ASIC takes Australia and New Zealand Banking Group to court

Australia and New Zealand Banking Group (ASX: ANZ) is being taken to court by the Australian Securities and Investments Commission (ASIC), alleging the bank manipulated interest rates.

In a statement, ASIC says it has commenced legal proceedings against ANZ for “unconscionable conduct and market manipulation in relation to ANZ’s involvement in setting the bank bill swap reference rate (BBSW) in the period March 2010 to May 2012”. The matter is being heard by the Federal Court in Melbourne.

The BBSW rate is the primary benchmark interest rate used in Australian financial markets, and ASIC says ANZ traded in a manner to create an artificial price for bank bills on 44 separate days. The regulator also says that ANZ was seeking to maximise its profits or minimise its losses to the detriment of those holding opposite position to ANZ’s.

As you would expect, ANZ has rejected the allegations and says it will vigorously defend the legal action. Additionally, ANZ Chief Risk Officer Nigel Williams says, “We believe the Commission’s statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies in this area.

In February, the regulator urged the banks involved in the alleged rigging of the rate to plead guilty to avoid the force of the regulator’s powers. ANZ is the first bank to come under such scrutiny after ASIC began its probe into rate rigging in 2012. Three foreign banks, UBS, BNP Paribas and Royal Bank of Scotland have all agreed to enforceable undertakings, but ANZ went as far as suspending seven traders in November 2014.

A small number of traders are believed to have manipulated the BBSW rate for their own benefit.

Foolish takeaway

Given ANZ’s share price has hardly budged since the news was released gives you an indication of how the market thinks this will affect the bank – whether it wins or loses the case.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget ANZ, BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.