In-house legal teams at banks will have to restructure to meet requirements on business continuity and independence under wide-ranging reforms proposed by the Bank of England.
A shakeup of banks’ law firm panels is also likely.
The proposals appear in two consultation papers. One covers the creation of a ‘ring-fenced’ sub-group protected from banks’ riskier investment banking activities. The other covers changes demanded to provide for ‘operational continuity’ during resolution of a bank’s financial problems.
There is likely to be no reporting line between the general counsel team at the ring-fenced bank and the bank’s group-level operation. Departments will have to ensure that legal services supporting day-to-day operation of the bank could continue through a crisis – pointing to further upheaval for in-house legal departments.
The imposition of an arm’s-length relationship between retail banking and the group also puts the spotlight on external legal needs, and could be the signal for a widespread review of law firm panels where firms’ ‘Chinese walls’ are not deemed adequate.
A regulatory focus on ‘outcomes’ over prescription in the proposals reflects the diverse operating structures of the six major banks directly affected.