Protection of the Bank Customer: By Statute or by Ethical Codes - Which is Preferable? An Israeli Perspective

תקציר

This article focuses on the various dimensions of the statutory regulation of bank-customer relations. There is some kind of discomfort with respect to the enforcement of these regulations. The author proposes to examine the issue of whether it might be preferable to base some of the regulations on ethical codes (soft law) instead of specific statutory provisions. There are several means to control bank-customer relations. The main modes are: First, contract law, torts and unjust enrichment; second, special contract laws; third, the Standard Contracts Law, 1982; fourth, banking laws; fifth, special laws intended to protect bank customers. In addition, there are rules of administrative regulations such as the Directives for proper bank management. Despite the heavy regulations, there are problems in enforcing them. It is possible that voluntary Codes of Ethics might be more useful. Ethical Codes have the advantages of flexibility, enforcement, veracity and willingness. The author concludes that there are numerous shortcomings in replacing binding legal rules with voluntary codes. The main problems are lack of willingness, problems of implementation, questions of legitimacy, partial participation of dealers, and insufficient participation of consumer organizations. Accordingly, voluntary codes cannot replace legislation but can serve as an addition to the existing legislation as a part of improving the image of the banking sector.