ANZ and NAB will pay a collective $100 million dollar penalty for their involvement in the rigging of overnight bank bill swap rates after an settlement was ratified by the Federal Court.
The banks had agreed to head off a potentially long-running and much more expensive case after settling the action brought by the Australian Securities and Investments Commission (ASIC).
ASIC had alleged ANZ and NAB were among 17 local and international banks — including Westpac — that engaged in market manipulation and unconscionable conduct by rigging the bank bill swap reference rate (BBSW).
The BBSW is one of the most important interest rates in the economy, and it provides a benchmark for setting personal and commercial loan rates. It can therefore affect business loans, mortgages and credit cards.
Small differences in the rate that is set can equal many millions of dollars in profits or losses for banks.
NAB was accused of 50 breaches, and ANZ 44 breaches, over attempts to influence the BBSW between 2010 and 2012. Each breach carried a maximum penalty of $1.2 million.
Westpac has decided to go it alone and fight the charges.
In a statement after the settlement, ANZ acknowledged that “in the course of trading on the BBSW market, a small number of traders attempted to engage in unconscionable conduct on 10 dates between September 2010 and February 2012”.
“ANZ also did not have in place adequate policies and systems to monitor trading and communications of its BBSW traders,” ANZ chief risk officer Nigel Williams said.
“We know our customers and the community expect better from us and we apologise for both the attempted unconscionable conduct and our inability to prevent or detect the behaviour.”
As part of the resolution, the banks agreed to a $10 million penalty.
They will also make a payment of $20 million to a Financial Consumer Protection Fund and a $20 million payment toward ASIC’s costs.
Both banks also agreed to enter into an enforceable undertaking with ASIC, where an independent expert will be appointed to review controls, policies, training and monitoring of BBSW trading.