The Future Lawyer Weekly Update – w/c 1st May 2017

The Future Lawyer Weekly Update – w/c 1st May 2017

Your round-up of the stories that you should discuss at interview this week.

Commercial Law

The untouched $200 Billion

Reported by Spencer Yap

Operational risk, a concept by regulators in the US to measure non-economic factors that could affect a bank’s health. The Base II Committee defines it as

“The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.”

Why is it important? Barclays PLC “estimate $236 billion in capital is tied up in operational risk at the four biggest U.S. banks alone.” While on average operational risk equate to about 29% of the five biggest US bank’s risk weighted assets, combined their $1.5 trillion of operational risk comes up to about 18% of banks total assets.

Freeing up capital would mean that more could be returned to shareholders in the form of dividend or buy-backs, or even used for lending purposes which results in additional revenue.


How does operational risk work?

A simple example of operational risk would be the risk of disaster that a farmer adopts. In the given scenario, the risk would be straight forward, the risk of having a tornado coming through the field would damage crops and result in the farmer making a lost.

In the banking and finance sector however is not as straight forward, operational risks in the banking and finance sector takes into account events such as fraud. And the only way such risks could be calculated is by looking back to previous dealings of the company, which is a grievance certain banks have with this regulation. Citigroup, for example, still holds capital against operational risk on assets which it has already started liquidating.

As illustrated by the wall street journal, if a bank has $1.5 trillion in risk-weighted assets and a requirement of 10% capital buffer (which varies). It would require $150 billion in capital. Imagine if operational risks made up a third of that risk-weight assets, and that operational risks were eliminated, risk-weighted assets would fall to $1 trillion and the capital buffer down to $100million, freeing up $50million.

Currently in America, a legislation is being proposed which would overhaul operational risks. Though it is unlikely that it would be completely eliminated, a small change could be meaningful. That being said, Citigroup’s finance chief thinks that a reduction would only be seen in 10 – 15 years.

Read more in The Wall Street Journal.

Employment Law

The truth about the ‘gig economy’

Reported by Radhika Morally

The ‘gig economy’ is one consisting mainly of ‘short-term contracts or freelance work’ rather than permanent employment.

MP’s have stated that full worker rights are needed for drivers and couriers for companies like Uber and Deliveroo, rather than the current self-employment status.

The work and pension committee have conducted an investigation into the issue, from which they concluded that their current self-employed status leaves them open to exploitation.

Both Uber and Deliveroo were included in the study. Despite the committee criticising Uber’s policy of charging sick drivers the cost of replacing them, they claimed that their drivers were all ‘happy with the terms’. Deliveroo’s response was similar; they insisted that ‘people are attracted to the flexible way of working that we offer.’

However, it appears that the law, as well as the views of current MPs, are against them. Last year an employment tribunal ruled that Uber drivers were wrongly classified as self-employed, although the company is appealing against the ruling.

In the report by the work and pensions committee, companies have been accused of ‘avoiding all their responsibilities’ in order to profit from ‘bogus self-employed designation’, according to the chairman, Frank Field.

He also expressed the fact that the inquiry only confirmed the need to offer worker status to drivers and such in certain sectors, suggesting that employers should be made to justify their employees having a self-employed status.

Along with protecting staff from ‘the appalling practices’ reported to the committee in the duration of the inquiry, it has been suggested that self-employment causes ‘substantial’ tax losses for the government.

Therefore, another employment review has been commissioned, focusing upon employment practices. It will look at security, pay, workers’ rights and consider whether opportunities for carers and the elderly can be increased.

Read more in The Guardian and the BBC.

Family Law

3 out of 5 people think civil partnerships should be available to everyone

Reported by Anna Flaherty

Populus recently surveyed 2,000 people in order to gauge public opinion on this issue. One of the key reasons for carrying out this survey was in reaction to a recent case, where a heterosexual couple were refused to be in a civil partnership. Matt Hawkins, Campaign Manager for the Equal Civil Partnerships Campaign, is of the opinion that it would be a fair and popular policy to give the option of civil partnership to every couple. He also highlighted the fact that petitions have been signed by over 76,000 people.  This survey, as well as the petitions, therefore suggests that the Court of Appeal’s decision failed to reflect public sentiment.

Read more in Anna’s recent article on Steinfeld and Another v Secretary of State for Education [2017] EWCA Civ 81 to find more about the case, or head to Family Law for more information.


Does regulation of surrogacy need reform?

Reported by Anna Flaherty

Regulation of surrogacy has become a major issue in several countries. Its failure to regulate has left many children in a ‘legal limbo’. Several countries are facing the same issue. An example in the UK is that of a mother whose surrogate mother had twins, but rather than taking both the mother only took the healthy child. This left the surrogate mother to raise the disabled daughter, despite a £12,000 agreement to raise both children. The adopting mother described the disabled baby as a “dribbling cabbage”. Despite this being a case within the UK, many similar cases occur internationally, and so the UK and international surrogacy lawyers are calling for worldwide regulation agency and an international convention to protect the children concerned in these agreements. The reason for such recommendations come following issues, such as the fact that the parenthood must derive from a parental order which requires that the parents are a couple. This immediately discriminates many people who wish to become parents through surrogacy. It also arguably violates these potential parents’ right to respect for their private and family life.

Read more in The Independent, Family Law and the Law Gazette.

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