Making bank reimbursement statutory

Many of the recommendations of the House of Lords Science and Technology Committee report on Personal Internet Security have been recycled into Conservative Party policy [*] — as announced back in March. So, if you believe the polls, we might see some changes after the next election or, if you’re cynical, even before then as the Government implements opposition policy!

However, one of the Committee recommendations that the Conservatives did not take up was that the law should be changed so that banks become liable for all eBanking and ATM losses — just as they have been liable since 1882 if they honour a forged cheque. Of course, if the banks can prove fraud (for cheques or for the e-equivalents) then the end-user is liable (and should be locked up).

At present the banks will cover end-users under the voluntary Banking Code… so they say that there would be no difference with a statutory regime. This is a little weak as an objection, since if you believe their position it would make no difference either way to them. But, in practice it will make a difference because the voluntary code doesn’t work too well for a minority of people.

Anyway, at present the banks don’t have a lot of political capital and so their views are carrying far less weight. This was particularly clear in last week’s House of Lords debate on “Personal Internet Security”, where Viscount Bridgeman speaking for the Conservatives said:

“I entirely agree with the noble Lord, Lord Broers, that statutory control of the banks in this respect is required and that we cannot rely on the voluntary code.”

which either means he forgot his brief! or that this really is a new party policy. If so then, in my view, it’s very welcome.

[*] the policy document has inexplicably disappeared from the Conservative website, but a Word version is available from Microsoft here.

1 thought on “Making bank reimbursement statutory

  1. @ Richard,

    “Of course, if the banks can prove fraud (for cheques or for the e-equivalents) then the end-user is liable (and should be locked up).”

    Any law should tkae the basic idea behind contract law into accout (ie equity of exchange).

    So if a customer can show the actions by the bank where the equivalent of fraud (irespective of deliberate or accidental) then the customer should expect to see an equivalent punishment met by the bank.

    That is if a responsable person can be found then they must face a jail term equivalent of if the fraud was deliberate. Or the bank should make payment to the customer equivalent to that the most highly renumerated member of the bank would receive during the equivalent imprisonment term.

    Obviously this payment would include all bounus, perks, pension and other direct or indirect renumeration the bank member would receive.

    Further the customer should be able to chose between direct monetry payment or an equivalent equity payment at the most favourable rate given to a bank employee.

    That is if the financial payment would be 1million, and a member of staff through share options etc could obtain the shares at 10% of face value then the customer should be able to get 10million in equity.

    This sort of penalisation would have two moderating effects on banks.

    The first would stop them building shody systems where the bank has externalised their risk via the banking code and Chip-n-Spin etc and as a consiquence currently have no need to be duly diligant.

    The second is that it would also encorage the bank to either moderate their renumeration packages or use better oversight.

    Unfortunatly benifficial as it might be I cannot in all honesty see any politician walking into the appropriate lobby on it come voting time 8(

    Oh and the law would need to be applied such that it applied to any bank taking money from a british person, and the employee used to calculate the equivalent renumeration is open in that it could be any part of the organisation group or affiliate in any part of the world.

    Otherwise the banks would simply structure their operations to minimise liability…

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