ASIC boss gears up for court battle on rate-rigging case

The Australian 12:00am June 1, 2017

Ben Butler

ASIC boss Greg Medcraft has taken a hardline stance against the big banks as the corporate watchdog pursues them over alleged ­interest-rate rigging, saying only a “court-based outcome” is acceptable.

Appearing before the Senate estimates committee yesterday, the chairman of the Australian Securities & Investments Commission slammed as “ridiculous” the idea that alleged big bank manipulation of the benchmark interest rate was a victimless crime.

In testimony yesterday, Mr Medcraft’s deputy, Peter Kell, also revealed ASIC’s deep unhappiness with the way Macquarie Group’s troubled financial planning department had been run.

However, he was unable to explain why the name of a senior CBA executive appeared on a draft press release dealing with that bank’s equally stricken financial planning business, and was forced to apologise to Nationals senator John Williams for suggesting he would leak confidential discussions to the media.

Under questioning from Labor senator Sam Dastyari, Mr Medcraft defended ASIC’s decision to pursue three of the big four banks — ANZ, Westpac and NAB — in the Federal Court over alleged rigging of the benchmark bank bill swap rate.

Mr Medcraft said the BBSW was the “wiring of the house” and a benchmark used widely across the economy. “People rely on and trust it as something they can refer to,” he said.

ASIC commissioner Cathie ­Armour, who is in charge of the case, told the committee the BBSW was “directly relevant to business borrowing”.

Senator Dastyari reminded Mr Medcraft that in the past he had told the committee that court was an inefficient and expensive way of resolving the BBSW stoush.

“Your view was that you were very open to working out a solution with the banks but it required them to admit — it required them to take responsibility,” Senator Dastyari said.

Mr Medcraft replied: “We need a court-based outcome.”

He also repeated his complaint about “very slow co-operation” from the big banks in ASIC’s BBSW investigation.

Senator Williams questioned Mr Kell about revelations by The Australian that ASIC regularly ­allowed big banks to water down its press releases about their regulatory breaches.

He was asked about a review Macquarie commissioned of its troubled financial planning division, which internal emails from early 2013, published by The Australian, revealed a senior investigator thought was a “sham”.

“We ultimately entered into a very wide-reaching enforceable undertaking with Macquarie due to a number of reasons, but one of them was because we didn’t think their own internal compliance was adequate, and the way in which their own reviews were dealt with was adequate,” Mr Kell said.

Macquarie had completely altered the way it did business since entering the enforceable undertaking in 2013 and paid compensation to victims, Mr Kell said.

He apologised for an internal email he sent in 2014 relating to a scandal at Westpac in which he said he expected Senator Williams to leak confidential discussions.

“I have already apologised for my inappropriate words then and I do so again,” he said. “I am accepting my flogging with as much good grace as possible.”

Mr Medcraft also revealed ASIC had launched an investigation into a leak of Scott Morrison’s bank tax on May 10, the morning after the move was unveiled in the budget.

The ASIC chairman said he then received calls about the leak from head of Treasury John Fraser and Federal Police commissioner Andrew Colvin. A formal joint investigation with AFP was established the following day.

“We think this is quite important to market integrity,” Mr Medcraft said. “If there is a problem we want to find it.”

Ms Armour told the committee ASIC was examining trading before the rumours emerged, looking for unusual profits, and short-selling would also be investigated.

“It’s not limited to trading on May 9,” she said.

Mr Medcraft poured cold water on a proposal by Mr Fraser to ban the media from bringing their own computers into budget lockups to stem future leaks. “The leak happened before the lockup,” he said.