Legal Business Blogs

‘The time lag will vary’: New research shows litigation against global banks up 37%

Figures published by City firm RPC have shown a marked 37% increase in litigation against the largest 50 global banks in 2016, with the rates rising year on year.

The percentage incline accounted for a jump from 115 to 157 cases in which banks were named as the defendant in High Court cases. The statistics were based on an analysis of court hearing lists.

UK banks made up a majority of the 784 High Court cases involving the top 50, with Barclays, HSBC, Lloyds and Royal Bank of Scotland (RBS) accounting for 67%, or 530, cases. RBS appeared as the defendant in 118 cases, higher than any of its UK counterparts with Barclays just behind with 106.

Notably, RBS is in the midst of a high-profile £4bn group action brought against it by Signature Litigation on behalf of around 27,000 shareholders. The claim relates to a 2008 rights issue in which RBS sold its shares at £2 per share, with the claimants alleging the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions. As reported earlier this week, the costs estimate in the dispute for Herbert Smith Freehills (HSF) client RBS has now reached £125m.

Clifford Chance commercial litigator Simon Davis commented: ‘Litigation follows bouts of financial misery. The reasons for the time lag will vary. What is clear is that banks and their shareholders will look forward to the time when the legacy of the financial crisis is behind them. People forget that the people who foot the bill for all this is the bank’s shareholders.’

HSF banking litigation partner Damien Byrne Hill (pictured) added: ‘I would attribute the rise to a range of factors but, above all, to the financial crisis of 2008. For that reason I would not expect the rise to continue, because the bulk of that cohort of cases will have reached trial by the end of 2017.’

Read more in: ‘The end of the tunnel – litigation and regulatorychallenges in financial services’