LIBOR scandal - who's lost out

Amid the scandal over Barclays' attempted manipulation of the key interbank lending rate called LIBOR, there has been a lot of speculation about winners and losers amongst the UK public.

Just to recap, LIBOR* is a very important international indicator - or set of indicators. They are benchmarks which show the interest rates banks would expect to pay to each other if they borrowed in various popular currencies.

The level of LIBOR depends on the submissions made by leading banks which estimate what it would cost them to borrow from their rivals. And the accuracy of the rate depends on the honesty of the banks involved.

If LIBOR was lower or higher than it should have been, as a result of fiddled submissions, then savers and borrowers might have lost or gained in various ways.

For instance, the payments on hundreds of thousands buy-to-let mortgages are linked to LIBOR. And you might have an interest in a pension fund which deposits money, short-term, with a bank to earn an interest rate linked to LIBOR.

Lawsuits are already being planned in the United States against 21 banks accused of being involved in LIBOR manipulation.

Solicitors in the UK are looking at the merits of a group action by victims. The aim would be to prove that banks had operated a price-fixing cartel which colluded to alter LIBOR, leaving people out of pocket.

But the question of who lost out from the rigging of LIBOR, and by how much, is very tricky to answer at this stage.

It's not clear whether the submissions which came from Barclays had any impact on LIBOR at all. And we don't know - yet - the extent to which other banks may have been submitting fictitious rates.

A crucial point to bear in mind is that when the FSA slammed Barclays over attempts to rig LIBOR, its focus was on US dollar LIBOR and to a lesser extent on EURIBOR, a similar benchmark rate based on the euro.

Sterling LIBOR is hardly mentioned. It's less important, but it also appears that the FSA didn't unearth evidence of attempts to manipulate sterling LIBOR.

When UK mortgages are linked to LIBOR, it's to the sterling variety, for obvious reasons. The borrower pays sterling LIBOR plus something on top.

And when UK financial organisations deposit their pounds short-term with banks, sterling LIBOR is the key reference rate.

Until evidence emerges of sterling LIBOR being rigged, it's hard to see any direct impact in these areas.

In contrast, a large proportion of students and homeowners in the United States have had loans with interest rates linked to US dollar LIBOR.

All this doesn't mean that institutions in the UK, such as pension funds, hedge funds and investment firms, may not have been affected.

They're likely to have deposited dollars and euros or dabbled in professional investments, such as interest rate swaps and futures, which depend on dollar LIBOR. And many will be reaching for their lawyers.

*LIBOR submissions are sent in over the ten minutes after 11am in the morning, every working day, when banks provide estimates of what they would pay to borrow.

Thomson Reuters, which makes the calculation for the British Bankers Association, discards the highest and lowest submissions and works out averages of the rest.

LIBOR is calculated for 10 different currencies over 15 terms (from overnight to 12 months), so there are 150 rates in all.