The Australian Securities and Investments Commission (ASIC) has announced in a Media Release that they have commenced legal proceedings in the Federal Court (the Court) against the Commonwealth Bank of Australia (CBA) for alleged unconscionable conduct and market manipulation relating to CBA's involvement in setting the Bank Bill Swap Reference rate (BBSW) between 31 January 2012 and October 2012 (the relevant period).
ASIC also alleges that CBA contravened numerous sections of the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC Act") and the Corporations Act 2001 (Cth) (the "Corporations Act").
The BBSW is the primary interest rate benchmark used in Australian financial markets and was administered by the Australian Financial Markets Association (AFMA) during the relevant period. On 27 September 2013, the AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to occurred before this change in methodology.
The Australian Stock Exchange (ASX Limited) has been the administrator of the BBSW since 1 January 2017, introducing a new Volume Weight Average Price (VWAP) based calculation methodology.
During the relevant period, CBA had a large number of products which were priced or valued off BBSW. ASIC alleges that on three specific occasions CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA's.
In a statement to the media, a spokesman for the CBA said:
The Government’s strategy to implement financial benchmark regulatory reform and proposed financial benchmark rules saw the introduction of the Treasury Laws Amendment (2017 Measures No. 5) Bill 2017 (the Bill) into the House of Representatives on 7 September 2017. The Bill is proposed to amend:
The Bill’s Summary indicates the object of the Bill is:
“Schedule 1 to this Bill makes amendments to the Corporations Act 2001 to:
Schedule 2 to this Bill amends the Productivity Commission Act 1998 to provide for the appointment of an additional Commissioner to oversee the work of the Productivity Commission in relation to the evaluation of policies and programs that have an impact on Indigenous persons.”
After having been initially introduced into the House of Representatives, the Bill is currently awaiting further debate.
On 4 March 2016, ASIC commenced legal proceedings in the Court against the Australia and New Zealand Banking Group (ANZ) and, on 7 June 2016, against National Australia Bank (NAB).
The Court made declarations on 10 November 2017, that each of ANZ and NAB had attempted to engage in unconscionable conduct in attempting to seek to change where the BBSW set on certain dates and that each bank failed to do all things necessary to ensure that they provided financial services honestly and fairly. The Court imposed penalties of $10 million on each bank.
On 20 November 2017, ASIC accepted enforceable undertakings from ANZ and NAB which provides for both banks to take certain steps and to pay $20 million to be applied to the benefit of the community, and that each will pay $20 million towards ASIC's investigation and other costs.
ASIC also commenced legal proceedings on 5 April 2016 against Westpac Banking Corporation (Westpac), where this matter is currently awaiting judgment.
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