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Aussie securities regulator commences legal action against NAB for interbank swap rate manipulation

Xinhua, June 7, 2016 Adjust font size:

The National Australia Bank (NAB) has become the latest to be taken to court over alleged manipulation of the inter-bank bill swap rate, the third of the 'big four' after Westpac and ANZ.

The Australian Securities and Investment Commission (ASIC) on Tuesday commenced legal proceedings in the Federal Court against NAB for "unconscionable conduct" and "market manipulation" in the interbank bill swap market (BBSW) on 50 occasions between June 8, 2010 and December 24, 2012.

"It is alleged that NAB traded in a manner that was unconscionable and intended to create an artificial price," ASIC said in a statement after the market closed on Tuesday, adding "NAB had a large number of products which were priced or valued off BBSW" on those occasions.

"ASIC alleges that NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB's."

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 Australia and New Zealand Banking Group (ANZ), among other penalties in other banks. ASIC has also taken action against Westpac.

NAB's chief risk officer David Gall said the bank has fully cooperated with the investigation, including providing emails, instant chat messages and recorded phone calls of their employees, and "takes these allegations seriously."

"We do not agree with ASIC's claims which means they will now be settled by a court process," Gall said in a statement to the ASX after the close.

"As this matter is now before the court, it is not be appropriate to comment further."

ANZ and Westpac are also defending the cases in court.

ANZ chief risk officer Nigel Williams described ASIC's claim as "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."

"Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets," Williams said in a statement when ASIC launched action against the bank in March. Endit