ANZ, Westpac, NAB rate rigging trial date set

Australian Financial Review Dec 9 2016 3:19 PM

Patrick Durkin

The corporate regulator's landmark case against the banks for alleged rigging of the bank bill swap rate will be heard together in a 12-week trial which could extend into 2018 and beyond regulator Greg Medcraft's term.

However, rather than having the cases against ANZ Bank, Westpac and National Australia Bank heard simultaneously, Federal Court Justice Jonathan Beach will hear the matter in four phases from September 25 in a hard-fought battle between the country's leading lawyers expected to cost hundreds of millions of dollars.

The Australian Securities and Investments Commission is seeking up to $112 million in fines.

ASIC's latest annual report reveals the regulator has already spent close to $45 million fighting the case which remains in its early stages while the banks have "lawyered up" with Alan Archibald QC for ANZ and Neil Young QC for NAB and dozens of leading lawyers packing the court rooms in Melbourne and Sydney on Friday for the preliminary hearing.

The first phase will see the three banks and ASIC fight it out over common issues, including whether the swap rate can even be manipulated, before the judge hears the cases against each of the banks.

"The present position is to have a joint hearing on common issues with a separate phase for each of the bank cases," Justice Beach ruled on Friday.

Important for money markets

ASIC wanted the cases heard together and hoped to use evidence against each bank in the other cases.

The banks wanted the cases heard separately but said they were prepared to "live with" Justice Beach's compromise solution.

The major issue in dispute at Friday's hearing was the cross-admissibility of ASIC's evidence between the bank cases but Justice Beach said he would formally rule once the specific evidence was before him.

NAB - which were the last of the three banks to face legal action - also wanted to delay the trial date and while it has been moved from August to September, the judge was not prepared to delay any further.

"The case is an important case for the economy and the money markets and has to be determined as soon as practical," ASIC lawyer, John Karkar QC told the court.

The prospect of a settlement in the case seems increasingly remote with all three banks denying the claims and NAB recently describing ASIC's understanding of how the market works as "embarrassing" in its defence filed last month.

The bank bill swap rate, known as BBSW in financial markets, is a key rate at which banks lend to each other over short periods.

Woolworths, Hochtief, BBSW mixed message

The battle comes after a dramatic 48-hours for the regulators after the Australian Competition and Consumer Commission lost their landmark case against Woolworths for unconscionable conduct and a $400,000 fine against Hochtief, CIMIC's controlling shareholder after admitting to "inadvertently" insider trading.

The ACCC will be under pressure to appeal the Woolworths case and lawyers said the contrasting cases may encourage companies to "lawyer up" and fight the regulators.

Experts said the regulators should be encouraged to take on difficult cases but it makes the government's current review of penalties for corporate crime increasingly important to send a message that if companies do take on the regulators and lose, the penalties are more than "just a cost of doing business".