Australian federal Judge says Westpac acted "against commercial conscience."
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Thursday, 24 May, 2018 - 08:04
Yesterday, we were supportive of Westpac in a case where adverse social reaction did not take account of the realities of the case. Today, they are getting a well deserved kicking from Beach, J in the Australian High Court. His Honour's language bordered in the intemperate in his obvious anger.
Using completely the wrong terminology, we can summarise the case as follows. Over a period of time, a number of Australian and foreign banks conspired to fix the Bank Bill Swap Reference Rate (inexplicably known by the acronym BBSW) on four separate occasions.
ASIC, Australian Securities and Investments Commission , started civil proceedings against a number of banks.
On 4 March 2016, action started against Australia and New Zealand Banking Group (ANZ) and against National Australia Bank (NAB) on 7 June 2016. On 10 November 2017, according to ASIC "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 court expressed its displeasure by imposing a civil penalty of AUD10 million on each of the two banks. At that time, ASIC also accepted undertakings from ANZ and NAB requiring both banks to do a bit more: they were to pay AUD20 million to community causes (that needs some clarification - after all, sponsoring a series of concerts, or sporting events, could count under that head as defined) and they would also each pay AUD20 million towards ASIC's investigation and other costs. The worrying word there is "towards".. just how much did ASIC pay out of its generally meagre budget to investigate the case?
In January this year, ASIC began action against the Commonwealth Bank of Australia (CBA) in respect of the same conduct and on 8 May, ASIC and CBA reached an agreement in principle to settle ASIC's claims and the agreed terms will be put before the Court for approval. ASIC has also taken undertakings, and received penalties, from UBS-AG, BNP Paribas and the Royal Bank of Scotland.
A new method of calculating the BBSW was brought into effect on 21 May 2018 which calculates it with reference to real transactions over a longer period of time and taking data from more institutions. ASIC says "This means that the benchmark is anchored to real transactions at traded prices."
If readers are still confused, think of it like this: while the market was different, the conduct complained of was more or less the same as that in the LIBOR scandal.
