San Marino, an independent republic surrounded by Italy, is tiny, but allegations brought by a bank there are anything but. A court case filed Monday against the UK's Barclays lays bare the risks as London banks provided advice and then designed and sold complex financial products in the months leading up to the credit bust.

The suit, brought by Cassa di Risparmio della Repubblica di San Marino before London's High Court, is one of a number of lawsuits in which a small or mid-size bank is taking a bigger bank to court over credit derivatives.