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Blog: causation key issue for litigants in Libor claims

Agree on a number of points with the writer of the above blog post. It was practically impossible for SMEs to obtain advice about the OTC derivative product they were entering into whether this was sold standalone or within a wrapper such as a Fixed Rate Loan or Tailored Business Loan type arrangement. Either ought to amount to a regulated designated investment. Why has the FSA not dealt with fixed rate loans with an actual underlying swap in which the contingent liabilities of that swap are imposed on the borrower via a break fee? It seems perverse that these are not included in the Banks reviews. Interesting that the writer mentions the ISDA clause forcing payment of the break profits (if any). In one particular case, we have discovered that the break profit paid did not match the actual mark to market break profit at the time and the bank was secretly retaining a large portion of the same. Would they ever do the same with actual break costs on interest rate swap derivatives today? The sooner the banks are taken to task and adequate regulation is imposed, the better.

7-Nov-2012

7:49 pm