A Study On The Several Legal Issues In Tne Bank’s Right Of Set-Off

Given the safe of its own assets, banks spare no efforts to avoid any losses from either the breach of loan contracts or any other debts of their clients. Bankers right of set-off, an easy, fast and private relief, is one of the useful and powerful tools which helps banks to achieve their rights as creditors. In China, the related financial laws and regulations empower the commercial banks to adjust credit balance in one account with the debit balance in another account as stipulated in loan contracts. In practice, almost all of the banks in China automatically combine clients’accounts having debit and credit balance when the clients fail to pay off loans in time. In our legal system, the theory of ’right of set-off is well-discussed in the civil law, however, the deputes of ’bankers right of set-off exist in the filed of the commercial law. To be specific, when there is no consensus or stipulations in contracts, how to define the combination of clients ’accounts having debt and credit balance? Whether it can be considered as ’right of set-off’ or not is a heating issue in the legal aspect. Besides, due to ’bankers right of set-off has not yet been enacted in details in any laws or regulations, the precaution of the abuse of’bankers right of set-off’ and the protection to the clients are lacking. In the common law system, especially in England and America,’bankers right of set-off has already been established. The precedents of bankers right of set-off in America are abundant and the assorted customs and America has been established, which are worth being researched and referred. Based on the aforementioned works, the essay tries to build a legal system of’bankers right of set-off’ in China, which covers the prerequisites of ’bankers right of set-off, the management system of bank accounts, the precaution of the abuse of’banks right of set-off’ and the protection to the clients. This article will have the discussion in three parts: introduction, text and conclusion.The first chapter is the legal relationship between banks and clients. Because this is the fundamental essence of ’banks right of set-off, the legal relationship between banks and clients, namely the debtor-creditor relationship, is well-discussed. The essay compares the different views of this relationship between Civil Law System and Common Law System.The second chapter is the legal practice of ’banks right of set-off in Common Law System. In this part, the related precedents are chosen and analyzed, from which ’banks right of set-off’ in America is well understood and the improvement of our own legal system is found.The third chapter is about the current situation of set-off in Chinese commercial banks and the improvement of ’banks right of set-off. Hereby, the set-off in commercial banks is defined as a kind of ’right of set-off in civil law which has its own characters. The prerequisites of’ bankers right of set-ofF’, together with the protection to the clients, is designed.In the Conclusion, the essay emphasizes the designed ’banks right of set-off’ needs to be improved while it is in practice.