Aus­tralia clamps down on rate rig­ging

The Myanmar Times - - Business -

MA­NIP­U­LAT­ING fi­nan­cial bench­marks will be­come a crim­i­nal of­fence in Aus­tralia, the gov­ern­ment an­nounced yes­ter­day, as the na­tion’s largest lenders pre­pared to be grilled by a par­lia­men­tary com­mit­tee over their prac­tices.

Trea­surer Scott Mor­ri­son said the tough new rules would “en­sure that past egre­gious con­duct by the banks in ma­nip­u­lat­ing bench­marks is pre­vented in the fu­ture”.

Crim­i­nal penal­ties, in­clud­ing jail time, could be im­posed for mar­ket ma­nip­u­la­tion in set­ting bank bill swap (BBSW) rates – used to set the price of fi­nan­cial prod­ucts such as bonds, loans and de­riv­a­tives – and other key bench­marks such as eq­uity in­dexes and Trea­sury Bond Fu­tures set­tle­ment prices.

The BBSW – the rate at which banks lend to each other – was in the past set by 14 banks each busi­ness day, which quoted the in­ter­est rate they were pay­ing and re­ceiv­ing.

But that left it open to ma­nip­u­la­tion if the wrong in­for­ma­tion was given, with tweak­ing the rate po­ten­tially al­low­ing traders to make mil­lions in prof­its.

Aus­tralia’s cor­po­rate reg­u­la­tor, like its coun­ter­parts in the United States and Bri­tain, has been prob­ing multi­na­tional banks over bench­mark in­ter­est rate-rig­ging.

Three of the coun­try’s big four lenders – West­pac, ANZ and Na­tional Aus­tralia Bank – have been charged over al­le­ga­tions they ma­nip­u­lated the in­ter­bank lend­ing rate be­tween 2010 and 2012. None of them has ad­mit­ted any wrong­do­ing.

“This pack­age will en­sure our reg­u­la­tory regime is as mod­ern and se­cure as any com­pa­ra­ble regime found in equiv­a­lent for­eign ju­ris­dic­tions, such as the United King­dom and the Euro­pean Union,” Mr Mor­ri­son said of the new rules, which will come into ef­fect in Jan­uary 2018.

Crim­i­nal acts will in­clude mak­ing false or mis­lead­ing state­ments or en­gag­ing in dis­hon­est con­duct in re­la­tion to de­ter­min­ing a bank bill swap rate or other fi­nan­cial bench­mark.

The new reg­u­la­tions came as Com­mon­wealth Bank chief ex­ec­u­tive Ian Narev ap­peared be­fore a par­lia­men­tary com­mit­tee yes­ter­day for a new an­nual grilling of the coun­try’s big banks de­signed to make them more trans­par­ent.

The heads of West­pac, ANZ and NAB will an­swer ques­tions by the House of Rep­re­sen­ta­tives eco­nomics com­mit­tee later this week.

The “big four” lenders – among the de­vel­oped world’s most prof­itable – have been un­der scru­tiny in re­cent years amid al­le­ga­tions of dodgy fi­nan­cial ad­vice, life in­sur­ance and mort­gage fraud.

There has also been con­cern over why they do not al­ways fully pass on to cus­tomers the ben­e­fits of in­ter­est rate cuts by the Re­serve Bank of Aus­tralia, a key tool wielded by the cen­tral bank to boost growth amid global eco­nomic tur­bu­lence and un­even do­mes­tic ex­pan­sion. –

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