After a period of intense speculation, on 15 September 2008 Lehman Brothers International Europe (LBIE) and certain other English companies within the Lehman Brothers Group went into administration in the UK. They were followed later that day by Lehman Brothers Holdings, Inc. which filed for Chapter 11 protection. In the subsequent days and weeks, various other Lehman entities worldwide filed for insolvency in their relevant jurisdictions. The fall of the investment banking giant that had been the Lehman Group was complete. More than three years later, the relevant insolvency officials, including the English administrators, are still trying to resolve the issues and complexities caused by the insolvency and in so doing, to return funds to the companies' creditors. Many of these complexities arose as a consequence of the way in which client monies and client assets had been held by the various Lehman group companies. Reports indicate that in the UK, Lehman’s counterparties were unclear as to whether over 840,000 trades would go on to settle, while clients had more than $35 billion in cash and assets tied up in the insolvent estate.1 There have been delays in identifying and returning those assets to clients, resulting in further disruption to the financial markets. In some cases, the delay in returning assets to the counterparties has caused those counterparties to find themselves in financial difficulties. So what has been done to try to avoid similar issues should an investment bank fail in the future?
The Banking Act 2009
The Investment Bank Special Administration Regulations 2011
What is an "Investment Bank"?
The New Procedure for Investment Banks
Application for Special Administration
— Objective 1 – Return of Client Assets
Distribution of Client Assets
— Objective 2 – Engaging with Market Infrastructure Bodies & the Authorities
Continuity of Supply
Variations where the Investment Bank is a Deposit-taking Institution
Will it Work?
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