Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1). Deutsche Bank fails US stress test
This year’s two stage stress test run by the US Federal Reserve was tough all round, as Deutsche failed to pass the second round whilst Morgan Stanley and Goldman Sachs were awarded conditional approvals only.
All 35 of the largest banks in the US passed the first round of stress tests last week, including the US division of Deutsche Bank. However the second stage uncovered “material weaknesses” from the German lender, caused by critical deficiencies in its capital planning controls and infrastructure, particularly raising concern over the bank’s ability to “effectively determine its capital needs on a forward-looking basis,” stated the Fed.
Central bank stress tests have taken place since 2008 and were established in order to ensure the banking industry is better prepared with the effects of a recession.
Deutsche Bank passed the first hurdle measuring its capital levels against a severe recession. This week’s second test assessed whether the bank’s plan for that capital, such as dividend payouts and investments, could withstand such harsh scenarios.
Dividends for Deutsche’s shareholders are expected to still be paid, despite this week’s news, although the bank will need to make further improvements to its US operations, which could adversely affect the bank’s already suffering financial health.
Meanwhile, Goldman Sachs and Morgan Stanley will need to expand their capital buffers as the Fed restricts the amount each bank can return to shareholders. This is a result of the conditional passes awarded to the two US banks, as regulatory officials said they were affected by unusually large one-off tax bills, which doesn’t accurately reflect the banks’ performances.
It is reported that all other banks to undergo the stress tests held sufficient capital buffers to withstand another financial crisis.
Also featured in the news this week was the Bank of England’s announcement to introduce cyber stress tests for the UK financial sector, which will examine their security measures and test their abilities to endure and recover from a cyber attack.
2). CMS offers one month unpaid leave to staff in a bid to boost work-life balance
CMS UK have given staff the opportunity to take up to one month a year off work as unpaid leave with ‘no questions asked’.
In the latest initiative to improve work-life balance at the firm, CMS has made all employees, barring trainees, eligible to apply for a ‘time out break’ of up to a month’s unpaid leave each calendar year.
To be eligible for the scheme, employees must have been at the firm for at least 12 months, and coordinate with other members of their team before making a request. The final decision will then be made by their practice group leader or director.
Understood to be one of the first of its kind to be introduced into a UK law firm, CMS said that the idea had been put to the firm’s board by an associate who had heard about a similar initiative at Deloitte while attending one of the firm’s ‘Women in Business’ networking events.
“The thinking behind the scheme is the idea that the thing people lack most is time and it is about giving time back to people” said Co-practice leader for litigation, arbitration, insurance and employment Catherine Taylor.
The policy applies to the CMS UK partnership, which also includes a number of offices outside of the UK, including Bulgaria, the Czech Republic, Hungary, Russia, Turkey and the United Arab Emirates.
The firm has also updated a number of its other people policies following its three-way merger with Nabarro and Olswang last year, which added roughly 700 lawyers to the firm.
In September, CMS overhauled its parental leave package for UK staff and lawyers, to enable new parents to apply to stay at home with their child for several years before returning to the firm, rather than the standard 12 months.
The maternity leave policy also has no clawback provision, meaning the firm does not reclaim any enhanced pay from people who do not return after taking leave.
The ‘Time out break’ also follows other firms who have tried in innovate in the way that they address the issue of work-life balance.
Firms such as Fieldfisher and Simmons & Simmons have introduced cross-firm agile working policies to allow lawyers to work from home for up to one day per week, while last year a number Linklaters associates in Germany agreed a new 40-hour week fixed-hour contract on reduced pay.
At the beginning of April, Allen & Overy opened a remote hub pilot in Vauxhall in a bid to provide more flexible working opportunities for people that have to commute.
3). Movers & Shakers
Bates Wells Braithwaite gains new COO from Linklaters
Clifford Chance reappoints global finance and capital markets heads for new terms
Clifford Chance rejigs corporate leadership with two new City heads
Hunton Andrews Kurth London disputes team makes post-merger move to US rival’s City base
The London office of US firm Haynes Boone has recruited a two-partner international disputes team from legacy Andrews Kurth Kenyon, following its April merger with Hunton & Williams. The four partner team led by Melanie Willems and Markus Esly joined on Monday.
Mergers & Alliances
Hogan Lovells seals new Saudi Arabian tie-up two years after previous deal dissolved
Office Openings & Closings
Japan’s largest law firm to open nine-lawyer base in New York
Ashurst targets funds and Brexit business with Luxembourg launch
A&O looks outside of legal with new regulatory business
Baker McKenzie promotes six London partners in 68 strong global round