ANZ Moves to Settle Rate-Manipulation Allegations

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia -- Australia & New Zealand Banking Group Ltd. has moved to settle a lawsuit alleging past rate-setting manipulation by the bank, putting on hold a court case that was set to begin Monday.

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In a brief statement to the stock exchange, ANZ said it had reached a confidential in-principle agreement with the Australian Securities and Investment Commission to settle court action related to the setting of the country's primary interest-rate benchmark.

The regulator and the bank have agreed to a 48-hour halt to the trial to reach an agreement, after with the bank said it would make a more detailed statement.

The securities regulator launched civil action against ANZ in March 2016. It took similar action against Westpac Banking Corp. a month later and then against National Australia Bank Ltd. in June 2016. The case against all three was set to begin Monday in the federal court in Melbourne.

Since 2012, the commission has been probing local and foreign banks with regard to trading that dates back to 2007 in Australia's bank bill swap rate market, the primary interest-rate benchmark used in the country's financial markets. It came in the wake of rate-fixing scandals that engulfed some of the world's largest financial institutions, including the manipulation of the London interbank offered rate, or Libor.

In the statement of claim lodged with the court, the commission said it found 44 instances when ANZ allegedly engaged in market manipulation, unconscionable conduct and other unlawful behavior between March 2010 and May 2012. That action, it said, likely influenced the setting of the bank bill swap rate in a way to benefit ANZ over others.

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ANZ rejected the allegations. At the time the suit was filed, it said the claims appeared to be based on a misunderstanding of the bank bill issuance process and the operation of interest-rate risk management. Westpac and NAB have also denied the allegations.

Banks use bank bills to borrow funds for a short period.

Before late September 2013, the benchmark was based on submissions from up to 14 local and overseas banks. After eliminating the highest and lowest, the Australian Financial Markets Association calculated the mean of the rest. Since September 2013, the benchmark has used an electronic compilation of the midpoint in the locally traded market for reference bank bills, eliminating the need for submissions from the banks.

ANZ said that based on the in-principal settlement, the financial impact on the bank would be reflected in its fiscal 2017 financial results and would largely be covered by provisioning.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 22, 2017 20:23 ET (00:23 GMT)