Today, the U.K. Treasury announced that it “has taken decisive action to protect the interests of retail depositors and wider financial stability” by placing London Scottish Bank plc in administration.
From 1 January 2016, deposits made by private individuals and small businesses to any authorised firms are protected by the Financial Services Compensation Scheme to a limit of £75,000 (previously £85,000).
In Crowden and Crowden v QBE Insurance (Europe) Ltd[2017] EWHC 2597 (Comm) the Commercial Court found in favour of the Defendant insurer on the disputed construction of an "insolvency" exclusion in a professional indemnity insurance policy. The case is a useful reminder of the approach which the English Courts take to the construction of exclusions in insurance contracts.
1. Background
High Court holds that an Insolvency Exclusion applies in respect of a claim under the Third Parties (Rights Against Insurers) Act 1930 (“1930 Act”) and awards summary judgment accordingly but declines to provide much-needed guidance on insurers’ liability in the case of claims partially settled by the Financial Services Compensation Scheme (“FSCS”).
In the current market turmoil, several banking and insurance names have already had to be rescued by government-brokered packages. It is therefore timely to review what rights institutional investors have in the event of counterparty insolvency. Unfortunately, the picture is complicated, not just because the question of how pension fund investors can get their money back may have an international dimension, but also because governments keep moving the goalposts on the availability and adequacy of compensation schemes.
Where does the claim arise?
High Court holds that an Insolvency Exclusion applies in respect of a claim under the Third Parties (Rights Against Insurers) Act 1930 (“1930 Act”) and awards summary judgment accordingly but declines to provide much-needed guidance on insurers’ liability in the case of claims partially settled by the Financial Services Compensation Scheme (“FSCS”).
The Court of Appeal decision in the Nortel case upheld the High Court ruling that FSD/CN liability is an expense of the administration and therefore ranks ahead of administrators' remuneration, floating charges and unsecured creditors. Much of the press coverage which has followed in the immediate aftermath seems to have assumed that the decision is a victory for "good" pensioners over the "bad" banks.
Proprietary trading. Reuters reported that Latvia, which currently holds the European Union presidency, opposes a proposal that would prohibit European banks from engaging in proprietary trading. (3/31/2015) Proprietary trading.
PRA consults on capital adequacy. The UK Prudential Regulation Authority proposed changes to the PRA’s Pillar 2 framework for the banking sector, including changes to rules and supervisory statements. The proposed policy is intended to ensure that firms have adequate capital to support the relevant risks in their business and that they have appropriate processes to ensure compliance with the Capital Requirements Regulation and Capital Requirements Directive.
Today, the U.K. Treasury announced that it “has taken decisive action to protect the interests of retail depositors and wider financial stability” by placing London Scottish Bank plc in administration.