Banks as financial advisers : a comparative study in English and German law

This thesis deals with law concerned with the role of banks as their customers' financial advisers in England and Germany. At present, the law related to financial advice in England and Germany appears to be a motley conglomerate of isolated concepts and lines of authority which fail to form a homogenous body of rules capable of guiding those who are involved in the banking business. Recent developments such as the 'misselling' of pension funds and other investment products have undermined consumer confidence in the financial services industry and have raised the question whether the present legal concepts can still be seen as adequate means to protect the interests of consumers. This thesis argues that the duties of banks which assume the role of their customers' financial adviser should be extended so as to ensure that only those financial products are sold to customers which are positively suitable to their individual needs. Furthermore, it is argued that banks which provide their customers with investment advice should disclose to them any substantial conflict of interest on their part. Additionally, the duties of lenders should also be in creased. This thesis maintains that, in certain circumstances, there should be an obligation on the part of a lender not to grant a loan to a financially inexperienced consumer. Furthermore, it is argued that - with regard to third party guarantees involving substantial financial risks for the guarantor - a lender should be under the obligation to ensure that the guarantor receives independent legal advice before signing the guarantee agreement. On a more general level, this thesis calls for the development of a partnership between banks and their customers and regards it as the law's task to counterbalance existing inequalities of bargaining powers between banks and their customer to further the forming of such a partnership. It also supports the idea of informal conflict resolution systems such as the Banking Ombudsman Scheme.