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Supervision on bankers: banker’s oath and disciplinary law versus civil law

Supervision on bankers: banker’s oath and disciplinary law versus civil law

Additional supervision on the financial sector
Various media recently reported on negative advice from the Council of State from 3 September 2014 in relation to a legislative proposal from the Minister of Finance, Jeroen Dijsselbloem. The minister’s proposal to (legally) impose disciplinary law on the financial sector was rejected by the Council of State, which claimed it was unnecessary. The Council of State argued that public disciplinary law is reserved for closed professions like the medical or legal profession and that the banking sector was itself already working to introduce disciplinary law.

The minister’s desire to expand the group required to take the banker’s oath from a limited group of bankers to 90,000 employees in the financial sector was also not well received by the Council of State since this would detract from the significance of taking the oath and make it into a routine text recited by rote.

Nonetheless, the minister has maintained his proposals in full on both points. What implications do these plans have for the sector?

Banker’s oath
To put it briefly, the oath is taken by a policy-maker in a senior position at a financial undertaking, or by the supervisory officers at such an undertaking. The oath contains promises about (among other things) prioritising the interests of the client, about conducting one’s self in accordance with the applicable legislation, regulations and codes of conduct, and about secrecy.

A common response from the banking sector has been that the banker’s oath does not add anything and that it is therefore doubtful that this will bring about a better financial world.

The situation might be different if bankers were also subject to disciplinary law, which could sanction the actions of bankers in general and their actions on the basis of the banker’s oath in particular.

Disciplinary law versus civil law, how does it work again?
It goes without saying that banks and bankers are also subject to civil law, as far as their liability is concerned as well. Various other professions (such as doctors, lawyers, estate agents and accountants) also have their own disciplinary law. What (added) value does this represent?

The costs, speed and the fact that a disciplinary tribunal is usually made up of members of the profession who have earned their spurs (often along with a judge) are often cited as the advantages of a disciplinary procedure above a civil procedure.

A relevant question is, however, what benefit a consumer can derive from a disciplinary decision which declares his complaint well founded. Does this also establish the professional practitioner’s liability, for instance?

On the one hand, the considerations in disciplinary law do not necessarily take place with reference to the same standards as considerations in civil law. In other words: if the disciplinary judge finds that an individual did not act in accordance with a standard that applies for the particular profession, this does not mean that a civil judge must find that the individual is guilty of breach of contract or unlawful act (NJ 1997, 151). The costs of a disciplinary procedure also cannot be regarded as reasonable costs in determining damage and liability (ECLI:NL:HR:2003:AF0690) nor can they be considered reasonable costs for preventing or limiting damage (ECLI:NL:HR:2005:AT4097); these costs are therefore in principle not eligible for compensation by the liable party pursuant to Article 6:96 of the Dutch Civil Code.

On the other hand, if, in assessing the actions of a professional practitioner, the civil judge comes to an opinion different from the opinion given by the disciplinary judge in response to a complaint relating to the same actions, the civil judge must provide reasons for his opinion so that it is also adequately comprehensible in the light of the disciplinary judge’s assessment (ECLI:NL:HR:2002:AE1532).

Conclusion
A banker’s oath alone does not appear to be a very powerful instrument in achieving further supervision on the financial world. The oath in combination with the possibility of sanctioning conduct that is at odds with that oath or other regulations via disciplinary law, however, could contribute concretely to a higher degree of integrity and carefulness within the financial sector.

After all, experience teaches that in the large majority of cases, the civil judge goes along with the disciplinary decision and the possibility of imposing disciplinary sanctions (for instance a reprimand, suspension or even disqualification from the profession) would also have a deterrent effect.

By Aernout Baarsma

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