Westpac defends rate rigging allegations

The bank says there are valid reasons for instances of suspect trading identified by ASIC.

Westpac has lodged a comprehensive defence to allegations by the corporate watchdog that it manipulated Australia’s benchmark interest rate, the bank bill swap rate (BBSW).

In a 55-page document lodged with the Federal Court, Westpac denies that it manipulated the BBSW by trading in interest rate swaps and bank bill futures between April 2010 and June 2012.

The bank says there are a number of valid reasons for the 16 instances of suspect trading identified by the Australian Securities & Investments Commission.

Rather than seeking to manipulate the BBSW, Westpac says its trading in the rate-set window was influenced by funding and liquidity requirements, including raising cash for its banking operations, deploying cash to increase returns and hedging, as well as an assessment of the likely trading strategies of other market participants.

Westpac also denies it engaged in unconsionable conduct.

It says the price of interest rate swaps was not derived from the BBSW, and neither was the price of bank bill futures.

Westpac has previously said that the interbank short-term money market - and bank balance-sheet management - is a highly complex activity that occurs for a range of valid reasons.

“We disagree with ASIC’s interpretation of the communication between employees referred to in the court documents and their assessment of trading activity given the complexity of strategies involved,” Westpac chief financial officer Peter King said in April.

“As a result, we will be vigorously defending ASIC’s allegations in court.”