As the Libor interest-rate scandal continues to spread, lawsuits are piling up by individual investors and institutions who say they were cheated by the artificially low rates, reports the Wall Street Journal. Banks could face up to $176.3 billion in Libor-related liability, according to Macquarie Research, assuming the rate was understated by 0.4% in 2008 and 2009. "This is just the beginning," warned a lawyer representing plaintiffs in several cases, adding that "scores of interested potential clients" have called him.
Other assessments of liability are much smaller. Assuming settlements are made for 10% of damages, Morgan Stanley predicts payouts will total only $7.8 billion. As Barclays is the only bank to have admitted wrongdoing, the other implicated financial institutions are asking the courts to toss out the lawsuits. Because legal wrangling could drag on for years, and the Libor rate affects so many aspects of banking—syndicated loans, derivatives, corporate bonds, adjustable-rate mortgages, student loans, and commercial paper—experts say the banks will be under pressure to look for settlements.