UK: The Heavyweight: Coverage Of This Month's Banking And Insolvency Law

Last Updated: 3 March 2010
Article by Ruth Pedley

Welcome to the February issue of the Heavyweight, with developments in this month's banking and insolvency law.

Some interesting items to note this month:

Cheques - "The end of cheques?"

The Treasury Select Committee has launched an enquiry into the use of cheques. The Board of the UK Payments Council announced in December 2009 that cheques will be phased out by October 2018, but only if alternatives are developed. The Council stated that it had decided to set the date for proposed abolition so far in advance in a bid to encourage the advance of other forms of payment.

Terrorist Asset-Freezing (Temporary Provisions) Bill

The case of HM Treasury v Ahmed and Others (4 February 2010) resulted in the Supreme Court quashing some existing terrorism orders so casting doubt on the ability of banks to freeze the assets of suspected terrorists. A day later, the Terrorist Asset Freezing (Temporary Provisions) Bill was laid before Parliament and granted Royal Assent on 10 February 2010. The Act gave retrospective authority for banks to maintain existing freezes under certain orders between 4 February 2010 and Royal Assent. The temporary Act will expire on 31 December 2010 and a new permanent Act is intended to be brought into force before the end of 2010.

POCA - Banks' position

In Shah v HSBC, the Court of Appeal held that a bank which makes an authorised disclosure under the Proceeds of Crime Act 2002 (POCA), preventing it complying with a customer's payment instruction, may have to prove its suspicions at trial - summary disposal of the question without disclosure and evidence is not appropriate. This decision raises important issues for bank money laundering procedures.

Bank complaints data

The Financial Ombudsman Service has published its complaints data for the last six months on the number of complaints received about named banks and insurance companies. The data includes the percentage of complaints upheld by the ombudsman service in favour of consumers and shows the product areas to which the complaints relate.

Regulatory challenges and developments in the bond markets

In a speech, the FSA have commented on regulatory challenges and developments in the bond markets. They cover a number of areas, one being sources of non-traditional funding. The FSA supports alternative forms of capital accessed through debt markets, such as contingent capital and covered bonds. They believe covered bonds may provide a source of mitigation against an over-reliance on short term wholesale funding. They will continue to support asset-backed bonds if they are "sustainable" and don't compromise financial stability.
The FSA is also continuing its work on the new liquidity regime and structural funding issues for banks.

Tax - capital gains rules for groups of companies

HM Treasury have opened onsultation on capital gains rules for groups of companies. It seeks views on proposals for simplification, on capital losses after a change in ownership, value shifting and depreciatory transactions, and degrouping charges. Draft legislation is included.

Uniform Rules for Demand Guarantees

A revised version of the Uniform Rules for Demand Guarantees will come into force on 1 July 2010. "URDG 758" will replace the rarely used URDG 458; the changes that have been made are designed to make it more user-friendly and attractive to banks.

Interpreting UCP 600

The case of Fortis Bank v Indian Overseas Bank considered the construction of Article 16 of UCP 600. Article 16 deals with "Discrepant documents, waiver and notice". The case shows that a bank must not delay in rejecting discrepant documents.

The Heavyweight: Coverage of this month's banking and insolvency law (www.law-now.com/cmck/pdfs/nonsecured/heavyweightfebruary2010.pdf)

If you have problems opening or printing the pdf file from the link above, please click here (www.law-now.com/law-now/pdfhelp.htm) for help.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 01/03/2010.

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