There are many day to day banking activities which aren’t governed by prescriptive legal requirements but by the terms of the financial institution-customer contract, by customary banking practice and what a competent financial institution would do.

In BFSO Bulletin 58 the Ombudsman discusses the results of bank surveys which he has used to reach conclusions about industry practice and the requisite standard of care and skill of a diligent and prudent financial services provider.

He looks at 3 particular everyday scenarios:

• Mandate for Change of Signing Authority on Accounts: "it would be good industry practice to require both account holders to request or consent to the addition of a third party signatory irrespective of whether the account mandate was for both to sign or either to sign."…"Similarly…it would appear appropriate that both account holders should request or consent to one of the account holders being removed from the account signing authority, or to a transaction which would in effect close the account or remove the whole of the funds in a deposit account from the control of one of the account holders."
• Withdrawal Instructions Presented by a Third Party: "the major banks follow different procedures in circumstances where a passbook and withdrawal voucher are presented to a teller to make a withdrawal by a person who is not the account holder. All are examples of good practice: One bank requires prior arrangements to have been made by the customer with his or her manager, in which the customer authorises the third party to present the withdrawal request. Another bank requires the third party presenting the withdrawal request to produce a signed authority from the account holder, together with proof of identity in accordance with that authority. Another bank again will not process the withdrawal request unless it can contact the account holder to verify his or her instructions."
• Guarantor and Third Party Income in Credit Assessments: "there may be circumstances in which it would be industry practice to take into account a guarantor’s income. However, where a guarantor is not directly and regularly involved in the financial affairs of the debtor, a financial services provider should take extra care before approving an application for finance based on the income of a third party or guarantor.
  We will consider what information was provided to the guarantor regarding the financial position of the debtor and the financial services provider’s reliance upon the guarantor’s income as well to approve the loan. If a guarantor was not in a position to know the financial position of the debtor in its totality, and was not fully informed of the financial services provider’s credit assessment, we may consider that it was imprudent to include the guarantor’s income in the assessment of serviceability. In that event, we may conclude that the financial services provider had engaged in maladministration in granting the credit facility."

Do you know what your organisation’s procedures are in these circumstances ? Are they documented? Is there discretion between branches? Who monitors day to day practice?

The key issues will always be:

• did you comply with the terms of your contract with your member?
• who did you owe a duty to and were you negligent or did you breach that duty?
• have you breached any law?
• have you breached your Code of Practice?
• have you acted fairly and reasonably?