ANZ Banking Group and Macquarie Bank have agreed to settle an action by the competition regulator for attempting to act as a cartel over setting the benchmark rate for the Malaysian ringgit.
ANZ has admitted to ten instances of attempted cartel conduct and Macquarie to eight, the Australian Competition and Consumer Commission said in a statement on Friday, relating to the setting of benchmark interest rates over Malaysia's currency in 2011.
Both banks are cooperating with the competition regulator, which said the proceedings were taken "on a consent basis".
An "agreed settlement" has been filed with the Federal Court.
Macquarie has volunteered to pay a $6 million fine. The final size of the fines will be set by the courts. Bloomberg
The ACCC will allege in the Federal Court that in 2011, ANZ or Macquarie sought to influence the rate at which the benchmark rate for the Malaysian ringgit was set by the Association of Banks in Singapore, the ACCC said on Friday morning.
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 in a statement the conduct involved a single, junior employee, who was terminated in 2012.
"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 in a statement.
ANZ said three employees were involved and none are still employed by the bank. "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," ANZ chief risk officer Nigel Williams said in a statement. "We have made significant improvements to our compliance, training and monitoring systems to ensure this does not happen again."
"These proceedings are a reminder that Australian cartel laws apply to financial markets, and capture cartel conduct by firms that carry on business in Australia, regardless of where that conduct occurred," ACCC chairman Rod Sims said in a statement.
"The ACCC recognises the integrity of foreign exchange markets plays a fundamental role in our market economy."
The ACCC will tell the Federal Court a Macquarie trader, together with traders employed by ANZ and a number of other banks - who were all located in Singapore - communicated via private online chatrooms about daily submissions to be made to the Association of Banks in Singapore in relation to the benchmark rate for the Malaysian ringgit.
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.
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.
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".
ANZ 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 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.
This article was first published in www.afr.com http://www.afr.com
Author: James Eyers