ASIC takes on foreign bank over interest rate rigging

by Julia Corderoy22 Jul 2014
The Australian Securities and Investment Commission (ASIC) has accepted an enforceable undertaking (EU) from the Royal Bank of Scotland (RBS) due to “potential misconduct” involving the Australian Bank Bill Swap Rate (BBSW) – the benchmark interbank interest rate.
At the time the misconduct occurred, the BBSW was determined by calculating the mean of the mid-rate for Reference Bank Bills of varying maturities – as submitted by a panel of up to 14 banks.
Following a review of how the bank set its Benchmark Interest Rate applied to its BBSW submissions, RBS notified ASIC of “evidence it had found that suggested Submitter Influence conduct that may have occurred in the Relevant Period,” according to the Enforceable Undertaking under the Australian Securities and Investment Commission Act 2001
According to a release from ASIC, RBS is the third bank to be penalised after enquires into the BBSW submission process – UBS AG and BNP Paribas have also entered into EUs and paid a $1 million voluntary contribution. Under the EU, RBS will have to make a voluntary contribution of $1.6 million to fund independent financial literacy projects in Australia.
Since 27 September 2013, the BBSW is now determined using an electronic calculation of the midpoint of the National Best Bid and Offer (NBBO) in the locally traded market for Reference Bank Bills. This means that a panel of banks no longer make submissions to calculate the BBSW.