OF THE LAW SOCIETY OF SCOTLAND - The Journal Online

Journal
Review
BANKING LAW in Scotland
SCOTLAND
hosts the headquarters of some of Europe’s largest banks and
banking is now one of our major industries. Despite this
most of the main Banking Law textbooks are published south of the border with the result
that we have only a limited supply of banking textbooks available for Scottish students.
The publication of Mr Grier’s book
is therefore to be welcomed as it
presents a useful opportunity for
consideration of some of the more
recent developments in the field of
banking law in Scotland.The author
acknowledges that the book is not
intended to provide comprehensive
coverage of all banking related
topics. With this in mind where he
touches on specialist areas he
provides some helpful guidance to
readers who require more detailed
commentary on the subject matter.
On reviewing the Contents section
it was not surprising to see that
many of the
‘boilerplate’
chapters of
banking law
books appear,
such as those
dealing with the
structure and
regulation of the
UK Banking
system, Types of
Account and
the Transfer of
Money. One
chapter did, however, catch the eye
under the rather unusual title “The
Responsible Bank”. In this chapter
the author explains how banks
operate under a complex web of
legislation and codes of practice and
touches on a number of issues
which were not previously covered
to any material extent in Scottish
banking textbooks. The guidance
provided in this chapter will be
useful to Scots Banking Law
students but may be less
comprehensive than an experienced
practitioner will require. For
Nicholas Grier
W Green
ISBN 0 414013 093
Price £80
example, the author cites the case
of Stafford v Conti Community
Services Limited [1981] 1 ALL
E.R.691 as authority for the
proposition that “In certain
circumstances, particularly those
involving complicated financial
transactions such as derivatives ….
the complexity of the transaction is
such that the customer takes the
risk upon himself”. In light of the
current stringent FSA rules relating
to hedging and derivative
transactions, a banker requires to
satisfy himself that his customer was
an experienced professional
investor before
he could be safe
in assuming that
a customer
could take a risk
of this kind
upon himself,
w i t h o u t
adequate
advice.
There are also
useful chapters
dealing with the
relationship
between a Bank and its Customers
and the Banker-Customer contract
as well as some useful information
on a range of other everyday
banking transactions.
One somewhat disconcerting
feature of the book is the way in
which related topics appear under
apparently unrelated headings, e.g.
in the chapter entitled “Types of
Account” there is a section dealing
with Arrestment of Bank Accounts.
Elsewhere, the topic of inhibitions
appears under the chapter headed
“Security for Loans and their
Documentation”.
Without detracting from the book’s
value as a useful first point of
reference to the subject there are a
few areas where minor errors have
not been picked up in the proof
read. For example:
The increase in the level of loans
affected by the Consumer Credit
Act from £15,000 to £25,000 has
not been identified.
Reference is made to the Solicitors
Indemnity Fund rather than its
Scottish equivalent of the Master
Policy and Guarantee Fund.
In the section dealing with
overdrafts it is suggested that
sometimes the rate is a certain
number of percentage points above
the “LIBOR” (London Inter-Bank
Offered Rate). Experienced banking
lawyers will recognise that LIBOR
related rates are not normally
available on overdrafts and are
generally confined to term lending
facilities.
The paragraphs dealing with the
vexed question of ‘Guarantees
given under pressure’ and The need
for Independent Advice’ was
unfortunately written before the
landmark judgment issued by the
House of Lords in Royal Bank of
Scotland v Etridge.While Mr Grier
highlights the key pitfalls to be
avoided practitioners will need to
pay heed to the more detailed
guidance provided by their
Lordships in the case of Etridge.
Derek Arnott