On The Exercise Of Set-off Of The Banks

We have studied on how the banks exercise the right of set-off by such path: First is the universally international legislation on set-off, then is our`s, and first is some basics then details.Separately speaking, we have analyzed the relation of the banks and their clients at frist. Citizen, legal person and other organizations could be clients of the banks, but not everyone who have made business with the bank could be. According to correlative juridical prejudications and legislation of some countries, we can hold such view that only the person who made a account in a bank can be the client of the bank. Not every operation of the bank needs to build up a account for their coustoms, of course. This contributes to understand why not everyone could be the client. Identifying who is the client of the bank is significant ,and it is foundation of the bank which exercise the right of set-off. What kind of legal effect will happen if the relation of the banks and the clients build up? Generally, the banks take on such obligations after that: they should keep the cash for clients and cash check up on demand or by promise. Besides, the banks are also charged with such obligation: duty of care, keeping secrets and so on. As far as the legal characters of the relation, we assent that it is a kind of contract, and the banks possess an amount of money which their clients credit account with. At the same time, the banks get debt to their client correspondingly. Although there maybe other kind of legal relations between the banks and the clients because of different operation of bank, mostly it characters as a kind of contarct. So there is mutual creditors-debtors when the bank loan to its client.Secondly, we have made a study on what kind of qualifications should be meet if the banks want to excise their right of set-off and what kind of method should be by. There is an important part of essay here. Different qualifications should be meet if there are different occasion, so is the method that by. Then we distinguish between no bankruptcy and bankruptcy. As far as the first occasion, the banks could get the right of set-off by law or advanced promise. The right of set-off got by law, called statutory set-off, should meet several qualifications following: Frist,the bank and the client must be creditors-debtors each other. That is ,they must be in legal debt each other,and one can claim the other discharge the debt; Second,both creditor`s rights should be maturity and be discharged. For the current deposit,the creditor`s right is maturity at any moment possibly.But for the fixed deposit, it isn`t maturity until some fixed period have gone. Third, both debts are conspecifid. Account build up in a bank usually log money or other currencies. Four, both debt must be suitable to be set off. The right of set-off also can be got based on promise made in contract. It is common for the banks in practice. The two parties can make a promise on how to excise the right of set-off in order to exclusive some restrictions from statutory set-off, for example: be maturity , be conspecific and so on. But the promise can`t against law and damage the interest of other person. Set-off in bankruptcy follows some special rules, for example, set-off could be executed even if the creditor`s right wouldn`t be maturity. And the legal effect of set-off based on promise would be confined.The method which the bank execute set-off by, may be requsted by law or based on promise made by the two parties. Summarizing legislation of most counties, the banks could excise the right of set-off by three method:set-off by itself, automatic set-off and judicial set-off. Doing set off by self-help is represented as Germany, and the bank can claim set-off by notifing its client. Automatic set-off is represented as French, and the right of set-off have been over automaticly once it adapot to be set off. There is no need to claim, even to know the fact of set-off. For judicial set-off, it is the method which have been done in proceedings and achievement of set-off depands on the court judgement. Above all, set-off by self-help is most common and convenient .Then we focus on some risk and restrictions which the banks would face in the process of doing set-off. Where are rigts, where are risk. So is the right of set-off.Undoubtfully it is significant for bank to study on what kind of risk and restrictions will be faced.Doing set-off not only should meet special qualifications and follow special method, but also is fluctuated by such factors as time,place, notify. These factors may have effect on weather the banks could make their interests maxim and weather the exercise of set-off would be useful. In all, there is two side of risk would be faced: Frist is lacking of right of set-off, the other is inadequate method. Therefore the bank which doing set-off should be cautious enough to keep the validity. The restrictions to the excise of the right of set-off may be various, and different legislative tradition of counties have different regulate on them. But some common is still found, for example, cross-claim which limitation of action have past couldn`t be adapot to set-off.At last , we sum up our present legislation on set-off and analyze weather it is favorable for the banks. Our legal rules on set-off is still primary, though we have bulided up legal framework, including set-off by law, set-off by promise and set-off in bankruptcy. Here we introduce set-off by law and set-off by promise seperately. At first, some restrictions on set-off of our legislation have based on provisions of other law and the nature of debt mainly. Regretly, as we have known ,there are no enough provisions of law, so it is unconvenient for bank to excise the right of ser-off inevitably. For set-off by promise, it is more perfect relatively in practice. The bank alwalys make some promises on the right of set-off in the contract. But the question is the bank would take advantage of status to opress the other party. What`s more, we have gave some suggestions for the bank who excise the right of set-off. After all, confronting unfavorable legal circumstance, the bank should excise the right of set-off based on promise adequately.