Banking and Finance Law Commons^™

Bank Resolution And Creditor Distribution: The Tension Shaping Global Banking –Part Ii: The Cross-Border Dimension, David Ramos, Javier Solana

University of Miami Business Law Review

New bank resolution frameworks that aim to address the complex task of managing the collapse of a large financial institution stand in considerable tension with basic principles and policy objectives of insolvency law. In this two-part study, we present an analytical framework that aims at helping us understand how this tension can undermine the effectiveness of the new bank resolution frameworks. In the first part of this article, we introduced our three-layered framework and explored its first two layers: the group dimension, and the duality of crisis-prevention and crisis-management tools. In this Part II, we explore the last layer: the …

A Canadian Lens On Third Party Litigation Funding In The American Bankruptcy Context, Stephanie Ben-Ishai, Emily Uza

Chicago-Kent Law Review

This Article offers two major recommendations to expand the use of third party litigation funding (“TPLF”) into the U.S. insolvency context. As seen in the Canadian context, courts have accepted the use of litigation funding agreements fitting within certain parameters. If U.S. courts follow suit, friction against the implementation of TPLF can be mitigated. Alternatively, regulation may occur through legislative and regulatory models to govern and set out precisely what types of arrangements are permitted. Involving entities such as the SEC may expedite the acceptance of TPLF, but special attention is necessary not to intermingle notions of fiduciaries into the …

A Bridge Over Troubled Waters - Resolving Bank Financial Distress In Canada, Janis P. Sarra

All Faculty Publications

Effective June 2017, Canada formalized its new resolution regime for “domestic systemically important banks”. This article examines the new resolution regime in the context of the early intervention program by the financial services regulator. The system offers a complex but integrated set of mechanisms to monitor the financial health of financial institutions, to intervene at an early stage of financial distress, and to resolve the financially distressed bank in a timely manner. Resolution is the restructuring of a financially distressed or insolvent bank by a designated authority. To “resolve” a bank is to use a series of tools under banking …

A No-Tribunal Sdrm And The Means Of Binding Creditors To The Terms Of A Restructuring Plan, Charles W. Mooney Jr.

All Faculty Scholarship

The paper addresses two discrete but related and essential attributes of a sovereign debt restructuring mechanism (SDRM). It first considers the merits and feasibility of an SDRM that would provide a procedure for proposing and adopting a restructuring plan for a sovereign debtor’s debt which would not involve any tribunal or administrator (a No-Tribunal SDRM). The No-Tribunal SDRM would undertake the restructuring as if the sovereign debtor and its creditors were subject to the Model CAC regime. In addition to embodying a novel and interesting structure for an SDRM—and one that eliminates the difficult hurdle of identifying a satisfactory tribunal—adoption …

Of Progressive Property And Public Debt, Christopher K. Odinet

Faculty Scholarship

Debt is property, and, because of this, property law has a lot to say about how debts are resolved. Indeed, property law is deeply woven into the fabric of the bankruptcy process — a fact that has been woefully neglected by many scholars. The ability to provide debtors with relief and the ability of creditors to demand protections from discharge or diminished payments are both concepts that are intimately tied to property law. However, despite the doctrinal workings of property law in this context, from a theoretical standpoint property law has been underutilized. This is particularly true, as this Article …

A Framework For A Formal Sovereign Debt Restructuring Mechanism: The Kiss Principle (Keep It Simple, Stupid) And Other Guiding Principles, Charles W. Mooney Jr.

All Faculty Scholarship

Given the ongoing work on a multilateral restructuring process for sovereign debt in the UN, consideration of the content and implementation of a sovereign debt restructuring mechanism (SDRM) is timely. The framework and content of the SDRM proposed here differs from earlier proposals in several important respects. For the classification and supermajority voting of claims in the approval a restructuring plan, it would mimic the structure and operation of the model collective action clauses (Model CACs) proposed by the International Capital Markets Association. Restructuring under a qualified sovereign debt restructuring law (QSDRL) would be guided by four principles: (i) observe …

The Bankruptcy Code’S Safe Harbors For Settlement Payments And Securities Contracts: When Is Safe Too Safe?, Charles W. Mooney Jr.

All Faculty Scholarship

This Article addresses insolvency law-related issues in connection with certain financial-markets contracts, such as securities contracts, commodity contracts, forward contracts, repurchase agreements (repos), swaps and other derivatives, and master netting agreements. The Bankruptcy Code provides special treatment—safe harbors—for these contracts (collectively, qualified financial contracts or QFCs). This special treatment is considerably more favorable for nondebtor parties to QFCs than the rules applicable to nondebtor parties to other contracts with a debtor. Yet even some strong critics of the safe harbors concede that some special treatment may be warranted. This Article offers a critique of the safe harbor for settlement payments, …

Standing To Sue A Carrier's Killers , Davis J. Howard

Pepperdine Law Review

No abstract provided.

A Test Case In International Bankruptcy Protocols: The Lehman Brothers Insolvency, Jamie Altman

San Diego International Law Journal

Part II of this Article, explains the competing theories underlying bankruptcy systems: universalism and territorialism. Part III details various statutory solutions to international bankruptcy problems. Next, Part IV analyzes the provisions of the Lehman Protocol in depth. Part V then examines the precedent upon which the Lehman Protocol relies. Part VI assesses potential threats to the Protocol?s success. This leads to Part VII, which contains suggestions for future protocols. Finally, Part VIII concludes.

“The Law Of Corporate Restructuring And Insolvency In Portugal: A Brief Introduction From A Financial Creditor’S Perspective", Bruno Ferreira

Bruno Ferreira

In times of economic slump, the law of restructuring and insolvency, particularly its statutory provisions, assume an indisputable relevance. The involvement of financial creditors in informal and formal restructuring procedures and the eventual ensuing formal insolvency procedures presents significant challenges and risks. This article provides a brief introduction to the law of restructuring and insolvency in Portugal and addresses some of these challenges and risks.

Reconciling The Dormant Conflict: Crafting A Banking Exception To The Fraudulent Conveyance Provision Of The Bankruptcy Code For Bank Holding Company Asset Transfers, Cassandra Jones Havard

All Faculty Scholarship

Banking law and bankruptcy law clash. This is most evident when a bank holding company (parent company) becomes insolvent after it has made an asset transfer to its financially troubled bank subsidiary.

The Bankruptcy Code (Code) governs the insolvency proceedings of the bank holding company. Predictably, the parent company's trustee, appointed for the protection of all the creditors of the bankrupt entity, uses the fraudulent conveyance provision of the Code to have any asset transfers that were made to the bank subsidiary returned to the debtor's estate. The good faith exception to that provision will protect the asset transfer only …

Back To The Parent: Holding Company Liability For Subsidiary Banks — A Discussion Of The Net Worth Maintenance Agreement, The Source Of Strength Doctrine, And The Prompt Corrective Action Provision, Cassandra Jones Havard

All Faculty Scholarship

Given the statutory goal of parental accountability, this Article focuses on a narrow issue: Whether parental guarantees are the most effective regulatory tool for shielding the federal deposit insurance fund from losses when insured banking subsidiaries that are members of a multibank holding company system are insolvent. This Article posits that a needed complement to parental guarantees is temporary substantive consolidation of a holding company's affiliated banks. This would require the parent company to combine the assets of its banking siblings to facilitate the reorganization of a financially troubled subsidiary. Temporary enterprise consolidation is a necessary regulatory tool because it …

Bankruptcy-Set-Off-Bank Deposits, A. E. Anderson S.Ed.

Michigan Law Review

Endorsers of a corporation's notes caused the corporation to make deposits in the payee bank in the regular course of business, knowing the corporation to be insolvent, and the bank took over the deposits within four months of adjudication in bankruptcy. It was contended that under the amended definition of "transfer" as set out in section 1 (30) of the Bankruptcy Act of 1938, this transaction resulted in a voidable preference to the endorsers under section 60. The trial court rejected this contention. On appeal, held, affirmed. Although the 1938 amendment gave a broader significance to the term "transfer" …

Banks And Banking - Immunity Of National Banks From State Escheat Statute, Spencer E. Irons

Michigan Law Review

A Michigan statute provided that bank deposits, in the possession or control of insolvent banks, which have remained inactive for a period of seven years or more shall escheat to the state. In a suit for a declaratory judgment, filed by the Attorney General of Michigan, against the receiver of an insolvent national bank and the Comptroller of the Currency of the United States, the federal district court held that the receiver must turn over deposits coming within the terms of the statute. Held, the statute is invalid if so applied, since it would constitute an unlawful interference with …

Some Problems Arising Out Of Deposits To Pay Principal And Interest On Bonds, Paul P. Lipton

Michigan Law Review

Since Lawrence v. Fox contracts students have been puzzled by the numerous and varying relations that may arise when A, the debtor, delivers money to B to pay C, his creditor. Equally puzzling and much more complicated are the rights and relations of the obligor, trustee and bondholders with respect to sums deposited with the trustee to pay principal and interest on bonds.

The insolvency during recent years of many large trust companies that had been named as trustees in indentures securing corporate bonds, having on hand at the time of their failure large sums of money which …

Banks And Banking - Relationship To Customers - Principal Or Creditor, Charles E. Nadeau

Michigan Law Review

A collection agreement permitted plaintiff to clear items through defendant bank in return for maintaining a balance of $10,000 which was not subject to check. All items received immediate credit, and twice weekly defendant bank remitted, in New York exchange, all amounts in excess of $10,000. On insolvency of defendant bank, plaintiff sought a preferred claim on the basis that the bank was its agent for collection. Held, where, as here, the bank may use the funds before remittance, or where the depositor may withdraw any part of the funds, the relationship is that of debtor-creditor and not of …

Banks And Banking - Collections - Trust Or Debt, Michigan Law Review

Michigan Law Review

A certificate of deposit issued by A bank and owned by plaintiff was presented for collection in a routine clearance transaction between defendant bank and A bank. A bank paid for the several items presented with other items and a draft. The draft was dishonored. After both banks closed, defendant bank collected the amount of the draft from A bank as a preferred claim. Plaintiff seeks full payment of the certificate of deposit. Held, payment terminated the agency for collection and gave rise to a debtor-creditor relation, and, for this purpose, payment by draft was equivalent to any other …

Banks And Banking - Reorganization Under Enabling Statutes Requiring Less Than Unanimous Agreement - Effect On Special Deposits

Michigan Law Review

The plaintiff issued drafts to the defendant bank under a special agreement that they were to cover certain checks already cashed or to be cashed. When a balance of such drafts stood at $2,000 in favor of the plaintiff, the defendant bank became insolvent. A North Dakota statute provided that if eighty per cent of the deposit creditors agreed to a plan of reorganization, and such plan was approved by the state bank examiner and the secretary of the guarantee fund commission, it was to be held binding on all other unsecured creditors. Eighty per cent of the depositors of …

Bank Reorganization And Recapitalization In Michigan, Ellis B. Merry

Michigan Law Review

On January 2, 1933, 420 state and 68 national banks were operating in Michigan. On February 13, the Governor of Michigan proclaimed a banking holiday for eight days which was extended in effect on February 22. On March 4, the President proclaimed a national banking holiday until March 9. Under the provisions of the President's proclamation lifting the national banking holiday, 198 state and approximately 30 national banks were reopened by the appropriate authorities as "sound" banks. State bank conservators assumed the management and custody of 215 state banks which did not open, on appointment by the Commissioner of the …

Constitutional Law - Bank Reorganization Legislation - Composition With Depositors And Other Creditors, Maurice S. Culp

Michigan Law Review

Twenty States and the federal government now have laws permitting the reorganization and reopening of insolvent or failing banks. The usual statute provides for the reorganization of a bank upon some plan approved by a large majority of the general creditors of the institution; the plan must also have the approval of state banking officials and of a court of general jurisdiction, although the last is by no means a universal requirement. The reorganization, when approved, becomes binding upon all depositors and general creditors of the bank regardless of consent. By the terms of a few statutes, non-assenting creditors are …

Banks And Banking -Trust Funds - Deposits For A Special Purpose

Michigan Law Review

Plaintiff had an arrangement with defendant bank whereby receipts of certain of plaintiff's branch stores were to be deposited daily with defendant, and the latter was to transmit each day by draft to a bank in Pittsburgh for plaintiff's credit all sums in excess of a dormant balance of $2,000. Drafts covering two days' deposits were in process of transmission to the Pittsburgh bank when defendant bank was taken over by the Comptroller of the Currency. The deposits represented by these drafts were made at a time when defendant's officers and directors knew the bank to be insolvent, though negotiations …

Failed Banks, Collection Items, And Trust Preferences, George Gleason Bogert

Michigan Law Review

About 1,200 banks failed in the United States during the year 1930, and failures for the years 1921-1929 averaged over 600 a year. Each of these bank failures doubtless involved several problems regarding collection items. In each case it was almost inevitable that there should be found among the assets in the hands of the defunct bank several items held for collection but not yet collected, and also that a number of items should have been collected but no effective remittance made on account of such collection. There thus arose a series of controversies between the banks or individuals which …