Banks have changed and evolved

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The growth of the banking sector since its creation in the 1600’s has allowed for banks to change and evolve into being more than just a business. Critically discuss how, through the ages, banks have changed and evolved. Make reference in your answer to how regulation, financial crisis and societies needs have aided this banking evolution. B. 1. What is a bank? There is no comprehensive legal definition of the term ‘bank’, ‘banker’ or ‘banking’. So to define these concepts, people has to look at the particular circumstances in which the precise meaning of them arises. The most common circumstances are: the area of bank regulation; where rights and duties are granted to banks; and where there is an effort to eschew a payment obligation that it arose on an illegal contract, which is void or unenforceable because it is owed by or to an unlicensed bank.[1] There are two reasons why the common law definition of these concepts remains important. The first one is under law, certain rights and duties are only conferred on a ‘bank’ or ‘banker’, e.g. the banker’s duty of confidentiality. The second one is some rules use the term ‘bank’, ‘banker’ or ‘banking’ without an accurate definition. We can see it clearer in the case of Kirkwood:[2] Kirkwood’s defence was that UDT could not recover on a debt because they were neither an unregistered moneylender nor a bank and the loan was illegal as it infringed the provisions of the Moneylenders Act 1990. Lord Denninghas stated that: ‘Parliament has conferred many privileges on “banks” and “bankers”, but it has never defined what is a “bank” and who is a “banker”. It has said many times that a banker is a person who carries on “the business of banking”, but it has never told us what the business of banking is. It has imposed penalties on persons who describe themselves as a “bank” or “bankers” when they are not, but it has never told us how to decide whether or not they are bankers.’[3] To determine if a person is a banker or not, the Court specified three elements: the nature of the banking services provided; the fame of the organization; the importance of these services in relation to business as a whole.[4] The characteristics of banking was: accepting money and collecting cheques for their customers and place them to the credit of the customers’ accounts; honouring cheques or orders drawn on bankers by their customers when presented for payment and debiting their customers accordingly; keeping current accounts, or something of that nature, in which debits and credits were entered.[5] Hsiao enounced that a bank must have only two distinctive elements, namely deposit taking and cheque collection.[6] However he then rejected the possibility of this definition in answering the question: ‘what is a bank?’ Because banks are classified in different ways, some institutions will fall into the banking category despite not having two elements stated in the Kirkwood case.[7] The answer for this problem can be found in some statutes.

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