The bank/law firm love-in hits a rough patch

It really is a sign of the times when partners at major City firms start complaining about the behaviour of their most cherished banking clients. In this case, as we reported last week, the complaint is about increasing demands for secondees but it comes against a backdrop of mounting pressure on the once-unquestioned relationship between banks and law firms. A series of panel reviews from major banks have ushered in far tougher terms as hard-pressed institutions demand lower rates, predictable costs and more flexibility from their lawyers. In this context, it appears that complaints regarding secondments are symptomatic of a wider tension between two parties that, until recently, never imagined they would fall out. True, it would be an exaggeration to imply that the relationship between banks and law firms has broken down but a significant number of partners at major City firms are now expressing frustration over the demands of banks. Just a few years ago, even the best-connected observer of the legal market would have been hard-pressed to find any partner at a major firm who would utter a word of criticism of a bank. It was an article of faith that major banks were first among equals within law firms’ client rosters. Questioning that, on any level, provoked blank stares.

As such some would say law firms have only got themselves to blame if the other party in this relationship comes to expect special treatment. And who cared if the priority given to financial services clients sometimes came at the expense of other clients, who could never compete with law firms’ willingness to build their practice around banks?

Understandably, many banks are giving short-shrift to complaints from law firms. They argue that they helped to drive up law firms’ profits for years so it is a case of for better or worse. Some partners would fire back that banks don’t realise the extent to which they already received priority treatment in exchange for their generosity. And it does pose a problem now when bank clients are – for obvious reasons – no longer the quite jewel in the crown they once were and those neglected industrial and public sector clients suddenly look more attractive to lawyers. There is some justification to both sides’ case but the underlying point is that law firms and banks have some serious thinking to do about how their relationship will work in future. Clearly, given their size and influence banks are always going to be important clients for law firms. But whether banks will justify quite such devotion in the foreseeable future given the outlook for the banking industry is open to debate. Besides, some would argue it would be healthy for both parties to get a little more distance from each other.

The bank/law firm love-in hits a rough patch

It really is a sign of the times when partners at major City firms start complaining about the behaviour of their most cherished banking clients. In this case, as we reported last week, the complaint is about increasing demands for secondees but it comes against a backdrop of mounting pressure on the once-unquestioned relationship between banks and law firms. A series of panel reviews from major banks have ushered in far tougher terms as hard-pressed institutions demand lower rates, predictable costs and more flexibility from their lawyers. In this context, it appears that complaints regarding secondments are symptomatic of a wider tension between two parties that, until recently, never imagined they would fall out. True, it would be an exaggeration to imply that the relationship between banks and law firms has broken down but a significant number of partners at major City firms are now expressing frustration over the demands of banks. Just a few years ago, even the best-connected observer of the legal market would have been hard-pressed to find any partner at a major firm who would utter a word of criticism of a bank. It was an article of faith that major banks were first among equals within law firms’ client rosters. Questioning that, on any level, provoked blank stares.

As such some would say law firms have only got themselves to blame if the other party in this relationship comes to expect special treatment. And who cared if the priority given to financial services clients sometimes came at the expense of other clients, who could never compete with law firms’ willingness to build their practice around banks?

Understandably, many banks are giving short-shrift to complaints from law firms. They argue that they helped to drive up law firms’ profits for years so it is a case of for better or worse. Some partners would fire back that banks don’t realise the extent to which they already received priority treatment in exchange for their generosity. And it does pose a problem now when bank clients are – for obvious reasons – no longer the quite jewel in the crown they once were and those neglected industrial and public sector clients suddenly look more attractive to lawyers. There is some justification to both sides’ case but the underlying point is that law firms and banks have some serious thinking to do about how their relationship will work in future. Clearly, given their size and influence banks are always going to be important clients for law firms. But whether banks will justify quite such devotion in the foreseeable future given the outlook for the banking industry is open to debate. Besides, some would argue it would be healthy for both parties to get a little more distance from each other.