Wrong venue: The U.K. Supreme Court threw out an attempt by Goldman Sachs to enforce a claim on an $835 million loan to a failed Portuguese bank through the British court system. Instead, Goldman will likely have to pursue its claim against Banco Espírito Santo in Portugal.
The decision creates “a potentially important precedent for European bank collapses,” the paper says. “It could have legal implications for the way future disputes about how failed banks are dealt with in Europe. Many cross-border bank loans are written under U.K. law, which can lead to lawsuits being pursued in British courts even for banks that collapse in other countries.”
In another case, the U.K.’s Court of Appeal said a legal battle between British retailers and Visa and Mastercard over interchange fees will have to be reviewed by a competition tribunal. “The case is important because it will have a bearing on the outcome of other lawsuits brought against Mastercard and Visa by retailers over interchange fees,” the paper says. The merchants argue swipe fees charged by the two payments networks are an unlawful restriction on competition.
Sound the alarm: The decision by a U.S. federal judge ordering PricewaterhouseCoopers to pay $625.3 million in damages for failing to detect the fraud that led to the 2009 failure of Alabama’s Colonial Bank “should serve as a wake-up call to strengthen regulation and reshape the culture of the auditing profession,” an op-ed argues. “It is time to act lest we repeat the accounting scandals of the past. The auditing profession plays a vital role in maintaining the integrity of the world’s capital markets, but recent audit failures are renewing doubts about whether the world’s largest accounting firms are truly serving the public interest.”
Still too big?: Former banker Philip Augar’s book on Barclays, The Bank That Lived a Little, “provides a brilliantly readable account, based on exceptional access to most of those involved, of the transformation of the old Quaker bank into a hard-charging capitalist adventurer.” It also makes a strong case that “even after the post-crisis toughening of regulation, it is arguable that the big banks are so complex and lacking in transparency as to be unmanageable.”
Pay for performance: What exactly do investment bankers do for all the money they get? “The secret to a bulging ‘success fee’ is less to obtain the best possible deal than to make the chief executive and the board believe they got it. That is not the same thing, particularly in the long term,” writes John Gapper the paper’s chief business commentator.
“Deals can be brilliantly executed at the time without adding to a company’s long-term value and many are unwound — often with the help of the same advisers — when a chief executive leaves,” he notes. “The success fees of advisers should be more closely tied to whether the deal succeeds long after it has closed and they have moved on to the next one.”
No case: The Consumer Financial Protection Bureau’s decision not to pursue legal action against Zillow for allegedly violating the Real Estate Settlement Procedures Act (RESPA) and federal rules on unfair and deceptive practices could have “potentially significant implications for consumers, realty agents and lenders.”
Fix it or else: The Bank of England and the Financial Conduct Authority have given U.K. financial services firms three months to get their IT acts together following several major technology snafus in the past few months, including the TSB account transfer fiasco and Visa’s payments system outage. The banks must report back to the regulators by October 5.
Cooperation: The European Banking Authority is warning banks they risk being left behind if they don’t collaborate with financial technology firms. “At this point, the predominant type of relationship between incumbent institutions and fintech is partnership and collaboration with fintech firms,” the EBA said in a report.
“Clearly our data was wrong. But prior to the event, I think anybody thought Germany was a favorite.” — Peter Williams, an executive at German insurer Allianz, which passed on insuring retailers’ promotions that paid out in the event Germany won the World Cup — which it didn’t.