Santander UK Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 01 July 2021 |
| Neutral Citation | [2021] EWHC 1813 (Ch) |
| Docket Number | Case No: CR-2020-004078 |
| Court | Chancery Division |
[2021] EWHC 1813 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building,
Fetter Lane
London, EC4A 1NL
Mr Justice Snowden
Case No: CR-2020-004078
and
Martin Moore QC and Stephen Horan (instructed by Slaughter and May) for Santander UK plc
Hearing date: 23 June 2021
Further written submissions: 25 June 2021
Approved Judgment
Introduction
This is the hearing of a Part 8 claim brought by Santander UK plc (“SanUK”) under Part VII of the Financial Services and Markets Act 2000 (“ FSMA”) for the sanction of a banking business transfer scheme (the “Scheme”). Under the Scheme, certain corporate and investment banking business of SanUK will be transferred to the London Branch (the “SLB”) of SanUK's ultimate parent company, Banco Santander, S.A. (“Banco”). The hearing before me took place on 23 June 2021 and I received further written submissions on 25 June 2021.
SanUK is an English public company. It is authorised by the Prudential Regulation Authority (the “PRA”) and regulated by the PRA and the Financial Conduct Authority (the “FCA”) (the “Regulators”).
The London branch of Banco, the SLB, is not a separate legal person from Banco. However, for banking regulatory purposes it is treated as a distinct firm. Before the United Kingdom's exit from the European Union, the SLB was authorised in the UK through the exercise of freedom of establishment rights and prudential supervision of credit institutions and markets on financial institutions under two EU directives, namely, CRD IV and MiFID II. Since the end of the Brexit transition period on 31 December 2020, the SLB is deemed to be authorised in the UK for the purposes of FSMA by the PRA pursuant to the UK's temporary permissions regime (the “TPR”) and is subject to regulation by the PRA and the FCA. The SLB can operate under the TPR for up to three years whilst Banco is seeking permanent authorisation by the PRA as a third country firm. I was told by Mr. Moore QC that Banco has applied for authorisation for the SLB and expects to receive an answer later this year.
The reason for the Scheme
Santander was one of five large banking groups in the UK which were required to undertake ring-fencing transfer schemes pursuant to s.106B FSMA in 2018, separating their retail banking businesses from their wholesale and investment banking businesses in order to comply with the UK's new ring-fencing requirements. The ring-fencing transfer scheme promulgated by Santander was sanctioned by Hildyard J, whose reasons were set out in a judgment dated 25 January 2019: see Re Santander UK plc [2019] EWHC 111 (Ch).
The result of the ring-fencing was that substantially all of the Santander Corporate and Investment Banking (“SCIB”) business in the UK (“SCIB UK”) was split between SanUK (as the ring-fenced bank) and the SLB (i.e. Banco). In addition to its retail banking business, SanUK retained most of the corporate banking business, and the investment banking and other business that was not permitted to be carried on by a ring-fenced bank was transferred to the SLB.
SanUK's business thus includes a division that offers general banking services, including deposit taking services, to large corporates (who typically have annual turnover in excess of €500 million), financial institutions and financial sponsors. Customers of SCIB UK which transact with SanUK can therefore fairly be characterised as sophisticated.
The evidence is to the effect that SanUK and Banco, having reviewed the operation of the SCIB UK business, have decided that it would be better for substantially all of the SCIB UK business to be conducted from the SLB. The intention is that this will result in a simplified structure for the conduct of SCIB UK business.
The Transferring Business and the Excluded Business
The business transferring under the Scheme (the “Transferring Business”) comprises certain assets and liabilities of SanUK, and is primarily defined by reference to a specific list of transferring customers of SanUK (the “Transferring Customers”). Those customers are identified upon a flash drive which will be held to the order of the Court by SanUK's solicitors. The Transferring Business comprises substantially all of the SCIB UK business conducted by SanUK and, in particular, includes all of the assets and liabilities associated with the Transferring Customers' products, transactions or arrangements with SanUK, with some exceptions which are irrelevant for present purposes.
As at 9 June 2021, there are expected to be 594 Transferring Customers, representing (as at 30 April 2021) approximately £2 billion of assets and £3 billion of liabilities. Under the terms of a banking business transfer scheme agreement dated 16 September 2020 (as amended and supplemented) between SanUK and Banco (the “Transfer Agreement”), a balancing sum will also be transferred by SanUK to Banco representing the difference between the transferring assets and liabilities (being, as at 30 April 2021, about £1 billion).
The Transferring Business broadly falls into the following business groupings:
i) the Global Transaction Banking business, which includes deposit-taking, cash management and documentary trade finance;
ii) the Global Debt Finance business, which includes loans and project finance;
iii) the Risk Solutions Group business, which includes vanilla interest rate and FX derivatives and structured deposits; and
iv) other Transferring Business, which is comprised of a small number of specified assets and liabilities which do not fall within limbs (i) to (iii) above.
Some SCIB UK business conducted by SanUK will not transfer under the Scheme because: (i) it will not transfer at all and is to remain in SanUK or has been or will be wound down in SanUK; (ii) it will be transferred outside the Scheme, either by novation, assignment or other form of transfer to the SLB or other entities or branches within the Santander group, or (iii) it will be terminated by SanUK and offered by the SLB to existing SCIB UK customers. The Scheme defines such business as “Excluded Business”.
Among the Excluded Business falling within limb (i), which will not transfer at all, are:
i) SanUK retaining the role of security agent and security trustee in respect of the Global Debt Finance Business transferred from SanUK to the SLB until the maturity of the relevant transactions;
ii) services provided by SanUK to SCIB UK customers through the Post Office Limited or Takepayments Limited, enabling the collection of bill payments;
iii) the SanUK cash handling business provided to SCIB UK customers;
iv) a limited number of specific arrangements to deal with particular circumstances unique to one or a small number of Transferring Customers; and
v) certain intra-group agreements, including the Transfer Agreement.
Among the Excluded Business falling within limbs (ii) and (iii), which will be transferred outside the Scheme are:
i) transferring business governed by non-UK law. Subject to advice as to the likelihood that the Scheme, if sanctioned, will be recognised in the relevant jurisdiction, such business will be transferred outside the Scheme by various means (e.g. novation, transfer certificate, or cancellation and reissuance). The conventional trust arrangements in Part VII schemes will apply to any of this non-UK law business which has not transferred outside the Scheme by the final date provided by the Scheme for transfers to take place. In other words, such business will be held on trust by SanUK for the benefit of the SLB until the transfer of legal title can be effected. There are seven arrangements which fall within this category which, as at 12 March 2021, governed arrangements comprising approximately 0.5 per cent. of the total arrangements to be transferred under the Scheme;
ii) UK M&A corporate finance advisory business, which sits within SCIB UK, was transferred by way of novation from SanUK to the SLB on 1 January 2020;
iii) an electronic platform for the provision of supply chain finance facilities to Transferring Customers and/or uncommitted discount facilities for the suppliers of those Transferring Customers has been in the process of being wound down since June 2020, with any new business transacted through the SLB or Banco using the Banco group's electronic platform;
iv) complex cash management products, transactions and arrangements specific to certain Transferring Customers may be transferred outside the Scheme due to the complexity involved in transferring the business;
v) about 280 SanUK employees are expected to transfer to the SLB as a result of the Scheme, predominantly by operation of law pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).
The benefits of the Scheme
The evidence asserted (but did not give any detail) that the Scheme will be for the benefit of Transferring Customers. In argument, Mr. Moore QC gave as an example a SCIB UK corporate customer who currently would deal with SanUK in respect of permitted business which the customer conducted in the UK, but would have to deal with the SLB or Banco in relation to prohibited business in the UK (that SanUK as a ring-fenced bank cannot conduct), or business that the customer conducted in the EEA (because SanUK has no authorisation to conduct business in the EEA). Mr. Moore QC suggested that, for such customers, simplification from a dual...
To continue reading
Request your trial