Dan Barnes looks at the potential for claims following the Libor fixing scandal.
The scandal around Barclays’ misconduct
relating to the London Interbank Offered Rate (Libor) and the
Euro Interbank Offered Rate (Euribor) is far reaching, but
proving lost revenue due to any manipulation of the interbank
rate could be challenging.
Libor is a benchmark set by the British Bankers Association
(BBA) and covers a range of rates depending on the lending
period. It is the average of all the interest rates charged by
London’s big banks. Its three-month dollar rates
are used to price the Eurodollar contracts offered by the
Chicago Mercantile Exchange and interbank interest rate swaps
are based on LIBOR. In total some US$350 trillion of
derivatives are estimated to be based on the London rate.
The rate of Libor is used to settle options at the time of
contract expiration, and therefore can determine if a contract
is worthless or in the money, and whether or not a writer, in
the case of a call option for example, will have to compensate
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