• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Barclays’ court submission denies councils’ LOBO fraud claim

0
  • by Colin Marrs
  • in 151 News · Treasury
  • — 8 May, 2019

Barclays has denied fraudulently entering a number of Lender Option Borrower Option (LOBO) loans with councils, in court documents seen by Room151.

In February, a group of seven councils lodged a legal claim against the bank claiming they only entered into a number of their LOBOs because Barclays had effectively implied it was not manipulating the LIBOR rate.

However, Barclays’ written defence, submitted to the High Court, denies the authorities’ claim that “relevant individuals” in senior management roles at the bank could have prevented these false LIBOR representations from being made.

The document submitted by the bank said: “It is denied that any of the so-called relevant individuals knew that all or any of the alleged LIBOR representations were being made…and as such it is denied that any of those individuals had the requisite knowledge required for the claimants’ claims in fraudulent misrepresentation”.

According to the authorities’ claim, LIBOR was an integral feature of the LOBO loans, as it was used to calculate breakage costs and was fundamental to the determination of interest payments on “range LOBOs”.

Range LOBOs required councils to pay a higher rate if Libor fell above or below a certain range.

However, Barclays argues in its submission that this does not mean that LIBOR was “either integral or fundamental” to the range LOBO loans.

It also says that the LIBOR played no role in the determination of payments or breakage costs under the “vanilla” LOBOs included in the claim.

The bank also denies the councils’ claim that the Financial Services Authority (FSA) had found that the period that alleged LIBOR manipulation had taken place was between January 2005 and June 2010.

It says the FSA ruling referred only to breaches of its principles caused by a lack of adequate risk management systems or effective controls in relation to the LIBOR submissions process.

In addition, the councils’ claim provided a “distorted and/or inaccurate amalgamation” of parts of the FSA ruling, muddling up allegations relation not just to LIBOR but to USD LIBOR and EURIOBOR.

The document states: “Barclays denies that there was any trader conduct in relation to GBP LIBOR.”

Barclays also called on the councils to provide proof of alternative arrangements that it would have entered into to meet their funding requirements if they had not entered the LOBO loans.

It rejected a claim that the LOBO loans should be cancelled and that the councils should be reimbursed the payments they have made on them – so called “recision”.

Barclays said that “…each claimant has elected to affirm the relevant LOBO loans and/or waive its right to rescind by continuing to make payments under the LOBO loans without any reservation of rights”.

It added that Newcastle City Council and Greater Manchester Combined Authority had also waived its right to recision when their range LOBOs were converted into fixed rate loans in 2016 and 2017.

The document reveals that Newcastle, prior to the fixing of the loan rates at 4.565%, had been paying 4.75% interest.

Greater Manchester, which had been paying 4.1%, had its loan rate fixed at 3.99%.

The councils have a chance to respond in writing to Barclay’s defence before the first oral hearing, expected to take place later this year.

In a separate development this week, London Borough of Newham has agreed a deal with Nat West bank to repay £150m of LOBO loans.

The council, which had issued legal proceedings against the bank, claimed the termination agreement will save it the equivalent of £3.5m a year over the remaining 41 years of the loans.

Newham mayor Rokhsana Fiaz, said: “Over the past ten years that the loans have been in place, it’s cost us an extra £31m in interest payments compared to borrowing from the Public Works Loan Board.

“That’s money that should have been spent on Newham residents.”

Get the Room 151 Newsletter

Room151 Conferences & Events

Share

You may also like...

  • News round-up: LEPs lack skills, counter fraud strategy, council borrowing, mortgage backed bond rating News round-up: LEPs lack skills, counter fraud strategy, council borrowing, mortgage backed bond rating 23 Mar, 2016
  • Housing Investment Body, Economic Revenues, Lancs & London LGPS, Capita’s CIV Contract Housing Investment Body, Economic Revenues, Lancs & London LGPS, Capita’s CIV Contract 9 Jul, 2015
  • Bank wobbles and local authority risk Bank wobbles and local authority risk 18 Feb, 2016
  • Welsh LAMS suspended Welsh LAMS suspended 8 Aug, 2013

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 23 hours ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 2 days ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 2 days ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

    Room151 3 days ago

    Tremendous report from @MarkSandford3 citing @room_151 no fewer than six times (despite what the @lgcplus fact checking/counting dept might tell you) #localgov commonslibrary.parliament.uk/research-brief… 1/5

    Room151 1 week ago

    Dan Bates: Capitalisation directions are not the only tool for rebuilding finances: Dan Bates argues deep seated problems are contributing to a rush for capitalisation directions. For some time now we have been reading that a number of councils are in… dlvr.it/RspKff pic.twitter.com/xRRsgVim9u

    Room151 2 weeks ago

    Is local government funding “broken”?: Andrew Hardingham looks at the underlying issues that caused more than a third of respondents in the Room151/CCLA treasury survey to say that the funding system for local govenrment is[...] dlvr.it/RsYhsg pic.twitter.com/plNp7Ayys6

    Room151 2 weeks ago

    GameStop: A lesson for LGPS in the risks of short selling: Day traders coordinating their efforts through the social media platform Reddit have not only boosted the stock of US GameStop, but also badly hurt hedge funds engaged in huge bets[...] dlvr.it/RsGdVV pic.twitter.com/NTMC3j6J2u

    Room151 2 weeks ago

    Room151 panel backs unitary councils and devolution: Bigger isn’t always better when it comes to local government, according to Sir Bob Kerslake, chair of the Peabody Trust, but “ …we need to move to unitary government and[...] dlvr.it/RsFPNv pic.twitter.com/lT4eCi0TmV

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Hackney to tackle fuel poverty with clean energy company
  • Next story Boosted s151 officer role ‘significantly improves’ LEP transparency

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK