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Banking & Finance Litigation Update BANKING & FINANCE LITIGATION UPDATE Issue 56 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……….……...…………………...4 affecting the Group's area of practice and its clients during the preceding month. European General……….………...…………………4 This publication is a general overview and discussion International Banking………………………………..5 of the subjects dealt with. It should not be used as a International General….……………………………..5 substitute for taking legal advice in any specific situation. DLA Piper UK LLP accepts no Press Releases………….…………………………….5 responsibility for any actions taken or not taken in reliance on it. Case Law……………….……………………………8 Where references or links (which may not be active Articles………………….…………………………..15 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 7. Barclays' shareholders have accused regulators of destabilizing the bank by forcing the resignation of chief executive Bob Diamond and weakening BARCLAYS the management team. Investors were responding 1. Barclays is planning a reform of its bonus scheme. to claims made by the FSA and the Bank of One of the proposals being considered is that England at the Treasury select committee that the awards should be withheld until staff retire or sudden removal of Mr Diamond was in the best leave the bank. Other proposals include bonuses interest of shareholders. being deferred for five years or clawed back if targets are not achieved. Daily Telegraph, 19 July 2012 Daily Telegraph, 6 August 2012 8. Barclays has lost exclusive insurance advertising rights as a condition of its new Premier League 2. Barclays is being urged by shareholders to use deal - despite having paid more than 45 per cent Bob Diamond's departure as an opportunity to more this time round to secure its position as title change the bank's strategy and cut the size and sponsor. cost of its investment banking operation, putting an end to so-called "casino banking". Daily Telegraph, 18 July 2012 Sunday Times, 5 August 2012 9. The Treasury Select Committee has revealed that the board of Barclays was told in February this 3. As part of an investigation into possible rigging of year that the relationship between the bank's the Euribor rate, Italian police have seized senior management and the FSA had "broken documents from the Milan offices of Barclays. down". The FSA had also apparently raised Prosecutors in the city of Trani have opened a concerns about Mr Diamond's appointment as criminal investigation following complaints from chief executive in September 2010 and had sought two consumer groups, Adusbef and assurances that there would be "a change of Federconsumatori. culture at Barclays". Daily Telegraph, 31 July 2012 Daily Telegraph, 5 July 2012 4. Barclays has set aside £450 million to compensate small and medium-sized businesses mis-sold HSBC controversial interest rate swaps. Barclays is one 10. HSBC's former chief executive, Michael of four banks to have agreed a settlement with the Geoghegan, and head of its Mexican business, regulator in June. Sandy Flockhart, could have millions of pounds in bonuses clawed back as a result of the US money- Daily Telegraph, 30 July 2012 laundering scandal that has so far cost the bank $700m (£444m). 5. Barclays is being investigated by the FSA over whether the bank adequately disclosed fees paid Daily Telegraph, 31 July 2012 to Qatar Investment Authority when it purchased a stake in the bank in 2008. 11. David Bagley has resigned as chief compliance officer at HSBC during a hearing in the US Senate Financial Times, 30 July 2012 concerning the bank's failure to comply with anti-money laundering procedures. Mr Bagley 6. Anthony Salz, vice-chairman of Rothschild, has will remain with the bank. been appointed by Barclays to investigate whether the way in which the bank set its bonuses Financial Times, 18 July 2012 encouraged some staff to behave dishonestly. Salz will also look at conflicts of interest, training, disciplinary processes, whistleblowing systems LLOYDS BANKING GROUP and leadership behaviour as part of a review of the 12. Lloyds Banking Group's former head of security bank's culture. for online banking has pleaded guilty to the theft The Times, 25 July 2012 of £2.5 million. Jessica Harper is facing a custodial sentence for falsifying invoices over a 02 | four year period and laundering the proceeds. She 19. Stephen Hester, chief executive of RBS, has will be sentenced at a later date. warned that the bank will take another hit to its reputation, as well as a huge fine, as a result of its Independent, 8 August 2012 involvement in the Libor scandal. The exact size of the fine to be faced by RBS is not yet known 13. Lloyds Banking Group has been forced to cut the but Hester told an interview with the Guardian price of its Project Lundy auction after failing to that the investigation by the FSA was "in attract enough interest in the portfolio of loans. process". The proposed price of 70p in the £1 has been cut to 50p. Guardian, 30 July 2012 Daily Telegraph, 23 July 2012 20. Sami Wasif, the London restaurant entrepreneur who is the co-founder of Michelin-starred Chinese 14. Lloyds Banking Group is expecting to announce restaurant Hakkasan, has claimed that an interest that it will accelerate the ring-fencing of its retail rate swap mis-sold to him by RBS has cost him banking business from its investment arm ahead almost £200,000 in extra payments. Mr Wasif of the Independent Commission on Banking's says he was sold the 10-year swap in 2004 2019 deadline. without his permission, when it was attached to a £1.2 million loan he took out, and that he only Sunday Telegraph, 22 July 2012 discovered its existence in February after he noticed discrepancies in his bank account. THE ROYAL BANK OF SCOTLAND Sunday Telegraph, 29 July 2012 15. The Royal Bank of Scotland (RBS) customers will not be offered any price discounts or free 21. Mervyn King, Governor of the Bank of England, deferred shares when the bank's insurance division has called on the FSA to launch a full floats later this year. The Direct Line group investigation into RBS's recent computer which owns Churchill, Green Flag and Privilege is problems within its retail arm, which left many valued between £3 billion and £4 billion. customers without access to their accounts. Times, 6 August 2012 Daily Telegraph, 27 June 2012 16. Brazil's Itau Unibanco is putting together a bid for 22. An inexperienced technician in RBS's computer RBS's business in the US. Speculation is centre in Hyderabad, India, could have been mounting that the state-owned bank will put responsible for the bank's recent computer Rhode Island-based retail bank, Citizens, up for problems. Information was accidentally deleted sale for an estimated £10 billion. Bank of during a software upgrade. America Merrill Lynch and JP Morgan Chase are also said to be interested in the business. Daily Telegraph, 27 June 2012 Sunday Times, 5 August 2012 STANDARD CHARTERED 17. First quarter figures show that RBS has repaid the 23. Standard Chartered is considering a counterclaim emergency loans obtained from the Treasury and against the New York regulator after the bank was the Bank of England in 2008 but business accused of funding $250bn in breach of Iranian secretary Vince Cable is asking why the funds sanctions. used to repay the loans were not used to lend more money to small businesses. Mr Cable is pushing Financial Times, 9 August 2012 for a full nationalisation of RBS. Sunday Times, 5 August 2012 DOMESTIC GENERAL 18. Cabinet ministers are in discussions about whether 24. The cost to UK banks of mis-selling payment to buy the 12 per cent of RBS which it does not protection insurance is fast approaching £10 own, thus fully nationalising the bank. The billion and rising, putting it on course to become Chancellor is thought to be opposed to the idea. the most costly consumer financial scandal in British history. Financial Times, 2 August 2012 www.dlapiper.com | 03 Independent on Sunday, 5 August 2012 on companies' shares. Over £1 million was made by the insider trading ring. 25. New FSA rules mean banks providing insurance as part of "packaged" accounts will need to check Times, 23 July 2012 customers are eligible to claim on the policies. Financial Times, 31 July 2012 EUROPEAN GENERAL 26. Preparations are being made for the first British 30. BaFin, the German markets regulator, has group legal action against those banks who rigged extended an investigation into the alleged rigging interest rates. The legal action will demand that of Euribor, the main interbank lending rate for the contracts worth millions of pounds should be Eurozone. Eight of the country's banks - DZ Bank, ripped up and that all money paid under tainted LBBW, Deutsche Bank, Commerzbank, NordLB, deals be given back to clients. It will be argued BayernLB, Landesbank Berlin and Heleba - are that the banks who colluded to drive down rates to believed to have been ordered to submit details of the detriment of customers were in breach of how they calculate and monitor the interest rate.
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