ASIC launches rate-rigging case as swap rate scandal hits CBA

THE Commonwealth Bank has been swept up in the scandal over interest-rate rigging at Australia’s major banks, accused by the corporate cop of “market manipulation”.

New chief executive of the Commonwealth Bank Matt Comyn. Picture: James Croucher

THE Commonwealth Bank has been swept up in the scandal over interest-rate rigging at Australia’s major banks, accused by the corporate cop of “market manipulation”.

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In an announcement late on Tuesday, the Australian ­Securities and Investments Commission said it was suing the bank in the Federal Court.

The corporate regulator says staff at the CBA traded with the intention of affecting the bank bill swap rate — an interest rate that plays a pivotal role in the economy — so it could profit at the expense of others.

ASIC has previously launched legal action against the other three major lenders, National Australia Bank, ANZ and Westpac, accusing them of rigging the swap rate, also known as the BBSW.

Its move on the CBA presents another problem for Matt Comyn, who was appointed chief executive of the bank on Monday. Mr Comyn, who runs the group’s retail banking business, takes the reins of the group in April, succeeding Ian Narev.

The latest legal battle comes at a pivotal time for the bank, which has been embroiled in a succession of scandals in recent years.

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ASIC chairman Greg Medcraft. Picture: Chris Pavlich

It also comes at a critical juncture for the broader industry, ahead of the royal commission into misconduct in the financial services industry that starts next month.

CBA chair Catherine Livingstone, announcing Mr Comyn’s promotion on Monday, said he had been tasked with restoring “the bank’s reputation in areas where trust has been damaged”.

ASIC on Tuesday kicked-off legal proceedings for its rate-rigging case against the CBA at the Federal Court in Melbourne, with a directions hearing set for Friday.

The bank last night said it had “fully co-operated with ASIC’s investigation over the last two years”, and it disputed the allegations.

“As this matter is before the courts, it is not appropriate to comment further at this time,” the CBA said in a statement.

In court documents lodged by ASIC on Tuesday, the commission said the CBA engaged in “unconscionable conduct and market manipulation”.

It said the bank traded with the intention of affecting the bank bill swap rate to its advantage during 2012.

Commonwealth Bank chairwoman Catherine Livingstone. Picture: Britta Campion

The regulator said it was seeking “pecuniary penalties” to be levied against the lender and an order requiring it to introduce a compliance program.

“CBA had a large number of products which were priced or valued off BBSW,” the commission said.

“ASIC alleges that on three specific occasions CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA’s.

“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 alleged the CBA’s trading “created an artificial price and a false appearance with respect to the market for some of these products.”

The three claims against CBA are dwarfed by the 50 faced by NAB, the 44 by ANZ and the 16 by Westpac.

While NAB and ANZ both settled with the commission, paying a combined $100 million, Westpac has fought the case in court. A judgment is expected as soon as March.

In their settlements, NAB and ANZ agreed to a lesser number of breaches.

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