According to the headline of the Dutch financial newspaper (Het Financieele Dagblad) of Wednesday 18 March 2020, ‘In 2008, banks were part of the problem, but now they are part of the solution’. This confident statement was a quote from Wiebe Draijer, chairman of the Rabobank board. On the same day, ABN-AMRO chief executive Kees van Dijkhuizen announced his desire to steer both companies and individual clients through the COVID-19 crisis. In both of their statements, they sketched the outlines of broad packages of measures in relation to the coronavirus, intended to furnish SMEs and private individuals with the suspension of payment of interest and loan repayments. Shortly thereafter, ING, Volksbank and Triodos Bank followed suit, with commitments to temporary repayment deferrals.
Though the COVID-19 crisis is first and foremost a question of public health, it is clear that the financial consequences are also set to be enormous. It is for that reason that the banks’ measures went live so quickly. That the banks were capable of presenting a plan to accommodate large numbers of customers holding many billions of euros worth of outstanding loans within a week is impressive.
At first sight, the measures appear to be a logical consequence of the pivotal role that banks play in society. However, the decision to step up so decisively is not as logical as it might seem, if you consider the attitudes of some banks during the 2008 credit crisis. For a long time, SMEs were very dissatisfied with the service provided by some banks during that period. Attentiveness now, in the time of COVID-19, is offering banks the opportunity to put their unfortunate inheritance from the credit crisis behind them for good.
Banks’ pivotal role translated into duty of care
Under civil law, the pivotal role of banks has in recent years led to a broad palette of case law, which may be summarised as the tenet of banks’ special duty of care. Banks have an information lead and possess special expertise in the area of financial products and services, and put simply, with that expertise come certain expectations. The customer's interest is secured through the special duty of care, which manifests itself between the customer and the bank both in the pre-contractual phase and during the term of the contract.
Through the commitment to and expressed intention of supporting a large group of customers in these difficult times, banks are showing themselves to be pre-eminent protectors of customer interest. It does not, therefore, require too much in the way of imagination to see the proclaimed attentiveness on the part of the banks as a corollary of their special duty of care. But is it right to do so, and if so, what are the consequences from a civil-law point of view?
Banks’ special duty of care in light of the COVID-19 crisis
The implementation of the special duty of care imposes a number of obligations on banks. For example, the Dutch Supreme Court has ruled that the special duty of care entails the duties to investigate and provide advice, to warn and verify, and, in exceptional cases, to refuse. Lower and higher courts both continue to provide further substance to the various aspects of the special duty of care. In this way, it is a tenet which is constantly in development and whose dimensions, furthermore, are continuing to expand.
It does not come as any surprise that banks have a special duty of care in case of the bankruptcy of individuals or the liquidation of companies. A bank must adopt a reasonable posture in respect of customers in difficulties, even where doubts exist concerning continuity. With the implementation of the European Mortgage Credit Directive (MCD) on 14 July 2016, this obligation has even become legally enshrined: banks must try harder to assist consumers experiencing payment issues. But rules of conduct also exist in respect of companies. Additional requirements (including those of due care) must be set in some situations for cases being dealt with by ‘special administration’ departments. In no case may a bank simply demand repayment of a loan overly quickly or rashly, even when the bank is contractually entitled to do so.
The current measures are a shining example of banks adopting a reasonable and careful position towards customers facing or potentially facing heavy weather. A step which customers would not have been able to demand contractually and which - we assume - would have been equally impossible to enforce in advance through the civil courts. Nonetheless, the banks have taken this step and, with it, their responsibility.
First and foremost, the measures announced by Dutch banks must be viewed in the light of the exceptional circumstances in which we presently find ourselves. The measures simply cannot be viewed separately from the situation. This takes nothing away from the fact that, without any doubt, the coronavirus crisis will have an effect on banks’ special duty of care. More than ever, during the COVID-19 crisis, banks will have to behave reasonably towards customers in financial problems. As long as banks explain to customers in a clear and informative manner what is expected of them, through their attentiveness, banks will be contributing to the resolution of the financial consequences of the coronavirus crisis.
Through their current commitments, the Dutch banks are sending a clear message regarding how they themselves interpret their special duty of care at this time of exceptional and unique crisis. So doing, Dutch banks are giving further substance to their special duty of care in respect of the impact of the COVID-19 crisis. The responsibility now being taken by Dutch banks ad hoc does not, however, indemnify them from damage claims arising from breach of their special duty of care. Undoubtedly, there will be customers who will later be of the opinion that their bank could have done more or acted differently. However, if banks realise this now, during the roll-out of the measures, and anticipate it - for example, by clearly communicating time lines and emphasising that the attitude in this unique situation should not be interpreted as a precedent - the legacy can only be a beneficial one.
If you have any questions about this topic, feel free to contact our Banking & Finance team.
