Bank customer relationship fiduciary bond

Role of Bank as Trustee - Academike

bank customer relationship fiduciary bond

[6] The relationship between a bank and its customer is not fiduciary in character. from bank because there is a "special relationship" between the insurance. Fiduciary bonds are also known as probate bonds, executor bonds, administrator bonds, and many others, depending on the nature of the fiduciary relationship. corporate fiduciaries, such as a bank or trust company, to post fiduciary bonds. . USA · Private Client & Offshore Services · Wills & Probate. [I]n the ordinary case of banker and customer, their relations depend entirely . of a Fiduciary Relationship Between Bank and Depositor or Customer so as to.

As soon as we open an account in a bank or the banker issue a draft or we deposit our valuables in a bank, a relationship is created with the bank at that moment. However, the relationships are not the same in all the cases. It means that for the different functions of banks, the nature of relationship between the banker and the customer varies.

In this unit we will discuss the relationships between the banker and the customer where role of bank as a trustee. A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer.

The customer is the beneficiary so the ownership remains with the customer. So basically, this paper seeks to examine the circumstances under which a bank may be held liable as a trustee.


This paper shall examine the various such circumstances under two broad heads. Chapter III discusses the various judicial principles evolved over a period of time, with in the ambit and scope of which the banker can be fastened with the liability as a trustee.

Historical background of banking system Banking is today an integral part of our everyday life: At home, at school, at office, at business, on travel everywhere we counter some aspect of banking.

The significance of banking in our day to day life is being felt increasingly. What are the institutions, so inevitable in the present day set up? How do they transact? How did the concept emerge?

bank customer relationship fiduciary bond

These are some of the simple queries that do not surface in our minds but are lurking deep down. Forms of money have evolved from coin to paper currency notes to credit cards. Commercial transactions have increased in content and quantity from simple banker to speculative international trading.

Hence the need arose for a third party who will assist smooth banding of transaction, mediate between the seller and buyer, hold custody of money and goods, remit funds and also to collect proceeds.

As the number of such mediators grew there is need to control. With the exception of the extremely wealthy, very few people buy their homes in all-cash transactions. Most of us need a credit in form of loans, to make such a large purchase. In fact, many people need financial support from Bank to fulfil the financial requirement.

It also throws light on living style, political and cultural aspects ofcivilized mankind. The strongest faith of people has always been religion and God. The seat of religion and place of worship were considered safe place for money and valuables. Numerous people, like priests or temple workers were both devout and honest, always occupied the temples, adding a sense of security. There are records from Greece, Rome, Egypt and Ancient Babylon that suggest temples loaned money out, in addition to keeping it safe.

The fact that most temples were also the financial centers of their cities and this is the major reason that they were ransacked during wars. Gradually as the personal possession got evaluated in term of money, in form of coins made of precious metal like gold and silver, these were being deposited in the temple treasuries.

bank customer relationship fiduciary bond

With the expansion of trade the concept of banking gained greater ground. Issuing currency was one of the major functions of the banks. The earliest from of money — coins, were a certificate of value stamped on a metal, usually gold, silver, and bronze or any other metal, by an authority, usually the king. With the increasing belief and faith in such authority of their valuation and the necessities of wider trade a substitute to metal was found in paper.

  • Table of contents
  • Navigation menu
  • Post navigation

The vagaries of monarchial rule led to the issues of currency being vested with the banks since they enjoyed faith, controlled credit and trading. All forms of money were a unit of value and promised to pay the bearer of specified value. Due to failure on account of unwise loans, to rule and organize, a stable banking system arose. History of Banking in India The story of Indian coinage itself is very vast and fascinating, and also throws tremendous light on the various aspects of life during different periods.

The Rig Veda speaks only gold, silver copper and bronze and the later Vedic texts also mention tin, lead, iron and silver. Recently iron coins were found in very early levels at Attranji Kheri U.

bank customer relationship fiduciary bond

A money economy existed in India since the days of Buddha. In ancient India during the Maurya dynasty to BCan instrument called adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist period, there was considerable use of these instruments. Merchants in large towns gave letters of credit to one another.

Trade guilds acted as bankers, both receiving deposits and issuing loans. The larger temples served as bankers and in the south the village communities economically advanced loans to peasants.

It has survived in the North India as seth. Small purchases were regularly paid for in cowry shells varatakawhich remained the chief currency of the poor in many parts of India.

Indigenous banking grew up in the form of rural money lending with certain individuals using their private funds for this purpose. The scriptures singled out the vaishyas as the principal bankers.

Exports and import were regulated by barter system. Havell in his work: The History of Aryas Rule in India says that Muhammad Tughlaq issued copper coin as counters and by an imperial decree made them pass at the value of gold and silver. The people paid their tribute in copper instead of gold, and they bought all the necessaries and luxuries they desired in the same coin. Soon the whole external trade of Hindustan come to a standstill. When as last the copper tankas had become more worthless than clods, the Sultan in a rage repealed his edict and proclaimed that the treasury would exchange gold coin for his copper ones.

As a result of this thousands of men from various quarters who possessed thousand of these copper coins bought them to the treasury and received in exchange gold tankas.

The standardisation of currency unit as Rupee in largely due to Sher Shah in Under Roman law a woman could arrange a fictitious sale called a fiduciary coemption in order to change her guardian or gain legal capacity to make a will.

The fiduciary of a fideicommissum is a fideicommissioner and one that receives property from a fiduciary heir is a fideicommissary heir. Similarly, ordinary commercial transactions in themselves are not presumed to but can give rise to fiduciary duties, should the appropriate circumstances arise.

These are usually circumstances where the contract specifies a degree of trust and loyalty or it can be inferred by the court. In Breen v Williams, [3] the High Court viewed the doctor's responsibilities over their patients as lacking the representative capacity of the trustee in fiduciary relationships. Moreover, the existence of remedies in contract and tort made the Court reluctant in recognising the fiduciary relationship. Recently, in an insider trading case, the U.

bank customer relationship fiduciary bond

Securities and Exchange Commission brought charges against a boyfriend of a Disney intern, alleging he had a fiduciary duty to his girlfriend and breached it. The boyfriend, Toby Scammell, allegedly received and used insider information on Disney's takeover of Marvel Comics. Although terminologies like duty of good faith, or loyalty, or the mutual duty of trust and confidence are frequently used to describe employment relationships, such concepts usually denote situations where "a party merely has to take into consideration the interests of another, but does not have to act in the interests of that other.

A protector of a trust may owe fiduciary duties to the beneficiariesalthough there is no case law establishing this to be the case. Inthe United States Department of Labor issued a proposed rule that if finalized would extend the fiduciary duty relationship to investment advisory and some brokers including insurance brokers.

Let us imagine it is a serious, successful band and that a court would declare that the two members are equal partners in a business. One day, X takes some demos made cooperatively by the duo to a recording label, where an executive expresses interest.

Y is unaware of the encounter until reading it in the paper the next week. This situation represents a conflict of interest and duty. Both X and Y hold fiduciary duties to each other, which means they must subdue their own interests in favor of the duo's collective interest. In this case, the customer becomes the Pledger, and the bank becomes the Pledgee. Under this agreement, the assets or security will remain with the bank until a customer repays the loan.

Relationship of Licensor and Licensee The relationship between banker and customer can be that of a Licensor and Licensee. This happens when the banker gives a sale deposit locker to the customer. So, the banker will become the Licensor, and the customer will become the Licensee.

Relationship of Bailor and Bailee The relationship between banker and customer can be that of Bailor and Bailee. Bailment is a contract for delivering goods by one party to another to be held in trust for a specific period and returned when the purpose is ended.

Bailor is the party that delivers property to another.

Role of Bank as Trustee

Bailee is the party to whom the property is delivered. So, when a customer gives a sealed box to the bank for safe keeping, the customer became the bailor, and the bank became the bailee. Relationship of Hypothecator and Hypothecatee The relationship between customer and banker can be that of Hypothecator and Hypotheatee.

This happens when the customer hypothecates pledges certain movable or non-movable property or assets with the banker in order to get a loan.

Fiduciary - Wikipedia

In this case, the customer became the Hypothecator, and the Banker became the Hypothecatee. Relationship of Trustee and Beneficiary A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary.

If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. The customer is the beneficiary so the ownership remains with the customer. Relationship of Agent and Principal The banker acts as an agent of the customer principal by providing the following agency services: Buying and selling securities on his behalf, Collection of cheques, dividends, bills or promissory notes on his behalf, and Acting as a trustee, attorney, executor, correspondent or representative of a customer.