There are numerous areas of law that members of the everyday public will never be exposed to. For example, most people will never be party to litigation. However, almost everyone at some stage needs to borrow money and this is what a banking lawyer helps with.
What’s it all about?
While individuals may require a loan to buy a house or a car, a banking lawyer will typically assist companies that require more versatile and complex loans for far greater amounts of money.
Putting these loans together can be quite complicated and tends to raise interesting legal issues, as the deals often involve a large number of parties with competing interests, various jurisdictions with different legal frameworks and very short deadlines. It is the task of the banking lawyer (acting for either the borrower or the lender) to draft and negotiate the loan documentation and ensure their client’s legal interests are protected and that their commercial interests are reflected fairly in the documents.
Banking and finance covers a variety of topics and in larger firms lawyers tend to specialise in a particular area. Popular areas include asset finance (providing money for the purchase of specific large assets such as aeroplanes and ships); acquisition finance (providing money to buy out other companies); corporate restructuring and insolvency (including restructuring and rescues, administrations, receiverships and liquidations); Islamic finance (providing money in accordance with sharia law principles); and project finance (financing specific projects such as power, infrastructure and oil and gas projects).
The working culture
With such a large amount of documentation, short deadlines and, on cross-border transactions, different timezones, it will not come as a shock to learn that at times banking lawyers work long hours. When involved in a transaction it is not unusual to be in the office until the early hours of the morning. Many transactions involve cross-border aspects (whether it be Europe, Asia, the Middle East or the US), so although you may have to
arrive at work early one morning for a conference call held in Beijing, there is a good possibility of international travel.
A banking lawyer’s level of seniority will determine their involvement on any specific transaction. A senior lawyer will be in charge of providing advice to the client and will draft and negotiate the main agreements. The more junior lawyers and trainees act as support to the senior lawyer and will be in charge of drafting and negotiating other documents (the reality of being a lawyer). However, you also get the opportunity to liaise with clients and other lawyers.
A typical deal could involve advising a syndicate of international banks providing a multimillion-pound loan facility to a group of companies based throughout Europe to finance members’ operations. A junior lawyer on this type of transaction could, for example, be asked to ensure that the banks obtained adequate security over the group’s assets for the loan. As each member of the group might be based in a different jurisdiction, this would mean liaising with lawyers in each of these jurisdictions to help establish what type of security can legally be taken under the laws of that jurisdiction and then negotiating the terms of that security with the borrowers’ lawyers.
The multijurisdictional aspect of these large deals gives lawyers the opportunity to compare how different legal systems tackle the same issues. On the downside, it can lead to some pretty unorthodox sleeping patterns.
The recent credit crunch has had a major effect on the financial markets. Essentially, the credit crunch is the effect of high levels of mortgage defaults in the US, which has caused significantly less liquidity in the market (meaning lenders are finding it more difficult to access cash to lend to borrowers). This in turn has caused the cost of borrowing to increase (reflected in interest rates and upfront fees). This lack of liquidity and increased cost of borrowing means that fewer deals are currently going through the market.
Loan documents can be very complicated, technical and full of financial and legal jargon that needs to be understood. To ensure the client’s needs are reflected, a high level of knowledge in a specific area of banking law needs to be grasped early on.
Although it is important to have a very analytical and critical mind, in banking law it is also important to have commercial awareness of the current state of the banking and finance markets, as any changes are likely to reflect on the structuring of the commercial deal and the client’s bargaining power.
Often the drafting and negotiation takes place on a very short timescale, with clients keen to see results as soon as possible, so there can also be a great deal of pressure surrounding these transactions.
Working as a banking lawyer allows you to be involved in a market that is as fascinating as it is demanding.
Mark Fines and Josh Cairns are associates at Norton Rose