Santander UK Plc v Abbey National Treasury Services Plc (together, “the Companies”)

JurisdictionEngland & Wales
JudgeMr Justice Hildyard
Judgment Date25 January 2019
Neutral Citation[2019] EWHC 111 (Ch)
Date25 January 2019
CourtChancery Division
Docket NumberCase No: FS-2018-000003

[2019] EWHC 111 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (ChD)

FINANCIAL SERVICES AND REGULATORY

7 Rolls Building

New Fetter Lane

London, EC4A 1NL

Before:

Mr Justice Hildyard

Case No: FS-2018-000003

In the Matter of:

Santander UK Plc
and
Abbey National Treasury Services Plc (together, “the Companies”)

And in the Matter of:

Mr Martin Moore QC AND Mr Stephen Horan (instructed by Slaughter and May) appeared on behalf of “The Companies”.

Mr Rory Phillips QC AND Ms Sophie Mallinckrodt appeared on behalf of the Prudential Regulation Authority and the Financial Conduct Authority.

Ms Charlotte Eborall (instructed by Ernst & Young LLP) appeared on behalf of the Skilled Person

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Hildyard Mr Justice Hildyard

Introduction

1

After a two-day hearing on 11 and 12 June 2018, I decided to sanction a ring-fencing transfer scheme under Part VII of FSMA (“the Santander Scheme” or “the Scheme”) proposed by Santander UK Plc and Abbey National Treasury Services Plc (“Santander UK” and “ANTS” respectively and together “the Companies”). The purpose of this judgment is to elaborate, at the request of the parties, on the short reasons I gave then for my decision.

2

A ring-fencing transfer scheme or “RFTS” is a statutorily-mandated process for the separation of the relevant banks' retail banking business from their (potentially riskier) wholesale and investment banking activities. The process is governed by provisions also newly introduced into Part VII of the Financial Services and Markets Act 2000 (“ FSMA”), and in particular by a new Part 9B which was introduced into FSMA by section 4(1) of the Financial Services (Banking Reform) Act 2013 (“FSBRA”).

3

FSBRA represents a multi-layered response to the financial crisis of 2008 and 2009. It is all part of a package designed to strengthen the UK's larger high-street banks and to provide additional protection to their retail and small business customers. Ring-fencing, which is mandated in respect of UK retail bank operations above a specified size, is an essential part of that response: it is mandatory and has to be effected by 1 st January 2019.

4

Sir Geoffrey Vos CHC has described ring-fencing as “a statutory project on an unprecedented scale.” As noted in the skeleton argument provided to me on behalf of the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”, and with the PRA together, “the Regulators”),

“Implementation is a highly complex project of national importance. It will be relevant to millions of retail banking customers in the UK.”

5

A ring-fencing scheme is inevitably highly detailed and complex. After detailed consideration by statutorily-designated persons, and especially the Regulators and the person appointed under section 109A FSMA to report on the RFTS Scheme (the “Skilled Person”), an RFTS must ultimately be put before the Court for its sanction before it can be given effect.

6

The Santander Scheme is the fourth and last of a series of RFTSs presented to this Court for sanction, such schemes having already been sanctioned by this Court in the case of Barclays, Lloyds and HSBC. 1

Representation at the hearing before me on 11 and 12 June 2018 to consider whether the Santander Scheme should be sanctioned (the “Sanction Hearing”)

7

In considering the detailed provisions governing the Santander Scheme and in reaching my decision, I have had the benefit of comprehensive submissions both written and oral from Mr Martin Moore QC, leading Mr Stephen Horan, who appeared for the Companies; from Mr Rory Phillips QC, leading Ms Sophie Mallinckrodt, who appeared for the Regulators; and from Ms Charlotte Eborall, who appeared for the Skilled Person.

8

I have also, of course, had the benefit of the judgments given by the Chancellor in two of the preceding RFTSs, as well as my own experience from the Lloyds Bank RFTS. An additional benefit of those earlier judgments is that I think it unnecessary to rehearse at length in this judgment the description there given of the details of the ring-fencing regime introduced as Part 9B of FSMA, and the requirements for the implementation of ring-fencing by a RFTS. Those earlier judgments go into those matters at some length. For example, in his judgment in the Barclays RFTS ( Re Barclays Bank plc and others [2018] EWHC 472 (Ch)) the Chancellor described the legislation enacting the ring-fencing regime at paragraphs 10 to 11, and the legislation concerning applications for sanction of such schemes and the Court's obligations and powers, at paragraphs 13 to 21. I addressed these matters in my judgment in Re Lloyds Bank plc and others [2018] EWHC 1034 (Ch) at paragraphs 11 to 15 and 16 to 33 respectively.

9

As also appears from those judgments, in each of the three RFTSs which have come before this Court previously there have been numerous statements of representation filed on behalf of persons who considered themselves to be potentially adversely affected by the scheme, and at least one objector appeared in person at the relevant sanction hearing, in each case pursuant to the rights expressly conferred by section 110 of FSMA. In this case, only one written representation was received, from a Mr Robert Brown who had lodged the same objection with all three of the preceding RFTSs in the English Courts, and also with the RBS RFTS in the Scottish Courts. On this occasion, Mr Brown confirmed that he did not wish to appear at the Sanction Hearing. I deal later with his written representations.

Structure of this judgment

10

I propose to address the matters relevant to my decision under the following headings and in the following sequence:

[A] Description of the Santander Group (paragraphs [11] to [14]);

[B] Procedural antecedents and chronology prior to the Sanction Hearing (paragraphs [15] to [18]);

[C] Notification, the Communications Plan and its implementation (paragraphs [19] to [23]);

[D] Jurisdictional pre-conditions and their satisfaction (paragraphs [24] to [45]);

[E] The Court's role and discretion, as explained in previous judgments (paragraphs [46] to [52]);

[F] Basic design of the Santander Scheme (paragraphs [53] to [58]);

[G] Rationale for the design of the Santander Scheme (paragraphs [59] to [65]);

[H] The Statutory Question and the role of the Skilled Person (paragraphs [66] to 80]);

[I] Principal features of the Santander Scheme (paragraphs [81] to [122]);

[J] Brexit (paragraphs 123] to [143]);

[K] Customer queries, concerns, representations and formal objections (paragraphs [144] to [152]);

[L] Proposed amendments to the Santander Scheme (paragraphs [153] to [155]);

[M] The Skilled Person's Supplementary Report and his conclusions in detail (paragraphs [156] to [163]);

[N] Conclusions on whether the Court should sanction the Santander Scheme (paragraphs [164] to [165]); and

[O] Form of Order (paragraphs [166] to [175]).

[A] Description of the Santander Group

11

The current structure of the Santander Group, so far as relevant, is as follows:

(1) Banco Santander S.A. (“Banco Santander”) is the ultimate parent company of the global Santander Group (“the Santander Group”). Banco Santander directly or indirectly controls 100% of the voting rights of both Companies.

(2) Banco Santander controls 100% of the voting rights in Santander UK Group Holdings plc (“UK HoldCo”), which is the immediate direct parent undertaking of Santander UK, the First Applicant.

(3) ANTS, the Second Applicant, is a wholly owned subsidiary of Santander UK.

12

Cater Allen Limited (“CAL”) is also a wholly owned subsidiary of Santander UK. It is a private bank for high net-worth individuals and business customers and, like Santander UK, will become a ring-fenced body (“RFB”). No business will be transferred by or to CAL under the Scheme.

13

Santander UK, ANTS and CAL are UK banks that carry on a combination of retail, wholesale and markets business. In particular:

(1) Retail banking is currently undertaken by Santander UK and, to a smaller extent, CAL. The retail brands of the Santander UK business include Santander, Cahoot (Santander UK's online-only banking service), Santander Select, Santander Private, Santander for Intermediaries and Cater Allen.

(2) The corporate and commercial banking brands are Santander Business (SME and business customers) and Santander Corporate & Commercial (“SCC”). ANTS undertakes elements of the business of the SCC division.

(3) Santander Global Corporate Banking (“SGCB”) is the brand for larger corporate and international customers. ANTS undertakes the majority of the wholesale banking and markets business of SGCB.

14

Santander UK, ANTS and CAL all have PRA permissions to carry on the regulated activity of accepting deposits and acting as a credit institution.

[B] Procedural antecedents and chronology

15

The Sanction Hearing was the culmination of a long process in which the Court had been involved at various stages.

16

Indeed, and (as I have noted in my previous judgments on RFTSs) exceptionally, the Court was involved even before any application in respect of the Santander Scheme (or any ring-fencing scheme) had been filed: this was to obtain the Court's directions for an orderly process and to give the Companies comfort, in the context of a novel jurisdiction, as to how to proceed.

17

The sequence was, in summary, as follows.

(1) The PRA, after the required consultation with the FCA, approved the appointment of Mr John Cole of Ernst & Young LLP (“Mr Cole” or “the Skilled Person”) as the Skilled Person in respect of the Santander Scheme by letter...

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1 cases
  • Santander UK Plc
    • United Kingdom
    • Chancery Division
    • 1 July 2021
    ...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). 5 The result of the ring-fencing was that substantially all of the Santander Corporate and Investment Banking (“SCIB”) business in the UK......

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