ASIC Sues National Australia Bank over Alleged Benchmark Rate Manipulation

ASIC alleges that on 50 occasions NAB intended to create an artificial price.

The Australian Securities and Exchange Commission (ASIC) announced today that it has taken legal action against National Australia Bank (NAB) in a Melbourne Federal Court, in connection with alleged market manipulation that occurred during a 930-day period ending December 24, 2012.

The charges from ASIC are in connection with NAB allegedly artificially moving the price of the bank bill swap (BBSW) reference rate – which is the primary interest rate benchmark used in Australia – during the period in question.

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NAB has contested the claims, according to media reports, which will now be settled using the country’s federal court system. In 2014, Finance Magnates wrote about news in connection with a period subsequent to the above cited years, when a trader at NAB had been nabbed along with an ABS staffer for insider trading.

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Assets priced from benchmark

The allegations from ASIC claim that during the period in question NAB had numerous products that were priced or valued from the value of the BBSW reference rate, and that it had traded in the underlying bank bill market with the intention of moving the BBSW price higher or lower.

An excerpt of the concise statement that accompanied ASIC’s announcement regarding the action against NAB can be seen below and which highlights a particular chat transcript between traders:

Source: ASIC
Source: ASIC

While the above chat transcript may or may not imply any wrongdoing as the details of the context and circumstances are relevant, such language has come under scrutiny and led to the new Global Code of Conduct for Foreign Exchange which proposes safer and more neutral language than what has been traditionally used by certain dealers.

ASIC alleges that on 50 occasions NAB intended to create an artificial price for the bank bills during the above mentioned period, and in order to maximize its profit or minimize its loss to the detriment of those holding opposite positions to bank.

 

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NAB has fully co-operated with ASIC’s review and takes these allegations seriously. We do not agree with ASIC’s claims which means they will now be settled by a court process.

 

ASIC seeks penalties

ASIC described the conduct as unconscionable in relation to NAB’s involvement in setting the BBSW reference rate during the nearly 2.5 year period starting June 8th, 2010, through December 24 2012. The charges by ASIC seeks court pecuniary penalties against NAB, in addition to requiring it to implement a related compliance program.

The Australian Financial Markets Association (AFMA) had changed the manner in which the BBSW reference rate is calculated on September 2013, subsequent to the period cited by ASIC’s charges against NAB. The regulator added in a corporate statement that it will not be making any further comments at this time.

David Gall Source: LinkedIn
David Gall
Source: LinkedIn

According to coverage by the Sydney Morning Herald earlier this Tuesday, NAB Group’s Chief Risk Officer, David Gall, commented regarding the charges: “NAB has fully co-operated with ASIC’s review and takes these allegations seriously. We do not agree with ASIC’s claims which means they will now be settled by a court process.”

Mr. Gall has been in his current position since 2014, and has held senior roles across various NAB departments after intially joining in 2008, according to a LinkedIn profile description.

NAB becomes the third bank in Australia that the regulator has taken action against in connection with the BBSW reference rate.

In addition to a number of other historical actions related to misconduct with the BBSW benchmark, ASIC provided background in its announcement today on recent actions it had taken against in March against Australia and New Zealand Banking Group Limited (ANZ) under reference number 16-060MR, and in April against Westpac Banking Corporation under reference number 16-110MR.

 

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