Banks could face Libor cartel claims

Tim Wallace
Follow Tim
BANKS could face another huge wave of claims amounting to hundreds of millions or even billions of pounds if the European Commission rules Libor fixing amounted to anti-competitive behaviour, City lawyers warned yesterday.

Solicitors from Collyer Bristow believe any finding that low-balling Libor was anti-competitive or represented a cartel, could lead to a raft of claims relating to derivative contracts or loan products.

Low-balling was the practice early in the financial crisis where banks submitted falsely low interest rates to give a dishonestly positive impression of their health to the markets.

That would come on top of the PPI claims, which have cost the big four banks £12bn so far, and interest rate swap mis-selling claims which are set to cost several billion more.

Competition lawyer Stephen Critchley describes the possible outcome as a “nuclear option” for aggrieved bank customers, with any EC ruling potentially acting as a springboard to jump past many of the initial hurdles of proof in any action.

And as the department for innovation, business and skills (BIS) plans to shake up the way small firms can bring legal challenges, this could mean banks face a wave of claims from clients of all sizes.

BIS recently put forward plans that could see small firms allowed to band together to launch class actions against anti-competitive behaviour.

And it also wants to let firms fast track claims relating to such behaviour.

The European Commission does not yet know when it will make its ruling on possible anti-competitive behaviour.