ANZ bank taken to court by regulator over alleged rate rigging

[SYDNEY] Australia's securities regulator said it has started legal proceedings against Australia & New Zealand Banking Group Ltd for allegedly manipulating the nation's benchmark interest rate. The lender said it would "vigorously defend" the action.

Civil penalty proceedings have commenced against the bank in the Federal Court in Melbourne, the Australian Securities & Investments Commission said in a statement Friday. The regulator alleges that ANZ Bank "traded in a manner intended to create an artificial price for bank bills" on 44 separate days from March 2010 to May 2012.

The regulator has been investigating the setting of the bank-bill swap rate - the local equivalent of Libor that's also known as BBSW - since mid-2012 and has previously criticized a lack of cooperation from the nation's banks. The investigation led to the suspension of seven traders at ANZ Bank in Nov 2014 and voluntary contributions of a combined A$3.6 million (S$3.75 million) toward financial literacy projects from Royal Bank of Scotland Group Plc, UBS Group AG and BNP Paribas SA.

Bank Bill Market

ASIC alleges that on the days in question, the lender "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," according to the statement.

The regulator "alleges that ANZ was seeking to maximize its profit or minimize its loss to the detriment of those holding opposite positions to ANZ's." The lender rejects the allegations, ANZ Bank spokesman Stephen Ries said by phone.

"ANZ will be vigorously defending the legal action brought by the commission," he said.

"We will be making a more complete statement on the matter shortly."

ASIC is seeking declarations that the Melbourne-based bank contravened sections of the Australian Securities and Investments Commission Act and the Corporations Act. It is also seeking pecuniary penalties against the bank and an order from the court requiring the lender to implement a compliance program, according to the statement.

BLOOMBERG