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Blog 2015

2015-11-doc7 FSB issues Principles for Cross-border Effectiveness of Resolution Actions

Last year, on 6 November 2014, during the 4th annual conference of the Netherlands Association of Comparative and International Insolvency Law (NACIIL), I gave a short annual address, touching on the system of recognition that should be followed in the near future with regard to certain resolution measures taken outside the EU with regard to financial institutions. Not an approach to be followed by every individual Member State in its own way, guided by some general principles (as has been chosen by the Financial Stability Board (FSB)), but I suggested a uniform EU system, see Last week, on 3 November 2015, the FSB released two guidance papers and three consultative documents as part of its policy agenda to end ‘too-big-to-fail’ and to promote the resolvability of all financial institutions that could be systemic in failure through full implementation in substance and in scope of the so-called Key Attributes of Effective Resolution Regimes for Financial Institutions. The two finalised guidance papers are (i) Principles for Cross-border Effectiveness of Resolution Actions (these Principles set out statutory and contractual mechanisms that jurisdictions should consider including in their legal frameworks to give cross-border effect to resolution actions in accordance with the Key Attributes, and (ii) Guidance on Cooperation and Information Sharing with Host Authorities of Jurisdictions where a Global Systemically Important Financial Institution (G-SIFI) has a Systemic Presence that are Not Represented on its Crisis Management Group (CMG), not a short name for a guidance that promotes cooperation and information sharing between CMGs for G-SIFIs and authorities from jurisdictions not represented on the CMG where the firm is systemic for their market. Both guidances were issued after a revision in the light of comments received on public consultations in October 2014. The approach chosen for the Principles remains one in which every single jurisdiction will create its own rules (be it based on the Principles, one may hope), therefore in future leading to a system of recognition of resolution measures which may reflect ‘cooperative territoriality’. For related documents, see

2015-11-doc6 New textbook: European Banking and Financial Law

Every decade serves as a source for a new branch of law and the first decade of this century the engine produced financial law. A big chunk of that branch would be all financial law that originates from the European legislature. The last decades have seen an exponential increase in European financial legislation, so that an introductory textbook into this part of the new branch seemed warranted. To my knowledge, the book under review (Matthias Haentjens and Pierre de Gioia-Carabellese, European Banking and Financial Law, Routledge 2015, 258 pp. ISBN 978 1 138 89796 0) is the first one of this sort. On the other hand, as the authors of the book show, this branch is like Phoenix, rising from its own ashes, as financial law has its roots in much earlier times, amongst which most notably the Italian Renaissance and the Dutch ‘Golden Age’, ie the 17th century. Thus, they convincingly show how the area of law they describe can be placed in an historical continuum. They also confirm that this area is a mixed bag: private law as well as public law (supervision of institutions), traditional players (banks, lawyers, courts, central banks) and new ones (many recently established European authorities), different levels of rules (national as well as European rules), in different forms of hardness (hard law, soft law, understandings on communications, standard contracts). How to see the wood for the trees? Matthias Haentjens (professor of financial law, Leiden Law School) and Pierre de Gioia-Carabellese (associate professor of business law, Edinburgh) are the able skippers to navigate their readers through the increasing volume of rules and regulations in this field. They cover a broad range of issues, always from a European perspective, and use thirteen chapters to state their views. In a novel and comprehensive approach, they divide these chapters into the three economic themes that are central to the financial industry: financial markets, financial institutions and financial contracts. They start off with an introductory Chapter 1 (‘Sources of European Financial Law’) that sets out EU statutes and their hierarchy and the historical development of financial law legislation, originating ‘from Brussels’, including the Lamfalussy and De Larosière Reports, and the Single Supervisory Mechanism. The Lamfalussy process, the authors note, discerns four levels which they briefly describe and subsequently explain (though I could not find level 4). The following set of chapters are devoted to financial markets. This market part evidently covers the stock market (including the admission of securities to a stock market and their offering in a prospectus), market abuse (including insider dealing, market manipulation and disclosure issues), and financial consumer protection (including the Unfair Terms Directive, the Distance Financial Services Directive, the MiFID-Legislation, Consumer Credit Directive, and Mortgage Credit Directive). This chapter on financial consumer protection already demonstrates that the book is essential reading for those interested in corporate law as well as general private law. The next group of chapters deals with the financial institution itself, the way banks are practically (commercial, investment and multifunctional and universal banks) and legally organised (branches, subsidiaries, groups), the organisation of European bank supervision with – paying tribute to the abbreviation fever – SSM, EBU and EBA, and its prudential supervision. This part provides most interesting reading on matters such as the stability of the bank, solvability and capital buffers, liquidity exposures and leverage, and corporate governance and remuneration. After a chapter on a bank’s insolvency (see some remarks later in this review) the European rules regarding investment firms and funds (including MiFid and UCITS V) are described. The final part of the book touches on financial contracts. The authors look at custody and transfer of money and securities, loan finance, including – most instructive – documentation structure, facilities, often used document clauses (the well-known guarantees, representations and undertakings, and events of default, such as cross-default, material adverse change and change of control), derivatives, including the ISDA Master Agreement, the statutory framework (EMIR; MiFIR), collateralised finance and structured finance, including securitisation and covered bonds. All chapters finish with small sections ‘further reading’ and ‘questions’. As insolvency is my hobby, I read with even greater interest chapter 7 (‘The bank and its insolvency’). European bank insolvency laws are the Winding-up Directive of 2000, the BRRD and the SRM. Protection of certain groups is covered too, including the Deposit Guarantee Scheme Directives and the Directive on Investor Compensation Schemes. Although the chapter starts with a historic perspective and describes the BCCI affair of 1992 and its disputes regarding allocation/ringfencing of assets in four jurisdictions, it does not mention that BCCI was the triggering event to what eventually became the Deposit Guarantee Scheme directive of 1994. What is missing too – I know these are old shockwaves in the less mature financial markets of that time – is the case regarding Herstatt Bank, a privately owned German bank, going bankrupt in 1974, confronting many people at that time, including myself, with a new phenomenon: settlement risk in international finance. This event led to the creation of the Basel Committee on Banking Supervision, which now mainly is known for – as the authors describe elsewhere – the basic formula of a mandatory solvency ratio, which has been rolled out rather harmoniously all over the globe. More importantly, I question the authors’ observation: ‘Insolvency law is a national matter by definition, traditionally left to the discretion of each local legislator’. While they may be right to imply that as regards bankruptcy liquidation proceedings and statutory bankruptcy law, European harmonisation is largely absent, the statement must be nuanced if one takes into account non-statutory (soft) law. In several countries, for instance, procedural practice rules or professional rules for insolvency office holders are not a product of the legislator. Also, in recent years ‘insolvency law’ has grown much wider, including recovery or debt rescheduling plans, or pre-packs, for which the rules predominantly are contractual. These contractual developments have, over the last four or five years, found their ways into several national codes or acts on insolvency, e.g. in Germany, France, Italy and Spain, so that the authors’ statement ‘… bankruptcy law is regarded  as mandatory rules of a jurisdiction, therefore applicable irrespective of any party agreement’ may only partly be true, where it does not take into account these recent developments. Coming to a close: the book is attractive in that it is a textbook analysing European financial law legislation as a starting point, and its dimensions to national law. It also clarifies the most salient international standard contracts (usually governed by English law), of which LMA and GMRA contracts feature prominently. This makes the publication worthwhile for practice as well. The organisation of the three (economic) themes that are central to the financial industry: financial markets, financial institutions, and financial transactions, is well chosen. Within these segments its primary focus is on banking as it is the most important category of financial institutions in the European financial sector. I would applaud a similar publication on what seem less spectacular, but just as important topics: insurers and pension funds. The book is aimed at the needs of lecturers and students alike, while also providing a valuable resource for practitioners (lawyers, chartered accountants, financiers and bankers) working in a global environment. The authors indicate that this textbook will be used principally in academia, and that by definition it is not finished nor complete. My guess is that students will welcome ‘model answers’ added to the questions posed in each chapter, including a small section per chapter on ‘future developments’. Anyway, the authors have accomplished no mean feat, by making accessible a vast array of brand new European legislation and keeping pace with the Brussels’ tempo. In all, a very timely and most relevant book, that helps students to understand financial law better, and offers practitioners a methodical insight in this complex and ever changing world of financial law.

2015-11-doc5 New book! Research Handbook on Crisis Management in the Banking Sector

Research Handbook on Crisis Management in the Banking Sector published! Go to Research Handbook on Crisis Management in the Banking Sector Friday November 6, 2015, at Leiden University, Matthias Haentjens and I, launched our new book by presenting a first copy to Mr Nout Wellink, former president of the Dutch Central Bank and Chairman of the Board of Supervisors of the University of Leiden. Some eight years ago uncertainty and fear was rising up to a fever pitch when the global financial crisis unfolded. The widespread crisis of 2007–09 constituted the biggest shock to the economies of the OECD nations since the Second World War and caused most its governments to move into an intense crisis mode, including massive interventions to stabilize markets and economies. The global financial crisis raised havoc in banking and other financial institutions and the question is still out whether Europe and in particular the Eurozone will regain stability and substantive growth. The past seven years or so, legislators on both national, regional and supranational level have been seeking ways to deal with large-scale insolvencies of banking and other financial institutions. At an impressive rate legislators have introduced or reinvigorated existing processes and rules to dealing with distressed financial institutions. These rules form the core of our book. Around 30 prominent academics, practitioners and regulators from across the globe, including Australia, China, Japan and the USA provide in-depth insights into an area of law that the recent this crisis has placed in the spotlight: bank insolvency law. This comprehensive and timely book contains a collection of papers from leading scholars in the field that reflects the various debates and analysis on recovery, resolution or bankruptcy liquidation of banks. During the preceding conference (with over 90 registrants) several authors commented briefly on their papers. Speakers included Qingjiang Kong (Professor of Law at the Collaborative Innovation Centre for Global Governance and the Rule of Law, China University of Political Science and Law, Beijing, People’s Republic of China), George S. Zavvos (Legal Adviser at the Legal Service of the European Commission), Andrew Campbell (Emeritus Professor of International Banking & Finance Law, Solicitor of the Supreme Court and Chartered Banker School of Law University of Leeds) and Matthias Haentjens (Professor of Financial Law and Director of the Hazelhoff Centre for Financial Law at Leiden University). That our publication may be considered timely, is evidenced by the fact that a few weeks ago the European Commission has published a call for evidence on the EU regulatory framework for financial services, seeking feedback and evidence on the benefits, unintended effects, consistency and coherence of the financial legislation adopted in response to the financial crisis. The Commission intends to produce a report with its findings by mid-2016. Last week, in Holland, the Dutch Central Bank’s Director of Supervision, Jan Sijbrand, said in an interview: ‘I have to say that an awful amount of legislation has flooded the financial markets. I think it is too much.’ We will see to it that both the Commission and Mr Sijbrandt will receive a copy of the book. For its content, see the publisher's website.

2015-11-doc4 Publishing opportunities in Canada

Publishing in Canada? The International Journal of Business and Management (IJBM) provides this opportunity. International Journal of Business and Management is a peer-reviewed journal published by the Canadian Center of Science and Education and can be found both online and in print. The journal publishes research papers covering the following subjects: corporate governance, human resource management, strategic management, entrepreneurship, marketing, e-business, services, information technology management, production & operations management, financial management, decision analysis, management research methods and managerial economics, etc. IJBM is calling for the submission of papers. For the journal’s profile see and submit your manuscript online. For questions, please contact the editorial assistant, Stephan Lee, at

2015-11-doc3 Improving arbitration proceedings

(International) arbitrators are invited to assist Harvard and Arizona researchers in the improvement of the design of arbitration proceedings, and respond to a short survey, see Researchers of Harvard University and the University of Arizona are conducting a study into how international arbitrators make decisions, and they are seeking input from the community of arbitrators. As a thank you for participating in the study the researchers made the promise to provide early access to the results of the survey.