Is Westpac Banking Corp facing a shareholder class action?

National Australia Bank Ltd (ASX:NAB) has agreed to settle its rate-rigging dispute with ASIC. Where does that leave Westpac Banking Corp (ASX:WBC)?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Westpac Banking Corp (ASX: WBC) has been left out in the cold after National Australia Bank Ltd (ASX: NAB) agreed to settle its rate-rigging dispute with ASIC for $50 million.

Westpac, NAB and Australia & New Zealand Banking Group (ASX: ANZ) were accused of unconscionable conduct relating to the manipulation of the bank bill swap rate (BBSW).

ANZ last week agreed to settle with ASIC for a figure believed to amount to $50 million as the matter was gearing up to be heard by a federal court.

That settlement followed ASIC's acceptance of "enforceable undertakings", or payments as penalties, from UBS-AG, BNP Paribas and the Royal Bank of Scotland in relation to ASIC's investigations into misconduct in the BBSW.  

NAB was the latest bank to buckle under the pressure of the ASIC investigation.

NAB agreed to a $10 million penalty, subject to Court approval, and to pay ASIC's costs of $20 million.

NAB will also make a donation of $20 million to a financial consumer protection fund nominated by ASIC.

The impact of the $50-million settlement will be reflected in NAB's FY17 results, according to the bank.

NAB Group Chief Executive Officer Andrew Thorburn said the legal action related to trading in the bank bill market from June 2010 to December 2012.

"We accept that we did not meet the high standards of professional conduct that ASIC, the community and NAB expects of itself, in that market during that period," Mr Thorburn said.

"How BBSW is calculated has changed since that time."

"The ASX is now responsible for the administration of BBSW and NAB fully supports the reforms that are being introduced by the ASX to enhance trust and transparency in the BBSW market."

NAB Chief Legal and Commercial Counsel, Sharon Cook, said NAB was happy to settle.

"It brings to a conclusion a complex issue and expensive and protracted litigation, and provides certainty to our shareholders, customers and our employees," she said.

With ANZ and NAB both proceeding with settlement agreements with ASIC, Westpac faces a sticky situation.

There is speculation circulating that Westpac is reluctant to settle as it is concerned that it could face a class action by shareholders.

But that seems a bit strange as it appears that should Westpac be found to have acted unconscionably by the Court, its legal costs and penalties would likely be far higher than if it settled out of court.

As such, should Westpac proceed with the trial, it could cause greater detriment to shareholders.

It is clear, however, that Westpac is in a difficult situation.

The difficult situation is perhaps exacerbated by the strong denial made last year by Westpac Group Chief Financial Officer Peter King when he expressed his intention to battle with ASIC in court.

"We reject the allegations made by ASIC and do not believe Westpac, or any employee, has acted unlawfully in relation to the instances detailed by ASIC," Mr King said.

"The operation of the interbank short-term money market, as well as bank balance sheet management, is highly complex and activity occurs for a range of valid reasons."

"We disagree with ASIC's interpretation of the communication between employees referred to in the court documents and their assessment of trading activity given the complexity of strategies involved.

"As a result, we will be vigorously defending ASIC's allegations in court."

Despite Mr King's strong words, it seems Westpac may be wise to opt for a quick end to the dispute.

Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »