The Relationships Between A Banker And A Customer

Due to the different transactions between a banker and his customers, different types of relationships are being built.  A clients comes to a banker either to save money, borrow money or to entrust securities. And in the course of doing this, a relationship is created.

Relationships are built based on the type of transactions between two parties. Examples could be that between a buyer and a seller or a student and a teacher etc. 

In this article, we have isolated the different types of relationships existing between a banker and a customer, as seen below.

Relationship  Between A Banker And A Customer

Various relationships do exist between a banker and his customer. The relationship of a banker and a customer comes in to existences went the banker agrees to open an account on behalf of his customer.  Some of these relationships include:

The Relationship of a Debtor and a Creditor:

One of the relationships existing between a banker and his customer is that of a debtor and a creditor.

A debtor is a person or other legal entity who owes another person or organization money or services. The party to whom the debt is owed is referred to as the creditor.

When a customer establishes a bank account with a credit balance, the banker becomes the debtor and the customer becomes the creditor. 

When a consumer borrows money, obtains an overdraft, or receives an advance payment from a banker, he or she becomes a debtor to the banker (the creditor).The banker can legally refuse to honor checks if there is no proper proof of identity.

The Relationship of a Pledger and a Pledgee:

Another interesting relationship between the customer and a banker is that of a pledger and a pledgee. To pledge simply means to offer something for another thing in return.

This happens when a customer pledges(promises) certain assets like land, house, documents or a car with the banker as security for the payment of a debt in order to take a loan, In this case, the customer is the pledger and the banker becomes the pledgee.

The Relationship of Assigner and Assignee:

A party or entity who transfers the rights of the contract they hold to another party (assignee) is called the assigner.

Some golden loans are offered to consumers on the condition that they purchase a life insurance policy in the amount of the loan. The banker is the initial beneficiary of this life insurance policy. In this case, the customer has assigned the banker as the irreversible beneficiary of the life insurance policy. 

The Relationship of Bailor and Bailee:

A bailor is the person who delivers the property to the bailee who then receives it. A contract of bailment may arise when one person engages another to perform some services with respect to one's personal property and then leaves the property with the other without any instructions as to its disposition.

A bailment contract exists between the consumer and the banker in which the customer entrusts things to the banker for a defined amount of time before returning the commodities. In this case, the customer is the bailor  since he is the one that deliver goods to the banker who is the Bailee.

The Relationship of Agent and A principal:

The relationship of an agent and a principal is a type of a banker-customer's relationship.

This is a kind of relationship in which one entity legally appoints another to act on its behalf. Here. the agent acts on behalf of the principal and have no conflict of interest in carrying out the act.

The banker acts as the customer's (principal's) agent, or the customer acts as the banker's (principal's) agent. For example, when an investor buys shares of an index fund, he becomes the principal,  and the fund manager becomes the his agent.

When the banker acts as  agent  of a customer, it does this by providing the following agency services;

• Buying and selling securities on behalf of the customer.
• Collection of checks, dividend, promissory notes on his behalf.

When Can A Contract Between A Banker and a Customer Be Terminated?

After studying the types of banker-customer's relationships, it is now time to know when a contract between a banker and customer 

Termination can occur in the following cases;

• Voluntary termination: When a consumer decides to terminate his or her contract with the bank. This can occur if a customers rights are being neglected by the banker. 
• In case of death of the customer: If a customer dies and his contract did not stipulate that some other individual could carry on with the contract then, the contract will be terminated.
• In case of liquidation of  the Bank: Liquidation is a process where a business/bank ceases(stops) to operate due to ether a short in capital, or acting illegally etc.
• In case of insecurity in the bank: When thieves constantly breaks into a bank then, that bank becomes insecure to deposit money and so customer will turn to search for banks that are more secured.

Conclusive Summary On The Different Types Of Banker-Customer's Relationships

Besides performing the main functions of accepting deposits and lending money, some financial institutions engage various relationships with their clients, some of which are listed above. 

Meanwhile, a contract between a banker and a customer could be terminated in the case where the customer dies or he voluntarily decides to terminate it.