Brief Banking Bites – September 2019

Welcome to the latest edition of Brief Banking Bites!

In this edition, we look at the recent case of The State of the Netherlands v Deutsche Bank AG [2019] EWCA Civ 771 and whether negative interest is payable on cash collateral posted under the 1995 Credit Support Annex (CSA) to an International Swaps and Derivatives Association (ISDA) agreement. We also consider the controversial Braganza duty and the case of UBS AG v Rose Capital Ventures Ltd [2018] EWHC 3137 (Ch). Is a bank under a duty to act rationally when exercising its contractual discretion to demand early repayment of a loan from a large commercial entity? You are about to find out!

Then, we will tell you about the difference between fixed and floating charges and you will find out how to effectively protect yourselves where the assets you are buying are subject to a floating charge.

Finally, we will introduce you to our Corporate and Property Tax team, who can help you and your business with all matters concerning corporate tax, remuneration and benefits, share option schemes and management incentives, stamp duty and VAT in property transactions and more!

The State of the Netherlands v Deutsche Bank AG [2019] EWCA Civ 771

The Court of Appeal held that negative (as opposed to positive) interest was not payable on cash collateral posted under the 1995 Credit Support Annex (CSA) to an International Swaps and Derivatives Association (ISDA) agreement.

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UBS AG v Rose Capital Ventures Ltd [2018] EWHC 3137 (Ch)

The High Court held that the bank was not under a duty to act reasonably (a Braganza duty) when exercising its absolute discretion to demand repayment of a loan.

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Letters of non-crystallisation – dealing in assets subject to a floating charge

Unlike a fixed charge, which attaches to specific assets (such as a business premises) and prevents the chargor from dealing or disposing of those assets without the chargee’s consent, a floating charge does not immediately attach to any specific assets, but rather floats over the chargor’s assets, allowing the chargor to deal freely with such assets, both present and future. These would usually taken over an asset that may fluctuate with time and be necessary in the day to day running of a business – for example, cash.

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LIBOR: Interest rate benchmark reform

On 19 March 2019, the Working Group on Sterling Risk-Free reference Rates published a discussion paper on “Conventions for referencing SONIA in new contracts”, inviting feedback by 30 April 2019.

The discussion paper is intended to raise market awareness of existing conventions for referencing SONIA directly in contracts (particularly the conventions that have developed in the sterling bond market), as well as encourage the further adoption of SONIA (including in the syndicated loan markets). It is also intended to support infrastructure providers in developing the necessary changes to enable market participants to reference SONIA.

Kath Shimmin, head of the Banking and Finance team at Blake Morgan, has prepared the attached briefing note on interest rate benchmark reform.

Do you need Corporate and Property Tax advice? We can help!

Our team of experts can assist you with all Corporate and Property Tax matters. Areas we specialise in include:

• Corporate Tax;
• Remuneration and Benefits;
• Share Option Schemes and Management Incentives;
• Stamp Duty Land Tax and Land Transaction Tax; and
• VAT in Property Transactions.

For further information, please contact:

• Cathy Bryant, t: 029 2068 6198, e: [email protected] or
• John Shallcross, t: 023 8085 7469, e: [email protected].