Lloyds banking group could be forced to pay over £1bn over involvement in the manipulation of Libor.

Analysts at the broker Liberum Capital have made such predictions despite the "mistaken impression" of investors that the relatively small size of Lloyds' derivatives book compared to Barclays would help the bank stay "insulated from this issue".

Liberum also described how the reaction of the market to Lloyds' potential exposure had been "too sanguine", adding that the "potential liability is likely to extend well beyond each bank's own customers".

The predicted payout of £1.5bn was formed through a calculation of the possibility of successful litigation against a breakdown of the costs of all 16 banks implicated in the scandal. A payout of £1.5bn would equal approximately 7 per cent of the lender's market value.

Barclays are currently the only bank to have admitted attempting to manipulate the world's key borrowing rate and have already faced a payout of £290m to US and British authorities.