Relationship between Banker and
Customer
The relationship between a bank and a
customer exists as from the date when
the bank accepts the customer’s
instructions even though an account
has not been opened until a certain
reasonable period of time later. It is a
contractual relationship under which an
account is to be established.
Relationship between Banker and
Customer
The relationship of banker and customer
does not come into existence unless
both parties intend to enter into it. If a
person has no account with a bank and
is not about to open an account, the fact
that a bank renders some causal service
for him will not make him a customer.
Relationship between Banker and
Customer
The banker has the expressed and implied
right to charge a customer a reasonable
fee for a service.
The banker should supply a customer
with either a passbook or a statement
recording the item by item transactions
and the balance of the accounts held
with the banker.
Relationship between Banker and
Customer
Debtor and Creditor
• When a customer deposits money with a
bank, the customer is the bank’s creditor
and the bank is the customer’s debtor.
• When a customer borrows money from a
bank, the customer is the bank’s debtor
and the bank is the customer’s creditor.
Relationship between Banker and
Customer
Principal and Agent
A bank acts as an agent for a customer to
collect and process the customer’s
cheques and accepts the customer’s
instructions in other services such as
foreign exchange, buying and selling
stocks and shares, payroll management,
etc. The customer is the principal in the
contract of services.
Relationship between Banker and
Customer
The mortgagor/mortgagee relationship is
established when a bank (the mortgagee)
takes a mortgage over securities when
granting an advance to a customer (the
mortgagor).
The bailor/bailee relationship is established
when a bank (the bailee) takes charge of the
valuables of a customer (the bailor) for safe
custody, and the bank is bound to take
reasonable care of the customer’s property.
Terms of Contract between Banker and
Customer
According to the case Foley v. Hill and Others
(1848), the relation between a banker and
his customer who pays money into the bank
is the ordinary relation of debtor and
creditor. Money, when paid into a bank,
ceases to be the money of the customer; it
is the money of the banker, who is bound to
return an equivalent by paying a similar
sum to the customer when he is asked for it.
Terms of Contract between Banker and
Customer
The banker must receive cash and collect the
proceeds of such items as cheques, postal
orders, money orders and bills of exchange
for his customer’s account. The money so
received becomes at once the property of
the banker, and he is indebted to his
customer for an equivalent sum; hence the
banker does not hold the money as his
customer’s agent or trustee.
Termination of the banker-customer
relationship
The relationship between a banker and a
customer may be terminated by mutual
consent, or unilaterally by either party.
Termination of the banker-customer
relationship
A customer can close his current account with the
credit balance duly withdrawn. If the current
account is overdrawn, the bank will nevertheless
require the repayment of both the principal and
interest accrued before the closure of the
account can be duly effected. Any unused
cheques of the account should be returned by
the customer to the bank for destruction. Then
the credit facilities should be immediately
deleted and any securities should be returned to
the customer.
Termination of the banker-customer
relationship
On the other hand, a bank has to give its
customer reasonable notice before the
closure of the customer’s accounts, which
must be long enough to enable the
customer to make alternative
arrangements except the customer has
performed any unlawful acts.
The banker’s duty of secrecy
It is the bank’s duty not to disclose to a
third party any information about its
customer. Any violation of the duty of
secrecy can result in the bank being
sued by the customer.
The banker’s duty of secrecy
But a bank may disclose information about a
customer’s account under the following
circumstances :
• under the compulsion by law
• under a public duty
• for the interests of the bank
• with the express or implied consent of the
customer
The banker’s duty of Repayment
According to the case Joachimson v.
Swiss Bank Corporation (1921), the bank
undertakes to receive money for its
customer’s account, and that money so
received is not held in trust for the
customer but borrowed from him with a
promise to repay it or any part of it during
banking hours at the branch of the bank
at which the account is kept, against the
customer’s written order addressed to
the bank at the branch.
The banker’s duty of Repayment
The customer must give clear
instructions as to how money of
his account is to be repaid. When
giving
the
instructions,
the
customer must exercise reasonable
care so that the bank is not misled
and
forgery
facilitated,
e.g.
instructions on a cheque.
The banker’s duty of Repayment
The bank’s duty of repayment can be
overridden
under
the
following
circumstances :
• The customer makes a stop-payment
order to the bank
• When the bank receives the notice of
the death of the customer
• When the customer has become
mentally incapable of running his own
affairs
The banker’s duty of Repayment
•
A court may also order the bank to stop
making payment from a customer’s
account in the following situations :
– Receipt of a garnishee order
– Notice of a petition of winding-up a
limited company
– Notice of a receiving order against a
customer who is in the process of
becoming bankrupt
Code of Banking Practice
The Code of Banking Practice (Code) is issued
jointly by the Hong Kong Association of Banks
(HKAB) and the Deposit-taking Companies
Association (DTCA) and endorsed by the Hong
Kong Monetary Authority (HKMA). This is a nonstatutory Code issued on a voluntary basis. It is
to be observed by authorized institutions in
dealing with their personal customers. It covers
specifically banking services such as current
accounts, savings and other deposit accounts,
loans and overdrafts, and card services. However,
the principles of the Code apply to the overall
relationship between authorized institutions and
their customers.
Objectives of the Code of Banking Practice
 to promote good banking practices by
setting out the minimum standards
which institutions should follow in
their dealings with personal customers;
 to increase transparency in the
provision of banking services so as to
enhance the understanding of
customers of what they can
reasonably expect of the services
provided by institutions;
Objectives of the Code of Banking Practice
 to promote a fair and cordial
relationship between institutions and
their customers; and
 through the above, to foster customer
confidence in the banking system.
Terms and Conditions



Institutions should make readily available to
customers written terms and conditions of a banking
service.
The terms and conditions should provide a fair and
balanced description of the relationship between the
customer and the institution.
The terms and conditions should be available in both
Chinese and English unless the banking service is
governed by law other than that of Hong Kong or
there is little or no demand for bilingual information.
Plain language should be used to the extent that this
is consistent with the need for legal certainty. Legal
and technical language should only be used where
necessary.
Terms and Conditions
 The terms and conditions should, where
applicable, highlight any fees, charges,
penalties and relevant interest rates (or the
basis on which these will be determined), and
the customer's liabilities and obligations in
the use of a banking service.
 The terms and conditions should be
consistent with this Code.
 Institutions should advise customers to read
and understand the terms and conditions
applying to the banking service.
Terms and Conditions
 Institutions should give customers 30 days'
notice before any variation of the terms and
conditions which affects fees and charges
and the liabilities or obligations of customers
takes effect. For all other variations,
institutions should give customers
reasonable notice before such variation takes
effect. The notice should show clearly the
variation and the ways in which the customer
may indicate refusal and the consequence.
Terms and Conditions
 Where the variation involves substantial
changes to existing terms and conditions or
the changes are very complicated, the
institution should provide a written summary
of the key features of the revised terms and
conditions.
 Institutions should issue to customers a
single document to provide a consolidation
of the revised terms and conditions if there
are sufficient changes to warrant it.
Terms and Conditions
 Where a customer refuses to accept the
variation to the terms and conditions and
chooses to terminate the banking service
within a reasonable period, the institution
should repay the annual or other periodic
fee on that banking service on a pro rata
basis, if the fee can be separately
distinguished and unless the amount
involved is minimal.
Fees and Charges
 Institutions should make readily available to
customers details of the fees and charges
payable in connection with the banking
services covered by the Code. A schedule of
the institution's standard fees and charges
should be displayed in its principal place of
business and branches.
 Details of the basis of charges for services
not subject to standard fees and charges
should be advised at the time the services
are offered or on request.
Fees and Charges
 Institutions should inform customers of
the nature and amount of charges
debited to their accounts promptly after
any such charge is debited.
Collection, Use and Holding of Customer
Information
 Institutions should treat their customers' (and
former customers') banking affairs as private
and confidential.
 Institutions should at all times comply with
the Personal Data (Privacy) Ordinance (PDPO)
in the collection, use and holding of customer
information. They should also comply with
any relevant codes of practice issued or
approved by the Privacy Commissioner for
Personal Data giving practical guidance on
compliance with the PDPO.
Personal Referees
 Institutions may require applicants for
banking services to provide in the application
forms for such services the names and
particulars of persons who have agreed to
act as referees for the applicant.
 The role of referees is confined to providing,
on a voluntary basis and upon request by the
institution, information about the applicant in
respect of the banking service specified in
the application form. Referees have no legal
or moral obligation to repay to the institution
liabilities of a customer unless they have
entered into a formal agreement to guarantee
the liabilities of that customer.
Personal Referees
 Institutions should require applicants for
banking services to confirm that they have
obtained the prior consent of the referees
for their names to be used. If the applicant
fails to give such confirmation, institutions
should not approach the referees. In such
cases, institutions should decide on their
own judgement whether to continue to
process the application.
Equal Opportunity
 Institutions should at all times comply with
the relevant ordinances for the promotion of
equal opportunity, including the Disability
Discrimination Ordinance and the Sex
Discrimination Ordinance, and any codes
issued under these Ordinances.
Equal Opportunity
 Institutions should not discriminate against
customers with a disability and should adopt
a helpful approach by making available to
them banking services on the same terms
and conditions as for other customers.
Institutions are also encouraged to install
specialized machines or software and to
provide physical access to facilitate the
provision of banking services to persons with
a disability.
Bank Marketing
 Institutions should exercise care in the
use of direct mail and in particular
should exercise restraint and be
selective –
– where customers are minors; and
– when promoting loans and overdrafts.
Bank Marketing
 Institutions should ensure that all advertising
and promotional materials are fair and
reasonable, do not contain misleading
information and comply with all relevant
legislation, codes and rules.
 In any advertising and promotional material
for a banking service that includes a reference
to an interest rate, institutions should also
indicate the annualized percentage rate of
interest and other relevant fees and charges,
and that full details of the relevant terms and
conditions are available on request.
Annualized Percentage Rates
 Institutions should quote the annualized
percentage rates of interest on deposit, loan or
credit card products to facilitate comparison
between different charging structures.
 Institutions should be prepared to respond to
inquiries from customers concerning
annualized percentage rates and the methods
of calculation, and also to advise customers
the annualized percentage rates of specific
products. The formula set out in the relevant
guidelines issued by the industry Associations
should be adopted in the calculation of the
annualized percentage rate.
Handling Customer Complaints
 Institutions should establish procedures for
handling customer complaints in a fair and
speedy manner. The complaint procedures
should take into account the following
criteria –
• (a) transparency - the applicable procedures
should be documented;
• (b) accessibility - the procedures should be
easily invoked by customers; and
• (c) effectiveness - the procedures should
provide for the speedy resolution of disputes
in a fair and equitable manner.
Handling Customer Complaints
 Details of how to invoke complaint
procedures should be made available to
customers and other interested parties
such as personal referees and
guarantors so that they know what steps
to take if they wish to make a complaint.
Institutions are encouraged to make
available details of how to invoke
complaint procedures in tape recording
or in Braille for the visually-impaired.
Handling Customer Complaints
 Institutions should ensure that all their
staff who deal directly with customers
are made aware of the complaint
procedures and are able to help
customers by giving correct information
about these procedures.