West­pac es­capes with ‘pal­try’ $3.3m penalty

Mercury (Hobart) - - BUSINESS - JEFF WHAL­LEY

A FED­ERAL Court judge says he hit West­pac with a “clearly in­ad­e­quate” $3.3 mil­lion fine for try­ing to rig a key in­ter­est rate be­cause the law stopped him levy­ing any­thing higher.

At the Fed­eral Court in Mel­bourne yes­ter­day, Jus­tice Jonathan Beach said he was ham­strung from ap­ply­ing a greater de­ter­rence.

“If I had been per­mit­ted to do so, I would have im­posed a penalty of at least one or­der of mag­ni­tude above $3.3 mil­lion … but I am not free to do so,” he said.

In his lengthy de­ci­sion, Jus­tice Beach said: “Clearly, this is in­ad­e­quate, but there we are.”

West­pac last week re­vealed a cash profit of $8.07 bil­lion for the year, but chief ex­ec­u­tive Brian Hartzer ad­mit­ted the bank needed to lift its game af­ter scathing crit­i­cism from the bank­ing royal com­mis­sion.

CBA, NAB and ANZ paid a col­lec­tive $125 mil­lion penalty when they set­tled their cases, rather than face court.

The West­pac penalty fol­lows the de­ci­sion in May by Jus­tice Beach that found it en­gaged in “un­con­scionable” con­duct in at­tempts to ma­nip­u­late the bank bill swap rate — a lend­ing rate be­tween banks that in­flu­ences in­ter­est rates paid by con­sumers and busi­nesses.

Jus­tice Beach yes­ter­day said the fact he im­posed the max­i­mum per­mit­ted in law would hope­fully send the cor­rect sig­nal to the mar­ket­place in terms of gen­eral de­ter­rence.

ASIC, the cor­po­rate watch­dog, had on Thurs­day mounted an 11th-hour at­tempt to hike the fine from $3.3 mil­lion to $64 mil­lion, but this failed.

While West­pac was not found guilty of ma­nip­u­lat­ing the bank bill swap rate, it was found to have traded with an in­ten­tion of in­flu­enc­ing the yields on three dif­fer­ent dates.

ASIC had ar­gued that West­pac should be fined $1.1 mil­lion for each of 58 trades that hap­pened over the three days of trad­ing in ques­tion.

But Jus­tice Beach re­jected ASIC’s le­gal ar­gu­ment for the greater penalty.

“The con­tention that each and ev­ery trade on the three con­tra­ven­tion dates was a sep­a­rate con­tra­ven­ing act is in­con­sis­tent with ASIC’s pleaded case, in­con­sis­tent with the ev­i­dence, and in­con­sis­tent with my find­ings in my prin­ci­pal rea­sons,” he said.

ASIC’s push for a greater penalty was seen by some as the first at­tempt by new chief James Ship­ton to beef up the penal­ties large in­sti­tu­tions pay when they break the law.

ASIC ac­knowl­edged in a sub­mis­sion to the royal com­mis­sion that it needed to be tougher on cor­po­rates.

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