Ex-ANZ trader in firing line

ANZ’s former managing ­director of global markets, Rob O’Callaghan, is one of the figures caught up in a regulatory probe regarding the interbank interest rate.

An ANZ Bank trading room.

ANZ’s former global head of fixed income and former managing ­director of global markets, Rob O’Callaghan, is one of the figures caught up in a regulatory probe into the manipulation of the interbank interest rate.

Mr O’Callaghan also served as a member of a market governance committee at the Australian ­Financial Markets Association. This committee plays a central role in the administration of and providing data on the Australian market’s intra-bank benchmark rate known as the Bank Bill Swap Rate.

The Australian Securities & Investments Commission is investigating alleged large-scale manipulation of interest rates by Australia’s big four banks and international banks.

Two weeks ago ANZ stood down seven traders on full pay in the midst of an ASIC investigation into alleged manipulation of the benchmark rate at the bank, with the possibility of the investigation spreading to other Australian banks.

The Australian understands that the role of a senior ANZ trader is under investigation and this executive is currently on leave from the bank.

ANZ did not comment when asked whether it had been informed of any investigation into Mr O’Callaghan or the trader on leave. A spokesman said the bank could not comment on individual staff members or former staff members involved in markets trading under investigation by ASIC.

Mr O’Callaghan has not returned requests for comment.

ANZ chief risk officer Nigel Williams has previously said the bank was taking the ASIC investigation very seriously, was co-operating with the watchdog and had launched its own internal investigation that covered a period ending 2013.

The Australian understands Mr O’Callaghan’s role as global head of fixed income until May 2013 is under investigation by ASIC as part of a broader regulatory probe into alleged benchmark manipulation.

Mr O’Callaghan also served as ANZ’s acting head of global markets during his time at the bank.

A key role of the committee is to administer the management of the BBSW rate, with AFMA providing data on the BBSW on a daily basis, the benchmark rate at which banks lend funds to each other. This is also used as a benchmark for bonds and hybrid shares.

Mr O’Callaghan left ANZ in May of 2013 to join Citigroup as managing director and senior portfolio manager within Citi’s Australian risk treasury business. He departed Citi in May this year to work for himself.

Citi declined to comment on Mr O’Callaghan’s employment, but The Australian understands the New York-based investment bank was not made aware of an any investigation into Mr O’Callaghan’s activities while at ANZ and he left Citi of his own accord.

ASIC is investigating benchmark manipulation between 2007 and 2013 amid a worldwide scandal of the manipulation of the Libor (the London Interbank Offered Rate) by traders in the UK and Europe.

In a speech this week ASIC chairman Greg Medcraft said the watchdog was spending 20 per cent of its market enforcement resources on the investigation, which has been running for two years.

“We need to scare. It’s fear versus greed. We’ve got to lift the fear and smother the greed,” he said.

While calculation of the BBSW rate is different to the Libor, the scandal is broadly similar. The Libor rort saw Royal Bank of Scotland fined €391 million ($705m) and eight major financial institutions hit with penalties totalling €1.7 billion.

Until September last year, the BBSW was calculated on submissions made by the 14 panel banks to the Australian Financial Markets Association, which is responsible for administering the published BBSW rate.

It is understood that ASIC is working its way through the 14 panel members that set the BBSW, including the nation’s major banks. ASIC is pouring over millions of documents, including texts, records of telephone calls and other methods of communication.

Last July RBS was caught up in ASIC’s investigation into BBSW manipulation. It paid a $1.6m voluntary contribution to fund independent financial literacy projects in Australia, and also accepted an enforceable undertaking from ASIC.

French bank BNP Paribas was prosecuted for self-reported misconduct in the period between 2007 and 2010. It accepted an enforceable undertaking and made a similar $1m contribution and engaged an independent expert who found that the market impact of the bank’s actions was “not significant”.

On Christmas Eve last year UBS agreed to an enforceable undertaking, a $1m penalty and engagement of an independent expert. The expert found that the market impact of UBS’s conduct was insignificant.