Posted on August 1, 2012 by

The real cost of the Libor scandal

What will be the real cost of the Libor scandal that broke with Barclays £290 million settlement with UK and US regulators? The industry is and will continue to see regulatory fines grow. We will also see lawsuits and class actions, and we can expect to see knock on effects in many other industries including the insurance industry… firms who offer professional indemnity insurance will be worried. With the numbers involved, the potential cost is huge. For shareholders of banks these are worrying times.

As a simple illustration, and perhaps early signal of the cost of this scandal let’s consider Barclays. The major impact is not represented by the £290m settlement, it is and will continue to represented in the loss in shareholder value. Since the Libor scandal broke, Barclay’s share price is down 16%… wiping out approximately £3.4 billion of value. This is where the real cost of the Libor scandal will be felt….in the loss of shareholder value.