CBA’s $25M rate-rigging settlement gets court OK
Financial Services June 21, 2018 10:58 am By Christine Caulfield | Melbourne

The Federal Court has approved Commonwealth Bank’s $25 million settlement with ASIC over allegations it manipulated the bank bill swap rate.

Justice Jonathan Beach said during a hearing Thursday in Melbourne that the bank’s conduct was deliberate, involving relatively senior staff and was done with the intent of enriching CBA.

The judge also noted that the conduct took place on five separate occasions over multiple months.

In signing off on the deal, Judge Beach said the penalty was sufficient to deter similar conduct and was on a par with penalties paid by ANZ and NAB for manipulating the bank bill swap rate.

As part of the settlement, CBA will pay a $5 million penalty, make a payment of $15 million to a financial consumer protection fund, and pay $5 million towards ASIC’s costs.

The bank will acknowledge that it attempted to engage in unconscionable conduct in the course of trading on the bank bill swap rate market on five occasions in violation of the ASIC Act.

It also agreed to an enforceable undertaking under which an independent expert will be appointed to review controls, policies, training and monitoring in relation to its bank bill swap rate business.

ASIC brought the case in January, claiming CBA engaged in unconscionable conduct by trading with the intention of affecting the bank bill swap rate in order to maximise its profits or minimise its losses.

“ASIC alleges it was unconscionable for CBA to trade in this way, and also to enter into products priced off the BBSW without disclosing its trading practices to its customers and counterparties. ASIC also alleges that CBA’s trading  created an artificial price and a false appearance with respect to the market for some of these products,” ASIC said in a press release announcing the action.

The case against Commonwealth is just one of several ASIC has brought over attempts to manipulate the rate.

A Federal Court judge in November signed off on $100 million in settlements between ASIC and National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. for attempting to manipulate the market for the bank bill swap reference rate.

Westpac – the only bank that did not settle the rate rigging claims – decided to take its chances at trial against ASIC. Both sides claimed victory in May when Judge Beach found Westpac had engaged in unconscionable conduct when it traded in bank bills in an attempt to influence the benchmark Bank Bill Swap Rate on four occasions but did not engage in rate rigging, as ASIC had alleged.

A hearing on penalties has not yet been scheduled.

The commission brought the case against ANZ in March 2016, alleging unconscionable conduct and market manipulation in setting the bank bill swap reference rate, the primary interest rate benchmark used in Australia.

ASIC later brought action against NAB and Westpac.

UBS AG, BNP Paribas and the Royal Bank of Scotland all settled with the regulator before facing court.  Those banks paid a total of $3.6 million in voluntary contributions as part of their agreements, ASIC said.

Commonwealth Bank is represented by MinterEllison.

The case against Australian Securities and Investments Commission v Commonwealth Bank of Australia.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.