ANZ is sued by ASIC over rate rigging

ANZ Group is being sued by corporate watchdog, the Australian Securities and Investments Commission (ASIC) over allegations of manipulation of the Bank Bill Swap rate between March 2010 and May 2012. ANZ has rejected these allegations and says it will "vigorously defend the legal action brought by the commission". This marks the first major bank in Australia to face action from the corporate watchdog, who is determined to penalise interest rate rigging banks.

ANZ Banking Group offered to settle allegations it manipulated a key market interest rate over a two-year period but wouldn't go far enough to satisfy the corporate regulator and is now gearing up for a long legal and public relations battle.

A Federal Court lawsuit alleging market manipulation and unconscionable conduct was filed by Australian Securities and Investment Commission on Friday afternoon after intense negotiations between ANZ chairman David Gonski, chief executive Shayne Elliott and ASIC chairman Greg Medcraft ended in a stalemate.

ASIC chair Greg Medcraft has pinned his legacy on punishing rate-rigging banks. Credit: Daniel Munoz

ANZ offered more than than $50 million to settle the action but refused to concede a demand that it admit to manipulating the bank bill swap rate (BBSW), which influences the setting of interest rates across the economy, sources said.

The bank said ASIC's case was "based on a misunderstanding of how bank bill issuance and interest rate risk management operates" and that it operated in a consistent way with market practices.