News Column

Barclays paper reveals extent of legal battles worldwide

August 15, 2014

Jennifer Rankin



A Barclays document sent to shareholders has laid bare the full extent of the bank's legal woes, ranging from continuing court tussles over rigging interest rates to allegations of ripping off its own clients.

As the bank battles to restore its reputation, the investor prospectus makes clear it faces multimillion-pound payouts and years of costly litigation.

Although the prospectus was published as part of a pounds 60bn programme of bond sales, more than 10% of the 146-page document is devoted to "risk factors" - or wrongdoing, whether alleged or proven.

The prospectus, first spotted by the FT's Alphaville columnist, contains few new charges, but will make uncomfortable reading for Barclays shareholders who this year staged a protest against the board's decision to pay out pounds 2.4bn in bonuses at a time of shrinking profits.

One of the biggest cases centres on a $1.25bn claim for damages against Barclays and nine other banks for manipulating Libor, the benchmark interest rates that determine the cost of credit for borrowers across the globe.

Smaller lenders have banded together to seek damages, arguing that artificially low Libor rates depressed their income. Barclays, which has already paid pounds 290m to US regulators and pounds 60m to the UK after admitting its role in manipulating Libor, is battling similar class actions for alleged manipulation of the equivalent rates for the euro and yen.

The document also details the $280m settlement Barclays paid in April to the US federal home loan finance companies Fannie Mae and Freddie Mac after allegations of selling faulty mortgage-backed securities during the US housing bubble.

Allegations of rigging electricity markets in California and of not publishing key information on the UK stock market give a flavour of the variety of legal battles Barclays is fighting.

But the biggest headache for the bank's chief executive, Antony Jenkins, is the allegation that Barclays ripped off its own customers in its so-called dark pool, a trading platform that allows investors to remain anonymous. Allegations of "fraud and deceit" have been levelled by the New York attorney general since Jenkins began his clean-up. Barclays has defended itself against the accusations and said the charge sheet contained "clear and substantial errors".

The final bill is impossible to calculate, as in many cases Barclays states it is unable to estimate potential fines or damages. However, the bank did say that it did not expect the cases to have "a material impact", implying it does not expect a hit on profits.

1.25

Claim in billions of dollars for damages against the bank arising from its role in the manipulation

of Libor rates



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Source: Guardian (UK)


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