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ASIC lobs new rate rigging salvo at ANZ, Westpac
May 12 2016
- by
- Sarah Thompson
- Anthony Macdonald
- Joyce Moullakis
http://www.afr.com/street-talk/asic-lobs-new-rate-rigging-salvo-at-anz-westpac-20160510-gos3w2
The stoush between giants ANZ Banking Group, Westpac Banking Corp and the corporate regulator will reach boiling point over the next week. Street Talk can reveal the Australian Securities and Investments Commission is preparing to lodge a longer 70-odd page statement of claim against Westpac on Friday. The document is said to go a lot further than initial claims that focused on unconscionable conduct and market manipulation for Westpac's part in setting the bank bill swap reference rate (BBSW) between April, 2010 and June, 2012. Those proceedings needed to be lodged ahead of the expiry of a statute of limitation. Westpac managing director group treasury Colin Roden, known among colleagues as "The Rat" and one of the most influential rate traders, was repeatedly named in those court documents. He was talking to another trader in a telephone conversation in one of 16 alleged cases of manipulation. The bank is, however, vigorously defending the action, claiming ASIC doesn't understand how interest rate risk is managed. Earlier this month as part of its interim results, Westpac reported a $28 million increase in 'group risk related income' driven by 'interest rate risk management'. ANZ won't escape ASIC's wrath either with more documents due to be lobbed with the Federal Court in Melbourne on Tuesday. These will include reams of further material collated by the regulator against the bank in its lawsuit over alleged manipulation of the bank bill swap rate. ....read more http://www.afr.com/street-talk/asic-lobs-new-rate-rigging-salvo-at-anz-westpac-20160510-gos3w2
Heads roll at NAB over foreign exchange scandal
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March 12, 2004 - 1:04PM |
National Australia Bank Ltd has sacked four foreign exchange traders at the centre of a trading scandal that cost Australia's biggest bank $360 million. The bank said today "primary responsibility" for the unauthorised trading rested with four members of the foreign currency options desk. NAB today released the findings of a report by PriceWaterhouseCoopers into the trading scandal which found the four traders exploited loopholes and weaknesses in systems and processes to hide trading losses and protect bonuses. The traders - Luke Duffy, David Bullen, Gianni Gray and Vince Ficarra - have been dismissed. As well, NAB said today the head of forex in the bank's Markets Division, Gary Dillon, who was the direct supervisor of the four traders, would also be dismissed. The bank said three senior managers would leave NAB following the release of the report. Those leaving are the Executive General Manager of Corporate & Institutional Banking, Ian Scholes, the Head of Markets Division, Ron Erdos, and the Executive General Manager of Risk Management, Chris Lewis. NAB said experienced managers have been appointed to these positions on a short term basis until the NAB completes appropriate recruitment processes. Earlier this year, former chief executive Frank Cicutto and chairman Charles Allen quit in the wake of the scandal.
The bank today announced a four point plan to address the issues covered by the PriceWaterhouseCoopers (PWC) report. Chairman Graham Kraehe and chief executive John Stewart said the plan followed a two month review by PWC which involved interviews with more than 45 employees and third parties, research into thousands of emails and analysis of 10,000 trading transactions. NAB said the key points in the report included that the final loss from the FX options unauthorised trading is $360 million; the losses significantly increased between September 2003 and January 2004; the four traders involved exploited loopholes and weaknesses in systems and processes to hide trading losses and protect bonuses; and the trading losses had been reported to management by several junior employees. "The board is confident that a full and fair assessment of all issues has been undertaken and that appropriate remedial actions are being taken to address all of the issues raised in the PWC report and to prevent them from recurring," Mr Kraehe said. The report said there was inadequate management supervision in NAB's markets division as well as significant gaps in back office monitoring functions. There were also weaknesses in control procedures, failure of risk management systems and an absence of financial controls in the division, the report said. According to PWC, there was not a suitable compliance culture within the markets division of NAB and there was a tendency to suppress bad news rather than be open and transparent about problems. It added that warning signals, both from inside the bank and from regulators and other market players, were not properly acted upon.
Mr Kraehe said the board accepted it was ultimately responsible for the culture and reputation of the bank and any losses suffered by shareholders. The bank today rejigged two board committees, with Peter Duncan replacing Mr Kraehe as chairman of the risk committee and John Thorn taking over from Cathy Walter as audit committee chairman. The trading losses are being investigated by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Federal Police. "Those agencies will determine whether any civil or criminal actions will be taken against individuals as a result of the foreign currency options trading losses," Mr Stewart said. Mr Stewart said the bank was refining its risk management framework to get a more appropriate balance between management and policing functions. "We have already reviewed value at risk limits and reduced our risk exposure," Mr Stewart said. He said weaknesses in control procedures identified by PWC had been, or would be, rectified without delay. These include analysis of daily trading profits and accounts, reporting of all large and unusual transactions, investigation of all off-market rates on high risk transactions and a stronger back office that properly checks all transactions. "It is totally unacceptable that employees of the National breach policies and control limits," Mr Stewart said. "From now on, there will be a zero tolerance policy towards unauthorised limit breaches at the National."
FBI 'Prince' exposes foreign currency scam
Edward Helmore reports from New York on the scandal of cash-filled envelopes that has led to a mass arrest of traders
http://www.afr.com/street-talk/asic-lobs-new-rate-rigging-salvo-at-anz-westpac-20160510-gos3w2
While Wall Street and the colossi of corporate America lurch from one financial scandal to another, the exposure of an old-fashioned foreign currency scam last week was, by the standards of a rigged game, almost refreshing. On Tuesday, at 5.45 pm, two dozen armed agents of the FBI burst into the offices of Madison Deane, a foreign exchange firm on the 36th floor of Manhattan's World Financial Centre, and yelled at employees to put their phones down and their hands up. Co-ordinated raids at other firms, including the arrest of traders at JP Morgan Chase & Co and UBS AG, resulted in 47 currency traders being brought to book. Among those arrested for sham or rigged currency trades were bankers from 16 firms, including Dresdner Kleinwort Benson, Chase, UBS Warburg and Société Générale, many of whom were charged with accepting kickbacks on fake trades handed out in cash-filled envelopes in New York diners. According to prosecutors in the Manhattan district attorney's office, the arrests were the culmination of an 18-month investigation. Code-named Wooden Nickel, it began with a tip-off that traders at Madison Deane were cheating small investors. The FBI introduced an undercover agent posing as the manager of a hedge fund. Known as the the Prince to traders, he convinced the conspirators he was interested in learning how to conduct rigged foreign exchange trading, which in the industry's shadowy corners is known as 'points for cash'. But the traders did not suspect that the Prince was secretly videoing and taping their conversations. According to investigators, the traders made an illegal profit of $650,000 on the fraudulent currency trades, and perhaps tens of millions of dollars more in a much more basic trick of pressuring thousands of individual investors into making 'low-risk, high-return' foreign currency investments that were rigged or non-existent. According to an investigator, the traders at JP Morgan and UBS were lower-level employees who engineered 'sweetheart trades in exchange for kickbacks'. 'It wasn't fancy,' said Comey. 'It was fraud.' ........ read more http://www.afr.com/street-talk/asic-lobs-new-rate-rigging-salvo-at-anz-westpac-20160510-gos3w2