'Disgusted' judge clears banks' $100m rate-rig settlement

The Federal Court on Friday approved a $100 million settlement between the sharemarket regulator and two of the major banks accused of seeking to rig the benchmark bank bill swap rate (BBSW).

ANZ Bank and National Australia Bank will both pay $50 million each to end the case brought by the Australian Securities & Investments Commission, Justice Jayne Jagot told the Federal Court in Melbourne. The penalties should serve as a deterrent, she said.

"The public should be shocked, and indeed disgusted" by the conduct of the banks, aimed at corrupting a key benchmark in the pursuit of short-term gain, Ms Jagot said. The settlements leave Westpac as the only bank still fighting the case in court.

ASIC alleged traders at the three banks sought to manipulate the BBSW rate -- used to price more than $10 trillion in derivatives -- to benefit their institutions' trading positions.

The local industry cases came after banks worldwide paid $US9 billion ($11 billion) in fines for rigging Libor, a practice that scarred the industry's already-tainted reputation in the wake of the global financial crisis.

NAB said on October 27 it would pay a $10 million penalty, $20 million in costs and a donation of $20 million to a financial consumer-protection fund. It also admitted its employees "attempted to engage in unconscionable conduct".

ANZ's financial settlement is also split between penalties, costs and a donation, the court heard. In its agreement, ANZ acknowledged it failed to adequately train its traders on BBSW and agreed to initiate an independent expert review of its BBSW policy.

The big risk for the banks in settling the case is whether any admissions will be subsequently used in other legal actions. National Australia minimised the potential of further suits by admitting only to attempting to engage in unconscionable conduct; class actions rely on the plaintiff being able to show actual losses.

Further, the bank didn't admit to any breaches later than 2011, and civil claims typically need to be filed within six years of the alleged breach.

Bloomberg

This story 'Disgusted' judge clears banks' $100m rate-rig settlement first appeared on The Sydney Morning Herald.