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ASIC rounds on Westpac for tampering with rate

Chris Hamblin, Editor, London, 5 April 2016

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The Australian Securities and Investments Commission has embarked on legal proceedings in the Federal Court in Melbourne against Westpac for unconscionable conduct and market manipulation in relation to the banking giant's involvement in setting the bank bill swap reference rate (BBSW) between 2010 and 2012.

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 was to be calculated. The conduct to which the proceedings relate occurred before the change.

It is alleged that Westpac traded in a manner intended to create an artificial price for bank bills on 16 occasions during 2010-12.

ASIC alleges that on these days Westpac had a large number of products that 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 Westpac was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to Westpac's.

ASIC is seeking declarations that Westpac contravened s12CA, s12CB and the former s12CC Australian Securities and Investments Commission Act 2001, and ss912A(1) and 1041A Corporations Act 2001.

ASIC has also asked the court to impose pecuniary penalties against Westpac and issue an order requiring the bank to set up a "compliance programme."

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