ACCC alleges Cartel Conduct by ANZ and Macquarie Bank
Tuesday 29 November 2016 @ 9.55 a.m. | Trade & Commerce
Court action taken by the Australian Competition and Consumer Commission (ACCC) alleges traders at Australia and New Zealand Banking Group Limited (ANZ) and Macquarie Bank Limited (Macquarie) engaged in alleged cartel conduct to influence the daily rates used for currency trading. The allegations date back to a series of trading days in 2011.
The ACCC said it had launched legal action against the two banks over private online chat room conversations between traders who were trying to influence the daily fixing of a price for forward contracts of Malaysian ringgit.
Background to the Case
Association of Banks in Singapore (ABS) benchmark rates are used as reference rates for settling non-deliverable forward contracts (NDFs). Non-deliverable currencies are not freely tradeable outside the domestic economy, so a benchmark rate must be set by banks submitting their views on the appropriate rate. That benchmark is used to enable trade in forward contracts. Banks and other institutions primarily use NDFs for hedging and risk management. The ABS MYR Fixing Rate (Malaysian ringgit) would ultimately affect NDF settlement payments.
During the relevant period, the ABS MYR Fixing Rate was derived from submissions made each day by a panel of banks. The ABS Rules required this be done independently and without reference to other submitting banks. ANZ was a submitting bank for the MYR. Macquarie was not a submitting bank however it often initiated discussions between traders.
The Penalties
ANZ has agreed to the allegations and offered to pay a penalty of $9 million, while Macquarie has volunteered to pay a $6 million fine. The final size of the fines will be set by the courts.
The two banks have filed statements of Agreed Facts in the Federal Court, which detail online chats between traders that the watchdogs said show attempts to fix the rate.
Both banks have accepted a series of facts the ACCC has put before the court. These include that a Macquarie trader regularly contacted traders from ANZ and other Singapore-based banks in private online chatrooms about daily submissions in relation to the benchmark rate for the Malaysian ringgit.
Reaction from the ACCC
The ACCC Chairman Rod Sims said the ACCC took on the case to defend the integrity of financial markets, and to remind the financial sector of its obligations under this part of the law, which also applies to misconduct overseas:
"We wanted to make it clear that the cartel laws do apply to the financial sector. Banks are heavily regulated by other regulators, but we just wanted to remind them that the cartel laws do apply. We've had the slight sense that they're so focused on other regulators they sort of aren't fully aware that they're also subject to the Competition and Consumer Act. They did have this action brought to their attention, they acted in relation to the individuals and acted in relation to future compliance policies. I think we need to be clear that this occurred in 2011, that's a long time ago, and I think the banks would argue with some justification that they're trying to address the issues that have been brought to their attention."
Comment from the Banks
ANZ's Chief Risk Officer, Nigel Williams, said the bank had beefed up its compliance in recent years, after a separate 2013 investigation by Singapore's authorities. This probe, which also alleged attempted rigging of key rates, forced ANZ and Macquarie to set aside millions in extra capital:
"While there is no evidence that FX benchmarks in Singapore were successfully influenced, we accept responsibility and apologise for the actions of our former employees. We have made significant improvements to our compliance, training and monitoring systems to ensure this does not happen again."
ANZ also said in a statement:
"ANZ has agreed the employees unsuccessfully attempted to influence the setting of benchmark rates used to settle NDF contracts for the Malaysian Ringgit on 10 occasions in 2011."
Macquarie said the trader involved was terminated in 2012 and in a statement said:
"Macquarie notes the ACCC does not allege, nor does Macquarie make an admission, that it engaged in any conduct affecting the benchmark or that Macquarie obtained any benefit from the attempted behaviour."
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
ANZ Bank and Macquarie admit to attempted rigging in Malaysia – smh.com.au
Bank rate rigging spreads as ANZ, Macquarie hauled into court over Malaysian ringgit cartel – abc.net.au
ACCC takes proceedings against ANZ and Macquarie bank for attempted cartel conduct – ACCC Media Release 219/16
