By Sarah Danckert and Clancy Yeates
ANZ Bank has agreed to settle a landmark court case brought by the corporate watchdog that alleged the bank rigged one of Australia's key interest rates, with National Australia Bank also in talks over a deal with the regulator.
The settlement is reportedly worth $50 million, but neither the bank nor the Australian Securities and Investments Commission (ASIC) would confirm the amount.
ANZ confirmed the settlement to the Australian Securities Exchange on Monday morning after a brief hearing at the Federal Court. Credit: Bloomberg
ASIC has accused ANZ, Westpac and National Australia Bank of rigging the bank bill swap rate (BBSW), a key benchmark rate that is used when setting the cost of business loans.
Until now, a key stumbling block to a settlement has been the regulator's pressure for banks to admit to wrongdoing, which could leave the lenders exposed to class actions from customers.
It is understood ANZ believes its deal with ASIC has been drafted in such a way that will not open the door to such actions.
ANZ's settlement is expected to increase the pressure on Westpac and National Australia Bank to settle with the corporate watchdog in the next few days, especially if ASIC has allowed ANZ to settle without an admission of liability.
National Australia Bank has been in negotiations with ASIC over the weekend about a potential settlement, and these talks are likely to continue until the case resumes on Wednesday.
Westpac is believed to have been more reluctant to settle than the other banks, though if NAB settles, it would leave Westpac to fight the high-profile case on its own.
ASIC alleges 16 contraventions involving BBSW by Westpac, and 50 by NAB. ANZ was facing allegations it had rigged the rate on 44 separate days.
ASIC's case seeks financial penalties and a declaration by the court the banks engaged in unconscionable conduct.
ANZ confirmed the settlement to the Australian Securities Exchange on Monday morning after a brief hearing at the Federal Court.
"ANZ today announced it has reached a confidential in-principle agreement with the Australian Securities and Investments Commission to settle court action relating to the Australian interbank BBSW market," the bank said in a statement.
The case has been stood down for 48 hours so the agreement can be completed. The bank said it would make a more detailed statement to the market following completion of the agreement.
"Based on the in-principle agreement, the financial impact to ANZ will be reflected in the 2017 financial year results and is largely covered by the provisioning held as at March 31, 2017," the bank said.
The bank bill swap rate is a key rate at which banks lend to each other over a short period. It is one of the most important interest rates in the economy, providing a benchmark for the setting of a range of business loan interest rates.
ASIC is relying on evidence it obtained from the banks, including text messages between traders and internal bank chatroom transcripts, to prove its case.
In 2013 and 2014, BNP Paribas, Royal Bank of Scotland and UBS accepted an enforceable undertaking from ASIC for allegedly rigging the bank bill swap rate in Australia.
Overseas, major banks have been hit with multibillion-dollar fines for rigging other similar interest rate benchmarks.
The methodology for setting the BBSW was changed in September 2013. The alleged misconduct occurred before this date.
ASIC has been in settlement discussions with the three banks in recent weeks as it faces immense pressure to resolve the case after botching some major cases in recent years, including against the former directors of Prime Trust and LM Investment Management.
The trial was expected to go for at least eight weeks.