ASIC today accepted an enforceable undertaking (EU) from BNP Paribas (BNP) in relation to potential misconduct involving the Australian Bank Bill Swap Rate (BBSW).
BNP will also make a voluntary contribution of $1 million to fund independent financial literacy projects in Australia.
In November 2012, BNP reported to ASIC that it had found conduct between 2007 and 2010 that was indicative of seeking to influence its BBSW submissions, based on how the submissions may benefit BNP's derivatives positions. BNP remained a member of the BBSW submissions panel until a new methodology for calculating the BBSW was implemented on 27 September 2013.
The EU requires BNP to ensure its participation in relation to the setting of Australian interest rate benchmarks upholds the integrity and reliability of those benchmarks.
At ASIC's request, BNP engaged an independent expert to conduct a review of BBSW submissions. The expert found that any market impact was not significant.
ASIC's inquiries in relation to the BBSW submission process are ongoing.
The BBSW is the primary interest rate benchmark used in Australian financial markets. Prior to 27 September 2013, it was calculated based on submissions made by up to 14 panel banks to the Australian Financial Markets Association (AFMA), which is responsible for administering the published BBSW rate.
The calculation of BBSW substantially differs from the method that is used to calculate the London Interbank Offer Rate (LIBOR), in that BBSW submissions were required to be based on the panel banks' view of the average mid-rate for Reference Bank Bills, which are of similarly high credit standing, at a particular point in time each day as opposed to a subjective view of the bank's cost of obtaining unsecured funding from other banks.
Since November 2012, BNP has been fully cooperating with ASIC in relation to ASIC's investigation into the reported conduct. ASIC acknowledges BNP's cooperation and assistance in regard to its investigation, and that BNP self-reported this matter to ASIC.
Since mid-2012, ASIC has been undertaking inquiries of BBSW panel bank members in relation to the integrity of their past involvement in the BBSW submission process. ASIC's inquiries in relation to the BBSW rate set are ongoing.