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London interbank offered rate (Libor) has gone up more than 4 per cent due to the current global financial crisis, which favours SME bank, said a SME bank source.

SME bank in 2006 raised about Bt11 billion via floating-rate certificates of deposit on a swap contract from Standard Chartered to hedge against interest rate volatility.

That requires it to compensate Standard Chartered if Libor rate falls below 3.5 per cent; it gains if the rate is higher, the source explained.

The rate was higher than 3.5 per cent until this January, when it fell below that. The SME board of directors has accused the former managers of signing the swap contract as a speculation, exceeding their authority.

Standard Chartered is suing SME bank for penalty interest-rate payment.

Since September the rate has been up, favouring SME bank, but it could do nothing due to the board having ordered contract termination, said the source.

The former managers are preparing to sue the board, the source added.