Australia’s financial regulator, the Australian Securities and Investments Commission (ASIC), has taken the ANZ bank to court for alleged market manipulation of the bank bill swap reference (BBSW) rate.
In filings to the Federal Court in Melbourne, ASIC alleges that ANZ traded in “a manner intended to create an artificial price for bank bills” on 44 days between March 9 and May 25, 2012.
ASIC says ANZ was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positionss.
“ASIC alleges that on these days ANZ had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower,” the regulator says in a statement.
BBSW is the central benchmark rate used in Australia to price lending transactions and interest rate derivative products.
The regulator is seeking pecuniary penalties along with an order requiring ANZ to implement a compliance program. The legal proceedings allege breaches of the Australian Securities and Investments Commission Act and the Corporations Act.
The ANZ rejected the allegations, saying it will vigorously defend the action.
“We have cooperated fully with ASIC’s investigation over many months, at a cost of many millions of dollars,” says ANZ chief Risk Officer Nigel Williams.
“We believe the commission’s statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies to this area.
“Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC’s characterisation of the transactions in question.”
Prior to today’s legal action launched by ASIC, investigations into misconduct in the BBSW saw UBS-AG, BNP Paribas and the Royal Bank of Scotland make combined voluntary contributions of $3.6 million to fund independent financial literacy projects in Australia.
Shares in ANZ are currently trading up 1.17% at $25.09.