Major bank Westpac has been found to have engaged in unconscionable conduct under s12CC of the Australian Securities and Investments Commission Act 2001 (Cth) by its involvement in setting the bank bill swap reference rate (BBSW) on four occasions.
Justice Beach of the Federal Court today (24 May) found that on these occasions, Westpac traded with the dominant purpose of influencing yields of traded Prime Bank Bills and where BBSW set in a way that was favourable to its rate set exposure.
In the civil proceedings brought by the Australian Securities and Investments Commission, the court also found Westpac had inadequate procedures and training and had contravened its financial services licensee obligations under s912A(1)(a), (c), (ca) and (f) of the Corporations Act 2001 (Cth)
His Honour said in his judgement, “Westpac’s conduct was against commercial conscience as informed by the normative standards and their implicit values enshrined in the text, context and purpose of the ASIC Act specifically and the Corporations Act generally.”
A further hearing of this proceeding on penalty and relief will be held on a date to be determined.
On 10 November 2017, the Federal Court made declarations that each of ANZ and NAB had attempted to engage in unconscionable conduct in attempting to seek to change where the BBSW was 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 Federal Court imposed pecuniary 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
Update
Westpac has released a statement in response to the findings on 24 May. It said, "Westpac notes today’s Federal Court ruling in relation to ASIC’s claim against Westpac concerning the Bank Bill Swap Rate (BBSW).
"ASIC alleged that on 16 specific occasions Westpac had engaged in market manipulation, unconscionable conduct and misleading and deceptive conduct. ASIC also alleged a breach of the bank’s supervisory duty.
"Today Justice Beach found that Westpac had not engaged in market manipulation or misleading and deceptive conduct under the Corporations Act. However, the Court found that Westpac did engage in unconscionable conduct on 4 of the 16 occasions and that Westpac had breached its supervisory duty.
"Today’s decision follows a complex investigation and court proceeding in relation to BBSW trading over a two year period beginning in 2010 and ending in 2012.
"Westpac is committed to working with regulators in a constructive manner including when we have a genuine difference of opinion. When that occurs our aim is to resolve the difference in an open, transparent and respectful way."
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