ASIC brings legal action against CBA over alleged 'unconscionable conduct'
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The corporate regulator has begun court action against Commonwealth Bank alleging it engaged in unconscionable conduct and sought to manipulate a key inter-bank interest rate.
In the latest episode of the regulator’s actions over alleged rate-rigging, and just a day after CBA named Matt Comyn as its new CEO, Australia’s biggest bank now faces Federal Court action brought by the Australian Securities and Investments Commission over alleged manipulation of the bank bill swap reference rate, or BBSW.
CBA is the last of Australia’s big four banks to be named in ASIC action over alleged BBSW manipulation, with ANZ and NAB having settled cases and Westpac’s matter still before the court.
ASIC alleges that on three occasions in 2012, CBA traded bank bills in an “unconscionable” way that created “an artificial price and a false appearance” of the market for some products.
“ASIC alleges that on three specific occasions CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA’s,” the regulator said in a statement on Tuesday.
The regulator alleges it was “unconscionable for CBA to trade in this way”.
In a brief statement on Tuesday evening, CBA said it had “fully cooperated” with ASIC’s investigation over the past two years.
“Commonwealth Bank disputes the allegations made by ASIC,” the bank said.
“As this matter is before the courts, it is not appropriate to comment further at this time.”
Bank bills are short-term instruments that banks use to lend to or borrow from other institutions, and the interest rate payable on a bill is affected by trading activity.
In its concise statement filed to the court and released on Tuesday, ASIC alleges that CBA bought or sold bank bills during a morning trading window to affect the rate in a way that favoured its own exposures.
The regulator is seeking declarations from the court that CBA breached sections of the Corporations Act relating to unconscionable conduct, creating an artificial price and creating a false or misleading appearance in the market.
ASIC has asked the court for pecuniary penalties and costs.
ASIC began proceedings against ANZ, NAB and Westpac in 2016 over rate-rigging allegations.
ANZ and NAB each settled in their cases in 2017, paying $50 million each in penalties, costs and contributions to consumer protection funds, as well as giving enforceable undertakings.
Westpac contested the allegations during in a high-profile court case during 2017 and the matter is awaiting judgement.
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