BANKING & FINANCE LITIGATION UPDATE Issue 61 We wish to establish a dialogue with our readers. Contents Please contact us at B&FL Update and let us know which particular areas you are interested in and what Domestic Banking ······································ 2 you would find helpful. Domestic General······································· 3 The Banking & Finance Litigation Update is published monthly and covers current developments European Banking ······································ 5 affecting the Group's area of practice and its clients during the preceding month. European General······································· 6 This publication is a general overview and discussion International Banking ·································· 7 of the subjects dealt with. It should not be used as a International General ··································· 8 substitute for taking legal advice in any specific situation. DLA Piper UK LLP accepts no Legislation··············································· 9 responsibility for any actions taken or not taken in reliance on it. Press Releases··········································· 9 Where references or links (which may not be active Case Law ··············································· 12 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. DOMESTIC BANKING 6. Sir Hector Sants, the new Head of Compliance at Barclays, has spoken to the Parliamentary BANK OF ENGLAND Commission on Banking Standards prior to taking up his post. He emphasised that his appointment 1. The new Financial Policy Committee of the Bank will drive Barclays to change its culture from of England has been given the power to stop within, whilst also denying that there were any excessive increases in house prices and to keep ethical issues relating to his appointment resulting mortgage lending under control in a bid to from his previous position as the head of the maintain stability in the economy and push up Financial Services Authority ("FSA"), where he house sales. The Bank will be able to use its new would have seen the accounts of Barclay's rivals. powers, which include the ability to force banks to build up capital, from June 2013. Daily Telegraph, 10 January 2013 Guardian 15 January 2013 7. Barclays is hoping to save billions by reducing its IT budget by up to 90 per cent. The bank has 2. As predicted by financial analysts, the Bank of developed its own network of computer servers England's Monetary Policy Committee has and has started to use Linux to run significant decided against raising interest rates, keeping areas of its business. The system, which was them at a level of 0.5 per cent. No changes have developed under Antony Jenkins when he was the been made to the level of quantative easing either, retail side's chief executive, will now be rolled out which remains at £375 billion. to the rest of Barclays. Daily Telegraph, 10 January 2013 Sunday Times, 6 January 2013 BARCLAYS 8. Barclays has emerged as the leading UK investment bank in a league table produced by 3. WaheedLuqman,oneoftwobrothers who Dealogic, rising from third place in 2011 and defrauded Barclays bank of £100 million before overtaking rivals Goldman Sachs and JP Morgan. fleeing to Pakistan to avoid trial after the collapse In the global investment banking league, Barclays of their company, Lexi Holdings, in 2009, has maintained its position as eighth overall. been sentenced following a trial at Manchester Crown Court. He was sentenced to seven and a Daily Telegraph, 27 December 2012 half years in absentia, following his conviction for fraud and false accounting. CO-OPERATIVE BANK Independent, 18 January 2013 9. The Cooperatve Bank may drop its plans to introduce a new IT platform, Finacle, if its 4. The new chief executive of Barclays, Antony purchase of 632 Lloyds Bank branches goes Jenkins, has told staff at the Bank that following ahead. If the acquisition proceeds, then the the scandal over the manipulation of the Libor rate Cooperative is prepared to take a £200 million they must commit to a new set of standards loss on the £700 million it has so far spent on the against which performance and values will be system as it will instead adopt the IT platform measured. He said those unable to follow these already in place at Lloyds. As a result, the mutual measures and to support the new ethical values of bank’s profits may be severely reduced. the company would be told "Barclays is not the place for you". The Times, 21 January 2013 Guardian, 18 January 2013 HSBC 5. A husband and wife who claimed that Barclays 10. Ruth Horgan has been appointed as head of misinformed credit reference agencies about the compliance and group general manager by HSBC. level of an agreed overdraft limit, allegedly Ms Horgan joins from KPMG and will be based in causing the husband to get a bad credit rating and London, working with head of financial crime resulting in them being declared bankrupt, have compliance and money laundering reporting, Bob lost their case for damages. Werner. Daily Telegraph, 15 January 2013 The Times, 22 January 2013 02 | Banking & Finance Litigation Update—Issue 61 11. HSBC agreed in December to sell its 15.6 per cent Antonio Horta-Osorio, is in line for a bonus of up stake in Chinese life insurer Ping An to Thai to £4 million. conglomerate Charoen Pokphand, in a deal set to make the bank $2.6 billion. However, financing Sunday Times, 13 January 2013 for the deal appears to have collapsed and China's insurance regulator is widely expected to reject THE ROYAL BANK OF SCOTLAND the proposed sale. 17. The investment arm of RBS is set to be split into The Times, 10 January 2013 two divisions, a markets business and an international banking arm, with the head of each 12. Hundreds of thousands of customers at HSBC division reporting straight to chief executive who made ATM withdrawals but forgot to take Stephen Hester. their cash, are to receive compensation from the bank. HSBC is following The Royal Bank of Sunday Times, 20 January 2013 Scotland ("RBS") in making the move. 18. The European Commission will be approached by Times.co.uk, 27 December 2012 the Treasury to request a delay in the deadline imposed by the European authority on the sale of LLOYDS BANKING GROUP over 300 branches of RBS. This follows a first round of offers for the branches in December 13. Lloyds Bank issued an apology to its customers which resulted in only two bids - one from Virgin after the Faster Payments system failed on Money and the other from JCFlowers, a US Monday 20 January. The system, which allows private equity business. At present RBS has until customers to transfer money from accounts in a the end of 2013 to sell off the branches. matter of hours, was back up and running again by 5pm and banking staff were working through the Sunday Times, 6 January 2013 backlog of payments to process them by the next day. 19. The five year plan to wind down RBS's £258 billion non-core business, which began in 2008 as Daily Telegraph, 21 January 2013 a proviso of the part-nationalisation of the bank, has continued apace. Now entering its fourth 14. Small and medium-sized enterprises can expect to year, the bank has only about £20 billion of the receive more assistance in starting up from Lloyds portfolio remaining, with the man in charge of the Bank, which has announced that it will cap its project, Rory Cullinan, saying "We've made loan and overdraft arrangement fees at 1.5 per excellent progress". cent. The bank has said it intends to aid 100,000 businesses in 2013, more than its competitors, as Financial Times, 3 January 2013 part of its charter. Daily Telegraph, 21 January 2013 DOMESTIC GENERAL 15. The Bank of England has said that Lloyds and 20. According to an internal FSA memo seen by the RBS have until March to inject much-needed Financial Times, seven of the 50-strong staff capital to bolster their balance sheets whilst working on the financial watchdog's Libor conceding that the UK Government paid too much investigation are turning their attention to the when it bailed out the banks during 2008. Lloyds world's largest interdealer broker, ICAP, for is contemplating selling off parts of its wealth possible breaches of market conduct rules, as it management arm to generate the capital. becomes a focus of the ongoing investigation into Libor rate-rigging. Daily Telegraph, 16 January 2013 Daily Telegraph, 24 January 2013 16. Shares in Lloyds Bank have risen by more than 100 per cent in the past 12 months, up from 25p a 21. Andy Haldane, financial stability director at the share in May 2012 to 54p. This, coupled with a Bank of England, has proposed to the Banking reduction in customer complaints and the Standards Commission that bank bonuses should successful introduction of a plan to turn the bank's be deferred for a period of five to 10 years in fortunes around, mean that the chief executive, order to help recapture the "old partnership www.dlapiper.com | 03 model" where bankers had to make the long-term 27. Anthony Browne, chief executive of the British health of their institutions their priority. Bankers' Association, has called for the establishment of an independent Banking Financial Times, 22 January 2013 Standards Review Council. 22. AnewreportfromtheBankofEngland has Financial Times, 15 January 2013 revealed that, during the three months to November, whilst conditions in the mortgage 28.