Banks in court over ASIC’s rate rigging case

Westpac, ANZ and NAB are facing a raft of ASIC allegations that they manipulated a key interest rate to boost profits.

A landmark case against three of the big four banks over interest rate rigging will get under way in the Federal Court in Melbourne this morning after mediation and talks with the corporate regulator failed to reach a settlement.

Westpac, ANZ and National Australia Bank are facing a raft of separate allegations that they manipulated the bank bill swap rate (BBSW), a key interest rate benchmark used widely as a reference rate for business lending and investment, in order to boost their own profits.

The case comes amid heightened political focus on the banks over a series of conduct issues, with the trial due to take up to 12 weeks and expected to renew the focus on cultural issues within the banks.

From March last year, the Australian Securities & Investments Commission launched three separate proceedings against the banks, beginning with Westpac.

But it has since resisted offers to settle the claims because it wants an admission of wrongdoing.

The cases stand apart from multi-billion-dollar settlements reached by regulators in the US and Britain over rigging of other benchmark rates because they did not include any admissions of liability.

But banks remain fearful that any admissions could further the case of class actions against them with Sonterra Capital and Frontpoint, one of the funds that ­inspired the film The Big Short, having already launched action against a group of Australian and international banks over alleged rigging.

NAB chief executive Andrew Thorburn last week told the parliamentary standing committee on economics that the banks were in talks with ASIC over the case “on an ongoing basis”, but had not reached a settlement.

“I’m hopeful that we can work through to get a successful conclusion, but the court hearing does start on Monday,” Mr Thorburn said.

He declined to say what the sticking point was, only that it was not appropriate.

Judge John Beach is due to begin hearing opening arguments from ASIC and has asked to hear common issues involved in each case, before dealing with the individual allegations against each bank.

ASIC had reviewed transcripts of seven years of trading room chat and email to compile its case against each of the banks and alleges that each acted to set the BBSW higher or lower, depending on what was advantageous to the bank at the time.