Law and ethics: the banks fiduciary duty towards retail customers

The Fiduciary Duty is the strictest duty that exists in the realm of private law. The fiduciary must act in the best interests of his principal, and prioritise these interests over every other interest – including those of his own. Hence, the reluctance to apply a fiduciary duty to banks, whose goal is to make profit. However, the fiduciary duty of banks should not be construed as an altruistic duty, but rather as a legal instrument designed to ensure a basic level of professional ethics in the activities of the banks. Based on this perception, the chapter calls for imposing a wide fiduciary duty on banks towards retail customers, due to the disparity of power between the parties and the fear that the bank could exploit its power to the detriment of the customer. The chapter examines the implications of establishing the fiduciary duty as a general guideline for the behaviour of the banks, and outlines the recommended format for ethical and legal implementation of this duty.