Introduction
A bank owes a special duty of care towards its clients and, in certain cases, towards third parties as well. This duty of care follows from the social function of banks and from the standards of reasonableness and fairness, and it extends further as the product becomes more complex and the counterparty less sophisticated. In disputes over complex financial products, credit and the termination of a banking relationship, the recurring question is the same: how far did that duty of care reach in the specific case, and did the bank meet it? The terms banking duty of care and special duty of care are used interchangeably here. The norm and the leading case law are set out below.
Basis and scope
The extent of the duty of care is not fixed. It depends on the circumstances of the case: the nature and complexity of the product, the risks attached to it and, above all, the expertise and position of the counterparty. The Dutch Supreme Court (Hoge Raad) roots the special duty of care in the social function of banks and in what the standards of reasonableness and fairness require. That duty of care is intended, among other things, to protect private, non-professional clients against the dangers of their own rashness or lack of insight. It therefore weighs more heavily towards a private counterparty than towards a professional party that is able to assess the risks itself. The private-law duty of care may moreover reach further than the rules of public financial supervision.
Duty of care for complex financial products
For complex or high-risk products a heightened duty applies. In the securities-lease judgments of 5 June 2009 (Dexia and Levob), the Hoge Raad held that the provider must expressly and in unmistakable terms warn the private customer of the residual-debt risk, and must in addition investigate the customer's income and asset position. If that investigation shows the customer cannot bear a possible residual debt, the provider must advise against entering into the agreement. That obligation does not, however, go so far as to require the bank to refuse to contract.
In asset management the duty of care may require the bank to warn expressly of the risks in the portfolio, even where the client is headstrong or emotionally attached to a particular holding. In Fortis/Bourgonje (24 December 2010) the Hoge Raad held that the duty of care is precisely intended to protect the client against such headstrongness and emotional attachment. At the same time, the client's degree of expertise and experience does bear on whether, and how far, the duty to warn extends.
For interest-rate derivatives, the preliminary ruling of 28 June 2019 on the interest-rate swap draws a sharp distinction. The duty to inform in the context of a plea of mistake (error, Article 6:228 DCC) requires the bank to give sufficiently clear information about the essential characteristics and risks, including the risk that the swap may acquire a substantial negative value on early termination. The duty to warn that follows from the special duty of care is separate from this. The difference matters in practice: a successful plea of mistake leads to annulment and reversal, whereas a breach of the duty of care leaves the agreement intact and gives rise to damages.
Duty of care towards third parties
The special duty of care applies not only towards a bank's own clients. In the Safe Haven judgment (23 December 2005) the Hoge Raad accepted that the social function of banks also entails a duty of care towards third parties whose interests the bank must take into account under the unwritten standards of what is proper in society. Once the bank became aware of investment activities that were possibly in breach of licensing requirements and that it facilitated through an account, it should have carried out its own investigation and should not have remained passive. That duty did not exist upon merely opening the account, and the judgment does not accept a general duty to warn every third party: whether such a duty exists depends on the circumstances. This line is relevant in disputes over unusual transactions and fraud via bank accounts.
Duty of care in lending and on termination of the banking relationship
The duty of care also plays a role in granting credit and in terminating a banking relationship. A bank may in principle terminate a credit relationship on the basis of a contractual power of termination, but that power is not unlimited. In ING/De Keijzer (10 October 2014) the Hoge Raad held that the termination is not valid if the exercise of that power is, in the circumstances of the case, unacceptable by the standards of reasonableness and fairness (Article 6:248(2) DCC). Within that test the interests of both parties are weighed; the bank falls short where it gives its own interest excessive weight relative to that of the client. The fact that the contractual power is the starting point therefore does not make the termination valid without more. Lower courts apply this test regularly: in a judgment of the District Court Midden-Nederland of 3 April 2024 the termination of a credit relationship was held unacceptable and therefore invalid. This subject overlaps with the wrongful termination of agreements.
What decides the outcome
Whether a claim succeeds is rarely determined by the norm alone, but by causation and the evidential position. The customer must in principle assert and prove that, with correct information, he would have acted differently (Article 6:98 DCC). In the securities-lease case law the Hoge Raad eases that burden with evidential presumptions where the financial burden of the product was unacceptably heavy. Contributory negligence also plays a major role (Article 6:101 DCC): mistakes arising from a customer's rashness or lack of insight weigh, in principle, less heavily than the bank's own mistakes, which in the securities-lease cases led to an apportionment leaving part of the loss with the customer. The duty to complain in good time and limitation periods often determine whether a claim can still be brought successfully.