PRACTICE OF BANKING

COVENANT UNIVERSITY M.SC/ACIB

PROGRAMME
 Banker’s Opinion (Status Enquiry)
 It is an established practice that bankers will exchange
opinion among each other on their customers and such
banker’s opinion may also be a form of service as a
customer may request that reference be obtained on
another person with whom he intends to have dealings
with.
 This could be by express authority or implied authority
Express Authority to answer status enquiry
a) When a customer gives third party his banker’s name
for reference purpose.
b) When a customer gives his bank specific instructions
to reply to another bank or direct to a third party
Implied Authority to answer enquiry
a) When a customer opens a bank account (Tournier
vs National Provincial and Union Bank of England
(1924).
b) That the customer is aware of this authority or
not is immaterial especially, for trading
customers.
c) Unless a customer specifically directs the bank to
reply an enquiry on him, such opinion is
restricted to banks and trade organisations like
Chambers of Commerce, Foreign Embassies and
government departments responsible for
commerce and trade.
 
 Where such request emanates from none of
these organizations, the bank should request
that it be routed through enquirer’s bank.
 Status opinion is worded and coded in
languages that presumably, only banks can
understand.
 Ifthis is used indiscriminately, confidentiality
might not be guaranteed.
 Circumstances necessitating taking reference

a) When an account is opened for someone who has

been maintaining an account before at another bank,
enquiry has to be raised to determine his banking
habit or commitment to his existing banker.
b) Where the customer of another bank introduces a
new customer (to confirm his suitability to introduce
another customer).
c) Where a customer of another bank is giving a
guarantee or indemnity (to establish if he is good for
such obligation and this must be reviewed
periodically).
 Practical Considerations When Replying to Any Enquiry

a) The letter head paper of the bank should not used

just a plane sheet paper is sufficient.
b) The reply should not be signed since signature is
admissible according to Statute of Fraud Amendment
Act (1828).
c) When a bank is preparing to reply, it is under no duty
to obtain information from outside sources (Parsons Vs
Barclays and Co.(1910)).
d) If the bank is holding a debenture over the customer’s
asset, this needs to be mentioned if it is not
mentioned.
e) If the account is new such that the opinion will be
premature, it needs to be mentioned.
f) If an enquiry is received by telephone, an immediate
reply should not be given. The enquirer’s identity
should be verified, thus he should be asked to confirm
by writing.
g) If an enquiry is received directly from the public, a
reply should not be given. However, the following
exceptions would apply
i. When the customer gives an express authority to
reply
ii. The enquirer ask the bank to make the reply to his
banker
h) Keep comprehensive record of all enquiries and
replies given. This helps to:
i. A guide to future replies to the same type of
enquiry
ii. The ability to process renewal enquires more
quickly
iii. A record of some of the customer’s outstanding
liabilities.
iv. If a customer asks the banker to give favourable
reply, the bank should politely and firmly decline
for the following reasons;
 Status enquiry is drafted with care and skill and
the bank should be fair, firm and objective to
avoid possible liabilities.
 If an unfavourable reply is given, the customer
may bring an action against the bank for libel or
damages.
 With the exception of debenture, other types of
securities whether direct or indirect should not be
mentioned.
 At the heading of the reply, the full name of the
customer should not be given.
 Possible Liabilities on Status Enquiry

 The possible liabilities of the banker’s opinion are

in two folds; first to the customer and second to
the end-user.
Risk to own customer
a) Breach of contract
b) Liability of libel or slander: where the customer
considers the opinion defamatory.
c) However, the bank could be protected if the
opinion is true, given honestly, in good faith and
without malice.
Special Consideration
 Where a customer is aware of the status opinion,
objects to it, and instruct the bank not to provide
such information without his prior consent, and the
bank accepts, the implied consent is ruled out. It
will amount to breach of contract if the banker
responds to such enquiry. In banking practice, the
best procedure is to close the customer’s account.
Risk to the Enquirer (Third Party)
 Although, the enquirer may not be a customer, the
bank owes him a duty of care when giving a status
opinion on bank’s customer. A breach of this will
expose the bank to the following liabilities;
a) Liabilities for fraudulent misrepresentation
(where the opinion is reckless and false).
b) Liability for negligence in tort as a result of:
i. Making statements without reasonable grounds.
ii. Expressing a statement in such an ambiguous
way that the recipient understood it in a
different way from the intention of the person
giving it.
iii. Liability for negligence in contract: This will
occur if the bank is in contractual relationship
with the enquirer (that is the enquirer is also a
customer of the same bank).