The Netherlands Bankers' Association (the "NVB") has reached an agreement with business and consumer associations on revised general banking conditions following an evaluation of the old general banking conditions from 2009. The revised general banking conditions (the "GBC") came into effect on 1 March 2017 and will generally apply between Dutch banks and their (business and consumer) clients.
The revised GBC are meant to be more accessible and easier to understand. They also include examples for guidance in the provisions themselves. Aside from simpler and more understandable wording, some substantive amendments have been made. This article briefly highlights the six most important changes for businesses.
- Duty of care provision expanded (art. 2)
The scope of the duty of care of the bank has been further expanded with respect to the products and services offered to its clients. Article 2 now explicitly states that the bank aims to provide comprehensible products and services. Furthermore, clients are obliged to provide the information specifically required by the bank so it can comply with its obligations towards (national, international, supranational, supervisory, tax or other) authorities. The client is now also obliged to provide information of its own accord if that information is clearly required by the bank.
- Bank no longer authorized to use own initiative to reverse crediting an account as a result of an order of an unauthorized person (art. 19)
In the past, when dealing with businesses, banks used to be able to use their own initiative to reverse crediting an account of a client as a result of an order by an unauthorized person or a person without a legal capability to act. The bank now no longer has this authority. For this purpose the third paragraph of the old article 19 has been removed. To remedy unauthorized orders, a follow-up order from the client is now required. Under the GBC the bank remains authorized to correct, without the permission from the client, an error made by the bank when executing its services.
- Further clarification in respect of rates and fees (art. 22)
Article 22 that deals with commission, interest and fees has been further clarified. The second paragraph of this article now stipulates that if the bank through an obvious error on its part has not agreed on a fee or rate with the client, the bank may only charge the client a fee according to the rate that it would charge in similar cases. This provision is intended to prevent clients from being charged excessive amounts. The third paragraph aims to set a standard for the process of a change of rates. If the bank changes its rates based on this article, it will need to inform the client prior to the rate change to the extent that this is reasonably possible.
- Clarification of the scope of the right of pledge (art. 24)
This article clarifies what falls within the scope of the right of pledge, which is vested by the acceptance of the GBC. The right of pledge not only extends to the credit balance on a bank account, but also to coins, banknotes, moveable property, shares and securities or other financial instruments of the client which are held at the bank. This article also stipulates that the power of attorney granted to the bank by the client to pledge assets to itself on the client's behalf, and to do so repeatedly, ends as soon as the relationship between the bank and the client has ended and is completely settled.
- Amendments to the obligation to provide collateral (art. 26)
Some amendments have been made to article 26, the provision regarding the obligation of the client to provide, upon request, the bank with (additional) collateral as security for the amounts owed. The new subparagraph 1(c) explicitly states that the client must provide the collateral required by the bank. The GBC give as an example that a client may not provide a pledge on its company assets if the bank requires a pledge on its inventory. This means that even if the company assets would have the same (coverage) value as the inventory, the bank is entitled to insist on being granted a right of pledge on the inventory of the client. Furthermore, subparagraph 1(d) of article 26 now explicitly states that a client may be asked to agree to a security surplus arrangement (overwaarde-arrangement) under which the bank may obtain any surplus proceeds realized from the enforcement of security rights vested in favor of another creditor. This inclusion reflects recent case law from the Dutch Supreme Court, which ruled that these security surplus arrangements, if well structured, are bankruptcy proof. Please click here if you would like to read more on security surplus arrangements.
- Amendments in relation to special costs (art. 28)
Further to the provision that the bank may require the client to compensate it for special costs to the extent that compensation is reasonable, the bank will be required to inform the client and explain why these costs are necessary. This may also apply to appraisal costs, advisory fees and costs for extra reports. Article 28 now also includes the rule that if there is a legal regime for special costs it will be applied. According to the NVB, the revised provision entails, amongst other things, that legal costs incurred by a bank in legal proceedings against a client but where the court has ruled in favor of the bank, the bank's claim for compensation of legal costs will be limited by the court's tariffs scale and thus the client will not be asked to pay the entire legal (assistance) costs.