Westpac defends 'innocent' trader phone calls in rate-rigging case

A Westpac banker was not rigging one of Australia's key interest rates when he told a colleague "I know it's completely wrong, but f--k it" or that he was "going to f--k the rate set" but rather commenting on where interest rates were at that point in time, a court has heard.

After hours of technical arguments in preceding days, lawyers for Westpac on Thursday addressed some of the more colourful phone call transcripts between the bank's staff.

The transcripts are key to the Australian Securities and Investments Commission's case in the Federal Court in Melbourne that Westpac's traders openly discussed rigging the bank bill swap rate (BBSW), a key rate used to set interest rates on a range of financial products including business loans.

ANZ Bank and National Australia Bank last week settled with ASIC for $50 million each.

Westpac maintains that ASIC has misinterpreted the conversations of its traders.

In a potentially major blow for the bank on Thursday, the court heard Westpac had been unprepared for some of ASIC's arguments and was asking the court to throw them out.

Justice Jonathan Beach will rule on the matter next week when it returns to court but has already indicated that ASIC will be able to include some parts of its case that Westpac is challenging.

In regards to the call transcripts, Westpac maintains that ASIC has misinterpreted the conversations of its traders, who were simply engaging in light-hearted banter with their colleagues. They heavily used industry jargon, often leaving out words that, if included, would have shown the innocent nature of the conversations, the court heard.

One of the key transcripts shows Westpac's star trader, Colin "the Rat" Roden, talking to colleague Sophie Johnson (dubbed "the Perfumed Steamroller" by rivals) on April 6, 2010, a day the Reserve Bank of Australia raised rates by 25 basis points.

Westpac's star trader, Colin "the Rat" Roden, will be called to give evidence.

The transcript shows Mr Roden saying: "I knew it was completely wrong but f--k it I may as well, I thought f--k it. We've got so much money on it we just had to do it, right?"

Ms Johnson replies: "Oh yeah."

While studiously avoiding swearing in court, lawyer for Westpac Matthew Darke, SC, told the court that the "it" in the sentence was the rate and Mr Roden was expressing his frustration.

In regards to Mr Roden saying what he was doing was wrong, Mr Darke said Mr Roden was not talking about his conduct.

"He is not saying his conduct is completely wrong. He's saying the rate is wrong given the RBA has lifted the cash rate ... the rate is too low," Mr Darke said.

A few seconds earlier in the same conversation, Mr Roden told Ms Johnson "I'm gonna just trash them on Friday", to which Ms Johnson replied: "So low ... considering they just went to 25 today."

Mr Darke said this exchange was not a reference to wanting to rig the rate to hurt rival banks, in this instance JPMorgan and BNP Paribas, but rather his concern about the credit quality of those banks.

"There was a view that those banks carried more credit risk than the domestic banks. He didn't particularly like having JPMorgan paper or BNP Paribas paper ... because it carries greater credit risk than the big four Australian banks," Mr Darke said.

And rather than Ms Johnson egging Mr Roden on by saying his behaviour was "so low", Mr Darke said Ms Johnson was referring to where the BBSW had set considering the RBA had raised rates that day.

BNP Paribas, Swiss bank UBS and Royal Bank of Scotland accepted an enforceable undertaking from ASIC in 2012 and 2013 for their roles in rigging the Australian bank bill swap rate.

Mr Darke also told the court that in another transcript, Mr Roden's comment to a colleague that he was "going to f--k the rate set" was a reflection of the impact his large trades would have on where the rate would be set in future and not a reference to manipulating the BBSW.

Both Mr Roden and Ms Johnson will be called to give evidence.

The trial before Justice Jonathan Beach continues.