Westpac settles civil action instigated by US investors

Westpac has settled a civil action instigated by US investors over the company’s involvement in a conspiracy.

The action was launched in 2016 by two US-based hedge funds, Frontpoint Financial Services and Sonterra Capital Master Fund. Picture: David Geraghty / The Australian

Westpac has settled a civil action instigated by US investors over the company’s involvement in a conspiracy to fix the benchmark rate at which banks lend to one another, closing the book on a long-running legal saga.

On Thursday, Westpac advised the ASX it had entered into an agreement with the plaintiffs over the civil action which was filed in New York’s Southern District Court.

The action was launched in 2016 by two US-based hedge funds, Frontpoint Financial Services and Sonterra Capital Master Fund, alongside trader Richard Dennis against several Australian and international financial institutions over a conspiracy to fix the bank bill swap reference rate.

It followed ASIC launching an investigation into Westpac for the same reason, with the Federal Court in 2018 finding that the bank engaged in unconscionable conduct around the setting of the BBSW.

The court also found that “by reason of inadequate procedures and training” the bank breached its financial service licence conditions.

At the time ASIC alleged Westpac had a general practice of attempting to rig the rate, but Justice Beach said that he was “not prepared to infer from the isolated instances on the specific four occasions that I have identified or from the totality of the evidence that there was a pattern or system such as to give rise to such a practice”.

At the time Westpac was fined $3.3m over the action. ASIC separately sought action against NAB, ANZ and the Commonwealth Bank for similar behaviour.

The BBSW is a short term benchmark that is set as an average of bill rates supplied by banks for maturities and is often used to set the price of floating priced securities

The US-based plaintiffs alleged that the price of Australian dollar futures were changed due to the influencing of the rate and sought compensation on that basis.

Other banks named in the action included the other three big banks, Macquarie, Citibank and the Bank of New Zealand.

Westpac did disclose the terms of the settlement, informing the market that it remained confidential.

It did note that it made a provision in relation to the matter in 2020, with the bank’s full-year results due to be handed down next Wednesday.

“Settlement is subject to negotiation and execution of complete settlement papers and Court approval,” Westpac said in a statement.