Brief Banking Bites – Summer 2023

Welcome to the second 2023 edition of Brief Banking Bites from Blake Morgan.

This summary of topical updates will include brief pointers to items currently in the news, as well as overviews of potential topics of interest, fleshed out in more detail within Blake Morgan articles. At the risk of spoiling the surprise, some topics under study are Practical Tips for Businesses affected by SVB, Sustainable Lending, and the Register of Overseas Entities.

We will finish off by highlighting team promotions and saying farewell to members of the team.

A snapshot of our work so far this year

Commercial and Legal News

Silicon Valley Bank

On 10 March 2023, Silicon Valley Bank (SVB), a well-known and important lender in the start-up industry, was shut down by US regulators due to a multi-billion-dollar loss on its investments which caused a liquidity issue, with customers unable to access their money. In turn, their UK subsidiary, SVB UK, was made insolvent the following weekend but rescued by a deal thrashed out between the Bank of England, the UK Government and HSBC, with HSBC purchasing SVB UK for a nominal amount of £1. The consequences of SVB’s failure caused tremors throughout the banking industry, with Signature Bank (based in New York) failing, Credit Suisse being provided with up to £44bn from the Swiss National Bank and First Republic (a Californian based commercial bank) having to be rescued by circa $30bn from other US lenders.

For more information please see practical advice for affected businesses and the tech sector here.

Business Banking Resolution Service (“BBRS”) – on the way out?

The BBRS, launched in February 2021, was set up to manage unresolved disputes between larger, SME customers and their banks (as long as their bank is one of the providers signed up to the BBRS). It intended to dovetail with the Financial Ombudsman Service rather than overlap in jurisdiction. However, it’s been reported that the BBRS has only overseen a handful of financial awards since it was set up, as of May 2022. Further bad press follows, with several senior personnel leaving the BBRS for various reasons. Most recently, the BBRS was criticised for dismissing independent advisers. For the benefit of our clients, it is good to know not only of the existence of these alternative dispute mechanisms, but also of their pitfalls.

For more information please see The Times article here (and our practical tips below).

Data Protection – for the Banks

The Data Protection and Digital Information (No. 2) Bill was introduced to Parliament on 8 March 2023. It is, as of 26 June 2023, in the Report stage. Its eventual impact will depend on what remains once it (potentially) reaches the desk of the King. In brief, the bill is intending to reform, albeit in an evolutionary manner rather than revolutionary one, the data protection regime GDPR. Particularly relevant to lenders, the Bill provides greater clarity as to the term “identifiable living individual” and processing for the purposes of legitimate interest. However, given the UK’s desire to maintain regulatory alignment with the EU, the changes are more at addressing sharp edges, rather than a wholesale change. For further reading, please use the links below.

For more information please see the Global Security & Privacy Compliance blog here.

Fixed and Floating Charges

The difference between a fixed and floating charge. This question, although in a more complicated fashion, arose in the case of Avanti Communications Ltd, Re [2023] EWHC 940 (Ch). The matter involved a company which had recently entered administration and whether certain assets were subject to either a fixed or floating charge.

The key decision made was that a charge exists on a spectrum, ranging from the chargor having total control of its own asset or it having no control. Legal commentators have speculated whether this means that, absent absolute restrictions on the use of the asset, any hint of control by the chargor leans towards the finding that a charge over that asset will be determined as floating.

The judge was clear in her disagreement with this approach. Although control is a key determinative factor, it must be looked at in the context of the entire circumstances of the matter and in light of the factors as highlighted by case law. Effectively, although there were exemptions which allowed the certain assets to be disposed of in particular circumstances, they were “strictly limited” and not, in their proper construction, allowed to be disposed in the ordinary course of trading by the company. In addition, some of the exemptions required any disposal to be made on commercially unattractive terms. Overall, the company was not free to deal with them.

FCA and the sustainable loans market

Concerned about potential manipulation, the FCA has recently announced that it is examining the market for sustainable loans. The background to the investigation is the risk that companies (and lenders) are setting environmental or sustainability targets artificially low, which have little to no impact on the company’s actual environmental impact. The concern is part of the wider criticism that the industry may be attempting to “greenwash” its impact. As of June 2023, there is no update on the pace or extent of the investigation, but lenders must be wary that any green loans they intend to put in place should have tough but achievable goals that lead to a definitive and quantitative drop in the company’s environmental impact.

For more information please see the Financial Times here.

Analysis

Practical Tips for Businesses affected by SVB

We have prepared a note to support businesses impacted by the failure and rescue of SVB by HSBC UK. With some of our clients and the tech sector being impacted, we prepared an update to help any organisations struggling to understand what it means to them and their business. These are points for consideration should you have a banking relationship with SVB and may have relevance for customers of other banks who are currently experiencing issues or have failed.

Read our Practical Tips article here.

Sustainable Lending

Continuing from our previous overview of the Environment, Society and Governance (ESG) concept, businesses are increasingly aware and interested in sustainable lending, and how that can assist both their lending needs and their wider corporate goals. In the context of COP-26 targets and with the UK Government issuing £16 billion in green bonds last year, the topic of sustainable lending is one worth revisiting. The Loan Market Association (LMA) has released three concurrent sustainable loan principles, which cover green loans, social loans and sustainably-linked loans, aiming to demystify and standardise understanding of sustainable lending.

Read our article here on Sustainable Lending here.

Register of Overseas Entities

The Economic Crime (Transparency and Enforcement) Act 2022 (ECA) introduces significant reform to the registration regimes at Companies House and Land Registry by creating a new Register of Overseas Entities (ROE). Rhian Davies and Thomas Jenkins have prepared an excellent run through of the background to the legislation, its requirements and set out the consequences of failing to comply. In an accompanying article, they also explain why lenders (and borrowers) should be aware of its introduction and practical steps that can be taken to meet its objectives and minimise any risk to either existing or prospective lending.

Read our articles here: for Overseas Entities and for Lenders.

Firm news

Blake Morgan continues to prioritise personnel professional growth and we are proud to announce 54 promotions celebrating talent across the UK.

Kath Shimmin said: “The wide range of specialisms in this latest round of promotions showcases the breadth of expertise among the next generations of the firm, and consistent excellence of service they deliver. This year, we are proud to be awarding so many well-deserved promotions as we continue to help develop the skills and careers of our talented lawyers and support staff here at Blake Morgan.

“I would like to congratulate everyone who has been promoted and thank them for their hard-work and dedication over the past year.”

In accordance with the theme of the firm’s promotions above, we are thrilled to offer promotions to the following members of our team by way of recognition of their hard work and professional expertise.

Jake Holmes – who has been promoted to Legal Director.

Iona Easton – who has been promoted to Senior Associate.

Rhian Davies – who has been promoted to Associate.

Richard Rogers – who has been promoted to Associate.

Separately, we are particularly pleased for the Cardiff office, who have been shortlisted for the Best Advisory of the Year award at the FinTech Wales Awards and have also been named Property Law Firm of the Year at the Insider Media Wales Property Awards 2023.

Thank you to everyone who took part in and supported the HSBC John Wilkinson Memorial Trophy Touch Rugby Tournament.

New joiners

We are pleased to imminently welcome to our September trainees ready to dive head first into the world of facilities, as well as Lauren Green, who will be qualifying with us as a Solicitor in August.

Farewell

Goodbye and a massive thank you to Guy Constant who has been an invaluable resource to the team and to the firm over the period of 30 years. We wish Guy the absolute best in his future endeavours and cannot thank him enough for supporting the team with his remarkable expertise and for his mentorship of those around him.

We are temporarily saying goodbye to Katherine Tan who will be joining HSBC for a six-month secondment, where she will be embedded in their Transaction Management team. We wish her the best of luck in her role and look forward to welcoming her back at the end of November. Finally, we wish a fond farewell to Rebecca McCabe-North who is leaving for pastures new.

Contact us

• Kath Shimmin – Southampton
• Meera Jansen – London
• Paul Duggan – Cardiff

We are excited to see what the team can achieve in the new year. From all of us in the Banking & Finance team, we wish you a wonderful end of the Summer and a flourishing second half of 2023.