Internet banking is a potential legal nightmare, “there can
be as many as 200 legal systems with which any one internet banking transaction
may have to comply, most jurisdictions don’t recognize on- line contract
formation and internet retail banking could cost your bank billions in customer
claims, “says Mark Lewis, Partner at Arnheim Tite & Lewis, Price water
house Cooper’s UK correspondent law firm.
Lewis adds: “you UK internet banking transactions will need
to comply with the Banking Act 1987 and regulations made under it such as the
Banking Act (Advertisement) Regulations 1988, as well as the Financial Services
Act 1986 and the regulations made under, it the Consumer Credit act 1974 and
the regulations made infer it the code of conduct for t he Advertising of
interest – Bearing Accounts, the Banking Code of Practice, the Unfair Contract
Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1994, the UK
law implementing the proposed Directive on Distance Marketing of Financial and
the proposed Directive on Certain Legal Aspects of Electronic commence in the
Internal Market – and that’s just in
the Uk.”
Despite the difficulties, Lewis remains bullish, “Banks
operate in a highly regulated market, but e-business is happening anyway. Can
you afford to hold back while you worry about all of those 200 jurisdictions
whose legal systems could stand in the way? It’s true that there are lots of
legal barriers but you can find your way round same and minimize other.”
There are four principal areas of concern for anyone seeking
to enter the e-banking market. The first stems from the recognition that a bank
cannot go to it alone. “Apart from banks, the parties involved include network
and communication providers, technology platform providers, retailers,
consultants, internet service providers and so on,” says Lewis, “the key is to
decide how such interests should be represented and the optimum number to make
a joint venture vehicle workable bearing in mind the go to-market time for
e-business projects.”
Next is the need to overcome systemic legal barriers. This
is the risk that legal systems do not recognize, or else create uncertainty in
banks’ legal rights and responsibilities or the effectiveness of e-banking
transactions, “says Lewis.
There are new laws or initiatives on the stocks that will
tackle some of these barriers. They include the proposed EU electronic commerce
directive mentioned above, the UK electronic commerce bill and a proposed EU
digital signatures directive. Then there is the service dependency/ liability
risk- that you and your e-banking joint venture partners could face greater
responsibility or liability than you should either because you have accepted it
or because it is imposed upon you. “ you need to establish clear terms of
engagement, allocating wish between
parties setting out the service dependencies and limiting parties ‘ liability
for direct and consequential losses”, says Lewis. But the challenge is to make
e-banking a worthwhile proposition for the customer.
The final component is the regulatory environment. “ The
regulatory environment presents two types of risks that laws either in place or
to be enacted will severely hamper your ability to undertake e-baking and the
risk that you will underestimate the impact of those laws or the time it can
take to manage them.”
By way of example. Lewis points to the litany to the litany
of UK regulations quoted above. “Again , some regulations can be overcome while
some can’t Assess the regulatory requirements at the outset; allow time than
you can possibly have imagined and structure your e-banking business to gain
regulatory approval. If you can’t then seek official opinions or other comfort
or else work well within the limits of your proposed project or trade and be
prepared to restructure it fall within the legal limits.” In short as with all
massive advances in the way we live and do business, the law may be slow to
catch up but that isn’t reason for not participating.
6.
In this passage the author seems to be saying
that:
A.
It is not worth venturing into- e-banking as it
is beset by innumerable legal wrangles.
B.
With more banks keen to explore internet banking
the legal and regulatory problems remain immense, but here are ways to minimize
the impact.
C.
With more banks joining the e- banking
bandwagon, the need of the hour is to overcome systemic legal barriers.
D.
With e-banking becoming more of reality, banks need to jump headlong into the
rat- race
7.
With which of the following statements is Lewis
least likely to agree?
A.
Banks should stay away from e-banking until the
legal wrangles are sorted out
B.
Most legal systems require stronger and higher
levels of proof for electronic transactions.
C.
Liability risk in e-banking is likely to arise
when parties fail to foresee risks that are not usually prevalent in
traditional banking.
D.
When regulatory laws are determined, they hamper the smooth working of e-banking
8.
On the basis of the last paragraph, it can be
implied that:
A.
The early
bird catches the worn
B.
There’s no use crying over spilt milk
C.
Do not pull all your eggs in one basket
D.
Nothing ventured, nothing gained
9.
The tone of Lewis’s remarks as quoted by the
author is:
A.
Cautionary
B.
Advisory
C.
Admonitory
D.
Reproving
10.
What is the meaning of word ‘litany’ as used in
the penultimate paragraph?
A.
Psalm
B.
List
C.
Benediction
D.
Ditty
Answer:
6.
B
option A seems tempting but throughout the passage Lewis defends
e-banking and says it is worth giving a try. Option C gets only a passing
reference. Hence B.
7.
A Lewis
is of the opinion that legal wrangles should not stop banks from venturing into
e-banking. Hence A.
8.
D Lewis
exhorts bankers to take a risk and minimize or circumvent legal barriers. Hence
D
9.
B Lewis
shows ways and means by which legal wrangles and risks can be minimized. Hence
B
10.
B
‘litany’ is a word with religious undertones. All the words given in the
options are synonyms of litany. But in the context, it specifically refers to
the array of laws as applicable in the UK. Hence B.
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