This content is as posted on the Australian Securities and Investment Commission (ASIC) website.
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ASIC has today commenced legal proceedings in the Federal Court in Melbourne against the Australia and New Zealand Banking Group Limited (ANZ) for unconscionable conduct and market manipulation in relation to the ANZ's involvement in setting the bank bill swap reference rate (BBSW) in the period March 2010 to May 2012.
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.
It is alleged that ANZ traded in a manner intended to create an artificial price for bank bills on 44 separate days during the period of 9 March 2010 to 25 May 2012.
ASIC alleges that on these days ANZ 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 ANZ was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to ANZ's.
ASIC is seeking declarations that ANZ contravened s.12CA, s.12CB and the former s.12CC of the Australian Securities and Investments Commission Act 2001 (Cth), s.1041A of the Corporations Act 2001 (Cth) (Corporations Act), and s.912A of the Corporations Act.
Further, ASIC has sought from the court pecuniary penalties against ANZ and an order requiring ANZ to implement a compliance program.
ASIC will be making no further comment at this time.
Background
Prior to today's action, 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 (refer: 13-366MR, 14-014MR, 14-169MR). The institutions also made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.
In July 2015, ASIC published Report 440, which addresses the potential manipulation of financial benchmarks and related conduct issues.
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ANZ has issued the following response.
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ANZ today rejected allegations regarding bank trading and the bank bill swap rate (BBSW) made in this afternoon’s statement of claim by the Australian Securities and Investments Commission (ASIC).
ANZ will vigorously defend legal action brought by ASIC.
Since mid-2012 ASIC has been investigating the practices of 14 panel bank participants in the Australian interbank BBSW market covering the period 2007 to 2012. ASIC’s statement of claim in relation to ANZ covers to the period March 2010 to May 2012. ASIC has advised ANZ that it has no concerns about the bank’s current market practices and ANZ notes there has been no allegation of collusion between it and other institutions.
ANZ Chief Risk Officer Nigel Williams said: “We have cooperated fully with ASIC’s investigation over many months, at a cost of many millions of dollars. This includes actively seeking to resolve the Commission’s concerns since January 2015.
“We believe the Commission’s statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies to this area.
“Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC’s characterisation of the transactions in question.
“Chat messages between traders is an issue that we will continue to review. We have already dealt with chats and behaviours that breach our Code of Conduct through internal disciplinary action against the individuals involved.
“Since June 2014 we have also engaged ASIC about chat messages between ANZ traders. We do not agree however with ASIC’s characterisation of the issues related to the chat messages. It is now for the Courts to provide clarity on trading practices,” Mr Williams said.
ASIC’s legal action is likely to take a considerable time to reach a resolution through the Courts and the matter of penalties is uncertain.
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