INSTITUTE OF BANKERS IN MALAWI
DIPLOMA IN BANKING EXAMINATION
SUBJECT: LAW RELATING TO BANKING 1 (IOBM – D216)
Date: Tuesday, 6th May 2014
Time Allocated: 3 hours (13:30 – 16:30 pm)
INSTRUCTIONS TO CANDIDATES
1 This paper consists of TWO Sections, A and B.
2 Section A consists of 4 questions, each question carries 15 marks.
Answer ALL questions.
3 Section B consists of 4 questions, each question carries 20 marks. Answer ANY
TWO questions.
4 You will be allowed 10 minutes to go through the paper before the start of the
examination, you may write on this paper but not in the answer book.
5 Begin each answer on a new page.
6 Please write your examination number on each answer book used. Answer
books without examination numbers will not be marked.
7 DO NOT open this question paper until instructed to do so.
SECTION A (60 MARKS)
Answer ALL questions from this section.
QUESTION 1
In relation to the Reserve Bank Act 1989, discuss the origins and objectives of the
Reserve Bank of Malawi.
(Total 15 marks)
QUESTION 2
(a) You have been approached by the managing Director of a foreign company called
Capital Investments Limited to advise it on the procedure that they need to follow in
order to register as a bank in Malawi under the Banking Act 1989.
Required:-
Advise Capital Investments Limited. (10 marks)
(b) Outline any five circumstances in which the Minister, upon the recommendation of
the Reserve Bank of Malawi, may revoke a licence, of the licensee under the
Banking Act 1989. (5 marks)
(Total 15 marks)
QUESTION 3
(a) Discuss the case of United Dominions Trust Limited v Kirkwood 1966 and its
relevance to banking law. (6 marks)
(b) Mention three circumstances will a bank be justified in refusing to pay a customer's
cheque when presented. (9 marks)
(Total 15 marks)
QUESTION 4
Comment on the following terms which appear in the Banking Act 1989:
(i) Banking business (5 marks)
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(ii) Credit facility (5 marks)
(iii) Financial institution (5 marks)
(Total 15 marks)
SECTION B (40 MARKS)
Answer ANY TWO questions from this section
QUESTION 5
(a) A guarantee is a type of contract. Discuss key features of a valid guarantee.
(10 marks)
(b) In relation to the Bills of Exchange Act:-
i. Define a cheque and explain the legal effect of crossings that may appear on
it. (7 marks)
ii. Discuss what you understand by the term ‘holder in due course.’ (3 marks)
(Total 20 marks)
QUESTION 6
(a) Discuss any three factors that must be considered by a banker when opening a new
account. (9 marks)
(b) With reference to a power of attorney, define what a power of attorney is, how it
may be granted and how it may be revoked. (11 marks)
(Total 20 marks)
QUESTION 7
It is settled law that a banker has a duty of confidentiality or secrecy towards his
customers. However, according to Lord Bankes LJ in Tournier v National Provincial and
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Union Bank of England [1924] 1 KB 461, there are in principle four qualifications to that
duty.
Required:-
Discuss the four exceptions to that duty.
(Total 20 marks)
QUESTION 8
(a) Give any three differences between bills of exchange and cheques. (6 marks)
(c) Mr Phiri a long time friend of Mr Chisale goes to Mr Chisale’s bank. At the counter
Mr Phiri produces a cheque for a sum of K1,000,000.00 purportedly drawn by Mr
Chisale in his favour. The cheque does not have any crossings and the teller
examines it and concludes that it is properly drawn. As a matter of the Banks policy,
the teller tries to phone Mr Chisale to confirm the payment. Unfortunately Mr
Chisale’s mobile phone is out of reach. The teller then proceeds to make the
payment having verified Mr Phiri’s identity. This was the last that was seen of him!
In fact, as it transpires later, Mr Phiri had stolen the leaf from Mr Chisale’s wallet and
forged his signature on the said cheque.
Required:
i. Now Mr Chisale has come to you for advice, intending to sue the Bank,
advise him, using case or statutory authorities, on whether such a suit will be
successful or not. (5 marks)
ii. Would your answer be different if the teller had paid Mr Phiri on a cheque with
a crossing on its face? (5 marks)
iii. In relation to drawing of cheques, discuss the duties that Mr Chisale owes to
his bank. (4 marks)
(Total 20 marks)
END OF THE EXAMINATION PAPER
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