1

Banking confidentiality versus disclosure

Waleed Alhosani
PhD Candidate
Bangor University- School of Law
Abstract:
In fact, confidentiality is one of the most eminent features which distinguishes the
relationship between a banker and a customer. The present article discusses the
confidential nature of the banker-customer relationship. Basically, the work will be
divided into four parts. The first part illustrates the general concept of this sort of
relationship. The second part will discuss the basis of the confidentiality. The leading
case of Tournier v. National Provincial and Union Bank of England
1
will be dealt with in
the third part in order to examine the scope and duration of the bank's duty of
confidentiality. This paper will then seek to demonstrate and interpret the exemptions to
this duty in the last part.





1
[1924] 1 KB 461
2

1. Introduction:
The general concept of the banker-customer relationship
It is important to appreciate that the confidential banker-customer relationship contains
aspects of agency, which impact on the contractual relationship. For example, the
obligation of secrecy and loyalty is imposed upon an agent towards his principal. This is
the case even if the agent is an estate agent, a solicitor, a company director, or even a
doctor. It should be noted that the scope of the obligation differs from one type of agent
to another. For instance, a director might be required (by a court) to testify or divulge
information about his company despite this being contrary to the company's interests. In
contrast, the obligation of secrecy is more practical, notably in relation to the client and
solicitor relationship, where the latter is prevented (in a court) from testifying about his
dealings with his client.
2

It has been said that the customer's credit usually relies on the strong observance of
confidence, and this is the justification for imposing the duty of secrecy on the
banker/customer relationship, hence public policy constituted the reason for imposing the
duty of confidentiality. However, such rationalisation can be easily refuted since credit
does not rely upon hiding the situation of a person's bank account. This is further
supported by the fact that already in ancient times, traders would be provided with bank
references without needing the express consent of the customer, enabling traders to
obtain information about a persons credit. Hiding fundamental information about the
financial affairs of creditors may even be equated with a seller defrauding customers

2
Ellinger E. P., Lomnicka Eva, and Hooley Richard, Ellinger's Modern Banking Law (Fourth Edition,
Oxford University Press 2006), 165
3

through concealing defects in products, and thus may not constitute a real justification for
imposing the duty of secrecy on the banker-customer contract.
3

Indeed, there are two reasons which led to the imposition of the agent's commitment of
secrecy. The first reason is historical; the duty arose to protect the principal guardian
from groundless attempts by intruders to enquire about his affairs. He had to safeguard
his principal's confidence and protect his interests. The second argument is economic in
nature and can be illustrated by the relationship of solicitor and client. The client would
not feel comfortable discussing his financial affairs if his solicitor could be forced to
disclose his client's information.
So in fact and at law, a person who undertakes work assumes a confidential duty to those
engaging him, which includes being able to rely on their judgment. The commitment of
confidentiality does not arise only between solicitor and client. It extends to other forms
of agency relationships, such as accountant and customer, banker and customer, and the
doctor and patient relationship.
4

Similarly, in the context of the banker/customer relationship, there are two arguments
which support enforcing a duty of secrecy on banks. The first argument may be
considered the main one for the obligation of banks confidentiality. This argument
perhaps overlaps with the second argument. The idea behind the first argument is rooted
in the belief to protect an individuals "personal autonomy". In reality, the main reason is
to ensure that both private and commercial customer's finances are kept secret.

3
Cranston Ross, Principles of Banking Law (Second Edition, Oxford University Press 2002), 169
4
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 165 & 166
4

A bank which would not ensure that information pertaining to its customer's finances is
kept secret would very soon acquire a bad reputation and would thus lose the public's
trust. The second argument relates to the sensitive nature of business information. It is
easy to imagine circumstances where a bank engaging in divulging confidential
information would place the customer at risk from competitors.
This is particularly so as information about a business has an intrinsic market value and
of course the value increases where confidential information is concerned.
5

Recently, economic factors have been given great attention with respect to policy
considerations and in certain circumstances, the duty of secrecy has been treated as
having less importance than the country's interests.
6

In the internet age, the issue of secrecy has also been heightened, especially since bankers
hold a considerable amount of personal information about a customer on their databases.
Third parties can 'hack' into banks' computer databases, especially if a customer makes
use of internet banking and there is thus a real risk of third parties obtaining personal
information.
7






5
Cranston Ross, Principles of Banking Law, n.3 above, 169
6
This issue will be discussed when studying the exceptions for the banker's duty of confidentiality in the
present article.
7
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 186
5

2. The Basis of the duty of confidentiality
The duty of secrecy is rooted in both the criminal and common law.
2.1. The criminal law
There are some jurisdictions which have placed the banking duty of secrecy on a
constitutional or statutory basis. Switzerland is an example of a country which has based
the duty of confidentiality on the criminal law. The breach of Article 47 of the Swiss
Banking Act (1934)
8
could thus lead to imprisonment or a fine. This law became a well-
known obstacle to foreign law enforcement agencies which were attempting to trace the
proceeds of unlawful activity. The Swiss law was effectively designed to protect
legitimate activity from illicit investigation. Jurisdictions which have adopted this type of
legislation argue that they distinguish between activities, where individuals/businesses
seek to escape from capital gains tax, exchange-control or financial laws, which are
considered legitimate in those jurisdictions and, illegal activities. Such jurisdictions deny
that countries with strong bank confidentiality rules also attract drug traffickers, money
launderers, and other criminals, who exploit banking confidentiality to avoid the creation
of an 'audit trail' which investigators can track.
9

2.2. The common law
In contrast, a number of jurisdictions established the duty of confidentiality at common
law and English law is an example of such an approach. This means that the bank's duty

8
which provides that "Whoever divulges a secret entrusted to him or of which he has become aware in his
capacity as officer, employee, mandatory, liquidator or commissioner of a bank, as representative of the
Banking Commission, officer or employee of a recognized auditing company and whoever tries to induce
others to violate professional secrecy, shall be punished by imprisonment for not more than six months or
by a fine of not more than SFr. 50,000 (nearly $40,000 USD).
9
Cranston Ross, Principles of Banking Law, n.3 above, 170 & 171
6

of secrecy is implied in the contract between the bank and the customer.
10
However, the
contract is not always the issue. For example, a contract does not confer protection in a
situation where a third party has obtained confidential information and has divulged this,
whether advertently or inadvertently or with consent. Instead, equity protects the duty of
confidentiality independently of the contract. Equity also offers aid since the courts are
entitled to grant an injunction, thus indirectly buttressing any duty of contract. In addition
to contract law and the use of equity, tort law offers another remedy, though "perhaps the
precise jurisdictional basis of breach of confidence in the common law is secondary to the
underlying notion."
11


3. Scope and duration of the duty of secrecy
When examining a bank's duty of secrecy, it is important to make recourse to the seminal
case of Tournier v. National Provincial and Union Bank of England.
12
In that case, the
claimant had his account with the defendant bank and the latter made payment demands.
It was agreed that the claimant would make payments in order to reduce his overdraft, but
he failed to keep up the payments after the third instalment. The bank became aware of
the claimant being the payee of a cheque to a third party and upon making enquiries the
bank became aware that the endorsee of the cheque was a bookmaker. The branch
manager then telephoned the claimant's employers apparently to determine the private
address of the claimant, but the branch manager divulged during the course of the

10
As in Tournier v. National Provincial and Union Bank of England, which will be discussed when dealing
with scope and duration of the duty of confidentiality in this article
11
Cranston Ross, Principles of Banking Law, n.3 above, 171
12
[1924] 1 KB 461, n. 1 above
7

conversation that the claimant's account was overdrawn and that he had dealings with
bookmakers. As a direct result of the conversation, the claimant's employers decided not
to renew his contract of employment.
The Court of Appeal found that the bank breached its duty of confidentiality. Atkin LJ
noted that:
"The obligation extends to information obtained from other sources than the customer's
actual account, if the occasion upon which the information was obtained arose out of the
banking relations of the bank and its customers."
13

Thus, a bank's duty is to treat information as secret
14
, and this obligation is not only
limited to information that the bank knew from the condition of the account of the
customer, but extends to all information derived from the banking relationship between
the banker and the customer
15
. Indeed, the duty includes any information gathered by the
bank, including assessments and/or general impression. The duty of secrecy also covers
details of transactions
16
, for example, the name of the customer, who is paying or
receiving payment, personal information about who their employer is, information about
the customers bank balance at various times. The duty is imposed regardless of whether
customers are depositors or borrowers; hence, the duty is independent of the customers
credit status.
17
A banks duty of secrecy remains in existence even upon the closure of

13
Ibid
14
Hudson Alastair, The Law of Finance (First Edition, Sweet & Maxwell 2009), 777
15
Proctor Charles, The Law and Practice of International Banking (Oxford University Press 2010), 678
16
Ibid
17
Cranston Ross, Principles of Banking Law, n.3 above, 172
8

the customer's account or it ceasing to be active.
18
Furthermore, the obligation of
confidentiality also remains in existence, even after the customer's death.
19

On the other hand, the duty of confidentiality does not extend to information gained after
the termination of the banker/customer relationship and does not relate to information
acquired prior to the beginning of the banker/customer relationship.
Nonetheless, a bank has still to be extremely careful in these situations because of the
following three reasons:
1. A bank may have given an express undertaking to the customer to keep
information confidential.
2. Information obtained prior to the commencing of banker/customer relationship
could still be classified as falling within the scope of the duty of confidentiality, if
the same information is conveyed/gathered at the start of the relationship.
3. A bank may receive information under conditions which fall within the scope of
the general law of confidence.
20

It is useful to note that in the Tournier case
21
, the duty of confidentiality was held to exist
impliedly since the information did not directly relate to the customer's bank account.
It is important to note that the duty of confidentiality is a legal and possibly also a moral
duty, which is qualified.
22


18
Proctor Charles, n.15 above, 679
19
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 170
20
Ibid, 170 & 171
21
[1924] 1 K.B. 461, n. 1 above
22
Joan Wadsley, Banks confidentiality: a much reduced duty (1990) 106 (Apr) Law Quarterly Review,
205
9

In the Tournier case, the Court of Appeal held that there are four exceptions with regard
to a bank's duty of secrecy. Bankes LJ opined that:
23

"On principle .the qualifications can be classified under four heads:
(a) Where disclosure is under compulsion by law;
(b) where there is a duty to the public to disclose;
(c) where the interests of the bank require disclosure;
(d) where the disclosure is made by the express or implied consent of the customer".
24


4. Exceptions to the bank's duty of confidentiality
The Tournier case
25
clearly illustrates that there are four exceptions with regard to the
banks duty of confidence. Indeed, these qualifications to the duty of secrecy are virtually
accepted in all jurisdictions around the world. Accordingly, the duty of confidentiality
will not arise if any of these qualifications apply.
26
Hence, it becomes important to
scrutinise each of the exceptions in detail.




23
[1924] 1 K.B. 461, n. 1 above
24
These exceptions were recently confirmed in Christofi v. Barclays Bank Plc [2000] 1 WLR 937
25
[1924] 1 KB 461, n. 1 above
26
Cranston Ross, Principles of Banking Law, n.3 above, 174 & 175
10

4.1. Obligation by law
The common example to illustrate an obligation by law is court proceedings.
27
During
legal proceedings, the court can legally oblige a bank to divulge information about its
customers account
28
(Bucknell v. Bucknell
29
and Eckman v. Midland Bank Ltd
30
). In such
a case, a bank is required by law to disclose information about its customers account in
favor of the public interest and the administration of justice. Judges will sometimes
require full disclosure in order to reach a decision, and this requires full disclosure for the
sake of establishing the truth. The Bankers Books Evidence Act 1879 sets out the
procedure for providing evidence relating to a customers bank account and the procedure
has been broadened by Schedule 6, Part 1 of the Banking Act 1979. Pursuant to s. 3 of
the Bankers Books Evidence Act 1879, a bank has to provide a copy of the relevant
entry and under section 4 it has to be shown that the entry is a normal bank entry and this
can be done by way of an affidavit of a bank officer. The affidavit will confirm that the
original and the copy match since this is required under s. 5 of the Bankers Books
Evidence Act. Under s. 6 of the Bankers Books Evidence Act 1879, a bank does not
have to provide evidence or its book, but only if the judge has made an order for a special
cause.
If the court summons a bank, then a bank must respond and provide the requested
information about its customers account. Indeed, a bank cannot refuse a courts order on

27
Proctor Charles, n.15 above, 681
28
Hudson Alastair, n. 14 above, 779
29
[1969] 1 WLR 1204
30
[1973] QB 519
11

the ground of privilege. This is simply because if a bank ignored or refused a court order
and did not respond to the order, then a bank will be held to be in contempt of court.
31

In the Chancery Division case Harding v. Williams
32
it was held that once evidence has
been produced, it can be used against any party. Section 7 of the Bankers Books
Evidence Act 1879 entitles a judge to make an order for inspection of the bankers book
and this can also be made ex parte, for example, without the other party being present,
though the bank has to be informed prior to the application being made, so that it has a
chance of opposing the order. The courts are very thorough when it comes to granting
such an order (South Staffordshire Tramways Co v. Ebbsmith.
33
) and exercise this right
prudently and carefully.
34
Hence, having a mere suspicion is insufficient to be granted an
order, though in Williams v. Summerfield
35
an order for inspection was permitted.
In addition, there is no requirement that a bank obtains a customers consent when
required to do so by a court (Bankers Trust Co v Shapira).
36
Hence, mandatory disclosure
substitutes the customers consent, though it was also said by Lord Denning in this case
that it was a strong thing to order a bank to disclose the state of its customers account
and the documents and correspondence relating to it. Hence, an order to inspect without
serving the customer does not happen frequently. However, such order can be made but it
would only endure for a short period of time.
37
Moreover, there is no obligation on a bank
to inform its customer that disclosure has been made since a notification could possibly

31
Cranston Ross, Principles of Banking Law, n.3 above, 176
32
[1880] L.R. 14 Ch. D. 197
33
[1895] 2 QB 669, 674
34
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 173
35
[1972] 2 QB 512; cf Sommers v. Sturdy [1957] 10 DLR (2d) 269
36
[1980]1 WLR 1274
37
Owen v. Sambrook [1981] Crim LR 329; R v. Nottingham Justices, ex parte Lynn [1984] 79 Crim App
Rep 234
12

impede any investigation. However, in R v. Marlborough St Metropolitan Stipedendiary
Magistrate, ex parte Simpson
38
where the man was charged for using the earnings of a
prostitute and an ex parte order was obtained without notice, the Court of Appeal noted
that notice ought to have been given and also that an inspection order should not last
indefinitely.
Instead, informing a customer that disclosure is made could lead to a bank committing
the so-called tipping off offence.
39
This is particularly necessary since banking secrecy
cannot be exploited by individuals/entities engaged in money laundering, terrorism,
insider dealing, company fraud, drug trafficking, human trafficking, tax evasion, and
banking supervision. An order can also be made against a person who is close to the
person against whom proceedings are being brought: South Staffordshire Tramways Co v.
Ebbsmith
40
and DB Deniz Nakliyati TAS v. Yugopetrol
41

Section 9(2) of the Bankers Books Evidence Act 1879 defines what documents are
covered when an order is made. In the Divisional Court case Barker v. Wilson
42
it was
held that the term 'documents' also included any records made through modern
technologies.




38
[1980] Crim LR 305
39
The Proceeds of Crime Act 2002 (POCA 2002) was amended by section 333A of the Serious Organised
Crime and Police Act 2005(SOCPA 2005).
40
[1985] 2 QB 669
41
[1992] 1 WLR 437
42
[1980] 1 WLR 884
13

4.2. Public interest disclosure
The public interest disclosure constitutes another exception noted in the Tournier case.
This exception was established in the 1920 ruling Weld Blundell v. Stephens
43
. What may
be deemed to be in the public interest is markedly different from what the public might be
interested in. Previously, it was possible to divulge information pertaining to any
inequity, so that the exception was based upon the unfairness rule. Nowadays, this
situation extends to misdeeds, such as crime and fraud. This is so regardless of whether
the act has been actually committed or has only been contemplated. Presently, the public
interest exception depends on a diversity of provisions which require banks to divulge
confidential information to law enforcement entities or regulators.
44
In certain situations,
matters, which may constitute a potential hazard to the country or are contrary to the
public duty, may override a bankers duty of secrecy.
45
For example, during the war
years
46
, a bank owed a duty to the public to divulge confidential information about a
customer who was dealing with the enemy
47
though Professor Ellinger notes that trading
with the enemy may not constitute such a serious offence as being engaged in major
crime.
48
The disclosure may be in relation to an official inquiry into banking regulation,
the police, or other regulatory authorities, such as banking supervisors, and may even be
in relation to other jurisdictions, including a multinational bank. In addition, statutory
provisions protect a bank from responsibility for breach of the duty of secrecy. Similarly,
legislation provides for protected disclosure. For example, a bank might be held liable

43
[1920] AC 956, 965
44
Cranston Ross, Principles of Banking Law, n.3 above, 178
45
Proctor Charles, n.15 above, 696
46
Hudson Alastair, n. 14 above, 779
47
Mourant, 'The duty of confidentiality: The rule and four exceptions', June 2007, available online at
www.mourant.com (accessed on 2
nd
February 2011)
48
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 181
14

and commit a crime, when it fails to divulge knowledge or suspicion about a customer
involved in terrorist crimes.
49
The public interest exception may overlap with the
previous mentioned exception -the obligation by law.
Hence, legislation may oblige bankers to disclose confidential information in certain
circumstances
50
, and this surely does not mean that the public interest exception is
impractical. At common law, the divulging of confidential information is often allowed if
this is deemed to be in the public interest. Banks are on the one hand obliged to adhere to
the duty of secrecy and to keep information confidential, but on the other hand may have
to divulge information if this is in the public interest or required by law. If the latter
would not be possible, banking integrity and markets would be at risk. Money launderers,
drug traffickers, human traffickers, and other serious offenders would be able to easily
launder their criminal proceeds secretly. This latter aspect is only one of the aspects
impacting on the public interest which has to be balanced against secrecy.
51

4.3. Divulging information which is in the interest of the bank
A bank may issue proceedings against a customer to, for example, repay his overdraft.
52

In such a case, a bank must evidence the amount of the overdraft on a summons which is
a public document. In ordinary parlance, this disclosure might be in the interests of the
bank and it is sanctioned, whilst as a matter of law, indeed this is to divulge in the public
interest for the purpose of the effective administration of justice.
53


49
Section 21A of the Terrorism Act 2000
50
See Staughton J in Libyan Arab Foreign Bank v. Bankers Trust Co [1988] 1 Lloyds Rep 259
51
Cranston Ross, Principles of Banking Law, n.3 above, 170 & 179
52
Proctor Charles, n.15 above, 693
53
Cranston Ross, Principles of Banking Law, n.3 above, 175
15

In Sunderland v. Barclays Bank Ltd
54
the bank refused cheques drawn on it by a woman.
The refusal was on the ground that her credit balance was insufficient and the bank knew
that these cheques were in favour of bookmakers. The branch manager of the defendant
bank told the plaintiffs husband when he interceded at her request that the majority of
the cheques were drawn for gambling debts. The plaintiff initiated an action for damages
for the banks breach of its duty of confidentiality. Du Parcq LJ rejected the plaintiffs
action and argued that the defendant was permitted to disclose the facts to her husband by
giving her implied consent; hence, the case came under the above-mentioned fourth
exception.
Du Parcq LJ stated that:
Given the information which explained what the bank, rightly or wrongly, had done
the interests of the bank required disclosure
55

Indeed, the suitable interpretation of this passage, according to the general principle is
that it might be in the public interest that potentially damaging statements be
immediately refuted by a limited release of confidential information.
56

It might be contended that the bank took this action to maintain its reputation, but it is
hard to understand why the bank was allowed to inform the plaintiffs husband that the
cheques were drawn in favour of bookmakers.
57
A reasonable justification could have
been that there was insufficient money in the account or because the husband was liable
for the wifes debts or they had a joint bank account.

54
[1938] 5 LDAB 163
55
Ibid
56
Cranston Ross, Principles of Banking Law, n.3 above, 176
57
Ellinger E. P., Lomnicka Eva, and Hooley Richard, n. 2 above, 184
16

In conclusion, it appears that this exception is so wide and, in practice, can cause a
number of unjustified disclosures. In addition, it seems that this exception should be
given a narrow interpretation, and this interpretation is already implied in the previous
one, the duty to the public to disclose. Therefore, this third exception may be redundant.
Hence, the duty to the public to disclose for justice to be administrated effectively may
provide the best justification for divulging information in such a case.
4.4.Disclosure with a customers permission
This constitutes the last exception to the banks duty of secrecy. There are two ways to
obtain the customers consent: expressly or impliedly
58
. As regards express consent,
when a customer gives his express consent to divulge confidential information by his
bank, this will absolve the bank from responsibility for breach of duty of secrecy. Indeed,
a bank ought to gain express consent from its customer in writing as a matter of
prudence.
A bank could for example include a clause in the customers loan documentation,
granting express consent to the bank with regard to passing on confidential information to
credit reference agencies, upon default.
It is worth noting that express consent can be general or qualified. If the express consent
is qualified, this means that it is given solely for a specific aim. Generally, there is no
limited period for an express consent to be valid, but it may become invalid where
circumstances change, and it is advisable to renew it periodically. For instance, before
divulging information to the customers auditors about any security or contingent

58
Proctor Charles, n.15 above, 700
17

responsibilities, and the situation of the customers bank accounts; the bank ought to
require the customers written consent.
59

The second is implied consent, which had often been used to provide trade credit
references, although the scope of this has been limited by the Business Banking Code
60
,
Which provides that a reference can only be obtained via express consent of the
customer. As a result, the customer has to be given 28 days notice before a bank can
disclose, though if the customer has disputed some of the amounts with the bank, then the
bank is not allowed to disclose.
61

In general, confidentiality is waived through the customers consent, but the confidential
information may only be made available to limited persons.
62








59
Cranston Ross, Principles of Banking Law, n.3 above, 179 & 181
60

60
March 2008, available online at http://www.lendingstandardsboard.org.uk/bcsbpubs.php (accessed on
9
th
March 2011)
61
Peter Cartwright, Consumer Protection in Financial Services (International Banking, Finance &
Economic Law 1999), Kluwer Law International, 93 & 94
62
As mentioned in the first exception.
18

Conclusion
Although the importance of a bank's duty of confidentiality extends to all information
derived from the banking relationship between the banker and the customer, it is not an
absolute duty but rather a qualified one. There are four exceptions to a banks duty of
confidentiality, nevertheless, it appears that the third exception, namely divulging
information in the interest of the bank is too wide and should be given a narrower
interpretation. Such an interpretation is already implied in the second exception - 'the
duty to the public to disclose' - which renders the third exception more or less redundant.











19

Bibliography
Books
- Cranston Ross, Principles of Banking Law (Second Edition, Oxford University
Press 2002)
- Ellinger E. P., Lomnicka Eva, and Hooley Richard, Ellinger's Modern Banking
Law (Fourth Edition, Oxford University Press 2006)
- Hudson Alastair, The Law of Finance (First Edition, Sweet & Maxwell 2009)
- Peter Cartwright, Consumer Protection in Financial Services (International Banking,
Finance & Economic Law 1999), Kluwer Law International
- Proctor Charles, The Law and Practice of International Banking (Oxford University
Press 2010)

Articles
- Joan Wadsley, Banks confidentiality: a much reduced duty (1990) 106 (Apr) Law
Quarterly Review
- Mourant, 'The duty of confidentiality: The rule and four exceptions', June 2007