Macquarie and ANZ to pay AUD 15m in penalties
Macquarie and ANZ have agreed to pay a combined AUD 15m ($11m) after admitting to attempted cartel conduct with a Malaysian benchmark rate in 2011. ANZ will pay AUD 9m, while Macquarie will pay AUD 6m of the fine. ANZ admitted to 10 instances of cartel conduct, while Macquarie admitted to 8. The Australian Competition and Consumer Commission said the alleged conduct involved Singapore-based traders communicating over private chat rooms about daily submissions on the Malaysian ringgit fixing rate.

A banking analyst said the timing of the announcement "is not great for the banks".

"It comes at a time when bank regulation is being used to get a political upper hand and is a live wire issue. The only thing in their favour is the allegations relate to conduct in Singapore rather than Australia," said the analyst, who asked not to be named.

A report into the banks by a parliamentary committee on Thursday made recommendations including the establishment of a Banking and Financial Sector Tribunal and said senior bankers responsible for serious breaches of bank licences should be named and shamed. It also said the ACCC should play a more active role monitoring banks for potential breached of competition laws.

Employees terminated

The ACCC will allege in the Federal Court that in 2011, the traders - who were all located in Singapore - sought to influence the rate at which the benchmark rate for the Malaysian ringgit was set by the Association of Banks in Singapore in communications via private online chatrooms, the ACCC said.

It's Macquarie everywhere you look! Bloomberg

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ANZ has agreed to pay a $9 million penalty over the conduct, and Macquarie $6 million. In addition, both banks will contribute to paying the ACCC's costs. The Federal Court will determine whether such penalties are appropriate.

Macquarie said the conduct involved a single, junior employee, who was terminated in 2012. The agreed statement of facts names him as Istvan Loh, who was employed in the Asian markets division in Singapore and was the only Macquarie employee responsible for trading the ringgit derivatives book. According to his profile on LinkedIn, Mr Loh is now a Singapore-based FX trader at RGE Group and before joining Macquarie worked at Standard Chartered Bank and HSBC.

"Macquarie notes that the ACCC acknowledges that no Macquarie senior management, or any other Macquarie employees were involved in or aware of the conduct of the former junior employee," the bank said.

ANZ said three employees were involved in the conduct and none are still employed by the bank. The agreed statement of facts names them as Wei Ewen Chew, Wai Theng Hooi and Joo Heng Tan.

The statement of facts said Mr Chew "indicated that ANZ would like a high MYR Fixing Rate and offered to make an arrangement with the other participants to the chat", including Mr Loh, on May 5, 2011.

On various dates in 2011, the traders "attempted to make arrangements with other banks that particular submitting banks would make high or low submissions to the ABS in relation to the ABS MYR Fixing Rate," the ACCC said.

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ANZ chief risk officer Nigel Williams said in a statement on Friday: "While there is no evidence that FX benchmarks in Singapore were successfully influenced, we accept responsibility and apologise for the actions of our former employees. We have made significant improvements to our compliance, training and monitoring systems to ensure this does not happen again."

ACCC chairman Rod Sims said the proceedings are a reminder that Australian cartel laws apply to financial markets and capture cartel conduct by firms who carry on business in Australia regardless of where conduct occurred.

"The financial sector, including boards, needs to better understand that cartel laws and the Competition and Consumer Act does apply to them," Mr Sims told The Australian Financial Review.

"Our view is when we do take action, boards and companies take notice and you do get better deterrence once you take an actions."

Mr Sims praised the way in which both ANZ and Macquarie had engaged during the investigation. The ACCC had "very good dealings with both banks at very senior levels" to resolve the case, he said.

Compliance strengthened

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The ACCC action comes as central banks including the Reserve Bank of Australia seek to improve standards in global FX markets, which deputy governor Guy Debelle said last week was necessary to create greater certainty for market participants.

The benchmark rates the subject of the ACCC action are used as reference rates for settling 'non-deliverable forward contracts', which are used by banks for hedging and risk management.

The ACCC said the annual turnover of ringgit-denominated forward contracts in Australia in 2011 was approximately $9 to $10 billion and the bank's customers included Australian companies.

The regulator said ANZ was a "submitting bank" for the "MYR". Macquarie was not, however "it often initiated discussions between traders", the ACCC said in its statement.

Like the process for setting the bank bill swap rate in the ABS MYR Fixing Rate was derived from submissions made each day by a panel of banks. Rules required this be done independently and without reference to other submitting banks.

Macquarie said since it became aware of the matter it has "significantly strengthened its e-communication surveillance globally, improved trade monitoring and intensified training for its front office staff".

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ANZ also said it has improved compliance systems. This includes enhancing internal policies and procedures with respect to the submission of benchmark rates to the Association of Banks in Singapore; conducting additional training for all sales and trading staff; implementing internal measures to reduce the risk of any conflicts of interest arising between sales, structuring and trading staff; implementing surveillance of communications to identify irregularities; and conducting independent audits of ANZ's compliance controls within its markets business, the bank said.

The matter was previously investigated by the Monetary Authority of Singapore, which completed a review and supervisory action in 2013 involving 20 banks operating in Singapore, ANZ said.

The MAS investigation found no conclusive evidence that FX benchmarks, used to settle non-deliverable forward contracts, had been successfully influenced, ANZ said. But ANZ and other banks were required to provide additional capital reserves to MAS and undertook a remediation program to address deficiencies associated with FX benchmark submissions.

ANZ is also being sued by the Australian Securities and Investments Commission for allegedly manipulating the benchmark interest rate in Australia. Westpac Banking Group and National Australia Bank are also part of that action.

Mr Sims confirmed the ACCC is investigating additional potential cartels in the banking sector.

"We have a couple of investigations into issues involving the financial sector relating to purely Australian cartel behaviour," he said.