BANKING & FINANCE LITIGATION UPDATE Issue 58 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……….………...…………………5 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………….…………………………….6 responsibility for any actions taken or not taken in reliance on it. Case Law……………….……………………………8 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. DOMESTIC BANKING global banks, will focus on customers in Malaysia and Saudi Arabia. BARCLAYS Independent, 5 October 2012 1. Barclays has set aside a further £700m to cover the cost of compensation for mis-selling payment 7. Creditors led by HSBC have seized control of protection insurance. The move sparked Biffa as it struggles to repay loans totalling over speculation that other banks would follow suit. £1 billion. The waste collector, which employs over 6,000 people, was saddled with the loans Guardian, 19 October 2012 after it was taken private in 2008 by investment companies Montagu, Global Infrastructure 2. About 18,000 Barclays call centre staff will no Partners and the private equity arm of Halifax longer receive commission payments for selling Bank of Scotland. financial products; instead they will receive bonuses based on the quality of the advice they Independent, 1 October 2012 give LLOYDS BANKING GROUP Daily Telegraph, 11 October 2012 8. A New York court has dismissed a case against 3. The promotion of two managers from the retail Lloyds and its former chairman and CEO (Sir arm of Barclays to its executive committee will Victor Blank and Eric Daniels) brought by a US see retail bankers getting a bigger say in how the retail investor Albert Ross, which accused Lloyds bank is run. Barclays new chief executive, Antony of fraudulent behaviour during its controversial Jenkins, has promoted the chief executive of takeover of HBOS in 2009. Barclaycard, Valerie Soranno Keating, and the head of the bank's UK retail banking business, Daily Telegraph, 18 October 2012 Ashok Vaswani, to the reconstituted top management team with immediate effect. Ms 9. The Financial Services Authority ("FSA") is Keating has also been given responsibility for threatening to block plans by Lloyds Banking running Barclays' global cards and payments Group to pay a small dividend to shareholders business, while Mr Vaswani will be responsible from next year's profits. The regulator believes for global retail and business banking. the state-owned bank should use the funds to boost its capital to protect it from future economic Daily Telegraph, 3 October 2012 instability or a break-up of the eurozone. 4. Barclays' infrastructure arm is in talks to sell its Sunday Times, 7 October 2012 remaining 40 per cent stake in student housing manager UPP to Chinese company Gingko Tree THE ROYAL BANK OF SCOTLAND Investments. Earlier this month the bank sold the other 60 per cent of its stake to a Dutch pension 10. Sir Philip Hampton, chairman of The Royal Bank fund. of Scotland ("RBS"), has announced that the Government could begin selling shares in the bank Daily Telegraph, 28 September 2012 before the next general election. Sir Philip said that basic restructuring work would be complete 5. Barclays is to close three of its nine branches in by the end of 2013. India as part of a move away from retail banking in the sub-continent. Daily Telegraph, 18 October 2012 Independent, 28 September 2012 11. Andrew Bailey, head of the bank supervision arm of the FSA, has written to RBS boss Stephen HSBC Hester, pointing out that a sale of its American arm - Citizens - and a further scaling back of the 6. HSBC is to scale back its global Islamic banking investment bank, would help its capital position. operations and stop offering products in the UK as The letter is a sign that the bank is facing calls part of a wider restructuring. The bank, one of the from regulators to begin a major restructuring of pioneers in developing Islamic finance among its American business. Guardian, 17 October 2012 02 | Banking & Finance Litigation Update - Issue 57 12. Virgin Money is reported to be front-runner in the 19. RBS will take on 16 unemployed young people as race to buy over 300 RBS branches which are apprentices in London. The apprentices will be now back on the market after Santander withdrew employed in the bank’s corporate banking from the deal over delays. Virgin Money lost out division for six months and it is hoped that as to Santander in the original round of bidding two many as possible will stay on in permanent roles. years ago. Private equity group JC Flowers and They will be given “hands-on” experience in key NBNK are also said to be interested in purchasing areas such as client relationship management, risk the branches. RBS has a year to dispose of them. analysis and IT. Telegraph, 15 October 2012 Evening Standard, 27 September 2012 13. In the wake of the collapsed deal to sell 316 DOMESTIC GENERAL branches to Santander, RBS chairman Sir Philip Hampton will ask the European Commission if 19. The Treasury Select Committee has accused the the state-owned bank can hold onto the branches FSA under the chairmanship of Lord Turner of an now that the climate in Brussels is "more "astonishing lack of appreciation of the flexible". understandable public interest in the failure of Royal Bank of Scotland" and has accused the Times, 15 October 2012 regulator of serious flaws in its culture and governance. 14. A package of support to help Britain's young entrepreneurs have been unveiled by RBS as new Independent, 19 October 2012 research revealed a "confidence gap" for many who plan to start their own business. The series of 20. The Financial Conduct Authority (FCA) is measures, which form part of the new RBS planning to divide the 26,000 companies it will Inspiring Enterprise initiative, were launched by supervise into separate groups. Banking, RBS chief executive Stephen Hester. RBS aims, insurance groups and businesses with large by the end of 2015, to help an additional 100,000 numbers of retail customers will be assigned young people and will inject a further £1 million individual supervisors. into Scotland. Financial Times, 18 October 2012 The Scotsman, 9 October 2012 21. Paul Tucker, the deputy governor of the Bank of 15. Ron Teerlink, the only remaining former ABN England, has urged consideration of caps which Amro employee on RBS's executive committee, would prevent individual banks from gaining has announced that he will step down from his dominant market shares in the savings and position as head of the bank's business services business loans market. In addition Mr Tucker division in the first half of next year. wants more decentralisation, with a return to local branch managers, and a review of bankers' pay. Daily Telegraph, 8 October 2012 Times, 18 October 2012 16. Concerns that the flotation of RBS's insurance division would be shunned by the City appear to 22. The Chancellor has asked the Parliamentary have been unfounded. The share sale of the Commission on Banking Standards to examine Direct Line Group which includes the brands whether ringfenced banks should be able to offer Churchill, Privilege and Green Flag is close to simple derivatives and to report back by 18 being fully subscribed. December 2012. Times, 8 October 2012 Financial Times, 15 October 2012 17. The collapse of Spanish house-builder Rivero y 23. The deputy governor of the Bank of England, Paul Soler, which has filed for bankruptcy, has left Tucker, has called for Banks to be restructured to RBS with a loss of £170m. The bank is unlikely to enable them to fail with fewer repercussions. The have to write-off the entire loan and has already objective is to reach a position where "public made substantial provisions for new losses. money is never used for solvency support". Daily Telegraph, 4 October 2012 Times, 15 October 2012 18. www.dlapiper.com | 03 24. The British Bankers' Association has established a Independent, 1 October 2012 new task force to look at whether the idea of a banking standards board could restore public faith 30. New proposals outlined by the FSA will in the industry following recent events such as recommend that bankers who try to manipulate Libor fixing and the mis-selling of payment Libor should face criminal prosecutions. Martin protection insurance. Wheatley's proposals to reform Libor also recommend the responsibility for overseeing the Guardian, 15 October 2012 inter-bank lending rate be taken away from the British Banking Association with a new private 25. The Financial Ombudsman Service has announced sector body created to manage the rate setting that it has already received almost 100,000 process.