Finance Focus – Spring 2013

This downloadable issue of Finance Focus from Thomas Cooper features the following items:

  • Finance case law update : High court finds in favour of RBS in interest rate swaps case
  • FCA update (Formerly FSA)
  • LMA updates
  • ISDA updates
  • Change of currency clauses in loan documentation
  • Thomas Cooper News


The Financial Times reported that the Royal Bank of Scotland plc (RBS) has won what is thought to be one of the first High Court rulings on a lawsuit alleging the mis-selling of interest rate swaps.

According to the article, the court dismissed the claim by Paul Rowley, a hotelier, and his business partner, John Green, who alleged that RBS had mis-sold them an interest rate swap in May 2005 as a form of insurance against their existing loan liabilities. The two men were sold the swap after a meeting in 2005 with one of the bank’s commercial managers and an area manager who specialised in interest rate management products.  They “did well out of the swap” until the financial crisis in October 2008, but “they fared very badly under the swap” when interest rates fell to historic lows. They issued legal proceedings in May 2011.

In dismissing the claim, Judge Waksman QC is reported to have said “because of the credit crunch, the ensuing parlous position of RBS, and the taking of the wholly unforeseeable step of increasing margin significantly, it transpired that the protection given by the swap was not complete… but none of that means that the swap was an unsuitable product back in May 2005”. However, he also noted that the case was “highly fact-sensitive” because for the most part it turned on what was said or not said at the meeting or in the period before.

In August 2012, the Court of Session handed down its judgment in the first case in Scotland to deal with interest rate swap mis-selling, Grant Estates Ltd v Royal Bank of Scotland plc [2012] CSOH 133. Again, RBS successfully defended the allegations made against it.


Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013 published.

On 20 March 2013, the Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013 (SI 2013/637) was published on, together with an explanatory memorandum.
The Order, which was made on 13 March 2013, specifies the relevant activities, relevant investments and relevant benchmarks for the purposes of Part 7 of the Financial Services Act 2012 (FS Act). Part 7 of the FS Act creates criminal offences relating to the making of false or misleading statements, or the creation of a false or misleading impression, in connection with a relevant agreement, relevant investment or relevant benchmark. Article 3 of the Order specifies the London Interbank Offered Rate (LIBOR) as the only relevant benchmark.

The Order as made does not appear to differ significantly from the draft Order consulted on by HM Treasury in November 2012.
The Order comes into force on 1 April 2013, which is also the date when the offences created by Part 7 of the FS Act will come into effect.


LMA Update: FATCA riders for primary market documents

The Loan Market Association (LMA) published updated US Foreign Account Tax Compliance Act (FATCA) riders for its investment grade facility agreement.

The 2013 riders replace the 2012 versions (and reflect the end of the FATCA grandfathering period on 31 December 2012, for US-source obligations.

LMA Update: FATCA riders for secondary debt trading documents

The Loan Market Association (LMA) published a second set of riders aimed at helping its members deal with the compliance and tax risks associated with theUS Foreign Account Tax Compliance Act (FATCA).

The LMA published riders for primary market documents in July 2012, which were updated in December 2012.

The new riders are for secondary debt trading documents and address the possible effects of FATCA on payments under the LMA forms of funded and risk participations and standard terms and conditions for par/distressed trade transactions.

This article is filed under:  Publications

About the contributor

  • Grant Eldred Partner

    Grant is a partner and the head of our Finance Group. He specialises in banking law including bilateral and syndicated secured and unsecured lending, trade finance and banking regulation and compliance.

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