Chap 4 Operating Customer Account.docx - CHAPTER 4...

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CHAPTER 4 OPERATING CUSTOMER ACCOUNTS 1. Discuss some of the reasons leading to termination of a banker-customer relationship. - By mutual agreement. Both parties agree to terminate the relationship. - Unilaterally : Closure by customer : Customer gives written notice to terminate account Closure by bank : Bank must give reasonable written notice to custom - By operation of law (i) Liquidation of the customer When a company is being wound up or a winding up petition is being presented against it, the bank must immediately freeze the account until it receives further notice from the liquidators. After the company has been wound up, it ceases to have any legal existence and all its contractual relationships come to an end. (ii) Bankruptcy of an individual customer When bankruptcy proceedings are initiated against an individual customer, the bank should freeze the account. When the customer has been adjudged a bankrupt, the bank may be requested to close the account and remit the balance standing in it to the Official Assignee. A bank may be a creditor who initiates bankruptcy proceedings by presenting a bankruptcy petition to the court. The bank will be: - A secured creditor for any outstanding debt of the customer for which security has been given. - An unsecured creditor for other unpaid debts which would typically include an overdraft. (iii) Mentally incapable According to contract law, a person who has been certified as insane cannot enter into a binding contract. A bank may open an account with an individual and subsequently receive notification of the mental incapacity of the individual. In these circumstances, the bank should comply with the instructions of the relevant authority such as a court. If a court finds that an individual has a mental disorder and
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