The biggest test case against Barclays for allegedly manipulating the Libor rates has been suspended until April 2014. The plaintiff in the trial, Guardian Care Homes (GCH), called it a last gasp and desperate move by Barclays to avoid justice.

The matter will now move into the Court of Appeal this summer where Barclays will challenge specofic aspects of the rigging scandal.


Barclays interest rate swap trial

GCH is suing Barclays for £70 million, charging that Barclays mis-sold the company swaps, called interest-rate hedging products, based on manipulated Libor rates in 2007 and 2008. GCH bought two swaps to refinance loans with Barclays.

Judge Julian Flax allowed the case to go forward back in October 2012 by agreeing that there was sufficient evidence presented by the claimant that Barclays engaged in fraudulent and false representation when it sold the swaps to GCH.

Last summer, the bank got hammered with £290 million in fines after regulators determined that Barclays’ derivative traders churned out false numbers about the interest rate that the bank was charged for borrowing cash in money markets.

The action in the Appeal Court will centre on whether Judge Flax’s decision to include allegations of fraudulent and false representation should stand.

Businesses around the UK are watching this trial closely as a test case. The outcome will determine whether other businesses will pursue legal action against various banks involved in the rate-rigging scam. Analysts are estimating that as many as 40,000 UK businesses may have been victims of mis-sold interest rate swaps. Compensation could easily eclipse the £10 billion already paid out in the mis-selling of payment protection insurance.

This is the last throw of the dice by Barclays, said Gary Hartland, the chief executive of GCH. “Barclays has admitted aggressively selling these highly complex financial products, which were designed to protect someone against an interest rate raise, and it is absolutely right that they should face allegations on the grounds that they were manipulating that rate for their own benefit,” Hartland said.

Barclays has countered the charge by GCH and denied the allegations, insisting that the home care company had financial experience and a suite of experts on board who had an understanding of swaps. “Barclays understands the client entered into their swap agreements with sufficient understanding to exercise their own judgment as to whether the products would meet their business objectives,” said a Barclays’ representative. “This is a significant business which owes Barclays £70m.”

Barclays, along with other banks, is under an order from the FSA to review the possible mis-selling of interest rate swaps. An initial review by the FSA determined that 90 percent of these interest-rate hedges failed to meet regulatory requirements and may form the basis to require customer redress.

The Financial Times revealed that Tim Lord QC, representing the claimant, told the court that Barclays had established several inquiry bodies within the bank to investigate employees. GCH claims that Barclays has admitted that at least five different internal committees had investigated its Libor actions.

It’s expected that 200,000 documents might be presented by Barclays in the trial scheduled for next year. The ordeal could extend for six weeks or more. Lord also complained that Barclays demanded “micro details” from the care home group.

Along with the documents, it’s probable that up to 20 employees of Barclays will trek through the court to give testimony.

Guardian will blaze the trail for other companies that are considering legal action against High Street banks involved in the Libor scandal. Barclays has already set aside £450 million to pay compensation ordered by the FSA. Businesses have criticized this effort as foot-dragging by the banks. Some analysts who are familiar with the Libor scandal are predicting that the cost to UK banks could exceed £20 billion.


Maple Financial Interest Rate Swap Claims

We have a specialist team of solicitors dedicated to dealing with the mis-selling of interest rate swap protection products by the banks. We are very happy to review these relatively complex arrangements and to claim compensation for our clients where appropriate.

If you believe you have incorrectly been classified as a ‘sophisticated’ customer and have, therefore, not been eligible for redress.  Maple Leaf Financial will review your interest rate product and we will be happy to discuss your individual concerns and requirements : 0800 7747624

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.