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Libor fiasco 'could cost banks up to $22bn'

Banks involved in the Libor interest rate manipulation scandal could be hit with costs of up to $22 billion, a new report has estimated.

At present, Barclays is the only financier to have admitted rigging this figure in order to secure favourable terms on its loaning arrangements - malpractice that resulted in it being hit with a fine of $455 million.

The lender's chief executive Bob Diamond has also tendered his resignation in light of this revelation, but a study by Morgan Stanley has suggested that 11 other banks are also guilty of illegally influencing the rate.

With this in mind, Morgan Stanley expects these companies to be required to fork out average damages payments of $400 million, with Deutsche Bank and the Royal Bank of Scotland potentially facing the biggest legal costs.

The analysts who conducted the report stated that while such figures are the "result of significant assumption", they "hope to at least provide a framework for how to assess the Libor litigation risk".

By Gary Cooper