Daily Bulletin


The Conversation

  • Written by Pat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie University
image

The Australian public should be dismayed and disgusted that the major banks are still attempting to cover up the extent of their complicity in manipulating the Bank Bill Swap Rate (BBSW), a key interest rate benchmark.

For years, the banks covered up the involvement of their traders in manipulating not only interest rate but also foreign exchange benchmarks, by attempting to outspend the corporate regulator, ASIC, in the courts, using shareholders’ money.

Faced with publication of the evidence they caved in at the very last minute to settle with ASIC, paying even more shareholders’ funds, for fines and legal costs.

Has any director or senior manager taken personal responsibility, or even apologised, for either the rampant misconduct or the failure to monitor it – No!

Little contrition

In a short media release, ANZ acknowledged, with little contrition, that

in the course of trading on the BBSW market, a small number of traders attempted to engage in unconscionable conduct on ten dates between September 2010 and February 2012. ANZ also did not have in place adequate policies and systems to monitor trading and communications of its BBSW traders.

But we should not be fooled by the references to the “small number of traders”, or “ten dates”.

Last year, CBA and NAB agreed to enforceable undertakings with ASIC in relation to manipulating the foreign exchange benchmark, which was arguably much more egregious than the BBSW manipulation, as it involved sharing of information with other market participants, in particular sensitive information about clients’ trades.

Not one of the directors or senior managers of these banks took personal responsibility for the actions of their staff or their collective failure to monitor such obvious misconduct.

The agreement between ASIC, NAB and ANZ stipulates that

Traders involved in the breaches will have to be retrained before they are allowed back on their banks’ trading floors

Trading on nonpublic confidential information, which is what “manipulating the bank bill swap rate to their advantage and the disadvantage of others” was, is often punished by custodial sentences not some short court-ordered training course. This would just reiterate the rules that the traders should have been following anyway and which diligent management should have been enforcing.

The failure to monitor staff seems not to have slowed the progress of some senior managers. For example, ANZ CEO Shayne Elliot, was head of ANZ’s Institutional Bank (i.e. trading operations) during most of the period in which the unconscionable conduct took place.

Why did they pursue the court cases?

So what were the boards of directors of some of Australia’s largest companies doing while this failure to monitor unconscionable conduct was going on?

While neither superstar chairmen Ken Henry (NAB) nor David Gonski (ANZ) were in place during the original misconduct, they have been in place since 2014 and have had ample opportunity to inquire into the details of the scandal.

Having read the same evidence as Justice Jagot, directors chose to proceed with the case before caving in on the day it was due to be heard in court. Investors should be tearing their hair out at such colossal waste of money on high-priced (and in the end useless) lawyers.

The LIBOR and foreign exchange scandals cost overseas banks billions of dollars in fines.

Did they really believe this time was different, given that other banks had already pleaded guilty to manipulating BBSW? Even if they were not in place at the time, the non-executive directors of both banks are certainly responsible for continuing this expensive charade.

Such lack of oversight should surely trigger the first investigation when the new Banking Executive Accountability Regime (BEAR) legislation comes into force, as it covers directors and senior managers.

Pulling no punches

Federal Court Justice Jayne Jagot certainly pulled no punches in her statutory approval of the settlement between ASIC and the ANZ and NAB banks, saying that the Australian public should be “shocked, dismayed and disgusted” by the behaviour of the two banks.

The Australian public is right to be perplexed as to why no one considers themselves personally accountable for such a fiasco. And investors must be afraid that in pursuing the failed litigation so far, without apologising, that further harm is not done by possible class action litigation in the United States.

The Australian taxpayer would be justifiably annoyed to learn that the offences admitted by the banks took place between 2010 and 2012, when the very same banks were given the free handout of a government guarantee following the global financial crisis (GFC) - that really is biting the hand that feeds you.

So, should Australian investors, taxpayers and the public be “shocked, dismayed and disgusted” as the judge suggested? Yes.

But recent history suggests that the largest banks will just try to tough it out before returning to their previous modus operandi. Only a royal commission into banking regulation will break this vicious circle.

Authors: Pat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie University

Read more http://theconversation.com/the-public-should-be-shocked-dismayed-and-disgusted-at-the-major-banks-87319

Writers Wanted

Victoria and NSW are funding extra tutors to help struggling students. Here's what parents need to know about the schemes

arrow_forward

The mystery of the blue flower: nature's rare colour owes its existence to bee vision

arrow_forward

Curb population growth to tackle climate change: now that's a tough ask

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Ray Hadley's interview with Scott Morrison

RAY HADLEY: Prime Minister, good morning.    PRIME MINISTER: G’day Ray.   HADLEY: I was just referring to this story from the Courier Mail, which you’ve probably caught up with today about t...

Ray Hadley & Scott Morrison - avatar Ray Hadley & Scott Morrison

Prime Minister's Remarks to Joint Party Room

PRIME MINISTER: Well, it is great to be back in the party room, the joint party room. It’s great to have everybody back here. It’s great to officially welcome Garth who joins us. Welcome, Garth...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Ben Fordham, 2GB

BEN FORDHAM: Scott Morrison, good morning to you.    PRIME MINISTER: Good morning, Ben. How are you?    FORDHAM: Good. How many days have you got to go?   PRIME MINISTER: I've got another we...

Scott Morrison - avatar Scott Morrison

Business News

Tips to find the best plastic manufacturing supplier for your needs

Plastics are very much an important part of all of our lives, but they’re particularly valuable to a wide variety of industries that rely on their production for their operations. The industries, ...

News Co - avatar News Co

7 foolproof tips for bidding successfully at a property auction

Auctions can be beneficial for prospective buyers, as they are transparent and fair. If you reach the limit you are willing to pay, you can simply walk away. Another benefit of an auction is tha...

Dominique Grubisa - avatar Dominique Grubisa

Getting Ready to Code? These Popular and Easy Programming Languages Can Get You Started

According to HOLP (History Encyclopedia of Programing Languages), there are more than 8,000 programming languages, some dating as far back as the 18th century. Although there might be as many pr...

News Co - avatar News Co



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion