Bank Law Blogger's Recent Articles from LexMonitor

Capital Requirements Directive: amendment approved

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Thu, 08 Jul 2010 12:41:02 GMT

The European Parliament have approved amendments to the Capital Requirements Directive, although the text is not yet available: see this press release from the Parliament issued on 7 July 2010. The release focuses on bonus rules but glances at stricter capital rules on bank trading activities and higher standards for re-scuritisations.

Lending Code – review

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Mon, 21 Jun 2010 09:43:43 GMT

The Lending Standards Board has announced a review of the Lending Code. The Code sets standards of good practice in relation to personal unsecured loans, credit cards and overdrafts and lending to microenterprises The review will be undertaken by Professor Lorne Crerar. who will seek comments from all interested stakeholders on the content of the Lending Code. A revised Code will be published in March 2011. Professor Crerar is writing to all major stakeholders to request views on any gaps or deficiencies in the current Lending Code – see his letter. Responses are required by 10 September 2010.

Mortgage Market Review – update from FSA

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Mon, 21 Jun 2010 09:30:57 GMT

What the FSA are doing in the Mortgage Market Review was covered in detail in a speech on 16 June 2010 by Lesley Titcomb, Director of Small Firms and Contact Centre at the FSA. She was addressing the Council of Mortgage Lenders’ annual mortgage regulation conference. The Review, the FSA says, is “to improve the outcomes for consumers and to help provide the solid foundations for the rebuilding of our mortgage market, so that we end up with a market that’s more sustainable for everyone and that works better for consumers.” In the speech, she discusses the responses on particular topics in the Discussion Paper, including an extension of scope. She notes that the Policy Statement will be published next week, with rules on arrears and that further papers on responsible lending and on distribution and advice will be released in July and “towards the end of the year” respectively.

Investment banks – market study by OFT

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 11 Jun 2010 09:06:53 GMT

The Office of Fair Trading has announced its intention of undertaking a market study into the investment banking sector. The OFT has been focussing on financial services for some time. One wonders though what the relevance of a competition enquiry (hunting for price-fixing?) is in the context of highly specialised, very expensive underwriting of large share offerings that require an underwriter with serious financial clout. It is a fact of the market that there aren’t that many of those about with the necessary expertise. The level of fees might be more a question of supply and demand.

My firm, CMS has published an article on Law-Now looking at the competition aspects of this in more detail but in brief, in its press release, the OFT has stated that its primary concern is the competitive efficiency of equity underwriting and that it is likely to focus on rights issues and other forms of equity-raising by the 350 largest UK public companies.

The OFT expects the formal launch of its market study to take place in the summer. It hopes to conclude the “initial phase” of its work by the end of 2010, although it will confirm the precise scope and timing of the investigation as part of its summer launch. The OFT has invited interested parties to submit written views by 9 July 2010 on its first-stage proposals so that investment banks and other market participants will have an important opportunity to contribute to the development of the OFT’s investigation.

Identity Documents Bill

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 11 Jun 2010 07:53:29 GMT

A new Identity Documents Bill has been published. In the Queen’s Speech on 25 May, it was said, “Legislation will be brought forward to restore freedoms and civil liberties through the abolition of identity cards and repeal of unnecessary laws.” The new Identity Documents Bill intends to scrap ID cards and to require the destruction of all [...]

The main elements of the Bill are:

The cancellation of all ID cards within one month of Royal Assent;
Removal of the statutory requirement to issue ID Cards on Royal Assent;
Cancellation of the National Identity Register.
Destruction of all data held on the Register within one month of Royal Assent.
Closing the Office of the Identity Commissioner.
Re-enactment of certain necessary provisions of the 2006 Act including some criminal offences (possession or use of false identity documents) that are commonly used for identity documents other ID cards.

See here for more detail about the thinking behind this move.

Winding up – change to minimum debt?

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 11 Jun 2010 07:45:34 GMT

The minimum debt that must be owed to a creditor before it may start insolvency proceedings has remained unchanged at £750 since 1986. This sum is now worth less than in 1986 and the Insolvency Service is reconsidering it after no action was taken on a previous consultation in 2006. It is suggested the sum be [...]

The Insolvency Service wishes to consider the amount of the sum due by taking a broader view of the matter rather than in a simple rebasing of the 1986 figure. Subject to Ministerial approval, they propose to consult on the issue again in the coming months but are first taking soundings from interested parties by invitation.

Participants are being asked questions as to:

Whether the petition debt levels should be changed to level reflecting the increase by inflation, or to a higher level, or reduced or abolished altogether.
Whether the bankruptcy level should be the same amount as that which applies to the winding up of companies.
Whether there are lessons to be learned from similar levels in other jurisdictions

There will be a meeting of stakeholders during July and a decision as to further progress will be published in due course.

Brave new …

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Tue, 08 Jun 2010 11:16:55 GMT

The Department for Business, Innovation and Skills has announced its plan to reduce regulation that, it says, is stifling business growth. Points: A new “Reducing Regulation Committee” will be formed, chaired by the Business Secretary, to plan how to reduce regulation. The first thing they will do is review all regulation in the pipeline for [...]

The Department for Business, Innovation and Skills has announced its plan to reduce regulation that, it says, is stifling business growth. Points:

A new “Reducing Regulation Committee” will be formed, chaired by the Business Secretary, to plan how to reduce regulation. The first thing they will do is review all regulation in the pipeline for implementation that has been inherited from the last Government.
A team will be formed with a brief to develop innovative approaches to achieving social and environmental goals in a non-regulatory way.
A new approach (“one-in, one-out”) will be devised that will control and reduce the burden of regulation. The aim of this is to make sure that new regulatory burdens on business are only brought in when reductions can be made to existing regulation.

In this context, it is useful to compare an extract from the speech made by Business Secretary, Vince Cable, on 3 June 2010 at the CASS Business School:
“So as part of the coalition I have three big priorities here.

“First – the question of structural reform – separating retail and investment banking, which we will address through the Banking Commission whose membership and terms of reference will be announced shortly. This exercise matters not only to make banks safe but to ensure that our banks are equipped to provide a range of funding streams, on a competitive basis, for the UK economy to function successfully.
“Second – the question of a levy on the banks to reflect the fact that – at least until banks are made safe through structural reform – the taxpayer is providing insurance: protection for which the banks should pay.
“And third – perhaps most important for early economic recovery, I will redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured – especially for SMEs. We do not expect to see viable businesses deprived of credit or working capital by banks that are largely owned by the taxpayer, or the general beneficiaries of wider public support.”

Full speech.

Independent legal advice – scope?

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 28 May 2010 11:54:18 GMT

Investec v Zulman: this isn’t a case that was specifically about the requirement on bank standard forms for guarantors to take “Independent Legal Advice”. When it comes down to it, I don’t actually know if the Bank were using a pre-printed standard form. But if they were, the case throws an interesting side-light on how judges might interpret [...]

Investec v Zulman: this isn’t a case that was specifically about the requirement on bank standard forms for guarantors to take “Independent Legal Advice”. When it comes down to it, I don’t actually know if the Bank were using a pre-printed standard form. But if they were, the case throws an interesting side-light on how judges might interpret the requirement. (Are the days of Ettridge No 8 so long ago and is the original reason for bank policy of wanting guarantors to get ILA beginning to be forgotten?). In this case, in which an amendment to an existing guarantee was negotiated orally but the draft, written, amended guarantee was not signed by the defendants, it was held that the defendants were not bound by the guarantee. The court considered the fact that the draft guarantee was not expressed to be “subject to contract” and reasoned that the absence of such a provision does not indicate the parties intend to form a contract. What is interesting is that the court placed importance on the provision that the guarantors would seek independent legal advice before signing. The requirement imposed by a bank on a guarantor to seek independent legal advice arose out of the Ettridge case and was intended to protect a vulnerable guarantor from undue influence. The court in this case assumed a much wider responsibility on the solicitors to advise on the whole context of the underlying transaction, and ironically, since the standard wording to see such advice is imposed by the bank, actually weakened the bank’s position. The facts of the case might be thought to be unusual however, in that the bank did not intentionally rely on the unsigned guarantee. I only make the observation that with the passing of time, it is possible for the original reason for procedures to be forgotten or perhaps this is merely a case of unintended consequences. The case should not be taken as a warning to refine bank policy, or at least, not yet.

Investec Bank (UK) Ltd v (1) Arnold Zulman (2) David Zulman
[2010] EWCA Civ 536 CA (Civ Div) (Sir Anthony May (President QB), Longmore LJ, Moore-Bick LJ) 18/5/2010

Floating charge over cash not a financial collateral arrangement

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Thu, 27 May 2010 11:10:46 GMT

What a shame no judgment will be published on this case that considered the Financial Collateral Arrangements (No 2) Regulations 2003. Bank Law Blogger has seen a short description of the case where the court decided the respondent held an unregistered floating charge, not a fixed charge, over monies in a bank account. The account was held in trust for the liquidators of the company who were the applicants to court. The court decided the charge was not a ‘security interest’ or a ‘security financial collateral arrangement’ within the meaning of the Financial Collateral Arrangements (No 2) Regulations 2003, SI 2003/3226, and therefore was not exempt from registration under the Companies Act 1985. Unfortunately, given that there must have been some discussion on the meaning of “control” for the financial collateral regulations, it appears the court does not intend to publish the full judgment: Gray and ors v GTP Group Ltd Re F2G Realisations Ltd (in liquidation) [2010] All ER (D) 80 (May).

OFT challenges competitiveness of Special Resolution Regime

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Wed, 26 May 2010 16:15:59 GMT

The OFT has begun a review of the retail banking market today that affects the whole of the UK. It will look at what prevents new entrants from entering the retail banking market and what factors discourage expansion and leaving the market. The OFT suggests the Special Resolution Regime (SRR) could be made more “competition-friendly”, perhaps heralding more debate on the functioning of the SRR towards the end of this year. The SRR is the administration regime for failing banks under the Banking Act 2009. The OFT comment on the SRR (3.43):

“…protection and support for failing institutions may have detrimental effects on markets. … We intend to focus on the way in which regulation and supervision of failing financial firms impacts upon entry of new firms and expansion of existing ones and whether there are ways in which these regulations could be made more competition friendly.”

The other issues the OFT will be interested in receiving evidence on are barriers posed by regulatory requirements, payment systems and credit risk information and what might prevent the development of branch networks.

The deadline for comments is 8 July 2010. The final report is likely to be published in the autumn.

It is not the first review of its kind; the grand-daddy of them all arguably being the Cruickshank report, “Competition in UK Banking: A Report to the Chancellor of the Exchequer”,March 2000.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Wed, 13 May 2009 11:59:50 GMT

Consultation on a product that guarantees reimbursement of UK confirming banks under letter of credit arrangements has started. The Export Credits Guarantee Department seeks views on such a scheme. Export finance has recently become harder to obtain and more expensive. The ECGD propose to launch the Letter of Credit Guarantee Scheme (provisional title). The LCGS would take the form of a master guarantee issued to participating UK banks, under which those banks cede to the guarantee potential exposure which they would incur by virtue of confirming letters of credit issued by overseas banks in favour of UK exporters. In respect of individual transactions ceded within the limits of the master guarantee, ECGD would guarantee repayment to the confirming bank of sums owed to it by the issuing bank. Replies to the consultation paper are sought by 3 July 2009.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Tue, 12 May 2009 09:21:15 GMT

A bill is to be published later this year that will propose a “primary” 3-year period for contract (and other) claims starting from, broadly, the date on which the claimant knows of the facts which give rise to the action and a “longstop” 10-year period starting from, broadly, the date of accrual of the cause of [...]

The ‘Limitation Bill’ will be published in draft as part of the provisions of the Civil Law Reform Bill later this year (2009) for pre-legislative scrutiny. The draft Limitation Bill is expected to follow the terms of the draft Bill that was published by the Law Commission in 2001 with their report, following their consultation on reform of the Limitation Act 1980. There is a shorter, 31 page, executive summary from 2001.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Mon, 11 May 2009 15:39:55 GMT

JJB Sports plc has been the first listed UK company to use a CVA successfully. They have announced that 99% of the retailer’s unsecured creditors had approved a company voluntary arrangement which will facilitate a restructuring of JJB’s business. It is believed that the restructuring will protect around 12,000 jobs by allowing JJB to survive as a corporate [...]

This CVA is the first of this scale to pass without challenge or opposition from landlords who appear to have been persuaded by the fact the CVA provides for landlords to receive around £10,000,000 (or six months rent) and the landlords will accept rent on a monthly, rather than a quarterly basis.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 08 May 2009 09:33:15 GMT

The Government introduced the Equality Bill to the House of Commons on 27 April 2009. The Bill is to strengthen existing equality law and introduce new measures against discrimination. The Bill makes it unlawful to discriminate against someone aged 18 or over when providing services, which will include the provision of financial services. The second [...]

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 08 May 2009 07:37:23 GMT

The Privy Council have decided (5 May 2009) that it is not necessary for the person taking security in the form of share charges to become the registered holder of the shares for there to be a valid appropriation within the meaning of “appropriation” in Directive 2002/47 and the Financial Collateral Arrangements (No.2) Regulations 2003. [...]

The case arose in the British Virgin Islands and Harney’s, solicitors, have issued a report on it. They comment: “The case is the first known judicial decision anywhere on the interpretation of the Regulations … [it draws] a definitive end to the vexed preliminary issue under British Virgin Islands law.”

1) Cukurova Finance International Ltd (2) Cukurova Holding As V Alfa Telecom Turkey Ltd[2009] UKPC 19 PC (BVI) (Lord Hope of Craighead, Lord Scott of Foscote, Lord Walker of GestingthorpeBaroness Hale of Richmond, Lord Mance) 5/5/2009

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 01 May 2009 16:34:24 GMT

The Department for Business, Enterprise and Regulatory Reform (BERR) has published revised draft regulations for the registration of charges created by overseas companies. The Overseas Companies (Company Contracts and Registration of Charges) Draft Regulations 2009. They have also published a note on the revised regulations. The main changes are: The creation of a single regime applicable to [...]

The main changes are:

The creation of a single regime applicable to all overseas companies that create a charge on property in England and Wales which closely follows the regime for English companies.
There is no longer a provision to determine whether property is situated in the UK.
There are special rules for debentures that apply to English companies.
The rules for inspection of records that are generally applicable to private companies will apply to the inspection of overseas companies’ records in respect of the inspection of the register of charges and copies of instruments creating charges.

The Regulations are expected to come into force on 1.10.09.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 01 May 2009 16:29:40 GMT

There is conflicting news about the progress of this Bill. A commercial legal information provider this week reports it as having been withdrawn at its second reading in the Commons. The Parliament website says there was not enough time to complete the debate before the end of the session on 27 February 2009, so it has been postponed to 15 May. Perhaps the Parliament website just needs updating to catch up with subsequent, unknown events. If I find out what is really happening, I will let you know … The Bill is to impose requirements on lenders relating to the calculation of interest rates and to regulate the promotion of lending.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 01 May 2009 16:24:47 GMT

The Bank of England has begun a new monthly publication that presents the Bank’s assessment of lending to the UK economy. The Bank say, this first report provides a longer-term perspective and is therefore more comprehensive than will be the case for future editions. The report draws on existing monetary and financial statistics collected by the [...]

The report draws on existing monetary and financial statistics collected by the Bank and data from six major UK lenders that participate on the Lending Panel established by the Chancellor in November 2008. The report also draws on intelligence gathered by the Bank’s regional Agents and market contacts, as well as the results of other surveys.

The main findings of the report are:

Growth in the stock of lending to UK businesses slowed markedly during 2008 but looking ahead, some lenders expect the overall availability of credit to the corporate sector to increase over the next three months.
Growth in the stock of mortgage lending to individuals has slowed sharply since the start of the financial crisis as credit availability declined. Lenders expect the demand for secured credit to remain weak in coming months.
The availability of unsecured credit has tightened over the past year and weak demand for unsecured lending is expected to continue over the coming months.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 01 May 2009 16:20:42 GMT

The BoE has published the first quarterly report on the transactions undertaken through its Asset Purchase Facility. The objective of the Facility was to improve the liquidity in, and increase the flow of, corporate credit by making purchases of high quality private sector assets including commercial paper and corporate bonds. The Facility was authorised by HM [...]

The Facility was authorised by HM Treasury to purchase up to a total of £50 billion of private sector assets financed by Treasury bills. The first purchases of commercial paper began on 13 February.

1banklawblogger

ruth.pedley@cms-cmck.com (Bank Law Blogger) — Fri, 01 May 2009 16:18:35 GMT

This private member’s Bill received its second reading on 24 April. The Bill is to: make provision for societies to be registered as co-operative or community benefit societies; to re-name the Industrial and Provident Societies Acts; to apply to registered societies the provisions relating to directors’ disqualification and to make provision for the application of certain other enactments relating [...]

This private member’s Bill received its second reading on 24 April. The Bill is to:

make provision for societies to be registered as co-operative or community benefit societies;
to re-name the Industrial and Provident Societies Acts;
to apply to registered societies the provisions relating to directors’ disqualification and
to make provision for the application of certain other enactments relating to companies; to confer power to make provision for credit unions corresponding to any provision applying to building societies.