ASIC has commenced legal proceedings in Melbourne's federal court against NAB for alleged unconscionable conduct and market manipulation.
The corporate watchdog said it started civil penalty proceedings against NAB in relation to the bank’s alleged involvement in setting the bank bill swap reference rate (BBSW).
The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association (AFMA). On 27 September 2013, AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to allegedly occurred before the change in methodology.
“It is alleged that NAB traded in a manner that was unconscionable and intended to create an artificial price for bank bills on 50 occasions during the period of 8 June 2010 and 24 December 2012,” ASIC said in a statement late yesterday afternoon.
ASIC alleges that on these days, 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. ASIC alleges that NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB’s.
ASIC has sought from the court pecuniary penalties against NAB and an order requiring NAB to implement a compliance program.
NAB responded to the allegations in a trading update last night, in which the lender's chief risk officer David Gall stated that “trust in the integrity of our financial markets is crucial to a strong Australian economy. A fair, well-functioning and competitive financial system is crucial to providing the best outcome for customers and the wider community”.
“NAB takes its role in upholding high standards of professional conduct seriously. We are committed to service, integrity and ethics and our values reflect this.”
Mr Gall said NAB has fully co-operated with ASIC’s review and takes the allegations seriously.
"We do not agree with ASIC’s claims which means they will now be settled by a court process,” he said.
“As part of ASIC’s investigation, NAB has provided emails, instant chat messages and telephone conversations involving our employees. NAB retains this information as part of our business processes.”
Mr Gall said NAB remains committed to serving its customers and ensuring its people demonstrate the values and behaviour the community expects of them.
“As this matter is now before the court, it is not appropriate to comment further,” he said.
On 4 March 2016, ASIC commenced legal proceedings in the federal court against the Australia and New Zealand Banking Group Limited.
On 5 April 2016, ASIC commenced legal proceedings in the federal court against the Westpac Banking Corporation.
Prior to filing against ANZ and Westpac, ASIC’s investigations into misconduct in the BBSW has seen ASIC accept enforceable undertakings from UBS-AG, BNP Paribas and the Royal Bank of Scotland. The institutions also made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.
In July 2015, ASIC published Report 440, which addressed the potential manipulation of financial benchmarks and related conduct issues.
[Related: Westpac to defend rate rigging allegations]