RI Libor Round-up: CalPERS could seek damages; new class action filed

A review of the key developments in the Libor rate-rigging scandal

With the Libor rate-rigging scandal continuing to evolve, here is a summary of some of the key investor-specific developments.

The California Public Employees’ Retirement System (CalPERS), the largest US public pension fund, has said it would seek damages if it finds it has been hurt by the scandal, according to reports citing chief investment officer Joe Dear. He said it was not yet clear how or if the $232bn (€189.8bn) fund may have been impacted by the affair.

CalPERS’ Corporate Governance Director Anne Simpson was earlier reported by the New York Times as saying fund officials were “sifting through the impact, but there certainly is an impact.”

Comptroller George Maragos of Nassau County in Long Island, has calculated the county’s Libor-related losses at $13m on swaps tied to $600m of outstanding bonds.

Leicester City Council in the UK has said it plans to withdraw the £6m (€7.6m) it holds on deposit with Barclays. Deputy Mayor Rory Palmer said the council was “uncomfortable” holding its money with Barclays due to the scandal.

Swiss banking giant Credit Suisse said it does not expect a “material” impact from the scandal. A spokesman was quoted as saying that while the issues are complex “we do not currently believe that Credit Suisse has any material issues in this matter”.A Libor-related securities fraud class action has been brought by a holder of Barclays’ American Depositary Receipts. The complaint has been filed in federal court in Manhattan by Wolf Haldenstein Adler Freeman & Herz on behalf of the Vladimir Gusinsky Living Trust. It claims the bank lied to shareholders when they failed to disclose the bank’s manipulation of reports to the authorities. Link

Deutsche Bank has reportedly sought to cooperate with authorities over the Libor scandal, which could potentially mean it would face lighter fines. German financial regulator BaFin has launched a “special investigation” into Deutsche. Link

The Attorneys General in at least five states in the US are investigating alleged Libor manipulation, according to Bloomberg. It reported the probes – by New York, Connecticut, Massachusetts, Florida and Maryland – are at different stages. New York’s Eric Schneiderman and Connecticut’s George Jepsen in Connecticut are working together, while Massachusetts is talking to other states about possible coordination.

The New York Times reported over the weekend that the US Justice Department is building criminal cases against several financial institutions.

Morgan Stanley has estimated banks’ eventual Libor-related costs at $22bn, with legal costs exceeding $14bn. It added: “The political climate in the UK appears more hostile to perceived bank wrongdoing than in a number of other jurisdictions.” Link