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When a company is facing insolvency, the law requires the company and its directors to consider the interests of the creditors as a whole. Lenders (such as banks) which are in a position to take security are likely to have more information about the company's situation than is available to the general body of trade creditors. Thus, there should be some effective constraint against the bank's ability to prop up the company in a manner which may be detrimental to the interests of the unsecured creditors. This chapter discusses transactions at an undervalue; preferences; extortionate credit transactions; floating charges; and transactions defrauding creditors.

Banks provide loan facilities and other accommodation to their customers in a variety of ways. The best known forms of facility include overdrafts and term loans, which are considered in this chapter.

This chapter discusses the following: bank guarantees, performance bonds, documentary credits, security under a commercial credit, standby credits, the fraud exception; and certain private international law issues.

This chapter considers recent UK legislation to deal with bank insolvencies and issues of systemic stability. It discusses the collapse of Northern Rock in 2007; the bespoke legislation — the Banking (Special Provisions) Act 2008 — introduced to deal with the nationalization of Northern Rock; the ensuing difficulties encountered by larger institutions; the Banking Act 2009; the terms of the government's asset protection scheme; and the Bank of England's role as ‘lender of last resort’.

This chapter revisits the banker–customer relationship. The contractual nature of the relationship considered in Chapter 15 assumed that the bank was established in England and that its customer was also resident in the same country. However, that analysis is by no means of universal. Multinational companies, for instance, may need to have bank accounts in a number of different countries; wealthy individuals may opt to maintain accounts with banks in more advanced jurisdictions to gain access to portfolio management or other services. Banks may promote their services to overseas customers and wish to take security over assets situate outside England. How do these affect the legal nature of the banker–customer relationship? The chapter discusses the governing law of the banker–customer relationship; the effect and consequences of the applicable law; the law governing capacity and authority; and the situs of deposit obligations.

This chapter considers the nature of the basic contractual relationship between the bank and its customer. It covers the meanings of ‘banker’ and ‘customer’; the general nature of the banker–customer relationship; the terms of the banker–customer contract; the customer's duties to the bank; and the regulation of the contractual terms of the banker-customer relationship.

This chapter examines the nature and scope of the bank's duty of confidentiality, and the exceptions to it. It considers the difficulties which may confront a bank with branches in several countries and whose business may therefore be subjected to several different systems of law. The discussions cover the system of law applicable to the duty; the general nature and scope of the duty; disclosure under compulsion of law; disclosure in the interests of the bank itself; disclosure in the public interest; disclosure with the consent of the customer; damages for breach of the duty; the Data Protection Act 1998; wider duties of confidence; duties of confidentiality to third parties; and other duties of confidentiality.

The Eurozone has been in the midst of a financial crisis since the extent of Greece's sovereign debt problems became public in 2009. This chapter examines the consequences if a Member State found itself compelled to withdraw from the Eurozone as a result of its difficulties. It begins with some general remarks about the applicable treaty provisions and the framework for a Eurozone withdrawal. It then analyses the consequences if Greece withdrew from the Eurozone with the consent of the other Member States; or if Greece withdrew from the zone on a unilateral basis. It also considers essential measures aimed at protecting the national economy and the banking system, including the imposition of exchange controls.

This chapter examines the current capital adequacy framework and associated provisions designed to ensure that a bank's business is managed on a prudent basis. It also considers other closely allied topics which may affect the stability of the banking system, namely, liquidity and large exposure requirement. Topics discussed include the origins of the Basel Standards; Basel 2 and Basel 3 rules; the calculation of risk-weighted assets; the nature and effect of credit risk mitigation techniques; market risk; operational risk; and reform on Basel 2.

This chapter evaluates the character of monetary obligations. Monetary obligations primarily exist where the debtor is bound to pay a fixed, certain specific, or liquidated sum of money. This definition presupposes that money is to be paid in the sense of a medium of exchange or in a similar monetary context, for example, where a bank advances a loan to its customer. So far as English law is concerned, a monetary obligation cannot become impossible to perform—whether expressed in sterling or a foreign currency. Circumstances peculiar to the debtor, such as his poverty, is ongoing attempts to negotiate an overall restructuring of his indebtedness, his inability to raise the anticipated financing for the transaction, or the inability to access the intended source of funds will not relieve the debtor of his monetary obligation. Likewise, the depreciation of the market value of the money of account as against other currencies will only in extreme circumstances result in the application of the doctrine of frustration under English law.

This chapter provides an overview of aircraft finance and security, focusing on aircraft registered in the UK. It discusses the priority of competing mortgages and security interests over aircraft; validity of a charge over an aircraft both the country of registry and the place of physical location at the time of the charge; and international issues concerning the recognition and enforcement of proprietary interests in aircraft.

This chapter discusses how a charge over a bank deposit differs from a charge over an ordinary book debt; the need to register a charge over a bank deposit created by a UK-incorporated company under section 859A of the Companies Act 2006; and the application of rules governing the priority of consecutive charges over bank deposits.

This chapter on charges over real estate focuses on registered land. It covers the nature of the asset; the nature of the security; the extent of the security; registration of the security; remedies of the mortgagee; the taking of security over residential property which is jointly-owned by the sole borrower and his spouse/partner; and security over foreign land.

A lender may wish to take security over debts owing, or to become owing, to its borrower. Often, a charge over the benefit of book debts owing to the borrower will simply form a part of the standard security package, and will be included as a part of a fixed and floating charge over the entire assets and undertaking of the borrower. This chapter discusses the essential validity of security over book debts; charge over foreign receivables; and the priority of successive charges over receivables.

A charge over shares may be taken for various reasons. Where the security consists of a portfolio of listed securities, they will have their own ascertainable value and there will be a ready market for them in the event that the bank wishes to realize its security. A bank may also wish to take a charge over shares for other, less obvious reasons. For example, if it funds the acquisition of a commercial property by a company specifically incorporated for that purpose, it may wish to take a charge over shares from the equity investors. This chapter discusses legal charge; equitable charge over shares; validity of a security interest created over shares in a foreign company; charges over uncertificated securities; the need to deliver a charge over shares or other securities to the registrar of companies for registration within 21 days of its creation; and priorities of competing mortgages over shares.

In contrast to the position for aircraft, there is no international convention dealing with the recognition and enforcement of ship mortgages created under foreign systems of law. This chapter considers the regime for the creation of ship mortgages in England; and the rules of private international law applied by the English courts when considering a mortgage over a foreign vessel.

This chapter reviews the general law relating to cheques. It covers the definition of bills of exchange and cheques; the impact of the Cheques Act 1992; the legal effects of payment by cheque; and the terms of the UK's cheque guarantee scheme.