SYDNEY (BLOOMBERG) - Australia's securities regulator said it has started legal proceedings against Australia & New Zealand Banking Group (ANZ) for allegedly manipulating the nation's benchmark interest rate - the first court action in a more- than-three-year probe across the banking industry.
Civil penalty proceedings have commenced against the bank in the Federal Court in Melbourne, the Australian Securities & Investments Commission said in a statement on Friday (March 4).
The regulator alleges that ANZ "traded in a manner intended to create an artificial price for bank bills" on 44 separate days from March 2010 to May 2012.
ANZ said it would "vigorously defend" the action.
The regulator has been investigating the setting of the bank-bill swap rate - the local equivalent of Libor that's also known as BBSW - since mid-2012 and has previously criticized a lack of cooperation from the nation's banks.
The investigation led to the suspension of seven traders at ANZ in November 2014 and voluntary contributions of a combined A$3.6 million toward financial literacy projects from Royal Bank of Scotland Group, UBS Group and BNP Paribas.
Probes into the rigging of foreign-exchange markets and interest-rate benchmarks have led to lenders across the globe paying billions of dollars in fines and an overhaul of how such rates are set.
ANZ's shares responded sharply to the news, with gains trimmed as much as 0.8 per cent in the five minutes after ASIC issued the statement. They traded 1.2 per cent higher at A$25.09 at 3:42 pm in Sydney.
ASIC is seeking declarations that ANZ Bank contravened sections of the Australian Securities and Investments Commission Act and the Corporations Act. It is also seeking pecuniary penalties against the bank and an order from the court requiring the lender to implement a compliance program, according to the statement.
Australia changed its rate-setting regime in 2013, following the global Libor-rigging scandal. It scrapped a 14-bank panel that made submissions on BBSW and moved to a system where the benchmark is compiled using prices sourced from approved interbank trading platforms.
Reserve Bank of Australia Assistant Governor Guy Debelle last month highlighted the shortcomings of the new system, as trading activity during the daily rate-setting window has dropped. The Council of Financial Regulators, which coordinates Australia's main financial regulators, is considering further reforms.
"The low turnover in the interbank market raises the risk that market participants may at some point be less willing to use BBSW as a benchmark," Debelle said in a Feb. 22 speech. "This is the motivation for the CFR's consultation, to ensure that BBSW remains a trusted, reliable and robust financial benchmark."