Commonwealth Bank will pay $25 million to settle rate-rigging allegations

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  • Commonwealth Bank has acknowledged it engaged in unconscionable conduct to rig the bank-bill swap rate
  • All four major banks have been charged over rate-rigging. CBA is the third to pay a settlement fine.
  • CBA shares are down more than 3% in early trade.

Commonwealth Bank has agreed to pay $25 million to settle charges brought against it by the corporate regulator, for rigging the bank-bill swap rate (BBSW) to boost profits.

CBA was taken to court by ASIC in January, where it was alleged the bank engaged in unconscionable conduct in breach of the ASIC Act.

All four major banks have faced legal action for alleged manipulation of the BBSW — a key benchmark rate used as the basis for billions of dollars in lending across the economy.

NAB and ANZ also paid a settlement fee, while Westpac continues to fight the allegations in court.

“CBA will acknowledge that, in the course of trading on the BBSW market in Australia on five occasions between February and June 2012, CBA attempted to engage in unconscionable conduct in breach of the ASIC Act,” the bank said in a statement this morning.

“CBA will also acknowledge it did not have adequate policies and systems in place to monitor the trading and communications of its staff in order to prevent that conduct from occurring.”

The bank said it has reached an in-principle agreement to pay total fines and penalties of $25 million, pending Federal Court approval.

The fine will be reflected in CBA’s 2018 financial statements and is comprised of:

  • A $5 million penalty
  • A payment of $15 million to a financial consumer protection fund and
  • A payment of $5 million towards ASIC’s costs of the litigation and its investigation

CBA has also agreed to enter into an enforceable undertaking with ASIC, which will see an independent expert appointed to review the bank’s control processes for its BBSW business.

The bank also has an enforceable undertaking with bank regulator APRA to ensure it complies with remedial action, following an APRA inquiry in the wake of the AUSTRAC money laundering scandal.

Also this morning, CBA reported a dip in underlying operating earnings for the March quarter. A short time ago, CBA shares were down more than 3% in early trade.

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