Banking and Finance LawJanuary 19, 20154A-16A bBanks are multifunctional, usually, they were responsible to lending money and accepting deposits. Abks are not replying on the branch network anymore. They in some instances want customers to utilize online facilities.Banks can be divided into a number of groups. There is increasing overlap in the business activities in the banks. Banks are multifunctional so they are doing activities that they did not do before in essence they are engaging in a wide range of business activities. These activities include securities dealing, investment management insurance and estate agencies. Some banks have subsidiaries and these insurance, building societies, printries. Groups include commercial banks, merchant banks, building societies.Banks operate under regulated institutions such as the financial services commission and to some extend the Bank of Jamaica. Current, fixed deposits, business accountsThe common law definition of a bank is an institution engaged in the business of banking. The court has extalished 3 cardinal principles in contructing the common law definition of banks. The meaning of banking Martin vin that case Salmon J held that the giving of advice of financial matters constituted banking business and this is so because the bank held itself out as being in a position to advise its customers on their investments. And Salmon J stated, the limits of a bankers business cannot be layed down as a matter of law the nature of such a business must in each case be a matter of fact and accordingly cannot be treated as if it were a matter of pure law.A financial institution that is regarded as engaging in banking business in one jurisdiction is not necessarily so considered elsewhere. An institution that is widely considered to be a bank will usually be treated by the courts as engaged in banking business. Traditionally, the hallmark of banking business involves the acceptance of money on deposit from members of the public who thereby became customers of the bank and the relending or reinvesting of these funds by the bank in order to make a profit. In the case ofUnited Dominions Trust v Kirkwood an entity cannot qualify as a bank at common law in the UK unless it opens on behalf of customers current accounts operable by cheque and into which customers can pay cheques and other effects for collection.Lord Denning noted that there are 2 characteristics of banks which is one they accept money from and collect cheques for their customers and place them to their credit and two, they honour cheques or orders drawn on them by their customers when presented for payments and debits their customers accordingly. These two characteristics carry a third in that they keep current accounts or something of that nature in which credits and debits are entered. A bank should normally possess the qualities of probity, soundness and stability. In addition, an entities reputation as a bank may also be relevant. Harman LJ dissented as reputation alone was not sufficient for an entity to be referred to as a bank. It is felt that since 50 years has passed since the Kirkwood case and cheques are becoming obsolete the definition of banks should be updated. Another reason for cheques becoming obsolete are the more use of credit and debit cards.

NCB v Raymond Hue- Negligent AdiceMurrel v Workers Siblings and Loans Bank JANUARY 26,2015Banking and Finace Lecture notes Jamaican Financial services Industry Deposit taking BanksMerchant banks 1. JMMB2. MF and G trust and finance ltd.3. Scotia DBGTrust companies- non banking financialBuilding Societies- JN, VMBS, Jamaica Building SocietyCredit Unions Governed Cooperative Societies ActMoney Services business- cambios, FXtraders, Bureaux de Change (places on can change money operating inside hotelsNon-deposit taking investment institutions:Insurance companies- insurance actFirms and dealers- securities actUnit trust- securities actPrivate pension funds- pension fundsNon-deposit taking lenders- money lending acts, (same day loan) fianc houses

Bank of Jamaica supervises the activities of deposit taking entities (sec 34a Bank of Jamaica Act). It also provides regulatory oversight for foreign exchange traders and remittance companies (sec 22b and sec 22g (2) BOJ Act). BOJ supervisory and regulatory authority for deposit taking institutions has been established through number of primary and secondary legislative acts of parliament. The banking act, The Financial Institutions act, the financial building institutions act. These statute provides the legal and policy parameters for licensing and supervision of financial institutions including the legal basis for enacting secondary legislation, prescribe credential criteria, minimum solvency standards to be maintained by licences, the various powers available to the bank of Jamaica and the minister of finance and planning in the event that bank distress or failure appear imminent of threatens the soundness of the financial system. (What happened in the 1990s with the financial break down.)All commercial banks, building societies and licences under the financial institutions acts have been authorised to acts as authorised foreign exchange dealers (buy sell and deal in foreign currencies) this includes the taking of deposit and making loans in foreign currency.Credit unions operate under the co. They were designated to be specified financial institution under the BOJ Act, allowing the BOJ obtain info on the operation of the credit union. Operating with the financial system is a mix of non deposit taking financial institutions and these fall directly under the regulatory over sight of the FSC( Aug 2, 2001 replaces the office of the superintendent of insurance). The mandate of the FSC is to supervise and regulate the securities, the insurance and private pension industries.What is security? It is a essentially a contract that may be assigned a value and is often times tradable. It include notes, stocks preferred shares, bonds, debentures, warrants. The FSC is empowered under the FSC and securities act to1) Grant or refuse licences and in any case or the branch of the securities act and its regulations suspend or cancels license.2) Examines the records of licences in such manner as the FSC sees fit3) Test the integrity competence, and judgement through fit and proper assessments of all significant holders directors and senior managers of securities firms.4) Introduce measure to reduce the threat of fraud or money laundering in licensed institutions.5) Enforce the rules of a recognised stock exchanged.6) Hear appeals by members of a recognized stock exchanged in matter relatin to the operation of that organization.7) Take action to prevent manipulation of the securities market.8) Take action in the interest of the public to stop trading a security.9) Apply penalties for breaches of the securities act 10) Educate the public about the securities industry.What is POCA?March 2007, may30 2007This a wide ranging legislation that targets benefits derived from the commission of any crime and incorporates the concept of money laundering as introduces the principle of civil procedures, with the passage of POCA. The drug offences (forfeiture of procedures) dangerous drug act, money laundering act and the money laundering regulation 1997, have been effectively repealed and replaced.Its the Basel Committee on banking supervision has drafted guidelines for the minimum capital to be held by internationally active banks to serve as a buffer against losses and assist in ensuring bank safety by calibrating for variation in risk resulting from variation to investment activities. Similar standards or variation of the standard have been adopted by regulatory agencies in most countries, including developing countries.So maintaining a bank account enhances a persons financial standing and credit worthiness. Until the end of the First World War, banks generally acted only for business men, the profession and the landing classes. The banks/ customer relationship was a particularly close one, now today and now in Jamaica, and after FINSAC, persons will maintain one or more bank accounts.There are legal consequences regarding holding a bank account as ... and other payment instructions and to obey its customers instructions as regard the collection of cheques and other effects payable to them. A bank holds certain incidental duties to its customers such as a common law duty of care, a duty of confidentiality and sometimes fiduciary duties similar to those owed by a trustee. (Abourahmah v Abacha 2005 EWHC 2662 QR 68)Who is a customer?There was a time when it was thought that a person becomes a customer of the bank only when banking services were habitually performed by him or her by that bank. Merely opening an account in the customers name was insufficient to confer that status. (Matthews v Williams Brown and Co. 1894)However in Ladbrook v Todd 1914, Bailhache J held that the thief had become a customer when the bank agreed to open the account and that the advice to the thief there had to be clearance before the proceeds could be withdrawn was irrelevant in this regard. A similar decision was arrived at in Commissioners of Taxation v English, Scotish and Austaralian Bank Ltd 1920. Lord Dunedin stated. the word customer signifies a relationship in which duration is not of the essence a person whose money has been accepted by a bank on the footing that the bank undertake to hour cheque up to the amount standing to his credit is a customer of the bank irrespective of whether his connection is of short or long standing. Where the bank performs a casual service for someone, for example Cashing cheques even on a regular basis, that person does not become a customer. The HOL held in the case Great Western Railway Company v London and County Banking Company Ltd 1901, that although the bank cashed cheques regularly at the request of the rate collector over the years he was not a customer as he did not maintain an account with the bank. Therefore, a person must operate an account with a particular bank in order to be designated as a customer (Iskandar v Bank of America National Rrust and Savings Association (1998). However in Canada, New Zealand and Malaysia there are suggestion that customer might include person who receive services from a bank without necessarily having an account. There are times when it is important to determine the precise moment when the banker stroke customer relationship comes into existence. Ladbrook v Todd suggest that this occurs when the bank agrees to open the account and this view is supported by Wood v Martin. The mere opening of an account in anothers name without their authority does not establish a banker/ customer relationship between the nominal account holder and the relevant bank. Accordingly the banker customer relationship comes into exists when the bank agrees to open an account in a persons name. It is consenting to having a regular business relationship with that person. To honour his or her cheques and executing other types of payment instruction and collecting cheques or other effects payable to him or her. The bank agrees to act as the customers agent in banking transactions and to exercise the same degree of care and skill in this regard as can be expected of a reasonable banker. A bank acquires certain defences visa vis a vis third parties in situation, where the banks operations on behalf of its customer such as the honouring and collection of cheques would otherwise expose the bank to claims for example, Conversion of a cheque.The Nature of the Relationship between Banker and Customers. This relationship is a contractual relationship. For example an amount equal to that deposited has to be repaid by the bank. In respect of a current account the amount is repayable without interest or with minimal interest against the customers demand and the customer retains the right to draw on his funds by means of a cheque or other payment instructions. As it regards a fixed deposit or savings the amount is repaid with interest either at a determined date or at call. The essence of the banker/customer contract is the banks rights to use deposits for its own purposes and its undertaking to repay an amount equal to that deposited with or without interest either at call or a fixed time. The HOL in Foley v Hill held that the banker/customer contract was fundamentally a contract between debtor/borrower and creditor. Lord Cotteham stated that when the account was in credit the banks duty was to repay to the principal when demanded a sum equivalent to that paid into his hands. Atkin LJ in Joachimson v Swiss 1921 b 110 CA stated that the bank cooperation described the banker/customer contract as including inter alia, a promise to repay any part of the amount due against a written order of the customer, addressed to the bank at the branch The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or facilitate forgery. His lordship concludes the bank is not liable to pay the customer until he demands payment. Case to note: Lipkin Gourman v Karpnale and Company.

For next class:1) With reference to the POCA explain what is meant by the term money laundering. 2) Outline the duties and responsibilities which are imposed on financial institutions under the Proceeds of Crime Act and the POCA (money laundering) prevention regulations.

February 2, 2015.The obligation of the bank to repay the debt only arises when demand is made. The relationship means that money deposited, the bank can treat it as its own. It simply has to return the money when requested. The fundamental banker/customer relationship is therefore not based on agency trust or bailment, though this may be the situation in particular contracts in the broad relationship. Ladbrook v Todd.The opening of an account is crucial. There is a duty of care (Wood v Martins Bank)There is also a fiduciary duty (Marley v MSMB and tC)Undue influence Hew v Ncb Advisory Liability (Headley v Byrne)Confidentiality (Megill v Mayne & Tounier V AG)Closing accountMutual agreement in accordance with contract.Unilateral agreement (NCB v Olint, David Smith, World Wise v RBTT)In respect of Folly.... 1-A customers demands is only necessary in the case of a current account or a savings account providing for payment at call. 2- The notion that a demand for repayment must be made at a branch where the money is held does not always operate thus Watkinson Case ( the matter of the demand ...)The trend in modern banking is for banks to dispense with writing relying on other devices such as passwords and codes. Morrel v Workers Saving and Loan Banks. Judicial support was given to the modern practice of acting upon the customers oral instructions. The fact that a bank impliedly promises to repay any amount against the written order from the customer addressed to the bank at the branch does not exclude the possibility of an oral order 3-If a bank is wounded up or the account is closed the customers credit balance becomes repayable. 4- the limitation period runs from the day on which the customer makes demands and is refused 5- Whilst the analysis in Folly and what [MISSING PART] concentrates on the banker customer relationship as reflected in the maintenance of an account. Banks also provide other services to their customers that cannot be described in debtor creditor terms. 6- Whilst Watkinson tends to suggest that the banker customer and account relationships are largely regulated by implied contractual terms modern banking practice usually requires a customer to sign an account mandate that contains details expressed terms governing accounts operation.

The Confidential Nature of the Contract.

This arises from the fact that the banker customer relationship includes elements of an agency relationship. The general rule is that an agent holds a duty of loyalty and confidentiality to its principal (Regal Hastings v Gulivers) however that duty varies depending on the type of agent involved. For example the confidentiality expected from a lawyer client relationship is much higher than that expected in other relationships, such as the director and company. The connection between the banks duty of confidentiality on one hand and other types of agency relationships involving the provision of highly personal services on the other hand; Diplock LJ in Carrick Jones v Law Society states such a duty (of secrecy) exists not only between solicitor and client but for example between baker and customer, doctor and patient and accountant and client. Such a duty of confidence is subject to and overridden by the duty of any party to that contract to comply with the law of the land. It is the duty of such a party to a contract to disclose in defined circumstances confidential information then he must do so any expressed contract to the contrary would be illegal and void

From the perspective of the agent the existence of a duty of confidentiality allows him to retain others in his business confident that such a duty will protect him from unnecessary external attempts to ascertain knowledge of his affairs or obtain his trade secrets thereby facilitating his entry into an extremely competitive kind of business which he would not have otherwise entered. In addition the agent is well aware that there exist professions that would not be carried on at all or at least not successfully should the person undertaking the confidential work not be able to reassure. Those instructing him not only of his own personal discretion but also that he cannot be generally compelled to disclose confidential information. For example an attorney-at-law cannot represent his clients interest effectively unless the client is able to discuss his matters openly. This justifies the duty of confidentiality in the banker customer relationship. However the banks duty of confidentiality maybe superseded by matter of state which are considered to be of greater importance.

Termination of the Relationship Generally the banker customer relationship or a particular banking contract may be terminated in accordance with his express terms. Therefore it is important to know the particular terms or nature of the contract a party is seeking to end. Where the contractual period is fix, for example a fixed deposit, maturity date or the hire of a safety deposit box for safe keeping, the contract cannot be terminated early unless both parties agrees. This is for a fixed period. In the case of an account that contemplates payment on demand such as a current account or ordinary savings account, the customer at common law may terminate the relationship at any time, by withdrawing the credit balance and closing the accounts according to the requirements. However the bank may insert a provision in the current contract to give notice prior to the closing of the account. The bank can also charge a penalty for closing the account to cover the cost to the bank resulting from the closer of the account. The bank is not obliged to pay any cheques presented after the account has been closed.

February 9, 2015

The banks Fiduciary Duty

Its customers agent a, bank has a duty to adhere strictly to its customers mandate. Similarly, a customer owe his bank a duty, as in any agent principal relationship, to issue clear and unambiguous instructions, to draw cheques with reasonable care and to inform the bank of its knowledge relating to fraud on the account. A part from the banks core duty (what are the core duties of the bank: to take deposit ... etc) to obey its customers instructions, any executions of its customers payment instructions or any performance of other incidental banking services for him (the customer) may lead to any imposition of other duties or form of liability on the bank.

These services may include the following:

1) A bank may become a fiduciary, owing its customers the core fiduciary duties of loyalty and fidelity. A bank attracts fiduciary duties arising from its proximate relationship with a given customer whether by actually assuming the role of a fiduciary or by knowingly dealing with a customer in circumstances that have induced the customer to regard the bank as having assumed such a role.2) Validity of mortgages or guarantees granted in non-commercial settings is determined by asking whether the bank exercised undue influence or committed some other legal or equitable wrong against the surety or more usually whether the bank had notice of such wrong doing by a third party vis a vis the surety. 3) A bank owes its customer concurrent common law and contractual duties to exercise reasonable care when providing services or products. In those rare circumstances, where a bank becomes a fiduciary, the bank will owe its customers an equitable duty to take care. {Bristol and west Building society v Matthew} Beyond the duties of skill and care, banks do not generally owe their customer the fiduciary duties of loyalty and fidelity. The courts do not impose fiduciary duties on banks towards their commercial customers and this reluctance has also been extended to personal customers who might be considered to be more vulnerable when dealing with the bank.Undue Influence:In the UK, in various cases of actual undue influence the claimant had to prove affirmatively that the wrong doer had exerted undue influence over the complainant to enter into the transaction. The complainant had only to show a confidential relationship with the wrong doer, which in turn raised a presumption of undue influence, the burden shifts to the wrong doer to prove that the complainant entered into the transaction freely. In Bank of credit and comerse int. SA v Aboody, undue influence was further sub-divided into two categories, certain relationship were deemed to be confidential such as attorney client, doctor patient, but not husband wife or banker/customer. The complainant had to show that he or she had reposed trust in a particular wrongdoer and this classification was adopted in Barklay v Obryant, which involved the relationship between husband and wife. Browne Wiliknson LJ concluded that this relationship did not fall within class 2a, a wife could also prove that in her particular case she left decisions on financial affairs to her husband. Accordingly reposed confidence and trust in her husband in relation to their financial affairs and therefore undue influence was to be presumed In Lloyds Bank Limited v Bundy, Sir Eric Sachas treated confidentiality as the touch stone for such fiduciary liability that is treating a bank as fiduciary obliged to safe guard the suretys interest. Sacrman LJ in National Wesminster Bank PLC v Morgan, shifted the focus away from whether the bank was fiduciary to whether undue influence had been exercised and accordingly on to whether one party had exercised a dominating influence over the other rather than on whether there was a relationship of confidentiality. The Juridical nature of undue influence has engendered considerable debate. One view is that the equitable doctrine of undue influence looks to the lack of good conscience on the part of one person exercising the influence and the wrongful exploitation of his counter party. {NCB ltd v Hew}Duty of Care in contract and TortA customer may try to recover his loses from the bank by pleading the breach of an implied term in the banker/customer contract to exercise reasonable care and skill. This implication can arise either at common law or by virtue of the relevant act in Jamaica.Selangor Rubber ltd v Cradock, Ungoede Thomas J put forward a general principle concerning a banks duty of care to its customers:1) A bank has a duty of care under its contract with its customer to exercise reasonable care and skill in carrying out its part with regards to operation within its contract with its customers2) The standard of that reasonable care and skill is an objective standard applicable to bankers 3) Whether or not the standard has been attained in particular case will be decided on the relevant facts which can vary greatly.4) The relevant considerations include the prima-facie assumption that men are honest. The practice of bankers, the very limited time in which banks have to decide what course to take with regard to a cheque presented for payment without risking liability for delay and the extent to which an operation is unusual or out of the ordinary course of business. 5) If reasonable care and skill is brought to the consideration of such an operation there is no need for any intervention by the bank.6) Any intervention required, in the exercise of reasonable care and skill depends on the circumstances7) Where it is to enquire then failure to do so is not excused by the conviction that enquiry would be futile or that the answer would be false The relevant principles in Selangor were restated by the Court of Appeal, Lipkin and Gorman V Karpale + Co, which like Selangor claim that the bank was negligent. In respect of the banks alleged breach of its duty of care May LJ said that conceptually the reasonable banker test propounded in Selangor imposed two stringent duties on banks. Courts should not be too ready that a bank had acted in breach of its duty of care when it has honoured without question a cheque within the authority of its customers agent. Accordingly, a bank will only have acted negligently in paying a cheque if any reasonable teller would hesitate to pay the cheque without first referring it to superior who in turn would hesitate to honour their instrument without making further inquiry. For example: If the cheque appears to be signed by the account holder and there is no reason of the genuineness of the signature, then there will be nothing on the face of the instrument indicating fraud. However, a bank was not entitled to ignore clear evidence of fraud being perpetuated or being perpetrated on a customer. Parker J, held that there are certain unusual cases when a bank will be put on enquiry and when its failure to investigate circumstances further would constitute a breach of its Duty of Care. The test applied in Selangor is Whether if a reasonable and honest banker knew of the relevant facts he would have considered that there was a serious real possibility albeit not amounting to probability that its customer was being defraudedBanks could nether be expected to review individual accounts on a continuing or a periodic basis or to assume a suspicious attitude towards its customers. Accordingly, their lordships approach is justifiable both in terms a of protecting bank from potentially endless litigation given the number of transaction with which they are involved and also requiring customer to safe guard their own interest rather than relying upon the bank to do so, at least when undertaking straight forward banking transaction. The preposition Lipkin Gorman, The bank does not owes it customer any particular duty of care in respect of ordinary payment transaction carried out by the authorised signatory on the customers account. However this blanket proposition may now need some modification in light of the Banks extensive obligations under the anti money laundering legislation. The courts are reluctant to impose a contractual or common law duty of care on banks not limited to the provision of ordinary banking services or products. This applies to banking product that are particularly risky, sophisticated or unusual where its bank provides its customer with financing that he uses for speculative dealings or to enter risky transactions and the customer subsequently complaints that its losses results from the banks failure to warn him of a particular risk or conditions.

Payment and payment system

February 16 and 23Many banks are multifunctional institutions engaged in a wide range of business activities extending well beyond their traditional core activities of deposit taking and lending. In the UK payment services may also be regarded as an aspect of core banking activities arising from the payment services regulations 2009. London is a major centre of international banking so naturally most major banks in the west are located in the city of London. There are 3 organizations or such foreign banks: 1Association of foreign banks 2.the America financial services association, 3.the Japanese bank of association. Changes to the United Kingdom Building Society Act 1996 together with the amendment in 1988 n 1987 allow building societies to provide numerous banking and financial services to their members eg current accounts operable by cheques, money transfer services. Accordingly the defences available to bank regarding payment and the collection of cheques have also been conferred on building societies. Payment services essentially covers the operation of payment accounts. Eg current accounts and flexible savings account. The execution of payment transactions such as direct debits and payment card transactions, card issuing, merchant acquiring and money remittance. Before executing a customer payment instruction, bank must:1 inform the customer of the maximum execution time for the transaction2 indicate the charges payable for the service3 provide a break down of the charges after debuting a customers current account a bank must provide a reference number to identify the transaction4 information concerning any exchange rate applied to the payment and the amount of that payment after the currency conversion5 information about when the payment will be debited from the payers account for the purposes of calculating account or overdraft interest. Alternatively this information can be provided to the customer by means of a periodic monthly statement

Payment methods1 despite the increasing popularity of electronic payments the payment of cheques drawn by customers on their current accounts remains an inMordant function of a bank. Payment is not restricted to cash only. So u av debit cards credit cards bank transfers and of course ATMs2 instructions by the customer to the bank to pay sums to a third party and the bank is obliged to obey these, the customer may request payment by cheque or by money transfer order3 the use of a debit card often at a point of sale terminal in a retail outlet Use of. Debit card to obtain cash from the ATM

Credit cardsThe supplier of the goods or services provides them (credit cards) on the basis of his reimbursement arrangement (security) with the issuer of the credit card. Payments for the purchase of goods and services can increasingly be settled by electronic money. The card holder can utilize a card to obtain goods and services from dealers who have entered into a merchant agreement with a member of the network and displays the networks insignia.

Debit cardsThe card holder uses these cards in designated retail stores to obtain goods and services. The difference between debit card and credit card is that when the card holder uses a debit card the amount is remitted to the retailer by an electronic funds transfer involving a debit of the sum concerned to the cardholders bank account, the transfer is either instantaneous if it is an online system or occurs in batches sometimes after the transaction, cash can also be obtained using the debit card. Payment by cards enable the card holder to obtain goods and services or cash thereby saving the cardholder the inconvenience of carrying cash.

Settling, clearing and nettingClearing refers to clearing houses which were responsible for the general clearing of cheques and paper generating ...issues. In the UK most clearing banks offer their customers telephone and Internet banking services. Some banks operates their own clearing department to which all cheques payable to the banks customers are sent by the branches charged with their collection. Such cheques are largely processed at the banks own clearing centre as subsequently delivered to the clearing house where the bank also picks up any cheques drawn on itself. The process of exchanging payment orders between participating banks is known as clearing. Clearing may take place through a series of bilateral exchanges of payment orders between banks , but in the uk it is common for clearing to take place multilaterally through a centralized bearing house.

SettlementCan occur on either a bilateral or multilateral basis. Bilateral settling occurs where the bank sending the payment order and the bank receiving it are correspondents. Ie each holds an account for the other. Settlement is effected through an adjustment of the accounts. Multilateral settlement involves the settling of accounts of the sending bank and the receiving bank held at a third bank. The third bank could be a correspondent of the two banks ie1 where they both have accounts or more typically the third bank could be a central bank. Settlement may be either gross or net.

NettingNet settlement, mutual payment obligations of the parties are set off against each other and only the net balance is paid. This process occurs periodically with net balances being settled either at the end of the day where it will be same day funds or the following day in which it will be next day funds.In a bilateral net settlement system a participants exposure is measured by reference to its net position with regard to all other participants in the system as a whole. As a result each participant will end up As a net debtor or a net creditor in relation to all other participants in the system. The principal advantage of net settlement is that it reduces the number and value of interbank settlement operations which in turn leads to reduced transaction cost and improve liquidity. In addition net settlement ,..exposure to recover risk a bank receiving a payment instruction from another bank participating in a payment system usually makes funds available to its own customers before it has been placed in funds on completion of the multilateral net settlement at the end of the day. Thus the receiving bank carries the risk that it may never be placed in funds.

Payment and banking go in hand in hand. Payments are usually made through the banking system although for small trans cash, credit card and money are used. Banks make payments on their own initiative as a result of their own dealings in foreign exchange, securities and derivatives. When customer driven , however the mandate is central to payment. If a bank acts within the mandate it may claim reimbursement from the payor that is debating its account if it has one. If it acts outside the mandate, eg paying on a forged mandate, it has no authority to claim reimbursement though the payor may ratify what the bank has done or it may be stopped from denying the banks reimbursement.

Basic elementsThree basic elements of making payment through the banking system are1. The payment message which is an unconditional instruction to effect payment in favor of a payee. It may facilitate a credit or debit transfer. Banks effect payment on receipt of a payment message. This payment message may be divided between the customers mandate to expand and any instructions which that bank then sends to another bank, for eg the payees bank or a correspondent. However traditionally, payment messages were paper based, but now apart from cheques and payment, cards are now conveyed electronically as a part of a anti terrorism method, banks must include both domestic and international payment messages, information on the organizations name, address and account number.2. Movements on accounts. The customers account is debited and the payees account is credited. Payment through the banking system for eg credit transfer, direct debit, cheques or other means involves a movement on accounts effected following receipt of a payment message.3. Settlement. Payment between the banks themselves of their obligations inter Se (between or among themselves) arising out of a payment. Settlement may follow each payment or is done periodically, through the netting of a series of payments either between two banks(bilateral netting) or a number of banks( multilateral netting). Settlement can be effected by a movement on accounts which both banks have with a third bank, but is typically effected by a movement on the accounts which banks have with the central bank. Settlement is typically across the books of the central bank, so payments involving a particular currency, are usually routed through the country of that currency. This $US payments are usually settled in New York, sterling payments in London, yen payments in Tokyo. With the euro payment messages are exchanges bilaterally between the two central banks of the countries of the payor and the payee concern using reciprocal accounts for debating and crediting.

Payment methodsInstruments, procedures and institutions which enable users to meet payment obligations. Traditionally, payment methods are classified as credit or debit transfers depending on whether the payor payment instructions are given direct to its bank (a credit transfer). Or pass via the payee (debit transfer). Payment methods are either, paper based, electronic or a combination of both and payment systems may be on a small or large scale. Payment methods are:1. Cheques. In the uk, use and France cheques are the preferred methods of payments. However it is obvious that in time cheques will no longer be used as the cost for processing are becoming prohibited in a cost conscious world. In Germany, credit transfers and direct debits are dominant while cheque usage is less than 5%. The commercial world is heading towards a paperless credit transfer and hence cheques will be obsolete.2. Payment cards. Credit cards, debit cards, cheque guarantee cards are used in conjunction with a cheque book and guarantees the payment of a cheque up to a specified amount. E-money card which the customer can use to pay for small value items and can be used independently of a bank account. Any one card may be multifunctional. Customers may obtain cash and access other banks services from an ATM through the use of a payment card. While credit cards are subject to extensive regulations. Most jurisdictions do not have regulations or payment cards other than credit cards and e-money. However Denmark has special legislation and the USA has electronic funds transfer since 1978.3. E-money, the monetary value as represented by a claim on the issuer is stored in an electronic device and accepted as a means of payment by undertakings other than the issuer. A European community directive. This includes e-money cards or electronic purses and prepaid software products for use on the internet ie digital cash. Payment by credit card is excluded and the usage of e money is minute.4. Payment method cross-boarder. This is a small proportion of all retail payments and that amounts to 1.3% in the European community member states. In Luxem Bourg 17 payments per inhabitant. He bulk of cross border retail payments are faced to face with cash or payment cards. Cross border payment may also be by foreign draft. For eg a cheque drawn by the payor or a bank in the beneficiary's country.5. Travelers cheques, the issuer sells the cheques to the traveler who can either obtain cash or make payment abroad to a third party prepared to accept them. The advantage of travelers cheque is that should they be stolen the traveler would be reimbursed by the issuer(the bank). The express written contract may be especially onerous obliging the traveler to demonstrate as a precondition of obtaining reimbursement that he or she has safeguarded without negligence, each travelers cheque against lost or theft.

March 2, 2015Payment and Banking go hand in hand. Payments are usually made through the banking system, although for small value transaction cash, credit card and e-money are used. Banks makes payments on their own initiative as a result of their own dealings in foreign exchange securities and derivatives. When customer driven, however the mandate is central to payment if a bank acts within the mandate it may claim reimbursement from the payer, that is debiting the account (of the payor, if it has one). If it acts outside the mandate, eg paying a forge mandate it has no authority to claim reembuirsement although the payor may ratify what the bank as done or it may be estopped from denying the banks right to reimbursement.

Baisc Elements. 3 basic elements of making payment through the banking system are1) The payment message: an unconditional instruction to effect payment in favour of a payee. It may facilitate a credit or debit trnafer. Banks effect payment on recipt of a payment message. This msg may be divided between the customers mandate to its bank and the any instuructions which that bank then sends to another bank. For eg. The payees bank or a correspondent. However traditionanlly, payment messages were paper based but now apart from cheques and payment cards, are now conveyed electronically. as aprt of an anti terrorism measuere banks must include on both domestic and international payment messages information on the organizations name address and account number 2) Movements on accounts: the customers account is debited and the payee is credited. Payment through the banking system credit transfer direct debit cheques or other means involves a movement on a accounts effected following receipt of a payment message. 3) Settlement: payment between the banks themselves of their obligations inter se (between or amongst themselves) arising out of a payment. Settlement may follow each payment or is done periodically through the netting of a series of payments either between two banks (bilateral netting) or among a number of banks (multilateral netting). Settlement can be effected by a movement on accounts which both banks have with a third bank. But is typically effected by a movement on the accounts which banks have with the central banks. Settlements is typically across the books of the central banks, so payments involving a particular currency are usually routed through the country of that currency. Thus US$ payments are usually settled in New York, Sterling payments in London, Yen payments in Tokyo. With the Euro payment messages are exchanges bilaterally between the two central banks of the countries of the payer and the payee concerned using recipro cal accounts for debiting and creditingPayment methodsInstruments procedures and institutions which enable users to meet payment obligations. Traditionally payment methods are classified as credit or debit transferd depending on whether payer payment insructions are given direct to its bank (credit transfer) or pass via the payee (debit transfer) payment methods are either paper based electronic or a combination of both and payment systems maybe on a small or large scale.1) Cheques: in the uk,usa, this is a popular method of payment hwevr it is obvious in time, cheques will nolonger be used as the cost of processing are becoming prohibiting in a cost conscious world. In Germany credit transfers and direct debits are dominant while cheque usage is less than 5%. The commercial world is heading towards a paper less credit tranfers and hence cheques will obsolete. 2) Payment cards: credit, debit, cheque gurantee cards are used in conjuction with a cheque book and gurantees the payment of a cheque upto a specified amount. Emoney card which the customer can use to pay for small value item and can be used independently of a bank account. Any one card can be multifunctional. Customers may obtain cash and access other bank services from an ATM through the use of a payment card. While credit cards are subject to extensive regulation most jurisdictions donnot have regulations for paymet cards other than credit and emoney however. Denmark special legialtion and the USA has eclectronic funds transfer since 1978.3) Emoney: Monetary value as represented by a claim on the issuer is stored in an electronic device and accepted as a means of payment by undertakings other than the issuer. A European community direvtive: this include emoney cards or electronic and prepaid software products for use on the internet: digital cash. Payment by credit card is exclusage and the use of emoney is minute4) Payment cross-border: this is a small proportion of all retail payments and this amounts to 1.3% in Euro comm member states. In Lux em Bourg 17 payments per inhabitants. Buk are face to face with cash or payment cards. Cross-border may also be by forgeign draft for example a cheque drawn by the payor or a bank in the beneficiers country.5) Travellers cheques: the issuer (the bank) sends the cheque to the traveller who can ieither obtain cash or make payment abroad to 3rd party prepared to accept them. The adgvantage of a travellrs cheques is that should they be stolen. The expess written contract may be especially onerous obliging the traveller to demonstrate as a precondition of obtaining reimbursement that he or she has safe guarded without negligence each travellers cheque against loss of theft.

Tutorial Advise and advise Who, Which, That? Offence Referred Difference between debit and credit Cheque and check Honours and Honor

March 9, 2015Regulating Jam SectorThe Bank of Jamaica was established in 1960 and brought with it the banking act in 1960. The provisions of the banking law has transfer to the Bank of Jamaica Act of 1997. Banking regulation is effected by the central bank through the provision of the Banking Act 1962 as amended in 1997. In 960 the Ministry of finance was responsible for banks supervision but in 1973 this was delegated to the Central bank with the minter finance retaining overall responsibility. One of the main function of the central bank is the achievement and maintenance and the stability of the financial system and the responsibility is considered to be more important than is implied by the BOJ act. The Central Bank through the department of supervisions of banks and financial institutions utilizes various resources and techniques to ensure the achievement of its credential objectives of safeguarding depositors funds and preserving the stability of the banking system. There are two main aspect of banking supervision one supervision and two monetary inspection. Inspection; These are scheduled to take place at least annually. On site individual banks involved discussions with bank management regarding the banks profitability operation and internal control based on the analysis of financial ratio information some of which is collected beforehand as well as the external auditors report and findings. Examination results management aptitude and expertise and other aspects of the banks operations using criteria broadly capturing CAMEL or other risked based assessment methods. Any deficiencies identified must be addressed within a specific time after the examination and fall within the monitoring ambit of the supervision process.Capital AdequacyAssets quality Management EarningsLiquiditySensitivity to market riskThis method refers to a regulatory methodology widely used in the USA. Now S had been added, which means Sensitivity to market risk.

Monitoring- This enforced through the analysis of statistical information submitted to the central bank by way of periodic credential return of financial information. Prior to 1997, off sight monitoring was mainly concerned with broad based issues such as maintaining limited licencing requirement and assessing capital and liquidity adequacy as determined by the capital ratio and reserves requirement. Despite the presence of fit and proper rules, there was little focus and proactive supervision to appraise management quality and aptitude or to engender a culture of appropriate risk management. Fit and proper refers to an evaluation of the competence integrity and qualification of management as well the board of Directors. In executing its roles the Bank of Jamaica shares close working relationship with bankers, the Government and the accounting Profession.Between the regulator and the BankSec 26 of the BOJ act the central bank as to the commercial banks. it provides clearing house facilities for the settlements transaction between banks and in its capacity as lender of last resort which will provide liquidity to support when necessary in order to discourage borrowing by banks, BOJ imposes a punitive rate for over draft interest. Banks are required to maintain a specified minimum percentage of priscribed liabilities in the form of liquid assets and cash reserves with the BOJ. BOJ uses moral suasion to seek mutual agreement with the banking community, accordingly regulation emerges through the general authority of the bank of Ja in giving effect to government policy. The use of moral suasion has traditionally been a powerful regulatory mechanism although moral suasion is referred to in the banking act of 1997 it is notenforceable but the banks are expected to respond to it as if it were so.Administrative Guidance is continually provided to banks via notification to banks or letters as directives or warnings. Bankers playing a very active and important part in decision making processes as the participate in extensive discussions prior to the issue of new legislation or an amendment of a statue. This collaboration is two fold 1) There is clarification and refining of issues prior to enactment which should aid implementation and support compliance by individual banks.2) Opportunistic behaviour by powerful private interest is always a key concern in policy making regulators must reduce such opportunism in the standard setting process as well as executing the standards and ensuring compliance. Relationship between regulator and government.Boj is empowerd by the BOJ act to act as banker to the government, agent, manager of public debt and registrar government local registered stocks. The central banks acts as advisor on economic policy formulation and may occasionally make temporary advances to the government. It may liaised with regional and international organization for exam the Caribbean Development Bank. The inter development bank, the IMF, and world bank on behalf of the Government. The central Bank is not an independent bank. In the early years it enjoys little operation autonomy, this may have resulted to reconcile Financing for the Governments economic program with the bank of Jamaica control of monetary policies. During those early years the MOF appointed senior staff OF BOJ determined salary scales and prior to 1997 was sole authority on some operational decision. Whilst this has change the minister still has the right to determine the composition of the board of Bank Of Jamaica the Financial secretary holds a permanent seat on the Board.Relationship between Regulator and Accounting ProfessionAn annual audit, of the financial statement of Banks is legally required. Therefore the report produced by external auditors is a critical document in Bank supervision only person registered under the public authority act and who are members of the institute of chartered accounts may express an opinion of financial statements. Current banking legislation recognizes the critical role of accountants as agents in the regulatory process. This amendment to the legislation resulted from the banking crisis experience in Jamaica in the 1990s.

March 16, 2014The Central BankA central bank stands at the centre, of a countries banking system because ultimately it is the central bank which provides liquidity to the commercial banks, and thus to the economy as a while. The Central Bank is the Banks bank, and the Governments bank. In exceptional cases the Central Bank acts as Lender of Last Resort. Hence where a particular institution faces difficulties the central bank may rescue it. In addition where there is a shock to the system as a whole, and cash in withdrawn from a range of banks which is not re deposited with other banks, the central bank will act as lender of Last Resort. On such a wide spread loss of confidence is rare. But if it does occur, the central bank will provide extra reserves to the banks to avoid a collapse of the system. Banks need to have, operational accounts is the central bank as this is the only way to settle certain obligations. For example, if a Bank after netting payment due to other banks against those due to itself. It still owes other banks settlement by adjustments to the accounts which banks have with the Central Bank is acceptable. (So in other words the banks have an account with the CB and if they are short they may seek help from the CB) The banks have accounts with the CB in order for the CB to administer monetary policy. Banks use the CB, similarly to ordinary customers using their banks. The CBs basic function is the issue of currency. I.e. notes and coins. The CB makes a profit on the issue of currency as the Govt deposits securities to back the issue. The Central Bank performs for the Govt the services ordinarily provided for customers with a current account. The Govt departments and agencies also keep accounts at the Commercial Banks to facilitate payments to and from the public. However, the rel of a CB to Govt is not simply that of banker and customer. The CB performs a variety of tasks for Govt which vary in kind from the ordinary rels. While the public debt is managed by the Ministry of Finance, the CB advises the Govt on the issue of its securities, selling them to the private Sector by Auctions and other means. It also mops up liquidity ( to control inflation). In respect of foreign exchange the central bank may be source of rules. That is, it may licence foreign exchange dealers, administer foreign exchange controls and be the compulsory depositary of the foreign exchange earnings of residence. However, the role of the CB vis a vis the Govt, is giving of advice on a national economic policy and significantly conducting one aspect of it. The BOJ gives monthly reports which are shown on the news. Mainstream economic literature suggests:(1) In the medium to long term inflation does not contribute to positive economic performance- Inflation has an adverse effect on economic performance. In a short term the relationship does hold. Recessions have repeatedly followed tighter monetary policy and output has been stimulated by Accelerating Monetary Growth. In some countries the average rate of inflation rate was lower with an independent CB. In Germany hyperinflation was so entrenched into public consciousness that it led to both the creation of an independent Bundesbank (CB) and to the almost universal determination, to keep inflation low. Is the BOJ subject to political direction? Does it lack autonomy in the formation and implementation of monetary policy?

Banks and Finance

Lending is central to a banks business; hence loans are banks assets. Loans that are serviced consistently by the borrowers can provide a steady stream of income. However, banks have been known to buy Govt bonds, thereby indirectly funding inter alia presidential places and bloated armies, instead of providing credit to small business farmers and consumers.

Commercial lending by banks may provide: short term, which is referred to as bridging working capital or trade finance.Medium term for working capital or some capital expenditure 2- 5yearsProduct finance and capital expenditure. Bank lending may be in the terms of term loans, revolving facilities and overdrafts.

In some situations, monies may be advised before a loan agreement is finalised can be inferred from the conduct of the parties that there is a contract. The commercial reality is that business people are comfortable with an agreement to agree or to negotiate, and in any instance currently commercial contracting is a process completed in stages. The nature of the contemplated loan and some or all of the term to which it will be subject are set out in a document known as the commitment letter.

Questions:

1. To my mind a bank has a duty under its contract with its customer to exercise reasonable care and skill in carrying out, its part with regards to operations within its contract, with its customer. The standard of that reasonable care and skill is an objective standard applicable to bankers, whether or not it has been attained in any particular case has to be decided in the light of all the relevant fact which can vary almost infinitely

Ungoed Thomas J

Analyse the above statement with reference to a banks contractual duty of care to its customers.

2. Banks have moved away from their core activities to become multifunctional institutions, with this radical change customers now appear to no longer enjoy what formerly was a special relationship with the bank manager. They have now been relegated to interacting with machines. Discuss,