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I have actually taken a long thought on this write up headlined “Banker-Customer relationship”. The motive of this write up is to actually clarify the role the Customers and Bankers need to play in the Banking sector. This is because many complications come up in today’s Banking sector which some bank workers believe they are right whereas they were wrong and some customers believe they have done the right thing meanwhile they have wronged at the expense of the bank. Also, the purpose is to strengthen the relationship that exists between the banker and its customers.
It is very imperative at this point, to explain the terms Banker and customer.
According to late Dr H.L Hart, in the Law of Banking defines a bank/banker as “A person or company carrying on the business of receiving money and collecting drafts for customers subject to the obligation of honouring cheques drawn upon them from time to time by customers to the extent of the amount available on their current account.
Also, The Banking Regulations Act (BR Act), 1949 does not define the term ‘banker’ but defines what banking is? As per Sec.5 (b) of the B R Act “Banking’ means accepting, for the purpose of lending or investment, of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.”
According to Sec. 2 of the Bill of Exchange Act, 1882, ‘banker includes a body of persons, whether incorporated or not who carry on the business of banking.’
Definition of whom a Banker is, in my own humble opinion includes; Body of persons, or person, incorporated or not, who is saddled with the responsibility of carrying on banking business, in honoring of customer’s cheques, receiving monies on deposit account, current, savings and other accounts operated by the customer. There are certain duties Banks owe its customers, among the duties is the ‘Duty of secrecy’ I.e. A Bank cannot not disclose its customer’s information to third parties. The only exception to this is the court decision in the case of (Tournier vs. National provincial Bank 1924) which the court decided that the duties of a Banker to its customers are qualified but not absolute, and He stated four conditions where a bank can disclose its customer’s information to third parties.
Who is a customer? The definition of a customer was set out In Commissioners of Taxation v English, Scottish & Australian Bank Ltd [3], Privy Council, Lord Dunedin delivering the advice of the Privy Council referred a customer “as a person whose money has been accepted by a bank on the footing that they undertake to honor cheques up to the amount standing to his credit is in the view of their lordships, a customer of the bank in the sense of the statute irrespective of whether the connection is of short or long standing”. Also it was further analyzed in the case of Warren Metals Ltd v Colonial Catering Co Ltd (Supreme Court of New Zealand) [ 5] McMullin J also held that (at 276)…A customer is someone who has an account with a bank or who is in such a relationship with the bank that the relationship of a banker and customer exists…This emphasizes on how opening of account is very crucial as regard to Banker-Customer relationship.
The duties of customer to his bank are on two fold;
That the customer must take a reasonable care in drawing of cheques so as not to facilitate forgery. See this (London Joint Stock Bank Ltd v. Macmillan (1918) A.C. 777).
That the customer should give prompt notice to its bank immediately he notices of fraudulent activity or activities on his account. See this (Greenwood vs. martins Bank 1933).
In lieu of the above definitions of a customer, there are three (3) categories of customers. Among which are, those who maintain account relationship with the bank I.e. (Existing customers). Those who had maintained account relationship with the bank I.e. (Former Customers) and lastly are, those who are prospective customers/Potential customers. These are people intending to have an account with the bank. See this (Woods vs. Martins Bank, 1959). In summary, where the bank manager gave Mr. Wood a negligent advice on investment analysis. Mr. Wood suffered for damages and sued the bank for negligence. The court ruled in favor of the customer (Mr. Wood), stating that a prospective customer is also a customer of the bank. Literarily, most customers believe there is no contract between them and the banker meanwhile; there is an implied contract (by conduct) which means the defaulting party can be sued.
The relationship between a Banker and its Customers, inter alia is that of the debtor and creditor, Bailor and bailee, Lessor and lessee, Agent and principal.
Banker-Customer relationship becomes debtor and creditor relationship when the Customer deposits his fund with the bank, he becomes the creditor while the banker becomes the debtor and also becomes Creditor and debtor relationship when a customer borrows money from the bank, and he becomes the debtor while the bank becomes the creditor.
The relationship between a banker and a customer becomes that of Bailor and bailee relationship in the sense that, when a banker receives vital documents or any other valuable documents from his customer for safe custody, therefore, the bank becomes the bailee while the customer becomes the bailor. Note that bailment is classified into ‘gratuitous bailee’ and ‘paid bailee’. Banker offers a gratuitous bailee to their net worth customers where the customer will not pay for his safekeeping, if they deem it fit to have been satisfied while Bank offers a paid bailee to some of their customers for reason of unsatisfied charge.
Another relationship between a banker and a customer is that of principal and agent relationship. The Bank becomes an agent to his customer under the latter’s express or implied authority to act on his behalf in giving standing order, direct debit and such other instructions in compliance with Banking regulations law. The only exception to this, is when the bank is under the compulsion of law which can come through garnishee order or receiving order.
– Saliu Ismail Oluwatosin, an Associate Accounting Technician West Africa, writes from Lokoja, Kogi state.
Credit: Alhaji M.L Audu (FCIBN).
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