TABLE OF CONTENTS:

Table of Cases
Table of Legislation
Table of International Treaties and Conventions
PART I: BANKS AND BANK REGULATION

1. BANKS IN THE FINANCIAL SYSTEM 3
I. The role of banks in the financial system and the economy
A. Fundamental functions of the financial system
B. Key bank functions

II. Banks in the era of globalization
A. The rise of multifunctional banks
B. The fall of multifunctional banks

III. The too-big-to-fail banks
A. Bank organization, structure, and competition
IV. Financial innovation in the banking sector
A. Banks and the markets for complex financial instruments
B. Securitizations and structured finance
C. The challenge of shadow banking
V. The global nature of bank regulation
A. The Basel Committee and its remit
B. ‘The financial stability board and the new global financial architecture
VI. What is a ‘bank’? A post-2008 definition

2. PRUDENTIAL REGULATION I: CAPITAL AND LIQUIDITY CONTROLS 27
I. Reasons for regulation
A. Introductory remarks
B. Regulation vs market discipline

II. Prudential regulation
A. Introductory remarks
B. The macroprudential approach

III. Capital regulation
A. What is bank capital for?
B. How much capital?
C. The thorny matter of bank leverage
D. Whither risk weights?
IV. The different phases of the Basel Capital Framework
A. Basel I
B. Basel II
V. Basel III and the EU Capital Regulation Framework
A. Introductory remarks
B. Basel III and CRD IV capital adequacy requirements and beyond
C. Liquidity requirements and measurement of liquidity
D. Essential properties of regulatory capital under Basel ITI and the CRR
F. Macroprudential measures that may be adopted in connection or independently of the Basel III Framework
VI. Total loss absorbing capacity (TLAC) standard
A. Definition and reach

3. PRUDENTIAL REGULATION II: STRUCTURAL REFORM, DEPOSIT INSURANCE, AND CORPORATE GOVERNANCE 71
I. Regulation of bank structure: the hard path to a safer banking system?
A. Introductory Remarks
B. Structural reform in the United States
C. Structural Reform in the UK: ring-fencing under the UK Banking (Reform) Act 2013
D. The EU approach
II. Regulating bank involvement in derivatives markets
A. Introductory remarks
B. Centralization of derivatives trading and clearing, and margin requirements for OTC trading
C. New product intervention and governance regimes for financial products
III. Deposit insurance
A. Overview
B. Deposit protection in the EU Under EU Deposit Guarantee Schemes Directive 2014
IV. Bank corporate governance, risk control, and executive remuneration: a radical change of regulatory paradigm
A. Overview 93
B. Risk governance, board supervision, and control: a radical change of paradigm
C. Regulation of bank corporate governance in the EU and the UK
D. D. Remuneration regulation

4. FUNDAMENTAL PRINCIPLES OF BANK SUPERVISION AND THE LENDER OF LAST RESORT—A RECONCEPTUALIZATION 110
I. Introduction
II. Fundamental principles of financial supervision
A. The question of optimal regulatory architecture
B. Supervisory powers
C. The cross-border challenge—consolidated supervision, the EU banking passport, and the financial stability trilemma
D. Bank supervisors’ accountability and judicial review
III. Bankers’ conduct, money laundering, and terrorist financing
A. Overview
B. Conduct and ethics
C. Money laundering and terrorist financing

5. BANK SUPERVISION IN PRACTICE: THE CASE OF THE UK AND OF THE EUROPEAN BANKING UNION 142
I. Introduction
II. Bank supervision in the UK
A. Overview of the UK regulatory structure
B. The Financial Policy Committee
C. The Prudential Regulation Authority: competences and approach to supervision
D. The Financial Conduct Authority (FCA)
iii. Prudential supervision in the European Banking Union
A. From the European System of Financial Supervision (ESFS) to the European Banking Union (EBU)
B. The single supervisory mechanism: function and powers

6. BANK INSOLVENCY AND RESOLUTION 171
I. Justifying special treatment
II. Special resolution regimes
III. Bank resolution regimes at domestic level
A. Trigger(s) for bank resolution regimes
B. Bank resolution proceedings: the resolution authority and its powers
C. Bail in
D. Stakeholder consultation and challenge
IV. Cross-border complexities

PART II BANKS AND THEIR CUSTOMERS

7. THE BANK-CUSTOMER RELATIONSHIP 189
I. Bank customers and banking services
A. Matters of definition
B. Characterizing the bank—customer relationship
II. Banking contracts
A. Identifying the customer
B. Validity of a banking contract: authority and capacity
C. The bank’s mandate
D. Contract terms
III. Regulating banking contracts
A. EU Directive on Unfair Terms in Consumer Contracts
B. Unfair credit bargains
C. Unfair Contract Terms Act (UCTA)
D. Codes: standards of lending practice
E. Financial Services Ombudsman Service PRS)
IV. The bank as depository—the account
A. Current accounts
B. Statements of the account
C. Combination of accounts
D. Bank charges

8. BANK NETWORKS 227
I. Networks
II. Correspondent banking
A. The nature of correspondent banking
B. The correspondent's error
C. Correspondent banking, money-laundering, and terrorism
III. Inter-bank markets and contracts
A. Contracting on inter-bank markets
B. Standard form documents
C. Master agreements and their interpretation
D. ‘Soft’ law: codes and guidelines
IV. Exchange markets and payment systems
A. The rules of the market/system
B. The position of non-members
C. Regulation of markets and clearing systems
V. Bank syndicates
A. 'True’ syndicates and participation syndicates
B. The severalty clause in context: syndicated loans
C. Subscription agreements for securities issues
D. Legal characterization of a syndicate
E. Lead’s liability for information memorandum
F. The agent bank

9. THE DUTY OF CONFIDENTIALITY 253
I. An outline of the duty
A. Nature and justification of the duty
B. Basis of the duty
C. Scope of common law duty
D, Duty not to use confidential information
II. Qualifications to the duty
A. Compulsion of law
B. Public interest
C. Customer's consent
III. International dimensions

10. ADVISORY AND TRANSACTIONAL LIABILITY 269
I. Doctrinal bases of liability
A. Duty of care
B. Fiduciary law
C. Knowing receipt and dishonest assistance
D. Emerging standards: good faith, due diligence, suitability
II. The content of liability standards
A. Banking practice
B. Trade association/regulatory rules
C. Internal bank guidance
D. Type of transaction and customer
III. Advice
A. Duty to advise
B. Liability for advice given
IV. Vitiating factors in banking transactions
A. Undue influence, unconscionability, and duress
B. Vitiation and third party behaviour 298
V. Lender liability
A. Promoting risky loans/associated products
B. Management and termination of a facility
C. Workouts, receiverships, and insolvencies
D. Environmental liability

11. CROSS-BORDER BANKING 308
I. Introduction
II. The problems examined
A. Regulating the international bank
B. Extraterritorial jurisdiction
C. Moratoria
D. Sanctions and freezes
E. Anti-suit injunctions
F. Secrecy laws
III. Resolving a clash of jurisdictions
A. Avoiding problems
B. Blocking measures
C. Judicial decision-making: comity and balancing
D. International cooperation
E. International harmonization
IV. Conclusion

PART III PAYMENT AND PAYMENT SYSTEMS

12.PRINCIPLES OF PAYMENT 335
I. Basic elements and mechanisms
A. Basic elements
B. Credit/debit payments
C. Payment through banking system
II. Payment discharge, countermand, funds availability, completion
A. Discharge of underlying payment obligation
B. Revocation
C. Availability of funds
D. Completion of payment
III. Payment systems
A. Clearing, settlement, netting
B. Payment and message systems Soll
C. The rules of payment systems
IV. Supervision of payment systems
A. EU Settlement Finality Directive
B. Systemically important payment systems
C. Regulating payment messages
D. Competition objectives

13. DOMESTIC PAYMENT SYSTEMS 361
I. Money
A. Electronic money
B. Virtual money and cryptocurrencies
II. Cheques
A. The nature of cheques
B. Collection of cheques
III. Payment cards
A. Payment cards as contractual networks
IV. Electronic funds transfers

PART IV BANKS AND FINANCE

14. LENDING 415
I. Negotiation of the agreement
A. Actors in the negotiation
B. Ascertaining when agreement arises
C. In the interim: agreements to negotiate
D. Varying the agreement
II. The facility and its repayment
A. Draw-down and demand facilities
B. ‘The obligation to lend, hardship and force majeure, and remedies
C. Purpose clauses, illegality, and vires
D. Repayment
E. Interest
F. Default interest and the rule against penalties
III. Conditions precedent, representations and warranties, covenants
A. Conditions precedent
B. Representations and warranties
C. Covenants
D. Breach by the borrower
IV. The negative pledge and pari passu clauses
A. Negative pledge lending
B. Ambit of the negative pledge
C. Bank v. borrower for breach of negative pledge
D. Bank v. third party on breach of negative pledge
E. The pari passu clause
V. Default
A. The default clause
B. General law limits on acceleration/cancellation?
C. The commercial realities

15. BANKS AND THE CAPITAL MARKETS 444
I. Types of securities, subordination, and custody
A. Types of securities
B. Subordinated capital
C. Custody
II. Distributing securities issues
A. Mechanics of distribution
B. Protection for the bank vis-a-vis the issuer
C. Bank's liability to investors
D. Trustees to debt issues
III. Securities regulation
A. Regulation of investment services
B. Securities disclosure provisions
C. Financial promotion of securities
D. Contractual selling restrictions
E. Price stabilization

16. LOAN SALES AND SECURITIZATION 478
I. Legal techniques for transferring debts/contractual rights
A. Novation
B. Assignment and its limitations
C. Legal and equitable assignment
D. Trust
II. Selling loan assets
A. Techniques for loan sales
B. The sale agreement and its implications
III. Asset securitization
A. Forms of securitization
B. Transfer of loan assets
C. Risk
D. D. Regulation

17. INTERNATIONAL PAYMENT SYSTEMS AND TRADE FINANCE 497
I. International payments in general
II. Trade finance
A. Bills of exchange in international trade
B. Documentary letters of credit

18. SECURITY 541
I. Security—its nature and rationale
II. Key types of security: pledge, mortgage, and charge
A. Overview
B. Pledging goods and documents
C. Receivables financing by way of security
D. Security over contracts—project finance
E. The floating (universal business) charge
III. Some current issues
A. Security over securities
B. Quasi-security—repos and stock lending
C. Conflict of laws
IV. Ineffective security
A. Vitiating factors in formation
B. Non-compliance with formalities
C. Statutory vulnerability
Index 563