Is there morality in banking practice?

Banks in SA are amongst the institutions the public generally love to hate, and the massive pay packages of some bankers are indeed cause for concern.

It was therefore significant that in a recent court case Breedenkamp v Standard Bank of SA Ltd (6) SA 277(GSJ), the court was prepared to examine the action taken by the bank in cancelling the facilities it had granted to an international commodities trader.

Following the listing of the trader by a USA state department on the grounds that it had provided support to the Zimbabwe government, the bank became mindful of its public image and gave consideration to  the damage its reputation might suffer. 

The trader’s contract with the bank allowed the bank to terminate any facility for any reason,  which it then decided to do.  Breedenkamp took the matter on review to the High Court.

The court held that the bank had the freedom to contract with whom it wished, and that it was entitled to act upon a moral basis of its own choosing.  If its relationship with the listed trader was to increase its financial risk, it was entitled to cancel the contract, and this was not unfair from a constitutional point of view.

One wonders whether the trader will now be able to acquire banking facilities elsewhere.  Now that the truth is known, it is likely that other banks would not want to support such a client. Despite this real concern, and the constitutional right to be able to conduct one’s business, the court held that the trader had not shown that he would be unable to obtain alternative facilities, and so his argument of unfairness was not valid.

The lesson is clear – SA is not immune to the fallout from our neighbour, and even our banking institutions are now taking a stand against its clients who support undemocratic regimes.  A victory for morality indeed!

Clive Hill | Financial Services Manager