New Banking Codes

The new Business Banking Code and the Banking Code were published at the start of April, together with guidance and a fact sheet giving the key new provisions.

The Codes have been given a bit of “press”.  Radio 4’s Moneybox Live had Eric Leenders, head of the Retail team at the British Bankers’ Association on to explain the changes.  The BBA’s view is the Codes have been received posititively by consumer organisations and the press.  The committment by the banks to contact customers who are getting into financial difficulty is thought particularly helpful.  Anyone want to disagree?

New provisions added to the Codes include:

• A requirement to lend responsibly (added to the fairness commitment in section 2 of the Banking Code and Business Banking Code).
• More stringent guidelines for credit assessments (the Banking Code).
• A requirement that banks provide customers with a summary of important information about unsecured loans and savings accounts before customers purchase a product.  This will apply from 1 October 2008 (the Banking Code).

Banking Code Standards Board: http://www.bankingcode.org.uk/home.htm

Eric Leenders: http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=153&a=8077

Improving processing of credit derivatives

In response to concerns about backlogs of unconfirmed trades in the over-the-counter (OTC) derivatives market, a group of dealer banks have written to the New York Federal Reserve committing to improving the trade processing of credit derivatives.

In recent years, the volume of trades has increased and many banks are struggling to process them.  Many OTC trades are still confirmed by email or fax rather than on electronic trading platforms.

“Rome I - Should the UK Opt in?”

The Ministry of Justice has issued a consultation paper addressing the issue of whether the UK should opt in to the Rome I Regulation on choice of law in contract.   BLB has been concerned about Rome 1 before.

The Rome I proposal will provide clarity over which law applies if a dispute arises over a contract made between people or businesses from different countries.  The idea is to allow cross border trade to continue with confidence.  Questions arise for the banking industry in relation to securitisation and assignments, among other things.  There will be - or should be - a great deal of debate on this from bankers.  For a couple of years now there has met at MinJ, and before that at the DTi, a stakeholder group of lawyers and eminent academics who have ironed out the worst problems of the drafting.  There are still enough practical problems that need to be addressed that, eg, ISDA has formed a working group to work out what to do about the proposals.

The Government thinks the UK should opt in to the Rome I Regulation.  In doing so, they think the UK should apply similar rules to contracts connected to two or more jurisdictions within the UK. 

The Government wants to test this conclusion by seeking the views of stakeholders.  The consultation paper seeks views on:

• Is it in the national interest for the Government to seek to opt in to the Regulation?
• Should the Rome I rules apply throughout the UK if the UK opts in to the Regulation?

Responses must be submitted to the HM Courts Service by 25 June 2008.

An apology and some law

Bank Law Blogger’s loyal reader must think BLB spends too much time watching credit crunch and her shares plummet to write posts for the Blog.  It’s true.  That, combined with an enjoyable secondment to a client has distracted her a trifle.  But with the passing of a snowy Easter, BLB has pulled herself together and is back in action.

Grosvenor Casinos Ltd v National Bank of Abu Dhabi

This case last month shows that the Uniform Rules for Collection (URC) 522 did not create privity of contract between the principal and the collecting banks.   The claim based on breach of contract and fraud was dismissed.  It was brought by a London casino against a UAE bank and arose out of the bank failing to honour two cheques created by a customer of the casino.

Companies Act 2006 - 6 April 2008 implementation

Another stage of implementation of the Companies Act 2006 happened on 6 April 2008. Provisions now in force include:
Part 12: Company secretaries
Section 44: Execution of documents
Part 15: Accounts and reports, other than ss417 and 463.
Part 16: Audit, other than ss485-488
Part 19: Debentures
Parts 20: Private and public companies and 21: Certification and transfer of securities
Part 23: Distributions
Part 26: Arrangements and reconstructions

The biggie - changes to registration of charges - will come in on 1 October 2009.

Remaining commencement dates

Mortgage arrears - pre-action protocol proposed

The Civil Justice Council (”We promote the needs of civil justice in England and Wales and monitor the system to ensure that progress to modernise it continues.”) has issued a consultation paper on a Mortgage Arrears Protocol.   This is going to be of interest to amongst others, lenders to residential developers. 

The consultation proposes a new mortgage arrears pre-action protocol to ensure that before proceedings are commenced for proceedings in which a residential possession claim is made by a lender against a borrower in mortgage arrears, all reasonable steps have been taken to avoid the necessity for litigation.

Responses to the consultation are requested by 23 May 2008.

Mortgages - house points?

Just when you thought regulation of financial products couldn’t get any heavier, see the front page of today’s FT and its banner headline “Darling to push ‘gold standard’ mortgages“.

Alistair Darling is going to propose that all mortgages in Britain will be graded and the least risky will be given an official seal of approval.  The plans will appear in next week’s Budget.

The FT says the proposal is for a “gold standard” kitemark for batches of mortgage-backed securities that comprise only those loans that meet higher standards of creditworthiness and quality thresholds.

Execution clause - single director from 6 April 2008

Do you need to have a look at your standard company execution signing block? Companies will be able to execute deeds on the signature of a single director that has been witnessed, from 6 April 2008.  The Companies Act 2006, section 44 makes the change.    Companies will continue to be able to execute on the signature of two directors, or one director and the company secretary. 

Insolvency set-off - building societies

The Financial Markets Law Committee have published their December 2007 paper proposing that the mandatory insolvency set-off rule should be applied to building societies and incorporated friendly societies.   Insolvency Rule 4.90 doesn’t apply to them at present.  This leads to uncertainty in the financial markets when such entities are counter-parties because participants can’t provide clean legal opinions on transactions not being able accurately to analyse the credit risk. 

Delay on new Insolvency Rules

The Insolvency Service have said the timetable for introducing new Insolvency Rules that update the 1986 ones has slipped back to 1 October 2009.  The details are here. 

OFT credit card comparisons

The OFT has today published its report into the difficulty consumers have in comparing credit cards.  It makes a series of recommendations to help consumers choose a credit card, the most significant being the recommendation that the FSA offer a price comparison website.  The FSA have said they will include this on their “moneymadeclear” site.  The OFT will also work with APACS to make consumers more aware of their ability to shop around for cards.