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Barclays’ Libor fixing ‘voided’ swaps deals
Barclays’ manipulation of the London inter-bank offered rate (Libor) may have rendered tens of thousands of customer agreements that reference Libor ‘void’, according to a £12m claim against the bank. The case could open the way to claims for sums far exceeding direct losses incurred through Libor manipulation, admitted in a £290m settlement with regulators last month.
Court papers seen by the Gazette show that amended particulars of claim by the Guardian Care Homes (GCH) group of companies concern two interest rate hedging agreements, an interest rate swap and an interest rate collar agreement. The agreements fix or place a ceiling on the rate of interest paid by a customer. The cost to GCH of exiting the collar and swap agreements would be in excess of £9m.
The GCH claim alleges that Barclays ‘was in breach of an implied warranty that the Libor representations were true’. Correct representations concerning the Libor rate were ‘an implied term’, allowing GCH effectively to cancel the swap, collar and margin agreements, ‘if not void for want of consideration’.
Last month’s regulatory settlement does not protect banks from civil suits, and Barclays admitted activities provide a new context to sections of the GCH claim relating to Libor-fixing.
Previous estimates of the bank’s exposure to claims arising from manipulation of the Libor rate were based on the losses that were triggered by the rate being artificially high, or on the losses incurred by customers when small fluctuations triggered opt-in and opt-out points that favoured the bank.
City law firm Cooke Young & Keiden is acting for GCH. The claim has been made in the Birmingham Mercantile Court. A spokesperson for Barclays said the bank was unable to comment on the specifics of the case.
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