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UPDATE 2-Australian regulator starts legal action against Westpac over alleged rate-fixing

Published 05/04/2016, 07:44 pm
© Reuters.  UPDATE 2-Australian regulator starts legal action against Westpac over alleged rate-fixing
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* Regulator alleges fixing of BBSW rate

* Westpac denies allegations, intends to defend itself

* Westpac is second Australian bank to be targeted (Adds detail from court filings)

By Colin Packham and Nathan Lynch

SYDNEY, April 5 (Reuters) - Australia's securities regulator said on Tuesday it has started legal action against Westpac Banking Corp WBC.AX for allegedly fixing the bank bill swap reference rate (BBSW), an allegation the bank said it rejects.

The Australian Securities and Investments Commission (ASIC) alleges that Westpac traded in a manner intended to create an artificial price for the BBSW on 16 occasions from April 6, 2010 through June 6, 2012.

The regulator said it intends to press for financial penalties if Westpac is found guilty.

"ASIC alleges that on these days Westpac 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," ASIC said in a statement.

"ASIC alleges that Westpac was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to Westpac's."

In federal court filings, ASIC outlined some of its evidence, including expletive-ridden exchanges between traders captured in email records and telephone recordings, allegedly about how much money they had made from BBSW fixes.

The BBSW is the primary interest rate benchmark used in Australian financial markets to price home loans, credit cards and other financial products worth trillions of dollars.

Westpac said in a statement that it intends to "vigorously" defend itself from the allegations.

"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," said Westpac Chief Financial Officer Peter King in a statement filed at the Australian Securities Exchange.

Westpac said it had given the regulator more than 12 million internal documents to assist with the probe.

Westpac is the second Australian bank targeted by ASIC over alleged rate-fixing.

ASIC last month began legal action against Australia and New Zealand Banking Group Ltd (ANZ) ANZ.AX for "unconscionable conduct and market manipulation" over allegedly fixing the BBSW. ANZ rejects the allegation. changed the method by which it calculated the BBSW in 2013 after an exodus of banks from the panel that set the rate, becoming the first major market to dismantle such mechanisms.

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