Barclays Libor case to go to trial

Mon Oct 29, 2012 2:27pm EDT
 
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By Matt Scuffham

LONDON (Reuters) - Barclays became the first bank to be ordered to stand trial in a British court over damages stemming from manipulation of the Libor interest rate after a High Court ruling on Monday.

Guardian Care Homes, a residential care home operator based in Wolverhampton, is suing Barclays for up to 37 million pounds ($59 million) over the alleged mis-selling of interest rate hedging products known as swaps.

"Today is a huge milestone with a trial now going forward to determine whether these financial products should be declared void," Guardian Care Homes' chief executive Gary Hartland said after the ruling.

The case could also lead to new revelations about the Libor scandal after Guardian Care Homes asked for documents relating to the affair to be disclosed.

The company says it should be fully compensated for its losses because the swap rates were based on the London Interbank Offered Rate (Libor). Barclays agreed to pay $450 million in fines to U.S. and British authorities in June to settle allegations that it manipulated Libor and other key interest rates. More than a dozen other banks are also being investigated.

The trial will be a test case for thousands of small British firms who believe they were mis-sold such swaps and raises the prospect of other companies linking future claims to interest rate rigging by banks.

"This legal battle will be watched carefully by the thousands of small businesses affected by mis-selling who may decide to take a similar route," John Walker, chairman of the Federation of Small Businesses, said on Monday.

The country's biggest four banks agreed in June to review past sales of interest-rate hedging products to small businesses and to compensate customers for mis-selling loan insurance after the Financial Services Authority said it had found "serious failings" in the way that they were sold.   Continued...

 
A logo of Barclays bank is seen outside a branch in Altrincham, northern England April 26, 2012. REUTERS/Phil Noble