Australia’s Big Banks Risk Losing Billions over Alleged BBSW Rate-Rigging

ANZ, Westpac, NAB and Macquarie have been hit with rate-rigging allegations and are now facing fines and legal action.

Australia’s leading banks may have landed themselves in hot water and could stand to lose billions after becoming embroiled in an international lawsuit launched by two US hedge funds and a derivative trader in connection with alleged rate rigging, according to The Sydney Morning Herald today.

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Rate Rigging Allegations

ANZ, Westpac, National Australia Bank and Macquarie Group are among several international banks that have this week been hit with legal action over allegations that traders at the banks rigged the bank bill swap rate (BBSW).

The BBSW determines the rate that banks charge to lend to each other and helps define the rates for business and commercial loans. ANZ, Westpac and National Australia Bank have reportedly denied the allegations.

The complaint, which accused Australia’s main financial institutions of racketeering, wire fraud and collusion under America’s RICO act, also pointed out that the alleged rigging had a “reasonably foreseeable effect on US domestic commerce”.

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As a result of their alleged wrong-doings, the banks now face the possibility of major fines and significant legal action.

ASIC Legal Action

ANZ, Westpac and National Australia Bank are already fighting legal action launched by ASIC, Australia’s corporate watchdog, over their alleged manipulation of the rate.

The new complaint was filed in a US court by Florida-based derivative trader, Richard Dennis and hedge fund Sonterra Capital Master Fund and Frontpoint Financial Services.

While ASIC is not involved in the new filing, the US complaint said the ASIC action had revealed strong evidence, including emails, phone calls and electronic chats, demonstrating a conspiracy among BBSW panel banks and inter-dealer brokers to fix the prices of BBSW-based derivatives.

The big four banks have in recent months faced criticism over huge profits and CEO salaries and there have also been previous revelations of corporate misconduct leading to major concerns about banking corporate culture.

ASIC has not yet launched action against the Commonwealth Bank but is expected to do so in the near future.

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