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‘Plead guilty’: ASIC tells manipulative banks

AAP

AAP

“Plead guilty”. That was the blunt message from Australian Securities and Investments Commission chairman Greg Medcraft to banks involved in manipulating Australia’s key benchmark interest rate, the Bank Bill Swap Rate (BBSW).

ASIC has been investigating potential rigging of the BBSW since 2012.

Back then it was revealed the United Kingdom’s benchmark, the London Interbank Offered Rate (Libor), had been systematically manipulated by staff at some of the world’s biggest financial institutions, later resulting in multi-billion-dollar fines and one trader going to jail.

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ASIC told the Senate Estimates Economics Committee its investigations into BBSW manipulation are at an advanced stage.

The corporate regulator has already secured voluntary contributions of $1.6 million from Royal Bank of Scotland, and $1 million from UBS and BNP Paribas after those banks discovered “potential misconduct” in their BBSW submissions.

Now the other banks that were on the BBSW setting panel – including the big four – are in the regulator’s sights.

“This is the largest investigation of its type ever,” Labor Senator Sam Dastyari told the ABC.

“It may lead to some of the largest ever fines and conditions placed on an Australian bank.”

In urging banks to plead guilty, the corporate regulator has given its clearest signal yet it is not prepared to cut any deals.

Greg Medcraft said ASIC has a growing $80 million war chest to fight legal battles, and is prepared to use it.

“Governments have given us this money to be there to not be reluctant to take action on behalf of Australians,” Mr Medcraft told the committee.

BBSW is the reference point that is used to set interest rates on most business loans, and indirectly helps to set personal lending rates.

Since September 2013, BBSW has been electronically calculated from market data collected by the Australian Financial Markets Association.

However, before then, it was set by AFMA based on submissions by up to 14 banks, quoting the interest rate they were paying and receiving at 10:00am each business day.

That old process left the door ajar to manipulation, because AFMA depended on the banks to provide accurate data.

“If there is rate rigging that has gone on, this is not a victimless act,” Mr Dastyari said.

“The victims of this are every Australian business and every Australian family.”

– ABC

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