ASIC said on Tuesday it had commenced legal proceedings in the Federal Court in Melbourne against Westpac for “unconscionable conduct and market manipulation” in relation to its involvement in setting the BBSW between 6 April 2010 and 6 June 2012.
The corporate regulator alleged that Westpac traded in a manner intended to create an artificial price for bank bills on 16 occasions during the period.
“ASIC alleges that on these days Westpac 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,” ASIC said in a statement.
“ASIC alleges that Westpac was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to Westpac’s.”
The corporate regulator has sought from the court pecuniary penalties against Westpac and an order requiring the bank to implement a compliance program.
Westpac’s group chief financial officer Peter King said the bank will be “vigorously defending” ASIC’s allegations in court.
“We reject the allegations made by ASIC and do not believe Westpac, or any employee, has acted unlawfully in relation to the instances detailed by ASIC,” Mr King said.
“The operation of the interbank short-term money market, as well as bank balance sheet management is highly complex and activity occurs for a range of valid reasons.
“We disagree with ASIC’s interpretation of the communication between employees referred to in the court documents and their assessment of trading activity given the complexity of strategies involved.”
Mr King said Westpac takes conduct very seriously and has fully cooperated with ASIC in its investigation of bank participants and their trading practices relating to the BBSW and had provided more than 12 million Westpac documents for review.