International Banking and Finance Law - Essay Example

The legal structure of the banks for proper financing the project may include lead bank, which has a direct relationship with the borrower; participant; which is a financial intermediary lending an amount below the threshold; documentation bank responsible for correct drafting of the documents concerning the loan and agent bank responsible for managing the cash flows and payments during the project lifecycle (Gatti, 2008:157). It is however important to mention that lead banks could be liable to other members for negligent preparation of the information memorandum (Roberts, 1998:79).b) The legal issues arising from the loans given by the group of banks for a particular project include pre-contract relationships involving the lead banks, lenders and borrowers; the legal position of the agent banks, information of the borrower, project details like the requirement of finance during its lifecycle.

The Unfair Contract Terms Act 1977 declares the exclusions of liability for negligence by the notice will only be effective in as much as they are reasonable. A noncontractual remedy is also available to the member in the form of an action for fraudulent misrepresentation (Roberts, 1998:83). The rights and obligations of the banks are independent of each other and that the financial assistance provided by the banks in the group is usually separate loans made to the borrower which also gives the right to the bank to make its own decisions on matters pertaining to default by the borrower.

The group of banks act like a syndicate, whereby, a clause is included declaring that when an event of default takes place, all the lenders decide by a majority on whether to accelerate the facility or to waive the event of default. Further, if any lender wants to take the borrower to the court is not authorized to do in case of majority is in favor of acceleration. In an event of insolvency of any member of the group of banks, the remaining banks are in liability to finance the project (Roberts, 1998:90).