Bank wins right to challenge aspects of rate-rigging case after similar move by Deutsche Bank last week
The first UK trial concerning the alleged fraudulent manipulation of Libor rates has been delayed until next year after Barclays won the right to challenge aspects of the high court case.
The trial, brought by Guardian Care Homes (GCH), will be delayed until April 2014 pending the appeal court’s ruling.
GCH, which is suing Barclays for £70m over the alleged mis-selling of interest-rate hedging products (swaps) that were based on Libor, described the bank’s appeal as “highly opportunistic”.
Gary Hartland, chief executive of GCH, said the bank’s decision to lodge an appeal five months after the high court ruling “hints at a last throw of the dice by a business desperate to avoid facing rightful justice”.
Speaking after a short case-management hearing, he added: “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.”
Barclays, which denies all the allegations, lodged the appeal after a successful challenge by Deutsche Bank in a similar case last week. The British bank said GCH had “a suite of advisers and a lot of financial experience and skill in-house. 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. This is a significant business which owes Barclays £70m.”
This year Barclays was forced to reveal the identities of more than 100 employees, including its former chief executive Bob Diamond and investment banking boss Rich Ricci, named in regulatory findings as part of its £290m Libor settlement in June.
The bank carried out three internal Libor-related investigations, including one called the Libor investigation employee review committee.
A provisional trial date has been set for 29 April 2014.
CEO Nick Buckles, whose firm failed to hire enough security staff for the Olympics, may also struggle to secure his job
The cover of G4S’s latest annual report (pdf) proudly sports a picture of the Olympic stadium alongside the tagline “securing your world”. An alternative headline could now read: chief executive desperately trying to secure his job.
Nick Buckles will have known that the Olympics gig was the one contract G4S had to execute to perfection this year. The mess is still developing but the scale already risks doing very serious damage to the company’s reputation for competence, and thus to its ability to win high-profile contracts in future. A total of 3,500 troops have been put on stand-by to cover for G4S’s failure to hire enough security guards on time.
If Buckles can rapidly round up a few thousand gap-year students, the eventual requirement for troops may turn out to be smaller. Equally, though, the problems could get worse – and prolonged chaos would probably require Buckles to put away his high-visibility jacket for good.
His personal stock is yet to recover from the cack-handed and failed attempt to buy rival ISS for a colossal £5.2bn last year. Shareholders hated the deal and shot it down. In part, that was because they thought a company with a proposed combined workforce of 1.1m would be too big to manage. The same question should now be asked of G4S in standalone form. It employs 575,000 people. Is management too stretched?
For now, investors are taking a relaxed view of the shambles. Even on a “down” day in the market, G4S shares fell less than 3%, perhaps reflecting the thought that a £280m contract is small beer in the context of a company with revenues last year of £7.5bn. But what does the market really know? Remember: on day one of Barclays’s Libor revelations, the bank’s share price actually rose. This could get a lot worse for G4S and Buckles.
John Mann MP has released correspondence from 2008 between Paul Tucker of the Bank of England and Jeremy Heywood, then a senior civil servant in the Cabinet Office, ahead of a hearing with Tucker over the Libor scandal at the Treasury select committee.
Key events in the six days since Barclays was fined £290m for manipulating key interest rates
This is a timeline of key events in the Libor inter-bank lending rate scandal over the last week.
Wednesday 27 June
The banking industry is engulfed in a fresh scandal after Barclays pays £290m to settle claims that it used underhand tactics to try to rig financial markets.
The penalties from UK and US regulators, including a record £59.5m fine from the Financial Services Authority, follow allegations it manipulated Libor and Euribor interbank lending, which govern the rates at which banks are prepared to lend to each other in the wholesale money markets.
In the depths of the financial crisis, Barclays gave false information about the interest rates it had to pay to borrow money in an effort to paint a false picture of its health to markets.
Chief executive Bob Diamond, who was in charge of Barclays Capital at the time the breaches occurred between 2005 and 2009, apologises and says he and three other key executives would waive their bonuses for this year.
Thursday 28 June
Britain’s biggest banks face the threat of a criminal investigation over the rate-rigging scandal that could cost the industry billions of pounds.
The Treasury starts to look at strengthening criminal sanctions for those responsible for market abuse.
After fining Barclays, the FSA is investigating several other lenders including HSBC and taxpayer-backed Royal Bank of Scotland.
Serious Fraud Office investigators are in talks with the FSA over the scandal while pressure is mounting on Diamond to stand down.
Friday 29 June
A fresh mis-selling scandal caps a nightmare week for the banking industry, as the FSA announces it has found “serious failings” in the sale of complex interest rate hedging products to some small and medium-sized businesses (SMEs).
It reaches agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate compensation where mis-selling occurred.
Bank of England governor Sir Mervyn King demands a “real change in culture”.
Saturday 30 June
An urgent independent review into the inter-bank lending rate is to be set up by the government in the wake of the interest rigging scandal.
The review will consider the future operation of the Libor rate and the possibility of introducing criminal sanctions, a Treasury source says.
Diamond is summoned to appear before the Treasury select committee on Wednesday.
Sunday 1 July
The chairman of Barclays Bank is reported to be on the brink of stepping down.
Reports say Marcus Agius is about to leave the embattled bank, which declines to comment on the suggestions.
The development comes as business secretary Vince Cable backs calls for a criminal investigation into bankers involved in the affair.
Monday 2 July
Barclays confirms Agius is quitting as chairman. Aguis said he was “truly sorry” for the interest rate rigging scandal which had dealt a “devastating blow” to the bank’s reputation.
Existing board director Sir Michael Rake, the former top accountant and serial company director, was put in the new key role of deputy chairman to oversee an audit of the bank’s business practices, the findings of which will be published.
Barclays said a “zero-tolerance policy” will be adopted against staff who damage the bank’s reputation and a new code of conduct drawn up which all staff will need to adhere to.