Banks to face rate rig suit in US

Australia’s banks will face a US class action over alleged manipulation of bank bill swap rates.

The bank bill swap rate, a widely used benchmark, is the short-term rate at which banks borrow from each other.

Australia’s banks are set to face the scrutiny of the US legal system after a class action lawsuit was filed over alleged manipulation of bank bill swap rates.

The fresh legal proceedings that confront 17 Australian banks and two international broking houses were launched today by two US-based investment funds – FrontPoint and Sonterra Capital Master Fund – and derivatives trader Richard Dennis at the US District Court for the Southern District of New York.

Sonterra and Frontpoint have form in challenging the banks, with a court action filed in July against dozens of global giants – including ANZ and Macquarie – amid claims they conspired to manipulate rates in Singapore.

Sonterra has also previously launched lawsuits against the world’s largest banks over the fixing of benchmark Libor and Tibor rates.

The group reached a binding settlement with HSBC in May in relation to a yen-denominated Libor case for an undisclosed fee, while Citigroup agreed to pay $US23 million in February.

The action follows persistent pressure from the local corporate regulator over claims the big banks rigged rates in order to enhance profits.

The Australian has previously reported that ASIC has been seeking out-of-court settlements with NAB, ANZ and Westpac, but wants an admission of guilt from the banks, something they are seen unwilling to offer.

If they were to admit responsibility, it would open them up to potentially much larger payouts through separate legal proceedings, such as the latest made in New York overnight.

ASIC is also seen likely to pursue action against Commonwealth Bank.

In separate statements to the market this afternoon, ANZ, Westpac and National Australia Bank confirmed they were among the banks named in the suit, with Commonwealth Bank yet to respond.

Macquarie and a host of international names that trade out of Australia including JPMorgan, Citi and UBS are also named in the class action.

“Since mid-2012 the Australian Securities and Investments Commission has been investigating the practices of 14 panel bank participants in the Australian interbank BBSW market,” ANZ said in a statement.

“ANZ has rejected allegations regarding bank trading and the bank bill swap rate made in a statement of claim by ASIC in March 2016 and is vigorously defending the legal action brought by ASIC.

“ANZ will also be vigorously defending the US class action complaint.”

The bank noted the ASIC claims have made no suggestion of any collusion between it and its rivals, an assertion made in the US suit.

Westpac similarly rejected the allegations, noting it was aware of the class action despite not yet being served.

“Westpac denies the allegations in this claim and, if served with the claim, will defend those allegations vigorously,” it said in a statement.

“As the matter is now before the courts it would not be appropriate to comment further at this time.”

NAB also said it would fight the lawsuit in line with its defence against ASIC’s allegations.

“The action names a number of defendants, including NAB, and references the proceedings brought by the Australian Securities Investments Commission in relation to BBSW,” the bank said.

“As we have stated previously, NAB does not agree with the claims by ASIC in relation to BBSW.”