BARCLAYS’ Libor crisis came back to haunt the bank yesterday as senior managers were accused of knowing that traders tried to manipulate the key inter-bank lending rate.
In a Court of Appeal hearing lawyers claimed board-level managers knew of the manipulation, but still let borrowers take out products based on Libor.
Guardian Care Homes (GCH) is accusing Barclays of fraud, claiming the bank manipulated Libor for profit, and that GCH lost out because its interest rate swap was based on Libor.
The bank now faces an excruciating wait until the end of next month to see if the Court of Appeal allows GCH to bring the fraud accusations.
And the industry will be watching closely – trillions of dollars of loans are based on Libor and so this case could lead to a flood of fraud claims.
Barclays has already settled claims it manipulated the rate, paying regulators £290m in July 2012. In that case the regulator said top bosses had expressed dissatisfaction with the Libor submissions, but did not say they knew of the manipulation.
But GCH’s lawyers said in court filings yesterday that bosses including ex-finance director Chris Lucas and then-group treasurer Jon Stone knew what was happening. The filings cited transcripts from traders which GCH argues back up the case.
“Mr Lucas doesn’t want us to be outside the top end. And apparently they chatted on the whole of the 31st floor [the boardroom location],” said treasury manager Miles Storey to former-rate submitter Peter Johnson in records from 30 November 2007.
“Mark had a talk with Jon Stone on the phone saying oh what are you doing with Libors? Ya know you’re going over the market again. And he said, well that’s where they are, in fact they’re probably not high enough,” said Johnson to two Libor submitters on 19 November 2007.
They also cited an email from the British Bankers’ Association which was circulated to then-chief John Varley, ex- finance head Chris Lucas and ex-chief Bob Diamond, in 2008.
It asks them “to do what is necessary within your organisation to effect appropriate rates to be set.”
Barclays rejects GCH’s claims, and hopes the Court of Appeal will stop the fraud claim going ahead.
“This started as an alleged mis-selling case which Barclays considers has no merit. The addition of a claim based on what happened with Libor does not change the bank’s view,” Barclays said in a statement.
The appeal judges are expected to make a decision in late November.