Banking Law

769 Pages·2014·26.681 MB·English

by  Anu Arora

‘This book is concise and covers the relevant topics which are normally prescribed ‘Accessible though rigorous, setting out the black letter law in a social,
in an LLB module. It is focussed on theory and the relevant case law and serves B political and economic context.’
the purpose of a good textbook without daunting detail. I shall recommend it as
Richard Alexander, SOAS, University of London
essential reading.’ M. Shabir Korotana, Brunel University
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‘This is going to be an excellent addition to the banking law textbook market.’
Clare Chambers-Jones, University of the West of England Banking Law
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i
Exploring all aspects of domestic, European and international laws and regulation, Banking Law
is essential reading for students and practitioners alike. From examining the academic debates, n
policy considerations and practical infl uences underpinning the regulations, this text offers you
a truly socio-economic and contextual approach to a subject which has an impact on the daily Anu Arora
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lives of people worldwide.
Written by a leading academic in the fi eld, this text looks to explore this constantly evolving
subject in depth, following the developments since the 2007 fi nancial crisis. This contemporary
textbook:
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■ highlights how banking law works in practice by analysing high-profi le cases including the
Northern Rock collapse and the effect of unregulated traders amongst many others
a
■ includes extracts from key legislation and cases that you’ll need to be aware of during
your studies
w
■ helps you explore the subject further with annotated further reading
About the author
Anu Arora is a Professor at the University of Liverpool. She has written extensively in the area
of banking law and is widely published in a range of academic journals, with research typically
focusing on banking regulation, the bank/customer relationship, commercial letters of credit
and some aspects of company law.  In addition, she is the banking law subject area editor for the A
Journal of Business Law.
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For further resources accompanying this text, please visit: r
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www.pearsoned.co.uk/legalupdates
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www.pearson-books.com
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Banking Law
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Banking Law
Anu Arora
iii
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Pearson education Limited
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Web: www.pearson.com/uk
First published 2014 (print and electronic)
© Pearson education Limited 2014 (print and electronic)
the right of anu arora to be identified as author of this work has been asserted
by her in accordance with the copyright, designs and Patents act 1988.
the print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval
system, distribution or transmission in any form or by any means, electronic, mechanical, recording or
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infringement of the author’s and the publishers’ rights and those responsible may be liable in law accordingly.
contains public sector information licensed under the open Government Licence (oGL) v2.0.
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Pearson education is not responsible for the content of third-party internet sites.
isBn: 978-1-4082-9784-1 (print)
978-1-4082-9786-5 (PdF)
978-1-292-01498-2 (etext)
British Library Cataloguing-in-Publication Data
a catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
arora, anu author.
Banking law / anu arora.
pages cm
isBn 978-1-4082-9784-1
1. Banking law—Great Britain. 2. Banks and banking, international—Law and legislation. i. title.
Kd1715.a97 2014
346.41’082—dc23
2014006485
10 9 8 7 6 5 4 3 2 1
18 17 16 15 14
Print edition typeset in 9/12.5pt itc Giovanni by 35
Printed in malaysia
note tHat anY PaGe cross-reFerences reFer to tHe Print edition
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Brief contents
Preface xiii
Guided tour xv
Acknowledgements xvii
Table of cases xx
Table of European legislation xxxix
Tables of equivalences xliv
Table of UK legislation lxvii
Table of US legislation xci
Table of international agreements xcii
1 What is money? 1
2 the role of the city of London as a financial centre and the
international financial institutions 57
3 the corporate governance failings in financial institutions and
directors’ legal liability 96
4 the uK response to the credit crisis 123
5 Bank regulation and supervision 168
6 the banker and customer relationship and the unfair terms in
banking contracts 204
7 duties arising under the banker and customer relationship 239
8 the bank as the fiduciary 302
9 the nature of the overdrawn account and the bank’s self-help
remedies 323
10 Bills of exchange 349
11 cheques as negotiable instruments 379
12 third party rights: wrongful dealings and liability 411
13 money laundering 457
14 nature and type of electronic fund transfer systems 481
15 Plastic money 530
16 overdrafts and bank loans 557
vv
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Brief Contents
17 recovery of money paid by mistake 589
18 securities for bank borrowing 621
Index 656
vi
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Contents
Preface xiii
Guided tour xv
Acknowledgements xvii
Table of cases xx
Table of European legislation xxxix
Tables of equivalences xliv
Table of UK legislation lxvii
Table of US legislation xci
Table of international agreements xcii
1 What is money? 1
chapter overview 1
introduction 1
the legal nature of money 3
History of money 4
Banking system: structure and classification 6
the uK banking sector 12
Banks and the 2008 financial crisis 25
other institutions providing banking services 30
competition in the uK banking sector 32
the nature of the banker and customer relationship 34
the clearing system and when is payment made? 38
conclusion 54
Further reading 55
2 the role of the City of London as a financial centre and
the international financial institutions 57
chapter overview 57
introduction 57
the role of the city of London 57
expansion of city activity 58
the nature of city activities 61
economies of scale 63
an international dimension to banking 63
an international financial system 70
the european institutions 73
effective regulation of cross-border banking institutions 80
some national barriers to the establishment of a global regulator 86
vii
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Contents
conclusion 95
Further reading 95
3 the corporate governance failings in financial institutions and
directors’ legal liability 96
chapter overview 96
introduction 96
What were the failings in corporate governance? 98
Why is good governance in banks important? 105
the position of depositors as stakeholders 106
Failings in bank governance and the duties owed by directors under the
companies act 2006 108
corporate governance under the Financial and services and
markets act 2000 (Fsma 2000) 114
the Fca’s corporate governance regime 115
conclusion 121
Further reading 122
4 the UK response to the credit crisis 123
chapter overview 123
introduction 123
the Banking (special Provisions) act 2008 124
the Banking act 2009 125
the insolvency regime for investment banks 136
the failings of the Fsa and bank regulation and supervision 137
the proposals for reform and the new regulatory architecture 140
the ‘joined up’ approach to prudential supervision 146
remuneration practices in banks and other financial institutions 153
conclusion 166
Further reading 166
5 Bank regulation and supervision 168
chapter overview 168
introduction 168
Bank regulation and bank supervision 170
the formal regulation of banks 170
the Financial services and markets act 2000 (Fsma) 173
conclusion 202
Further reading 202
6 the banker and customer relationship and the unfair terms in
banking contracts 204
chapter overview 204
introduction 204
Who is a customer? 206
types of bank customer 210
viii
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Contents
Fairness in consumer contracts in the banking sector 224
unfair contract terms legislation and bank contracts 231
conclusion 237
Further reading 238
7 Duties arising under the banker and customer relationship 239
chapter overview 239
introduction 239
terms arising under the banker and customer contract 240
duty to conform to the customer’s mandate 240
duty to make payment 241
duty not to exceed the customer’s mandate 242
duty to obey the customer’s countermand 244
duty to collect instruments 251
the bank’s duty to render an account 252
the banker’s duty of confidentiality 258
duty of confidentiality and the jurisdiction of foreign courts 271
duty to exercise care in contract and tort 283
the duty not to terminate the banker and customer relationship 294
duties owed by a customer to the bank 296
conclusion 300
Further reading 300
8 the bank as the fiduciary 302
chapter overview 302
introduction 302
the balance between the common law and fiduciary nature of the banker
and customer relationship 304
Protecting the vulnerable 305
undue influence 310
Practical consequences of the cases on undue influence 318
conclusion 321
Further reading 322
9 the nature of the overdrawn account and the bank’s
self-help remedies 323
chapter overview 323
introduction 323
the effect of the overdraft 326
Processing a request for an overdraft facility 327
Withdrawal of the overdraft facility 328
interest on an overdraft 329
appropriation of payments 330
combination of accounts 336
special rules relating to insolvency 345
conclusion 347
Further reading 348
ix
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