The Australian Securities and Investments Commission (ASIC) said on Tuesday it has commenced a civil penalty procedure against the National Australia Bank (NAB) for market manipulation with the bank bill swap (BBSW) reference rate. The proceedings were filed with the Federal Court in Melbourne and was accompanied with a request for pecuniary penalties against NAB and an order requiring it to implement a compliance program.
The BBSW is administered by the Australian Financial Markets Assassination (AFMA) and is calculated as the mid-rate of the markets for AFMA Prime Bank Eligible Securities with remaining maturity of one to six months. It finds application in both lending transactions and interest rate derivative products. The proceedings concern the BBSF calculation methodology that was used prior to 27 September, 2013, when the AFMA introduced a new way of the reference rate’s calculation.
According to the ASIC, in the period 8 June 2010 to 24 December 2012, the NAB allegedly traded in a manner that was unconscionable and intended to create an artificial price for bank bills on numerous occasions. During the period under review, it allegedly had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower, aiming to maximize its profit or minimize its loss to the detriment of those holding opposite positions.
According to the ASIC, the National Australia Bank has breached several principles of the Australian Securities and Investments Commission Act 2001 by taking misleading or deceptive actions in relation to financial services, providing false or misleading representations.
The ASIC is an independent body that oversees the corporate, markets and financial services markets in Australia. It regulates local companies, financial markets, financial services organizations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit.