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The bank’s duty of care

Thomas van Vugt
Thomas van Vugt
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According to the law, when carrying out his work, a contractor should observe the care that can be expected from a good contractor. This general duty of care applies for every contractor. Whether the duty of care has been fulfilled depends on the question as to whether the contractor has acted as a reasonably acting and reasonably competent colleague would have acted. This criterion is given substance in case law and depends on the circumstances.

Special duty of care for banks

The social function of the bank entails a special duty of care, both in respect of its client and in respect of third parties whose interests should be taken into account by the bank. This special duty of care does not only apply to private clients in the course of the contractual legal relationship, but also to private clients in the pre-contractual stage and in respect of third parties. The scope and implementation of the special duty of care depends on the circumstances of the case. Relevant circumstances are the complexity and risks of the relevant financial product, the knowledge and experience of the client, and the client’s financial position.

Duty of care for banks in case of trading in options

Especially where trading in options is concerned, banks are subject to a strict duty of care. The Dutch Supreme Court ruled that a bank has the obligation to protect its private clients against the dangers of thoughtlessness or lack of insight. The bank therefore acts contrary to the duty of care if it follows its client in the latter’s explicit wish to carry out highly risky instructions to sell options.

Cancellation of credit by the bank

Another case in which the stricter duty of care of banks is assumed is the cancellation of credit. According to settled case law, a bank may only use its power of cancellation if there is a sufficiently compelling reason for cancellation and the requirements of proportionality and subsidiarity have at least been met.

Financial Supervision Act

In addition, banks are subject to public regulations such as the Financial Supervision Act (Dutch Wft). This act also contains rules with regard to the provision of information and advice to clients. As the rules have also been drawn up for the protection of the client, violation of the Wft may result in civil liability.


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