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Banking Law: Private Transactions and Regulatory Frameworks

PrefaceI: Banks and their regulatorsThe banking systemThe historical development of banks and the global financial crisisThe economic functions of banksThe special nature of banksThe classification of banks and the business of banksThe banking system, business of banks and legal definition of banksCo-operative banks, building societies and virtual banksThe rationales for regulating banksBanks and financial marketsSystemic risk and systemic stability in the prudential banking frameworkSystemic risk and the prudential regulation of banksMacro-prudential vs micro-prudential regulationThe enhanced role of macro-prudential supervisionSignificant banks and G-SIBsConclusionsThe regulatory architecture of the UK banking systemThe evolution of the UK banking regulation until the 2007–2009 financial crisisThe Bank of England and HM treasury: the moral suasion toolFinancial Services and Markets Act 2000: the Financial Services AuthorityPrinciples-based regulation and reliance on market disciplineThe Northern Rock crisis and the Banking Act 2009The Financial Services Acts 2012 and 2016An overview of the new regulatory architectureThe governance of the regulatory bodiesAn evaluation of the current UK regulatory architectureOutcomes- and judgement-based regulationsConclusionEU harmonisation of the banking regulatory frameworkThe EU Banking DirectivesThe freedom of establishment and mutual recognition of banksThe Financial Services Action PlanThe Lamfalussy report: the role of CEBSThe MiFID DirectiveThe de Larosière Report and the ESAsThe MiFIR and MiFID IIThe European Systemic Risk BoardThe centralised system of supervision and financial stabilityThe structure of the Banking Union and the SSM mechanismThe joint supervisory teamsThe principles of separation and co-operation between authoritiesII: The business of banksThe relationship between banks and customersThe bank–customer relationshipThe bank customerThe non-fiduciary nature of the standard relationshipBanks’ duty of care and other dutiesCustomers’ dutiesBanks’ duty of confidentialityStatement and legal nature of the duty of confidentialityThe scope of the duty of confidentialityBanks and customer data: the GDPR and Data Protection Act 2018 frameworkThe four qualifications to the duty of confidentialityCompulsion by lawPublic duty to discloseDisclosure in the bank’s own interestDisclosure with the customer’s authorityConclusionBusiness conduct regulation and financial consumer protectionThe consumer protection objective of the FCAOverview of consumer protection legislation applicable  to banksRetail investor protection in the context of provision of investment adviceThe Financial Ombudsman ServiceThe Money Advice ServiceConclusionAccounts and payment methodsThe current accountOverviewThe legal nature of the current account relationshipThe core obligations of the partiesThe joint current accountThe savings accountCombination of accountsChequesThe decline in the use of cheques and the future of the chequeThe obligation of the paying bank to honour the customer’s chequesConsequences of wrongful payment of a chequeDebit cards and other payment cardsThe electronic transfer of fundsConclusionClearing and settlement processIntroduction: the evolution of the banking payment systemThe dematerialisation of securitiesThe mechanics of payment services: the clearing housesThe EU regulatory framework: the PSD 1 and the PSD 2The EU Settlement Finality DirectiveThe EMIR regulationOnline banking and digital payment systemsConclusionBusiness and consumer lendingBank lending in generalOverdrafts: legal nature and principal termsTerm loansA brief overview of security interests in English lawThe transfer of loansBusiness lendingCommon terms in business loansSyndicated loansConsumer lendingThe regulation of overdraftsCredit cardsPersonal loansResidential mortgagesConclusionMoney laundering and terrorist financingML and TF activity and the UK financial systemThe development of the UK, EU and international AML and CTF frameworkThe internal governance for AML and CTF compliance in banks and the role of the Financial Conduct AuthorityRisk assessments and the duty to have adequate controlsCustomer due diligenceThe supervisory role of the FCAThe scope of banks’ duty to report suspicions: the substantive ML and TF offencesThe ML offencesThe terrorist financing offencesThe internal process to generate a SARThe bank-customer relationship after the submission of a SAREvaluating the UK AML and CTF frameworkIII: Preventing banking crisesRegulation of bank capital and liquidityInternational bank supervisory standardsThe role of bank capitalThe Basel AccordsBasel I: credit risk and the capital adequacy ratioBasel II: flexible capital requirements and market disciplineBasel III and Capital Requirements Directive IV: enhanced capital and liquidity requirementsImproving the quality of capitalThe capital conservation buffer, counter-cyclical buffer and Pillar 2 capitalAdditional capital requirements for banks that pose systemic riskLeverage ratios and associated buffersRegulation of bank liquidityCapital adequacy rules for insurance firmsThe reforms known as Basel IVThe regulation of bank corporate governance, executive remuneration and senior managers accountabilityAn overview of the conventional UK corporate governance frameworkBank corporate governance: the Walker Review and the report of the Parliamentary Committee on banking standardsThe regulatory framework on bank board structure and risk managementThe regulation of executive remuneration on banksThe general legal framework for executive remuneration in listed companiesThe regulatory framework for bank executive remuneration: general principlesThe regulatory framework for bank executive remuneration: the bonus capThe Senior Managers RegimeRegulatory accountability mechanisms for bank directors and senior managersConclusionFinTech and automation in banksFinTech in banks: rules, principles and automationRisks and challenges of FinTechRegTech in the banking sectorThe role of automation and AI in banksThe virtual banking markets: BitcoinBlockchain and digital platformsTowards banking disintermediationConclusionIV: Managing bank failuresUK banking resolution and the EU Single Resolution MechanismEnsuring banks are resolvable: ring-fencing of domestic bankingThe UK Special Resolution RegimeThe Bank Recovery and Resolution DirectiveRecovery plans and resolution plansThe bail-in toolMREL and total loss absorbing capacity (TLAC)The mechanics of SRM and the Single Resolution BoardStress testingPrecautionary recapitalisation and State aidConclusionDeposit insurance and banking stabilityThe European Financial Stability FacilityThe European Stability MechanismThe Deposit Guarantee Scheme DirectivesThe LOLR and deposit insurance schemesThe Deposit Guarantee Network and the Capital Markets UnionConclusionThe regulation of non-performing loansThe implications of NPLs on bank balance sheetsThe regulatory treatment of NPLsThe restructuring regime of NPLsResolution options for NPLs: AMCsOut-of-court proceedings and securitisation mechanismsThe EU regulatory initiativesConclusionThe impact of Brexit on the banking sectorThe possible Brexit scenarios and their legal impact on the banking sectorEEA membership and the banking sectorUK-EU free trade agreement covering financial servicesThe UK as a third country: the equivalence framework and banksBrexit and UK bank branches in the EUBrexit and bank resolutionConclusionPost scriptum: temporary modifications to banking law and regulation in response to the Covid-19 public health emergencyOverview of the global pandemic and its implications for the financial servicesPrudential regulatory suspensions to facilitate financing of the real economyRegulatory measures providing relief to personal borrowersFiscal support for businesses raising debt financing during the emergencyConcluding remarksBibliography

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