Posted: February 4th, 2015

Banking Law HI8

Paper, Order, or Assignment Requirements

Introduction to the Problem

Effective banks are important to the proper functioning of global financial sector and the consequential economic efficiency. However, transforming the banking systems, both within nation-states and at international levels into an effective system that is free from fraud or unfavourable protective policies remains a key challenge to global banking. Owing to the macroeconomic problems and other problems affecting the externalities of the global financial system, attempts to keep national and global monetary systems effective continue to trouble international monitors.

Purpose of the project

This project will examine what should be done to facilitate the effectiveness of banking law globally and how the International Monetary Fund can take a more proactive role in the change process^[1]. I will also examine the effectiveness of the Articles 3 and 4 of the UCC. Article 3 is referred to as Negotiable Instruments and seeks to regulate all negotiable financial transactions. Article 4 regulates Bank Deposits and Collections. As such, the project will examine secondary research findings as to whether Article 4 is effective in its oversight role.

Definition of terms

UCC: Uniform Commercial Code

ULC: Uniform Law Commission

NIL: Negotiable Instruments Law

Assumptions and Limitations

Basing the project on UCC, I will compare various national laws with the international banking regulation for purposes of suggesting appropriate rules for incorporation into the latter^[2]. I assumes that most of the banking policies by nation-states will be available in secondary sources, and that their similarities with the UCC will be too insignificant to keep them when banking is going global.

Introduction to the Literature Review

Through various literature reviews, I will try to establish that negotiable instruments are primarily regulated by statutory laws enacted by countries^[3]. In light of this, the project will firstly examine different sources and assess whether the partial incorporation of Article 3 of the UCC in national negotiable instruments is sufficient. Second, based on the UCC, I will explore the impact of digital technologies on negotiable instrument, especially in the wake of cyber fraud based on Articles 4 to 5.

Currently, such instruments are defined as clear writing that pledge or order the settlement of a certain sum of money. Notes and drafts are two of the primary classes of the instruments. A draft such as check orders the settlement of funds; a note promises the settlement of future payment(s); and Certificates of deposit (CD) qualify as notes^[4]. I intend to establish that these instruments are generally applicable in business transactions, where they facilitate transfer of money and goods with commensurate value. They also help with loan distribution. For an instrument to be considered negotiable, various sources will be equivocal in suggesting that they must conform to the conditions specified in Article 3. These include non-monetary items, payment orders regulated by article 4(a) such as money transfers or investment securities as regulated by Article 8^[5].

A close analysis of the UCC will reveal that generally applicable derivative titles rule does not permit the transfer of rights of a property whose value exceeds that of the property owner. For negotiable instruments, the rule does not suffice^[6]. Checks fall under negotiable instruments and are regulated by Article 4 of the UCC. In light of this, I will examine the effectiveness of various protections enshrined in Articles 3 and 4 by observing critical research findings on the subject. In doing so, more focus will be placed on the findings revolving around whether checks are effectively regulated under Article 4 of the UCC^[7].

Policy Design

I will use secondary research findings, statutory laws and the outcomes of the common law to arrive at the best banking policy that combines national and international interests^[8]. A review of these sources will provide an overview of the problem issue and the most effective ways to streamline the international banking sector. The project will also explore ways of making nation-states more concerned about the international law than their domestic laws.

Political issues

The enactment of uniform codes is the most effective way to end irregular banking policies in the world. However, nation-states will continue to show political bias whenever such proposals are made^[9]. In light of this, I will explore the content of different domestic policy papers on banking in order to establish the bias or lack of it in respect of the international UCC. The past roles and expanded scope of reputable international finance oversight bodies such as the World Bank and the IMF will also be important to tackling political impediments.

Expected results

Relevant outcomes of secondary research on the topic are likely to reveal that most countries will be unwilling to enact international laws threatening local financial investment at least in the short-term^[10]. This is especially true in countries with protective banking policy. Regardless, any laws aimed at improving international banking services are likely to be readily accepted by nation-states.

Conclusion

An attempt to streamline the international banking laws to be in line with the current trends and the needs of the increasingly globalized world will attract resentment from states with domestic protective laws. But by reforming the UCC based on current-day secondary research findings; the outcomes of cases before international banking tribunals, and the increasing use of digital platforms, negotiable instruments will be safer and more effective in the future.

[1] Burgess III, and H William, ‘Negotiability of Promissory Notes in Foreclosure Cases: Ballast Is Not Luggage’ (2014) Florida Bar Journal 88(3), pp.9-19

[2] J F. Dolan, ‘What ever happened to the poor old doctrine of negotiability?’ (2013) Banking Law Journal 130(2), pp.136-151

[3] S Dzaja, Legal Aspects of Internet Banking Related to International Business Transactions (GRIN Verlag, New York 2007), pp. 111-187.

[4] A G. Walker, International Banking Regulation: Law, Policy, and Practice (Kluwer Law International, London 2001), pp.21-59

[5] J Camero, ‘Two too many: third party beneficiaries of warranties under the uniform commercial code’ (2012) St. John’s Law Review 86(1), pp.1-30

[6] N Ter-Grigoryan, ‘Improving the law of negotiable instruments: Support for Arizona’s Adoption of the 2002 Proposed Revisions to Uniform Commercial Code Section 3-309’ (2010/2011) Arizona State Law Journal 42(4), pp.1331-1355

[7] Friedman et al., ‘The Uniform Commercial Code Survey: Introduction’ (2014) Business Lawyer 69(4), pp.1147-1149

[8] J Yovel ‘Quasi-Checks: An Apology for a Mutation of Negotiable Instruments’ (2007) DePaul Business & Commercial Law Journal 5(3), 579-603

[9] E Renuart, ‘Uneasy intersections: the right to foreclose and the U.C.C.’ (2013) Wake Forest Law Review, 48(5), pp.1205-1270

[10] Graynor et al., ‘The Uniform Commercial Code Survey: Leases,’ (2007) Business Lawyer 62(4), pp.1575-1583