Barclays will be forced to disclose the names of staff involved in Libor rigging, following a damning court judgment over claims it mis-sold interest rate swaps to a care home operator.
The bank was chastised on Monday at the High Court in London by Lord Justice Flaux, who claimed Barclays was intentionally trying to hide the true scale of the Libor scandal, which has already seen the lender fined £290m.Up until now, the true scale of the Libor scandal has not only been hidden by banks like Barclays, but also by the global financial regulators.
The criticisms came as Barclays faced a preliminary hearing, ahead of a trial, over allegations it mis-sold to a care home group complex interest rate derivatives that were in turn based on false Libor rates.
Issuing a damning judgment, Lord Justice Flaux said Barclays’ objections to the Libor-rigging claims brought against it by Guardian Care Homes were “wholly without merit” and accused the bank of “misleading” customers.Would banks ever mislead their customers?
Of course they would and we didn't need the Libor rate manipulation or CDOs like Abacus to know it. It has been well known since the Great Depression.
This is why we have a financial system based on the FDR Framework and the combination of the philosophy of disclosure with the principal of caveat emptor.
It is assumed that if disclosure of all the useful, relevant information in an appropriate, timely manner is not required of the banks, they will not provide it and instead will mislead their customers.
Allowing the case to continue to trial, the judge described the bank’s attempts to dismiss the Libor aspects of the care home operator’s claim as “shadow boxing” and said they were “doomed to fail”.
Guardian Care Homes’ lawsuit is seen as a test case for Libor-rigging claims and the court decision to allow the case to go to trial potentially opens the door to billions of pounds of legal actions against other banks involved in the rate-setting scandal.A level of exposure that calls into question the solvency of the banks involved.
Over a day-long hearing, Lord Justice Flaux repeatedly struck down Barclays’ objections and said the bank would be forced to disclose potentially embarrassing details, such as the identities of staff implicated in Libor manipulation.
“[It] just seems perfectly obvious... that the people responsible for giving those instructions [manipulate Libor] must have known customers were being misled,” he said....The judge has just provided an example of why transparency works so well. By shining a bright light on bad behavior by bankers, it discourages them from engaging in bad behavior in the first place.
However, Lord Justice Flaux rejected the arguments and said Barclays would from next month have to begin providing the names of staff involved in Libor-rigging to Guardian Care Homes’ legal team.
“This is all shadow boxing. The real issue is they [Barclays] are trying to shut it down because they don’t like it,” he said.