In their relationship with their customers, bankers are subject to a set of obligations and responsibilities, the contours of which have gradually been defined by case law and the law. This responsibility is based on two key concepts: the duty of care and the duty to warn, supplemented by a duty to advise in certain situations. These rules aim to establish a balance in the often asymmetrical relationship between a financial institution and its customer, whether an individual or a professional. In addition, there are fundamental principles such as respect for the banking secrecy and banking ethics rules.
The foundations of a banker's liability
The banker's main obligations
The banker has a number of obligations, the intensity of which varies according to the transactions, circumstances and customer profile.
L'duty of care requires the banking service provider to pay constant attention to the transactions it processes. They must be able to detect apparent anomalies and check certain information to prevent possible fraud, such as a suspicious transfer.
L'obligation to warn is a major development in case law. It requires credit granting bankers to warn their customers, especially if they are considered 'uninformed', of the specific risks of a proposed transaction, particularly if it is unsuited to their financial situation or involves a risk of excessive indebtedness. The duties of the mortgage lender illustrate this requirement.
Le duty to provide information and advicewhich is more binding, does not apply systematically. It arises when the bank initiates a transaction, particularly in the area offinancial engineeringThis duty involves actively guiding the customer towards the most appropriate solutions. This duty involves actively guiding the customer towards the most appropriate solutions. The responsibility of the ISP (Investment Services Provider) is particularly regulated in this respect.
The management of banking conflicts of interest is also an essential part of the banker's obligations, in order to ensure a loyal relationship.
Liability legislation
The banker's liability is based on various legal and regulatory texts:
- Le Civil CodeArticles 1231 et seq. on contractual liability.
- Le Monetary and Financial Codewhich sets out a wide range of obligations, particularly with regard to the marketing of financial products and sharing banking secrecy.
- Le Consumer Codefor credit transactions (consumer, property).
- La jurisprudencewhich constantly refines these obligations, such as the fundamental judgment of the mixed chamber of 29 June 2007 (no. 05-21.104) on the obligation to warn.
The duty of care
Definition and scope
The duty of due diligence must be reconciled with the principle of non-interference, which prohibits bankers from interfering in their customers' affairs. The balance is sometimes subtle. Case law (Com. 11 May 1999) points out that it is not for the bank to judge the appropriateness of its customer's transactions. However, it cannot ignore flagrant anomalies. The bank's vigilance essentially concerns the formal and material aspects of the transactions, not their economic relevance. This obligation also includes the need to preserve the confidentiality of information, in connection with the banking secrecy and the taxman.
Concrete examples
The banker's vigilance is expressed in concrete terms when :
- Verification of the apparent authenticity of means of payment (cheques, etc.), with a more in-depth analysis of obligations with regard to cheque anomalies.
- Checking transfers to detect any fraudulent transactions.
- Identifying obvious anomalies in a transfer order.
- Verification of compliance with the use of loaned funds if a specific allocation was planned.
A case law example (Com. 1 July 2003, no. 00-18.650) shows that the banker must be alert to abnormal or unusual bankcard spending. Failure to do so may give rise to contractual liability.
The duty to warn
Field of application
Case law has extended the duty to warn to a number of key situations:
- Towards uninformed borrowers The bank must warn of the risk of excessive debt if the loan seems unsuited to the borrower's financial capacity (Cass., ch. mixte, 29 June 2007, no. 05-21.104).
- Towards the uninformed guarantor The warning must relate to the risk of non-repayment by the principal debtor and the risk of excessive indebtedness for the guarantor itself, given its own capacities (Com. 23 September 2014, no. 13-18.827). The guarantor must prove this risk (Com. 26 January 2016, no. 14-23.462).
- Financial products The banker must warn the uninformed customer of the risks of a speculative transaction (Com. 7 July 2009, no. 08-18.194).
It is important to note that a breach of the duty to warn does not constitute wilful misconduct allowing the contract to be annulled (Com. 9 February 2016, no. 14-23.210).
Scope of the obligation
The duty to warn requires the banker to take into account the customer's knowledge and experience in order to adapt his or her approach. It goes beyond mere information: it involves specifically warning of the risks involved. The starting point for the limitation period for bringing a liability action on this basis is the first payment incident that is not rectified (Civ. 1re, 5 January 2022, no. 20-18.893).
The banker's duty to advise
Conditions of existence
The duty to advise is more intense than the duty to warn, but is not systematic. It is distinguished by its proactive nature:
- Warning = to warn of risks.
- Advice = active guidance towards a suitable solution.
This duty arises mainly when the bank is actively offering a complex financial product or arrangement, or when it is entrusted with an explicit advisory role. Thefinancial engineering and banking liability are often involved.
Content and implementation
When under a duty to advise, the banker must :
- Analyse the customer's financial situation, objectives and constraints.
- Propose appropriate solutions (for example, for a mortgage).
- Clearly explain the advantages and disadvantages of the options.
- Document the advice given.
Unsuitable or inadequately documented advice may render the institution liable, particularly if inappropriate credit is arranged. Preventing bank-client conflict of interest is crucial here.
Implementing liability
Conditions of liability
The distinction between "informed" customers (who have the knowledge to understand the transaction) and "uninformed" customers is a key one. Assessment is made on a case-by-case basis. The onus is on the banker to prove that he has fulfilled his obligations (information, warnings, relevant advice).
To hold the bank liable, the customer must demonstrate :
- Failure by the bank to fulfil one of its obligations.
- A loss suffered.
- A direct causal link between the breach and the loss.
The loss that can be made good often consists of the "loss of opportunity" not to enter into a contract or to enter into a contract on better terms.
Penalties and redress
In the event of proven liability, the main sanction is the award of damages, calculated on the basis of the loss of opportunity suffered. These damages are generally not the full amount of the financial loss, but a fraction representing the probability that the customer would have avoided the damage had they been properly informed or warned.
In certain serious cases (fraud), criminal liability may be sought. A third party (asset management adviser, etc.) may also be held liable alongside the bank.
The bank is liable for faults committed in the performance of its duties, unless the customer's behaviour contributed to the damage (for example, providing an incorrect IBAN for a transfer, if the error was not detectable by the bank). Protecting consumers, particularly the most vulnerable, is a major objective of banking and financial distribution law.
Navigating the intricacies of banking liability can be complex. Each situation is unique and depends on the precise facts, the documents signed and the customer's profile. If you feel that you have suffered a loss as a result of a breach by your bank, you should seek the assistance of a lawyer. banking lawyer is strongly recommended in order to assess your chances of success and defend your interests to the best of your ability.
Frequently asked questions
What are a banker's main obligations to his customer?
Bankers have a duty of vigilance (to detect anomalies), a duty to warn (to warn of risks, particularly credit risks or speculative transactions) and, in some cases, a duty to advise (to recommend appropriate solutions).
When can a bank be held liable?
The bank may be held liable if it fails in its obligations (due diligence, warnings, advice), causing direct harm to its customer (for example, granting excessive credit without warning, inappropriate advice on an investment).
What is the difference between the duty to warn and the duty to advise?
The duty to warn involves alerting customers to the risks of a transaction they are considering, while the duty to advise involves a more active approach on the part of the bank to suggest and guide customers towards the solution best suited to their situation and objectives.
What is a banker's duty of care?
This means that the bank must pay close attention to transactions on its customers' accounts and detect any apparent anomalies (unusual transactions, suspected fraud, etc.) that require verification or an alert.
How can you prove that your bank is at fault?
Proving that the bank is at fault often involves showing that it failed to comply with its obligations to provide information, warnings or advice. The burden of proof lies partly with the banker, who must prove that he fulfilled his duties, but the customer must establish the breach, the loss and the causal link.
What compensation is available in the event of bank liability?
Compensation is generally intended to make good the "loss of chance" suffered by the customer (chance not to contract, chance to avoid a loss). It does not always correspond to the entire financial loss, but to a fraction of it.
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