¹ See sec. 2 (2).

² Sec. 10 states: A bank may carry on only the following activities;

1) The acceptance of monetary deposits in current accounts from which sums are withdrawn by check upon demand.

2) The acceptance of other monetary deposits.

3) The issue of securities.

4) The conduct of a system of payments, including the collection, transfer and conversion thereof.

5) A grant of credit.

6) Investment in securities or in gold intended for monetary purposes.

7) The safekeeping and management of negotiable instruments, securities, rights and other assets for another, as an agent, baillee, factor or trustee; provided that a business enterprise shall not be managed in this way.

8) The renting of safety deposit boxes.

9) The purchase and sale of securities as dealer, agent or subscriber.

10) Financial and economic counselling.

11) Brokerage in financial and economic transactions, except in the purchase or sale of goods or land.

12) An activity expressly permitted to a bank by law.

13) Any other operation concomitant to an activity permitted to a bank. (Unofficial translation).

³ Four years after the enactment of the Banking Ordinance, 1941, its definition of “banking business” was criticized in the following terms: “This definition is extremely narrow… Collections, trusts, securities business and the various incidental services which are customarily rendered by banks, are not included in the definition.” See Annotated Laws of Palestine (Tel Aviv, 1945) vol. II, p. 221.

⁴ See sec. 25 of the new Law. This section introduces a troublesome flexibility in the legal definition of banking, which, according to sec. 10 of the Law, purports to be an exhaustive definition. In fact, sec. 10 (supra n. 2) states: “A bank may carry on only the following activities…”. In Germany, the Gesetz über das Kreditwesen (KWG) in the version published on May 3, 1976, has a similar provision [§1 – (1) in fine] although authority is conferred upon the Minister of Finance. The provision states: “Der Bundesminister der Finanzen kann nach Anhörung der Deutschen Bundesbank durch Rechtsverordnung weitere Geschäfte als Bankgeschäfte bezeichnen, wenn dies nach der Verkehrsauffassung unter Berücksichtigung des mit diesem Gesetz verfolgten Aufsichtszweckes gerechtfertig ist.”

⁵ See, for example, the Israeli Bills of Exchange Ordinance (New Version), according to which “banker includes a body of persons, whether incorporated or not, who carry on the business of banking” (sec. 1(3)). This tautological definition is a result of English influence. In England see: Bank Charter Act, 1844, sec. 28; Bills of Exchange Act, 1882, sec. 2 and Cheques Act, 1957, sec. 6 (1); Stamp Act, 1891, sec. 29; Finance (No. 2) Act, 1915, sec. 30; Bank of England Act, 1946, sec. 4 (6). The same approach may be found in the laws of other countries which have been inspired by the English model. See, for example, in Ghana, the Banking Act, 1970, sec. 47 (1) (2) which defines a “bank” as “any banking enterprise (whether foreign or Ghanaian) which is issued with a license” and a “banking enterprise” as “any enterprise not yet issued with a license which carries on or proposes to carry on the business of banking”; in Malaysia, the Banking Act, 1973, sec. 2 (1) states that “bank means any person who carries on banking business.”

⁶ In Israel, for example, the Bills of Exchange Ordinance (New Version) in various provisions protects a bank which pays a bill with a forged or unauthorized endorsement, and which pays and collects a crossed check. See 1 L.S.I. [N.V.] 17, secs. 23(c), 80, 82.

⁷ See, for example, Chorley, , Law of Banking (London, 6th ed., 1974) 376 Google Scholar et seq.

⁸ In Israel see, for example, the Banking Ordinance, 1941, sec. 14b.

⁹ In Israel, and in accordance with the English model, see the Evidence Ordinance (New Version), 1971, secs. 35 et seq.

¹⁰ At present banking secrecy is to a greater or lesser extent recognized in all civilized countries. This duty appears to have existed since the beginning of the sixteenth century. See, for example, Mueller, “The Swiss Banking Secret—From a Legal View” (1969) 18 I. Comp. L.Q., 361.Google Scholar

¹¹ This is a point which is usually covered by every administrative banking law in the world.

¹² [1850], 12 I. Eq. R. 400; quoted in Paget's Law of Banking (London, 8th ed., 1972) 12.

¹³ [1869], 3 I. R. 3 Eq. 693; quoted in Paget's Law of Banking, supra, p. 9.

¹⁴ See reasons for this increase in, for example, Chorley, supra, n. 7, p. 78.

¹⁵ Turner, L.J. in Re District Savings Bank, Ltd., Ex parte Coe [1861], 3 De G.F. & J. 339 Google Scholar said: “Even that branch of the company's business which has most resemblance to banking differs materially from the ordinary business of bankers, for the company did not honour cheques payable on demand and drawn upon themselves, but only allowed deposits to be withdrawn upon notice … It therefore appears to me impossible to say that this could be considered a banking company (Emphasis supplied).

¹⁶ See, for example, the opinion of Smith, J., in Re Bottomgate Industrial Co-operative Society [1891], 65 L.T. 712, 714Google Scholar, for whom the essential nature of banking lies in “receiving money on deposit, allowing the same to be drawn against as and when the depositor desires, and paying interest on the amounts standing on deposit”.

¹⁷ See Buckley, L. J. in Re Birkbeck Permanent Benefit Building Society [1912] 2 Ch. 183, 227.Google Scholar

¹⁸ [1918] A.C. 626, 652, 653.

¹⁹ [1959] 1 Q.B. 55, 70.

²⁰ [1966] 2 Q.B. 431, 447.

²¹ Sec. for example, Sayers, R.S., Modem Banking, (Oxford, 6th ed., 1964).Google Scholar In Chapter 11 of this book we may find an interesting picture of English commercial banking.

²² See 10 Am. Jur. 2d Banks §3.

²³ 374 US 321, 10 L ed. 2d 915, 923 (1963).

²⁴ The Swiss Federal Law Relating to Banks and Savings Banks, of November 8, 1934, as amended by the Federal Law of March 11, 1971, does not give any definition of “banking business”. However, and in a way different from other banking laws, the Swiss legislator gives a comprehensive definition of “customer”, when compared for example, with English concepts. The Implementing Ordinance for the Federal Law Relating to Banks and Savings Banks of May 17, 1972, in its Article 3 (2) of the Swiss law states: “The customers of a bank are defined as persons that maintain business relations with the bank as creditor, debtor, depositor or mandator.” (Emphasis supplied).

²⁵ Definitions of this kind are given, for example, in Ghana, by the Banking Act, 1970, sec. 47 (3); in Malaysia, the Banking Act, 1973, sec. 2 (2), after referring to the making of deposits and loans, states: “Such other business as the Central Bank, with the approval of the Minister may prescribe for the purposes of this Act.”

²⁶ See, for example, in France, the law of June 13, 1941, arts. 1, 4 and 27; in Germany, the Banking Act of May 3, 1976, §1. In England, the new Banking Act, 1979, states that to qualify for recognition as a bank, an institution must provide either a “wide range of banking services” or a “highly specialised banking service.” Banking services are then enumerated by law (Sch. 2 §2). In Israel, see sec. 10 of the Banking Law (Licensing), 1981.

²⁷ In the Netherlands, for example, the Act on Supervision of the Credit System of June 21, 1956, art. 1 (1) (b) defines commercial banks as “all bodies corporate, general partnerships, limited partnerships and physical persons that to a substantial extent make it their business to accept monies on deposit or in current account, and to grant credits for their own account, with the exception, however, of agricultural credit banks and security credit institutions” (Emphasis supplied).

²⁸ In Norway, for example, the Act Relating to Commercial Banks of May 24, 1961, sec. 19 states: “In accordance with the provisions of this and other Statutory Enactments and regulations issued pursuant thereto, a Commercial Bank may carry out all business transactions and services which are usually or naturally performed by banks”.

²⁹ See, for example, in Spain, the Law of December 31, 1946, on banking regulation, art. 37.

³⁰ See, for example, in Korea, The General Banking Act of May 5, 1950, as amended, sec. 18.

³¹ I discussed major theories concerning the legal definition of a general deposit of money in my doctoral thesis The Juridical Nature of the Bank-Depositor Relationship (Jerusalem, 1977), pp. 51 to 163. After rejecting classic definitions, I have concluded that a deposit in a bank implies a contractual fragmentation of the depositor's ownership of the money between the customer and the bank. The bank acquires possession and may dispose of the customer's money. However, in my opinion, the depositor, having placed his money in the bank, still retains ownership of the fund. See practical results of this construction in Ben-Oliel, R., “Banker's Liability in the Bank Deposit Relationship” (1979) 14 Is. L.R. 164 Google Scholar et seq.

³² See Romano, S., “Dell'Apertura di Credito”, Banca Borsa e Titoli di Credito, Anno XXXII, pp. 479 Google Scholar, 481. Italy, however, presents an exception, since four provisions of the Civil Code (articles 1842 to 1845) cover this contract. In some what simplistic terms, the Italian Code (art. 1842) defines the contract as follows: “L'apertura di credito bancario è il contratto col quale la banca si obbliga a tenere a disposizione dell' altra parte una somma di danaro per un dato periodo di tempo o a tempo indeterminato.” The French Commission for the Revision of the Commercial Code has also dealt with this transaction and suggested the following definition: “L'ouverture de crédit a pour objet de mettre, directement ou indirectement, à la disposition du bénéficiaire, des moyens de paiement à concurrence d'une certaine somme d'argent.” See Travaux de la Commission de Réforme du Code de Commerce et du Droit des Sociétés, (Paris, 1952), Vol. IV, p. 214.

³³ For basic studies on the above controversy see, for example: In Spain: Garrigues, J., Contratos Bancarios (Madrid, 1958) 188 Google Scholar et seq.; In France: “Les opérations de crédit se rattachant à une promesse de crédit”, Juris-Classeur Commercial Annexes Banque, fasc. 31 (1958), n. 27 et seq.; Hamel, J. and Lagarde, G., Traité de Droit Commercial (Paris, 1966), vol. II, p. 819 et seq. Google Scholar; Gavalda, C. and Stoufflet, J., Droit de la Banque (Paris, 1974) 554 et seq. Google Scholar; Rodière, R. and Rives-Lange, J.L., Droit Bancaire (Paris, 3rd ed., 1980) 310 et seq. Google Scholar; Ripert, G. and Roblot, R., Traité Elémentaire de Droit Commercial (Paris, 9th ed., 1981), Vol. II, p. 343 Google Scholar et seq. In Italy: Messineo, F., Operazioni di Borsa e di Banca (Milano, 3rd ed., 1966) 334 et seq. Google Scholar; Molle, G., I Contratti Bancari (Milano, 1966) 143 et seq. Google Scholar; S. Romano, supra n. 32, p. 486 et seq. See also Ben-Oliel, R., “Notas sobre a Abertura de Crédito Bancàrio” (1972) 29 Revista Bancária (Portugal) 31 Google Scholar et seq.

³⁴ We have analysed the main opinions supported in Continental countries on the legal definition of a discount in our study “O Desconto Bancário – Algumas Notas Juridicas” (1973) 27 Boletim Económico e Financeiro (Portugal) 3, 7 et seq. Our final conclusion was that a discount is a sui generis contract, in spite of the apparent similarities with other contractual models. See also, for example, R. Rodière and J.L. Rives-Lange, supra n. 33, p. 336; G. Ripert and R. Roblot, supra n. 33 pp. 350, 351.

³⁵ The origin of credit cards lies in credit coins, i.e. small pieces of metal presented by customers to large department stores, in which the number of the holder's account was engraved. From an historical perspective we see that in its initial phase in the 1920's, credit cards were issued by big companies, such as oil companies in the United States. These were courtesy cards, usually valid within a regional ambit, but reciprocal agreements among oil companies gave such cards a national acceptance. A second era began when financial institutions, such as Diners' Club and American Express, introduced their own credit cards in 1950 and 1958, respectively. In 1959 the Hilton Hotel chain in turn introduced the Carte Blanche. These cards were primarily used for tourist needs (hotels and restaurants). Finally banks entered the field of credit cards, extended their usage to a great number of services and improved considerably the credit card system because of their capacity to proceed to an immediate debiting of the credit users for expenses incurred. In 1959, in the United States, the Bank of America and the Chase Manhattan Bank introduced their own credit card plans for use by ordinary consumers. See, for example, Bergsten, E.E., “Credit Cards – A Prelude to the Cashless Society” (1967) 8 B.C. Ind. Com. L. R. 485.Google Scholar In the United Kingdom, the first credit cards to be introduced by a British bank were the “Barclaycards”, in 1966, by the Barclays Bank; in France, this first step was taken in 1967 by the Crédit Lyonnais, Société Générale, Groupe de Crédit Industriel et Commercial, Crédit Commercial de France and Banque Nationale de Paris which introduced the “carte bleue”. On the situation in England and France see, for example: Holden, J.M., The Law and Practice of Banking, Banker and Customer (London, 2nd ed., 1974), vol. I, p. 317 Google Scholar; R. Rodière and J.L. Rives-Lange, supra n. 33, p. 246.

³⁶ See, for example, Clark, B. and Squillante, A.M., The Law of Bank Deposits, Collections and Credit Cards (Boston, 1970) 189.Google Scholar

³⁷ See, for example, R. Rodière and J.L. Rives-Lange, supra n. 33, pp. 246, 247.

³⁸ On leasing see, for example, J. Calais-Auloy, “Crédit-Bail (Leasing)”, Encyl. Dalloz, dr. comm.; Gabrielli, G., “Sulla Funzione del Leasing” (1979) II Rivista di Diritto Civile 455.Google Scholar

³⁹ See for example, R. Rodière and J.L. Rives-Lange, supra n. 33, pp. 411, 412.

⁴⁰ See M. & M. Leasing Corp. v. Seattle First Nat. Bank, 563 F. 2d 1377, 1382 (1977).

⁴¹ See, for example, R. Rodière and J.L. Rives-Lange, supra n. 33, pp. 376, 377.

⁴² Factors take upon themselves the risks involved in the collection of bills, a fact which assumes great importance in international trade, because of monetary and political fluctuations. On the other hand, on a discount, bankers may obtain compensation from their customers when a discounted bill is not paid by the parties involved. See, for example, G. Ripert and R. Roblot, supra n. 33, p. 354.

⁴³ On the main technical and legal details see, for example, Gavalda, Ch., “Factoring”, Encycl. Dalloz dr. comm., sec. 13 Google Scholar; Carnevali, U., “I problemi giuridici del factoring” (1978) II Rivista di Diritto Civile 299.Google Scholar

⁴⁴ In France, for example, companies dealing in factoring are practically obliged to incorporate as a bank or as a financial intermediary. See Ch. Gavalda, supra n. 43, sec. 14.

⁴⁵ In the United States see, for example, Schweitzer, P.R., “Banks and Banking – A Review of a Definition” (1977) 94 Banking L.J. 6, 16.Google Scholar In England, banks do not pay services for factoring which became a particular field for factoring companies. See, for example, J.M. Holden, supra n. 35, p. 346.

⁴⁶ See, for example, Ch. Gavalda, supra n. 43, sec. 16.

⁴⁷ See, for example, R. Rodière and J.L. Rives-Lange, supra n. 33, pp. 284, 285.

⁴⁸ See J. Garrigues, supra n. 33, pp. 36, 37.

⁴⁹ See our comments on p. 506.

⁵⁰ See, for example, P.R. Schweitzer, supra n. 45, at p. 12 et seq.

⁵¹ This is, for example, the conclusion reached as to the United States by P.R. Schweitzer, supra n. 45 at p. 16, on the basis of the highly complex character of these transactions.

⁵² See, in France, for example, Lyon-Caen, G., “Contribution à la recherche d'une définition du droit commercial” (1949) 2 Revue Trimestrielle de Droit Commercial, 577, 579Google Scholar et seq.; Escarra, J., Cours de Droit Commercial (Paris, 1952) 54 Google Scholar et seq.; G. Ripert and R. Roblot, supra n. 33, vol. I, p. 192 et seq.

⁵³ § 1 of the German banking law indicates the following types of banking business: Einlagengeschäft (deposit business); Kreditgeschäft (credit business); Diskontgeschäft (discount business); Effektengeschäft (securities business); Depotgeschäft (custody business); Investmengeschäft (investment business); die Eingehung der Verpflichtung, Darlehensforderungen vor Fälligkeit zu erwerben; Garantiegeschäft (guarantee business); Girogeschäft (giro business).

⁵⁴ See supra n. 2.

⁵⁵ See supra n. 4.

⁵⁶ See sec. 25 of the new law.

⁵⁷ See comments on pp. 500–501.

⁵⁸ See comments on pp. 510–511.

⁵⁹ On the credit character of leasing see, for example, in France, R. Rodière and J.L. Rives-Lange, supra n. 33, pp. 410, 411. In the United States, see discussions on the banking character of leasing in for example, M. & M. Leasing Corp. v. Seattle First Nat. Bank, supra n. 40. See a comment on this court decision in “The Permissibility of Leasing under the National Bank Act: M. & M. Leasing Corp. v. Seattle First National Bank” (1978) 91 Hvd. L. R. 1347.

⁶⁰ See supra n. 35.

⁶¹ See P.R. Schweitzer, supra n. 45, at 16.

⁶² On the attention given by the court to the risks involved in a transaction see, for example, American Society of Travel Agents, Inc. v. Bank of America, 385 F. Supp. 1084, 1089–90. (N.D. Cal., 1974). Here we read: “History has taught us the disastrous consequences which follow when banks are weakened and public confidence in them undermined. National banks are denied the opportunity to earn a profit through investing in ventures unrelated to the business of banking not simply because they might unfairly compete in other industries, but because the pursuit of profit in fields unrelated to banking could tempt bankers to make unwise or improvident decisions and thus could threaten the strength and stability Congress sought to instill in the banking industry.”