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Lawyers and systemic risk in finance: could (and should) the legal profession contribute to macroprudential regulation?

2016; Taylor & Francis; Volume: 19; Issue: 1 Linguagem: Inglês

10.1080/1460728x.2016.1189115

1757-8450

Joanna Gray,

Corporate Insolvency and Governance

ABSTRACTThe aim of this paper is twofold. Firstly, to examine questions about the role and responsibilities of transaction lawyers working in the financial sector that, it is argued here, deserve closer scrutiny than they have hitherto received since the banking and economic crisis of 2008. It considers the manner in which the conduct of such lawyers in the pre-crisis financial markets may have played a particular role in contributing to the sources of latent risk that bore systemic fruit in 2008. It poses the question, ‘Could (and should) they have acted differently?’. The first section concludes that there are strong and persuasive arguments both for and against reorienting the responsibilities of the transaction lawyer to include some obligation to take account of the risk to the financial system which the transactions they are conducting for their clients may pose. Secondly, this paper explores ways in which, nonetheless, financial sector lawyers could – and indeed should – be expected to play a part in the efforts of UK regulators who do now have a clear legislative obligation (with all the weight of public expectation that accompanies such a mandate) to detect, minimise and prevent systemic risk erupting again in the financial sector.KEYWORDS: Legal professionrole of lawyersfinancial crisissystemic riskfinancial regulation AcknowledgementsThe author would like to thank the following individuals and institutions for comments, assistance and hospitality and support during its preparation: the anonymous reviewer for Legal Ethics, Steven Vaughan of Birmingham Law School, participants and organisers of the June 2015 CEPLER ‘Corporate Lawyers’ symposium at Birmingham Law School from which this paper developed, Matteo Solinas of Victoria University School of Law, Wellington, NZ, Felicity Barker of the Reserve Bank of New Zealand, all other participants at the ‘Corporate & Financial Law’ seminar in April 2016 at Victoria University School of Law and, above all my colleagues and friends in the College of Business and Law, University of Canterbury, Christchurch, New Zealand for their hospitality and help during my tenure there as an Erskine Visiting Fellow (February to April 2016), when this paper was prepared. All errors and omissions remain my sole responsibility.Notes1 Andrew Haldane, ‘Why Institutions Matter (More Than Ever)’ (Centre for Research on Socio-Cultural Change [CRESC] annual conference, School of Oriental and African Studies, London, 4 September 2013) accessed 29 March 2016.2 ‘Citigroup chief stays bullish on buy-outs’ Financial Times (London, 9 July 2007) accessed 1 March 2016.3 Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (Washington DC, January 2011); hereafter referred to as ‘The US Financial Crisis Inquiry Report’.4 Ibid., ch 13; House of Commons Treasury Committee Financial Stability and Transparency (Sixth Report of Session 2007–08, HC 371) ch 3.5 The US Financial Crisis Inquiry Report (n 3) ch 13, in particular the discussion of effects on households and businesses in ch 21; UK Parliamentary Commission on Banking Standards First Report (HL Paper 98 HC 848 2012–13) 14 para 16; Misbah Tanveer Choudhry Enrico Marelli Marcello Signorelli, ‘Youth Unemployment Rate and Impact of Financial Crises’ (2012) 33 International Journal of Manpower 76–95 accessed 29 March 2016; Carin Cruijsen, Jakob de Haan and David-Jan Jansen, ‘Trust and Financial Crisis Experiences’ (2013) DNB Working Papers, Netherlands Central Bank, Research Department accessed 29 March 2016.6 IMF Global Financial Stability Report Market Developments and Issues (Washington DC, April 2006) ch II accessed 29 March 2016.7 ‘OTC’ meaning over the counter in the sense that they are not traded on any organised marketplace or exchange, but are purely private arrangements made between the counterparties with each other and settled bilaterally.8 Yutaka Yamaguchi (Deputy Governor, Bank of Japan), ‘Challenges Raised by Recent Changes in the Financial System’ (Joint Bundesbank/BIS conference, ‘Recent Developments in Financial Systems and the Challenges for Economic Policy’, Frankfurt, 28–29 September 2000).9 One excellent and prescient study examining the ability of these instruments to channel contagion through tightly coupled webs of connectivity is provided by Adam Waldman, ‘OTC Derivatives and Systemic Risk: Innovative Finance or the Dance into the Abyss?’ (1994) 43 American University Law Review 1023; the political economy of the (lack of) pre-crisis regulation and oversight of these instruments is discussed in Lynn A Stout, ‘Derivatives and the Legal Origins of the 2008 Credit Crisis’ (2011) 1 Harvard Business Law Review 1.10 The US Financial Crisis Inquiry Report (n 3) 386.11 Robert Shiller, Finance and the Good Society (Princeton University Press, 2012).12 Katharina Pistor, ‘Towards a Legal Theory of Finance’, Law Working Paper 196/2013, European Corporate Governance Institute (February 2013) accessed 29 March 2016.13 Through the work of the International Swaps and Derivatives Association (ISDA), a supranational and private-sector trade association for repeat users of derivative financial instruments whose key objectives are stated to be reduction of counterparty credit risk, increasing transparency, and improvement of the industry’s operational infrastructure accessed 29 March 2016. ISDA members comprise financial institutions and their legal and professional advisers from 67 countries who meet regularly and keep under review the standard form contractual documentation that forms the design template for individual derivatives transactions. For a view on ISDA as a private transnational regulatory mechanism that can shape national public policy with distributional consequences, see John Biggins and Colin Scott, ‘Public–Private Relations in a Transnational Private Regulatory Regime: ISDA, the State and OTC Derivatives Market Reform’ (2012) 13 European Business Organization Law Review 309–46.14 The UK has been described as a leading provider of many professional and support services associated with the financial services industry [and that] Legal services generated £20.9 bn in 2011, 1.6% of GDP, and net exports of £3.3 bn. The UK is one of two leading centres for international legal services, including corporate finance, corporate and commercial law and tax. Four of the ten largest global law firms are from the UK … (‘An Indispensable Industry: Financial Services in the UK’ report published by the City of London Corporation in 2011 accessed 29 March 2016); The Bar Council, Law Society and UK Trade & Investment (UKTI) have all emphasised recently that the UK accounts for 7% of all global legal services, with the largest international law firms in London being lead advisers on many international capital markets deals (The City UK Professional Services Series: Legal Services January 2014 accessed 29 March 2016).15 House of Commons Treasury Committee, ‘Financial Stability and Transparency’ (Sixth Report of Session 2007–08: HC 371). Law Society statistics published March 2016 claim a considerable GDP-enhancing role for the UK legal sector too; see accessed 29 March 2016.16 David Howarth, Law as Engineering: Thinking about What Lawyers Do (Edward Elgar, 2013).17 Ibid., ch 2.18 Doreen McBarnet, ‘Financial Engineering or Legal Engineering? Legal Work, Legal Integrity and the Banking Crisis’ in Iain MacNeil and Justin O’Brien (eds), The Future of Financial Regulation (Hart Publishing, 2010).19 Joan Loughrey, ‘Accountability and Regulation of the Large Law Firm’ (2014) 77 Modern Law Review 732–62.20 Steven Schwarcz, ‘The Limits of Lawyering: Legal Opinions in Structured Finance’ (2005) 84 Texas Law Review 1–58; John A Flood, ‘Lawyers as Sanctifiers: The Role of Elite Law Firms in International Business Transactions’ (2007) 14 Indiana Journal of Global Legal Studies 35–66.21 House of Commons Treasury Committee, ‘Private Equity’ (Tenth Report of Session 2006–07, Cm 567-I, 2007).22 Ibid., ch 4. The conclusions drawn by the Treasury Select Committee are directed towards the Bank of England and Financial Services Authority (FSA) primarily; not to the architects and draftsman of the covenant-lite loans themselves, whose role is never mentioned.23 Parliamentary Commission on Banking Standards Changing Banking for Good (First Report of Session 2013–14 HL Paper 27-I, HC 175-I June 2013).24 HL Paper 27-II, HC 175-II ch 6, ‘Discussion’ in chapter entitled ‘Lessons from Other Sectors’.25 Ibid., para 247.26 HL Paper 27-I, HC 175-I paras 19 and 90, where the Commission contrasts banking as an activity with those of the professions (‘It is a long way from being an industry where professional duties to customers, and to the integrity of the profession as a whole, trump an individual’s own behavioural incentives’) yet fails to canvas the possibility of desirability of extending the ambit of those duties to include the stability of the financial system from which the bulk of their legal work is generated.27 House of Commons Treasury Committee, ‘The Run on the Rock’ (Fifth Report of Session 2007–08 HC 56–I, 2008) ‘The Supervision of Northern Rock: A Lessons Learned Review’ (March 2008, FSA); Joint House of Lords and House of Commons Parliamentary Commission on Banking Standards ‘An Accident Waiting to Happen: The Failure of HBOS’ (Fourth Report of Session 2012–13, HL Paper 144 HC 705, 2013); Report by the Financial Conduct Authority and the Prudential Regulation Authority ‘The Failure of HBOS plc (HBOS)’ (November 2015).28 FSA Board Report, ‘The Failure of the Royal Bank of Scotland’ (November 2011) accessed 29 March 2016, 415.29 ‘Goodwin stripped of Knighthood’ Financial Times 1 February 2012 accessed 29 March 2016; ‘Disgraced HBOS chief Crosby is stripped of knighthood’ Glasgow Herald 12 June 2013 accessed 29 March 2016.30 Daily Telegraph 20 March 2008 accessed 29 March 2016.31 Johan J Graafland and Bert W van de Ven, ‘The Credit Crisis and the Moral Responsibility of Professionals in Finance’ (2011) 103 Journal of Business Ethics 605–19.32 Prem Sikka, ‘Financial Crisis and the Silence of the Auditors’ (2009) 34 Accounting, Organizations and Society 868–73.33 Peter Yeoh, ‘The Global Financial Meltdown: What Happened to the Gatekeepers in the US and the EU and What to Do About Them?’ (2012) 10 Journal of Transatlantic Studies 271–93.34 Donald C Langevoort, ‘Getting (Too) Comfortable: In-House Lawyers, Enterprise Risk, and the Financial Crisis’ (2012) Wisconsin Law Review 495; Julija Kiršienė, ‘The Bank and Credit Union Disasters in Lithuania: Where were the Lawyers?’ (2014) 7 Baltic Journal of Law & Politics 77–94; Stephen Schwarcz, ‘The Public Responsibility of Structured Finance Lawyers’ (2006) 1 Capital Markets Law Journal 6.35 William H Simon, The Practice of Justice: A Theory of Lawyers’ Ethics (Harvard University Press, 2000); Deborah Rhode, In the Interests of Justice: Reforming the Legal Profession (Oxford University Press, 2003); Stephen L Pepper, ‘The Lawyer’s Amoral Ethical Role: A Defense, a Problem and Some Possibilities’ (1986) American Bar Foundation Research Journal 613.36 John Coffee, ‘The Attorney as Gatekeeper: An Agenda for the SEC’ (2003) 103 Columbia Law Review 1293–316;, Stephen M Bainbridge, ‘Corporate Lawyers as Gatekeepers’ 2012 8 Journal of Scholarly Perspectives 5; David A Skeel Jr et al, ‘Inside-Out Corporate Governance’ (2011) 37 Journal of Corporation Law 147.37 Coffee (n 36) 1297.38 Reinier Kraakman, ‘Gatekeepers: The Anatomy of a Third-Party Enforcement Strategy’ (1986) 2 Journal of Law, Economics and Organization 53.39 Julia Black, ‘Mapping the Contours of Contemporary Financial Services Regulation’ (2003) CARR Discussion Papers, DP 17. Centre for Analysis of Risk and Regulation accessed 29 March 2016.40 S 307 Sarbanes-Oxley Act 2002, Pub L 107–204, 116 Stat 745.41 Coffee (n 36) 1302, referring to the criticisms of the notion of ‘attorney as gatekeeper’ made by Jill E Fisch and Kenneth M Rosen, ‘Is There a Role for Lawyers in Preventing Future Enrons?’ (2003) 48 Villanova Law Review 1097.42 C Fried, ‘The Lawyer as Friend: The Moral Foundations of the Lawyer–Client Relationship’ (1976) 45 Yale Law Journal 1060; Robert W Gordon, ‘The Citizen Lawyer: A Brief Informal History of a Myth with Some Basis in Reality’ (2009) 50 William & Mary Law Review 1169; Alice Woolley, ‘Rigorous, Relevant, and Right: The Scholarship of Monroe Freedman’ (2015) 23 The Professional Lawyer 1.43 Andrew Paizes, ‘Towards a Broader Balancing of Interests: Exploring the Theoretical Foundations of the Legal Professional Privilege’ (1989) 106 South African Law Journal 109.44 FATF, Recommendation 22 of the ‘40 Recommendations on International Standards On Combating Money Laundering and the Financing of Terrorism & Proliferation’ (2012). Lawyers are included within the list of designated non-financial businesses on whom various due diligence and regulatory reporting obligations attach when they act in the course of buying and selling of real estate; managing of client money, securities or other assets; management of bank, savings or securities accounts; organisation of contributions for the creation, operation or management of companies; creation, operation or management of legal persons or arrangements; and buying and selling of business entities.45 Case C-305/05, Ordre des barreaux francophone and germanophone & others v Conseil des Ministres [2007] All ER (EC) 953; J Komarec, ‘Legal Professional Privilege and the EU’s Fight Against Money Laundering’ (2008) 27 Civil Justice Quarterly 13–22.46 ‘European Bar Leaders Unite Against Plans for Broader Money Laundering Reporting’ Law Society Gazette 9 December 2000 accessed 29 March 2016; Simmons & Simmons, ‘The Third European Union Anti-Money Laundering Directive’ In House Lawyer website 25 April 2007 accessed 29 March 2016.47 Paul D Paton, ‘Cooperation, Co-option or Coercion? The FATF Lawyer Guidance and Regulation of the Legal Profession’ (2010) Journal of Professional Law 165.48 Sir Mark Potter, ‘The Ethical Challenges Facing Lawyers in the Twenty-first Century’ (2001) 1 Legal Ethics 23, 34.49 Milton C Regan Jr, ‘Tax Advisors and Conflicted Citizens’ (2013) 16 Legal Ethics 322–49; Richard Lavoie, ‘Am I My Brother's Keeper? A Tax Law Perspective on the Challenge of Balancing Gatekeeping Obligations and Zealous Advocacy in the Legal Profession’ (2013) 44 Loyola University Chicago Law Journal 813–64.50 Finance Act 2013, Part 5.51 See for example reader comments posted online to the article by Michael Cross, ‘Society Condemns New Tax Avoidance Penalties’ (2015) Law Society Gazette 16 March 2015 accessed 29 March 2016, including one suggesting ‘while I agree that acting on a lawyer’s advice that the scheme is legal should exonerate the taxpayer whose behaviour is judged illegal, I don’t know why HMRC doesn’t go after the lawyer whose advice caused the behaviour and the SRA penalise him/her for being incompetent, at least barring her/him from giving advice on tax matters again’.52 ‘A precise definition of systemic risk is still lacking’ – Basel Committee on Banking Supervision (Eugenio Cerutti, Stijn Claessens, and Patrick McGuire. ‘Systemic Risks in Global Banking: What Can Available Data Tell Us and What More Data Are Needed?’ (2012) Bank of International Settlements (BIS) Working Papers 376, 1); Steven Schwracz, ‘Systemic Risk’ (2008) 97 Georgetown Law Journal 193.53 D Edwards, ‘Systemic Risk and Taxation’ (2011) 31 Virginia Tax Review 331.54 Carmen Reinhart and Kenneth Rogoff, This Time It’s Different (Princeton University Press, 2009).55 Howarth (n 16) ch 4.56 Ibid., 97.57 Ibid., 97–103.58 Ibid., 103–5.59 David Kershaw and Richard Moorhead, ‘Consequential Responsibility for Client Wrongs: Lehman Brothers and the Regulation of the Legal Profession’ (2013) 76 Modern Law Review 26–61.60 Ibid., 61.61 Ibid., 40–1.62 Donald C Langevoort, ‘Taking Myths Seriously: An Essay for Lawyers’ (2000) 74 Chicago-Kent Law Review 1569–97.63 Robert Baldwin, Martin Cave and Martin Lodge, Risk-based Regulation Understanding Regulation: Theory, Strategy, and Practice, 2nd ed (Oxford University Press, 2011).64 Joan Loughrey, ‘Accountability and the Regulation of the Large Law Firm Lawyer’ (2014) 77 Modern Law Review 732–62.65 Ch 11 s 4, SRA Code of Conduct for Solicitors (2011) accessed 29 March 2016. It has been argued however that the 10 SRA Handbook Principles could indeed support a more public interest–oriented interpretation of the extent and nature of corporate lawyers’ professional obligations; see Steven Vaughan, ‘Corporate Lawyers and the Public Interest’ (2015) CEPLER Working Paper, University of Birmingham accessed 29 March 2016.66 As Howarth puts it (n 16), ‘It might well be the case that lawyers lacked the expertise necessary to understand the impact of their activities on the financial markets, but that should have been a spur to change, not an excuse for inaction. Establishing relationships of strict causation between what specific lawyers did and specific aspects of the subsequent disasters might be difficult, since one cannot rule out the possibility that bankers and accountants might have tried to set up risk-multiplying transactions by themselves, without the benefit of legal input, but that does not relieve lawyers of all obligation to think about the consequences of what they were asked to do and in particular of an obligation to engage in the legal equivalent of safety engineering’ (128).67 Ibid., 129.68 Ibid., 130.69 Howarth (n 16) ch 4, 130.70 Ibid.; Steven Vaughan, Linden Thomas and Alastair Young, ‘Symbolism Over Substance? Large Law Firms and Corporate Social Responsibility’ (2015) 18 Legal Ethics 138–63.71 As in the course of one of the interview comments (CP 11) reported by Steven Vaughan and Emma Oakley in their contribution to this volume entitled ‘The Gorilla Exceptions and the Ethically Apathetic Corporate Lawyer’.72 Vaughan and Oakley, ibid.; Richard Moorhead and Victoria Hinchly, ‘Professional Minimalism? The Ethical Consciousness of Commercial Lawyers’ (2015) 4 Journal of Law and Society 387–412.73 P Clement, ‘The Term “Macroprudential”: Origins and Evolution’ (2010) BIS Quarterly Review 59.74 David Colander et al, ‘The Financial Crisis and the Systemic Failure of the Economics Profession’ (2009) 21 Critical Review: A Journal of Politics and Society 249–67.75 For example, the Economic and Social Research Council (ESRC) provided early funding for a Systemic Risk Centre in established in 2013 at LSE (London School of Economics and Political Science) in conjunction with other academic and policymaking partners with the objective to ‘study the risks that may trigger the next financial crisis and to develop tools to help policymakers and financial institutions become better prepared’ accessed 29 March 2016; Jon Danielsson and Jean-Pierre Zigrand, ‘Systemic Risk: A Research and Policy Agenda’ Vox – Online portal of the CEPR 7 August 2015 accessed 29 March 2016.76 Pawel Smaga, ‘The Concept of Systemic Risk’ (2014) Systemic Risk Centre (SRC) Special Paper 5, August 2014 accessed 29 March 2016; emphasis added.77 S Cantono and S Solomon, ‘When the Collective Acts on its Components: Economic Crisis Autocatalytic Percolation’ (2010) New Journal of Physics 12.78 Pierre FJ Lermusiaux, ‘Adaptive Modeling, Adaptive Data Assimilation and Adaptive Sampling’ (2007) 230 Physica D: Nonlinear Phenomena 172–96; Lee Chapman and John Thornes, ‘The Use of Geographical Information Systems in Climatology and Meteorology’ (2003) 27 Progress in Physical Geography 13–330; Marc Barthélemy et al, ‘Dynamical Patterns of Epidemic Outbreaks in Complex Heterogeneous Networks’ (2005) 235 Journal of Theoretical Biology 275–88.79 S Cincotti et al, ‘An Economic and Financial Exploratory’ (2012) 214 European Physical Journal Special Topics 361–400.80 P Gai, A Haldane and S Kapadia, ‘Complexity, Concentration and Contagion’ (2011) 58 Journal of Monetary Economics 453–70; Andrew Haldane and Robert May, ‘Systemic Risk in Banking Ecosystems’ (2011) 469 Nature 351–355; John Hill and Jamie Coen, ‘Extracting Insight from Complexity’ (2016) Bank Underground Blog (Bank of England), 11 January 2016 accessed 29 March 2016.81 Turner Review – ‘A Regulatory Response to the Global Banking Crisis’ (FSA, March 2009); The de Larosière Group, ‘The High-Level Group on Financial Supervision in the EU’ (Brussels, 2009); European Commission Communication on European Financial Supervision (May 2009) COM (2009) 252; Financial Crisis Inquiry Report: ‘Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States’ (10 February 2011).82 Sir Jon Cunliffe, ‘Macroprudential Policy: From Tiberius to Crockett and Beyond’ (speech given to CityUK, 28 July 2015) accessed 29 March 2016; Simon Gleeson, ‘Macroeconomic Regulation: New Regulators, New Powers’ (2009) 4 Capital Markets Law Journal 99–111; Bank of England, ‘The Role of Macroprudential Policy’ (Bank of England discussion paper, 19 November 2009) accessed 29 March 2016; Iris H-Y Chiu, ‘Macroprudential Supervision: Critically Examining the Developments in the UK, EU and Internationally’ (2012) 6 Law and Financial Markets Review 184–95.83 HM Treasury, ‘A New Approach to Financial Regulation: The Blueprint for Reform’ July 2011 Cm 8083.84 Graham Nicholson and Michael Salib, ‘The Regulatory Powers and Purview of the Bank of England: Pre- and Post-crisis’ (2013) 10 Butterworths Journal of Banking and Financial Law 636–40.85 Eilis Ferran, ‘The Break Up of the Financial Services Authority’ (2011) 31 Oxford Journal of Legal Studies 455–80; Iain Macneill, ‘The Trajectory of Regulatory Reform in the UK in the Wake of the Financial Crisis’ (2010) 11 European Business Organization Law Review 483–526.86 Financial Services and Markets Act 2000 s 2A, Part 2, emphasis added.87 Justin O’Brien, George Gilligan and Seumas Miller, ‘Culture and the Future of Financial Regulation: How to Embed Restraint in the Interests of Systemic Stability’ (2014) 8 Law and Financial Markets Review 115–27.88 Bank of England Act 1998 Part 1A.89 Bank of England Act 1998 s 9C 2–3.90 B Morgan, ‘The Economization of Politics: Meta-Regulation as a Form of Nonjudicial Legality’ (2003) 12 Social and Legal Studies 489–523.91 Andrew Crockett (General Manager of the Bank for International Settlements and Chairman of the Financial Stability Forum), ‘Marrying the Micro- and Macro-prudential Dimensions of Financial Stability’ (11th International Conference of Banking Supervisors, Basel, 20–21 September 2000) accessed 29 March 2016; Paul Tucker, ‘Macro and Microprudential Supervision’ (British Bankers’ Association Annual International Banking Conference, London, 29 June 2011) accessed 29 March 2016.92 Bank of England Act 1998 s 9H.93 Ibid., ss 90-9R.94 The Bank of England noted in its 2009 Discussion Paper (n 82, para 6.1: ‘Rules vs Discretion’) that unless effective rules could be designed, macroprudential policy choices would likely be based significantly on judgement. Importantly, this would include qualitative evidence, such as that gathered from market participants. A discretionary approach would also allow policymakers to learn from observing the interaction between macroprudential instruments, the financial system and the economy, helping them improve modelling approaches and data collection and, ultimately, the quality of policy judgements.and also that ‘There are large data gaps that would need to be filled before a macroprudential policy regime could be made operational. Sufficient data would be needed to capture the evolution of both the aggregate risk of the consolidated financial system over time and the network risk operating across institutions at any point in time’ (para 7.3); see too all papers published in 2013 Special Issue: ‘The Future of Financial and Regulatory Data’ (2013) 14 Journal of Banking Regulation 3–4. There continues to be vigorous discussion among central bankers now tasked with macroprudential tools about the need to make robust use of them despite the predictive limitations of systemic risk modelling; see for example 29 January 2016 Bank Underground blog accessed 29 March 2016.95 S 165A(3).96 Joint Committee on Draft Financial Services Bill Report 2010–12 paras HL Paper 28, HC 1447 at paras 144–48.97 That Committee recommendation was not incorporated into the legislation, and the Financial Policy Committee (FPC) must rely on the PRA to exercise any such data requests.98 Joanna Gray and Peter Metzing, ‘Defining and Delivering Judgement-based Supervision: The Interface with the Legal System’ (2013) 14 Journal of Banking Regulation 228–40.99 Joan Loughrey, ‘An Unsatisfactory Stalemate: R (on the application of Prudential plc) v Special Commissioner of Income Tax’ (2014) 18 International Journal of Evidence & Proof 65–77 [73]. Cf the House of Lords acknowledgement that privilege is not an absolute concept but involves a balancing of interests in Three Rivers District Council and others v Governor and Company of the Bank of England (No. 5) [2004] UKHL 48.100 The framework began to take shape in an FSA Statement Paper, A New Regulator for the New Millennium (FSA, January 2000) had been last revised prior to the crisis in 2005–06 and was set out in detail in The FSA’s Risk-Assessment Framework (FSA, August 2006); see further J Black, ‘The Emergence of Risk-based Regulation and the New Public Risk Management in the UK’ (2005) Public Law 512–48; J Black, ‘The Development of Risk-Based Regulation in Financial Services: Just “Modelling Through” in J Black, M Lodge and M Thatcher (eds) Regulatory Innovation: A Comparative Analysis (Edward Elgar, 2005).101 Julia Black, ‘Paradoxes and Failures: “New Governance” Techniques and the Financial Crisis’ (2012) 75 Modern Law Review 1037–63; Joanna Gray, ‘Is it Time to Highlight the Limits of Risk-based Financial Regulation?’ (2008) 4 Capital Markets Law Journal 50–6.102 ‘The Supervision of Northern Rock: A Lessons Learned Review’ FSA Internal Audit Division Report (March 2008).103 (n 81) ch 3 Part 7.104 ‘The Prudential Regulation Authority’s Approach to Banking Supervision’ (PRA, June 2014) accessed 29 March 2016.105 Rosa Lastra, ‘Defining Forward-Looking, Judgement-based Supervision’ (2013) Journal of Banking Regulation 14 Special Issue: ‘The Future of Financial and Regulatory Data’ 221–7.106 Andromachi Georgosouli, ‘Judgement-led Regulation: Reflections on Data and Discretion’ (2013) Journal of Banking Regulation 14 Special Issue: ‘The Future of Financial and Regulatory Data’ 209–20.107 ‘PRA’s Approach to Banking Supervison’ (n 98) paras 171–81.108 Gray and Metzing (n 98).109 Sarah Burls, ‘Bank of England Systemic Risk Survey’ (2009) Bank of England Quarterly Bulletin Q3.110 Joseph Noss and Rhiannon Sowerbutts, ‘The Implicit Subsidy of Banks’ (2012) Financial Stability Paper 15, Bank of England (London, May 2012).111 Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford University Press, 2014) for an excellent historical discussion of how private banks came to acquire this constitutive role in money itself.112 Rhiannon Sowerbutts and Peter Zimmerman, ‘Who benefits from the implicit subsidy to “too big to fail” banks?’ [2015] accessed 29 March 2016.113 Shiller (n 11) 86.