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Duty of care of banks and the termination of a bank account

Banks are obliged to offer a bank account to companies in the context of its duty of care

The Dutch Supreme Court has ruled as highest authority in the Yin Yang c.s. case regarding the obligation to offer a bank account to companies in the context of the duty of care after termination by the bank.

Introduction

Recently, the Dutch Supreme Court ruled in the case ING/Yin Yang c.s. on the duty of care of banks and the related lawful termination of a banking relationship with a company. Yin Yang had in this case a bank account at ING. In addition, Yin Yang c.s. concluded an agreement with ING, named ‘Packaged deposit’ (in Dutch: verpakt afstorten) to enable deposit of cash by Yin Yang c.s.. ING terminated the relationship with Yin Yang c.s. because the source of funds was insufficiently substantiated. As a response, Yin Yang started proceedings. In the meanwhile Yin Yang c.s. approached other banks without success, as they had taken measures to limit the integrity risks for ING. As the agreement of a bank account and the agreement ‘Packaged deposit’ are two different agreements, the distinction between these two agreements will be important for the course of the case.

Decision of the court

In previous case law, courts have ruled that the bank has a duty of care and in that regard, they can be obliged to offer or continue a bank account with natural persons. In the case ING/Yin Yang the Court of Appeal acknowledged that banks could have a legitimate interest in refusing customers because of supervisory requirements or integrity risks. If that interest outweighs the interest of the customer, a bank may not have to offer a bank account to certain customers. In addition, the question whether ING Bank should be obliged to enter into a new contractual relationship with Yin Yang must be answered according to the situation at the time of the Court's ruling (ex nunc). The Court of Appeal ruled that a discrepancy between the interest of the bank and Yin Yang c.s.. The decision not to offer a bank account to Yin Yang c.s. was disproportionate according to the Court. However, the Court ruled that the interest of the bank stood in the way of the duty to offer the agreement to enable deposit of cash. The Dutch Supreme Court ruled that the decision of the Court of Appeal was not incomprehensible or insufficiently motivated. As the Supreme Court is the highest authority, no appeal can be made to this decision.

Impliations and conclusion

This ruling implies that a bank also has a duty of care to offer a bank account to a company. Important for this duty is that it is virtually impossible to participate in society and to operate a business without a bank account. The ex nunc ruling makes it difficult for a bank to extinguishg to a relation forever.

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