Brief Banking Bites – Summer 2022

Welcome to the Summer edition of Brief Banking Bites (BBB)! We are kicking off the summer in an optimistic mood and are excited to see what the Banking & Finance team can achieve this year.

We are particularly pleased to announce that Meera Jansen will be taking up the reins as the Banking & Finance Team’s new Business Group Head. Kath Shimmin will of course remain contactable as a Partner and fee earner within the team, as well as in her role as Blake Morgan Chair.

In this edition of BBB we will highlight our focuses for this Financial Year. We will also discuss some ‘Hot Tips’ and overview Blake Morgan articles for potential topics of interest, such as the Enforcement of English judgments overseas, the role of “Smart” contracts and the Quincecare duty as well as introduce you to a few new members of the team.

Happy reading! If you have any questions or need to contact us, our key contacts in each office are:

• Kath Shimmin – Southampton
• Meera Jansen – London
• Paul Duggan – Cardiff
• Rebecca McCabe-North – Reading

Recent deals

Firm news

Legal Excellence

As with every year, we strive to provide quality advice and service to our clients. This year is no different, and it is with great pleasure that we start the year having been included in The Times Best Law Firms Guide for 2022. The listing recognises the expertise and quality of advice delivered by leading law firms and is entirely peer selected.

Equality, Diversity and Inclusion (EDI)

We are delighted to celebrate Pride Month 2022 and to continue to prioritise an inclusive workplace through our BM Pride Allies Programme.

Mark Jones, the firm’s LGBT Champion leads the firm’s initiatives to ensure all members of the LGBT community feel part of the firm and able to be their true selves when at work. We have a networking group, BM Pride, for both members of the LGBT community and allies within the firm. During Pride month we will be celebrating across our offices.

Mark says: “Pride month gives me time to reflect on what it means to me. For me, it is an opportunity to both reflect and celebrate. Reflect on the struggles we have overcome and the difficulties we still encounter. Celebrate together and promote inclusion and diversity across the firm and out in the wider communities we live and work in. Pride month gives visibility to the challenges still faced by the LGBT community and raises awareness of these issues. Pride is about being who you are and feeling comfortable expressing that – however that expression may be, and regardless of who you love and your sexual orientation. I encourage all staff to be their true selves at work, to be proud of who they are and ensure they feel supported and a vital part of the firm they work at. I hope that by being a role model within the firm, I can show others that sexual orientation is no barrier to progression at the firm and that inclusiveness is positively promoted.”

Blake Morgan is proud to take part in initiatives that will support its members and the wider community in promoting an equal, diverse and inclusive workplace. Putting its money where its mouth is, Blake Morgan recently appointed Victoria Hand to be its EDI Specialist and signed up for the Law Society’s Women in Law Pledge. Victoria is responsible for leading the development and implementation of the firm’s EDI strategy, and will be a key member of Blake Morgan’s EDI Committee and HR leadership team. The Pledge signals our commitment to the progress of gender equality, elimination of gender discrimination and to making positive change for the legal profession.

In addition, we are delighted to have been again listed in the Inclusive Top 50 UK Employers List for 2021/22. Blake Morgan has a long-standing commitment to providing equal opportunities in the workplace, and this underpins everything that we do across our policies, processes and management. It is immensely gratifying to see our work and continued progress once again being recognised by such a respected body.

Environmental, Social and Governance (ESG)

In our recent Counsel+ event hosted by Blake Morgan Chair, Kath Shimmin, guests, Jonathan Lipman (Mercedes-Benz UK), James Dickinson (Centrica PLC) and Glyn Richards (Group Director of Sustainability, Bupa), and Commercial Real Estate Partner, George Panteli, discussed the approach taken by leading businesses in embedding ESG policy and the role of the in-house lawyer.

In particular, the Banking & Finance Team continues to watch the growing SLL and green loan market in order to provide clients with an innovative service. For more information please see our previous article.

Hot tips

Mr. Volcker, we’ve been expecting you…

The Volcker Rule prohibits certain banking entities from engaging in proprietary trading and acquiring or retaining any ownership interest in, or sponsoring, a hedge fund or a private equity fund.

The most recent update expanded the exclusions to and exemptions from the proprietary trading prohibition and removed the proposed “accounting prong” from the trading account definition.

Buy Now Pay Later consultation

The buy now, pay later (BNPL) company Klarna will start reporting UK customer debts to credit agencies for the first time in June 2022, meaning credit card companies will be able to see transactions and debts when conducting formal checks on potential borrowers from the end of 2023. This is in part in response to the HM Treasury announcement in October 2021 of future regulation on BNPL products.

Retail businesses in particular should keep a watchful eye on what proposals are made as future regulation may have a significant impact on how retail clients advertise BNPL products, what information a customer must receive and the enforceability of BNPL products where breaches of the relevant legislation are discovered.

“Relational Contracts” and Duty of Good Faith

The High Court recently held that a loan agreement is not a “relational contract” and therefore the bank’s exercise of its contractual discretions was only subject to a duty to exercise them for a legitimate commercial aim and that it did not vex the borrower maliciously. Although the decision was fact-dependent, this is a success for lenders, as the decision means that the court is less like to imply good faith duties into the loan agreement, which could limit the discretion of the lender under the terms.

(Morley (t/a Morley Estates) v Royal Bank of Scotland Plc [2020] EWHC 88 (Ch))

Ring-Fencing Review headed by Keith Skeoch

The Ring-Fencing and Proprietary Trading Review released its final report and recommendations in March 2022. You can read the full report here but to summarise, the key points outlined were:

• the reforms introduced have contributed to a more resilient banking sector and banks are careful in applying the legal provisions and rules;
• critical economic functions definitions now include a far-wider array of activities than at the time of the Independent Commission on Banking which means that some are not included in the ring-fenced regime, leaving certain entities outside of the ring-fence although they are fulfilling critical functions;
• the ring-fencing regime has had no significant impact on competition in retail banking or its sub-markets, nor is “trapped” liquidity supported by evidence;
• the potential of the regime to constrain the competitiveness of UK banks has not been realised however, the regime did create unintended consequences in respect of compliance costs and customer friction; and
• classic proprietary trading is no longer an activity being systemically undertaken by banks in the UK.

Registration of Overseas Entities Bill 2021-22

The Registration of Overseas Entities Bill 2021-22 (currently undertaking a second reading in the House of Commons) would set up a register of overseas entities and their beneficial owners and require overseas entities who own land to register in certain circumstances. The Bill is designed to be a robust and reliable deterrent against money laundering and has the potential to dramatically alter the requirements that overseas entities must satisfy when purchasing property in the UK. Those undertaking Real Estate Finance should watch this space.

Analysis

Enforcement of English judgments abroad

We look how English court judgments are applied in foreign jurisdictions practical steps can be taken to increase the chances of successful enforcement. This will be dependent on what international treaties they have ratified and the private international law of that jurisdiction.

Read more

Examining Quincecare duty

Under Quincecare, financial institutions should not follow a customer’s payment instruction where there are reasonable grounds to believe that the payment is an attempt to misappropriate funds. Misappropriation is the improper use of property for purposes other than that for which intended.

Read more

“Smart” contracts – what you need to know

Smart contracts define and perform the obligations of a legally binding contract and present advantages and disadvantages to hard copy contracts which require the principals or their legal advisors to perform several tasks.

Read more

Meet our new team members

We welcome to our Banking team new members:

Lewis Morley – Lewis joined us last Christmas as a Paralegal following an internal move from our Regulatory team. Lewis impressed at interview, where his knowledge and passion for the area was exemplar.

“Hello everyone, I’ve had a great first 6 months in the team as the resident Banking & Finance paralegal. I’ve enjoyed building on previous transactional experience and my time in the Regulatory Team. Thank you all for help so far; I’m looking forward to my future at the firm.”

Jodie Craven – Jodie joins Blake Morgan as a Senior Associate working across Banking & Finance and Commercial Recoveries. Jodie has significant experience in secured lending litigation and has settled in well to her non-contentious role.

“Hi guys. I’m a newby into the non-contentious side of banking, having spent the past 10 years scrapping on behalf of banks in respect of secured lending. Really looking forward to getting to grips with the non-contentious side of things and thanks to everyone for welcoming me and helping me settle in so quickly.”

All of us in the Banking team wish also Rebecca, our head of Banking in Reading, our best and welcome Francis Gabriel Maui McCabe-North to the Firm!

From all of us in the Banking & Finance team, we wish you a flourishing second half to 2022.