The furore in some quarters, including a call for an inquiry into the conduct of the banks, following the decision by some banks to close accounts held by the Guptas, raises the question of what circumstances would entitle your bank to terminate its relationship with you.

Personal Finance put the question to Absa, First National Bank (FNB), Nedbank and Standard Bank, as well as the Ombudsman for Banking Services, Advocate Clive Pillay.

Pillay says a bank would have to consider the Code of Banking Practice, the Financial Action Task Force (FATF), the Financial Intelligence Centre Act (Fica) and the Fica Amendment Act. They would also be guided by the Supreme Court of Appeal’s ruling in Bredenkamp and Others v Standard Bank (2010) (see below), “which deals extensively with the approach and principles to be adopted by a bank and the bank’s rights when closing a customer’s account”.

The Code of Banking Practice states that a bank will not close your account without giving you “reasonable prior notice”. However, a bank reserves the right to “protect our interests in our discretion, which might include closing your account without giving you notice: If we are compelled to do so by law (or by international best practice); if you have not used your account for a significant period of time; or if we have reason to believe that your account is being used for any illegal purposes”.

Pillay says South African banks are compelled to act as above through at least two instruments: FATF and Fica.

FATF is an inter-governmental body of which South Africa is a member. FATF compels its members to monitor domestic and foreign “politically exposed persons” (PEPs).

Pillay says that, in financial regulation, the term PEP describes a person who has been entrusted with a prominent public function. “A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.”

Fica imposes duties on institutions that might be used for money laundering and the financing of terrorism and related activities.

“Chapter three of Fica deals with this aspect. It imposes obligations on accountable institutions, such as banks, to identify clients, keep records, etc. Section 29 of part three of Fica deals with suspicious and unusual transactions. The application or implementation of these obligations could potentially have far-reaching consequences. Remember that the Act is intended to be intrusive,” Pillay says.

The Fica Amendment Act includes an expanded definition of a PEP and includes people in the private sector who hold prominent positions, he says.

“Parliament has already passed this amendment, and it is with the president for signature.”

An Absa spokesperson this week said the relationship between a bank and a client continues as long as both are happy to maintain it.

“Either [party] can end the relationship at any time. Clients may choose to end the relationship if, for instance, they are offered better terms elsewhere or are unhappy with service. All they need to do is settle any outstanding financial obligations with the bank.”

A bank may end the relationship with a client for a variety of reasons. “The most important is if it concludes that continued association constitutes unacceptable financial risk.

“Also, a bank may end the relationship if, despite its best endeavours, it cannot assure regulators that the manner in which a client conducts their banking activities is not in breach of regulations or legislation.

“A client’s ability to transact on an account may be suspended if, for example, the bank has been trying to obtain information or documents from the client to satisfy regulatory requirements and the client has not produced them,” the spokesperson said.

Virginia Magapatona, the head of corporate affairs at FNB, says the bank treats every case on its individual merits, in terms of the contract with its customers and in compliance with the applicable legislation.

Anna Isaac, the chief legal counsel at Nedbank, says a banking relationship is based on a contract and may be terminated for various reasons, as set out in the underlying contracts, and/or by giving reasonable notice.

In response to questions, Standard Bank sent Personal Finance the relevant section of the Code of Banking Practice.


The Supreme Court of Appeal dismissed an appeal by Bredenkamp, two companies and a trust in which he had interests against a judgment of the High Court. The appellants had sought an order preventing the bank from closing their accounts. The High Court dismissed the application.

It was accepted that the bank had, in terms of its contract with the appellants and in terms of the common law, the right to close the accounts with reasonable notice. However, the appellants contended that the closure was unfair, because it was unlikely that they would be able to obtain other banking facilities. They relied on a Constitutional Court judgment for the proposition that a party is not entitled to use its contractual rights if it would be unfair to the other party.

The court held that the appellants had misconstrued the Constitutional Court judgment and, in any event, the closing of the accounts was not unfair under the circumstances of the case.