Heat on Westpac in rate-rigging row as ANZ, NAB settle

Westpac will head to court Tuesday morning, as ANZ and NAB sign agreements with ASIC over the rate rigging case.

The Westpac Building in Adelaide. (AAP Image/Emma Brasier)

Both ANZ and NAB have this morning told the Federal Court that they have signed agreements with ASIC over its rate-rigging case against them.

However, the third bank sued by ASIC, Westpac, is holding firm and the trial against it will begin tomorrow morning, barring a last-minute settlement.

ANZ and NAB have agreed to admit to unconscionable conduct by trying to rig the benchmark BBSW rate between 2010 and 2012 and pay a total of about $100m in penalties, costs and donations.

The deals require court approval and Justice Jonathan Beach this morning referred them to another Federal Court judge, Jayne Jagot, for a hearing on November 10 so that he can hear the trial.

The three banks were accused by ASIC of each individually rigging a key interest benchmark, the bank bill swap rate, between 2010 and 2012.

ASIC’s case against Westpac is likely to throw new light on the activities of the bank’s then star trader, Col “The Rat” Roden, whose obscenity-laden boasts about moving the BBSW have already featured heavily in the regulator’s court filings.

ANZ announced an in-principle settlement with ASIC last Monday, the day the mammoth trial was supposed to get underway.

The start of the trial was again delayed, until this week, after NAB on Wednesday told the court it was in advanced talks with ASIC.

Late on Friday night NAB released some details of its settlement with ASIC — a contrast with ANZ, which has insisted its deal must remain confidential until it is approved by the court.

Both deals are believed to be structured to minimise the banks’ risk of having to pay out in any class action brought by people who lost out because of moves in the BBSW.

One such class action is already under way in the US.

In NAB’s case, the regulator did this by allowing the bank to admit only to “attempted” unconscionable conduct, enabling the bank to argue — if needed — that its attempts were unsuccessful.

The admissions relate to trading on 12 occasions in 2010 and 2011, which are now outside the six-year limitation period on civil action.

However, it is unclear what “attempted” unconscionable conduct means as the ASIC Act’s definition of the term makes it clear that the conduct does not need to succeed to be unconscionable.

The number of breaches represents a significant discount to the original 50 alleged by ASIC, which has also dropped market manipulation claims against the bank.  NAB also admits to breaching its financial service obligations under the Corporations Act and agreed to enter an enforceable undertaking under which it promises to upgrade its policies and procedures for monitoring employees in the BBSW business.

It has agreed to pay a total of $50 million: $10m as a penalty, $20m to a financial consumer fund to be chosen by ASIC and $20m for the regulator’s costs.

NAB chief executive Andrew Thorburn said the bank accepted it “did not meet the high standards of professional conduct that ASIC, the community and NAB expects of itself, in that market during that period”.

Banking sources said ANZ has also agreed to admit to unconscionable conduct but not market manipulation.

ANZ has also agreed to pay a total believed to be between $50m and $60m, but it is not clear whether the structure of the payment is the same as NAB’s.

The settlements have been claimed as vindication by ASIC chairman Greg Medcraft, who is due to leave the job in a fortnight, bound for the OECD.

They come as the banking sector reels from a series of scandals, including an inquiry into the culture of the Commonwealth Bank, which has not yet been pursued over BBSW.

Mr Medcraft consistently insisted the banks must admit to wrongdoing — “plead guilty” — in order to settle the BBSW cases, maintaining his position in the face of a ferocious media campaign designed to undermine the credibility of the lawsuits.