Bad luck for Australia’s big four banks, plus Macquarie and a host of other international banks? A US court action has extended the potential for costly damages claims over rigging claims of a key Australian bank bill rate.
The action emerged late yesterday in US and local media reports, and statements from the big four banks here yesterday afternoon. A total of 17 international banks and two global brokers have been sued in New York.
The reports say the big four plus, Macquarie and a dozen international investment banks who were members of the panel that set the Australian bank bill rate (the BBSW, a key benchmark interest rate) are being sued inUnited States District Court for the Southern District of New York. The applicants are Florida-based derivatives trader Richard Dennis and two US-based investment funds, Sonterra Capital Master Fund and Frontpoint Financial Services and some of its related funds. The plaintiffs are seeking a jury trial.
This is not the first time though these two funds have sued over rigging claims.
On July 2, the two launched action in Singapore traces back to the 2013 scandal in Singapore when the country’s Monetary Authority found more than 100 traders in the city-state tried to rig key borrowing and currency rates.
Bloomberg reported that the class action, filed in the U.S. District Court for the Southern District of New York, claims the banks sought to fix the bank bill swap rate, the local equivalent of Libor, which is used to price billions of dollars of floating-rate bonds and syndicated loans.
“It cites civil action launched earlier this year by Australia’s securities regulator against Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd. and Westpac Banking Corp., which are also named in the U.S. action"
“Defendants generated hundreds of millions of dollars in illicit profits by artificially fixing BBSW-based derivatives prices at levels that benefited their trading books,” according to the complaint, which is seeking a court order to force the banks to “disgorge their ill-gotten gains,” Bloomberg reported.
The US investors claim that the prices of various derivatives – including swaps, forward rate agreements, Australian dollar futures contracts, Australian dollar foreign exchange swaps and forwards, and 90-day bank accepted bill futures contracts – were impacted because they were linked to BBSW.
The four banks all made statements to the ASX, with the ANZ telling the exchange that it will “be vigorously defending the US class action complaint".
The NAB said that the US action references the legal action brought by ASIC in relation to the BBSW and “as we have stated previously, NAB does not agree with the claims by ASIC in relation to BBSW.”
Westpac told the ASX it not been formally served with any proceedings but “denies the allegations in this claim and, if served with the claim, will defend those allegations vigorously.”
The Commonwealth Bank of Australia has also been sued in the action.
ASIC has started legal proceedings against the ANZ, NAB and Westpac alleging market manipulation and unconscionable conduct. Legal action has not been brought against the CBA or Macquarie.
Media reports say the New York action references the ASIC legal actions and refers to the cases as “smoking gun evidence including emails, phone calls, and electronic chats, demonstrating a conspiracy among BBSW panel banks and interdealer brokers to fix the prices of BBSW-based derivatives”.
The US claim goes further than ASIC’s case by alleging collusion between the banks.
The banks "manipulated BBSW so frequently that traders often joked about how easy it was to fix the rate," the US claim says. Their "ultimate goal was to increase the profitability of their BBSW-based derivatives positons [sic]," the claim says.
"ASIC’s ongoing investigation has already uncovered communications in which [the] defendants openly conspire to fix BBSW and the prices of BBSW-based derivatives. [The] plaintiffs have good reason to believe and do allege that the limited, public materials available to date are only the "tip of the iceberg"," the claim states.
The claim alleges the hedge funds and other members of the class action "sustained damages" from the banks’ actions.
"The injuries and damages of each member of the class were directly caused by defendants’ wrongful conduct in violation of the laws as alleged herein."
The other banks that are defendants in the action are Citibank, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland and UBS. International broking houses ICAP and Tullett Prebon are also named.
Named in the Singapore legal action are Citigroup, Bank of America, JP Morgan, RBS, UBS, UBS, ING, BNP Paribas, Overseas Chinese Banking Corporation, Barclays, Credit Suisse, Credit Agricole, Credit Sussie, Standard Chartered, DBS, Miitsubishi Ufi, HSBC, Macquarie and Commerzbank.
ASIC settled claims with UBS, RBS, and BNP Paribas over alleged BBSW manipulation in 2013 and 2014.
