The interest rate mis-selling scandal took another twist recently when a landmark legal case was dismissed by the High Court. Had the case been successful it would have challenged the banks’ £2.1bn compensation scheme set-up to settle inappropriate interest rate swaps – however the decision only brings temporary relief for the banks.

Background

In a move signaling the end of 6 years of litigation, the bankruptcy trustee for the holding company of failed mortgage lender IndyMac Bancorp, Inc. (“Bancorp”) negotiated a settlement agreement with the FDIC regarding the ownership of nearly $60 million of tax refunds.  If approved by the bankruptcy court, the settlement would resolve one of the most highly publicized tax refund disputes involving the FDIC, a number of which arose in the wake of 2008’s financial crisis.

Under the Bankruptcy Code, a reorganization plan may be approved if (1) proposed in “good faith” under  § 1129(a)(3), and (2) accepted by at least one class of creditors whose interests are impaired by the plan, see 11 U.S.C. § 1129(a)(10). In Village Green I, GP v. Fed.

Most lawyers are generally familiar with the concept of a floating lien under the Uniform Commercial Code. A secured creditor takes a lien in a collateral category that changes from time to time as items are added or subtracted. A common example is a working capital loan, in which financed inventory is produced and sold, then becoming an account, which is collected to provide the funds to produce new inventory.  A secured creditor may perfect a lien in the changing mass of inventory and receivables, as each category exists from time to time.

When can a bank be at risk of unknowingly receiving a fraudulent transfer? How much information does a bank need to have before it is on “inquiry notice”? A recent decision from the Seventh Circuit Court of Appeals highlights the risks that a bank takes when it ignores red flags and fails to investigate. This decision should be required reading for all lenders since, in the matter before the Seventh Circuit, the banks’ failure to investigate their borrower’s questionable activity caused the banks to lose their security and have their secured loans reduced to unsecured claims.

The insolvency administrators (hereinafter, “the Plaintiff”) of the company Santa Teresa Materiales de Construcción S.L. (hereinafter “the Company”) sought the declaration of invalidity of the transaction undertaken by the Banco Santander S.A. (hereinafter, “the Bank”) classified by the Plaintiff as debt offset.

Hypo Group Alpe Adria AG, an Austrian banking group, was nationalized by the Austrian government in 2009 in order to avert a bank collapse. The Austrian province of Carinthia owned the bank until 2007 and the guarantees given by Carinthia for the bank’s debt still amount to several times its annual budget, which has made the winding-down process more complicated because sharing the losses with bondholders would lead to significant claims against Carinthia.

In FDIC v. AmTrustFinancial Corporation, the Sixth Circuit considered the results of the very first trial in the nation under Bankruptcy Code Section 365(o). Section 365(o) is an infrequently litigated provision of the Bankruptcy Code that requires a party seeking Chapter 11 bankruptcy protection to fulfill “any commitment . . .

When can a bank be at risk of unknowingly receiving a fraudulent transfer?  How much information does a bank need to have before it is on “inquiry notice”?  A recent decision from the Seventh Circuit Court of Appeals highlights the risks that a bank takes when it ignores red flags and fails to investigate.

In re Sentinel Management Group – The Decision

On 13 July 2010 Germany's Federal Ministry of Justice and Finance published a discussion draft of an Act for the Restructuring and Orderly Liquidation of Credit Institutions, for the Establishment of a Restructuring Fund for Credit Institutions and for the Extension of the Limitation (Restructuring Act).