Bank Legal Function

In an article in the ABA`s Business Law Today, Associate Meg Tahyar is concerned about a recent trend where the role of banks` legal departments has been reduced and reduced as separate risk and compliance functions have gained prominence. She says it`s the opposite of the trend in other large, complex organizations that are increasingly using their general counsel and legal departments as trusted advisors and strategists. First Thing We Do, Let`s Exclude All the Lawyers, published on September 17, 2019, examines how the current situation has occurred, including, Tahyar writes, due to a surge by supervisors in the years following the financial crisis. She outlines a number of steps that she believes are necessary in banking organizations, regulators and the legal profession. Excerpts: Structural integration. The legal function should be at the heart of the structures of the financial institution and should not be entangled in a narrow legal silo, for example only for the execution of transactions or documents and disputes. If the legal function is purely reactionary and cannot influence decisions to avoid risks to the company, the risk of enforcement and litigation will only increase. An agreement that puts legal functions at the heart of decision-making would take full advantage of legal expertise and judgment. Legal services should be the responsibility of a sufficiently senior and influential executive, ideally the CEO, or the board of directors. Some companies seek a legal relationship with the head of administration or the head of a global risk function, both of which can function satisfactorily. It is important that the CEO visibly supports the General Counsel and that legal services sit on key internal committees, including key business and control committees. It is customary for the supervisory functions to meet regularly only with independent members of the Board of Directors.

The General Counsel should hold similar meetings with independent directors without the presence of senior management. [35] Former bank branch employees informed the author that in recent years, surveillance guidelines have often been issued without being reviewed by agency lawyers. Another side effect is the lack of training of management staff on the legal framework. Training on the legal framework was not available or was transferred to the regions. [36] As explained below, interprofessional training in silos is essential to finding solutions. I`ve written before about how the hierarchy of the legal framework can be misunderstood by the many regulatory readers and even by some digitally native lawyers. [37] There should be a duty to provide adequate training to all non-legal staff, suppliers and advisors who are readers of the regulations. [38] Basic training should be provided to help regulatory readers understand the hierarchy of powers in the legal framework, the basic principles of legal interpretation, the sources of free internet law, including the material available on the Agency`s websites, and when to consult an experienced lawyer. It doesn`t take three years of law school to get the basics. [39] The medical profession has long accepted the need for nurses and other nursing assistants. The main difference is that when the nurse gives us an injection, we know that he has been trained for it.

However, in the clash of silos between risk, compliance, oversight, consultants and lawyers, this lesson has been lost. Legal interpretation is not like normal reading, and knowing how to read is not enough to interpret the law. A clear understanding of the hierarchy of the legal framework and the foundations of the canon of legal interpretation is needed. There is no reason not to share this knowledge widely. The rise of risk management and compliance has even led to academic majors in the field. Strikingly, the descriptions of academic majors in compliance mention accounting, economics and statistics, but nothing about the law. Popular professional association certifications for risk and compliance professionals include little or no training on the law. [40] Currently, there are four main methods by which the independence and reputation of legal services threaten to diminish: (1) limiting the budget and resources available to the legal department, (2) restricting the view of the role of lawyers, including regional banking regulators, who lobby to exclude in-house lawyers from supervisory meetings or audit responses; (3) tolerate multiple poles of legal interpretation and judgment within banking organizations and (4) misunderstand the role of professional secrecy in facilitating open conversations. [20] See William H. Simon, The Kaye Scholer Affair: The Lawyer`s Duty of Candor and the Bar`s Temptations of Evasion and Apology, 23 L. & Soc.

Inquiry 243 (1998). As a result, a number of consultants, many of whom are former supervisors, advise banking organizations on audit responses. What advice would you give to students who want to work internally at a large bank? [27] The legal trade press is full of articles from in-house legal advisors calling on law firms, which are themselves poorly capitalized, to develop legal technologies, but the technology needed for an in-house legal department and used by a law firm to advise a company more effectively would be different. J.P. Morgan`s technology budget is about $11.4 billion. Michelle Davis, Dimon seems cautious as JPMorgan prepares for recession, Bloomberg, February 26, 2019. The largest law firm in the United States generated $3.76 billion in revenue in 2018. Ben Seal, The 2019 Am Law 100: Gross Revenue, Am. Law., April 23, 2019. This discrepancy says a lot about the false conscience of the specialized legal press. His demand is due more to the lack of adequate resources for the legal department than to a realistic hope that law firms will develop the technology.