Definition
A banker’s reference (also known as a status enquiry) is a report provided by a bank concerning the creditworthiness of an individual or entity. This report is typically prepared for third parties such as another bank or an existing bank customer. Bankers’ references serve as a tool for assessing the financial reliability and credit history of the subject in question. Often, such references are supplied by specialized credit-reference agencies, which keep detailed lists of defaulters, bad payers, and individuals who have violated credit agreements.
Recent legislative changes have granted subjects of these reports new rights, including the right to access information held about them, which has somewhat diminished the utility and detail provided in these references.
Examples
- Loan Application: A customer applying for a loan may need to provide a banker’s reference to demonstrate their creditworthiness to the lending institution.
- Business Dealings: To assess the financial stability of a potential business partner, a company may request a banker’s reference.
- Property Rental: Landlords may request a banker’s reference from prospective tenants to gauge their ability to meet rent payments.
Frequently Asked Questions (FAQs)
What information is typically included in a banker’s reference?
Most bankers’ references provide generalized information about the subject’s financial habits, including account management, repayment history, and overall creditworthiness. Specific financial figures are rarely included.
Who can request a banker’s reference?
Typically, financial institutions or existing customers of the bank can request a banker’s reference. They generally must have the consent of the subject.
How does recent legislation impact the value of a banker’s reference?
Legislation such as data protection laws has increased the rights of individuals over their personal data, which limits the detail and scope of information that can be included in a banker’s reference.
Can subjects access their own banker’s reference?
Yes, subjects have the right to request and access information held about them by credit-reference agencies, including their own banker’s reference.
Related Terms
Creditworthiness
An evaluation of an individual’s or organization’s ability to repay borrowed money.
Credit Reference Agency
An agency that collects and maintains credit information on individuals and businesses, often-used for credit evaluations.
Credit Report
A detailed report of an individual’s credit history prepared by a credit bureau, used by lenders to gauge their creditworthiness.
Defaulters List
A compilation of individuals or entities that have failed to meet debt obligations.
Data Protection Laws
Legislation designed to protect personal data and govern how it is processed and stored.
Online References
Suggested Books for Further Studies
- “Credit Risk Management: Basic Concepts” by Tony Van Gestel and Bart Baesens - A comprehensive guide to understanding credit risk and related management strategies.
- “Credit Reporting Systems and the International Economy” by Margaret J. Miller - Offers in-depth insights into the role of credit reporting in the international financial system.
- “Fundamentals of Financial Institutions Management” by Marcia Millon Cornett, Troy A. Adkins, and Joseph P. Janeiro - An essential read for understanding the operations and management of financial institutions.
Accounting Basics: “Banker’s Reference (Status Enquiry)” Fundamentals Quiz
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