The “Bankers’ Special Relationship” refers to the unique and trusted relationship that exists between a bank and its customer. It is based on the principles of confidentiality, trust, and fiduciary duty, where the bank is expected to act in the best interests of its customers while handling their financial affairs. Two important aspects of the Bankers’ Special Relationship are the Mandate and Power of Attorney. Let’s explore each in detail:
- Mandate:
- A mandate is a legal authority given by a customer to the bank, allowing the bank to perform certain specified actions or transactions on the customer’s behalf.
- It is a limited form of authorization, which means the bank can only act as per the specific instructions provided by the customer in the mandate.
- A mandate can be oral or written, depending on the bank’s policy and the nature of the tasks to be performed.
- The primary purpose of a mandate is to enable the bank to carry out routine financial transactions on behalf of the customer, such as depositing or withdrawing funds, issuing cheques, or making bill payments.
- Mandates are commonly used for joint accounts, where multiple account holders grant permission to one or more individuals to operate the account on their behalf.
- Banks are legally bound to follow the instructions given in the mandate and should not deviate from them without proper authorization.
- Power of Attorney (POA):
- A Power of Attorney is a legal document that grants a designated individual or entity (the attorney-in-fact) the authority to act on behalf of the person giving the power (the principal).
- Unlike a mandate, a Power of Attorney can be more comprehensive and broader in scope. It can cover a wide range of financial, legal, and personal matters, not limited to banking activities.
- There are different types of POAs, including General POA, Limited POA, and Durable POA, each with specific provisions regarding the scope and duration of authority.
- A Durable Power of Attorney remains valid even if the principal becomes incapacitated or mentally incompetent, while a Regular Power of Attorney may become invalid under such circumstances.
- A Power of Attorney can be used for various purposes, including managing bank accounts, real estate transactions, legal matters, and healthcare decisions, depending on the terms outlined in the document.
- Banks often require customers to provide a certified copy of the Power of Attorney document before allowing the attorney-in-fact to perform transactions on the customer’s behalf.
- It is essential to choose the attorney-in-fact carefully since they will have the legal authority to act as the principal and make decisions that can significantly impact the principal’s financial and personal affairs.
Both the Mandate and Power of Attorney are legal instruments that enable individuals to delegate financial responsibilities to trusted parties. However, it is crucial for individuals to carefully consider the scope and implications of granting such authority to ensure that their interests are protected and that their financial affairs are managed appropriately. Seeking legal advice before executing a Power of Attorney document is recommended to understand the implications fully. Additionally, banks have specific policies and requirements concerning mandates and Powers of Attorney, and customers should inquire and comply with these policies when authorizing others to act on their behalf.