Rate fixing: Big banks seek BBSW deal with ASIC

Settlement talks have begun between the corporate regulator and three of the big banks over BBSW-fixing allegations.

ASIC chairman Greg Medcraft

A veil of secrecy yesterday surrounded the opening day of settlement talks between the corporate regulator and three of the big banks over allegations ANZ, NAB and Westpac fixed the BBSW, a key interest rate benchmark.

The two sides were unwilling to disclose even the name of the Melbourne hotel where they were meeting with mediator — and former High Court judge — Robert French.

Yesterday’s mediation, which is scheduled to continue today, was ordered last week by Federal Court judge Jonathan Beach in a bid to head off months of hearings that are scheduled to start in three weeks.

Pressure to settle the landmark litigation has been building on both sides, but before going into talks the parties’ positions were still starkly separated.

The banks are concerned evidence that emerges during the trial might will fuel calls for a royal commission into the banks, proposed by the Labor Party.

On the other side, Australian Securities & Investments Commission chairman Greg Medcraft’s term expires on November 12 — which is just six weeks away.

Well-placed observers have queried whether a new appointee might be less enthusiastic about the lawsuit’s chances of success.

However, neither side has so far indicated willingness to compromise on a key issue: whether the banks should admit wrongdoing.

The banks are reluctant to do so because they fear opening themselves up to additional liability from customers who might claim to have been disadvantaged by the alleged rate-rigging.

ASIC alleges the banks’ traders tried to move the benchmark to suit the banks’ commercial interests, potentially at the expense of borrowers who paid interest rates tied to it.

In February last year, Mr Medcraft warned he had an $80m war chest to pursue big cases and told the banks that if they wished to avoid doing things “the hard way” they should “plead guilty”.

He has since indicated a willingness to settle but in March warned the banks: “I won’t compromise — it has to be the right outcome.”

The settlement talks come as speculation swirls about who might replace Mr Medcraft. Former CBA and Credit Suisse executive John O’Sullivan has been hot favourite, but is opposed by Labor due to his role in the Godwin Grech affair in 2009.

Mr O’Sullivan’s suitability for the role has also been questioned due to his role at CBA, which has not yet been pursued by ASIC over BBSW but in recent years has suffered a series of scandals.

It is believed Mr O’Sullivan’s name remains in the mix for the job but no decision has yet been made by the government.