BANKING & FINANCE LITIGATION UPDATE

BANKING & FINANCE LITIGATION UPDATE

ISSUE 64

We wish to establish a dialogue with our readers. Please contact us at B&FL Update and let us know which particular areas you are interested in and what you would find helpful.

The Banking & Finance Litigation Update is published monthly and covers current developments affecting the Group's area of practice and its clients during the preceding month.

This publication is a general overview and discussion of the subjects dealt with. It should not be used as a substitute for taking legal advice in any specific situation. DLA Piper UK LLP accepts no responsibility for any actions taken or not taken in reliance on it.

Where references or links (which may not be active links) are made to external publications or websites, the views expressed are those of the authors of those publications or websites which are not necessarily those of DLA Piper UK LLP, and DLA Piper UK LLP accepts no responsibility for the contents or accuracy of those publications or websites.

If you would like further advice, please contact Paula Johnson on 08700 111 111.

CONTENTS Domestic Banking.................................................... 2 Domestic General .................................................... 3 European Banking.................................................... 5 European General .................................................... 6 International Banking............................................... 7 International General ............................................... 8 Press Releases .......................................................... 9 Case Law ............................................................... 10 Legislation ............................................................. 13

DOMESTIC BANKING

BANK OF ENGLAND

1. The Bank of England and the Treasury are considering an extension to the Funding for Lending Scheme, whereby banks can get cheap loans as long as the money is passed on to customers in the form of loans to small business and low rate mortgages.

Independent, 18 April 2013

2. From 2 April, the new system of financial regulation in the UK will place the Bank of England at its centre. Its new subsidiary, the Prudential Regulation Authority ("PRA"), will replace the Financial Services Authority ("FSA") and will work alongside its own Financial Policy Committee and the newly formed Financial Conduct Authority ("FCA") in "resetting the system of financial regulation" in the UK.

Guardian, 2 April 2013

3. The Bank of England's financial policy committee has identified ?25 billion worth of hidden bank losses, a shortfall it says banks will need to fill by the end of the year. Vince Cable, the business secretary, has warned that if banks are forced to increase their capital it could have a negative impact on lending during the recession.

Guardian, 27 March 2013

BARCLAYS

4. Rich Ricci, the head of investment banking at Barclays, and Tom Kalaris, who ran Barclays' wealth arm, have both left as Anthony Jenkins moves to shake up the culture at the bank.

Daily Telegraph, 19 April 2013

5. Barclays annual profits have risen from ?7.048 billion to ?7.599 billion as a result of changes to accounting standards which meant the bank could restate its accounts.

Daily Telegraph, 17 April 2013

6. The Association of British Insurers will not give its approval to the use of complex financial instruments known as CoCos by Barclays and has given an "amber top" warning to investors not to support the bank's plan to use them.

Guardian 16 April 2013

7. Barclays could potentially make $70 million from its part in the takeover battle for Dell, the computer manufacturer, which is expected to produce $400 million in fee-income for the banks involved in providing advice.

Guardian, 5 April 2013

8. Barclays' failure to sell ?590 million worth of shares it had underwritten in Ziggo, the Dutch cable company, for Cinven and Warburg Pincus, means that it will have to wait until the shares rally in price before it can sell them, or take on the loss. The failure to sell was a result of a widespread drop in share value across Europe caused by worries about the Cypriot financial crisis.

Times, 23 March 2013

HSBC

9. In advance of changes to the rules that will make lenders carry out more stringent affordability checks on borrowers requesting loans, and in a move that will affect residential purchases but not buy-to-let, HSBC and Yorkshire Building Society have become the latest lenders to stop offering new customers interest-only mortgages.

Guardian.co.uk, 22 March 2013

LLOYDS BANKING GROUP

10. Lloyds Bank and The Royal Bank of Scotland ("RBS") have rejected proposals that their auditors should be limited to just seven years in post. The proposals from the Competition Commission have been roundly criticised by both banks. They argue that they should be able to keep the same auditor for as long as they want.

Financial Times, 12 April 2013

THE ROYAL BANK OF SCOTLAND

11. A consortium bidding for more than 300 RBS branches has lost its leader after John Tiner dropped out. The exit of the former chief executive of the FSA comes in advance of anticipated criticism regarding the conduct of the FSA in the run up to the financial crisis from the Parliamentary Commission on Banking Standards.

Daily Telegraph, 19 April 2013

02 | Banking & Finance Litigation Update

12. RBS is bringing in a new monthly borrowing fee which will result in thousands of customers with a RBS or NatWest current account soon paying more for their overdraft. A monthly charge of ?6 will be imposed on those who use their overdraft which is in addition to the interest, payable at 19.89pc on the overdraft.

Telegraph.co.uk, 18 April 2013

13. RBS has been unsuccessful in its attempt to stop a fraud claim by Highland Capital. The Texan investment firm claimed it lost approximately $100m when RBS aborted a derivatives contract and seized the underlying loans in 2008. A Texan court will hear the fraud case. An earlier ruling that the company owed RBS in the region of ?19m was overturned by the Court of Appeal.

Sunday Times, 14 April 2013

14. The FCA has announced that it is investigating a computer failure in the summer of 2012 which could result in a fine for RBS. The IT glitch affected millions of customers across the bank's RBS, NatWest and Ulster Bank divisions who could not access their accounts. The lender said the computer failure was "unacceptable" and that significant improvements had already been made and hundreds of millions would be invested in its systems over the coming three years.

Daily Telegraph, 10 April 2013

15. Hedge funds GLG and Lansdowne are in discussions to back a ?1bn bid for the 316 branches which the RBS must sell after being bailed-out by the Government. The hedge funds are thought to be amongst over 20 companies interested in making an offer for the branches.

Daily Telegraph, 9 April 2013

16. High Court proceedings have been issued against RBS and four of its former executives including Fred Goodwin. Up to ?4bn in damages is being sought by the RBS Shareholder Action Group which alleges that shareholders were deceived about the bank's financial condition when it asked them for ?12bn in fresh capital just months before it collapsed.

Times, 4 April 2013

17. The chief executive of UK Asset Resolution Limited (UKAR), Richard Banks, has said that the bank, created to manage debts following the collapse of Northern Rock and Bradford &

Bingley, could perform the same role for RBS. His comments came following reports that the Parliamentary Commission on Banking Standards is considering splitting up RBS into three separate entities: RBS, NatWest and a third "bad bank" to be managed by UKAR.

Times, 26 March 2013

DOMESTIC GENERAL

18. Shadow City minister, Chris Leslie, has tabled amendments to the banking reform bill, as Labour calls for bankers and other financial services professionals to have a new licensing system, with a breach of the terms of their licence bringing the threat of being "struck off".

Financial Times, 16 April 2013

19. Shadow Business Secretary, Chuka Umunna, has said that Labour would only look to introduce a financial transactions tax if one was also levied on Wall Street. Mr Umunna also said that the party would not embrace the financial transactions tax put forward by Brussels, which is currently backed by 11 of the EU member states.

Times, 16 April 2013

20. Andrew Bailey, head of PRA and the country's senior banking regulator, has questioned the fact that there have been no formal charges laid against any of the bosses of failed UK banks for their roles in the financial crisis. Bailey also said that the fact no senior directors have been disqualified was a "source of surprise".

Guardian, 16 April 2013

21. The claim by banks that their consistently weak lending to small businesses is purely down to a lack of desire for credit, has been rejected by independent research commissioned by the Government. The report from the National Institute of Economic and Social Research (NIESR), says evidence of continuing tight credit supply conditions is clear, blaming the attitude of banks to risk, the pressure on them to improve their capital positions and the negative impact of the fact that four giant high street banks have a stranglehold on lending to SMEs.

Daily Telegraph, 12 April 2013

| 03

22. The Post Office has announced that it is to offer current accounts at its almost 12,000 UK branches, leaving high street banks facing a new competitor that has a considerable existing high street network.

Financial Times, 11 April 2013

23. In the first phase of the government's new business bank, ?300 million is to be pledged by Vince Cable for small and medium-sized enterprises that are struggling to get access to finance. The money will be invested alongside the same amount, at least, from the private sector. The first transactions should occur in the autumn.

Financial Times 10 April 2013

24. A stinging report from the Parliamentary Commission on Banking Standards has urged regulators to consider stripping three of HBOS's top directors of their right to run a financial company. The 96-page report accuses Lord Stevenson, the bank's former chairman, and Sir James Crosby and Andy Hornby, its two former chief executives, of presiding over a "colossal failure". The bank collapsed in 2008, and the report says it cost taxpayers a total of ?28 billion of capital after it was folded into Lloyds, which itself then had to be bailed out by the government.

Financial Times, 5 April 2013

25. Britain's top bank watchdog has predicted that repeated bank failures, including the most recent problems seen in Cyprus, are leading to the "dying out" of the longstanding practice of allowing EU banks to take retail deposits across national lines. Historically banks have been permitted under EU single market rules to open deposit-taking branches anywhere in the 27-member bloc without submitting to local regulation. The bank's home countries are supposed to be responsible for supervision and deposit insurance.

Financial Times, 4 April 2013

26. PRA, the new financial regulator, has given a swift example of its powers. On its first official day it announced that it had overseen a deal safeguarding the deposits of customers of the failed Cypriot bank Laiki. Money belonging to depositors with the UK operations of Laiki is to be automatically transferred to Bank of Cyprus UK.

Financial Times, 3 April 2013

27. Libor has been brought under the net of statutory regulation for the first time under wide-ranging changes to the system of financial regulation. Formal regulation for Libor was introduced by the government following the controversy over rigging of the benchmark rate which has led to large fines for a number of banks. Following a review of Libor by Martin Wheatley, the rates banks submit to the Libor panel will, from July, be published with a three-month delay. Mr Wheatley also recommended that the number of Libor currencies should be reduced to five from the current 10.

Guardian, 3 April 2013

28. The first three months of 2013 saw the FSA hand out fines of ?136 million to financial firms, City workers and other wrongdoers, the largest amount in the first quarter of a year in the FSA's 15 years of existence. There is unlikely to be much of a drop in the high level of fines under the FSA's successor, the FCA as its chief executive has said there will be no let up as it aims to clear up London's financial centre.

Independent, 30 March 2013

29. The FSA has announced that new banks may only need 5 million ($4.25 million) of capital to get started. Startups will be allowed to fail more easily, potentially putting savings above the level of ?85,000 at risk.

Guardian, 27 March 2013

30. The "bad bank" responsible for winding down nationalised lenders Northern Rock and Bradford & Bingley's mortgage books, paid the government back ?4 billion in 2012, a 40 per cent increase in the amount it returned in 2011.

Financial Times, 26 March 2013

31. A survey of 2,300 finance professionals by think tank Z/Yen, has shown London retaining its place at the top of the league of global financial centres, followed by New York, Hong Kong and Singapore. However, the research also found that hubs overseas are closing the gap, with the likes of Paris, Zurich and Geneva seeing higher year-onyear increases than London.

Financial Times, 25 March 2013

04 | Banking & Finance Litigation Update

EUROPEAN BANKING

BANK OF IRELAND

32. An investment in a Manchester office block which cost Bank of Ireland ?33 million in 2007 is now said to be worth virtually nothing. The bank sold almost 50 per cent of the building to its customers who invested at least ?50,000 each and who were expecting a return on their investment in 2014. The bank has now told investors that it is "unlikely" they will recover the value of their investment.

Sunday Times, 7 April 2013

33. The Treasury Select Committee has ordered the head of the FCA, Martin Wheatley, to provide it with more details about the Bank of Ireland's decision to raise its mortgage tracker interest rates and to explain the FSA's response to the issue.

Daily Telegraph, 29 March 2013

BANK OF ITALY

34. The former directors, managers and auditors of Italian bank Monte dei Paschi may have to pay a penalty of up to 5 million as a result of the instigation of sanctions procedures against it by the Bank of Italy following an investigation into derivatives losses. The Bank of Italy has been criticised for the way it supervised the country's third largest bank.

Financial Times, 5 April 2013

CREDIT SUISSE

35. The former global head of structured credit trading at Credit Suisse, Kareem Serageldin, has pleaded guilty to mortgage fraud, making him the most senior person in the City to be convicted of the offence. Following his arrest in London in September 2012, Serageldin appeared before a US District Court to face charges of inflating the price of mortgage-backed assets. Two other colleagues had previously pleaded guilty saying that they had followed orders from Serageldin, who had wanted to protect his ?4.5 million bonus. Serageldin will be sentenced on 2 August and is likely to face 5 years in prison.

Independent, 14 April 2013

36. Credit Suisse will increase its UK business with wealthy customers twofold when it purchases Morgan Stanley's European and Middle Eastern wealth management arm. No details of the value of the sale has been revealed although it has been suggested the deal is worth around $150 million for a business with $13 billion of assets under management and offices in London, Dubai and Milan.

Financial Times 28 March 2013

DEUTSCHE BANK

37. In an effort to head off criticism of excessive corporate salaries, Deutsche Bank has announced that its co-chief executives are to have their pay capped. The proposals were put forward by the supervisory board of the bank for approval by shareholders in May, and are likely to be followed beyond this year. Even if they exceed all their targets, Anshu Jain and J?rgen Fitschen will not receive the maximum possible bonus for 2013. Their maximum capped pay out of 9.85 million this year would still be twice what they earned in 2012 however, though any bonus would be capped at 7.55 million.

Financial Times, 18 April 2013

EUROPEAN CENTRAL BANK

38. Renewed north-south political tensions over the role of the European Central Bank ("ECB") in battling the debt crisis affecting the Eurozone, have been highlighted by calls from the Spanish prime minister, Mariano Rajoy, for the ECB to be handed more powers. Mr Rajoy mentioned the Bank of England and the US Federal Reserve as possible models, though he did not set out what additional powers he was thinking about.

Financial Times, 9 April 2013

39. Mario Draghi, president of the ECB has signalled that an interest rate cut is moving up the agenda at the ECB. Mr Draghi revealed that the ECB's governing council had had an "extensive" discussion about interest rate policy. Though low, the bank's rates are still higher than those of the UK, US or Japan.

Financial Times, 5 April 2013

| 05

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download