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For several years, some bank clients have faced their banker’s announcement of the unilateral termination of the banking relationship and the resulting closure of their accounts, without reasons and generally on notice. The clients concerned have a period to give precise instructions on the fate of their assets: accounts, whether in debit or credit, must be zeroed, safes emptied, and any securities in a portfolio transferred to another regulated firm. The bank has this right, which is not, however, discretionary, and so does its client.
The bank’s general terms align with the ordinary law
This closure, a consequence of the end of the relationship and sometimes part of a broader exit procedure, is generally grounded in the bank’s general terms and conditions but is in reality an application, in banking law, of a general principle of the law of obligations and contracts. The bank-client relationship rests on the account contract, an unnamed contract of indefinite duration. The general principles on terminating indefinite-term contracts therefore apply: any party, whether the client or the bank, may terminate, where appropriate on contractually defined conditions and generally on reasonable notice. Closure of the accounts follows the end of the relationship.
The framework contract and payment services law
More specifically, for a relationship between the banker and a payment services user, Article 17 of Book VII of the Code of Economic Law provides an absolute right, for both the user and the provider (the banker), to terminate the framework contract binding the parties and to close the accounts opened under it. For the user, termination may be free of charge and with immediate effect, save a contractual notice of up to one month. For the provider, the notice must be at least two months.
The reasons behind the termination
As stated above, the bank’s decision to terminate the contract and announce the closure need not be reasoned, being discretionary, the client having the same right. It may be, for example, a new commercial policy, a de-risking operation targeting a client segment considered at risk (notably as to AML vigilance), or a decision following some event leading the bank no longer to wish to serve the client.
Two limits: abuse of rights and the basic banking service
The banker’s freedom is nonetheless subject to two potential limits. Under the law of obligations, the theory of abuse of rights may always be invoked, provided the client can show that the banker’s act, in the circumstances, is based solely on an intention to harm or is exercised disproportionately and to the client’s detriment relative to the bank’s legitimate interests. The sanction for abuse of rights can only reduce the banker’s use of its right to a normal use: the banker can never be forced to keep a client, though the termination may be arranged more flexibly without changing the final result.
The second limit results from the rules on the basic banking service, introduced by the Act of 24 March 2003 (now Articles VII.56/1 to VII.59/3 of the Code of Economic Law), which impose a guaranteed banking service on all credit institutions offering a current account in Belgium. These rules are covered in another article on this site. In 2021, a basic banking service for businesses also took effect.
In practice, the bank is generally open to arranging a smooth end of the relationship, negotiated in good understanding with its client, which also serves the bank’s reputational interest.
This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
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