Investors Wonder 'Who's Next' for Libor Pain

Barclays investors, blindsided by the bank’s $451.4 million regulatory fine for trying to rig benchmark rates, saw the stock drop 16% a day later. Other bank shareholders may be just as surprised.

Bloomberg reports that Barclays, like other lenders that help set key rates for $360 trillion in securities, has given investors scant guidance on the liability they face for alleged market manipulation. More than a dozen banks are being probed by U.S., Asian and European regulators for collusion in setting interbank lending rates. The others have mirrored Barclays on minimal disclosure.

The automatic reaction from investors is: ‘Who’s next ?’”said Todd Hagerman, a New York-based analyst at Sterne Agee & Leach Inc. who recommends investors remain 'cautious' on the biggest U.S. banks. 'It’s fair to assume that legal and related professional fees and associated reserves are going to continue to remain elevated, if not increase'.

Bank of America, Citigroup, Royal Bank of Scotland and UBS are among the lenders whose participation in setting the London and Europe interbank offered rates, known as Libor and Euribor, are under investigation. None of the banks would say if they set aside reserves to cope with potential liabilities and, if so, how much.

'I believe that Barclays had previously reserved for only about one-third of their ultimate liability' in regulatory fines, Charles Peabody, a banking analyst at New York-based Portales Partners LLC, said in an e-mail. Other banks’ reserves 'will probably prove inadequate'.

Hit the link below to access the complete Bloomberg article:

Wall Street Bank Investors in Dark on Libor Liability