Westpac escapes with ‘paltry’ $3.3m penalty
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.