International Law Office - Legal Newsletters, Law Firm Directory and Legal News

Albania

The Regulation on the Core Man­agement Principles of Banks and Branches of For­eign Banks and the Criteria on the Approval of their Administrators entered into force in Summer 2009. The Bank of Albania has established that the key function of the Steering Council and the directorate is to ensure that banks and foreign branches have sufficiently robust internal structures to manage liquidity risk.

Parliament recently approved a law making Albania a party to the International Convention on Maritime Liens and Mortgages. The adoption of the convention will give Albanian banks and credit institutions greater guarantees for the recognition and enforcement of their security interests (ie, mortgages, hypotheques and charges) over seagoing vessels.

The Supervisory Council of the Bank of Albania has approved a new regulation on electronic payment instruments. The regulation aims to improve the framework for the issue and use of electronic payment instruments, as part of the bank's implementation of a function to create and supervise the secure and efficient operation of Albania's payments system.

Argentina

The Argentine Central Bank recently enacted Communication A5295, establishing certain rules that regulate media and technology companies' payments abroad. The communication sets forth that if the payee is a foreign party that is directly or indirectly related to the paying party or to a foreign party that resides in a tax haven, payment for certain rights or services requires the prior approval of the Central Bank.

The Argentine Central Bank has recently issued Communication A4643, which extended the maximum term for the proceeds of foreign financial indebtedness to be transferred into Argentina and converted into pesos through the local foreign exchange market to 365 calendar days.

The legality of offsetting debits and credits with a suspended financial institution has been much debated. However, the National Supreme Court of Justice of Argentina ruled that set-off cannot take place during the suspension of a financial institution.

In light of recent regulatory trends, foreign financial corporations should carefully analyze the advantages and disadvantages of electing an individual or a separate legal entity as its representative in Argentina, and of reorganizing a representation office in Argentina.

The Argentine Central Bank has issued Communication A/4507, which regulates the transfer of foreign currency to Argentina for the payment to local financial entities of financial debts and financial guarantees granted by foreign residents. The communication came into effect on March 8 2006.

The Argentine Central Bank has issued Communication A/4443, which replaces the regulations regarding financing to exporters under Communication A/4415, issued in September 2005. The amendments are designed to relax some of the requirements provided by the previous regulations in order for local exporters to receive export financings.

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Australia

A recent decision by the Supreme Court of Victoria demonstrates how a material adverse change clause can be relied upon to terminate a commercial bill facility pursuant to a non-monetary event of default. If a lender reasonably believes that a material adverse change has occurred, an interlocutory application to restrain a lender from terminating a finance facility is unlikely to succeed.

In May 2005 the Australian Prudential Regulation Authority (APRA) released a draft Prudential Standard on the governance of APRA-regulated institutions. The draft standard sets out the minimum governance requirements that all authorized deposit-taking institutions such as banks, building societies and credit unions must adhere to as part of their overall governance arrangements.

The Ministerial Council on Consumer Affairs has published a discussion paper proposing a uniform national regulatory scheme for finance and mortgage brokers. The scheme would require all brokers to undergo a licensing process involving a 'fit and proper person' test with various solvency and criminal probity checks.

Basel II revises the existing regime by creating a stronger link between risk and capital requirements. The Australian Prudential Regulation Authority has announced that Basel II will, over the next three years, be implemented in Australia and believes that the Australian banking system will be even safer and more efficient under the new regulatory structure.

The government is proposing to reform Australia's anti-money laundering system in accordance with recommendations made by the Financial Action Task Force on money laundering. Although a risk-based partnership approach should allow businesses to tailor policies, stricter reporting and due diligence obligations will be imposed on financial service providers in Australia.

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Austria

Overview
Including: Market Structure and Trends; Regulatory Bodies; Banking Act; Credit and Financial Institutions; Establishing Operations; Online Financial Services; Buying Financial Institutions; Supervision; Disclosure Requirements; Insolvency; Financial Collateral Directive; Capital Requirements; Confidentiality; Outlook.

The EU Markets in Financial Instruments Directive, which was recently transposed into Austrian law, requires all banks to establish, implement and maintain an effective conflicts of interest policy. The policy must be appropriate to the size and organisation of the bank and the nature, scale and complexity of its business. In response to concerns over the legality of the new laws, the Constitutional Court has reviewed their provisions.

In a recent judgment the Supreme Court dealt with interest rate adjustment clauses and interest rate calculation methods under business loan agreements. The court acknowledged that banks have a legitimate interest in providing for the adjustment of interest rates in accordance with changes in refinancing conditions and the relevant markets. This judgment provides important guidance for banks and their advisers.

In the case of a bank guarantee drawn without legal cause, the Supreme Court granted the party on whose account the guarantee had been issued parallel recourse claims against both the beneficiary of the guarantee and the debtor whose payment obligation was meant to be discharged by the payment under the guarantee. This authoritative opinion decides a long-lasting dispute that followed from contradictory case law.

Under Austrian law, the term 'letter of comfort' is a collective description for instruments predominantly issued by parent companies to banks that secure the payment obligations of a third party, usually a subsidiary company, under its financing arrangements with the beneficiary bank. They come in a variety of forms within two 'pure' types - the unrestricted comfort letter and the restricted comfort letter.

The EU Consumer Credit Agreement Directive was implemented in Austria through the enactment of a new federal Consumer Credit Act. Under the directive, banks must provide extensive information on credit offers in order to enable consumers to compare offers. While banks appreciate the importance of early repayments, they risk being at a disadvantage if a fixed interest rate is in place.

In the context of secured financings, lending banks often require a pledgor to issue a sale power of attorney for the asset pledged, to facilitate realisation of the pledged asset in the event of default. However, in recent decisions, the Austrian Supreme Court held that such a sale power of attorney may be considered an illegal circumvention or breach of Section 1371 of the Civil Code.

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Azerbaijan

Azerbaijani law recognizes both promissory notes (simple veksels) and bills of exchange (transferable veksels). New banking and finance rules on transferable veksels are pending at both the Ministry of Finance and the National Bank, although it is difficult to predict whether these will cause a veksel market to develop.

The new Civil Code of Azerbaijan equips the local commercial and banking community with specific provisions on factoring operations, suretyship and bank guaranties.

The new Azerbaijani Civil Code has updated local banking law to reflect the needs of modern commerce. In contrast to the civil codes of other countries of the former Soviet Union, the code is now better designed for commercial transactions.

Bermuda

Sometimes a person is asked by a family member or friend to act as guarantor on a mortgage or personal or business loan from a bank or other lender. However, in a worst-case scenario, acting as a guarantor can lead to financial hardship or even bankruptcy. Although the safest option may be not to sign a guarantee agreement at all, a potential guarantor can take steps to minimize the risk.

A first mortgage transfers the legal estate to the secured lender. The borrower has the right to occupy the home and to have it transferred back when the mortgage loan is repaid with interest. Second and subsequent mortgages transfer a home subject to the first mortgage. The first lender will already hold the legal estate in a borrower's home. Thus, second and subsequent secured lenders are entitled only to the equity of redemption.

Brazil

Pursuant to Article 66-B(3) of Law 4.728/65, security can take the form of security bonds, a chattel mortgage of unfungible and fungible movables or a fiduciary cession of rights over movables. However, the legal system also accepts the establishment of atypical fiduciary legal business activities as security, such as the fiduciary cession of rights.

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British Virgin Islands

The Financing and Money Services Act 2009 will enter into force shortly. Previously unregulated businesses may become subject to regulation in the British Virgin Islands. Businesses affected by the new licensing requirement will need to apply to the Financial Services Commission for a licence and comply with several business conduct and prudential requirements.

The Eastern Caribbean Court of Appeal has issued the first known judicial decision on the interpretation of the Financial Collateral Arrangements (No 2) Regulations 2003. The case related to the English remedy of 'appropriation' under the regulations as it applied to shares in BVI companies which are subject to an English law share mortgage.

The British Virgin Islands (BVI) court recently handed down its much-anticipated judgment in Alfa Telecom Turkey Limited v Cukurova Finance International Limited on the English remedy of appropriation under the Financial Collateral Arrangements (2) Regulations 2003 as applied to shares in BVI companies which are subject to an English law share mortgage.

Bulgaria

Bulgaria's foreign currency controls were recently liberalized in order to make foreign currency transactions more flexible and efficient. The changes are intended to promote Bulgaria as an investment-friendly economy and to build on the European Union's recent recognition, for the first time, of the Bulgarian economy as a functioning market economy.

A new regulation sets out the terms and conditions for the consolidated supervision of banks, bank groups and financial holding companies incorporated and operating under Bulgarian banking legislation, based on financial and accounting reports and the supervising requirements on solvency.

A new currency law limits the scope of exchange controls and abolishes the permit regime. It also makes it easier for Bulgarian-registered companies to invest and export capital abroad, and allows Bulgarian companies to make payments in foreign currency.

A new regulation adopted by the Bulgarian National Bank brings banking legislation into line with EU law. It limits the risks that banks may assume as a result of credit exposure.

Canada

A recent Ontario Superior Court of Justice decision provides valuable guidance to creditors on how to protect the enforceability of guarantees where material changes have been made to the underlying loan agreements. The case underscores that where material terms of a loan agreement are amended, restated or replaced, creditors should ensure that the guarantor either confirms the original guarantee or provides a new one.

The government recently published the final versions of the new Credit Business Practices Regulations and the Regulations Amending the Cost of Borrowing Regulations, which will require increased disclosure, changes to customer documentation and changes to business practices in the consumer credit business.

The Supreme Court recently held that banks may, in certain circumstances, recover fraud-related losses from accounts of unwitting beneficiaries of a fraud and assist each other in such recovery efforts. Relying on the common law principle of mistake of fact, the court held that the defendant was entitled to debit funds from its client's accounts in order to indemnify another bank for losses relating to payment on a counterfeit cheque.

With 68 million cardholders and over 27 million active cards in circulation, it is clear that Canadians love their credit cards. On the heels of similar measures introduced in the United States, Finance Minister Jim Flaherty recently unveiled a number of new proposed regulations that will affect the credit card industry.

A recent Ontario Court of Appeal decision highlights the risks facing lenders that rely on standard form security agreements to enforce the obligations of defaulting borrowers. The court applied the remedy of rectification to the plaintiff bank's standard personal guarantee and collateral mortgage forms, allowing the bank to enforce on only the collateral mortgage, even though the personal guarantee was a separate obligation.

The Quebec Act Respecting the Transfer of Securities and Establishment of Security Entitlements recently entered into force. Modernizing the law governing securities transfer is certainly warranted and perhaps somewhat overdue. Today's economic frenzy highlights the importance of clear settlement rules for all stakeholders. This is particularly true for creditors taking the securities as collateral.

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Chile

The House of Representatives has voted on amendments to the General Banking Law in the context of the Second Capital Markets Bill. The next legislative step is the debate of the bill at the Senate. Additionally, Chilean regulators are considering the adoption of the agreements of Basel II, which would require amendments to the General Banking Law itself, among other regulations.

The House of Representatives recently debated the second Capital Markets Bill. The bill aims to give the Superintendency of Banks and Financial Institutions more authority with a view to guaranteeing adequate commercial practices, and boosting the efficiency, transparency and accessibility of the banking and financial markets.

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China

The China Banking Regulatory Commission's guidelines on reputational risk management in commercial banks apply to all Chinese commercial banks, banks established through equity joint ventures and foreign-invested banks. They require banks not only to integrate reputational risk management into their corporate governance and overall risk management, but also to minimize adverse effects on the public and society.

In an attempt to strengthen China's economic exchange with foreign countries, the government announced the launch of a renminbi cross-border trade settlement pilot programme, for which the People's Bank of China and ministerial authorities have issued implementing regulations. The scheme will affect background clearing between Chinese and foreign banks.

With Chinese banks' loan business growing rapidly - along with fears of inflation - the China Banking Regulatory Commission has released a consultative note on a draft circular on capital replenishment mechanisms. The draft circular indicates the government's intention to tighten capital adequacy ratio requirements for Chinese banks and to curtail bank lending.

The People's Bank of China and the Hong Kong Monetary Authority have signed a currency swap agreement which enables short-term liquidity support to be provided to the mainland operations of Hong Kong banks and the Hong Kong operations of mainland banks, as necessary.

The People's Bank of China and the Hong Kong Monetary Authority have announced a multi-currency cross-border payment arrangement between the mainland and Hong Kong. The arrangement covers cross-border payments and settlement in four currencies.

Rules newly in force are likely to complicate the acquisition or disposal of interests in financial enterprises. Among other things, they confirm that transfers of state-owned interests in unlisted financial institutions are subject to a mandatory public auction or tender process, unless a special approval for transfer by private agreement is obtained from the State Council or the financial authorities.

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Colombia

The Colombian Financial Reform Law introduces certain changes to the regulatory framework of the financial system. Among other things, it establishes a new regime for the protection of financial consumers, authorization for new activities for banks and new regulations for the development of microloans and microfinance.

There have been difficulties in the interpretation and execution of fiducie contracts, given the lack of clear rules regarding certain aspects of such contracts. Circular 46/2008, issued by the Financial Superintendence, addresses this and provides clearer parameters to fiduciary agreements, thus reducing uncertainty.

A bill currently being processed by Congress proposes establishing a state-regulated body that will resolves any disputes that may arise between financial institutions and their clients.

The Superintendency of Banks has issued a circular letter to all financial entities announcing changes to the ways in which credit risk may be analyzed. This update explains what sources of information may now be used to asses users' creditworthiness.

A recent decision by the Council of State offers protection for delinquent debtors. The decision states that once a person has met his or her financial obligations, information that classes him or her as a delinquent debtor must be removed from all databases so that he or she is not denied access to the financial system and to credit in general.

The new Colombian Criminal Code has attempted to identify banking crimes by giving more precise definitions of offences such as ‘economic panic’ and ‘usury’.

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Cyprus

In order to implement the Eurogroup agreement on the restructuring of the Cypriot banking system, Parliament recently enacted a new law on the resolution of credit institutions. The law aims to pave the way for the speedy reconstruction and rehabilitation of credit institutions under resolution and the concentration of powers to a resolution authority, among other things.

Under the Banking Law, all persons with access to the records of a bank are prohibited from giving out, divulging, revealing or using for their own benefit any information regarding the account of any individual customer of the bank, unless certain exceptions apply. The rules aim to enhance the trustworthiness of banks and credit institutions and encourage them to impose internal structures in order to ensure compliance.

As a well-established financial services centre and a member of the European Union, Cyprus is one of the best environments in Europe for the provision of banking services. A credit institution which is authorised and supervised by the competent authorities of another EU member state may conduct banking activities in Cyprus either by establishing a branch or by way of provision of services.

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Czech Republic

The Central Securities Depository has updated its rules and regulations on the way to pledge an owner's account on which dematerialised securities owned by the pledgor are registered. The new rules provide information on the interpretation and evaluation of the practicality of pledging an owner's account. The procedure is generally similar to the pledge of a single share.

A pledge of shares is a popular and practical security instrument used by obligors to secure loans from banks. Due to an amendment to the Securities Act and the Capital Markets Act, it is now possible to make the whole account (including all securities registered thereon) subject to a pledge. An account pledge should work like the common pledge of a single share, but with more flexibility in its establishment.

A Czech court has issued a surprising judgment in a case about the holding-type grouping of the role of a bank as both an agent of a syndicate and a secured creditor in the insolvency proceedings of a borrower company. The repercussions of the judgment may have both legal and economic consequences for the future of the banking sector.

The new Criminal Code has come into force. Some new crimes which were not criminalised under the previous regulations are of particular importance to the banking sector - for example, the crime of data-carrier damage and infringement of computer equipment through negligence may have serious consequences for bank employees.

Until recently, the Czech Republic ranked among those countries in which financial assistance is prohibited under the legal penalty of absolute non-validity of a legal act. However, a recent amendment to the Commercial Code has introduced new rules on financial assistance and lifted the prohibition. The new rules enable financing banks to obtain more complex security packages for acquisition finance purposes.

The use of payment instruments in the European Union varies significantly from country to country, since each member state has tailored standards and practices according to its national legislative needs. The payments industry has actively sought to remedy this situation by adopting the EU Payment Services Directive, which is set to be implemented in the Czech Republic in Autumn 2009.

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Denmark

The Financial Services Authority has finalized new guidelines concerning the organization of banks, their internal controls and the areas in which written procedures and policies are necessary. Among other things, the new guidelines implement the Committee of European Banking Supervisors' Guidelines on the Application of the Supervisory Review Process under Pillar II.

The Danish Financial Supervisory Authority has submitted for open consultation a proposal to allow commercial banks to issue covered bonds. The proposal exercises the option to issue covered bonds set out in the EU Capital Requirements Directive and implements the more stringent conditions of the directive.

The Danish Financial Supervisory Authority is to adopt the recommendations of a working group which was charged with reviewing the statutory obligations of financial undertakings to inform and advise their customers, and assessing whether the rules work against the objective of customers receiving relevant information in a timely fashion.

During 2005 and the first half of 2006 the International Monetary Fund (IMF) conducted a financial sector assessment programme in Denmark. The IMF has now published the programme's preliminary conclusions, including a finding that the sector has a high level of compliance with international financial supervisory standards.

The minister of economics and business affairs has put forward a proposal to Parliament which will adopt the presumed changes to the EU Credit Institution Directive (2000/12/EC) and the EU Capital Adequacy Directive (93/6/EC) - together known as the EU Capital Requirements Directive.

The Danish Financial Supervisory Authority (DFSA) has sent a letter to all Danish credit institutions regarding the developments in real estate prices in Denmark. In the letter the DFSA warned credit institutions that there might be a price bubble in the real estate market due to the significant rises in real estate prices in recent years.

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Dominican Republic

The Dominican Republic recently enacted a law that is helping the country's mortgage market to develop while providing significant opportunities for investors, as well as a boost for the country's efforts to expand its housing stock. The new law creates a market for securitised mortgages that will enhance the country's housing and construction industries, while offering institutional investors an important investment opportunity.

Egypt

The Anti-money Laundering Law was proposed after the Financial Action Task Force included Egypt on the Organization for Economic Cooperation and Development's list of non-cooperative countries and territories. The law is a response to governmental concerns surrounding the negative effects of such listing on the domestic economy.

El Salvador

In recent years a bill to replace the Financial System Superintendency and its stock market and pension counterparts with a new super-regulator has been on and off Congress's legislative agenda. However, new efforts to approve the bill before the end of 2007 follow a wave of recent acquisitions of local financial institutions by foreign groups.

The Central Reserve Bank of El Salvador has issued new regulations applicable to financial institutions domiciled outside El Salvador which wish to qualify to receive income tax benefits on interest received from loans granted to Salvadoran entities or individuals residing in El Salvador.

The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) provides an innovative regulatory environment for cross-border trade in financial services between countries with differing systems of civil and common law. The agreement encourages greater transparency, provides dispute resolution mechanisms and limits the market access restrictions on financial institutions.

Estonia

The Supreme Court recently highlighted an Estonian regulation related to loans granted to natural persons which is often forgotten or overlooked by creditors. Agreements for such loans are common. However, if they contain a jurisdiction clause under which all disputes arising between the parties in relation to such agreement must be settled in a specific court in Estonia, this clause may turn out to be void.

Under Estonian law, a guarantee is an independent obligation, the validity of which is not influenced by the validity of the obligations secured by it. The aim of the guarantee is to provide comfort; the beneficiary under the guarantee may enforce the guarantee once an obligor has failed to perform its obligations as secured by the guarantee. The Supreme Court has recently ruled on this issue.

In a recent ruling the Supreme Court provided important standpoints in connection with obligations secured under a security agreement. In its judgment, the court clarified the meaning of a 'global security arrangement'. The court found that global security arrangements are not always permissible and in some cases can be void. This ruling will have an impact on banks as lenders, as well as on borrowers.

The Estonian Central Bank and the Financial Supervision Authority often cooperate with their Scandinavian colleagues. Amendments to the Credit Institutions Act recently entered into force, introducing a new regulation on cross-border banking supervision and cooperation between financial supervision authorities. The amendments facilitate tighter cooperation between the financial authorities of EU member states.

The Parliament is in the process of drafting a law that will give the Financial Supervisory Authority (FSA) authorisation to impinge on banking secrecy when investigating alleged misdemeanours, an offence punishable by a fine or detention. The current Credit Institutions Act, which governs banking secrecy regulations, allows the FSA impinge on banking secrecy only in case of criminal offences.

The Estonian Supreme Court recently analysed a problem which emerged in conjunction with a decrease in the value of pledged shares upon a change in share capital, and explicitly confirmed that the value of a shareholding is also influenced by attached voting rights. Such decisions demonstrate the importance of the quality of collateral, with those that borrow against esoteric collateral, such as shares, likely to be penalised.

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European Union

An informal meeting of economics and finance ministers recently requested the European Commission to study the obstacles to cross-border mergers and acquisitions in the wholesale and retail banking sectors. The commission will also review the provisions of the Credit Institutions Directive which allow member states to block mergers and acquisitions on prudential grounds.

FIN-USE, an expert panel set up by the European Commission to help improve policy making in the financial services field, recently reported its findings to the commission. Its first brief was to comment, from a user perspective, on the four stocktaking group reports produced in May 2004 on integration in the fields of banking, asset management, securities and insurance.

The European Commission has adopted a proposal for a new Anti-money Laundering Directive, which will repeal and replace the current directive to widen the categories of persons and offences covered by the EU legislation. The proposal will also update the existing rules by bringing them into line with recent international developments in the fight against money laundering.

The European Commission has proposed a new capital requirements framework for banks and investment firms. The aim is to ensure the coherent application throughout the European Union of a new international capital requirements framework agreed at the end of June 2004 by the Basel Committee on Banking Supervision (Basel II).

The European Parliament recently adopted the report of the Legal Affairs and Internal Markets Committee amending the European Commission's proposed amendment to the EU Consumer Credit Directive. It has introduced several key changes to the proposal, including a provision excluding loans below €500 or over €100,000 from the directive's scope of application.

PricewaterhouseCoopers has reported to the European Commission on the financial and macroeconomic consequences of the draft new capital requirements for banks and investment firms. The study reviews the impact of the capital adequacy standards proposed by the Basel Committee on banking supervision and the proposed revised capital adequacy requirements being prepared by the commission.

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Finland

When a borrower gets into financial difficulties, a situation may arise whereby the lender bank takes certain measures to mitigate the risk for credit losses. This update considers the liability of a bank towards the bankruptcy estate in the event that a borrower goes bankrupt by considering situations in which the lender bank might be considered responsible.

This year has been exceptional in several respects and its effects may continue to be felt for a lot longer than many would like. The global credit crisis has had a dramatic impact on economies around the world. Although the effects in Finland were not as severe as those elsewhere in Europe, many companies are still in need of additional financing and many loan facilities have been renegotiated this year.

Since late 2008 the financial crisis has rapidly weakened the global economy and has demonstrated that Finland is not isolated from disturbances in the global financial markets. However, according to a recent analysis published by the Financial Supervisory Authority, the profitability of the banking sector has materially weakened, but loss-bearing capacity remains fairly solid.

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France

Capital acquisition through the repurchase of distressed debts could provide a solution to the problems that banks currently face. Stricter banking regulation means that there is a need for additional capital, but banks are still suffering losses incurred in the ongoing financial crisis. This update examines how banks can restore their lending capacity through the transfer of non-profitable liabilities.

The Prudential Supervisory Authority has confirmed the feasibility of using a French trust in cash pooling operations and has clarified the relationship between a trust and the banking monopoly principle. Clarification was awaited as the sanctioned use of a trust as a master account holder significantly strengthens the safety of a cash pooling arrangement in a zero-balance account.

The Supreme Court recently rendered a key decision for the international practice of syndicated financings by recognising, in the context of French insolvency proceedings, certain effects of the trust and the mechanism of parallel debt which were both governed by the laws of New York state.

The Dijon Court of Appeal has confirmed the effectiveness of the technique of parallel debt, whereby the security agent of a syndicated credit is recognised as the creditor of all amounts due and takes the collateral in its own name. Since the creation of this technique, French law has introduced two legal regimes that purport to implement the effects of the Anglo-Saxon trust.

Following the G20 meeting in Pittsburgh in September 2009, the French government has finalized a bill to implement a number of the G20 decisions on strengthening the international financial regulatory system. The bill fulfils EU implementation obligations on credit agencies that were adopted on the French presidency's initiative and is expected to be submitted to Parliament by the end of March 2010.

The level of systemic risk to the banking system and the economy brought about by the international financial crisis cannot be properly mitigated through existing prudential responsibility and guarantee mechanisms. This crisis has been the stimulus for a series of exceptional recovery measures.

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Germany

The Federal Financial Supervisory Authority (BaFin) recently published a revised version of its Circular on Minimum Requirements for Risk Management for banks and financial services institutions. The circular sets forth BaFin's interpretation of the Banking Act provisions regarding risk management, which are based on Pillar II of Basel II. The circular will be subject to continual updates in the future.

Until recently, savings banks, cooperative banks and private banks used general terms and conditions of business, including a clause giving them the right to charge expenses. However, in two judgments issued on the same day, the Federal Court of Justice changed its previous position and held that such clauses were not only subject to review under the Civil Code, but were also invalid when they imposed expenses.

In insolvency scenarios, banks and other creditors must examine their options carefully before taking any legal action. Restructuring may be achieved by selling certain parts of the debtor's business or some of its assets. Secured creditors must know whether their security interests are insolvency-proof under the law. A recent decision provides guidance to banks that consent to a sale of the insolvency debtor's collateral assets.

The new Act on the Optimisation of Money Laundering Prevention caused considerable controversy during the legislative process. However, the amendments are generally to be welcomed, particularly the removal of the requirement for distributors of e-money issuers to appoint a money laundering officer, and the introduction of a de minimis threshold for the distribution of e-money products.

The Federal Court of Justice recently ruled on two parallel proceedings on the extent of information that banks must provide to investors when selling certificates. Investors sued a bank that had sold them certificates of a Dutch subsidiary of US investment bank Lehman Brothers Holdings Inc, which became worthless following the Lehman collapse.

The Federal Court of Justice has recently issued two judgments in relation to the assignment of loan receivables and land charges. In the first judgment, the court confirmed that the assignment of loan receivables to a non-bank is valid. In the second decision the court ruled on an assignment of the land charge and the issuance of a so-called 'execution clause' to the assignee.

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Greece

Before granting the protection provided by the Consumer Protection Law, it is standard practice for the Greek courts to examine first whether a plaintiff qualifies as a consumer. In a recent case before the Supreme Court, the plaintiff claimed to be a consumer in order to have her case to be heard before the Greek courts, rather than the Swiss courts as agreed in her loan and pledge agreements.

A memorandum of agreement signed by the government, the European Commission, the European Central Bank and the International Monetary Fund provides for the foundation of a monetary and financial stability fund. The aim of the fund is to maintain the stability of the national banking system by supporting the capital adequacy of banks operating in Greece and creating a safety net for this purpose.

Law 3816/2010 is a controversial piece of legislation which was enacted after lengthy debate on a Ministry of Economy, Competitiveness and Shipping initiative. The aim of the law is to keep businesses solvent by means of the compulsory rescheduling of their banking debt. The basic function of the law is to reschedule performing and non-performing loans and facilities.

Greece began the year rather badly in terms of creditworthiness. However, doubts over demand for bonds at reasonable spreads faded and spreads tightened as fragile confidence has been gradually rebuilt. The new moderately socialist government is expected to do better at addressing contentious issues within the economy, in terms of both revenue and spending.

The National Bank of Greece has anticipated the need for capital in the banking sector with a €1.25 billion share issue, which has caught most of the other major Greek banks off guard, although some smaller banks have already launched or are implementing capital increases. The Greek credit rating bureau Teiressias has introduced a credit-scoring system, the effect of which remains to be seen.

The state support plan for Greek banks, which aims to enhance liquidity in the domestic market, is facing a number of implementation difficulties. As a result, its progress has been disappointing. Some problems relate to the plan's incompatibility with existing corporate legislation (eg, in the case of equity support by issue of preferred shares to the state against state bonds in lieu of cash); others have to do with the form of support.

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Guatemala

The Secured Transactions Act is intended to promote the use of different types of secured transaction in order to encourage and guarantee credit obligations. The executions provided in the the act are becoming an important tool in Guatemalan law, since they offer an expeditious means of resolving disputes and help to avoid the lengthy formalities and procedures laid down in the Procedural Regulations.

The relatively new Banks and Financial Groups Law has been tested by the failure of two banks in less than six months. The failures have been well handled, even though several disgruntled investors have filed court actions objecting to the measures taken by the authorities. The events have led to a rapid consolidation of the market and demands for increased public scrutiny and regulatory action.

Guernsey

In early 2011 the Guernsey Financial Services Commission held a workshop for non-executive directors relating to the Internal Capital Adequacy Assessment Process. This update summarises the key take-home points from the workshop for non-executive directors.

The States of Guernsey has established a deposit compensation scheme to protect the deposits of retail depositors with local banks. The scheme covers the first £50,000 of deposits by individuals. As part of the second level of funding for the scheme, a captive insurance company has been established to fund the first £20 million of risk of the scheme.

Honduras

The National Congress has approved the Credit Card Law, which replaced the Regulating Law for Credit Card Operations 1998. The change was prompted by the large volume of credit card operations and the disparity in the conditions offered by credit card issuers, as well as the disproportionate interest rates applicable to credit card services.

Hong Kong

Although fraud and injunctions are areas of letter of credit law that have caused concern to many bankers and trade finance practitioners, no guidance on the subject is available in the Uniform Customs and Practice for Documentary Credits. This update highlights some of the legal principles arising from case law.

An assignee of letter of credit proceeds takes a passive role in receiving the monies under the letter of credit, whereas a second beneficiary takes an active role in drawing the letter of credit. Assignment of letter of credit proceeds can be effected by way of purchase or by way of security; in the latter case, registration is required under Hong Kong law to ensure the priority of the assignment.

International and local trading activities in Hong Kong are increasingly transacted on an open-account basis. In the absence of a letter of credit, suppliers are directly exposed to their buyer's payment risk. Factoring and credit insurance are two options that suppliers may consider to mitigate such risk.

Regulators are moving away from the enforcement of specific rules towards a more general requirement that a bank's senior management must instil the right culture. Different departments in a bank have different responsibilities, but the division of labour is often unclear on compliance issues, which is a recipe for disaster unless workflow is analyzed and responsibility is clearly defined and documented.

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Hungary

The Financial Supervisory Authority (FSA) shows little sympathy for financial institutions that place unfair burdens on consumers, acting as a diligent executor of the most recent consumer protection legislation. It firmly keeps an eye on how institutions observe these rules and penalises any deviation. Three recent cases in particular illustrate the FSA's approach to these consumer protection regulations.

Parliament recently adopted the Act on Financial Transaction Fees, which becomes effective from January 1 2013. The act designates the levied contribution as a fee, but the contribution does not represent a reimbursement of costs or consideration for a service rendered by the state. As such, it is really no different from a general tax and is commonly called the 'financial transaction tax'.

Recent statistics show that the new Financial Conciliation Body (FCB) is achieving a large number of successful settlements between consumers and financial service providers. However, concerns remain over the scope of its competence, and over the fact that a consumer who is dissatisfied with an FCB decision may apply to the courts, whereas a service provider may not.

For the first time, the Supreme Court has examined in detail whether a contractual term that gives a financial institution the right to amend a consumer loan contract unilaterally is consistent with Hungarian law. Financial institutions are already revising their practices and contractual terms as a result.

On the basis of the Fundamental Law, the Magyar Nemzeti Bank Act 2011 has replaced the Magyar Nemzeti Bank Act 2001. The Magyar Nemzeti Bank (MNB) – the central bank of Hungary – is obliged to adapt its governance and operation to accord with the new law by the end of March 2012. But the new act's changes raise concerns that the government may try to exercise undue political influence over the MNB.

A new law passed by Parliament introduces an interest rate cap on consumer mortgage loans and regulates the calculation of interest rates. It enables debtors to ask for the amendment of contracts that were concluded before the new law entered into force. In addition, it amends the Civil Code by introducing a mandatory base rate plus a 24 percentage-point cap for contracts where both parties are natural persons.

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India

Following concerns over the discrepancy in regulation between banks and non-banking financial companies (NBFCs), the Reserve Bank of India (RBI) recently set up a working group to review the regulatory framework for NBFCs. On receipt of the group's report, the RBI released new draft guidelines for NBFCs, which seek to revamp completely the existing regulatory environment.

Factoring is a useful financial tool for micro and small enterprises. However, in the absence of a consolidated legal framework regulating factoring in India, it has so far played a limited role in business financing. The Factoring Regulation Act 2011 provides for and regulates the assignment of receivables and is intended to provide a much-needed legal framework for factoring in India.

The Reserve Bank of India (RBI) recently released a revised set of draft guidelines for the licensing of new banks in the private sector, which has received much attention in the banking and financial industries. The 2011 guidelines lay down a framework for the granting of banking licences by the RBI to corporate entities and non-banking financial companies, a significant departure from the RBI's earlier policy.

The central government recently announced new privacy rules under the Information Technology Act 2000. The rules will have a significant impact on the banking industry, given that a large volume of information that banks receive will be defined as 'sensitive information'. Banks that fail to comply will be exposed to potential claims for compensatory damages by affected persons.

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Indonesia

After heated debate among regulators and politicians on what was seen as unhealthy concentrated ownership of banks by groups of companies – particularly foreign groups of companies – Bank Indonesia, the country's central bank and industry regulator, has issued the Regulation on Ownership of Shares in Commercial Banks, which restricts ownership of banks by individual shareholders.

Parliament's long-awaited approval of the Bill on the Financial Services Authority is one of the most significant developments in the history of Indonesian law and will change the landscape of the country's financial industry. It not only establishes a new financial services authority, but also positions this new body as the main regulator and supervisor of Indonesia's financial sector.

In light of the current financial instability, Bank Indonesia has recently issued three regulations in an effort to make Indonesian exporters deposit their export revenues into banks in Indonesia. They include the requirement that stipulates that all foreign exchange export proceeds be received and deposited by the exporter in a foreign exchange bank.

The new Currency Law is likely to have a major impact on Indonesia's payment systems and in the fields of trade and finance due to its requirements regarding the use of rupiah for payments. Its controversial prohibition of foreign currency for domestic payments appears to catch Indonesian subsidiaries and branches of foreign companies, including foreign-owned companies and bank branches.

Bank Indonesia has issued the Regulation on Asset Quality Assessment for Commercial Sharia Banks and Sharia Business Units. It requires Sharia-compliant banks and Sharia business units to assess and supervise their own asset activities and to be proactive in ensuring the liquidity of their productive and non-productive assets.

The head of the Indonesian Financial Transactions Report and Analysis Centre has issued a new regulation on the procedure for the submission of reports on suspicious financial transactions. Among other things, the regulation is intended to prevent and eventually abolish money laundering, and to improve the reporting system used by financial providers.

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International

The Basel Committee on Banking Supervision recently issued a final set of Principles for Enhancing Corporate Governance in the banking sector. Since the adoption of the 2006 principles, there have been a number of corporate governance failures and lapses, many of which became apparent during the financial crisis that began in 2007; the revised principles are intended to deal with these issues.

The oversight body of the Basel Committee has endorsed the Basel 3 capital and liquidity reform package, announcing new levels for capital ratios. Despite generous transition arrangements, banks must consider the impact of the new quality of capital rules on their current capital base, as well as the increase in capital that certain assets, such as repos and derivatives, will require.

If a letter of credit dispute is dealt with properly, the negotiating banks or exporters may recover not only the letter of credit proceeds, but also late payment interest and their costs without resorting to legal proceedings. The success of such claims depends largely on an effective strategy, a good understanding of business dynamics and effective negotiation with the issuing banks.

Ireland

A High Court challenge to the acquisition by Ireland's 'bad bank', the National Asset Management Agency, of unimpaired loans of a participating bank has been rejected. The court referred to the need for the state to maintain the stability of the financial system while the state-backed deposit guarantee scheme is in existence.

The government has published the details of its bank guarantee scheme. Announced on September 30 2008, emergency legislation was subsequently passed within 48 hours to allow the minister for finance to provide guarantees of both the deposits and certain borrowings of certain domestic banks and building societies.

The Markets in Financial Instruments and Miscellaneous Provisions Act 2007 has been enacted. It contains an extended definition of 'financial contracts' having the benefit of certainty of set-off under Irish legislation, notwithstanding insolvency. Late amendments made to the act before it was passed provide for regulation by the Financial Services Regulatory Authority of non-bank lenders to Irish consumers.

The Irish Bankers Federation and the Consumers Association of Ireland have called on the government to review the imposition by retailers and service providers of surcharges on consumer payments made using credit or debit cards. Both organizations contend that surcharging should be very strictly monitored and controlled, if not completely abolished.

In the context of a general review of the regulatory regime, a new Consumer Protection Code is in the process of being finalized. The new code, which will adhere to the concept of a principles-based regulator, will apply to financial services providers regulated by the Irish Financial Services Regulatory Authority insofar as they are providing services to 'private customers'.

New regulations have extended the scope of the term 'consumer' to improve access to the complaints procedure provided by the financial services ombudsman. Unincorporated bodies and any incorporated body which has an annual turnover of €3 million or less (provided that it is not a member of a group of companies having a combined turnover greater than €3 million) will now have access to the scheme.

Isle of Man

The government has a scheme in place to compensate any depositors that suffer a loss where a deposit taker fails to satisfy a claim by a depositor. The Isle of Man Tynwald (Parliament) has approved and brought into force an amendment to the scheme that provides for an increase in deposit protection for both local and international individual depositors.

The Isle of Man has come a long way since the Isle of Man Bank Limited became the first incorporated body to be registered there in 1865. On June 30 2004 the island's banking deposit base stood at £29.09 billion. With regard to future developments, the Isle of Man has agreed to implement the EU Savings Directive with a view to maintaining its international business image.

Israel

The commissioner of banks recently issued a directive which demands that commercial banks take into consideration their exposure to environmental risks, particularly when granting credit to clients. The directive also opens up new opportunities for insurers in the environmental field.

A new law to combat money laundering has been enacted. The law follows the recommendations of the Financial Action Task Force and is as comprehensive as the EC Directive on Money Laundering.

Italy

The Data Protection Authority has issued regulations for banks and companies within banking groups on the lawful processing of clients' personal data. They govern the circulation of information related to banking clients and the tracking of banking operations (relating to money flow or information) performed by bank employees.

A new legislative decree has implemented the EU Consumer Credit Directive in Italy. Among other things, its amendments to the Banking Law regulate the advertising of consumer credit and introduce new rules on transparency provisions, micro-credit operators, financial agents and credit brokers.

A new legislative decree has implemented the EU Acquisitions Directive in respect of acquisitions and increases in holdings in the financial sector. The new rules aim to increase transparency in the approval procedure for acquisitions of stakes in banks and financial intermediaries, introducing new clearance thresholds and setting out the criteria by which the Bank of Italy will assess a potential acquirer.

The legislative decree that implements the EU Payment Services Directive in Italy has recently entered into force. It introduces a new category of payment services provider - the payment institution - and defines the regulatory requirements for Italian institutions and those from other EU member states. In addition, it sets out rules for conducting payment service operations.

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Japan

If a debtor defaults on a loan agreement, the bank may collect that loan from the debtor's ordinary deposit through acceleration and offset. However, an issue arises as to whether the bank may freeze the ordinary deposit in order to secure its claim without taking formal acceleration when the debtor's credit is uncertain, resulting in the debtor being unable to withdraw the deposit – and, if so, under what conditions.

In recent years, borrowers have brought numerous claims against money lenders in Japan for restitution of usurious interest, especially with respect to loans to individual consumers and small businesses. In 2009 such claims accounted for more than 40% of the new civil lawsuits in the district courts. This update considers the origins of usury claims and the issues surrounding them.

The severe effects of the global financial crisis on the Japanese economy have led to the adoption of temporary legislation to protect small and medium-sized enterprises (SMEs) and mortgage borrowers. Among other things, the law provides that SMEs and mortgage borrowers may apply to financial institutions to revise their loan terms; lenders are required to help and advise borrowers in good faith.

The enforcement of security interests has become a significant issue worldwide, with many receivables becoming uncollectable. Financial institutions providing financing to Japanese companies are looking for ways to create and manage security interests at the lowest cost. The security trust is an effective tool for doing precisely this.

In light of the widely recognized need to promote financing for small businesses, new legislation has introduced a system for electronic monetary claims. Such claims are intended to accelerate accounts receivable financing, but they have many other potential uses, including the liquidation of syndicated loans and the stabilization of cash management systems.

The Ministry of Justice has published a draft reform of the Law of Obligations, part of the Civil Code. The draft reform covers a wide range of topics, including several which could have a significant impact on banking practice: set-off, prescription, the assignment of claims and joint and several obligations.

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Jersey

The central objective of the new Security Interests (Jersey) Law is to provide Jersey with a simplified, modern, efficient legal regime for the creation, perfection, priority and enforcement of security interests in intangible movable property. Furthermore, the new law is designed to give Jersey one of the most up-to-date legal regimes in this field and thereby to enhance Jersey's attractiveness to local and foreign investors.

Lenders are increasingly examining the details of their security packages in order to identify the various enforcement options open to them. Where the security package includes a Jersey law security interest agreement in respect of Jersey situs assets, the provisions of the Security Interests (Jersey) Law 1983 must be taken into account.

A recent Royal Court of Jersey judgment gave strong support to the rights and powers of a secured party to take action necessary to protect its security and the value represented by the security, in accordance with the usual provisions of a security agreement. In addition, the court made a number of comments on variation of contract, estoppel and mitigation of loss.

The new Security Interests (Jersey) Law is in close-to-final form. The new law will add certainty and flexibility at a time when economic conditions have led to a greater focus on the protection of collateral. Among other things, it introduces more flexible methods of creation of a security interest and the establishment of a new centrally maintained register of security interests.

The draft Security Interests (Jersey) Law 201 is in close-to-final form and is shortly due to commence its journey through the legislative process. It is anticipated that the new law will come into force in the first half of 2011. This update looks at the transitional provisions that will apply to pre-existing security once the new law comes into force.

Kazakhstan

Proposed currency controls could see the imposition of a special currency regime. Its strongest impact would probably be on Kazakh resident exporters, requiring them to remove funds from offshore accounts and hold such funds in non-interest-bearing accounts in Kazakhstan, and to convert hard currency into tenge.

When two of Kazakhstan's systemically important banks defaulted on their debt in April 2009, it exposed a lack of legislation on consensual financial restructurings. A new law provides a procedure for restructuring a bank with the approval of creditors holding at least two-thirds of its obligations. It also introduces a framework for segregating a distressed bank's assets and creating a stabilization bank.

An amendment to the Law on Banks and Banking Activity has significantly increased the regulatory powers of the Financial Markets Supervision Agency. The amendment is intended to stabilize the sector by allowing the agency to suspend the rights and authority of a bank's shareholders and management.

The Financial Markets Supervision Agency has proposed certain amendments to Kazakhstan's capital adequacy regulations in an effort to protect the banking industry, limit its exposure to international investors and prevent the economy from overheating. However, the changes could hit local banks which have sought to tap the international capital markets through securities offerings.

The Kazakhstan Parliament recently passed a number of laws which will be of interest to players in the banking sector. Among them is a law which regulates the legal status, activities, creation, reorganization and liquidation of credit partnerships. New legislation on micro-credit has also been passed in order to assist the development of small businesses.

Kenya

Existing regulations on lending are unhelpful to lending institutions since they have always assumed that lending is the basis for growth and profitability. The blame for the current situation lies neither with borrowers nor with lending institutions, but rather with Parliament. It is now up to Parliament to review lending policy and accordingly close the gaps in the Banking Act.

In an attempt to strengthen the Kenyan banking industry, the minister for finance has amended the Second Schedule of the Banking Act to increase the minimum core capital requirement from KSh250 million (approximately $3.7 million) to KSh1 billion (approximately $14.7 million).

In most world economies, microfinance institutions have played a complementary role to the banking system by extending credit to borrowers whom banks view as too costly or too risky to reach. The Microfinance Act 2006 allows banks and financial institutions to carry out deposit-taking microfinance business through subsidiaries.

The Banking (Amendment) Act 2006 is due to come into force during 2007. The act proposes to limit the interest that may be recovered by banks and other financial institutions on defaulting loans. The provision will affect loans granted by a bank or financial insitution both before and after the date on which the amendment act comes into operation.

With over 40 commercial banks in operation, the Kenyan banking industry is generally considered to be saturated. In recent years the Central Bank of Kenya has encouraged consolidation in the sector through mergers and acquisitions, and a number of mergers have been effected. Banks have also resorted to mergers to comply with changes in legislation which have increased the minimum core capital requirements.

The Banking (Exchange of Information) Regulations 2004 permit banks, by agreement, to exchange and share prescribed information relating to their customers through the use of credit reference bureaux and other mechanisms approved by the minister of finance in consultation with the Central Bank, without first needing to obtain their customers' consent.

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Latvia

In July 2011 new regulations came into force which require non-bank consumer lending service providers to obtain a licence for rendering such services. The licences are to be issued by the Consumer Rights Protection Centre, a state authority that enforces the protection of consumer rights and interests in Latvia.

The Saeima recently adopted amendments to the Financial Collateral Law and included a new type of financial collateral: credit claims. Their introduction will have a positive impact on the Latvian financial sector and will expand opportunities for credit institutions and credit unions to use financial collateral as a security for the fulfilment of their clients' financial obligations.

Significant amendments to the Credit Institutions Law recently came into force. The amendments were mainly designed to implement the provisions of the EU Capital Requirements Directive II and give new powers to the Financial and Capital Market Commission. This update summarises the main amendments made to the law.

The government has approved draft amendments to the Deposit Guarantee Law. The amendments were designed to implement the provisions of the EU Deposit Guarantee Schemes Directive to ensure that newly established banks, which are required to have an initial capital of at least €5 million, contribute sums into the fund which are proportionate to the guarantees that the fund is intended to cover.

The government has approved amendments to the Consumer Rights Protection Law which were designed in order to implement the provisions of the EU Consumer Credit Directive and to establish a licensing system for non-bank consumer lenders.

After extensive discussions, the government has decided not to launch a support programme – which had been in development since 2009 – for troubled mortgage borrowers. The Ministry of Finance stressed that this programme was the best that it was able to offer. However, after failing to receive support, Finance Minister Einars Repse called for its cancellation.

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Luxembourg

Recent legislation has amended the Collateral Act. The act has always been a lender-friendly implementation of the EU Collateral Directive and, in general, it remains favourable to creditors in insolvency situations and other contexts. However, all stakeholders should be aware of the insolvency aspects of collateral arrangements.

Parliament has passed a new law which amends the Collateral Act. It seeks to enhance the legal security of the creditor's position when taking collateral, and to ensure that such collatoral is effective and bankruptcy-remote. Among many other measures, it introduces two new means of perfecting pledges over financial assets.

Excessive risk taking, incentivised by inappropriate remuneration policies, has led to the failure of many institutions. Luxembourg's financial regulator has addressed the issue with circulars that implement the EU Third Capital Requirements Directive. They explain how the proportionality principle applies to remuneration policies and when institutions may disapply certain remuneration obligations.

The Supervisory Authority of the Financial Sector has implemented the European Commission's recommendation on remuneration policies in the financial sector. The regulator's circular on the subject affects members of a bank's administration and management bodies, as well as certain categories of employee whose professional activities have a material impact on the bank's risks.

The passing of the Payment Services Act has implemented the EU Payment Services Directive in Luxembourg. Payment services providers include credit institutions, e-money institutions and payment institutions - a new classification that takes in supermarkets, retailers and public transport companies. The act also makes significant changes to the supervisory structure for such services.

Banks in Luxembourg and around the world have prioritized liquidity risk and risk exposure and have taken steps to improve the quality of their risk management. The Supervisory Authority of the Financial Sector has issued a circular that implements the Committee of European Banking Supervisors' principles on liquidity risk management provisions and the prudential supervision of liquidity risk.

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Macau

Financial intermediaries are professionals who deal directly with clients and advise them on savings plans, investments or insurance protection. These individuals play a crucial role when it comes to choosing financial products. However, the regime regulating such individuals in Macau is much less stringent than the corresponding regimes in Hong Kong and Singapore, leading some to question whether the rules should be tightened for the benefit of consumers.

The Mainland/Macau Closer Economic Partnership Arrangement (CEPA) aims to promote preferential access to the Chinese market for qualifying products, companies and residents of Macau. Supplement IX to the CEPA revised previous measures regarding the trade and investment facilitation sector in order to strengthen this area. The supplement takes measures to improve access to the banking and financial sectors.

Malaysia

Amendments have been made to both Schedule 1 and Schedule 2 of the Anti-Money Laundering Act 2001 to increase the types of institution covered by the act, as well as the number of offences. Over 1,300 suspicious transactions have so far been reported under the act, but there have been no prosecutions.

The introduction of the Payment Systems Act 2003 is in line with recommendations in the Financial Sector Master Plan, which include the adoption of a flexible, proactive and effective regulatory framework to oversee the payments system and improve its efficiency.

In its Annual Report 2002 the Central Bank of Malaysia announced that the exchange controls regulations have been liberalized in an effort to complement and boost other macro-economic initiatives and stimulate the economy, particularly domestic growth and foreign direct investment.

The Malaysian Ministry of Finance recently published its 2002/2003 Economic Report assessing the performance and prospects of the Malaysian economy. Generally, the domestic banking sector has recovered well from the economic crisis. Monetary policy for 2003 is likely to focus on supporting private sector initiatives, dynamism and growth to further accelerate the economy's recovery.

Islamic banking in Malaysia is set to expand on a global basis as the Central Bank of Malaysia formulates policies and measures to increase the capacity and capability of Islamic banking players.

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Malta

The Financial Services Authority recently announced a review of certain criteria regarding the licensing of credit institutions and insurance companies. The rationale for these changes was the recent global financial crisis, which resulted in increasing demands on regulatory authorities to maintain financial stability, and the widening of the grounds for recourse under the bank depositor compensation scheme.

The recent financial crisis has accentuated the importance and relevance of sound and robust internal governance systems for credit institutions. The general framework of internal governance applicable to credit institutions licensed in Malta must therefore be considered, with companies ensuring that their internal governance systems are subject to the necessary scrutiny.

The Malta Financial Services Authority (MFSA) recently published a consultation document proposing amendments to the Financial Institutions Act and a new financial institutions rule, setting out the changes to the Maltese regulatory framework. The MFSA plans to regulate electronic money institutions under the lighter and more flexible regime of the Financial Institutions Act as compared to the Banking Act.

The Malta Financial Services Authority recently published the results of the 2010 independent assessment of its regulatory activities, including banking. The assessment also considered the authority's compliance with the Basel Core Principles for Effective Supervision. This update summarises the main findings.

The Central Bank of Malta and the Malta Financial Services Authority recently published the results of the stress-testing exercise performed on Bank of Valletta plc. This extensive exercise, coordinated by the Committee of European Banking Supervisors, aimed to gather information and assess the resilience of the EU banking system to possible adverse economic development.

The Malta Financial Services Authority has signed a memorandum of understanding with the China Banking Regulatory Commission. The memorandum will enhance cooperation in the sharing of information and the area of banking supervision. Two new banking rules were also recently enacted: one on the prudential assessment of acquisitions and increases in shareholdings, and one on outsourcing.

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Mexico

An executive order promulgating the Federal Act to Prevent and Identify Illegally Funded Transactions was recently published in the Federal Official Gazette. The purpose of the act is to detect and investigate activities and transactions involving resources that have been illegally obtained.

One of the main purposes of the Basel III agreement is to improve the regulatory framework of banks and strengthen the global financial system. Although Basel III will not become effective until 2013, Mexico intends to implement its guidelines during the second semester of 2012. This is largely due to the favourable conditions prevailing in the Mexican banking system.

An executive order has amended several provisions of the Auxiliary Financial Institutions Law to impose rules for non-regulated multi-purpose financial institutions, money exchange centres and other entities with respect to money laundering and terrorism financing. The amendments also create the legal concept of a 'money transmitter'.

A decision has published in the Official Gazette that establishes the procedure for making and annotating records in the Personal Property Security Registry. It is intended to allow all new filings, annotations, terminations and notices regarding the registry to be entered digitally using specific forms.

The financial authorities have been systematically collecting information on cash transactions in US dollars within Mexico's financial system. Their analysis has revealed a considerable volume of excess US dollars - potentially originating from illegal activities - being held in cash by financial entities. Several additional control measures for dollar cash transactions have now been published.

Although only a minority of its citizens have access to banking services, Mexico has a fast-growing mobile phone industry. The National Banking and Securities Commission has introduced a new concept – the mobile banking agent management company – and has set out a comprehensive system for branchless banking services.

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Morocco

The much-anticipated Anti-money Laundering Law, which had been in draft form since 2005, was adopted unanimously by the Chamber of Counsellors. The provisions of the law were inspired by international norms, as well as recommendations from international financial institutions.

Mozambique

The Bank of Mozambique has approved new regulations setting out a new legal framework which reflects the dynamics of the modern Mozambique Interbank Money Market, and which introduces new means of communication between the Bank of Mozambique and the institutions authorized to participate in the market.

Mozambique recently enacted legislation that aims to curb money-laundering activities, continuing a trend towards making its financial system more modern and transparent. While it is too soon to draw conclusions as to whether the new legislation will be enforced successfully, the initial signs are encouraging.

Netherlands

In a recent letter to Parliament, the minister of finance outlined the possible introduction of legislation that would force banks to separate their commercial banking, investment banking and proprietary trading activities if they were combined in a single banking organisation or group. The plan follows the adoption of similar rules in the United Kingdom and the United States.

There are likely to be a number of key developments in legislation and compliance to be handled by banks in the Netherlands in 2012. For example, at the start of the year a number of amendments to the Act on Financial Supervision and certain lower government decrees will enter into force to meet the implementation requirements of the EU Capital Requirements Directives II and III.

With the introduction of the revised EU Capital Requirements Directive (CRD IV), European banks and investment firms will be subject to a new set of capital requirement rules. In order to address uncertainties arising from the fact that CRD IV has not yet been adopted and transposed into the law of the EU member states, the Dutch Central Bank has published further guidance on the policies in this area.

The Regulation of the Dutch Central Bank Liquidity Act on Financial Supervision 2011 represents a significant step forward in shaping comprehensive regulations for liquidity risk management in the Netherlands. According to the Dutch Central Bank, it was introduced to address the fact that although certain assets were appraised as sufficiently liquid, the banks did not actually have the requisite liquidity when markets collapsed.

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New Zealand

The deputy prime minister has recently been promoting the establishment of a New Zealand owned bank to provide branch services nationwide. It is being coined the 'People's Bank' or 'Kiwi Bank'.

Lenders in New Zealand have traditionally faced uncertainty about their acceleration rights when secured by a mortgage of land as well as by a debenture. A recent decision has held that a collateral mortgage will not prevent the acceleration of a loan, so the lender's position will not be weakened by having collateral security over land (as opposed to having a debenture alone).

The Reserve Bank of New Zealand has announced possible changes to the rules under which certain overseas-owned banks operate in New Zealand. The change would require that some branches of foreign banks operating in New Zealand become New Zealand subsidiaries.

Personal property security legislation, coming into force in April 2000 will radically alter the security for personal property other than land. This will have international as well as domestic repercussions.

Personal property legislation will not be enacted until next year, due to election issues taking priority. The act will replace current legislation with a more comprehensive system. Modeled on Canadian law, it will require both foreign and domestic lenders with security in New Zealand to reconsider their position.

Nicaragua

The General Law on Banks, Non-banking Financial Institutions and Financial Groups regulates the establishment of branches of foreign banks. The application for the establishment of a branch must be filed before the Superintendency of Banks, which must approve or deny it within 120 days.

Nigeria

Zenith Bank recently established its global depository receipts programme on the London Stock Exchange. This transaction highlighted the increasingly vibrant nature of the Nigerian banking sector, but also revealed certain grey areas related to the regulatory framework for global depository receipts programmes and afforded the Nigerian Central Bank the opportunity to make some clarifications.

The president has suspended the introduction of the N5,000 banknote, which was due to be launched as part of a Central Bank currency restructuring exercise. The decision has led to a discussion about the legality of the president's power to approve and suspend recommendations made by the Central Bank's board of directors regarding currency denominations.

The Central Bank of Nigeria's examination of the banking sector in 2009 began a process that led to the assets and liabilities of three Nigerian banks being transferred to bridge banks. The appointment of two consortia of advisers by the Asset Management Corporation of Nigeria (AMCON) marks the first step towards AMCON's divestment of its interest in the bridge banks, as it considers its most viable exit options.

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Norway

In 2012 the Ministry of Finance asked the Norwegian Financial Supervisory Authority (NFSA) to evaluate the system for fixing the Norwegian Interbank Offered Rate (NIBOR). The NFSA recently delivered its findings, concluding that it had found no evidence that NIBOR has been manipulated or that there had been attempts to manipulate it; however, it could not confirm that manipulation had not taken place.

Under Norwegian civil disputes legislation, it is a general rule that a party may not grant power of attorney to another party to represent it. The main rule is that the party wishing to obtain a judgment must appear as a party. However, bondholders' trustee Norsk Tillitsmann has tested this general rule by suing bond issuers as a party acting on behalf of bondholders. The Oslo City Court dismissed the lawsuit.

The deposit guarantee scheme, which covers aggregate deposits of each depositor up to Nkr2 million, is mainly funded by member institutions through an annual fee. However, this fee is not paid if the guarantee fund's own capital exceeds the minimum legal requirement. The Ministry of Finance recently proposed to abolish the use of the guarantee fund's upper limit to establish an exemption from paying the annual fee.

Until recently, Norwegian credit institution Eksportfinans ASA administered the government-supported export credit scheme and provided fixed-rate loans to buyers of capital goods – so-called commercial interest reference rate loans. Under the amended Capital Requirements Directive, the Ministry of Finance determined changes to the regulations concerning capital requirements and large exposures.

When dealing with buy-out and cross-border transactions, lenders often encounter financial assistance issues in relation to a proposed guarantee and security package, which may result in the proposed guarantee or security being refused or granted with limitations. If recent proposals are adopted, part of the uncertainty that exists will be removed – to the advantage of lenders.

Regulatory body Finanstilsynet has reported that Norwegian financial institutions enjoyed good results in the first half of 2011, but that uncertainties in the financial markets have resulted in a more challenging liquidity situation for Norwegian banks. They are also believed to be better prepared to weather market turmoil than they were before the financial crash of 2008.

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Oman

The use of guarantees to support debt obligations is reasonably widespread in Oman. A recent amendment to the Law of Commerce, which sets out the legal framework regulating guarantees, allows a guarantor of a personal loan to request the inclusion of a condition in the guarantee to the effect that the bank cannot claim payment under the guarantee until it obtains a judgment against the principal debtor.

Panama

The Superintendency of Banks of Panama recently adopted an agreement obliging all general and international licensed banks in Panama to submit to reviews by credit rating agencies. Only agencies which comply with the fundamentals of the code of conduct for credit-rating agencies set forth by the International Organisation of Securities Commissions are acceptable for the purposes of compliance with the agreement.

As of late 2009, Panamanian banks are obliged to comply with amended capital reserve requirements. The banking law requires that general licence banks (ie, banks that are licensed to engage in all kinds of domestic and international banking transactions in Panama) maintain an adjusted capital of no less than 8% of risk-weighted assets and
off-balance sheet items.

Following steps taken by the US financial authorities, Panama's banking regulator recently formally intervened in Stanford Bank (Panama) SA, a branch of Stanford International Bank. This is the first time that the regulator has exercised its intervention powers under the recently reformed banking law.

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Paraguay

A new law aims both to prevent and to limit systemic risks in light of the country's erratic financial history. In so doing, it provides for a series of mechanisms to enable the Central Bank and the president to take drastic measures where necessary. It balances such powers by requiring these bodies to report all such actions to Congress.

Under the Banking Law, local banks alone may acquire the stock of foreign banks and financial entities. However, a new Central Bank resolution has extended the right to acquire to other financial entities.

Including: Central Bank; Legal Framework; Commercial Banking Structure; Incorporation and Minimum Capital; Foreign Bank Branches; Subsidiaries; Reserve Fund; Profit Distribution; Restrictions; Money Laundering.

Poland

Some of the provisions of the amended Banking Law will become binding upon Poland's accession to the European Union. Regulations relating to credit risk concentration, shareholders equity and consolidated supervision will apply from 2002.

The size and number of Polish syndicated loans is increasing annually. The main beneficiaries of syndicated loans are the major Polish companies, particularly shipyards and the telecommunications and energy industries.

The Act Amending the Bonds Act provides long-awaited clarification on the issuing of bonds by banks. Previous discrepancies between the Banking Law Act and the Bonds Act meant that a bank had no legal means of issuing bonds in accordance with the provisions of the latter. The amending act also introduces significant changes concerning the entities entitled to issue bonds.

New legislation aimed at protecting consumer rights will affect banking agreements that are conducted outside the bank's premises and has implications for standard forms and contractual provisions.

Portugal

The Bank of Portugal has issued a notice on the applicability to payment institutions of a number of previously issued regulatory notices. Among other things, payment institutions must comply with its notices on uses of own funds, provision for credit and other risks, the provision of client information and the requirement to prepare consolidated and non-consolidated financial statements.

The Council of Ministers has approved a legislative decree that transposes the EU Payment Services Directive into Portuguese law. In addition to defining the categories of entity that may provide payment services, the decree stipulates prudential requirements for such entities and requires them to guarantee the transparency of the conditions and information requirements relating to their services.

As a result of a new legislative decree, the legal framework governing banking practices for the granting and renegotiation of mortgages - which covers interest calculation, early repayment, associated sales and duties of information and disclosure - now applies to other loans secured by the same property.

A new legislative decree sets out the information duties of credit institutions that wish to link life insurance contracts to mortgages. It reinforces consumer protection measures by establishing the required minimum content of life insurance contracts that may be offered to persons seeking a mortgage.

The Portuguese legislature has once again reacted to the problems in the financial sector, introducing changes to promote the disclosure of information about board-level remuneration in public-interest entities, including in the banking sector, and tasking the Bank of Portugal to supervise the credit institutions' lending to certain borrowers.

The Bank of Portugal has published details of a regulatory initiative that would impose greater duties on credit institutions to disclose the list of fees and interest rates that they levy on products and services. A notice and instruction set out details of the information required and the manner of its presentation.

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Russia

One of the most recent and far-reaching legislative changes is the revision of pledge and mortgage laws, which significantly amends the procedure for a levy of execution against pledged and mortgaged property and increasing notary fees. Among other things, the new law restricts the use of the procedure for levying execution without recourse to the courts.

After a long road to adoption, the Law on the National Payment System focuses on the regulation of e-money and payment systems, as well as dealing with issues related to money transfers. Among other issues, it addresses the global nature of payment operations and seeks to localise certain payment system functions.

The Resolution on Certain Matters Relating to Enforcement of Legislation on Pledges reviews court practice in the application of pledge and mortgage legislation and examines a number of controversial issues. However, it does not cover all situations - the issue of providing security in favour of an agent, such as a bank in a syndicated lending arrangement, remains unresolved.

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Singapore

The Monetary Authority of Singapore (MAS) recently issued a revised MAS Notice 757, setting out further measures to liberalize its policy on the non-internationalization of the Singapore dollar. Two key changes were announced that directly affect banking activities.

The Monetary Authority of Singapore has announced changes to the capital adequacy ratio for Singapore-incorporated banks. The authority has stated that it is ready to allow banks further flexibility in managing their capital.

The Monetary Authority has announced its approach to the licensing, regulation and supervision of internet banking in Singapore. The authority feels that the risk considerations inherent in internet banking are neither new, nor fundamentally different from those found in other forms of banking. Therefore, the admission criteria for new licence applicants will apply across the board.

The Monetary Authority of Singapore has announced new regulations requiring the separation of financial and non-financial activities of Singapore banks, as part of an ongoing reform initiative to strengthen the domestic banking sector.

The Monetary Authority of Singapore has awarded various foreign banks an assortment of privileges and licences.

The monetary authority wants the country’s commercial banking industry to be internationally competitive. It has therefore begun a five-year programme to liberalize the market, improve corporate governance, and allow greater foreign shareholding.

Slovakia

On May 1 2006 amendments to the Banking Act came into force imposing new information duties on banks. For example, a bank must now display on its website and in its branches intelligible information for the public regarding the terms and costs of any banking service.

A new law aims to strengthen the rights of creditors in bankruptcy proceedings involving financial institutions, including Slovak banks and branches of foreign banks. However, a bank may be declared bankrupt only by the relevant supervisory body or by a special administrator, and Slovak courts have no jurisdiction to declare bankruptcy in the case of a bank based in another EU member state.

A recent amendment to the Securities and Investment Services Act has created a select group of entities, including banks, which enjoy privileged status when a pledge over securities is created in their favour. In particular, enforcement of the pledge is more flexible.

Under the Banking Act, banks and branches of foreign banks can establish a Joint Banking Register that will facilitate the preparation, conclusion and performance of clients' trades, and evidence the activities of banks and branches of foreign banks. After the register is established, banks and branches of foreign banks will be authorized to exchange information on clients and their trades.

From January 1 2006 the National Bank of Slovakia will supervise the financial market in the spheres of banking, capital markets, insurance and retirement savings. Authorizations and licences issued by the Financial Market Office will remain in force and effect, and will be considered to have been issued by the National Bank.

Slovakia has amended the Banking Act to introduce a system of consolidated banking supervision. The supervision will be carried out by the National Bank of Slovakia in order to limit the risks to which banks are exposed as a result of their participation in a consolidated or subconsolidated group. The amendment also sets out new regulations for multinational banking holdings.

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Slovenia

According to recent amendments to the Notaries Act, mortgage agreements must be notarized (rather than merely authenticated) by a public notary located in the vicinity of the mortgaged real estate. The amendment aims to level the playing field between notaries located in Ljubljana, where most major banks and other financial institutions are seated, and those in more remote regions.

South Africa

The South African regulator of banks is committed to implementing Basel II in full. The Banks Amendment Bill, which mainly contains amendments required by Basel II, aims to create a sufficiently robust regulatory environment to enable the registrar of banks to regulate banks, controlling companies and banking groups on a standalone, cross-border or consolidated basis.

A large portion of the South African population has no access to banks or conventional bank accounts. This mass market of 'unbanked' people is being brought into the banking system by offerings of cellular-phone banking products. However, requirements under money-laundering and communications regulations will impede the provision of cellular-phone banking services to the unbanked population.

In any financing transaction, banks and other lenders seek to protect their financial exposure by taking some form of security. A 'contract of guarantee' has been defined as a "collateral engagement to answer for the debt, default or miscarriage of another person". It imposes an absolute liability on the guarantor.

Spain

The Bank of Spain recently made public its calculations of the additional capital needed by a number of banks in order to comply with the provisions of Royal Decree-Law 2/2011 on the strengthening of the Spanish financial system. The list comprises 12 banks that must increase their capital to a total aggregated amount of €15.15 billion. However, in the opinion of certain independent analysts, Spanish banks still need much more capital.

In recent years Spanish saving banks have suffered, particularly as a result of massive lending to real estate developers during the housing boom. As an alternative way of supporting savings banks without affecting their regional nature and social character, the Spanish Central Bank set up the institutional system of protection, according to which the liquidity and credit risk of different financial institutions is shared among them.

In early 2009 Parliament approved a draft of the Payment Services Law. It will implement in Spain the EU Directive on Payment Services, the aim of which is "to establish at Community level a modern and coherent legal framework for payment services". The Spanish implementation of the directive will remove the barriers which have restricted the complete development of the Single Euro Payments Area.

In light of the current economic climate, financial entities with exposure to Spanish borrowers which are suffering the consequences of the credit crunch must analyze the resources that they have in their facility agreements and the terms under which the relevant security scheme was set in place.

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Sweden

The Supreme Court recently ruled on the liability of two individuals who had assisted in a scheme to defraud Santander. The defendants had signed an agreement in which they falsely confirmed delivery of a boat and a cash payment. Santander sued for damages. The court's opinion was divided, but it was decided that the defendants should pay one-fifth of Santander's loss.

The Basel III accord aims to manage liquidity risk in financial institutions by, among other things, introducing a liquidity coverage ratio. The Swedish Financial Supervisory Authority is one step ahead, and has already adopted new regulations that require Swedish financial institutions to adhere to a liquidity coverage ratio designed to measure how much high-quality liquid assets are necessary to manage a situation of severe stress.

A recent ruling from the Svea Court of Appeals has sparked a discussion regarding the drafting of market-disruption clauses in financing agreements. Such clauses tend to grant the bank or credit institution a right to raise or replace the reference rate in certain circumstances, but do not normally include a corresponding obligation to lower the rate should the refinancing costs decrease.

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Switzerland

Overview
Including: Sources of Law; Regulation and Supervision of Financial Markets; Swiss Bankers Association; Banking Secrecy; Due Diligence Convention

The Federal Supreme Court recently rendered two landmark decisions regarding the extension of banking clients' options to obtain information, including internal documents, from banks. The court specified and expanded the information that must be passed onto banking clients. It also showed that the Federal Act on Data Protection could help clients looking for information held by a bank upstream of judicial proceedings.

The Federal Supreme Court recently rendered a landmark decision regarding the restitution to banking clients of commission received from funds or producers of financial products by banks acting as asset managers for their distribution services. In reaction, the Swiss Financial Market Supervisory Authority issued a newsletter on supervisory measures addressed to banks.

The Federal Supreme Court recently rendered two decisions regarding banks' duties of care and fidelity in the distribution of financial products. The court confirmed its established case law, but provided interesting insights into particular issues linked to the distribution of capital-protected structured products within the framework of an advisory relationship.

The Swiss Financial Market Supervisory Authority recently circulated a complete draft revision of the Ordinance on the Bankruptcy of Banks and Securities Dealers. The review was deemed necessary as a result of a series of amendments to the Federal Banking Act regarding the protection of depositors. However, the amendments to the act do not completely achieve the government's objective of full protection for depositors.

Switzerland and the United Kingdom have signed a cooperation agreement on taxation and financial markets. The agreement aims to regularise untaxed assets while preserving Swiss banking secrecy, and to curb the extent to which information is exchanged in relation to tax matters.

Switzerland and Germany have signed a cooperation agreement regarding the area of taxation and financial markets. The agreement aims to regularise untaxed assets while preserving Swiss banking secrecy, and to curb the extent to which information is exchanged in relation to tax matters. The agreement covers assets held by the clients at banks, brokers, PostFinance and asset managers in Switzerland. However, the agreement will mainly concern banks.

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Syria

The Court of Cassation has given a green light to the lower courts to refrain from enforcing unilateral government decisions which are in breach of contracts concluded between public agencies and private parties. The ruling ends a dispute between the state-owned Commercial Bank of Syria and the Ministry of Economy and Foreign Trade on one hand, and a number of private-sector importers on the other.

Thailand

A number of bills have been drafted that will, when enacted, reform the financial sector in Thailand. Although these bills were drafted in order to comply with the IMF’s Assistance Programme, the government has decided to exit the programme.

The Ministry of Finance has issued a report that summarizes the measures taken by the government to improve the foundation for long-term growth, including legal reform, privatization, tariff reform and bond market development.

Turkey

The Banking Regulation and Supervision Agency recently amended the Regulation Regarding Banks' Procurement of Support Services. The regulation sets out the principles and conditions for providing support services, as well as requirements for support service providers and service agreements signed between such providers and banks.

Once the new Code of Obligations enters into force, Turkish banks will become reluctant to accept suretyships (the most common type of personal guarantee under Turkish law). Turkish banking practice has been always to obtain the suretyship of all shareholders for loans granted to companies. The new code aims to eliminate the current tendency to provide suretyship against loan debts of bank clients

When the New Code of Obligations enters into force, Turkish banks will have to put remarkable effort into reviewing their standardised terms of contract. The rules on standardised terms of contract in the new code are mostly adopted from several EU regulations and directives regarding standardised and unfair contract terms. The new code brings a three-stage supervision process to the standardised terms of contract, which will also protect corporate clients.

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Ukraine

Ukrainian legislation permits mortgage lenders to enforce mortgages through the courts. However, in practice, the realisation of a mortgagee's rights requires determination and attention to the details in a statement of claim, which must be mirrored in the court's decision. Other­wise, a creditor's rights to the enforcement of a mortgage will remain nothing more than a clause in a contract.

The Law on Amending Certain Laws Regulating Relations between Creditors and Consumers of Financial Services recently entered into force. The law introduced certain changes concerning the activities of banks and financial institutions. Other provisions will affect loan restructuring, security enforcement, insolvency procedures and liability of borrowers' legal successors.

The National Bank of Ukraine has amended the regulations on licensing, providing an exemption for payments by Ukrainian sureties to foreign lenders in connection with loans provided to Ukrainian borrowers. However, it is unclear whether the change affects 'borrowings', which are distinct from loans under Ukrainian law and are frequently used as a means of financing between affiliated foreign entities.

Recent amendments to the Law on Banks and Banking Activities will change the rules of disclosure surrounding bank secrecy, including the disclosure of clients' personal data to certain third parties, such as auditors, legal counsel and debt recovery agents. Although this reduces the legal risks for banks, it could result in the further unrestricted transfer of personal data in violation of the client's privacy rights.

Amendments to banking legislation establish new rules on the acquisition of substantial interest in banks. However, they do not appear to reduce the notoriously long list of documents that must accompany the acquisition notice. Transactions involving a substantial interest in a Ukrainian bank may be suspended until the National Bank of Ukraine approves the necessary procedure under the new rules.

Although recovering, the Ukrainian banking sector is not yet fully back on track. Consolidation is a logical step for banks that are controlled by the same group, but it could be greatly simplified by procedural changes from the two main regulators. A few years ago there was a boom in acquisitions of Ukrainian banks by foreign banking groups; once again, foreign investors could have a key role to play.

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United Arab Emirates

Federal Law 8/2004 concerns the formation of financial free zones in the United Arab Emirates. The law is intended to facilitate the launch of Dubai International Financial Centre, the region's first world-class onshore financial centre.

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United Kingdom

For leveraged and crossover capital structures that include secured bank debt, bondholders often look to share guarantees and security on a pari passu (ie, equal) basis with the banks. This update analyses the key intercreditor issues where the capital structure of a borrower group contemplates both a secured bond (termed a 'pari bond') and a secured bank facility by reference to a single pool of assets.

The Emergency Budget included plans for a banking levy that will be payable by UK banks, banking groups and building societies, as well as UK branches or subsidiaries of foreign banks or banking groups. The impact of the measures may restrict the profitability of global banking groups, in particular when added to the various higher capital and liquidity charges due in the next few years.

The chancellor of the exchequer's Mansion House speech provided further details of the government's proposals to reform the financial services sector. Among other things, the chancellor proposes to create a subsidiary of the Bank of England to provide micro-prudential supervision of banks, investment firms, building societies and insurers, and to establish an independent commission on the banking industry.

The coalition government has launched its five-year policy programme. Among other measures, it proposes a banking levy, robust action to tackle unacceptable bonuses in the financial sector and the establishment of an independent commission to investigate whether there should be a separation between retail banking business and investment banking business.

The Financial Services Act confers a number of new powers and duties on the Financial Services Authority (FSA) which are likely to have a far-reaching effect on banks and other financial institutions. Many of these new powers and duties require the FSA to publish rules or statements of policy, on which the FSA is now consulting.

New regulations have removed the requirement for banking companies and the holding companies of credit institutions to disclose details of individual loans to directors in their accounts. Instead, banks will be required to disclose the aggregate total amount of loans, guarantees and credits to their directors, with no individual breakdown by director.

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USA

Overview
Including: Basel IA and Basel II; Correspondent and Private Banking Accounts; Revised Examination Manual; Deposit Insurance Reform; Industrial Loan Companies; Cross-Border Wire Transfers.

The Consumer Financial Protection Bureau (CPFB) has released a final rule implementing the remittance transfer provisions in Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule provides important new flexibility for remittance transfer providers, especially in open-loop environments such as international wire transfers. The CFPB also extended the effective date of the final rule to October 28 2013.

The Consumer Financial Protection Bureau (CFPB) recently issued guidance stating that it intends to use its regulatory tools, including enforcement lawsuits, to address discriminatory practices in auto lending. The CFPB bulletin represents an important development for the exercise of its fair-lending authority, as well as its authority over auto loans.

The Financial Crimes Enforcement Network recently issued guidance on how the Bank Secrecy Act applies to users, administrators and exchangers of 'convertible virtual currency'. Companies engaged in activities involving such currencies should assess the impact of the guidance on their obligations. Administrators and exchangers of such currencies should re-evaluate their status under money transmitter licensing laws.

The Federal Financial Institutions Examination Council has issued a request for comment on proposed guidance entitled "Social Media: Consumer Compliance Risk Management Guidance". Once finalised, institutions will be expected to use the guidance in developing and implementing risk management policies and practices to manage and control risks associated with social media.

The Federal Reserve Board has issued a notice of proposed rule making which would implement the enhanced prudential standards and early remediation requirements in Sections 165 and 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for certain foreign banking organisations (FBOs). The new rules are designed to respond to vulnerabilities in FBO activities observed during and after the financial crisis.

The Consumer Financial Protection Bureau has released a proposed rule and request for comments outlining a limited set of revisions to its previously published final rule on international money transfers, and an extension of the date on which the rule would become effective. The proposal would amend the rule implementing Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act on remittance transfers.

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Venezuela

Recent legislative developments include a resolution by the Superintendency of Banks and other Financial Institutions that changes the minimum capital requirement for loan and savings institutions.

According to the new Enabling Law the president may issue decrees that have the same force as those passed by the National Assembly. In the banking sector, changes are permitted regarding the development of small businesses, savings banks, the Economic and Social Development Bank and the External Commercial Bank.

This update discusses recent developments which include a new regulation on foreign exchange intermediation, and a new bill to overhaul the Venezuelan Investment Fund in order to encourage investment in low-income areas and improve the country's economic development.

The Venezuelan Bank Superintendency has issued a resolution contemplating new specifications for trust agreements to be executed by financial institutions. This resolution is intended to prevent institutions having to assume risks inherent in financial intermediation.

Vietnam

The State Bank of Vietnam (SBV) has set new limits on spot, swap and forward transactions. In respect of US dollars, the buy/sell rates set by banks may not exceed 0.25% of the average interbank foreign exchange rate announced by the SBV for the previous transaction day. Banks are free to decide the buy/sell rates in respect of other foreign currencies.

The governor of the State Bank of Vietnam issued Decision 546/2002/QD-NHNN to allow credit institutions freely to agree dong lending rates with their customers. Previously, credit institutions had to set lending rates based on the monthly basic interest rate stipulated by the State Bank of Vietnam.

The State Bank of Vietnam has issued a new decision announcing a new basic rate that credit institutions must use to determine their dong lending rates to customers.

A recent decision amends the percentage of foreign currency that organizations are mandated to sell to banks. Certain individuals and entities must immediately sell at least 30% of foreign currency gained from so-called 'vang lai' (broadly non-capital) incomes to designated banks in Vietnam.

To date, seven banks (including the State Bank of Vietnam (SBV) and state owned and joint stock banks) have participated in the interbank electronic payment system. The SBV expects this number to increase in the near future.

The State Bank of Vietnam has intervened to alleviate the concerns of foreign investors by issuing Decision 218/2002/QD-NHNN, which introduces a mechanism allowing qualified 'highly important' projects to convert dong revenue into US dollars and to gain access to US dollars when they cannot be obtained from commercial banks.

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