Recovery Procedure under Banking Law (Research Paper Sample)
Jim Peters wishes to purchase a dairy farm for $12 million. He has a deposit of $1 million. He seeks funding of $11 million from CSB Bank Co Ltd for his purchase.
CSB Bank Co Ltd requires Jim to transfer title to the farm to the bank until he has paid off the loan with the agreed interest. Jim accepts this proposal. In due course, the bank became the registered proprietor of the farm under the Land Transfer Act 1952.
Over time, dairy prices dropped. Due to this drop in prices, Jim fell behind in his contractual payments to CSB Bank Co Ltd.
Peter Brown, manager of the CSB Bank Co Ltd branch at which Jim maintained his account, initiated a sale of the farm after following all statutory notice requirements. The sale was widely advertised in the media in the local area but not otherwise.
At the sale, the price the purchaser of the farm agreed to pay was lower than the market value of dairy farms in the area. The proceeds of the sale satisfied Jim’s liability to CSB Bank Co Ltd, but Jim received only $400,000 from the sale. The market value for farms in the area suggested Jim should have received $600,000.
CSB Bank Co Ltd received a letter from Jim’s lawyer, Mary McIntosh, complaining that CSB Bank Co Ltd had caused Jim to lose much of his equity in the farm.
You work at the Head Office of CSB Bank Co Ltd. The file disclosing the circumstances above has landed on your desk. You are asked to advise the CSB Bank Co Ltd what it should do.
Required: Write a report (a report might include the following– (1) a summary of conclusions; (2) reasoning to justify those conclusions, including a statement of the salient facts, a statement of the relevant law, and the application of the latter to the former; and (3) your conclusions including practical advice as to the course of action the bank should take) to your manager, containing your advice.
Banking Law
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Recovery Procedure under Banking Law
Banking law is a law that seeks to make our financial matters work in the best way possible. Significantly, following the 2019 Covid19 global crisis, we continue to experience issues associated with banking, especially considering that the banking sector has been left to address matters relating to the financial industry. The United Kingdom has set up two regulatory authorities to guide the financial industry, which they believe will provide the best safety and soundness in the financial sector. One of the authorities put in place is the Prudential Regulation Authority, whose responsibility is to ensure that the banks observe the financials' safety and, more so, the soundness of the banks.
The second regulatory authority is the Financial Conduct Authority, whose primary responsibility is to ensure that the bank's clients do not get exposed to the volatility of the financial markets, and thus both the clients and the players in the banking industry (Cranston et al., 2018). It is important to note that clients remain to be the sole purpose for the existence of banks, and as such, they should be respected at all costs. One of how clients should be respected is by ensuring that their privacy is respected, while the second one is concerned with ensuring that they are not unlawfully exploited.
In the case of Jim Peter vs. CSB Ban Co Ltd, there were terms and conditions attached to the loan that Jim acquired from the bank, which should form the basis upon which any recovery action should be based. According to the records, Jim has already been served with the requisite data advising or requesting him to ensure that he has his obligations to the bank (Cranston et al., 2018). However, Jim has not met his end of the bargain, nor has he provided a plan that demonstrates his commitment to ensuring that the loan that he obtained from the bank is repaid. Therefore, it shows no obligation towards the loan that he was advanced, even though his primary payment source has gone through challenges that resulted in a reduction in the price of milk, which was the main contributor to the loan's payment. At the same time, while the bank must protect
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