Westpac to Defend Rate-Rigging Case Alone After Other Banks Agree to Settle

By Robb M. StewartFeaturesDow Jones Newswires

MELBOURNE, Australia--Westpac Banking Corp. (WBC.AU) will defend rate-rigging allegations alone after two other big Australian banks agreed to settle similar cases brought against them by the country's corporate regulator.

Lawyers for Australia & New Zealand Banking Group Ltd. (ANZ.AU) and National Australia Bank Ltd. (NAB.AU) confirmed in federal court on Monday that the banks had concluded settlement agreements with the Australian Securities and Investments Commission. A settlement hearing to ratify the agreements has been set for Nov. 10.

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Westpac opted to defend itself and Philip Crutchfield, a lawyer for the regulator, said the trial could begin Tuesday, with an aim of wrapping up ahead of Christmas.

The trial, scheduled to begin a week ago, was adjourned to give the banks more time to negotiate with the securities commission and after ANZ said it had reached an in-principle settlement.

The terms of the settlement with ANZ haven't been disclosed, but on Friday NAB said it had agreed to pay 50 million Australian dollars (US$38 million) to settle the lawsuit and would admit that on a dozen occasions in 2010 and 2011 employees attempted to engage in "unconscionable conduct" while trading in the market for the bank bill swap rate, a primary interest-rate benchmark.

The regulator had launched legal action against the three banks last year, alleging market manipulation and unconscionable conduct for their involvement in setting the BBSW reference 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. At the time, the banks denied the allegations.

There are no allegations of collusion against any of the banks. Westpac faces fewer charges than the other two banks and will argue there were valid reasons for each of the incidents identified by the regulator that didn't involve manipulation.

The securities commission has been probing local and foreign banks since 2012 over trading dating back to 2007 in the BBSW. 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.

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.

In its case against Westpac, the regulator alleged the bank traded in a manner intended to create an artificial price for bank bills on 16 occasions.

The regulator had alleged 44 instances when ANZ engaged in market manipulation, unconscionable conduct and other unlawful behavior. The case against NAB focused on alleged manipulation and conduct on 50 occasions.

NAB said its settlement involved admitting that on 12 occasions employees attempted unconscionable conduct and acknowledged breaches of its license obligations. It said it agreed to a A$10 million penalty and would pay A$20 million for the regulator's costs and donate A$20 million to a financial consumer-protection fund nominated by the regulator.

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

(END) Dow Jones Newswires

October 29, 2017 23:58 ET (03:58 GMT)