With many members and users of the financial markets choosing English law to govern their relationships, and recognising the United Kingdom as a global financial hub, a new court has been set up in London to deal with disputes between them. Among other things, the court will deal with claims relating to loans, banking transactions, capital and currency controls, bank guarantees and bonds worth more than £50 million.
The High Court recently considered an application by a claimant for an interim injunction requiring Barclays to unfreeze certain of her bank accounts which had been frozen following the designation of her husband under EU sanctions. The case highlights the importance of banks carefully monitoring and identifying the accounts of designated persons and other accounts in which they may have an interest.
The Supreme Court recently ruled on Carlyle v Royal Bank of Scotland, a dispute involving financing for real estate purchase and development dating back to the financial crisis. This was the first decision on appeal to acknowledge as binding a commitment to lend which a bank had given but not formally documented in writing. However, commentators are divided as to the lasting impact of the case.
In a welcome announcement for participants and advisers in the UK loan market, the Financial Conduct Authority recently confirmed that the Court of Appeal decision in Fons Hf v Pillar Securitisation Sarl has not altered its interpretation or application of the regulatory perimeter prescribed by the Financial Services and Markets Act 2000.
The High Court recently considered the substance and scope of a conclusive evidence clause, which provides that a certificate provided under a contract by one party to the other, certifying the amount due to it, will be conclusive evidence of that amount in the absence of a "manifest error". The decision highlights the distinction between the primary obligations under an indemnity and the secondary obligations under a guarantee.
For leveraged and crossover capital structures that include secured bank debt, bondholders often look to share guarantees and security on a pari passu (ie, equal) basis with the banks. This update analyses the key intercreditor issues where the capital structure of a borrower group contemplates both a secured bond (termed a 'pari bond') and a secured bank facility by reference to a single pool of assets.
The Emergency Budget included plans for a banking levy that will be payable by UK banks, banking groups and building societies, as well as UK branches or subsidiaries of foreign banks or banking groups. The impact of the measures may restrict the profitability of global banking groups, in particular when added to the various higher capital and liquidity charges due in the next few years.
The chancellor of the exchequer's Mansion House speech provided further details of the government's proposals to reform the financial services sector. Among other things, the chancellor proposes to create a subsidiary of the Bank of England to provide micro-prudential supervision of banks, investment firms, building societies and insurers, and to establish an independent commission on the banking industry.
The coalition government has launched its five-year policy programme. Among other measures, it proposes a banking levy, robust action to tackle unacceptable bonuses in the financial sector and the establishment of an independent commission to investigate whether there should be a separation between retail banking business and investment banking business.
The Financial Services Act confers a number of new powers and duties on the Financial Services Authority (FSA) which are likely to have a far-reaching effect on banks and other financial institutions. Many of these new powers and duties require the FSA to publish rules or statements of policy, on which the FSA is now consulting.
New regulations have removed the requirement for banking companies and the holding companies of credit institutions to disclose details of individual loans to directors in their accounts. Instead, banks will be required to disclose the aggregate total amount of loans, guarantees and credits to their directors, with no individual breakdown by director.
Sir David Walker was commissioned by HM Treasury to conduct a review of corporate governance in UK banks and other financial institutions. His consultation paper sets out the results of his review and seeks comments on 39 wide-ranging recommendations in relation to board composition and effectiveness, the governance of risk, remuneration and the role of institutional investors.
The long-awaited Turner Review, which sets out a blueprint for the future prudential regulation of banks and financial institutions in the United Kingdom, seeks to address the regulatory and supervisory shortcomings which have been exposed by the financial crisis. It promises to have a substantial impact on banks and their business models.
The recent entry into force of parts of the Banking Act 2009 - and particularly the special resolution regime - has far-reaching implications for the sector. Unsecured creditors and contractual counterparties, shareholders and other securities holders, and companies in a group that includes a troubled bank, must all assess the likely impact of the act.
Parts 1 to 4 (and some of Part 7) of the Banking Act 2009 have come into force, setting out the most substantial changes to UK banking law for decades. The most controversial aspect of the act is the special resolution regime, which consists of three stabilization options: a private sector transfer, a bridge bank transfer and temporary public ownership.
In a recent decision the High Court directed the administrator of a company to continue to treat a bank as a secured creditor where the bank had released its security on the basis of a mistake. The bank had executed a deed of release in respect of a charge without realizing that the company was still indebted to the bank on its own account.
The government has set out the details of its emergency measures to assist UK banks and building societies amid the turmoil affecting global financial markets. The aim of the scheme is to improve both short-term and medium-term liquidity in the market and to strengthen the capital position of UK banks and building societies.
The Bank of England has introduced a new discount window facility designed to contain financial system stress by providing financing against assets that may become illiquid in stressed conditions. In addition, it has increased the amount of its special liquidity scheme to £200 billion and has extended the range of eligible collateral for its three-month sterling repo operations.
The Treasury recently announced that by order under the Banking (Special Provisions) Act 2008, retail deposits had been transferred to Abbey National plc, and that Bradford & Bingley’s mortgage book, personal loan book, wholesale liabilities and other assets had been taken into public ownership. It also issued details of the government's guarantee in respect of certain of Bradford & Bingley’s obligations.
Various changes in the regulation of consumer credit agreements will, or are expected to, come into effect shortly. Among other things, the upper financial limit for consumer credit agreements, abolished for most credit agreements in April 2008, will be abolished for all remaining purposes.