Contract provisions

Types of contract

Describe the various types of private banking and wealth management contracts and their main features.

There are several types of private banking contract:

  • investment advisory agreements;
  • bank account agreements; and
  • asset management agreements.

These contracts are usually accompanied by a general private banking framework describing the features of the new relationship between the individual and the private bank.

Liability standard

What is the liability standard provided for by law? Can it be varied by contract and what is the customary negotiated liability standard in your jurisdiction?

The sanctions incurred by credit institutions are various; they may be professional, criminal or civil. The most general sanction remains the civil liability of credit institutions, which obeys the rules of ordinary law; it is tortious towards third parties and contractual in the relations of credit institutions with their customers.

Credit institutions generally incur liability in tort for their personal acts and for the acts of their employees, whereas the extent of the contractual liability depends on the obligations stipulated by the contracts binding them to their customers. However, this responsibility is sometimes difficult to retain because many contracts are only verbal, which makes it difficult to prove the content of the obligations. Even if this proof is provided, compensation may only be partial, or even excluded, if clauses lightening liability have been stipulated, which is common in banking matters.

Mandatory legal provisions

Are any mandatory provisions imposed by law or regulation in private banking or wealth management contracts? Are there any mandatory requirements for any disclosure, notice, form or content of any of the private banking contract documentation?

There are no specific mandatory provisions or requirements imposed by law or regulation with respect to private banking. Nevertheless, according to the MiFID II Regulations, a written framework agreement between the financial institution and its private client is required.

This cannot be satisfied by a simple discussion between the private banker and his or her client, no matter how thorough and regular it may be. The client must systematically and periodically answer long and precise questionnaires.

MiFID II also requires banks always to have their customers sign a contract. Until now, some forms of advice were given without a contract.

In order to guarantee maximum transparency, banks will have to send information regularly to their customers about the validity of what is offered to them, the characteristics of the products purchased and on the fees they are charged.

Limitation period

What is the applicable limitation period for claims under a private banking or wealth management contract? Can the limitation period be varied contractually? How can the limitation period be tolled or waived?

The applicable limitation period for claims under a private banking contract is the ordinary five-year limitation period. Since this limitation is provided by law, it is not possible for parties to waive or alter it.