Westpac Cleared of Rate-Rigging, Though It Tried, Court Says

(Bloomberg) -- Westpac Banking Corp. has been cleared of manipulating a key Australian interest rate, even though it did engage in “unconscionable conduct” in attempting to influence the rate, a court ruled.

The Australian Securities & Investments Commission had claimed Westpac sought to influence the bank bill swap rate -- which is used to price more than A$10 trillion ($7.6 trillion) in derivatives -- to benefit its trading positions.

In a ruling in Melbourne’s Federal Court Thursday, Judge Jonathan Beach said ASIC hadn’t made its case “concerning market manipulation or market rigging” and had failed to establish a “concerted pattern of conduct.”

However, he found the market was open to manipulation and that on four occasions Westpac engaged in “unconscionable conduct” by trading bank bills with the “dominant purpose of influencing yields” and where the rate was set. ASIC had originally alleged 16 instances of Westpac attempting to influence the rate.

Further, the judge ruled the country’s second-biggest lender breached its responsibilities in ensuring “financial services are provided efficiently and fairly,” and had contravened its financial services license by failing to provide adequate procedures and training.

Others Settled

“This is a very significant and positive outcome for the integrity of Australia’s financial markets,” an ASIC spokesman said.

While all four of Australia’s big banks had been sued for alleged rate-rigging, Westpac was the only one to take the action to court. Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. earlier each agreed to A$50 million settlements, and Commonwealth Bank of Australia settled for A$25 million.

Penalties on Westpac for breaching the Corporations Act will be imposed at a later date, Beach said in his 637-page ruling.

The breaches add to a litany of wrongdoing being exposed by a separate inquiry into misconduct in the financial industry, from lying to regulators, falsifying documents and taking bribes, to extracting fees from customers long since dead.

Westpac shares fell 0.3 percent to A$28.37 at 2:38 p.m. in Sydney. The stock has declined 9.5 percent this year.

In a statement following the ruling, Westpac said it was “committed to working with regulators in a constructive manner, including when we have a genuine difference of opinion.”

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