact on the interpretation of many banking contracts and agreements.5% of the loan amount. the Central Bank of Barbados has instituted guidelines governing the fees which can be charged by commercial banks. It is also likely that the banks will strongly object to the imposition of a restriction preventing them from implementing any change to its terms and conditions that would adversely affect a customer.com/file/p2usg8j/London-Joint-Stock-Bank-Ltd-v-MacMillan-and- Arthur-1918-AC-77-Commonwealth/ 21 . In Barbados. London https://link.00 Barbadian Dollars . third party withdrawals in respect of pensioners or for making account inquiries at the customer’s bank’s ATM. Different jurisdictions have taken varying approaches to bank fee and customer service regulation.com/chapter/10. Cite this chapter as: DOI Publisher Name Palgrave. there is a maximum $10 Barbadian Dollar p.springer.

He or she is also entitled to be reimbursed for any expenses incurred when acting on the customer's behalf. When the customer deposits some money in the bank without specific instructions and the amount is not sufficient to discharge all debts. 10.000 in his savings account. for instance. When a customer has two or more accounts in the same name and capacity in a bank. The bank has a right to combine the two accounts. then the problem arises as towards which debt this amount should be adjusted. the banker is agent to the customer when.000 after adjusting the credit balance of savings account against the debit balance of current account.000 and he has a credit balance of Rs. Mr X has overdrawn his current account to the extent of Rs.2 Like any other debtor.8. remits funds abroad and buys or sells stocks and shares for the customer.off. The banker has the right to repayment on demand of any overdrawn balance and has the right to exercise a lien over any of the customer's property lodged with the bank other than those simply deposited for safe custody (see below). the bank has the right to adjust the amount standing to the credit of the customer against the debit balance in the other account. The lien covers negotiable instru- use for q. In the absence of any specific instructions. the bank has the right 22 .In addition. A banker has the implied right to charge interest on advances. 3. For example. the banker collects bills of exchange and cheques. a bank also has a right of set.2. The bank can combine these two accounts and claim the balance of Rs. and reasonable commission for other services performed for a customer. Right of Appropriation: A customer may owe several distinct debts to the bank. makes payments for third-party cheques.

com/article/business/20180316/bank-fees-stir-passions-capri-forum 23 . Right to Charge Interest and Commission: The bank has the implied right to charge interest on loans and advances. http://jamaica-gleaner.wordpress. 4.to appropriate the deposited amount to any loan.com/2016/01/02/what-are-the-rights-and-obligations-of-a-bank- in-relation-to-customers-briefly-explain/ What are the rights and obligations of a bank in relation to customers? Briefly explain. But the banker must inform the customer about the appropriation. even to a time barred debt. https://ignoubcom. The bank can debit such charges to the customer’s account. and also to charge commission for services rendered by the bank.