Pedestrians walk past an Australia & New Zealand Banking Group branch in Singapore. The ANZ has suspended seven traders amid an investigation by regulators into whether market participants tried to influence Australia’s benchmark interest rates.
Bloomberg
Sydney
Australia & New Zealand Banking Group has suspended seven traders amid an investigation by regulators into whether market participants tried to influence Australia’s benchmark interest rates.
ANZ’s internal review and the investigation by the Australian Securities & Investments Commission “may not be complete for some time,” the bank said in a statement yesterday. Since mid-2012, ASIC has inquired into possible manipulation of the bank-bill swap rate, or BBSW, the local equivalent of the London interbank offered rate, by 14 banks that contributed prices to the rate-setting process.
ANZ didn’t name the traders in yesterday’s statement. Banks across the globe have paid billions of dollars in fines and made legal provisions as regulators probed rigging of foreign-exchange markets and benchmark interest rates including Libor.
ASIC said in July that traders from Royal Bank of Scotland Group sought to manipulate the Australian benchmark, and in January that traders from BNP Paribas tried to influence the French lender’s submissions on it.
“It’s a good opportunity for ASIC to assert its authority given it’s been criticised for not doing enough on market manipulation,” said Martin Smith, a senior market analyst with Sydney-based research firm East & Partners Pty.
“If the misconduct is clear, ASIC needs to act swiftly.” Voluntary Contribution Royal Bank of Scotland agreed July 21 to make a A$1.6mn ($1.4mn) voluntary contribution toward financial literacy projects after acknowledging limited instances of communications discussing the rate setting.
UBS AG and BNP Paribas agreed to make a A$1mn contribution December 23 and January 28 respectively, according to statements from ASIC.
“ASIC can confirm it is investigating ANZ, including the conduct of individuals, as part of its wider probe into the BBSW submission process and trading in reference bank bills,” Daniel Wright, a Sydney based spokesman for the commission, said in an e-mailed statement, without commenting further.
ANZ Chief Risk Officer Nigel Williams said the bank is “taking the precaution of having seven staff involved in markets trading step down pending completion of the investigation into practices” over a period ending in 2013.
“We have been treating this matter very seriously and we are continuing to cooperate fully with ASIC,” Williams said in the statement.
The potential outcomes from the regulator’s inquiries include civil and criminal penalties, ANZ said.
The Australian Financial Markets Association shut the rate- setting panel last year and moved to a mechanism where the benchmark is compiled directly using prices from brokers and electronic markets.
At least A$350bn of Australian syndicated loans and floating-rate bonds are priced off BBSW, according to data compiled by Bloomberg last year.
Trading of swaps, forward rate agreements and options tied to BBSW was valued at more than A$8.7tn in the 2009 financial year, according to a letter from the Australian Financial Markets Association to global banking regulators in 2010.
BBSW rates “substantially differed” from Libor in that lenders were required to make submissions based on the average mid-rate observed on bank bills, while Libor is subjective and not tied to observable transactions, ASIC said yesterday.
Singapore’s central bank said this month that it gave back as much as S$12bn ($9.2bn) taken from 19 lenders last year as a penalty for trying to manipulate benchmark rates.
The lenders took steps to prevent a recurrence of attempts to rig rates, the Monetary Authority of Singapore said. Before ANZ’s announcement, shares of the Melbourne-based bank closed 0.2% lower at A$31.77 in Sydney. The benchmark S&P/ASX 200 Index fell 0.6%.
