By Roger Baird
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Bank shares tumbled in London as investors feared the £290million fine paid by Barclays is just the beginning of a large round of claims.
Barclays saw its stock fall 30.45p to 165.6p, the day after the bank paid its fine to US regulators and the UK’s Financial Services Authority for rigging LIBOR interbank lending rates between 2005 and 2009.
Chancellor George Osborne said Barclays’ behaviour amounted to a ‘flagrant breach of proper conduct’.
Banks bashed: Shares in all four major High Street lenders plunged on the London Stock Exchange
He added that a number of other banks around the world were under investigation for the same breaches including America’s Citigroup, Switzerland’s UBS and major High Street banks Royal Bank of Scotland and Lloyds.
In London investors feared any fines faced if found guilty would be the least of a bank’s worries.
Their real fear is that a pay-out to regulators will open up the banks to class action suits worth billions from institutions who claim their deals were overpriced because they used faulty LIBOR rates as benchmarks.
Cenkos banking analyst Sandy Chen said in a note to clients: ‘We expect that the cost of lawsuits related to LIBOR manipulation will dwarf the £290million imposed on Barclays â€" and since RBS, HSBC and Lloyds have also been named in lawsuits, we expect they will also face significant fines and damages.’
Chen added: ‘We are pencilling in multi-year provisions that could run into the billions.’
RBS fell 26.7p to 206.4p, Lloyds Banking Group slipped 1.22p to 29.94p, while HSBC lost 14.8p to 558.2p. Only Asia-focused Standard Chartered managed a slight gain, rising 0.5p to 1375p because it has so far not been mentioned as a target for regulators. On Wall Street shares in JPMorgan Chase plunged amid fears its trading losses will be double initial estimates at $5billion.
The London share falls dragged the FTSE 100 down 30.8 points to 5,493.06.
David Cameron said Barclays’ management, led by chief executive Bob Diamond, had ‘serious questions’ to answer.
Veteran fund manager Patrick Evershed said: ‘Diamond is an overbearing character and his board have failed to control him.
‘This is a lesson to banking boards across the City. Suits will follow from these fines and that will leave the weak balance sheets at our bank even weaker.’
Hargreaves Lansdown head of equities Richard Hunter said: ‘Before the financial crisis in 2007 banks were a medium risk investment. Now they are high risk. This should be clear to everyone.’
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At last the bankers have been thrown to the wolves in a sacrificial attempt to appease the voters and send a message to the financial cartels that nobody's bigger than the state. If I didn't know better I'd have said they'd been setup in a very slick co-ordinated worldwide attack
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so why use LIBOR? You don't have to- use some other rate in your financial decisions. Better still, don't borrow money that you don't have to buy things that you cannot afford. Greed and instant gratification, when will the stupid masses learn? No wonder the banks make billions from the masses.
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£4bn? Wow, that IS a hefty price. I don't see how Mr Diamond can stay in his current position now...
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Cameron should proceed with his threat of breaking up the banks. Some financial organisations are simply too big now and act as big bullies normally do. They should seperate retail investment arms, making them entirely independant seperate to each other, then if the investment side fails then the retail will not be effected. You could even look at our biggest BS, they are simply a combination of several or more once thriving, locally established organisations. Portman, Staffordshire, etc. These all too powerful companies should be returned to their former glories. Local businesses looking after local communities.
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My son worked at Barclay's a few years ago and he found the unethical sales tactics sickening - so much so, he resigned. The unscrupulous individuals within the branch where he worked were eventually sacked. I'm sure all banks have worked in a similar way but it's time they were brought to book.
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