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Aussie corporate watchdog to sue ANZ over inter-bank rate rigging

Xinhua, March 4, 2016 Adjust font size:

Australia's corporate watchdog has launched civil proceedings against one of Australia's largest banks, the Australia and New Zealand Banking Group, over alleged manipulation of the Bank Bill Swap rate.

The Australian Securities and Investment commission (ASIC) on Friday said the filing in the Federal Court relates to "unconscionable conduct and market manipulation in relation to the ANZ's involvement in setting the bank bill swap reference rate (BBSW) in the period March 2010 to May 2012".

ASIC alleges ANZ traded in a manner intended to create an artificial price for bank bills on 44 separate days during March 9, 2010 to May 25, 2015, alleging the company was "seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to ANZ's"

"ASIC alleges that on these days ANZ had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower," ASIC said in a statement.

The interbank swap rate, or the daily interest rate set by banks for day-to-day interbank lending - Australia's LIBOR equivalent - is an integral part of the financial system.

ASIC has been investigating alleged market manipulation of the BBSW by Australia's "big four" banks for three years, which so far has netted seven traders at ANZ among other penalties in other banks.

It is believed ANZ and ASIC have been in discussions to settle the case, however at an Australian senate committee hearing in February, ASIC chairman Greg Medcraft said the watchdog was prepared to go to court should the big banks continue not to cooperate with the investigation.

"We're pay to go to court and we have a war chest," Medcraft said at the time.

However ANZ chief risk officer Nigel Williams said the bank had cooperated fully with the watchdog's investigation "over many months at a cost of many millions of dollars" and had sought to actively resolve ASIC's concerns since January last year.

"We believe the commission's statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies to this area," Williams said in a statement.

"Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC's characterisation of the transactions in question." Enditem