After ANZ and NAB’s last minute settlement against ASIC’s rate-rigging allegations, Westpac will be the only bank to defend themselves in court.
The initiation of legal proceedings
Last year, ASIC commenced legal proceedings against three of Australia’s big banks in the Federal Court for unconscionable conduct and market manipulation. It is alleged that the banks traded in a manner intended to create an artificial price for bank bills. All three banks initially denied this allegation.
On 4 March 2016, proceedings were commenced against the Australia and New Zealand Banking Group (ANZ) for unconscionable conduct and market manipulation on 44 separate days during the period of 9 March 2010 to 25 May 2012.
Later, Westpac was accused of breaking the law on 16 occasions during the period of 6 April 2010 and 6 June 2012, and National Australian Bank (NAB) on 50 occasions during the period of 8 June 2010 and 24 December 2012.
ASIC alleges that a large number of products were priced or valued off the bank bill swap rate (BBSW) and the banks traded in the bank bill market with the intention of moving the BBSW higher or lower. ASIC alleges that the banks sought to maximise its profit or minimise its loss to the detriment of those holding opposite positions to ANZ's.
Effect on consumers
The BBSW is the benchmark interest rate used in in Australian Financial Markets. The benchmark is used to set interest rates on most corporate loans, business loans, mortgages and credit cards. This directly affects consumers because the BBSW rate rises, consumers will pay more.
Where we are now
The trial was scheduled to commence on 23 October 2017, but was delayed when ANZ reached a last minute settlement with ASIC. NAB followed ANZ, reaching a settlement with ASIC last week.
ANZ's offer was conditional on there being no admission of wrongdoing. NAB agreed to pay a total of $50 million, comprising of a $10 million penalty, $20 million for ASIC's legal costs and a $20 million donation to a financial consumer protection fund nominated by ASIC.
ANZ will not be reporting the details of its settlement until the agreement receives court approval. Both banks will return to court on 10 November 2017 to obtain judicial approval for their respective settlement agreements.
Westpac, on the other hand, is vowing to fight on, maintaining that it did not manipulate the BBSW for economic gain. The trial of ASIC v Westpac, ASIC’s biggest litigation to date, began in the Federal Court in Melbourne on 31 October 2017.