The Commonwealth Bank is in court accused of unconscionable conduct and market manipulation by setting the bank bill swap reference rate (BBSW).
It is the fourth major bank to face legal action from the corporate regulator ASIC (Australian Securities and Investments Commission) over the BBSW, a key interest determining the pricing of billions of dollars of loans across the economy.
Proceedings started today in the Federal Court alleging offences between January 31, 2012, and October 2012.
The CBA is alleged to have traded three times with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses.
ASIC alleges it was unconscionable for CBA to trade in this way and also to enter into products priced off the BBSW without disclosing its trading practices to its customers and counterparties.
ASIC also alleges that CBA’s trading created an artificial price and a false appearance with respect to the market for some of these products.
The two have given enforceable undertakings to ASIC to pay $20 million to be applied to the benefit of the community. Each will also pay $20 million towards ASIC’s investigation and other costs.
ASIC also has legal proceedings in the Federal Court against Westpac.