With the Financial Services Authority (FSA) issuing a record £300m of total fines in the UK in 2012, up from £65.5m in 2011, litigation teams in the City are predicting a further surge in banking litigation in 2013 thanks to the Libor scandal.
Barclays’ fine of £59.9m in June was dwarfed by UBS’ £160m fine in December. Clifford Chance and Sullivan & Cromwell were brought in to advise Barclays, while Gibson, Dunn & Crutcher advised UBS in both the US and the UK.
One City disputes partner said that the FSA is also looking into five or six other banks and with the Serious Fraud Office given a budget last July to target banks involved in Libor rigging, follow-on claims are likely.
‘There are going to be a lot of claims in the US and more over here. We have spent time reassuring potential claimants who have both gained and lost as a result of Libor and were concerned about the potential net effect,’ said Marcus Rutherford, a partner at Enyo Law.
While fines may put a dent in a financial institution’s balance sheet, it is the reputational effect that may worry banks ‘more than the financial impact of the fines’, according to Barney Reynolds, a financial regulation partner at Shearman & Sterling.
Regulatory fines are only the start of the banks’ problems. Rutherford said that the amount of private claims could reach trillions of pounds. However, a partner at a global firm thinks that these claims may be more difficult to pursue.
‘Some of us are sceptical that there will be these vast payouts on Libor because you have to prove that the banks tried and did manipulate the Libor rate and that it caused losses,’ they said.
Rutherford said that for those looking to pursue private claims, time is of the essence, advising clients that there are potential claims but they need to be mounting challenges this year as ‘time is not standing still’.