Public duty to disclose

The second qualification refers to disclosures in the public interest, which was originally conceived narrowly, as relating to national security, for instance, with regard to enemy aliens. The continuing necessity of the public interest qualification was doubted by the Jack Committee, which recommended its abolition in view of the extensive statutory provisions compelling banks to disclose information. However, there is arguably reason to retain it as a residual category to cover situations that are not captured by statutory duties to disclose information. From a law and economics perspective, one could view the policy considerations as follows. Bank customers are normally recognised by law as owners of their information, and therefore, banks cannot disclose it without their consent,

unless there is some externality that justifies revoking this property right. So, the public interest qualification enables judges to engage in a cost-benefit analysis and reach efficient outcomes. Indeed, recent case law indicates that the concept of public interest is now viewed broadly and encompasses the effective regulation of banks, depositor protection and the investigation of the affairs of failed banks.[1] It remains unclear whether the public interest qualification also applies to disclosure of information to foreign law enforcement agencies with connection to foreign or international crimes.

Disclosure in the bank’s own interest

The third qualification concerns disclosures in the interest of the bank, for instance, where a bank brings proceedings against a customer to recover a debt. However, the qualification applies only to the bank itself as a legal person, not to other companies belonging the same group. On that matter, the Jack Committee had recommended to allow banks to pass confidential information to entities of the same group that engage in banking business. This qualification has been criticised as creating the false impression that banks have a right to disclose information whenever it is in their commercial interests to do so. No doubt, it is a very narrow qualification. Whether it is really an independent qualification has been doubted and it has been suggested that in fact all cases considered under this category can be justified on the basis of the public interest in effective administration of justice. However, courts still consider it an independent qualification to the duty.

An area where the interests of the bank qualification has significant practical relevance is the provision of customer information by banks to credit reference agencies. Such information may be negative (black) indicating that the customer has failed to honour his obligations to the bank, or positive (white) indicating that the customer has been fulfilling his obligations duly. Credit reference agencies are crucial for the efficient function of consumer lending and business lending markets, as they enable banks and other lenders to screen potential borrowers and estimate credit risk in an informed manner. This is also potentially beneficial for financial stability, as it facilitates the management of credit risk and the enhancement of the quality of banks’ loan portfolios. In this context, the Jack Committee recommended that legislation allows the passing of black information by banks to credit reference agencies when the customer has defaulted on his debts, and there is a breakdown in the relationship between the bank and customer. Taking into account the broader framework of data protection law and the public interest, it appears that banks can disclose black information without the customer’s consent, whereas they have to obtain express consent prior to disclosing any white information to a credit ref-erencing agency.

  • [1] See Price Waterhouse p BCCI Holdings (Luxembourg) SA [1992] BCLC 583. 2 An in-depth discussion can be found in Chaikin (above n 67) 273-284. 3 Bank of Tokyo Ltd v Karoon [1987] AC 45. 4 Banking Services: Law and Practice Report (above n 69). 5 Cranston and others (above n 106) 261. 6 See e.g. El Jawhary v BCCZ[1993] BCLC 396 and Christofi v Barclays Bank Pic [1999] 2 All ER. (Comm) 417. 7 Banking Services: Law and Practice Report (above n 69). 8 Cranston and others (above n 106) 265.
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