Legal Business

In-house: Lloyds appoints head of legal for ring-fencing as banks prepare for 2019 deadline

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In-house Lloyds Banking Group
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Former Berwin Leighton Paisner (BLP) corporate partner Frances McLeman has been made head of legal for ring-fencing at Lloyds Banking Group, a prominent in-house appointment made quietly by the bank nearly three months ago.

Since January McLeman has been leading and project managing legal aspects of ring-fencing arising from reforms set to take effect in January 2019; and further coordinates a multi-disciplinary team of over 30 lawyers together with a number of external law firms.

She is understood to be part of the team asking the bank’s core panel firms to pitch for advisory work relating to separating its retail and investment banking operations ahead of the UK’s newly established ring-fencing rules.

McLeman is understood to have been seconded to Lloyds on a temporary basis, initially taking the role of interim head of corporate and M&A legal in 2014, before being moved to project manage the bank’s ring-fencing project in January 2015. Her contract to head legal for ring-fencing was made permanent earlier this year.

McLeman spent 15 years at BLP as a corporate partner where she led both corporate M&A projects and joint ventures. She also oversaw legal aspects of numerous BLP strategic projects including conversion of the firm to an limited liability partnership, the negotiations for a merger with a Russian law practice in 2009, the establishment of the structure for BLP’s Hong Kong office, and additionally led the project team that established its outsourcing arm, Managed Legal Service.

In February Legal Business revealed Lloyds had appointed a specialist sub-panel for commercial mortgage-backed securities work ahead of its global panel review this summer, with US and Magic Circle firms among those taking places, with BLP, K&L Gates, Paul Hastings, Clifford Chance, Allen & Overy, and Ashurst winning spots.

Lloyds did not respond to requests for comment at the time of writing.

sarah.downey@legalease.co.uk

For more on bank ring-fencing see: ‘Like Scotland leaving the UK’: Bank ring-fencing reforms herald big changes’

Legal Business

In-house: Lloyds appoints real estate finance sub-panel ahead of summer global review

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Lloyds Banking Group has appointed a specialist sub-panel for commercial mortgage-backed securities (CMBS) work ahead of its global panel review this summer, with US and Magic Circle firms among those taking places.

The real estate sub-panel took effect in January following a review, with core firms winning places including US firms K&L Gates and Paul Hastings, as well as Clifford Chance, Allen & Overy (A&O), Ashurst, and Berwin Leighton Paisner.

The in-house team chose the firms based on experience in loans and capital markets work. A Lloyds lawyer told Legal Business: ‘Rather than using firm A to do the loans work and then have a separate firm to do the bond work later, you have one firm that understands it completely from day one and can give you the technology and insight to make that process cheaper, economical, and more efficient overall.’

The bank is known to work with firms including CMS Cameron McKenna, Dentons, Osborne Clarke, Taylor Wessing and Charles Russell Speechly for more commoditised real estate work.

Commercial mortgage-backed securities have seen a revival in recent years, as economic growth coupled with rising commercial property prices generated investor confidence in the market. The CMBS market in particular showed promising levels of activity last year with European issuance as of September 2015 at €2.8bn and up on 2014 volumes, according to data from Thomson Reuters. Analysts predict European CMBS issuance for 2016 to be between €5bn and €10bn.

With an annual legal and regulatory spend of about £400m, The bank’s group general counsel Kate Cheetham is also gearing up for a review of its general legal panel this summer, and firms are expected to be notified by October. Those currently part of its ten-strong panel include A&O, Linklaters, Herbert Smith Freehills, DLA Piper, Ashurst, Addleshaw Goddard, Eversheds, Hogan Lovells, CMS and Norton Rose Fulbright.

Lloyds recently requested all of its core panel firms to pitch for advisory work relating to separating its retail and investment banking operations ahead of the UK’s newly established ring-fencing rules.

Previous sub-panels created by the bank include its customer-pay panel with key spots allocated to firms including Hogan Lovells, CMS, Addleshaw Goddard and Osborne Clarke in 2014.

Yesterday (26 February) the UK bank announced its annual accounts for the 2015 financial year, posting an underlying profit rise of 5%, with provisions for legal actions and regulatory matters coming in at £813m, an increase from £521m the previous year.

sarah.downey@legalease.co.uk

For more banking analysis, see ‘Like Scotland leaving the UK’: Bank ring-fencing reforms herald big changes’

Legal Business

UK banking financials: Lloyds, Standard Chartered and HSBC ramp up legal provisions

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With the UK banking reporting season in full swing, Lloyds Banking Group, Standard Chartered and HSBC have all upped their provisions for settlements and legal claims.

Lloyds annual accounts for the 2015 financial year showed provisions for legal actions and regulatory matters came in at £813m, an increase from £521m the previous year. Last year the bank agreed a £117m settlement with UK regulator the Financial Conduct Authority, following its investigation into PPI – a long-running investigation that cost the bank £16bn. The bank also incurred a £837m charge to cover potential fines and compensation claims, of which £720m related to products sold through the branch network.

Lloyds, which posted underlying profits up 5%, continues to battle it out in the English Courts with Visa and MasterCard, as it faces a group action brought by several retailers seeking damages for allegations of ‘overpaid’ interchange fees.

Meanwhile, shares in Standard Chartered suffered a 4% drop on Tuesday (23 February) to a record low of 418.7p, with chief executive Bill Winters calling the bank’s 2015 performance ‘poor’. The bank’s provisions for regulatory settlements and legal claims rose by 6% to $115m, according to its 2015 annual report.

HSBC which saw its underlying profits dip by 7% in 2015, revealed its legal settlements and provisions increased to $1.7bn from $1.2bn the previous year.

HSBC, which has plans to move 10% of its legal team to Birmingham in line with ring-fencing rules, said its costs to achieve a UK ring-fenced bank for 2015 came in at $89m. The bank also confirmed that it is among several firms being investigated by the US Securities and Exchange Commission over its hiring practices in Asia.

RBS is expected to report tomorrow, having already warned it will post its eight successive full-year loss in 2015 after stating a £3.6bn loss from pension costs and new misconduct charges. The bank said in January it has set aside £2bn for past scandals including claims relating to mortgage-backed securities and payment protection insurance.

Last month the major US banks released fourth quarter 2015 results, with Goldman Sachs blaming poor profits on legal costs, while others benefiting from a decline in legal expenses included Bank of America and Morgan Stanley.

sarah.downey@legalease.co.uk

For more see: ‘The end of the tunnel – litigation and regulatory challenges in financial services’

Legal Business

RBS dispute: Mishcon de Reya instructed as Lloyds Bank claimants break away from shareholder group

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Several Lloyds Banking Group institutional clients have instructed Mishcon de Reya after breaking away from the shareholder action group involved in a multi-billion pound court battle against the Royal Bank of Scotland (RBS).

The nine claimants have left the RBS Shareholder Action group which continues to be represented by Signature Litigation.

The action is brought against the bank’s former chief executive Fred Goodwin and three other directors, and relates to a rights issue in April 2008, in which RBS sold its shares at £2 per share. The claimants allege that the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions.

The nine pension investment subsidiaries are suing Government-owned RBS for £420m in damages through nine of its pensions and investment management subsidiaries, in what is considered the first class-action style dispute in the English courts. Having gone on the record in court last week, Mishcon de Reya disputes partner Richard Leedham is now leading the case for claimants connected to Lloyds Banking Group.

Those claimants include Scottish Widows, Scottish Widows Unit Funds, Pensions Management (SWF), Scottish Widows Unit Trust Managers, Clerical Medical Investment Group, St Andrews Life Assurance, Clerical Medical Managed Funds, Halifax Life and HBOS Investment Fund Managers.

A spokesperson from the RBS Shareholders Action group said: ‘It’s always been a surprise that Lloyds, a part state-owned bank, should wish to be involved in an action group against another majority state owned bank, and so their wish now to go their own way and to terminate their contract with the action group is not entirely unexpected.

‘This changes nothing in relation to this group’s determination to obtain justice for our members, and we are delighted with the progress we are making following the appointment of Signature Litigation.’

In November last year Bird & Bird lost its high-profile advisory role on the dispute following a disagreement over fees, a significant instruction that was given to Fladgate.

By early August this year funding for the case had run out, according to a lawyer close to the dispute. As such, disputes boutique Signature had won the instruction from the shareholders and had helped secure third-party funding for the case, led by founding partner Graham Huntley.

It is a long-running and complex dispute: with a hearing on liability scheduled for December 2016, there have been eight case management conferences as of this month before Mr Justice Hildyard QC.

The RBS Shareholder Action group is the largest of three currently in dispute with RBS, with the others represented by Quinn Emanuel Urquhart & Sullivan and Stewarts Law.

Herbert Smith Freehills continues to defend RBS in both cases, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones.

sarah.downey@legalease.co.uk

Legal Business

In-house: Lloyds Bank hires JP Morgan EMEA litigation head as new disputes chief

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JP Morgan’s Europe, Middle East and Africa head of litigation Wilson Thorburn has been appointed by Lloyds Bank as its new litigation chief.

Thorburn, who was a partner at City firm Ashurst before joining JP Morgan in 2011, has been handed the role on an interim basis following Michael Hartridge’s exit earlier this year.

Hartridge, who spent eight years at the legal department of investment bank Morgan Stanley before joining Lloyds, became Lloyds Bank’s general counsel for litigation, regulatory and competition in June 2013.

A big-billing partner at Ashurst, Thorburn is known for his work for what was then Abbey National in the 2009 Supreme Court bank charges case and spent over a decade at the City stalwart. He joined a refreshed looking legal team at Lloyds on 10 August, with deputy general counsel Kate Cheetham stepping into the top job after Andrew Whittaker stepped down in April.

That in-house team will soon be joined by Linklaters’ managing partner Simon Davies, who shocked the Magic Circle firm’s partnership earlier this year to declare he will stand down early to join the bank. A new position has been created for Davies, who will become Lloyds Bank’s most senior lawyer when he joins in January as chief legal, people and strategy officer.

Earlier this year, JP Morgan Chase hired Goldman Sachs counsel John Tribolati as its EMEA general counsel (GC) replacing Piers Le Marchant, who was appointed global head of compliance for corporate and investment banking.

tom.moore@legalease.co.uk

Legal Business

Further legal exits for Barclays as corporate banking GC departs for Lloyds

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Just a day after Lloyds Banking Group announced the hire of Linklaters’ managing partner Simon Davies, the bank has also hired Barclays’ global head of legal for corporate banking, Joanna Carver.

Carver, who joined Barclays in December 2006 as acting head of legal, will be supported in her new role by current interim general counsel (GC) for commercial banking Greg McEneny, who will become deputy GC.

The news follows Lloyds’ hire of Davies, who will joining the group as chief people, legal and strategy officer when we retires from Linklaters at the end of the year – a year ahead of his current term. He will also take a place on the bank’s executive committee. Both Carver and Lloyds’ new group GC Kate Cheetham will report to Davies.

During her time at Barclays, Carver held a number of roles including head of legal for asset and sales finance and regional GC for corporate in Russia and western Europe. She also worked in house at European multinational aerospace and defence corporation Airbus group and at Dentons legacy firm Wilde Sapte.

Barclays’ has suffered multiple departures since the start of the year, and yesterday (July 1) the bank also saw the exit of its investigations and enforcement head Jake McQuitty, who joined TLT as a partner in the firm’s financial services team.

Last month Barclays’ deputy group GC Michael Shaw announced he would be leaving his post at the end of September following six years in the role.

His departure, which a spokesperson said was down to ‘family reasons’, follows a spate of legal exits from Barclays, including EMEA GC Erica Handling, who recently took up a position at BlackRock, global head of financial crime Jonathan Peddie, and global corporate and investment banking GC Judith Shepherd, since it streamlined its legal function. Barclays is seeking to create pools of lawyers working across its four core business divisions, instead of running separate legal divisions for its personal and corporate, Barclaycard, investment bank and Africa businesses.

kathryn.mccann@legalease.co.uk

Legal Business

Succession planning: Lloyds GC Whittaker steps down with deputy Cheetham picked as successor

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Lloyds Banking Group group general counsel (GC) Andrew Whittaker (pictured) is stepping down from his role after two years and leaving the bank, where he will be succeeded by deputy GC Kate Cheetham in the top legal role.

Whittaker joined Lloyds as group GC in May 2013 following a 13-year stint as legal head of the UK’s Financial Services Authority. It is understood that there will be no replacement for Cheetham’s deputy GC role.

With an annual legal and regulatory spend of around £400m, major mandates undertaken by Whittaker during his time at Lloyds includes reviewing its panel of core legal advisers last summer, a move which saw Allen & Overy, Linklaters, Herbert Smith Freehills, DLA Piper, Ashurst, Addleshaw Goddard, Eversheds, Hogan Lovells, CMS Cameron McKenna and Norton Rose Fulbright gain a coveted spot.

Since his arrival he and deputy GC Cheetham have also been executing measures required by European competition rules on state aid, in light of the government’s 43.4% stake in the bank in 2008, and also prepared the prospectus for the bank’s high profile initial public offering of TSB last year.

It follows news just days ago that disputes head Philippa Simmons has left the bank as it undergoes a consultation of the in-house legal team that could see up to 25 mid-level redundancies. With Lloyds having circulated an internal memo in March that it would outsource most of its high-volume litigation work to a third party, former DLA Piper lawyer and former UBS GC Simmons exited after less than two years in the high profile post.

Commenting on her promotion, Cheetham said: ‘I am absolutely delighted and extremely proud to have been appointed group general counsel – this is a pivotal time for both the group and also for the legal community. I am really excited about the future and I believe our team has a great opportunity to contribute to the group’s strategy. I would like to express my gratitude to Andrew for all his support over the last two years, and I wish him all the best for the future.’

Whittaker added: ‘It has always been my expectation that Kate Cheetham would succeed me after I completed my two years with the Group, and I offer her my warmest congratulations on her very well-deserved appointment’.

sarah.downey@legalease.co.uk

For more on Whittaker and Cheetham’s time at LBG, see our in-house profile: Andrew Whittaker and Kate Cheetham, Lloyds Banking Group

Legal Business

In-house: Lloyds’ disputes head Simmons exits as Dixons Carphone appoints BT’s Paterson after merger

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Lloyds Banking Group  has seen the exit of disputes chief Philippa Simmons as the bank undergoes a consultation of the in-house legal team that could see up to 25 mid-level redundancies. Meanwhile, BT Group’s general counsel (GC) for consumer legal, governance, compliance & regulatory, Nigel Paterson, has taken on the GC role at Dixons Carphone less than a year after the latter’s merger.

With Lloyds having circulated an internal memo in March that it would outsource most of its high-volume litigation work to a third party, former DLA Piper lawyer Simmons has left the bank after less than two years in the high profile post. She replaced former disputes head Aamir Khan who left the bank in 2013 for a GC role at US legal process outsourcing business Clutch Group. Her prior experience includes serving as head of disputes for wealth UK at UBS, and as head of litigation for corporate markets at RBS Group.

With an annual legal and regulatory spend of around £400m, other shake-ups at the bank include in October when it unveiled its panel of core legal advisers following a summer review. Those which secured a place included Allen & Overy, Linklaters, Herbert Smith Freehills, DLA Piper, Ashurst, Addleshaw Goddard, Eversheds, Hogan Lovells, CMS Cameron McKenna and Norton Rose Fulbright.

On the ongoing changes at the bank, a spokesperson for Lloyds said: ‘The principal reasons behind the changes are that we would like to introduce a more streamlined and efficient operating model aligned with business needs and a structure that is appropriate to deal with the challenges that we face now and will continue to face in the future.

‘Lloyds Banking Group is committed to working through these changes with employees in a careful and sensitive way. All affected employees have been briefed by their line manager. The Group’s recognised unions Accord, Unite, GMB and LTU were consulted prior to this announcement and will continue to be consulted.’

At Dixons Carphone, the appointment of Paterson from BT Group follows the £3.8bn merger last year between high street companies Dixons and Carphone Warehouse to create an electrical retail giant that brought household names including Currys and PC World under one umbrella.

Paterson brings with him experience in managing the legal, governance and compliance team of lawyers and commercial contract managers at BT, where he supported all aspects of the company’s consumer business, including broadband, fixed and mobiles, BT Sport, Vision TV and Wi-Fi. Trained at Linklaters, Paterson’s prior in-house roles includes serving as vice president and chief counsel in the major transactions division at BT, and as legal counsel at ExxonMobil International.

His successor is Russell Johnstone who previously served as chief counsel for TV and leading the legal team which supports BT Sport, BT TV, and YouView from BT. Johnstone previously featured as a Rising Star in the annual Legal Business in-house PowerList for 2014.

sarah.downey@legalease.co.uk

Legal Business

Lloyds Banking Group

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In-house Lloyds Banking Group
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  • Group general counsel: Andrew Whittaker.
  • Team headcount: 320 lawyers.

Lloyds Banking Group (LBG)’s corporate, and corporate real estate team in particular, received high praise from the wider legal market for their progressive and imaginative approach – the former, led by Hugh Pugsley, GC, group legal, for having the ‘ability to navigate a complex business and influence decisions through timely and commercial advice’ with a team of ‘bright and engaged lawyers’ and the latter, led by corporate real estate counsel Lesley Wan, for engaging effectively with panel firms and internal teams to support delivery of first class service to clients.

With an annual legal and regulatory spend of £400m, general matters dealt with by the legal department, led by group GC Andrew Whittaker and deputy GC Kate Cheetham, included an extensive law firm panel selection process in 2014 with an emphasis on a smaller number of core firms that advise ‘across the piece’.

The corporate team holds a track record of delivering complex projects, including last year’s £660m disposal of Scottish Widows Investment Partnership (SWIP), and the recent separation and flotation of a 25% share of the TSB business. Senior corporate lawyer Caroline Rollestone-Brown, a former partner at Maclay Murray & Spens, who now reports to Pugsley, is cited by an external source for ‘leading the corporate team’ on the disposal of SWIP, on which Linklaters also advised, and ‘demonstrating outstanding project management skills and first-class lawyering’.

The corporate real estate group has been proactive in producing standard forms of short loan agreements to assist in transacting deals more efficiently and also to provide pro forma legal opinions for all panel law firms to use.

Last year saw three of LBG’s legal team make it into our GC Power List Rising Stars 2014: corporate real estate duo Kumar Tewari and Sarah Batty, and the bank’s HR head of legal, Rebecca Priestley, and the team was widely recommended this year.

LBG’s relationship director global corporates UK, Allan MacKenzie, describes the team as ‘collaborative, informative, dedicated, hardworking and supportive’, adding it is ‘an invaluable support to the relationship teams. The team provides brilliant support to us in executing all transactions’.

Legal Business

Third party funding: Therium steps in to bankroll Lloyds group action

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In what constitutes the latest major bailed-out bank facing a shareholder dispute, third party financier Therium Capital Management is understood to be bankrolling the high profile claim by shareholders against Lloyds with the cost of funding the case thought to be as high as £12m so far.

In August, the High Court made a group litigation order, designed to manage large groups of claimants, in relation to an action pursued by shareholders in Lloyds TSB over allegations of losses suffered as a consequence of the bank’s acquisition of HBOS in January 2009, and the subsequent recapitalisation of the merged entity.

They allege that the bank, in which the taxpayer owns a 25% stake, concealed the fact that HBOS was reliant on emergency liquidity assistance from the Bank of England of up to £25.4bn, financial support from the Federal Reserve of up to $18bn, and a loan from Lloyds of £10bn. Total ‘losses suffered’ are estimated at £6bn and shareholders interested in making a claim will have until Monday (10 November) to apply.

Led by Harcus Sinclair litigation head Damon Parker, the claimants issued proceedings against the bank’s former directors Sir Victor Blank, Eric Daniels, Timothy Tookey, Helen Weir, George Truett Tate and Lloyds itself for ‘advising them that the acquisition of HBOS and the connected government re-capitalisation of Lloyds were in their best interests.’

Therium Capital Management has been looking to broaden its portfolio for some time and in 2012 agreed its first mandate to manage an account for an institutional investor, acting as an exclusive investment adviser for an initial £5m investment in a portfolio of litigation and arbitration-related claims. At the time, it aimed to increase the size of the fund to £15m.

According to sources, there is another funds management group in the pipeline looking to invest in the Lloyds case. Typically, for litigation to acquire third party funding involves strict assessment undertaken by professional funders on the merits of the case, and considers whether the defendant is creditworthy; if the cost of the case is proportionate; if the case has strong legal merit; and how experienced the legal team is.

Several sources close to the litigation funding industry told Legal Business that they would not consider investing in the Lloyds group action, and one in particular said: ‘They’re going to need more funders but I have absolutely no interest in that case I’m not sure that will change. It’s early on, I don’t know how big it will be; I don’t know how they will fund the whole case… a funder looks at lots of things. You don’t want to be left in a position where you have to fund more. The funding requirement on the Lloyds case will depend on how many clients they bring and to what extent the defendants have to spend money.’

Other high profile claims currently involving litigation’s bankrollers include a long running £4bn action filed by the shareholders of RBS in April 2013 over the bank’s 2008 rights issue, which is expected will be a source of guidance for practitioners in particular and is being funded by US shareholder firm Grant & Eisenhofer. Harbour Litigation Funding is also funding a £164m claim against Barclays alleging the bank mis-used confidential information in its 2010 takeover of Tricorona.

Lloyds Banking Group, which is represented by Herbert Smith Freehills disputes partner Damien Byrne-Hill on the matter, said: ‘The Group’s position remains that we do not consider there to be any legal basis to these claims and we will robustly contest this legal action.’

Therium declined to comment.

sarah.downey@legalease.co.uk