Barclays facing new Libor allegations in appeal court

Barclays Canary Wharf

The Financial Conduct Authority is ready to review new allegations about potential Libor-rigging by Barclays, the bank it fined £290m last year for manipulating the key interest rate.

The City regulator will decide after its informal analysis of evidence presented in the court of appeal on Thursday whether it should launch a formal investigation into the bank's involvement in the Libor market. It may decide not to do so.

A long-running case between Barclays and private health care provider Guardian Care Homes has led to allegations being raised in legal papers at the appeal court as part of the health company's attempt to have two interest rate swaps invalidated. "The FCA will look at the documents, as would be expected," the regulator said.

Guardian Care Homes had loans worth £70m from Barclays and alleges the bank mis-sold it interest rate swaps based on Libor that ended up costing it millions as interest rates fell. Barclays denies mis-selling and says the Libor-rigging allegations are irrelevant to the dispute.

In legal papers filed to the court, Guardian Care Homes cites a letter from Barclays' lawyers to the Singapore regulator containing details of an internal investigation by the bank between January 2006 and April 2010 into Libor.

According to Guardian Care Homes, the inquiry found that ex-Barclays employee Quan Hui Lee, now working at an investment fund run by Barclays called Ricardo Master Fund, had asked bank staff to manipulate the rate to boost the fund's returns. "Go get Libor down," Lee was cited as saying.

In another email, Lee was quoted as saying: "LOWER! Go for 3 percent ... I want yr end 3mL (three-month Libor) to be 2.8 percent or at worst 2.88 percent."

Citing the contents of the letter from Barclays lawyers to the Monetary Authority of Singapore, dated May 9, 2013, Guardian Care Homes said: "The purpose of the fraud was to make profit or avoid losses on 'Ricardo Master Fund'".

Barclays is trying to have the Libor-related elements of the case thrown out by the appeal court, which is hearing the case in conjunction with a similar dispute between Deutsche Bank and Indian real estate developer Unitech.

"[The case] is not concerned with the extent to which Barclays manipulated Libor or the regulators' reports," the bank's lead counsel Robin Dicker told the court. "It is concerned with a much narrower issue, whether Guardian Care Homes can rely on such conduct to avoid or reduce its obligations."

The three court of appeal judges are due to give their ruling later this year.

A spokesman for Barclays said: "The bank has chosen not to object to the introduction of new evidence to the court of appeal hearing, however the bank does not consider any of the new evidence to be relevant to the issues in front of the court of appeal."

Powered by article was written by Jill Treanor and agencies, for The Guardian on Thursday 17th October 2013 21.23 Europe/London © Guardian News and Media Limited 2010


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