The National Australia Bank (NAB), the third of our big four banks, has been accused by ASIC of manipulating the benchmark interbank borrowing rate, joining rivals the ANZ and Westpac (WBC) in the sights of the corporate regulator.
ASIC yesterday accused National Australia Bank of “unconscionable conduct and market manipulation” in its alleged involvement in setting the bank bill swap reference rate between June 2010 and December 2012.
The allegations are the same as those levelled at Westpac and the ANZ earlier this year. Both have rejected the allegations, but the claim is likely to re-ignite calls by the Federal opposition and others for a Royal Commission into the banks. In fact Labor leader Bill Shorten jumped on the move, saying it provided further evidence of the need for a royal commission into the banks.
ASIC claims the NAB “traded in a manner that was unconscionable and intended to create an artificial price for bank bills” on 50 occasions during the period.
NAB traded in the bank bill market with the intention of moving the benchmark reference rate higher or lower, ASIC alleges.
ASIC alleges NAB "had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower" and "that NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB’s".
The bank, which provided details of emails, instant chat messages and telephone conversations involving employees to ASIC, rejected the allegations.
“NAB has fully co-operated with ASIC’s review and takes these allegations seriously. We do not agree with ASIC’s claims which means they will now be settled by a court process,” said chief risk officer David Gall.
ASIC said it has begun legal proceedings in the Melbourne Federal Court.
The bank bill swap reference rate is the primary interest benchmark used in the country’s financial markets to price billions of dollars of commercial loans and financial instruments issued every day. It is used as a reference for pricing hundreds of billions of dollars of bonds, derivative contracts and loans.
ASIC has asked the court to make declarations against NAB and is seeking pecuniary penalties and an order requiring NAB to implement a compliance program.
The action was lodged with the court after the ASX closed for the day. NAB shares eased 0.1% to $26.59 yesterday.
