ASIC has begun legal proceedings against ANZ for allegedly manipulating the bank bill swap rate (BBSW), with the bank saying it will "vigorously" defend itself.
The corporate regulator announced yesterday that it will take ANZ to the Federal Court in Melbourne for "unconscionable conduct and market manipulation" between March 2010 and May 2012.
"It is alleged that ANZ traded in a manner intended to create an artificial price for bank bills on 44 separate days during the period of 9 March 2010 to 25 May 2012," ASIC said.
"ASIC alleges that on these days ANZ had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower.
"ASIC alleges that ANZ was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to ANZ's."
Shortly after ASIC's announcement, ANZ said it rejects the the allegations and will "vigorously defend" itself in the legal action.
ANZ chief risk officer Nigel Williams said the bank has "cooperated fully with ASIC's investigation over many months, at a cost of many millions of dollars".
"This includes actively seeking to resolve the commission's concerns since January 2015," Mr Williams said.
"We believe the commission's statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies to this area.
"Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC's characterisation of the transactions in question," he said.
Mr Williams said ANZ will continue to review the issue of chat messages between traders, adding that the bank has already dealt with chats and behaviours that breach its code of conduct through internal disciplinary action against the individuals involved.
"Since June 2014 we have also engaged ASIC about chat messages between ANZ traders," he said. "We do not agree, however, with ASIC's characterisation of the issues related to the chat messages. It is now for the courts to provide clarity on trading practices."
ANZ noted that ASIC's legal action is likely to take a considerable time to be resolved through the courts and the matter of penalties is also uncertain.