Seven councils are suing Barclays over LOBO loans the bank sold them in years 2005 to 2008. The loans’ interest rates were pegged to LIBOR, a benchmark rate set by a group of London banks, including Barclays. In 2012 it emerged the banks had been manipulating the rate, and Barclays was fined £290m.
The local authorities – Leeds, Greater Manchester Combined Authority, Newcastle, North East Lincolnshire, Nottingham, Oldham and Sheffield – allege that due to Barclays’ role in the rate rigging, the banks knew customers would rely on LIBOR rates when deciding whether to enter into contracts.
The councils are seeking for the High Court to cancel the loans without exit penalties, and also restitution for sums in interest they have already paid the bank.
Overall, the seven councils have taken out 49 LOBO loans with Barclays, totalling £573m. You can see the details of the loans here.
Research for Action welcomes the legal action, and is hopeful that it will bring justice to local authorities that have fallen prey to the toxic combination of conflicted advisors, LOBO loan mis-selling and benchmark rate rigging.
Legal actions taken by councils in relation to LOBO loans should not be restricted to LIBOR rigging alone. We hope to see further legal actions taken by local authorities in relation to ISDAfix manipulation and the role of council financial advisors (Butlers/ICAP and Capita) and the various banks involved in the mis-selling of LOBO loans which were never designed or promoted in either the council or taxpayers best interests.
You can see the particulars of the claim of the legal case below.