Banker-Customer Relationship The relationship between a bank and a customer begins 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. 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.

Banker-Customer Relationship The relationship between a bank and a customer may be terminated by mutual consent or unilaterally by either party.

Banker-Customer Relationship A customer can close his current account with the credit balance duly withdrawn.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.

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.

Types of Banker-Customer Relationship 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.

Types of Banker-Customer Relationship 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.

Types of Banker-Customer Relationship Bailor and Bailee When a bank takes charge of the valuables of a customer for safe custody, the bank is the bailee and the customer is the bailor, the bank is bound to take reasonable care of its customer’s property.

Types of Banker-Customer Relationship Mortgagor and Morgagee When a bank takes a mortgage over securities when granting an advance to a customer, the bank is the mortgagee and the customer is the mortgagor.

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. 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 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 non-statutory 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; to promote a fair and cordial relationship between institutions and their customers; and through the above, to foster customer confidence in the banking system.

The Code of Banking Practice is a non- statutory code The issuance of the Code of Banking Practice by the Hong Kong Association of Banks and the Deposit-taking Companies Association is based on the philosophy of self-regulation. The compliance with the Code is not compulsory but the members of the two associations are obliged to follow the guidelines in providing financial services to customers.