LEGAL ASPECTS OF FINANCE Lecture 7 Case 7 Matti Rudanko

Case 7: Credit Loss Liability of Bank Director Tasks: - see next slides

Possible Tasks and Questions 1 Account for the relevant (solvency) provisions in banking legislation and their applicability to this case. Give a report on the general damages liability of a bank director and members of the Board of Directors of a Bank. Try to solve the question of liability for damages in this case. Please pay attention to the general preconditions of liability (the existence of damage, causal relationship between acts of the responsible person and damage, and negligence). Legal Aspects of Finance 7

Liability for Damages of a Bank Director Topics and Issues Regulation of Credit Institutions (on Solvency; ”Prudential Supervision”) EU: The CRD IV package which transposes – via a Regulation and a Directive – the new global standards on bank capital (commonly known as the Basel III agreement) into the EU legal framework, entered into force on 17 July 2013 Finland: Act on Credit Institutions 2007 Basel (I, II and III): http://www.bis.org/bcbs/history.htm Liability for Damages of a Bank Director Liability for damages in general Here: contractual damages? The position of a bank director: employee Employment Contracts Act (55/2001) Infringements of solvency regulation e.g. sufficient collateral requirement in the previous Finnish Savings Bank Act ”Business Judgment Rule” Indications for possible liability Business economics based decisions (negligence?) The interest of the company Legal Aspects of Finance 7

Legal Basis Legal Aspects of Finance 7 Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 Act on Credit Institutions (121/2007); In English only the repealed Act (1607/1993, http://www.finlex.fi/fi/laki/kaannokset/1993/en19931607 ) Legal Aspects of Finance 7

Links to Legislation, European http://ec.europa.eu/internal_market/bank/regcapital/legislation_in_force_en.htm Directive text: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:0338:0436:EN:PDF Regulation text: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:0001:0337:EN:PDF Legal Aspects of Finance 7

Links to Legislation, Finnish http://www.finlex.fi/fi/laki/kaannokset/2001/en20011502.pdf (Savings Bank Act) http://www.finlex.fi/fi/laki/kaannokset/1993/en19931607.pdf (Act on Credit Institutions) http://www.finlex.fi/fi/laki/kaannokset/2001/en20010055.pdf (Employment Contracts Act; Ch. 12:Damages) http://www.finlex.fi/fi/laki/kaannokset/1974/en19740412.pdf (Tort Liability Act) Legal Aspects of Finance 7

Slide sets: - 8 and 8a: Damages Liability Case 7: Slides Slide sets: - 8 and 8a: Damages Liability