Fiduciary Principles in Banking Law

Evan J. Criddle, Paul B. Miller, and Robert H. Sitkoff, eds., The Oxford Handbook of Fiduciary Law (New York: Oxford University Press 2018)

Washington University in St. Louis Legal Studies Research Paper No. 18-07-01

31 Pages Posted: 21 Jul 2018

See all articles by Andrew F. Tuch

Andrew F. Tuch

Washington University in St Louis - School of Law

Date Written: July 10, 2018

Abstract

When are banks fiduciaries of their customers and clients? This question is of more than theoretical interest given the organizational structure of modern financial institutions and the broad-ranging functions they perform. In this chapter of the Oxford Handbook of Fiduciary Law, I canvass fiduciary principles in banking law. I consider when fiduciary duties exist and what they require, the range of remedies available for breach, and the various techniques banks use to exclude or modify fiduciary duties. One puzzling feature of the legal landscape is that clients bring actions less often than banks’ size and conduct might suggest, which contributes to legal uncertainty. Fiduciary law nevertheless constrains banks’ activities: courts have cast banks as fiduciaries in all of the major commercial and investment banking functions, including making loans and accepting deposits, advising on merger and acquisition (M&A) transactions, and underwriting securities offerings, although banks face greater risk in some areas than others. Banks have responded by disclaiming fiduciary duties and using information barriers/Chinese walls, and yet recent judicial decisions refuse to accept these measures as automatically effective for avoiding fiduciary liability. Courts insist that they, rather than the parties themselves, determine whether fiduciary duties exist and what they require. The law thus diverges from some theoretical accounts of fiduciary doctrine, posing challenges for banks and new questions for scholars.

Keywords: fiduciary duties, fiduciary law, banking, investment banking, making loans, accepting deposits, mergers and acquisitions, underwriting, disclaimers, information barriers, Chinese walls, informed consent, conflicts of interest, contracting out

JEL Classification: K10, K22, G20, G21, G24, G34

Suggested Citation

Tuch, Andrew F., Fiduciary Principles in Banking Law (July 10, 2018). Evan J. Criddle, Paul B. Miller, and Robert H. Sitkoff, eds., The Oxford Handbook of Fiduciary Law (New York: Oxford University Press 2018); Washington University in St. Louis Legal Studies Research Paper No. 18-07-01. Available at SSRN: https://ssrn.com/abstract=3211548 or http://dx.doi.org/10.2139/ssrn.3211548

Andrew F. Tuch (Contact Author)

Washington University in St Louis - School of Law ( email )

Campus Box 1120
Saint Louis, MO 63130
United States

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