Court Approves Rate-Manipulation Settlements by Two Australian Banks

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Two of Australia's largest banks have admitted their traders attempted to engage in unconscionable conduct in the setting of a benchmark interest rate and will pay 50 million Australian dollars (US$38.3 million) each to settle rate-rigging cases brought by the securities regulator.

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A federal court judge on Friday approved settlement agreements between Australia & New Zealand Banking Group Ltd. (ANZ.AU), National Australia Bank Ltd. (NAB.AU) and the Australian Securities and Investments Commission.

The settlements leave Westpac Banking Corp. (WBC.AU) alone in defending itself against allegations of market manipulation related to the bank's historical role in setting the bank bill swap reference rate.

In statement lodged with the court, ANZ said it acknowledged that in the course of trading on the BBSW market a small number of traders attempted to engage in unconscionable conduct on 10 dates between September 2010 and February 2012. The bank also said it acknowledged it didn't have adequate policies and systems in place to monitor trading and the communications of its traders.

Late last month, National Australia Bank said it had reached a similar settlement that involved admitting that on 12 occasions in 2010 and 2011 employees trading in the BBSW market attempted to engage in unconscionable conduct.

The court agreed that the banks should each pay A$10 million penalties, donate A$20 million to a financial consumer-protection fund and A$20 million toward the regulator's costs. The banks also agreed to the appointment of independent experts to review their controls, policies, training and monitoring of BBSW trading.

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"We know our customers and the community expect better from us," ANZ Chief Risk Officer Nigel Williams said.

The bank said it had since 2015 significantly changed the way it manages its markets business, including introducing new policies and systems, as well as extensive training.

The regulator launched legal action against the three banks last year, alleging the banks used products priced or valued off the primary interest-rate benchmark to maximize profits or minimize losses. There are no claims of collusion against any of the banks.

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.

The case against Westpac, which has denied the allegations, began in the federal court in Melbourne on Oct. 31 and continues.

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

(END) Dow Jones Newswires

November 09, 2017 23:51 ET (04:51 GMT)