Abstract
LL.M. (Commercial Law)
The unilateral termination of bank accounts by the bank is a current issue in South Africa. The
big four South African banks terminating their relationships with Gupta-controlled companies
during March 2016 had the rest of the world following suit. Banks are being pressurised around
the world to prove their undertaking to make bona fide business decisions and to demonstrate
their commitment to good governance when dealing with their customers’ accounts. The bankcustomer
relationship is a contractual one which has been defined differently by various
authors. The common law position on the closing of bank accounts has been compared in three
jurisdictions and clarified with reference to older judicial decisions.
Interestingly, there have been numerous developments in South African case law on the closing
of bank accounts. In different circumstances, banks have unilaterally terminated their mandates
with customers. The clause contained in the bank-customer contract empowering a bank to
unilaterally terminate a bank account has been alleged by contracting parties as either unfair or
contrary to constitutional values or public policy. The Constitution therefore has a significant
impact on the bank and customer contract. It has also been recognised in case law that the
conduct and transactions of a bank are subject to legislative provisions, policies and clear
imposed legal duties within the national and international sphere. Domestic and international
laws will be assessed to clarify the responsibilities of a bank in relation to conducting its
business operations. This discussion will explore the question of whether South African law
sufficiently provides for the circumstances in which a bank can unilaterally terminate a
customer’s account, against the background of the bank-customer mandate and the regulatory
environment surrounding the banking sector.