A bank confidentiality agreement is a legal contract between a bank and its employees or other entities, such as contractors, that prohibits disclosing confidential information or bank-owned documents to third parties. The agreement covers any information that is considered confidential. It also details any exceptions that might exist, including the standard of care that should be applied by the parties to the agreement.
The standard used by banks for determining what is confidential is quite broad. It includes all nonpublic information, such as business plans, financial statements, customer lists, business contracts, projects and any other proprietary information owned by the bank. Exceptions to these standards include publicly available information or independently developed documents.
All bank confidentiality agreements contain sections that outline the responsibilities for the handling of confidential information by a recipient of that information. For example, if the agreement refers to employees of the bank or an independent contractor, the person signing the document as an employee or independent contractor is barred from disclosing any information to any other individual without the express consent of the bank. On the other hand, if a confidentiality agreement refers to a proposed business transaction, lawyers or accountants will be allowed to view confidential information, as their input is necessary to structure the deal.
The features of a bank confidentiality agreement vary. In addition to what was described above, the agreement can also specify time limits for enforcement, the duties of non-disclosure and the remedies available to a party that has been damaged by breach of the agreement. The confidentially agreement normally contains a statement signed by employees and other interested parties that confidential information is the property of the bank, and that improper use or disclosure will result in breach of contract and legal action.
Breach of Agreement
In the event of a breach of contract, a bank confidentiality agreement includes legal remedies that banks can pursue. Most agreements state that any breach will constitute "irreparable harm" to the bank. The burden for the payment for all legal fees is placed upon the person or entity that broke the promise of confidentiality. The agreement also indicates that the bank will seek monetary damages and injunction relief against further breaches. However, in actuality, it is difficult to quantify the amount of monetary damages and injunction relief once the confidential information has been disclosed. Nevertheless, most banks will seek maximum damages for breaches.
Another type of bank confidentiality agreement is the non-competition (or non-compete) agreement. In the non-compete agreement, an employee or independent contractor promises not to engage in the same business as the employer while employed at the bank or for a specified period of time after terminating employment with the bank. These agreements are governed by state law and are highly controversial. Some states severely limit their use, while other states do not recognize them. Non-compete agreements are very hard to enforce due to the different possible legal interpretations of business type, geographic area and time durations.