INSTITUTE OF BANKERS IN MALAWI
ADVANCED DIPLOMA IN BANKING EXAMINATION
SUBJECT: LAW RELATING TO BANKING (IOBM – D216)
Date: Thursday, 7th November 2013
Time Allocated: 3 hours (08:00 – 11:00 am)
INSTRUCTIONS TO CANDIDATES
1 This paper consists of TWO Sections, A and B.
2 Section A consists of 4 questions, each question carries 15 marks.
Answer ALL questions.
3 Section B consists of 4 questions, each question carries 20 marks. Answer ANY TWO
questions.
4 You will be allowed 10 minutes to go through the paper before the start of the
examination, you may write on this paper but not in the answer book.
5 Begin each answer on a new page.
6 Please write your examination number on each answer book used. Answer books
without examination numbers will not be marked.
7 DO NOT open this question paper until instructed to do so.
A qualification examined by the Institute Page 1
SECTION A (60 MARKS)
Answer ALL questions from this section.
QUESTION 1
You are a Legal Adviser for a bank where Mr Msikawanjala has an account which has
received an instruction from Sky Bank in connection with its proposed transaction with
Mr Msikawanjala. Sky Bank is asking the bank that you work for to give it your bona fide
opinion of the financial state of affairs, creditworthiness and business reputation of Mr
Msikawanjala. What would you advise your bank on liabilities? (Total 15 marks)
QUESTION 2
(a) Mrs. Banda has gone to Alimi Bank to enquire about her husband’s bank account
balance. The bank refused her on the basis that she did not have permission
from her husband. Mrs Banda intends to sue the bank for refusing to disclose the
information regarding her husband’s bank account. She argued that she and her
husband are one flesh.
Required:
Advise Mrs. Banda on the legal position. (5 marks)
(b) Mention three conditions that are to be satisfied for a countermand to be
effective? (3 marks)
(c) Mention five main parties to a letter of credit. (5 marks)
(d) Define Accommodation Bill. (2 marks)
(Total 15 marks)
QUESTION 3
(a) In banking, a customer may give a third party to the banking contract his power
of attorney to operate his bank account. The power of attorney may be special or
specific (to operate the bank account or other specific powers like the sale of
property) or general (which may give the holder authority to act on the customer’s
behalf for many activities including banking). A power of attorney arrangement
A qualification examined by the Institute Page 2
creates some duties on the part of the attorney. Mention five of the duties that
are imposed by Law on the holder of a power of attorney. (5 marks)
(b) Just as a person can give a power of Attorney, can also cancel it by revocation.
However, Power of Attorney revocation may also result automatically from
various events. List five instances in which a power of attorney can be revoked.
(5
marks)
(c) Under section 75 Bills of Exchange Act (cap. 48:02) of the Laws of Malawi a
bank's duty to pay a cheque is ended by a countermand. Explain five of the
prerequisites of an effective countermand. (5 marks)
(Total 15 marks)
QUESTION 4
Discuss to what extent does the bank-customer relationship imposes implied duties on
the bank. (Total 15 marks)
SECTION B (40 MARKS)
Answer ANY TWO questions from this section.
QUESTION 5
Discuss the nature of the legal relationship(s) between banks and their customers.
(Total 20 marks)
QUESTION 6
Discuss the legal implications of a situation in which the statement of account shows a
credit balance higher than the true balance as the result of a wrongly credited item and
the customer writes out a cheque to the extent of the higher (incorrect) balance. Can the
bank recover an amount equivalent to the excess credit? (Total 20 marks)
A qualification examined by the Institute Page 3
QUESTION 7
Discuss remedies that a customer might seek to obtain where there has been a breach
of confidence by a bank. (Total 20 marks)
QUESTION 8
(a) Jonasi is an account holder with one of the commercial banks in town. One day,
he made a deposit of MK10, 000, 000, which surprised the bank since he had not
deposited any amount beyond MK20, 000. The bank was so suspicious of the
source of this money. The bank reported the matter to Finance Intelligence Unit
that is under Ministry of Finance. The unit made enquires that led to arrest of
Jonasi. Jonasi has threatened the bank with a suit for breach of contract. Advise
him. (5 marks)
(b) Mention four statutes that allow a bank to disclose information relating to clients.
(8 marks)
(c) Give two instances where a bank is mandated to disclose information of clients
to protect the interest of the bank. (4 marks)
(Total 20 marks)
END OF EXAMINATION PAPER
A qualification examined by the Institute Page 4
