ASIC takes NAB to Court over Alleged Rate Rigging
Monday 11 July 2016 @ 1.25 p.m. | Trade & Commerce
National Australia Bank (NAB) is now the third major bank to find itself in the Federal Court after the Australian Securities and Investments Commission (ASIC) announced through media release on 7 June 2016 that it would be taking the NAB to court for alleged rate rigging.
This follows actions against both ANZ and Westpac for alleged rate rigging after they were also involved in "unconscionable conduct and market manipulation" in helping to set the Bank Bill Swap Rate (BBSW) between June 2010 and December 2012.
What is Rate Rigging?
Prior to September 2013, the BBSW was set by a group called the Australian Financial Markets Association (AFMA).
The association made its decision based on submissions from up to 14 banks who quoted the interest rate they were paying and receiving at 10.00am each business day. Well, they were supposed to quote the interest rate they were paying and receiving at 10.00am each day.
According to the ABC News, this meant that in fact, the process left the door open to manipulation because AFMA relied on the banks to provide accurate data.
For consumers, the BBSW sets benchmark rates on corporate loans, business loans, mortgages and credit cards.
Charges Against NAB
It is alleged that NAB traded in a manner that was unconscionable and intended to create an artificial price for bank bills on 50 occasions during the period of 8 June 2010 and 24 December 2012.
ASIC alleges that on these days NAB 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 NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB's.
ASIC is seeking declarations that NAB contravened s12CA, s12CB, the former s12CC, s12DA, s12DB and s12DF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), s912A(1), s1041A and s1041H of the Corporations Act 2001 (Cth) (Corporations Act).
Further, ASIC has sought from the court pecuniary penalties against NAB and an order requiring NAB to implement a compliance program.
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