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upon a running account into which sums of money are from time to time paid by the customer and from time to time withdrawn by him.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.