The Bank's Fiduciary Duty Under Israeli Law: Is There a Need to Transform it from an Equitable Principle into a Statutory Duty?

Abstract

A deep seated rule in Israeli case law is that the bank owes a fiduciary duty to its customers. The concept of imposing a fiduciary duty on banks was adopted by the Israeli courts from English principles of Equity. However, the Israeli courts expanded the notion far beyond its original English counterpart. The Israeli duty automatically applies to all customers in all transactions. The duty imposes a very high level of behavior on the bank, and its breach grants the customer a wide range of remedies. During the years, this concept of the bank's fiduciary duty has become a basic premise in Israeli case law.

Given these facts, there is no apparent need to change the status of the bank's fiduciary duty from a case-law norm into a statutory edict. However, the article argues that, for different reasons, there is still a need to determine the bank's fiduciary duty statutorily.

The article examines the advantages and risks involved in such a process; It assesses the influence of the proposed legislative interference on the conflicting interests of the bank and the customer; and it reaches the conclusion that the time has come to transform the equitable doctrine of the bank's fiduciary duty into a statutory rule.

Keywords: bank-customer relationship,fiducairy duty, financial consumer protcetion, israeli banking law

JEL Classification: K12, K29, K39, N20