How worried is the Turnbull government and treasurer Morrison about potential blowback toward Australia’s banks from the round of appearances before House of Representatives, Standing Committee, on Economics of the Big 4 CEOs starting today?
Perhaps the answer lies in the timing of the release of new rules today around the setting of important market benchmarks like bank bill swap rate (BBSW).
Morrison announced a raft of changes to how benchmarks, such as the BBSW, are set and how the rate setting mechanism will be administered and licensed.
The new changes also carry significant penalties for manipulation of “any financial benchmark (significant or non-significant) or financial product used to determine a financial benchmark used in Australia (such as Negotiable Certificates of Deposit)” the treasurer said in a statement.
Manipulation will now be “made a specific criminal and civil offence” he said.
The new rules came as a recommendation from Australia’s Council of Financial Regulators (CFR) and “will ensure that past egregious conduct by the banks in manipulating benchmarks is prevented in the future” the treasurer said.
That’s after ASIC is “already pursuing three of the four major Australian banks over unconscionable conduct and market manipulation in setting the BBSW from 2010 to 2012” he added.
In March, Australia’s financial regulator announced legal action against ANZ for alleged market manipulation of the BBSW rate, and a month later, it was Westpac’s turn. In June, ASIC announced Federal Court proceedings against the NAB over the same issue.
All three banks deny the allegations and will defend them in court.
Oversight of the administrative functions of benchmark calculation has been increased with administrators of significant benchmarks – such as BBSW – required to have new “benchmark administration licence” from ASIC, unless they are granted an exemption.
The new package will “ensure our regulatory regime is as modern and secure as any comparable regime found in equivalent foreign jurisdictions, such as the United Kingdown and the European Union” the statement said.
But in a clear message that there is no need for a Royal Commission into the banks, the Treasurer added that:
These measured changes will build on the steps that the Turnbull Government is already taking to strengthen our banking and financial system including strengthening ASIC’s resources and capabilities and the establishment of a regular Parliamentary Inquiry into Australia’s banking and financial system.