Australia Rate-Rigging Case Adjourned as Banks Discuss Settlement

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--The trial of three of Australia's biggest banks on allegations of rigging the country's benchmark interest rate was adjourned until next week to allow the lenders more time to negotiate a settlement with the corporate regulator.

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Judge Jonathan Beach agreed to postpone hearings until Monday, but indicated that if there was no agreement then the trial would start the next day. With Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. negotiating with the regulator, that could leave Westpac Banking Corp. alone to defend against the Australian Securities and Investment Commission's case.

The request for an adjournment was made by ANZ, NAB and ASIC to provide further time for talks. Westpac made no objection to a delay, though its lawyers were ready for the case to begin.

Just before the trial was set to start on Monday, ANZ and the securities commission asked for a 48-hour halt to proceedings in order to work through the details of an in-principle settlement. No details of the agreement have been disclosed, although ANZ said the financial cost would be reflected in its annual results due to be released Thursday and largely covered by provisioning.

NAB continues to negotiate with the regulator.

The regulator launched legal action against each of the banks last year, alleging market manipulation and unconscionable conduct for their involvement in setting the bank-bill swap rate over periods between 2010 and 2012. It claimed the banks used products priced or valued off the BBSW to maximize profits or minimize losses.

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Each of the banks denied the allegations, and none has been accused of collusion. Of the three, Westpac faces the fewest charges.

The BBSW is the primary benchmark for the country's financial markets. Before September 2013, it 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.

In its statement of claim against Westpac, the securities commission alleged Westpac traded in a way intended to create an artificial price for bank bills on 16 occasions between April 2010 and June 2012. At the time, Westpac said it didn't believe the bank or any of its employees acted unlawfully in instances detailed by ASIC, and it disagreed with the regulator's interpretation of internal communications between employees and its assessment of trading activity.

A spokesman for Westpac declined to comment on the trial.

In an earlier claim against ANZ, the regulator alleged 44 instances of market manipulation, unconscionable conduct and other unlawful behavior between March 2010 and May 2012.

The case against NAB focuses on trading on 50 occasions between June 2010 and the end of 2012.

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

(END) Dow Jones Newswires

October 24, 2017 21:00 ET (01:00 GMT)