ANZ Settles with ASIC over BBSW Benchmark Rigging

Sources suggest the last-minute deal with ASIC will cost ANZ more than $50 million.

The Australian Securities and Exchange Commission (ASIC) announced today that it has reached an initial agreement with Australia and New Zealand Banking Group (ANZ) to settle court actions relating to the nation’s interbank BBSW market.

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Sources suggest that the last-minute deal with ASIC to settle the long-running bank bill swap rate case will cost ANZ more than $50 million. The Australian regulator asked the court to postpone the trial for 48 hours to seek approval for the settlement.

ANZ became the first bank to settle claims that suspicious traders manipulated rates to make more money. The deal was announced while a federal court case was running against three of Australia’s top banks, which began in Melbourne and included NAB and Westpac.

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The charges from ASIC are in connection with ANZ, which over a two-year period artificially moved the price of the bank bill swap (BBSW) reference rate, which is the primary interest rate benchmark used in Australia.

ASIC’s counsel John Karkar QC said: “An in-principle agreement has been reached by the commission and the the ANZ Bank to settle the claims against that bank. In the circumstances we request your honour that all matters be stood down for 48 hours to enable the ANZ documentation to be completed.”

ASIC alleges that the three lenders had numerous products that were priced from the value of the BBSW reference rate, and that they had traded in the underlying bank bill market with the intention of moving the BBSW price higher or lower. The benchmark is critical for the financial markets as it is used to set interest rates on trillions of dollars worth of bonds, loans and hybrid securities. It also plays a role in determining the rates offered by banks on mortgages and corporate and personal loans.

Administration of the BBSW was handed over to ASIC in a bid to make the benchmark less vulnerable to manipulation by enabling the BBSW to be calculated from a wider set of market transactions.

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