Moody's warns on Libor downgrade risk to banks The unpredictable costs of legal action over banks" alleged manipulation of Libor, the London inter bank offered rate, could dwarf regulatory fines, which banks can absorb into their annual earnings, the report said. "The risks posed by the Libor affair to the global banking industry mainly relate to potential litigation costs and reputational damage, the extent of which highly uncertain at present, but will become clearer as litigation currently in progress nears conclusion," said Moody's senior vice-president Geoffrey Richards. Barclays is the only bank to have admitted attempting to rig the key inter-bank lending rate which is used to fix the cost of borrowing on mortgages, loans and derivatives worth more than $450 trillion (£288 trillion) globally - though Lloyds, RBS and HSBC are being investigated. It paid £290m to settle investigations by UK and US authorities in June, and faces legal action from British company Guardian Care Homes over alleged losses of £12m after being mis-sold two two Libor-based interest rate swaps. The Moody's report follows CBI director-general John Cridland's controversial call on the Government to "head off judge-led law if necessary." His plea, in a letter to The Times on Monday, provoked an angry reaction among MPs and business leaders.