The Protection Of Banker- Customer Relationship In Uganda. A Review Of The Existing Legal Frame Work

ABSTRACT

Over the last ten to fifteen years, and in response to the huge growth in demand for unsecured

consumer credit, Ugandan banks have reviewed, automated, de-skilled and streamlined traditional

credit assessment techniques. In pursuit of margin and market share, today's due diligence relies

increasingly on centralized data and statistical certainty. During this same period the nature of the

banks' safety net, the sanction of bankruptcy and court action has changed too. The effect of this

is not only to increase the potential for recovery, in respect of bad debts, but also to increase the

moral hazard problem. However, increased risk is masked by creditor power in recovery situations.

This research draws on theoretical and empirical research from legal, ethical and economic view

points and suggests that a legal of this aspect of the banker-customer relationship is essential to

restore trust, prudence and long-tenn profitability. The researcher recommends that the rule

guiding customer/banker relationship cannot be properly appreciated if the recommendations are

not taken into consideration and fully applied in every transaction between the profits involved.

He also recommends that there should be public awareness on most of the relevant provisions of

the law guiding banking establishment and practice. This will clarify the customers ofthomy issues

and assist them take appropriate legal step where the need arise, that in most local community

where customers are ignorant of the law guiding banker and customer's relationship, banks should

be made to enforce the rule and fulfill their contractual obligation. This can be achieved by making

law that would ensure compliance and in default, provides for remedy and again he recommends

that the common law rule as it applies to the relationship is adopted by virtue of a local legislation.

Hence its application should therefore follow the qualifications in its subsection which says as

local legislations allow it.

The researcher concluded that the relationship existing between a banker and his customer is that of debtor and creditor, with the additional feature that the banker is only liable to repay the customer on payment being made1• This conception as painted out involved a departure from the original objective of the depositor which was simply the safe custody of his money, an aim which he probably shared with the majority of his descendants since the average customer at a bank has not the least idea that he is lending his money to a banker to do what he likes with it.