LIBOR rate fixing - How low can the Banks go?
Hardly a week goes by without another piece of bad publicity for banks. A transcript of a document has recently been revealed in a case involving Indian firm Unitech Limited who are seeking to set aside interest rate swap products and loans on the basis they were mis-sold. This case is being heard along with a case against Barclays brought by Guardian Care Homes.
The transcript reveals that US and UK Regulators found that Banks fraudulently manipulated LIBOR interest rates and deceived their customers. To add insult to injury the English courts have heard that a Deutsche Bank (DB) employee said that “clients don’t want to know how they are screwed”. LIBOR is the average interbank interest rate at which a selection of banks on the London money market are prepared to lend to one another. Instead of basing loans on a certain percentage above the Bank of England rate, the banks have based the repayments on the LIBOR rate. But if the banks were controlling and rigging the LIBOR rate they would effectively be setting their own repayment figures.
Interest rate swap claims and LIBOR manipulation
It is now therefore argued that banks not only mis- sold interest rate swaps by giving misleading information about the financial consequences, but they also rigged the rate of interest itself. Both Unitech and Guardian started out as mis-selling cases on the basis that the financial products concerned were unsuitable and their true cost was not properly explained. However, the courts have now given permission to add the LIBOR rigging accusations; thus the cases against DB and Barclays have been taken to another level of seriousness.
If the cases are successful, and the agreements are cancelled, this will have massive financial implications for the banks. It could open the floodgates to further claims by individuals and small businesses who can seek to avoid liability for similar products, which are formed on the basis of manipulated rates. Thousands of people will be affected.
The Financial Conduct Authority reached an agreement with lenders some time ago to review interest rate swap products and compensate customers where they were mis- sold. Things may be about to get a whole lot worse for banks if the LIBOR fixing argument succeeds.
The Unitech and Barclays cases are the first in the UK concerning the enforceability of agreements where the LIBOR rate may have been manipulated.
More bank manipulation?
As if the PPI, interest rate swap and LIBOR scandals were not enough, Royal Bank of Scotland has now admitted to being asked by regulators about potential manipulation of the foreign exchange markets and other banks, including DB and Barclays are being investigated.
It beggars belief that the currency benchmark may also have been manipulated and it seems this has all the hallmarks of the LIBOR investigation. Doubtless the regulator will be interested to see emails between dealers and brokers to see if there are similar sign of rate manipulation.
Help with bank mis-selling claims
If you believe you are the victim of mis-selling, rate manipulation or deceit by your bank, contact us. Redress Law Solicitors are experts in financial claims. Click here to contact us or phone 0845 867 4165 for a free case assessment.
