Dear Delegate,

The disruption of markets for interbank lending and structured products has forced central banks into liquidity support operations of unprecedented scope, while the associated failure of banks in Britain and the United States has resulted in bail-outs that were unimaginable a mere 12 months ago.

A common feature of these responses to the crisis is that they had to be arranged within an extremely tight timeframe. Yet, they all entail significant legal risks for central banks.

These episodes underline the fact that central banks need not only to monitor emerging risks, but also to continuously assess the legal risks associated with possible policy initiatives.

This seminar allows legal specialists from central banks and supervisory organisations to share their thoughts on emerging risks and hear from those closely involved with the leading challenges facing their institutions at the moment.

The elite panel of presenters include: Experienced central bankers, such as Thomas Baxter and Stefan Gannon, general counsel at the Federal Reserve Bank of New York and the Hong Kong Monetary Authority respectively, who have dealt with numerous crises – most notably their involvement in current credit crisis.

Legal experts from prestigious international law firms, who have extensive experience of the legal challenges central banks and supervisors face. Academics and lawyers from international financial institutions, such as Rosa Lastra of Queen Mary University and Thomas Laryea of the IMF, who are leading authorities engaged in the cutting-edge debates on the governance of the global financial system. In addition to discussing current and emerging legal risks, this practitioner-orientated seminar identifies what central banks can do to reduce and manage these risks.

A strong emphasis is placed on the importance of ensuring a sound and robust corporate governance framework – and how this objective can be achieved in practice. As Ian Plenderleith, the former deputy governor of South African Reserve Bank, and Kasper Roszbach, head of the research division at the Swedish Riksbank, will explain, establishing robust reporting lines and involving and informing the board about legal risks and strategic objectives are essential steps to managing risk and improving performance.

The roundtable format allows delegates maximum opportunity to engage with the presenters and learn from one another. For more information about this exciting programme, please take a few moments to look at the detailed course contents presented on the pages which follow.

Robert Pringle
Managing Director
Central Banking Publications Ltd

Identifying current and future challenges
Introductory group session

Governance in international financial supervision
Rosa Lastra
Senior Lecturer, Centre for Commercial Law Studies, Queen Mary College London

Regulatory and supervisory arrangements in Europe are in a state of flux. Among the key questions the need to be resolved are the governance structures for financial supervision, particularly the cross-border element. Current proposals offer valuable lessons for other jurisdictions. How, for instance, can matters of accountability be tackled under the current and proposed arrangements? How does international law currently help ensure international monetary and financial stability? How can legal and governance arrangement be improved? In this session, the speaker will examine the leading issues related to governance structure for cross-border financial supervision.

Legal aspects of the fight against money laundering and terrorist financing
Segun Osuntokun
Partner, Berwin Leighton Paisner and
Joseph Myers
Senior Counsel, Legal Department, International Monetary Fund (invited)

Central banks’ and regulators’ ability to enforce anti-money-laundering requirements and contribute to the fight against terrorist financing depends on the legal powers at their disposal. Yet, the legal framework must be fair and flexible enough to ensure that it can evolve with fast-moving risks and not impose an unnecessarily heavy compliance burden. This session will consider the range of powers available, including licensing powers, ongoing requirements, investigation powers and sanctions. The focus will be on how central banks and financial supervisors can contribute toward the creation of a robust legal framework to ensure that regulators can act quickly and effectively once risks are identified.

Emerging regulatory challenges in Islamic finance
Hamid Yunis
Partner, Taylor Wessing

Investment in Shariah-compliant Islamic financial products is growing at a rapid rate, and affects regulators and supervisors all over the world. The regulatory approach to Islamic finance, in both retail and whole markets, has emerged as a key consideration in the promotion of financial centres. At the same time, these developments raise complex and important questions for regulators, particularly for the legal framework within which regulation and supervision operates. Regulators need to establish a clear regulatory framework that is flexible enough to adapt to changes in the market and creates a level playing field. The speaker will discuss some of the latest and most important developments in the regulation of Islamic finance.

Regulatory approaches to sovereign investors
Wouter Bossu
Legal Department, International Monetary Fund

Regulatory approaches to sovereign investors Wouter Bossu Legal Department, International Monetary Fund The rising financial power of sovereign wealth funds has raised a number of complex questions for financial regulators in recipient countries. At the same time, policymakers in countries with excess savings need to be aware of legal and regulatory risks to their sovereign investments. In this session, the speaker will discuss the approach taken to developing international guidelines for sovereign investors, the legal foundations of potential restrictions on such investors and prospects for international cooperation in developing a long-term framework for the management of sovereign assets.

Current challenges in sustainable banking: what can the public sector do?
Penny Shepherd
Chief Executive, UK Social Investment Forum

Today, sixty of the world’s largest financial institutions have signed up to the Equator Principles, which provide guidelines for managing the social and environmental concerns associated with their activities. Indeed, in 2007, an estimated 70% of project finance debt in emerging markets was subject to them. Banks are also playing a leading role in addressing issues of global warming through their involvement in carbon trading markets and leveraging their financial expertise to fund projects to reduce emissions. These trends underline the fact that profit-driven institutions increasingly view sustainability not only as a way of avoiding controversy, but also as a source of competitive advantage, allowing them to help their customers avoid social and environmental pitfalls. This session will provide an overview of current developments in sustainable banking and consider the role public sector authorities can play.

Harnessing the governance framework to manage risks
Led by the chairman Professor Dr René Smits

Robust governance structures and reporting lines are essential to the management of both internal and external risks, and the way in which an understanding and appreciation of legal risks are spread throughout the institution. Yet, unlike private-sector financial institutions, where there is growing agreement on appropriate codes of governance and internal controls, differing mandates and legal environments for central banks and regulators have made similar agreements for the public sector difficult. This session will invite delegates, working in break-out groups, to discuss how the governance framework of their home institutions can be structured to minimise and manage risks to the institution.

Supervisory liability for central banks and supervisors
Charles Proctor
Partner, Bird and Bird

As central banks and supervisors perform their many public-policy roles (in monetary policy, and as supervisor, market participant and agent of the government) they are exposed to a variety of legal risks. Increasingly, central banks and supervisors may find themselves forced to account for their actions in a judicial setting. With particular reference to common law jurisdictions, the speaker examines recent cases including that of the Bank of England and BCCI and the “Peter Paul” case.

Case study: the HKMA’s market interventions
Stefan Gannon
General Counsel, Hong Kong Monetary Authority

When central banks intervene in markets, they do so with immense resources, privileged information and objectives different from market participants in the private sector. In doing so, they must fully understand the legal issues surrounding their actions, and ensure that they do not abuse their position. The speaker will discuss lessons learnt drawing on his first-hand experience of the Hong Kong Monetary Authority’s intervention, including its large and controversial purchases of domestic equities in 1998.

Refining coordination between supervisors
Andrew Whittaker
General Counsel, Financial Services Authority

The increasing integration of financial markets – both on a domestic and international level – raises critical questions for financial supervisors in terms of ensuring that clear and practical arrangements exist between the various institutions responsible for overseeing the financial system. Legal certainty over responsibilities, mandates and the distribution of powers are essential and need to be well understood before a crisis hits. In this session, the speaker will draw on the recent experience in Britain with regards to the sharing of supervisory functions and responsibilities between the Bank of England, the Financial Services Authority and the Treasury. The speaker will also outline the plans to restructure financial supervision in the United Kingdom and consider the lessons from this for other jurisdictions.

Defining the responsibilities of the board
Ian Plenderleith
Former Deputy Governor, South African Reserve Bank and former Executive Director, Bank of England

This session identifies the role the board can play in the management and governance of a modern central bank. How can member of the board – who often have little or no experience of how a central bank or a supervisory authority operates – best be prepared to add value to the organisation? Should they drive the management strategy or follow a more hands-off scrutinising approach? What constitutes best practice in terms of the relationship and reporting lines between executive management and the board? Clearly, an adequate understanding of the basic functions of the central bank is essential, but board members also need to be of fully aware of areas of risk exposure, including legal risks; and the major areas where board approval is needed. This group will identify how these issues can be approached in order to create the optimal central bank board.

Lessons learned and prospects
Led by the chairman Professor Dr René Smits

This session will draw together the themes covered by the course and the conclusions to be drawn from the seminar’s proceedings. Delegates will be asked summarise the lessons learned and generate priorities for action on their return to the home institutions. There will also be an opportunity for delegates to raise any remaining issues and questions for the chairman and the rest of the group to discuss.