National Australia Bank next in line for ASIC legal action on rate-rigging
Andrew Thorburn-led bank said NAB traders have been briefed about the impending action and management is shoring-up its defence.
- by
- Sarah Thompson
- Jemima Whyte
- Anthony Macdonald
National Australia Bank is the latest bank set to be dragged into rate-rigging claims, with the Australian Securities & Investments Commission preparing to take legal action against the $70 billion company.
The Australian Financial Review's Street Talk column revealed on Thursday that ASIC is investigating a specific issue around manipulating the bank bill swap rate (BBSW) from June 6, 2010, which means the regulator must file action by Monday, otherwise it would breach the six-year statute of limitations period.
It is understood ASIC's commissioners will meet on Monday to make a final decision.
Sources close to the Andrew Thorburn-led bank said NAB traders have been briefed about the impending action and management is shoring-up its defence.
"As we have said previously, NAB has been working with ASIC as part of an industry-wide BBSW investigation. It would not be appropriate to comment further," a NAB spokeswoman told The Australian Financial Review in response to a question about whether the bank was discussing settling with the regulator out of court.
The regulator is expected to allege that NAB manipulated the BBSW to boost its own profits.
It has launched similar cases against ANZ and Westpac, which have included pages of transcripts between traders taken from recorded phone calls and Bloomberg terminal chat.
Sources said the potential NAB case was less "strong", suggesting either fewer instances of alleged manipulation or less sensational trader transcripts.
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NAB has earned a few mentions in the documents filed so far, most notably by Westpac managing director group treasury Colin "The Rat" Roden, who is alleged to have described the "f---ing NAB" as "deadshits" in a conversation with a colleague.
But ASIC's case so far hasn't suggested collusion by the major banks in the BBSW market, rather using balance sheets and collaborating internally to move the rate.
ASIC chairman Greg Medcraft told The Australian Financial Review in Melbourne on Thursday that the regulator has "not made a decision about taking action against any other banks" but stressed "that does not mean we won't make a decision in the next week or month."
He was speaking on the sidelines of the annual Stockbrokers Conference where he is due to give a keynote speech. A Federal Court lawsuit alleging market manipulation and unconscionable conduct was filed by ASIC in early March after intense negotiations between ANZ chairman David Gonski, chief executive Shayne Elliott and ASIC chairman Greg Medcraft ended in a stalemate.
ANZ offered more than than $50 million to settle the action but refused to concede a demand that it admit to manipulating the bank bill swap rate (BBSW), which influences the setting of interest rates across the economy, sources said.
Court documents filed by ASIC show how it believed ANZ traders from various divisions in the bank shared information and acted in concert to move the bank bill rate in a direction that favoured their multi-billion dollar trading positions. The bank stockpiled bank bills and short term deposits, selling them into the market to force up the bank bill rate during the five-minute trading window in which the daily rate is calculated. The bank also bought bills, at times, if it needed the rate to fall.
ASIC says ANZ "traded in a manner intended to create an artificial price for bank bills on 44 separate days" between March 2010 and May 2012. It claims ANZ's behaviour is likely to have caused "financial detriment" to customers with the opposite exposure to the BBSW, or products that were referenced to BBSW.
ANZ was one of four commercial banks and ten investment banks that traded bills and it is understood the bank believes it would have been difficult for it to manipulate prices on its own.
ASIC has already accepted enforceable undertakings from UBS, BNP Paribas and Royal Bank of Scotland related to potential misconduct relating to the swap rate.
The swap rate is the most important and widely referenced interest rate in the Australian market. It is the base rate used to calculate payments on hundreds of billions of dollars of securities, and billions more in loans from mortgages to credit cards to corporate loans.
NAB shares fell 1.6 per cent on Thursday to, $26.34 while the broader market dropped 0.9 per cent.
Read more: http://www.afr.com/business/banking-and-finance/nab-next-in-line-for-asic-legal-action-on-raterigging-20160602-gp9ohr#ixzz4ASbSrSjd
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