New details of alleged Barclays rate-fixing emerge in court case

Thu Oct 17, 2013 2:37pm EDT
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By Estelle Shirbon

LONDON (Reuters) - Barclays (BARC.L: Quote) employees manipulated Libor benchmark interest rates to benefit one of the British lender's sterling investment funds between 2006 and 2010, according to evidence disclosed in court filings by a company that is suing the bank.

The details came to light on Thursday during a hearing at the Court of Appeal in London into a dispute between Barclays and residential care home operator Guardian Care Homes, a test case that could affect all banks tainted by the Libor scandal.

The key issue is whether Guardian Care Homes can rely on alleged Libor-rigging by Barclays to invalidate two interest rate swaps it entered into with the bank in 2007 and 2008.

Guardian Care Homes had taken out two loans totaling 70 million pounds ($113 million) from Barclays and alleges the bank mis-sold it inappropriate interest rate hedging products based on Libor that ended up costing it millions as rates fell.

Barclays denies mis-selling and says the Libor-rigging allegations are irrelevant to the dispute.

The bank has been fined $453 million by U.S. and British authorities in June 2012 over attempted manipulation of Libor rates, a scandal that led to the resignation of the bank's then chief executive Bob Diamond.

In legal papers filed to the court, Guardian Care Homes cites a letter from Barclays lawyers to the Singapore regulator that contains details of an internal investigation by Barclays covering the period between January 2006 and April 2010.

The investigation was into alleged manipulation of the three-month sterling Libor rate by bank employees, which Guardian Care Homes says is relevant to its case because that was the rate its two swaps with Barclays were tied to.   Continued...

A logo hangs outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville