US judges have raised the prospect of UK high street banks Barclays, HSBC, Royal Bank of Scotland and Lloyds facing penalties of billions of dollars for manipulating interest rates.
A Court of Appeal verdict yesterday overturned an earlier decision that 16 global banking groups, including the four UK lenders, should not face "anti-trust" charges relating to fixing Libor interest rates.
Putting that charge back on the table is significant as under US law, those found guilty can be required "to pay triple damages", the Wall Street Journal says.
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The three judges noted this had the potential to "bankrupt 16 of the world's most important financial institutions [and] also vastly extend the potential scope of anti-trust liability in myriad markets where derivative instruments have proliferated", notes The Guardian.
Despite allowing a number of other suits to proceed, Manhattan federal district court judge Naomi Reice Buchwald dismissed the competition charges in 2013, saying that "because setting Libor was a 'cooperative endeavour', there could be no anti-competitive harm to customers".
She also said the plaintiffs, who include the local governments of cities such as Baltimore, San Diego and Houston, had not proved harm.
The new verdict dismisses the claim that competition charges cannot apply and states that if the plaintiffs can prove that they paid more for financial transactions as a result of the higher Libor rate, as is alleged, they could prove harm and reclaim damages potentially in the billions of dollars.
Alongside the four UK institutions, the defendants include Bank of America, Bank of Tokyo-Mitsubishi, Citigroup, Credit Suisse, Rabobank, Deutsche Bank, JP Morgan, Norinchukin Bank, Portigon AG/Westdeutsche ImmobilienBank AG, Royal Bank of Canada, Societe Generale and UBS.
"These lawsuits are separate from the sprawling criminal and civil probes around Libor rigging, which began in 2008 and have implicated traders around the world," notes the Journal. The largest penalty so far handed down was $2.5bn (£1.71bn) to Deutsche Bank.
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