NAB makes its case in ASIC rate rigging suit
The Australian 12:00AM December 13, 2016
Ben Butler
NAB has attempted to peel itself away from ANZ and Westpac in a rate-rigging lawsuit brought against all three banks by the corporate regulator.
In submissions filed with the Federal Court, where the Australian Securities & Investments Commission is pursuing the banks for allegedly trying to rig the bank bill swap rate, NAB claims that, unlike other banks, it did not have any system in place to monitor its total exposure to the benchmark interest rate.
NAB said three units within the bank traded in the bank bill market, each of which “monitored their own exposure to movements in the BBSW rate”.
However, “there was no system in place under which each business unit monitored the exposure of other business units, or by which NAB monitored its overall exposure to movements in the BBSW rate,” the bank said. “ASIC accepts that this was the case.”
ASIC is accusing each of the banks of behaving unconscionably by trying to set the BBSW at a rate that was “to its advantage and to the disadvantage of parties to certain products who had an opposite exposure to the BBSW”.
The banks are not accused of collusion, but of each individually acting in their own interests.
NAB’s submissions were filed ahead of a hearing last week at which ASIC and the banks argued about how much of the cases should be heard together.
ASIC argued that there were many issues in common, while the banks were keen to keep as many issues separate as possible.
The regulator’s own statement of claim against NAB, filed in July, includes chat and phone-call transcripts that indicate tension between the three trading desks.
One of the desks, short-term interest rate risk, sat within the bank’s markets division while the other two, Australian liquidity management, which was tasked with making sure the bank maintained liquidity required under prudential regulations, and banking book risk management, which was concerned with interest rate exposure across the bank’s lending and funding portfolios, sat within NAB’s treasury division.
In one phone conversation, on September 9, 2011, markets dealer Terry Maxted complained to treasury’s David Page that head of STIRR Paul Howarth had withheld bank bills from the market.
Mr Page said Mr Howarth had “trucks loads” of bills and urged Mr Maxted to complain.
“It won’t go anywhere,” Mr Maxted responded.
“They just get all abusive.”
Mr Page said: “They’re abusing everybody. They’re abusing the balance sheet, they’re abusing the market, they’re abusing customers.”
Later that morning, Mr Maxted told Mr Page that Mr Howarth had “just redeemed himself a bit” and “come over”.
“Well, he hasn’t redeemed himself,” Mr Page responded. “He’s f..king failed at the rate set and he’s coming crawling back. I wouldn’t call it redeeming himself.”