The big banks are deliberately delaying the corporate regulator’s investigation into bank bill swap rate (BBSW) manipulation, says ASIC chairman Greg Medcraft.
Mr Medcraft told a Senate hearing yesterday he is being frustrated by the banks’ “overly legalistic approach to our request for information” about the BBSW.
Appearing before the Senate Economics Legislative Committee in Canberra, Mr Medcraft encouraged the banks to be “more cooperative”.
“And they know who they are. We want an outcome and they should want an outcome sooner rather than later.
“We can do this the easy way or we can do it the hard way,” Mr Medcraft said.
The BBSW is a financial benchmark that is used to set pricing for interest rate products – whether they are interest rate sways, financial futures over interest rates, or commercial loans.
Under questioning from Labor Senator Sam Dastyari, ASIC commissioner Cathie Armour said the BBSW is now calculated using a live-traded methodology.
But prior to 2013, the BBSW was set by a number of ‘reference banks’ which made submissions to the Australian Financial Markets Association.
“The live-traded methodology is more clearly verifiable because you’re looking at live market data,” Ms Armour said.
ASIC has been investigating the pre-2013 behaviour of the banks when it comes to the BBSW since 2012, Ms Armour said.
“We have been asking a number of financial institutions about their practices in connection with submissions to the BBSW and we have followed up with more specific inquiries over the course of a number of years.
“We’re sifting through information and interviews to find out whether or not we see any poor conduct,” Ms Armour said.
Mr Medcraft said he has discussed the issue with a number of bank chairmen.
“I’ve actually been saying to them: ‘Let’s be cooperative’, because some of them we’re finding [have] a very defensive approach to giving us information and [they’re] contesting us [legally].
“I’m appealing for their cooperation to allow a timely and expansive investigation to make sure we can deal with it as a problem – and we can always do this the easy way or the hard way,” Mr Medcraft said.
ASIC meets with the boards of the big banks on an annual basis, said Mr Medcraft – adding that the regulator is set to meet with the NAB board this week.
Ms Armour said one of the sticking points with the banks has been giving ASIC access to chatroom transcripts used by bank traders.
“Any mechanism [an institution uses while] conducting its business and becomes a record of its business needs to be retained,” she said.
“This is an area where we’ve had some reluctance on the part of the banks to actually provide us [with information],” Mr Medcraft added.
Citigroup, The Royal Bank of Scotland, Deutsche Bank and JP Morgan were all fined in relation to manipulations of Libor (the London Interbank Offered Rate) in 2013.
On 23 April 2015 Deutsche Bank was fined a combined US$2.5 billion by American and British authorities for its involvement in the Libor scandal.