The suspension or termination of a bank account by a bank can affect clients immensely. Business stops without a bank account. No money can be paid in, money transfers cannot be executed, and bills cannot be paid, or money debited from the account. The suspension or termination of an account is not only annoying, but it can also lead to serious problems and threaten one’s existence. However, not every termination of the business relationship and one’s bank accounts is lawful, and clients can defend themselves. For one client, it was achieved that a bank headquartered in Frankfurt/Maine withdrew the termination so that the client is once again able to use its bank accounts to their full extend.

Humanitarian aid without bank account?

The client was a non-profit association, that collects donations, to among other things, feed homeless people in Germany, advocate for educational rights of children, especially girls, or provide emergency aid in a country currently marked by war and poverty. The association had a business account and two donation accounts with the bank. Due to the activities of the association, cash withdrawals and cash payments often occurred since international transfers via the SWIFT system are often not possible to areas of crisis.

Bank terminates account without reason

Without indication of any reason, the bank terminated the accounts with a notice period of two months despite existing credit balances. The association found itself in a difficult situation directly affecting the association and its aid projects, which it would not be possible to continue as a result. Without a bank account the association would not be able to provide aid, nor make any required payments with the looming threat of insolvency. The bank did not disclose a reason for the termination. In principle, various reasons may apply for the suspension or termination of bank accounts, such as suspicion of money laundering, however any such reason did not apply to this client.

Injunction is effective

An initial out-of-court attempt to reach an amicable solution with the bank to withdraw the termination failed. Therefore, stronger means such as an injunction were resorted to, and it was demanded for the bank to revoke the termination and continue service provision of the bank accounts enabling the client to continue using its accounts. This was justified by the fact that the account termination was entirely arbitrary and without any objective reason. However, arbitrary termination or dismissal is contrary to good faith. Therefore, already the application for an injunction provided the desired effect, and the bank immediately withdrew the termination. For the non-profit association this was an important achievement, as it can make full use of its bank accounts again.

The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Benjamin Hasan, Partner at the Frankfurt office, via telephone at +49 69 247 428 444 or by email at benjamin.hasan@kyprianou.com