CHAPTER 25.docx

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Management and Organizational Studies
Course Code
Management and Organizational Studies 2275A/B
Philip King

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CHAPTER 25 - BUSINESSAND BANKING THE BANK – CUSTOMER RELATIONSHIP • Relationship between a business and its bank consists of one bank account into which collect cash from customers and makes payments to suppliers, employees, government, and owners. • The bank as debtor and the customer as creditor. • Bank has fiduciary duty (providing financial advice for customer’s best interest) and may have additional duties like: o To provide advice with care and skill o To disclose any actual or potential conflicts of interest o To consider the interests of the customer ahead of those of the bank. Duties of the Bank and the Customer • Common law and banking practice imply legal duties on both parties. Bank must: o Honor payment instructions and repay deposits o Collect payments for the customer o Provide account information to the customer on a regular basis o Maintain secrecy of the customer’s affairs. Duty is qualified by legislation. • Money Laundering – The false reporting of income from criminal activity as income from legitimate business. • Customers also have implied duties to the bank: o Take reasonable steps to provide documentation as to who is authorized to give instructions to the bank, in order to prevent fraud and forgery o Keeps authorizations current o Notify the bank of any suspected problems o Provide safeguards for electronic communications The Bank-Customer Agreement • Standard banking documents are designed to protect the bank, not the customer. • Banking contract – Acontract that specifies the rights and obligations of a bank and a customer. • Purpose of banking contract is: o To specify who has the authority to issue instructions to the
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