Textbook definitions

A seem above, the Court of Appeal in United Dominions Trust v Kirkwood suggested that for a deposit-taking business to be carrying on a banking business, it did not have to be engaged in making loans but, the Court went on to quote from Paget’s Law of Banking, that it must,

… accept money on current accounts, pay cheques drawn upon such account on demand and collect cheques for customers; that if such minimum services are afforded to all and sundry without restriction of any kind, the business is a banking business whether or not other business is undertaken at the same time; that providing the banking business as so understood is not a mere façade for other business, the person or corporation is a banker or bank for the purposes of statues relating to banking other than those where the sole criterion is the satisfaction of some government department.

Halsbury’s Laws of England defines a banker as:

… an individual, partnership or corporation, whose sole or predominating business is banking, that is, the receipt of money on current or deposit account and the payment of cheques drawn by and the collection of cheques paid in by a customer.

Dr HL Hart defines a banker or bank as:

… a person or company carrying on the business of receiving moneys, and collecting drafts, for customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts.

The above definitions are excellent definitions of deposit banking. They are, however, no longer wide enough to relate to the diversity of modern-day banking.

Common law definition

At common law, there is no exhaustive definition of ‘bank’. However, the Court of Appeal in United Dominions Trust Ltd v Kirkwood defined the following characteristics of the business of banking:

(i) The conduct of current accounts;

(ii) The payment of cheques drawn on bankers; and

(iii) The collection of cheques for customers.

In the landmark case, Diplock LJ held that it is essential to the business of banking that a banker should accept money from its customers upon a running account into which sums of money are from time to time paid by the customer and from time to time withdrawn by him. It was further held that a lacuna in the evidence relating to those characteristics is capable of being filled by evidence that the relevant person enjoys, in banking and commercial circles, the reputation of being a banker. In this connection, the difference between ‘usual’ and ‘essential’ characteristics become material. Lord Denning MR said,

… it must be remembered that a recital of usual characteristics is not equivalent to a definition. The usual characteristics are not the sole characteristics. There are other characteristics which go to make a banker. In particular stability, soundness and probity like many other beings, a banker is easier to recognize than to define. In case of doubt it is, I think, permissible to look at the reputation of the firm amongst ordinary intelligent commercial men.

Based on this view and the evidence of reputation which was adduced by United Dominions Trust Ltd (UDT), UDT’s status as a banker was established.

The above common law definition was formulated in the 1960s. In the 1970s, the Malaysian and Singaporean Banking Acts diminished the relevance of this definition. Indeed, as electronic of cheques is becoming a less prominent feature of banking practice.

Definition of ‘Banker’

Services provided by today’s bankers are far from their traditional activities of merely receiving deposits, honouring cheques and granting loans. The modern day banker issue credit and charge cards, deals in diverse foreign exchange and money market transactions, telegraphic and electronic transfers, bills and trade finance facilities, share financing, custodian and trust businesses and provides a variety of other banking and investment services. Indeed, it is now quite difficult to define the word ‘banker’ or ‘bank’ to cover all their diverse and varied activities and functions.
Essentially, there are two reasons why one needs to know who a banker is. First, the nature of the relationship between bank and customer has certain characteristics which may, to some degree, distinguish it from other relationships. Secondly, a variety of statutes refer to banks, or to bankers, or to the business of banking.
No writer can coin a single all-embracing definition of this word. Bearing this in mind, we can now consider definitions of the word ‘bank’ given by or laid down by the following sources:

(i) common law;
(ii) text-books;
(iii) statutes; and
(iv) judicial interpretation.