The relationship and contract of banker and customer
Produced in partnership with DLA Piper UK LLP
The relationship and contract of banker and customer

The following Financial Services guidance note Produced in partnership with DLA Piper UK LLP provides comprehensive and up to date legal information covering:

  • The relationship and contract of banker and customer
  • How is the relationship of a banker to a customer formed?
  • What are the general and implied duties of a banker to a customer?
  • What types of services do retail banks provide?
  • What are the FCA's concerns with conduct of business activities relating to the regulated activity of accepting deposits from retail customers carried on from establishments in the UK?
  • What systems and controls should firms have in dealing with customer complaints?

How is the relationship of a banker to a customer formed?

The Bills of Exchange Act 1882 (BEA 1882) establishes that a person becomes a customer when the banker opens an account in the person's name or when an instruction is received to open an account with a deposit credited to it. However, this is subject to certain condition. A banker/customer relationship is not formed merely through an account in a person's name being opened by the bank. For example, in instances of fraudulent activity such as identity theft whereby a bank account is opened using stolen identity details the banker would have no relationship with the person whose identity was stolen.BEA 1882

The relationship, therefore, only comes into existence if both parties intend for it to do so. This is normally given expressly when the customer asks for the account to be opened, but can also be inferred (Rowlandson v National Westminster Bank).Rowlandson v National Westminster Bank Ltd [1978] 1 WLR 798

The relationship is of creditor and debtor between the banker and customer, with the funds deposited becoming the bank's money. This is therefore a contractual relationship, with the amount of money deposited at the bank repayable to the customer. While the money is held by the bank, the bank will use the deposits for its own purposes.

If the account were to become overdrawn, then this simply reverses the relationship as between debtor and creditor.

What are the general and implied duties of a banker to a customer?

The duties of a banker to its customer, both implied and general, operate on two levels. Firstly there