The Court of Appeal in the UK began hearing evidence on Tuesday about the attempted manipulation of the London Interbank Offered Rate (Libor) by two banks. Two different cases were filed by clients against Barclays and Deutsche Bank. The court would decide if the banks mis-sold its products that were based on the benchmark interest rate. The judges would also decide if deals and loans based on the rate could be invalidated. Sources told Reuters that a landmark ruling was anticipated to be handed down later this year.
According to a Reuters report, a decision against the banks would pave way for more cases to be brought against the industry for allegations of Libor rigging. Banks would need to pay compensation claims amounting to billions of pounds.
However, Vedanta Hedging Managing Director Abhishek Sachdev told Reuters, ""To unwind all Libor-linked derivative contracts would be financial Armageddon."
Previous legal decisions showed that judges did not specify that Libor was relevant to claims made against lenders. However, the judges ruled that Libor could be used in instances when the agreement was tied to the benchmark itself.
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