The government’s announcement that it is “clamping down” on market manipulation of financial benchmarks coincided with the first day of the House Standing Committee on Economics’ Review of the Four Major Banks.
Westpac, NAB and ANZ are currently defending ASIC allegations of “unconscionable conduct and market manipulation” in setting the Bank Bill Swap Rate (BBSW) from 2010 to 2012.
In November 2015, Mr Morrison asked the Council of Financial Regulators (CFR) to provide advice to the government on options to reform the regulation of financial benchmarks.
The CFR advice, released by Mr Morrison yesterday, made three broad recommendations:
- Administrators of significant (that is, systemically important) benchmarks be required to hold a new ‘benchmark administration’ licence issued by ASIC unless granted an exemption;
- ASIC be empowered to develop enforceable rules for the administrators of significant benchmarks and for entities that make submissions to such benchmarks (including the power to compel submissions to benchmarks in the case that other calculation mechanisms fail); and
- The manipulation of any financial benchmark (significant or non-significant) or financial product used to determine a financial benchmark used in Australia (such as Negotiable Certificates of Deposit), be made a specific criminal and civil offence.
Mr Morrison said the government has accepted CFR’s advice, and will implement its recommendations over the next 18 months.
“The Turnbull government is absolutely committed to transparent and well-functioning markets, which are fundamental to a vibrant 21st century economy,” said Mr Morrison.
“These measured changes will build on the steps that the Turnbull government is already taking to strengthen our banking and financial system including strengthening ASIC’s resources and capabilities and the establishment of a regular Parliamentary Inquiry into Australia’s banking and financial system,” he said.
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