Category: Banking Culture

ASIC gives the banks cause for Christmas celebration

From The Conversation.

Christmas is a time to forgive and forget and the Australian Securities and Investments Commission (ASIC) sure knows how to distribute good cheer at Yuletide, especially to old friends such as the big four banks.

 

On (almost) the night before Christmas, ASIC popped down the chimney and gave the banks a great big present. Buried among the usual news about banning car dealers and liquidators, the regulator announced that it had accepted an “enforceable undertaking” from the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) in relation to the banks’ wholesale spot foreign exchange (FX) businesses.

The conduct revealed by ASIC would be criminal if other firms tried it and will be criminal in future. Traders at the two banks, had on several occasions between 2008 and 2013: exchanged information about their positions with traders in other banks; shared confidential information about clients’ orders; and, in some cases triggered “stop loss” orders to the financial detriment of clients.

The traders had used inside information to enrich the banks and themselves.

To date, overseas regulators have hit major banks with fines totalling more than US$10 billion for what has become known as the “forex scandal”. For example, the Financial Conduct Authority, the UK equivalent of ASIC, fined JPMorgan some A$379 million for the company’s part in manipulating the daily FX Spot Rate benchmark. JPMorgan traders had been found to have committed the same underhand behaviour that has been discovered in NAB and CBA.

So, what were the fines imposed by ASIC on CBA and NAB – wait for it – A$2.5 million each!

Now this is a really big Christmas pressie for the banks. The story that Santa won’t come if you are a bad child, is obviously rubbish.

The banks have also promised to be good from now on and ASIC has required that they employ a nanny (an independent consultant) and that they put in place changes to their “existing systems, controls, monitoring and supervision of employees”. What were they doing before?

And as a very bad Christmas cracker joke, these fines have been dressed up as a “community benefit” payment to – wait for it – advance “financial literacy education related to the aged care sector”. In other words, we will sell you a dodgy reverse mortgage and then tell you why you shouldn’t have bought it from us in the first place.

How did such a Christmas pantomime come about?

If regulation were a beach cricket match, the banks have just asked ASIC to “follow on” and then scuttled them out for a handful of runs.

ASIC is on the back foot, as it was dealt a big blow by the Federal court recently when its strategy for prosecuting the banks over the bank bill swap rate manipulation was delayed yet again. The banks know that by delaying they are rapidly chewing up ASIC’s (the taxpayers’) money to prosecute of A$80 million.

ASIC has had a bad year. Earlier in the year, it was found by the government to be a dysfunctional, over-worked and under-resourced organisation. Kelly O’Dwyer, the Minster responsible, leapt into action, and renewed Chairman Greg Medcraft’s contract for only 18 months rather than the usual three years.

It looks like 2017 is going to be much worse for the regulator.

As the bankers take off for their Christmas break, they have the hard job of deciding where to spend their record bonuses. For example, Santa has been very good to Ian Narev, CEO of Commbank, who has pocketed a 50% pay rise, despite a string of scandals, involving not only bankers manipulating the FX market, but also the CommInsure scandal.

What exactly does a bank CEO have to do to be left off the Christmas card list these days?

Ask the members of the Parliamentary Committee who had the CEOs of the four major banks over this year for a mild roasting. The result was, as the ex-CEO of ANZ said, “a bit of theatre” – a sort of Nutcracker with the nuts but without the cracker.

Each of the four CEOs was asked about systemic issues and all of them batted back the questions elegantly. Mr Narev, pirouetted around the question noting that he had “lost count of the number of times I have emphasised throughout the organisation the importance of escalation”. The committee members, bedazzled by the consulting speak, did not follow up.

As it turns out, Mr Narev must have been negotiating with ASIC over just the sort of industry-wide misconduct that the members were asking about, but it must have slipped his mind. Likewise, Andrew Thorburn, CEO of NAB, was asked about systemic issues but deflected the questions – nothing to see here – even though, at the time, he too must have been negotiating with ASIC on manipulating the FX benchmark.

Next time, if there is a next time, the Committee must follow up and ask the right questions of the right people.

So, the banks are the undoubted winners in 2016, lots of scandals, laughable fines, no Royal Commission, couldn’t get any better. And they certainly plan to have a Happy New Year.

Author: Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University

ASIC takes action against Westpac entities

ASIC says it has commenced civil penalty proceedings in the Federal Court against Westpac subsidiaries Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for a number of contraventions, including failures of the ‘best interests duty’ introduced under the Future of Financial Advice reforms.

The proceedings follow an ASIC investigation into Westpac’s telephone sales campaigns targeting superannuation fund members. Specifically, ASIC’s case sets out 15 examples of alleged contraventions of the ‘best interests duty’ arising from two telephone campaigns instigated by WSAL and BTFM.

ASIC alleges that during the two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts. WSAL and BTFM are not permitted to provide personal financial product advice under their Australian financial services licences. Further, ASIC alleges that WSAL and BTFM did not undertake a proper comparison of the superannuation funds as required by law.

The law provides enhanced consumer protections and imposes greater obligations on financial advice licensees when they provide personal advice.

ASIC also alleges that WSAL and BTFM have:

  • failed to do all things necessary to ensure that the financial services covered by their  licences are provided efficiently, honestly and fairly;
  • failed to comply with the conditions of their licences which only permits those licensees to provide general advice; and
  • failed to comply with the financial services laws in the Corporations Act.

ASIC and Westpac will continue to cooperate to limit the facts in dispute in the proceedings. The first hearing for the proceedings will be on 2 February 2017 at 9.30am in the Federal Court in Sydney.

These proceedings form part of ASIC’s Wealth Management Project, focusing on the wealth divisions of the major banks, AMP and Macquarie (refer: 15-081MR).

Suncorp-Metway pays $530,000 for breaching consumer credit notification laws

ASIC says Suncorp-Metway Limited (Suncorp) has paid infringement notice penalties totalling $270,000 together with remediation of $260,000 after ASIC found it breached important consumer protection provisions.

Due to an internal error, Suncorp failed to notify a large number of consumers of changes in the amount of their loan repayments and, in some cases, failed to advise the consumers of their first direct debit default. This led to some of the consumers inadvertently defaulting on their loans and being contacted by Suncorp’s collections team.

A lender must notify a consumer of changes to loan repayments (for example, amount or frequency of repayments) no later than 20 days before the change takes effect. Further, where a consumer’s direct debit has failed for the first time, the lender is required to send the consumer a direct debit default notice.

ASIC found that between November 2015 and March 2016, Suncorp:

  • failed  to provide consumers with the required written notice regarding a change in loan repayments; and
  • failed to provide consumers with a direct debit default notice.

As a result of these failures, consumers were not given the opportunity to prepare for a change in their repayment obligations or may not have been aware that their direct debit payment had failed. Subsequently, some consumers were subject to collections activity, including telephone calls or letters from Suncorp’s debt collections staff.

ASIC Deputy Chairman Peter Kell said, ‘Companies engaging in credit activity need to ensure that their systems have rigorous checks and balances, so that when errors occur, they are detected quickly and don’t cause disruption to customers’.

‘A change in repayments can have a significant effect on a consumer’s household budget and consumers need to be given time to prepare for that impact. The law demands that lenders keep their customers informed.’

Suncorp has implemented a $260,000 remediation plan refunding any default fees and any interest customers incurred and has paid some consumers reasonable compensation where appropriate. Suncorp has written to all consumers who were affected by the above failures. Consumers who would like to discuss the matter further can contact Suncorp on 13 11 55.

Suncorp has also agreed to engage an external compliance consultant to review its processes and procedures in relation to the causes of the above breaches. The consultant’s report will be provided to ASIC.

Background

Suncorp provides finance to consumers for a variety of purposes, including home loans and motor vehicle finance.

The matter came to the attention of ASIC in March 2016 when Suncorp voluntarily reported the issue. Since becoming aware of the breaches, Suncorp has implemented new processes to prevent a similar occurrence of non-compliance with these provisions.

ASIC conducted its own investigation into Suncorp’s non-compliance. On 16 December 2016, ASIC issued 20 infringement notices totalling $270,000 for 10 breaches of section 65 (repayment changes) and 10 breaches of section 87 (direct debit default notice) of the National Credit Code.

The payment of an infringement notice is not an admission of guilt in respect of the alleged offence. ASIC can issue an infringement notice where it has reasonable grounds to believe a person or body corporate has committed an offence of strict liability against the National Consumer Credit Protection Act 2009 (Cth).

ANZ’s OnePath implements improvements overseen by ASIC

ASIC has confirmed the completion of an independent review by PwC of Australia and New Zealand Banking Group’s (ANZ) OnePath’s compliance functions that was announced in March 2016.

The Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

This review followed the reporting to ASIC of a significant number of breaches by the ANZ Group in relation to its life insurance, general insurance, superannuation and funds management activities operated through its wholly-owned OnePath group of companies.

PwC has now completed its review. PwC made six recommendations for improvements to OnePath’s compliance framework. OnePath has implemented four of these recommendations and has committed to complete the other two by early 2017. ASIC will continue to monitor OnePath’s implementation of these final two recommendations.

Background

The ANZ Group’s subsidiaries covered by this review include OnePath Custodians Pty Ltd, OnePath Life Limited, OnePath Funds Management Limited and OnePath General Insurance Pty Limited.

See 16-069MR Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

ASIC accepts enforceable undertaking from NAB and CBA to address inadequacies within their wholesale spot FX businesses

ASIC says it has today accepted enforceable undertakings (EUs) from each of the National Australia Bank Limited (NAB) and the Commonwealth Bank of Australia (CBA) in relation to the banks’ wholesale spot foreign exchange (FX) businesses.

As a result of ASIC’s investigation, ASIC is concerned that between 1 January 2008 and 30 June 2013, both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC.

ASIC Commissioner Cathie Armour said, ‘A well-functioning foreign exchange market depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have in place effective mechanisms for ensuring that their employees are trained, monitored and supervised to provide financial services efficiently, honestly and fairly.’

NAB

ASIC identified the following conduct by employees of NAB between 1 January 2008 and 30 June 2013:

  • on several occasions, a NAB employee on an offshore spot FX desk, acting together with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for placing the offers;
  • on a number of occasions, NAB employees disclosed specific confidential details of pending client orders to external market participants, including identification of the client through the use of code names; and
  • on several occasions, NAB employees on an offshore spot FX desk inappropriately exchanged confidential and potentially material information about the bank’s client flow or proprietary positions.

ASIC is concerned that NAB did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning of the market.

Under the EU, NAB will develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its foreign exchange business to prevent, detect and respond to, amongst others, the following types of conduct:

  1. attempts to manipulate the market for a currency, including by placing offers without a legitimate commercial reason and attempts to influence benchmark rates;
  2. inappropriate trading while in possession of confidential and potentially material information; and
  3. disclosures of client confidential information.

The program and its implementation will be assessed by an independent consultant appointed by ASIC.

Upon implementation of that program, for a period of three years, NAB will provide to ASIC an annual attestation from its senior executives that the systems and controls in its spot FX business are appropriate and adequate to effectively prevent, detect and respond to specified conduct. The program will also be subject to annual internal reviews and assessment by the independent consultant for a period of three years.

NAB will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector and the promotion of ethical behaviour in Australian financial markets.

CBA

ASIC identified the following conduct by employees of CBA between 1 January 2008 and 30 June 2013:

  • on two occasions, CBA employees on an offshore spot FX desk acquired proprietary positions in a currency after coming into possession of knowledge of large CBA fix orders in that currency;
  • on at least two occasions, CBA employees traded in a manner that may have been intended to cause the trigger price for a stop loss order to trade when it might not have traded at that time; and
  • on a number of occasions, CBA employees on an offshore spot FX desk disclosed confidential details of pending client orders to external third parties, including identification of the client through the use of code names.

ASIC is concerned that CBA did not ensure that its systems, controls and supervision were effective in relation to such conduct by its employees. Such conduct had the potential to undermine confidence in the proper functioning of the market.

Under the EU, CBA will develop a program of changes to its existing systems, controls, monitoring and supervision relating to the management of fix orders, management of stop loss orders, and external communications containing specific confidential information to address such conduct. The program will incorporate changes already made by CBA as part of an existing review of its Global FX business.

The program and its implementation will be assessed by an independent consultant appointed by ASIC. Upon implementation of the program, CBA will also provide ASIC with an annual attestation from a senior executive, for a period of three years, that the systems and controls in its spot FX business are appropriate and adequate to effectively manage specified conduct risks.

CBA will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector.

ASIC encourages market participants to adhere to high standards of market practice, including those set out in the Global Code of Conduct for the Foreign Exchange Market, published by the Bank of International Settlements (BIS Global FX Code). The BIS Global FX Code provides a global set of good practice guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. Phase 1 of the Code was published in May 2016, and Phase 2 is due for publication in May 2017.

ASIC is grateful for the assistance of our international regulatory counterparts in progressing our investigation, including the UK Financial Conduct Authority and the NZ Financial Markets Authority.

Background

The wholesale spot FX market is an important financial market for Australia. It facilitates the exchange of one currency for another and thus allows market participants to buy and sell foreign currencies. As part of their spot FX businesses, both banks entered into different types of spot FX agreements with their clients, including Australian clients.

Spot foreign exchange refers to foreign exchange contracts involving the exchange of two currencies at a price (exchange rate) agreed on a date (the trade data), and which are usually settled two business days from the trade date.

Ombudsman to call on banks to give small businesses three months’ notice before ending loans

From Smart Company.

Australian banks would be required to give small businesses at least three months notice before ending or substantially changing their loan, if a recommendation by small business ombudsman is adopted.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell has been “forensically” examining how the big banks treat their small business customers since August and her report into the banking sector will be released tomorrow.

Read more: Should small business loans be capped at $1 million?

The report is expected to include a series of recommendations to the federal government, including changes to how much notice the banks are required to give their small business customers.

According to Fairfax, the recommended notice period could be up to six months for businesses with rural properties or complex structures.

“The reality is that business loans are regularly ongoing—you might borrow to buy a business or set up a business, you expand and pay some back, and then you borrow more,” Carnell told SmartCompany.

“Business loans are not like home loans. They are ongoing, they go up and down depending on where you are in the growth of your business. It’s a huge problem if a bank decides not to refinance.”

While the full details of the recommendation will be made available when Carnell’s report is made public this week, she said throughout the inquiry’s public hearings that this issue of communication is a matter that needs to be “addressed urgently”.

“What we found in a range of the cases we investigated, what’s happened is the business has been given the expectation that they will have a new loan or their loan will roll over, [and] discussions … have been positive,” Carnell says.

“And then, sometimes days before the loan is due to finish, they’ve been told that the bank has decided not to refinance.

“The dilemma is small businesses don’t usually have lazy money ready to pay the bank back. In a number of cases, it’s meant the company or business has been forced into receivership.”

This starts a domino effect for businesses, says Carnell, as the moment a bank decides not to refinance a loan, the business’s loan is in default and the interest rate on the amount owed can increase substantially.

“Not only are you having to repay money you don’t have, but the cost of that money increases significantly,” she says.

Businesses will then attempt to secure finance from another lender, but having a loan in default with the first bank makes that even harder.

Carnell says having enough time to secure a new loan, sell existing assets or restructure a business is critical in this situation.

“I think three months is the absolute minimum, but it will regularly take long than that,” she says.

“It certainly shouldn’t be shorter than three months.”

While Carnell is clear that lenders are well within their rights to choose not to finance particular businesses, she says the current 10-day notice period included in the Banking Code of Practice is “obviously not doable”.

NAB Says Up To 60,000 Migrant Bank Customer Details Emailed In Error

In a statement released by NAB Executive General Manager International Branches Peter Coad, he advises that NAB has written to customers who migrated to Australia, regarding accounts they established through the bank’s migrant banking team while they resided overseas.

In this letter, NAB notified these customers that an email confirming their account had been established was also sent in error to an incorrect email address.

This error does not impact customers who set up an account in Australia.

Our number one priority was to notify our customers.

The email included customer information such as a name, address, email address, BSB and account number and in some cases NAB identification number – but it did not include any passwords.

We take the privacy and the protection of our customers’ personal information extremely seriously.

We also take full responsibility and we sincerely apologise to our customers for this mistake.

The error was caused by human error and identified following our own internal checks and as soon as we realised what had happened we took action.

We have reviewed these customers’ accounts, over and above our rigorous normal checks, and have not identified any unusual activity.  We will continue to monitor 24/7 to protect our customers’ accounts.

We are reaching out to approximately 60,000 migrant banking customers to notify them about this error.

Approximately 40 per cent of these customers have either closed or have not used their account this year.

Furthermore, 19,000 of these accounts have a balance of less than $2.

We have also notified and are working with industry regulators, including the Office of the Australian Information Commissioner and ASIC.

We do not consider that customers need to take any action with their account.

Banking reform report card: ‘could do better’

A new report from Deloitte Access Economics has highlighted significant work remains on implementing key recommendations of the Financial System Inquiry (FSI).

The Customer Owned Banking Association (COBA) commissioned the report on implementation of FSI recommendations 1, 2, 3 & 30 because it is now more than two years since the report was delivered to Government and more than one year since the Government announced its response.

The Customer Owned Banking Association (COBA) engaged Deloitte Access Economics to report on progress in implementing the following recommendations of the 2014 Financial System (Murray) Inquiry (FSI):

  • Recommendation 1: Set capital standards such that Australian authorised deposit-taking institution capital ratios are unquestionably strong.

  • Recommendation 2: Raise the average internal-ratings-based (IRB) mortgage risk weight to narrow the difference between average mortgage risk weights for authorised deposit-taking institutions using IRB risk-weight models and those using standardised risk weights.
  • Recommendation 3: Implement a framework for minimum loss absorbing and recapitalisation capacity in line with emerging international practices, sufficient to facilitate the orderly resolution of Australian authorised deposit-taking institutions (ADIs) and minimise taxpayer support.
  •  Recommendation 30: Review the state of competition in the sector every three years, improve reporting of how regulators balance competition against their core objectives, identify barriers to cross-border provision of financial services and include consideration of competition in the Australian Securities and Investments Commission’s (ASIC) mandate.

Deloitte Access Economics finds that delays to implementation of the recommendations would adversely affect the ability of the financial system to realise the benefits of these reforms. These benefits were identified by the FSI as helping to:

  • ensure the robustness of the financial system
  • aid competition in the banking sector
  • address the ‘too big to fail’ issue in the banking sector.

“The customer owned banking sector wants to see more urgency from government and regulators in implementing the key FSI reforms,” COBA CEO Mark Degotardi said.

“This report is timely because the House of Representatives Economics Committee has just found that Australia’s banking market is an oligopoly where the major banks have significant market power that they use to the detriment of consumers.

“The House Economics Committee found that a lack of competition in banking has significant adverse consequences for the economy and consumers.

“There is no time to waste, yet Deloitte Access Economics’ report card finds only limited progress on the key FSI recommendations.

“In relation to the Recommendation 30 requirement for regulators to explain how they balance competition with their other mandates, Deloitte Access Economics finds that there has been ‘little progress’.

“This is particularly disappointing because regulator decision-making can have a significant impact on competition. Deloitte Access Economics mentions two examples of this: APRA’s approach to regulatory capital instruments for customer owned banking institutions and APRA’s application of the cap on investor lending growth.

“Deloitte Access Economics’ report proposes a draft terms of reference for a Productivity Commission review of competition in the financial system, focusing on the banking sector.

“COBA welcomes Deloitte Access Economics’ suggestion the PC review should consider whether regulators’ rules and procedures are creating inappropriate barriers to competition and whether there is appropriate regard to other business models, including the customer owned model.”

Deloitte Access Economics has provided the following snapshot of the status of key FSI recommendations:

Table 1.1: Overall state of play

 

State of play
Recommendation 1

Capital levels

 Some progress, yet to be completed.

·         Steps already taken which have seen an increase in the capital ratios of the Australian major banks.

·         Current schedule suggests that implementation may be completed in 2018.
Recommendation 2

Narrow mortgage risk weight differences

 Some progress, yet to be completed.

·         Still in progress, although interim steps have been taken to narrow risk weights.

·         Current schedule suggests that implementation may be completed in 2018.
Recommendation 3

Loss absorbing and recapitalisation capacity

 Limited domestic progress; contingent on international developments.

·         No set timeframe, but progress is expected to “hasten slowly”.
Recommendation 30

Strengthening the focus on competition in the financial system

 Limited progress.

·         Current schedule suggests that implementation could be completed by end-2017.

Source: Deloitte Access Economics

ANZ Announces Appointment of Customer Fairness Advisor

ANZ today announced the appointment of Colin Neave AM as its Customer Fairness Advisor, a new role to help improve fairness of the bank’s products and services for retail, small business and wealth customers in Australia, reporting to Chief Executive Officer Shayne Elliott.

Following a distinguished career of public service at the highest levels, Mr Neave will shortly leave his role as Commonwealth Ombudsman. He is a former Chief Ombudsman of the Financial Ombudsman Service, the Australian Banking Industry Ombudsman, Chairperson of the Legal Services Board of Victoria and Vice Chair of the Australian Press Council.

Mr Neave was recognised as a Member of the Order of Australia in June 2005 for service to public administration and to the banking and finance industry.

Commenting on the appointment, Mr Elliott said: “This is a significant new appointment designed to help us more consistently deliver fair and responsible banking to our retail and small business customers.

“Colin’s deep experience in financial services, examining and resolving the most difficult of issues, makes him the ideal person to provide us with frank and independent assessments of the fairness of our products and services. This includes the impact they have on customers, particularly those in vulnerable situations.

“Colin’s initial focus will be to help us listen and to better understand the key retail and small banking issues by speaking to our customers and relevant stakeholders including our regulators and NGOs.

“As a first step Colin will be to help us establish our Remediation Principles so that we have a consistent set of standards we stick to when things do go wrong. He will also conduct a Fairness Review of our core retail deposit and credit products to ensure they continue to operate fairly, including their fees and charges. Our decade old basic banking account, for the most vulnerable, will be part of this review,” said Mr Elliott.

Mr Neave will be based in Melbourne and will commence with ANZ early in 2017.

Federal Court imposes multi-million dollar penalties on ANZ and Macquarie Bank

The ACCC says the Federal Court has imposed multi-million dollar penalties on Australia and New Zealand Banking Group Limited (ANZ) and Macquarie Bank Ltd (Macquarie) for attempted cartel conduct after action by the Australian Competition and Consumer Commission.

Following the filing of joint statements of facts and submissions by the parties, Justice Wigney imposed penalties of:

  • $9 million against ANZ in respect of its admission that it engaged in ten instances of attempted cartel conduct in contravention of the Competition and Consumer Act 2010 (CCA); and
  • $6 million against Macquarie in respect of its admission that it engaged in eight instances of attempted cartel conduct in contravention of the CCA.

The banks were also ordered to contribute to the ACCC’s costs.

“These penalties underline the seriousness of the conduct involved in these proceedings. Two significant Australian banks have admitted that on several occasions their traders communicated with other banks in an attempt to influence the ABS MYR Fixing Rate. This conduct had the potential to undermine the integrity of foreign exchange markets and undermine healthy economic growth,” ACCC Chairman Rod Sims said.

“Australia’s strong cartel laws apply equally across the economy, including in the banking sector.” Mr Sims said.

In his judgment, Justice Wigney stated:

“There could be little doubt that the attempted contraventions … were very serious… The conduct of the traders in question was deliberate and systematic.”

“Attempts by banks and other market participants to fix prices or financial benchmarks in the financial system should be regarded as particularly serious contravening conduct. It is essential that market participants and the public generally have confidence in the integrity and efficacy of the financial system.”

Justice Wigney also noted:  “The Australian public is entitled to expect that Australia’s major corporations act as exemplary corporate citizens wherever in the world they may operate.”

Background

Traders employed by a number of banks in Singapore communicated via online chatrooms about daily submissions to be made to the Association of Banks in Singapore (ABS) in relation to the benchmark rate for the Malaysian ringgit (ABS MYR Fixing Rate).

ABS benchmark rates are used as reference rates for settling NDFs. Non-deliverable currencies are not freely tradeable outside the domestic economy, so a benchmark rate must be set by banks submitting their views on the appropriate rate. That benchmark is used to enable trade in forward contracts.

During the relevant period, the ABS MYR Fixing Rate was derived from submissions made each day by a panel of banks.

Every trading day, each bank on the panel was required to submit a buy and sell rate for USD against the MYR. The ABS rules required that the submissions were made independently and based on the banks’ objective assessment of the market.

During 2011, ANZ and Macquarie traders attempted to make arrangements with other banks to make high or low submissions to the ABS MYR Fixing Rate. The rate would ultimately affect settlement payments for MYR denominated non-deliverable forward contracts (NDFs).

ANZ was a submitting bank for the MYR. Macquarie was not a submitting bank however often initiated discussions between traders and acted as a hub or coordinator between submitting banks. ANZ and Macquarie’s customers included Australian companies.

The ACCC estimates that the annual MYR NDF turnover in Australia was approximately $9 to 10 billion.

Similar conduct has been investigated and sanctioned in other markets.  The Australian Securities and Investments Commission is also engaged in litigation against several Australian banks regarding the setting of interest rate benchmarks.