Financial Stability Board
Evaluation of too-big-to-fail reforms - FSB publishes consultation - 28 June 2020
The Financial Stability Board (FSB) has published for consultation an evaluation of the too-big-to-fail (TBTF) reforms for systemically important banks examining the extent to which the reforms are reducing the systemic and moral hazard risks associated with systemically important banks, as well as their broader effects on the financial system. The evaluation finds that the TBTF reforms have made banks more resilient and resolvable and that the benefits of the reforms significantly outweigh the costs.
The consultation period closes on 30 September 2020.
FSB consultation on its evaluation of TBTF reforms
Webpage
Press release
COVID-19 - FSB publishes statement on impact on global benchmark reform - 1 July 2020
The FSB has published a statement on the impact of COVID-19 on global benchmark reform. The FSB’s view continues to be that firms should transition away from the London Interbank Offered Rate (LIBOR) to alternative risk-free rates before the end of 2021. However, it acknowledges that some aspects of firms’ transition plans are likely to be temporarily disrupted or delayed by the pandemic.
The FSB intends to publish a report on the remaining challenges to benchmark transition later in July 2020.
FSB statement on the impact of COVID-19 on global benchmark reform
European Supervisory Authorities
EU digital finance strategy - ESAs publish responses to European Commission consultation - 29 June 2020
The European Supervisory Authorities (ESAs) (the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA)) have published separately their responses to the European Commission’s consultation on the adoption of a new EU digital finance strategy.
The consultation focused on a number of priority areas for the development of digital finance in the EU, including: (i) ensuring that the EU financial services regulatory framework is fit for the digital age; (ii) enabling consumers and firms to reap the opportunities offered by the EU-wide single market for digital financial services; (iii) promoting a data-driven financial sector for the benefit of EU consumers and firms; and (iv) enhancing the digital operational resilience of the EU financial system.
The EBA strongly supports the initiative and identifies in its response a wide range of possible EU-level actions to support the scaling of innovative technology across national borders while ensuring high standards of consumer protection and financial sector resilience. These include monitoring the application of innovative technologies in the financial sector, facilitating a common approach to the use of regulatory technology (RegTech) and supervisory technology (SupTech) and emphasising the potential of financial technology (FinTech) in enabling structural changes in the financial sector by, for example, supporting new business models.
In its response, ESMA identifies both risks and benefits to the digitalisation of the financial sector. It also focuses on the need to ensure a technology-neutral EU financial services framework that supports innovation, the removal of fragmentation in the single market for digital financial services and the promotion of a well-regulated data-driven financial sector.
EIOPA highlights that a sound approach to financial innovation should strike a balance between enhancing financial innovation and ensuring a well-functioning consumer protection and financial stability framework. In particular, EIOPA emphasises the importance of the following three topics: (i) areas where improvements or clarifications in insurance legislation could be introduced, such as in relation to outsourcing requirements; (ii) unlocking the use of new technologies, such as artificial intelligence (AI) while ensuring the fair, ethical and transparent use of data; and (iii) access to relevant data sets for the insurance sector.
EBA response to European Commission consultation on a new EU digital finance strategy
Press release
ESMA response to European Commission consultation on a new EU digital finance strategy
Press release
EIOPA response to European Commission consultation on a new EU digital finance strategy
Press release
European Commission
Interchange Fee Regulation - European Commission publishes report on its impact on card-based payment transactions - 26 June 2020
The European Commission has published a report on the application and impact of the Interchange Fee Regulation (EU) 2015/751 on card-based payment transactions. Among other things, the Interchange Fee Regulation capped interchange fees for consumer cards, introduced business rules and prohibited practices creating market barriers, such as territorial restrictions or the prevention of choice of payment brand or payment application by merchants and consumers.
The report concludes that the main objectives of the Regulation have been achieved as interchange fees for consumer cards have decreased, which has led to reduced merchants’ charges for card payments. This in turn has resulted in improved services to consumers and lower consumer prices. The report also comments that market integration has improved through the increased use by merchants of acquirers (banks servicing merchants) located in other EU member states (cross-border acquiring services) and increased cross-border card transactions.
Given the positive impact of the Regulation, and the need for more time to see its full effects, the report is not accompanied by a legislative proposal.
European Commission report on the impact of the Interchange Fee Regulation on card-based payment transactions
Press release
Consumer Credit Directive - European Commission publishes consultation - 30 June 2020
The European Commission has published for consultation four EU consumer policy proposals, including a proposal to review the Consumer Credit Directive (2008/48/EC) (CCD) in line with its better regulation principles. This follows the Commission’s inception impact assessment on its review of the CCD in 2018/19, published on 23 June 2020, which identified several key issues impacting the effectiveness of the Directive, including:
- the scope of the CCD may be inadequate to protect consumers from new challenges arising from the emergence of new credit providers and platforms, such as peer-to-peer (P2P) lending, and new forms of consumer credit, such as short-term high-cost loans and microloans;
- the content and disclosure of information provided to consumers in accordance with the CCD is often too complex; and
- the CCD does not contain appropriate provisions to adequately deal with exceptional situations and systemic economic disruption, such as that caused by COVID-19.
Alongside the consultation, the Commission has also published a consultation roadmap and a document containing background information on the four EU consumer policy proposals.
The consultation period closes on 6 October 2020.
European Commission webpage on its consultation on its review of EU consumer credit rules
European Commission consultation roadmap
Official Journal of the European Union
COVID-19 - CRR Amending Regulation published in the Official Journal - 26 June 2020
Regulation (EU) 2020/873 (CRR Amending Regulation) of 24 June 2020, which amends the Capital Requirements Regulation (575/2013/EU) (CRR) and the second Capital Requirements Regulation (EU) 2019/876 (CRR II) to encourage banks to lend credit to the real economy in light of the economic impact of COVID-19, has been published in the Official Journal of the European Union.
The CRR Amending Regulation introduces several important changes, including: (i) extending the transitional arrangements for IFRS 9 by two years; (ii) aligning minimum coverage requirements for non-performing loans guaranteed by the public sector with those guaranteed by official export credit agencies; (iii) deferring the application of the leverage ratio buffer for global systemically important institutions (G-SIIs) by one year to January 2023; and (iv) applying more favourable prudential treatment to loans to individuals backed by the borrower’s pension or salary, certain exposures to small and medium-sized enterprises (SMEs) and infrastructure investments. It also introduces a temporary “prudential filter” to calculate losses accumulated by firms since 31 December 2019 and transitional arrangements relating to preferential treatment for exposures to government and central bank bonds denominated in the currencies of non-Euro member states.
The CRR Amending Regulation entered into force on, and applies from, 27 June 2020, with the exception of amendments to the calculation of the leverage ratio which apply from 28 June 2021.
Official Journal: Regulation (EU) 2020/873 containing adjustments to the CRR in light of COVID-19
CRD IV - Corrigendum published in the Official Journal - 26 June 2020
A Corrigendum to the Capital Requirements Directive (2013/36/EU) (CRD IV) has been published in the Official Journal of the European Union. The Corrigendum implements minor technical amendments to the text of: (i) Article 141(8)(d)(iv), in relation to the payment of variable remuneration or discretionary pension benefits; and (ii) Article 142(3), in relation to the national competent authority (NCA) assessing and approving a bank’s capital conservation plan.
Official Journal: Corrigendum making minor technical amendments to the CRD IV
Macroprudential policy measures - ESRB Recommendation published in the Official Journal - 1 July 2020
Recommendation ESRB/2020/9 of the European Systemic Risk Board (ESRB) of 2 June 2020, which amends Recommendation ESRB/2015/2 on the assessment of the cross-border effects of voluntary reciprocity for macroprudential policy measures, has been published in the Official Journal of the European Union.
Official Journal: ESRB Recommendation ESRB/2020/9 on the assessment of the cross-border effects of voluntary reciprocity for macroprudential policy measures
European Banking Authority
BRRD - EBA publishes Discussion Paper on the application of early intervention measures - 26 June 2020
The European Banking Authority (EBA) has published a Discussion Paper on the application of early intervention measures under Articles 27 to 29 of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) which permit national competent authorities (NCAs) to take action to address problems in firms in difficulties at an early stage.
The Discussion Paper sets out the results of an EBA survey on the application of the measures by NCAs in the first half of 2019. The survey indicates that there has been limited application since the BRRD entered into force and that almost half of NCAs decided to apply supervisory measures instead. Moreover, in a relatively large number of cases where the early intervention triggers were breached, the NCAs subsequently concluded that the firm in question had not actually met the conditions for early intervention measures (so called ‘false positives’). The EBA concludes that the majority of the issues identified require legislative changes to the BRRD itself.
The deadline for comments is 25 September 2020.
EBA Discussion Paper on the application of early intervention measures under the BRRD
Webpage
Press release
CRR - EBA publishes Guidelines on the treatment of structural FX positions - 1 July 2020
The EBA has published its final Guidelines on the treatment of structural foreign exchange (FX) positions under Article 352(2) of the CRR. The Guidelines aim to establish a harmonised framework for the application of the structural FX waiver, which allows national competent authorities (NCAs) to authorise, on an ad hoc basis, the exclusion of FX-risk positions taken by firms to hedge against the adverse effects of exchange rates on capital ratios from the calculation of the net open currency positions where those positions are of a structural nature.
The Guidelines identify objective criteria to assist NCAs in their assessment of the structural nature of a FX position and to understand whether such a position has been deliberately taken for hedging the capital ratio.
The Guidelines will apply from 1 January 2022.
EBA Guidelines on the treatment of structural FX positions under the CRR
Press release
European Central Bank
Single Supervisory Mechanism - ECB consults on supervisory approach to consolidation - July 2020
The European Central Bank (ECB) has published for consultation a draft guide on its supervisory approach to consolidation for banks under the single supervisory mechanism (SSM). The ECB is responsible for ensuring that new entities emerging from relevant consolidations have sustainable business models, comply with prudential requirements and have sound governance and risk management arrangements in place. ‘Consolidation’ refers to any business combination of pre-existing independent legal entities, including mergers and acquisitions but not intra-group transactions.
Although the guide is directed at circumstances in which a bank subject to the SSM intends to acquire the control of another bank subject to the SSM, the ECB suggests that the principles in the guide remain valid when a non-bank or non-SSM bank is involved.
The consultation period closes on 1 October 2020.
Draft ECB guide on its supervisory approach to the consolidation of banks under the SSM
Webpage
Press release
Prudential Regulation Authority
COVID-19 - PRA publishes statement on regulatory reporting and Pillar 3 disclosure requirements - 26 June 2020
The PRA has published a statement on amendments made to regulatory reporting and Pillar 3 disclosure requirements for UK banks, building societies, designated investment firms and credit unions in light of the COVID-19 pandemic. This follows a previous statement published by the PRA in April 2020, which stated that it would accept the delayed submission of certain regulatory returns with deadlines on or before 31 May 2020 and that it would consider the treatment of returns with a deadline of June 2020 onwards.
The statement confirms that:
- the PRA will no longer apply the amended reporting requirements, as set out in the April 2020 statement, to future submissions and therefore, the PRA expects firms to submit future regulatory reporting requirements on time; and
- the PRA will continue to take a flexible approach to the publication of Pillar 3 disclosures by firms, but that it expects that publication timeline for Pillar 3 disclosures should not be affected by COVID-19 in most cases.
PRA statement on regulatory reporting and Pillar 3 disclosure requirements in light of COVID-19
COVID-19 - PRA updates statement on the regulatory treatment of guarantees provided under CBILS and CLBILS - 26 June 2020
The PRA has updated its statement, published on 27 April 2020, on the regulatory treatment of guarantees provided under the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) under the CRR. The statement contains the PRA’s observations on whether the guarantees provided by the government under the CBILS and CLBILS are eligible for recognition as unfunded credit risk mitigation (CRM) under the CRR.
The PRA has updated its statement to include clarifications on the application of credit risk approaches for firms. The PRA states that:
- when using the standardised approach for exposures to the obligor, the portion of an exposure benefiting from the protection of a government guarantee under the Schemes should be assigned the relevant sovereign risk weight prescribed by the standardised approach. The residual part of the exposure (the portion not benefiting from such a guarantee) should be assigned the standardised approach risk weight that would apply if the exposure were not guaranteed;
- when using the internal ratings based (IRB) approach for exposures to the obligor and the standardised approach for exposures to the guarantor, the portion of an exposure benefiting from the protection of a government guarantee under the Schemes should be assigned the relevant sovereign risk weight prescribed by the standardised approach. The residual part of the exposure should be assigned to the relevant approved IRB risk weight that would apply if the exposure were not guaranteed; and
- when using the IRB approach for exposures to the obligor and to the guarantor, firms should adopt an approach to reflect the effect of the government guarantee that is consistent with their approved IRB models and their IRB permissions.
Updated PRA statement on the regulatory treatment of guarantees provided under the CBILS and CLBILS under the CRR
CRR Amending Regulation - PRA publishes statement on amendments - 30 June 2020
The PRA has published a statement on Regulation (EU) 2020/873 (CRR Amending Regulation), which amends the CRR and CRR II to encourage banks to lend credit to the real economy in response to the economic impact of COVID-19.
Among other things, the statement sets out that it remains the PRA’s intention that all aspects of supervision of a firm using the transitional arrangements for capital impact of IFRS 9 expected credit loss (ECL) accounting will be carried out using ‘transitional data’ on capital resources, rather than ‘fully-loaded figures’. Firms currently applying the transitional arrangements that are considering ceasing to apply them should note that, under the CRR, doing so would require the PRA’s permission.
The PRA also confirms that the CRR Amending Regulation accelerates the application of certain CRR II provisions, including: (i) the revised SME support factor; (ii) the infrastructure support factor; and (iii) the non-deduction of certain software assets from Common Equity Tier 1 (CET1) capital, as specified by the relevant EBA regulatory technical standards (RTS). It also includes a temporary discretion for firms, until 31 December 2022, to apply a ‘prudential filter’ to remove certain unrealised gains and losses on exposures to certain public sector authorities.
The PRA states that it intends to request data to facilitate an analysis of the impact of the measures contained in the CRR Amending Regulation. Analysis of the data and the EBA’s final RTS on software assets will inform the PRA’s supervisory approach, including an assessment of whether further action is necessary under Pillar 2.
PRA statement on amendments made to the CRR in response to COVID-19
Webpage
Climate-related financial risk - PRA publishes ‘Dear CEO’ letter setting out its expectations of firms - 1 July 2020
The PRA has published a ‘Dear CEO’ letter from Sam Woods (Deputy Governor and CEO of the PRA) to all PRA-regulated firms setting out, building on and providing feedback in relation to its expectations of firms contained in Supervisory Statement (SS) 3/19 ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’, which was published in April 2019.
The letter states that firms should have fully embedded their approaches to managing climate-related financial risks by the end of 2021. The PRA also provides feedback from its review of firms’ implementation plans under SS3/19. It found that most firms were progressing well in developing approaches to identify, assess, manage, report and disclose climate-related financial risks and have started to embed them in their governance and control structures. The feedback also provides examples of good practice and highlights gaps between firms’ intentions and the PRA’s expectations.
The PRA confirms that it will continue to engage with firms on this and that firms should expect climate-related financial risk to be integrated within the full range of its regular supervisory activities.
The PRA has also published a speech delivered by Sarah Breeden (Executive Director for UK Deposit Takers Supervision and Executive Sponsor for Climate change at the PRA) on how the financial sector can better manage the financial risks arising from climate change. Among other things, she highlights recent work undertaken in this area by the Bank of England, the Climate Financial Risk Forum (CFRF) and the Network for Greening the Financial System (NGFS).
PRA ‘Dear CEO’ letter to PRA-regulated firms on the management of climate-related financial risks
Speech by Sarah Breeden (Executive Director for UK Deposit Takers Supervision and Executive Sponsor for Climate change at the PRA) on how the financial sectors can better manage the financial risks arising from climate change
Financial Conduct Authority
COVID-19 - FCA updates webpage on regulatory reporting - 26 June 2020
The FCA has updated its webpage on firms’ regulatory reporting requirements during the COVID-19 pandemic to confirm that it will continue to allow flexibility in relation to submission deadlines for certain regulatory returns. This follows the FCA’s announcement on 22 April 2020 in which it temporarily extended the deadlines for submitting certain regulatory reports due up to and including 30 June 2020.
The FCA will continue to allow flexibility in relation to the submission of credit union complaints returns, complaints returns and claims management companies complaints returns. Firms may apply a two-month extensions to deadlines for these returns falling due up to, and including, 30 September 2020.
The FCA reminds firms that the flexibility is intended to cover situations where the impact of COVID-19 has made it impractical for firms to submit the named regulatory returns on time and that firms should continue to submit all returns as soon as reasonably possible. Regulatory returns not listed above and falling due after 30 June 2020 should continue to be submitted by their usual deadlines. Subject to any significant change in the COVID-19 situation, the FCA has no intention of continuing to offer reporting deadline flexibility after 30 September 2020.
Updated FCA webpage on regulatory reporting deadlines
COVID-19 - FCA publishes updated temporary guidance for consumer credit customers and overdraft measures - 1 July 2020
The FCA has published its finalised updated temporary guidance for consumer credit customers in light of the economic impact caused by the COVID-19 pandemic. The draft guidance relates to credit cards, overdrafts and personal loans and updates the final guidance and temporary financial relief measures published by the FCA on 9 April 2020. As noted in a previous edition of this Bulletin, the FCA consulted on the draft updated guidance on 19 June 2020. It outlines the support firms would be expected to provide to credit card, overdraft and personal loan customers approaching the end of an initial payment freeze, as well as those yet to request one.
In April 2020, the FCA introduced specific measures to help consumers financially affected by coronavirus, including requiring firms to make sure that all overdraft customers will be no worse off on price when compared to the prices they were charged before the new overdraft rules. The FCA has confirmed proposals to ensure this support is focused on those customers financially affected by coronavirus so they can continue to ask for a reduced interest rate on any additional borrowing over £500.
More generally, the FCA will continue to monitor banks’ overdraft pricing rates and has published a statement explaining that, having reviewed information submitted by banks on the strategic, competitive and financial drivers of their overdraft pricing decisions, it does not intend to open a formal investigation at this stage. However, it will require firms to publish information on their overdraft pricing and current account services in August 2020, covering the period from 1 April 2020 to 30 June 2020. The regulator also intends to carry out a post-implementation evaluation of its package of overdraft remedies 12 months after its implementation, starting after April 2021.
The guidance comes into force and applies from 3 July 2020.
Press release: FCA publishes finalised updated temporary guidance for consumer credit customers in light of COVID-19
FCA Feedback Statement FS20/9: Further support for consumers impacted by COVID-19
FCA statement on banks’ overdraft pricing decisions
Webpage
FCA updated temporary guidance for firms in relation to credit cards in light of COVID-19
Webpage
FCA updated temporary guidance for firms in relation to overdrafts in light of COVID-19
Webpage
FCA updated temporary guidance for firms in relation to personal loans in light of COVID-19
Webpage
Financial Conduct Authority and Payment Systems Regulator
COVID-19 - FCA and PRA publish further information on managing access to cash - 30 June 2020
The FCA and the Payment Systems Regulator (PSR) have published further information on their joint approach to identifying and managing access to cash, particularly in the wake of COVID-19. This follows the FCA’s and the PRA’s joint statement on the actions the regulators have undertaken to maintain access to cash during the pandemic, which was published on 16 June 2020.
The FCA and the PSR confirm that the industry has collaborated to create a single database of the UK’s cash access points, enabling regulators to map access to cash in order to coordinate industry responses to ensure that vulnerable and self-isolating groups can continue to access cash.
Press release: FCA and PSR publish further information on managing access to cash in light of COVID-19
Competition and Markets Authority
SME banking behavioural undertakings - CMA publishes annual report on compliance - 30 June 2020
The Competition and Markets Authority (CMA) has published its annual report on banks’ compliance with the behavioural undertakings that apply to eight banks following the Competition Commission’s 2002 report on the supply of banking services by clearing banks to small and medium-sized enterprises (SMEs). Among other things, the undertakings required banks not to bundle together loans and accounts. No material breaches of the undertakings have been identified.
The CMA has agreed to extend the deadlines for the next reporting period with some banks, on request, due to current resourcing pressures.
CMA report on banks’ compliance with the SME Banking behavioural undertakings
CMA guidance on the SME Banking audit reporting template
Webpage
UK Finance
Cyber resilience - UK Finance publishes report on incident management - June 2020
UK Finance has published a report on the importance of effective cyber incident response plans for firms in the financial services sector. The report notes that the UK financial services sector is among the most targeted globally and that firms should ensure that they understand their strengths and weaknesses in responding to and managing such incidents.
UK Finance report on cyber incident management
Webpage
Climate Financial Risk Forum
Climate Financial Risk Forum - CFRF publishes guide on climate-related financial risks - June 2020
The Climate Financial Risk Forum (CFRF) has published a guide to help the financial industry better address climate-related financial risks by integrating climate-related risks into their strategies and decision-making processes. The CFRF was jointly established by the PRA and the FCA in March 2019 reflecting the importance of climate change to their respective strategic objectives. The CFRF aims to build capacity and share best practice across financial regulators and the financial industry to advance the sector’s responses to the financial risks from climate change.
CFRF Guide 2020
PRA webpage
FCA webpage
Press release
The Chancery Lane Project
Climate Contract Playbook Edition 2 - published by TCLP - July 2020
The Chancery Lane Project (TCLP) has published the second edition of its Climate Contract Playbook, alongside a glossary of key climate terms. This follows TCLP’s publication of the first edition in February 2020. TCLP is an independent, politically neutral body which brings legal professionals together to collaborate and draft contract clauses and model laws in order to support communities and businesses in fighting climate change and achieving net zero carbon emissions.
The second edition contains 13 new precedents that can be used in a variety of commercial, finance, corporate, employment and property documents to take account of climate risks, including:
- a climate-purposed non-disclosure agreement (NDA), which seeks to ensure that climate change and environmental issues are discussed at the outset of a new commercial relationship;
- a green shareholders’ agreement, which aligns shareholder rights and the company’s future value with environmental outcomes; and
- a net zero convertible loan note instrument, which makes the qualifying criteria for receiving finance conditional on setting a net zero target aligned with the UK’s 2050 net zero target and incentivises the borrower’s net zero performance by lowering the conversion discount.
TCLP Climate Contract Playbook Edition 2
Glossary
Recent Cases
Case C-459/19 HMRC v Wellcome Trust Ltd, Opinion of Advocate General Hogan, 25 June 2020
Place of supply of investment management services to a taxable person acting as such - Article 44 of the VAT Directive (2006/112/EU)
Advocate General Hogan has delivered an Opinion in relation to a request for a preliminary ruling on the interpretation of Article 44 of Directive 2006/112/EC on the common system of value added tax (VAT) (the VAT Directive). The case concerns a dispute between HMRC and Wellcome Trust Ltd (WTL) on whether, for the purposes of Article 44 of the VAT Directive, WTL is to be regarded as a ‘taxable person acting as such’ when it acquires investment management services from outside the EU for the purposes of its non-economic business activity.
Advocate General Hogan held that Article 44 of the VAT Directive should be interpreted as meaning that when a taxable person, who is carrying on a non-economic activity consisting of the purchase and sale of shares and other securities in the course of the management of the assets of a charitable trust, acquires a supply of investment management services from a person outside of the EU exclusively for the purposes of such activity, it is to be regarded as ‘a taxable person acting as such’ for the purposes of that provision of the Directive.
Case C-459/19 HMRC v Wellcome Trust Ltd, Opinion of Advocate General Hogan
Lamesa Investments Limited v Cynergy Bank Limited, [2020] EWCA Civ 821, 30 June 2020
Contractual provision in a loan agreement – interpretation of non-default clause in circumstances where sums not paid in order to comply with any mandatory provision of law – US secondary sanctions legislation – EU Blocking Regulation (2271/96/EC)
The Court of Appeal has dismissed an appeal brought by Lamesa Investments Limited (Lamesa) against a decision of the High Court that entitled Cynergy Bank Limited (Cynergy) to suspend payments under a Facility Agreement with Lamesa for so long as Lamesa’s beneficial owner was subject to US sanctions.
The issue raised in the appeal was whether the terms of the Facility Agreement required Cynergy to make an interest payment to Lamesa, in circumstances where such a payment was likely to result in the imposition of secondary sanctions on Cynergy. This turned on the meaning of Clause 9.1 in the Facility Agreement under which Cynergy was not required to make any payment where “such sums were not paid in order to comply with any mandatory provision of law”. At first instance, HHJ Pelling QC held that Cynergy’s non-payment fell within the scope of Clause 9.1. The Court of Appeal (Sir Geoffrey Vos, Lord Justice Males and Lord Justice Arnold) agreed and dismissed Lamesa’s appeal.
Among other things, the court stated that: (i) Clause 9.1 must have intended the borrower to be capable of obtaining relief from default if its reason for non-payment was to comply with a foreign statute that would otherwise be triggered; and (ii) the EU Blocking Regulation regarded US secondary sanctions legislation as imposing a “requirement or prohibition” with which EU entities were otherwise required to “comply”.
Lamesa Investments Limited v Cynergy Bank Limited [2020] EWCA Civ 821
Please see the Brexit section for an item on HM Treasury outlining its approach on certain aspects of the CRR Amending Regulation in light of COVID-19.
