On 9 November 2018, the Federal Court of Australia ordered Westpac to pay a pecuniary penalty of $3.3 million in addition to ASIC’s costs for its involvement in setting the Bank Bill Swap Rate (BBSW) in 2010. The conduct, which involved trading in a manner that was unconscionable and created an artificial price and a false appearance of the market for certain products that were priced or valued off BBSW, amounted to a contravention of s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth).
The conduct occurred between 6 April 2010 and 6 June 2012, with similar proceedings brought against ANZ, NAB and the Commonwealth Bank for their conduct in the BBSW market. In his reasons, Justice Beach noted that he would have imposed a penalty greater than the maximum $3.3 million to deter such action, but that he was not free to do so.
In addition to the penalty, the Court ordered an independent expert agreed on by ASIC and Westpac be appointed to review whether Westpac’s current systems, policies and procedures are appropriate.
New legislation implementing financial benchmark regulatory reform has been recently introduced, and ASIC has consulted on proposed financial benchmark rules. On 21 May 2018, the new BBSW methodology commenced, which calculates the benchmark directly from market transactions during a longer rate-set window and involves a large number of participants, meaning that the benchmark is anchored to real transactions at traded prices.