ASIC Takes Westpac to Court over Alleged Rate Rigging
Friday 15 April 2016 @ 10.19 a.m. | Corporate & Regulatory | Legal Research | Trade & Commerce
It has been revealed in an ASIC Media Release that the Australian Securities and Investment Commission (ASIC) has launched legal proceedings in the Federal Court against Westpac Banking Corporation (Westpac) for unconscionable conduct and market manipulation in relation to Westpac's involvement in setting the bank bill swap reference rate (BBSW) in the period 6 April 2010 and 6 June 2012. Also revealed in a previous TimeBase article, ASIC took ANZ Bank to the Federal Court over similar allegations.
Background to the Proceeding
On 4 March 2016, ASIC commenced legal proceedings in the Federal Court against the Australia and New Zealand Banking Group (ANZ). Prior to filing against ANZ, ASIC's investigations into misconduct in the BBSW has seen ASIC accept enforceable undertakings from:
- UBS-AG;
- BNP Paribas; and
- the Royal Bank of Scotland.
The institutions also made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.
About BBSW
The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association (AFMA). On 27 September 2013, AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to occurred before the change in methodology.
The Westpac Allegations
It is alleged that Westpac traded in a manner intended to create an artificial price for bank bills on 16 occasions during the period of 6 April 2010 and 6 June 2012.
ASIC alleges that on these two days Westpac had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower. ASIC alleges that Westpac was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to Westpac's.
Westpac in breach of Financial Services Licence
ASIC is seeking declarations that Westpac contravened ss 12CA, 12CB and the former s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); and ss 912A(1) and 1041A of the Corporations Act 2001 (Cth) (Corporations Act). It is also seeking a finding the bank was in breach of its Financial Services Licence.
Conduct by Westpac Employees
According to Westpac Group's Chief Financial Officer, Peter King, the bank took this conduct very seriously and had fully cooperated with ASIC in its investigation, including providing over 12 million documents for review.
Mr King said in a statement:
"We reject the allegations made by ASIC and do not believe Westpac, or any employee, has acted unlawfully in relation to the instances detailed by ASIC. The operation of the interbank short-term money market, as well as bank balance sheet management, is highly complex and activity occurs for a range of valid reasons. We disagree with ASIC's interpretation of the communication between employees referred to in the court documents and their assessment of trading activity given the complexity of strategies involved."
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
ASIC commences civil penalty proceedings against Westpac for BBSW conduct – ASIC Release 16-110MR
ASIC hauls Westpac into court on rate rigging accusations - abc.net.au
