Legal Data for Banking

Legal Data for Banking defines the legal data domain in the context of financial institutions, and describes how banks can leverage these assets to optimise business lines and effectively manage risk. Legal data is at the heart of post-2009 regulatory reform, and practitioners need to deepen their grasp of legal data management in order to remain compliant with new rules focusing on transparency in trade and risk reporting. This book provides essential information for IT, project management and data governance leaders, with detailed discussion of current and best practices. Many banks are experiencing recurrent pain points related to legal data management issues, so clear explanations of the required processes, systems and strategic governance provide immediately-relevant relief.

The recent financial crisis following the collapse of major banks had roots in poor risk data management, and the regulators’ unawareness of accumulated systemic risk stemming from contractual obligations between firms. To avoid repeating history, today’s banks must be proactive in legal data management; this book provides the critical knowledge practitioners need to put the necessary systems and practices in place.

• Learn how current legal data management practices are hurting banks
• Understand the systems, structures and strategies required to manage risk and optimise business lines
• Delve into the regulations surrounding risk aggregation, netting, collateral enforceability and more
• Gain practical insight on legal data technology, systems and migration

The legal contracts between firms contain significant obligations that underpin the financial markets; failing to recognise these terms as valuable data assets means increased risk exposure and untapped business lines. Legal Data for Banking provides critical information for the banking industry, with actionable guidance for implementation.

Preface vii

Acknowledgements ix

1 The Role of Data in a Financial Crisis 1

2 The Law, Legal System and Basics of Contract Law 11

3 Structured Finance and Financial Products – Derivatives 27

4 Data, Data Modelling and Governance 53

5 BCBS 239 – Legal Data in Risk Aggregation 81

6 Capital and Netting 89

7 Collateral – Enforceability, Reform and Optimisation 115

8 CASS – Client Assets and Client Money 155

9 Liquidity Risk Management and Reporting 167

10 Contractual Impediments – Recovery and Resolution Planning 187

11 Document Generation/Data-Driven Contracts 213

12 Smart Contracts 233

13 Electronic and Digital Signatures 259

Appendix A 267

Appendix B 271

Appendix C 279

Index 281

AKBER DATOO is founder and managing partner of D2 Legal Technology LLP, a boutique legal data-consulting firm dedicated to the capital markets space. With 20 years’ experience of derivatives and a blend of both technology and legal perspectives, Akber works with financial institutions to create legal risk frameworks to ensure regulatory compliance and business optimisation. This includes the provision of strategic change management advice relating to process and systems for contract data modelling, document assembly, search, information retrieval, know-how and legal opinion management. Akber sits on The Law Society’s Technology Law Committee where he chairs the blockchain and smart contracts working group. In 2016, he was recognised as “one of the top ten innovators” in the Financial Times Innovative Lawyers’ Awards. Akber graduated with first class honours in Computer Science at Cambridge University.

Legal Data for Banking defines the legal data domain in the context of financial institutions and describes how financial institutions can leverage legal data to achieve business optimisation, regulatory reporting and compliance, as well as operational management.

Legal data is at the heart of allowing financial firms to embrace the digital agenda, vital for both Fintech and Legaltech solutions in the banking industry. With the plethora of regulation that emerged after the collapse of Lehman Brothers, this is no longer a case of optimisation, rather a regulatory requirement. Accordingly, both lawyers and technologists need to deepen their grasp of legal data management and change management.

This book offers banking and legal professionals a much-needed explanation of how firms can deliver business value by bringing their legal teams into the fore of the business.

The author, Akber Datoo, is a noted expert in the field and explores a new model centred on legal digitisation to add business context to legal activity. Particularly within financial services, the new legal digital agenda is a chance to bring legal counsel further into business and use digitisation and data connectivity to achieve hyper-awareness both pre- and post-trade. With real-time recognition of key events and how they may affect a position, an empowered legal team can drive measurable new value.