Consolidation And Clearing Between Current Account and Savings Book

Abstract

A current account is a bank account that is frequently debited or credited by the agent, so it presents risks that banks try to guarantee through the saving account presenting the client’s safekeeping. “Clearing” and “Unity of Accounts” clauses are the principal mechanisms used by banks to fulfill this guarantee. The validity and effectiveness of these clauses can be questioned by the fact that they are applied on both saving and current accounts, in despite of their different legal nature.

In virtue of “Unity of Accounts” clauses, all accounts belonging to the same agent are considered to be different sections of one account divided for practical reasons, which grants the bank the right to set-off between the credit account and the debit one. A “Clearing” clause creates an artificial link between two mutual debts arising from two independent sources, and this will pave the way for a clearing between them in the future. It is concluded that the “Unity of Accounts” agreement directly affects the principle of independence of bank accounts, as they all become one account, while the effect of the “Clearing” agreement is limited to creating a correlation between the balances of different accounts.

The importance of this study is mainly highlighted in determining the extent to which the bank can resort to activate these two clauses to get its debt without participating in bankruptcy procedures in the event of its client bankruptcy. Also due to the financial crisis afflicting Lebanon, this study became more valuable after banks resorted to the clauses mentioned above to collect their loans granted in foreign currencies from the balances of saving accounts opened in these currencies as well. Accordingly, this study attempts to present all the different doctrinal and jurisprudential opinions in this regard.