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date: 24 May 2019

Abstract and Keywords

This chapter examines fiduciary principles in banking law, focusing on both commercial and investment banking. It considers when fiduciary duties exist and what they require, the range of remedies available for breach, and the various techniques banks use to exclude or modify fiduciary duties. One puzzling feature of the legal landscape is that clients bring actions less often than banks’ size and conduct might suggest, contributing to legal uncertainty. Fiduciary law nevertheless constrains banks’ activities: courts have cast banks as fiduciaries in all of the major commercial and investment banking functions, including making loans and accepting deposits, advising on merger and acquisition transactions, and underwriting securities offerings, although banks face greater risk in some areas than others. Banks have responded by disclaiming fiduciary duties and using information barriers/Chinese walls, and yet recent judicial decisions refuse to accept these measures as automatically effective for avoiding fiduciary liability. Courts insist that they, rather than the parties themselves, determine whether fiduciary duties exist and what they require. The law thus diverges from some theoretical accounts of fiduciary doctrine, posing challenges for banks and new questions for scholars.

Keywords: fiduciary principles, banking law, commercial banking, investment banking, fiduciary duties, informed consent, fiduciary disclaimers, information barriers, breach of fiduciary duty, remedies

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