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Westpac parts ways with Colin 'The Rat' Roden but sticks by other BBSW traders
Australian Financial Review May 25 2018 11:00 PM
Patrick Durkin
Westpac has parted ways with its top trader Colin "The Rat" Roden but is expected to rally behind other top executives, including group treasurer Curt Zuber, in the wake of the Federal Court's decision the bank acted unconscionably but failed to manipulate the bank bill swap rate.
The big four banks also plan to use the decision by Justice Jonathan Beach on Thursday that Westpac failed to manipulate the BBSW, and the judge's finding that it was impossible to prove customers suffered any loss, to seek to dismiss a major US class action launched against the banks over BBSW.
The AFR Weekend has learnt that Mr Roden – the star witness paid millions in bonuses to "f--- the rate set" – stayed with the bank until the end of last November's six-week trial, but then parted ways on what are believed to be mutually agreed terms with no special pay outs.
The Sydney-based Mr Roden, who has faced public criticism for his sexism and swearing, is understood to have retired from trading and is concentrating on his philanthropic work with an Indigenous women's shelter in northern NSW.
The bank expects Mr Roden's departure will ensure other top Westpac executives under scrutiny in the case will be able to remain at the bank, including Mr Zuber, deputy group treasurer Joanne Dawson, Sophie "The Perfumed Steamroller" Johnston, Daniel "the Bench" Park, who is now the bank's top trader, and other traders including Zac Sharma, Patrick "The Sherriff" Stokes and William Hosie.
Both sides claim victory
Both Westpac and ASIC claimed to be vindicated by Thursday's decision, which found Westpac guilt of four counts of unconscionable conduct but failed to prove that traders manipulated the BBSW.
ASIC argues the findings against the bank show that Westpac's traders attempted to manipulate the rate but failed and are a black mark against the bank.
The regulator also believes that the settlements by CBA, ANZ and NAB for a total of $125 million vindicate former chairman Greg Medcraft's decision to bring the hard-fought cases. Experts such as Professor Ian Ramsay said ASIC should be supported for bringing the tough cases, which show the power of litigation over enforceable undertakings, which new chairman James Shipton has come under fire for defending.
The ASIC penalties pale in comparison to the successful actions of regulators against global banks for rate-rigging which have raised more than $US9 billion. However experts said the Libor scandal involved collusion between the major banks whereas the evidence in the BBSW case showed the big four banks were in fierce competition to move the rate.
Given Westpac faces a penalty of less than $3.3 million, some observers have questioned whether the other banks should have settled. Insiders at the other banks claim to be pleased not to have dragged their bank through a lengthy court proceeding and point out they admitted to attempted, rather than actual unconscionable conduct.
Hartzer, Maxsted relieved
Westpac chief executive Brian Hartzer and chairman Lindsay Maxsted are also said to be relieved and claim to be vindicated after personally intervening to fight the case and dodging the heart of ASIC's accusations. Mr Hartzer called his legal team from an investor roadshow in North America to express his relief minutes after the decision.
ASIC have said they will seek legal costs, which in the case of ANZ and NAB amounted to $20 million, however Westpac said any costs would be much less given the decision was split.
Westpac were also relieved that their key executives were largely found to be credible witnesses, which was a key motivation for refusing to settle the case.
Mr Hartzer and Mr Maxsted faced maximum pressure to settle ASIC's case in October last year.
The bank dispatched some of their most senior executives to a two-day mediationbetween Westpac, ANZ, NAB and ASIC before retired High Court chief justice Robert French on October 2-3 last year.
F--- is the word
The mediation broke an 18-month stand-off between the two sides and by October 23, ANZ told the court they had reached an in-principle deal and by the end of that week NAB had folded, too.
By the time Westpac's six-week trial kicked-off last November, the bank had decided to go the full distance. But when Justice Jagot gave a scathing verdict of ANZ and NAB's conduct when she approved their settlements, also in November, and then CBA settled earlier this month for $25 million, Westpac were worried they may have made the wrong call. This background explains Westpac's relief at Thursday's decision.
The fact there was no clear winner was perhaps best demonstrated on Friday by the silence from politicians in Canberra in the wake of the decision.
Westpac hopes to quickly move on but observers said key questions now remain. How will Westpac's traders assimilate back into the bank, will the traders keep their bonuses and stock options, how will the newly regulated BBSW stack up and will young graduates want to join the bank's trading room or will the bank need to take decisive action to clean up swearing and sexism from their trading room floors?