Major Australian bank taken to court over interest rate rigging

The corporate regulator has launched legal action against National Australia Bank for allegedly manipulating the bank bill swap rate (BBSW) 50 times. NAB said it would fight the case.

Labor leader Bill Shorten jumped on the move, saying it provided further evidence of the need for a royal commission into the banks.

“How many more people need to suffer and get ripped off before [Prime Minister Malcolm] Turnbull stops covering up for the banks?” Mr Shorten said.

“Rather than hold the big banks accountable, Mr Turnbull is gifting them a $7.4 billion tax handout. It is an insult to everyone who’s been ripped off. Mr Turnbull has a choice here – and he’s putting the big banks first. He’s governing for the banks, not the Australian people.”

The Australian Securities and Investments Commission’s case is based on unconscionable conduct and market manipulation. ASIC alleges NAB “traded in a manner that was unconscionable and intended to create an artificial price” for bank bills on 50 occasions between June 8, 2010 and December 24, 2012.

The case was foreshadowed by The Australian Financial Review’s Street Talk column on Thursday, June 2.

A concise statement of claim filed by ASIC includes a December 2011 conversation between traders in NAB’s short-term interest rate risk business. ASIC alleges the trading on that day was conducted to cause the 90-day BBSW to be set higher.

NAB interest rate rigging Australian bank

NAB is the third of the big four banks to be sued over alleged BBSW manipulation.

In one instant chat conversation, trader Michael Tsakiris tells another trader, Hermeet Nejjhur, “Don’t hold back though.. If it is trading in little volume just keep pushing it.”

Mr Dajjhur replies: “Yep.”

NAB is the third of the big four banks to be sued by ASIC, which filed actions against ANZ Banking Group on March 4 and Westpac Banking Corp on April 5, the day before Mr Turnbull criticised bank culture in a speech at Westpac. Both banks are defending the actions.

The case against NAB was filed in the Federal Court after the market closed on Tuesday.

NAB group chief risk officer David Gall said in a statement to the ASX that NAB “has fully co-operated with ASIC’s review and takes these allegations seriously. We do not agree with ASIC’s claims which means they will now be settled by a court process”.

He said as part of ASIC’s investigation, NAB has provided emails, instant chat messages and telephone conversations involving its employees.

ASIC alleges NAB “had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower” and “that NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB’s”.

ASIC’s claim comes as the culture in Australia’s banks has become a significant issue in the federal election campaign, with Labor and the Greens arguing a royal commission is necessary to investigate the sector.

Mr Gall said NAB remains “committed to serving our customers and ensuring our people demonstrate the values and behaviours the community expects of us”.

The BBSW is a key benchmark interest rate that determines the pricing of financial products across the economy. It is the Australian debt market’s main benchmark rate, which means it is used as a reference for pricing hundreds of billions of dollars of bonds, derivative contracts and loans.

ASIC has asked the court to make declarations against NAB and is seeking pecuniary penalties and an order requiring NAB to implement a compliance program.

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