Barclays, others may face billions in litigation

‘Real change’ needed in industry’s culture

A scandal over the rigging of key interest rates could plunge the global banking industry into a legal morass for years, analysts said Friday, as the head of Barclays PLC fought to hold onto his job.

With the Times newspaper naming Royal Bank of Scotland PLC as the next bank facing a fine for its alleged involvement in manipulating the key lending rate between banks, the head of the Bank of England said there needed to be “real change” in the industry’s cul-

We expect to get settlements by others

ture.

Referring to what he called the “deceitful manipulation” of rates, Mervyn King told a news conference on Friday the London Interbank Offer Rate (Libor) should be reformed to reflect actual market transactions.

U.S. and British authorities fined Barclays US$453-million on Wednesday for manipulating Libor, which underpins some US$360-trillion of loans and financial contracts around the world — and analysts forecast more banks would soon be named for collusion.

“Reading the statements by the authorities we expect to get settlements by others in the course of time which could be more punitive,” analysts at Credit Suisse said.

Others predicted Barclays and other banks could face billions in costs from litigation, especially in the United States, in much the same way that oil major BP ran into drawn-out legal rows over its oil spill.

“Given the long-tailed nature of investigations we expect this to be a long-term overhang,” said Morgan Stanley analyst Chris Manners.

Barclays was the first bank to settle in an investigation which is looking at other large financial institutions in Europe, Japan and North America, including Citigroup, HSBC and UBS. No criminal charges have been filed.

The Times said RBS faced a likely fine of £150-million (US$233-million) for participating in market-manipulation offences similar to those engaged in by Barclays. The bank said no fine or settlement had been decided upon.

The heaviest pressure remained on Barclays chief Bob Diamond, who was running the investment banking arm Barclays Capital when the rigging occurred in 2005-2009, despite his vow not to quit.

Britain’s popular tabloid newspaper The Sun tore into the banker, calling him “Bob the Rob” and saying: “Never in the past four miserable years have bankers been more hated than now.”

Prime Minister David Cameron said Mr. Diamond would appear before parliament’s Treasury Select Committee, adding, “He and his management team have serious questions to answer.”

Britain has also called in the fraud squad to investigate possible crimes.

“Politicians have already been baying for blood and calling for the head of Bob Diamond,” said Stephen Peak, manager of the Henderson UK Alpha and European Absolute Return funds and a shareholder in the bank.

“We feel that the Barclays board will instinctively wish to resist this, as Diamond is clearly the architect and leading light of Barclays, but feel that the pressure may be too great.”